Factory International, Manchester’s new performing arts centre is nearing completion and is expected to open next June. However, the council is being asked to find an extra £25.2m for the project, taking the overall budget to £210.8m, nearly double the initial £110m estimate when Laing O’Rourke was appointed to build it five years ago.
The constraints of covid lockdowns in 2020 have already been blamed for £45m of the cost increase. Additional increases have been attributed “exceptional levels of inflation, workforce shortages and supply chain disruption exacerbated by the war in Ukraine”.
A report to council states: “These factors continue to significantly impact on the construction and fit-out costs for the building.”
It adds: “Figures from the Department for Business, Energy & Industrial Strategy (BEIS) show a 26.4% increase in prices for all construction work since June 2021. This includes a 58.2% increase in the price of concrete reinforced bars, a 46.3% increase in the cost of fabricated structural steel and a 28.3% increase in the cost of precast concrete products.
“While the existing budget made reasonable allowances for contingencies, it could not have predicted the exceptional circumstances with steep levels of inflation and considerable supply chain challenges that are still being experienced as Factory International approaches its opening in June 2023.
“The ongoing impacts of Covid-19 – with precautionary measures still in place across the construction industry – and challenges associated with the one-off and complex nature of the design have also contributed to budget pressures.
“Value engineering without compromising the vision for the building, tight cost control and efficiency savings have prevented costs from escalating further.”
The Factory International building, designed by Office for Metropolitan Architecture (OMA), is based around large, open spaces that can be reconfigured to host performances that cannot be put on anywhere else in the world. Its 21-metre high warehouse (with a capacity of up to 5,000 people standing) can be divided from its hall (which can house an audience of up to 1,600 seated or 2,000 standing) by a full-height acoustic wall – or opened up into one large space.
Less badly impacted but still under cost pressure is Manchester City Council’s other big capital works project, Our Town Hall – the repair, refurbishment and partial restoration of the Grade I-listed Town Hall.
Budgeted at £330m, the project is being managed by Lendlease. A separate report to council sets out “both the excellent progress which has been made so far and the ongoing challenges faced”. There is potential to overspend by 5% and the completion date is under review.
The report states: “With 90% of work packages already procured there is certainty around a high proportion of costs. However, the volatile economic climate – especially as it is affecting the construction industry where inflation is particularly severe – allied with the impacts of ‘discoveries’ as work progresses mean the budget for this highly complex project is under significant pressure.
“Between July 2020 and June 2022 overall materials prices across the construction industry soared 44.1% with shortages of steel and other metals, plaster, stone and timber for example, as well as labour shortages.”
It adds: “The unique nature of the project also means that although survey work was carried out in advance, further challenges are being discovered as the project team get up close to previously inaccessible areas and into the fabric of the building. In some cases these mean more extensive work is required than originally anticipated – for example because of the crumbling condition of stonework, guttering and pipes. In other cases this can cause design delays as bespoke solutions are required – for example to meet the challenge of enabling the building to meet modern fire safety standards without undermining its heritage.
“Risks are being constantly assessed and addressed but with only around half of the construction phase complete there is still a long way to go.
“While the project is still reporting to budget, sophisticated computer modelling shows that if 100% of the potential risks occur the realistic worst case scenario would be a £17m overspend – equivalent to around 5% of the overall budget.
“The completion date for construction work (which should not be confused with the reopening date for the building) is currently set for June 2024 but this is under review. The building will reopen to the public once construction work and internal fit out is completed. The date for this will be announced later this year.”
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