Ontario Construction News
Work on the long-stalled Cambridge Memorial Hospital (CMH) Wing B renovation project will resume in February following a settlement agreement between the hospital, Bondfield Construction Company Ltd., the project’s lenders (led by the Bank of Montreal), Zurich Insurance Company Ltd. and Infrastructure Ontario.
EllisDon will complete the work under an agreement designed to reduce the risk of further litigation or overage costs caused by the project’s delay – and the hospital’s will be fixed at the original $187 million cost, a CMH statement says.
“This is a fantastic day for the communities we serve,” said Mike Prociw, CMH’s executive lead, capital redevelopment.
“Getting this project finished is a top priority for our hospital,” Prociw said in a Dec. 7 statement. “Its completion ensures the extensive planning we made to grow services and enhance our clinical programs will get realized. Cambridge, North Dumfries and the Region of Waterloo will continue to be well-served by CMH both in the present and in the future.”
Bondfield’s collapse in the fall of 2018 – the CMH project was handled by a numbered company associated with the general contractor that went into receivership in December of that year – resulted in what surety broker Petrala Winters Associates (PWA) said “appears likely to go down as the largest loss in Canadian surety history.”
The CMH hospital project was one of several “high profile contractor defaults” that led Zurich Insurance to experience direct losses of more than $400 million (on $565 million of direct written premiums) as of September, 2018, representing a loss ratio of 71 per cent. “This compared to a loss ratio of just over 11 per cent for the same period in 2017,” the broker reported.
Federal Office of the Superintdendent of Financial Institutions (OSFI) records said that Zurich reported 444 contract surety claims by the end of the third quarter in 2018, with total surety claims incurred of $204.630 million total premiums written of $25.164 million.
The settlement agreement, which went into effect on Dec. 3, includes these terms:
- The $187 million guaranteed price for the project remains unchanged. CMH is only required to pay for change orders that may arise in the normal course of the construction;
- Costs above the guaranteed price will be funded through a demand bond from Zurich as defined in the project agreement;
- The hospital received $10 million to compensate for losses related to past delays;
- The project agreement and construction contract remain in place to ensure completion of the Wing B renovation is consistent with the original project budget and scope;
- Zurich has contracted ElliosDon to complete the final phase of this project;
- The projects lenders were paid a lump sum and released of further funding obligations as of the settlement’s effective date; and
- The parties exchanged mutual releases that settle any past claims and surrender rights to make future claims, minimizing the risk of future litigation.
CMH says EllisDon has installed trailers on the site and will begin mobilizing its team. “Their first course of action is to finalize a schedule and hire sub-trades,” the hospital’s statement says. Construction is set to begin in February 2021 and is expected to take 48 months.