NEWPORT — County officials hope the delegation of state representatives can hold an emergency meeting before Nov. 15 to consider additional bonding authority for the county nursing home project after learning Wednesday that the guaranteed maximum price has increased by $12 million to more than $75 million.
The urgency of a delegation meeting is because officials with Harvey Construction told county officials on Wednesday that with the cost of materials escalating at an unprecedented rate, bids submitted by subcontractors can’t be held past the 15th.
“The market is speaking here,” said Keith Kelley, senior project planner with Harvey of Bedford, N.H., about the 20% increase in the guaranteed maximum price since January and the dramatic increases in construction costs the last 2½ years. “The market is busy, labor is short and materials are expensive.”
Prices are rising so rapidly with no end in sight that Kelley said some bids on other projects expire after five days.
The current bids are still at risk to market volatility until the contracts are signed.
In order to hold a vote by Nov. 15, the delegation will have to meet next week to discuss the latest cost and also hold a public hearing. Delegation Chairman John Cloutier, D-Claremont, said Wednesday evening he hopes to get the delegation together late next week.
Previously, the county officials had put together a funding package of $63 million, which included up to $26 million in bonding, $25 million from a state fund for county nursing home capital improvements funded by the Governor’s Office for Emergency Relief and Recovery, $7 million of American Rescue Plan Act funds and $3 million of county reserves. The hope at the time was that the money would cover a guaranteed maximum price of $57 million plus an 11% inflation escalator. Ferland noted Wednesday the inflation factor turned out to be double.
Ferland presented some possibilities to reduce the funding gap to between $4 million and $5 million, or 6% of the total cost, and said delaying the project further will only result in higher costs and the possible loss of several funding sources because the money has to be spent before specific deadlines. For example, $25 million from the state’s capital improvement fund for nursing homes must be spent by September 2024 or the county could face penalties unless it gets an extension.
“Our choices now are to figure out how to get to yes or begin discussions on closing the facility down,” Ferland said.
Waiting six months or more to proceed will not only mean higher costs but “bidder fatigue,” which the commissioners were told means many bidders will not want to participate in a third guaranteed maximum price effort. Only about 30% of the roughly 200 bidders invited this time responded. In one example, 14 bidders were sought for structural steel but only two submitted bids.
“They have a lot on their plate,” said John Beaver, a senior estimator with Harvey. “This is a three-year project, and it is risky.”
If more bonding authority is approved by the delegation, Ferland said, the county would aggressively pursue other funding sources, including more money from the state’s capital fund for nursing homes and federal and regional grants.
“It feels pretty close,” Ferland said about the 6% difference. “I would hate to just walk away, but we have to move quickly or risk more cost increases.”
State Reps. Walt Stapleton, R-Claremont, and Judy Aron, R-Acworth, both favored moving as quickly as possible to authorize more bonding, which likely would not be exercised until the middle of 2024. They also did not want to hand the decision to what will be a delegation with new representatives after Tuesday’s election.
“We put too much time into this project to dillydally further,” Stapleton said at the meeting. “It will not get better with time; it will get worse.”
In a slide presentation at the meeting, bids from the subcontractors for the three-year project since guaranteed maximum prices in 2020 were shown to have increased dramatically. Structural steel is up 35%; masonry, 53%; doors, frames and hardware, 63%; concrete, 53%; electrical 74%; and mechanical 53%. Nearly every category was up at least 20%, except for flooring and tile, which was flat, and demolition, down 1%. The average increase per year from 2020 to 2022 was at least 10% and as high as 30% depending on the category.
“Prices are not going to come down,” said Jonathan Halle, a principal with Warrenstreet Architects.
Ferland’s options to pare the amount needed to bond from $12 million to between $4 million and $5 million included deferring work on the MacConnell building at the nursing home complex to save $2 million; taking the last $2 million from the county’s capital reserve fund; and paying for furniture, fixtures and equipment separately, which would cut another $1.2 million.
While the cost increases are daunting, Kelley said it is important to realize that had the county done the project 2½ years ago, it would have spent about $40 million in county taxpayer money for a $50 million project. He said the county is now getting more than $30 million from other sources and is still spending about $40 million for a $75 million project.
The centerpiece of the project is a complete renovation of the Stearns building with an 82,000-square-foot addition.
Deferring work on the MacConnell building would mean the county would lose 40% of the funding for the $2 million cost from the state’s capital reserve fund and have to pay 100%.
Commissioner Joe Osgood also favored moving quickly.
“Today I am ready to hand this off to the delegation and let them decide,” Osgood said at the meeting Wednesday. “We have to do something soon for the patients and employees. Time is of the essence. We can’t leave it to the next delegation.”
Patrick O’Grady can be reached at pogclmt@gmail.com.