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That is due to an increase in scope and the escalating costs of materials, freight and labour.
The original design estimate for the project was $9.2 million.
New estimates meant that cost had now jumped to $16.1 million.
The Lake Dunstan Water Supply upgrade project was consulted on with the community in the 2018 long-term plan.
Construction of the new treatment plant was originally scheduled to be completed by mid-2020, but was delayed due to the discovery of lindavia algae in Lake Dunstan.
In response, the Central Otago District Council had to trial alternate water treatment methods, the results of which led to the design of a different and more expensive micro-filtration method of treatment.
The increased cost reflected an increased project scope that included the upgrade to membrane treatment to filter lindavia, the requirement for a larger building needed for the layout of the membrane plant, and facilities to meet improved health and safety requirements, add resilience and provide for future growth.
Given the increase in project budget, the contractor and supplier cost estimates were comprehensively reviewed by council staff and by an independent party, Morrison Low & Associates Ltd, and reported back to the council at its November meeting.
This review concluded that the overall cost estimates were reasonable and in line with market pricing.
It was reported that differences from the original estimate were largely related to changes in scope, and Covid-19 related material, freight and labour cost increases that could not have been anticipated.
It is also recognised that some parts of the original estimate were optimistic.
Capital Projects programme manager Patrick Keenan said Covid-19 lockdowns and ongoing disruption to international material supply and shipping continued to have a significant impact on the progress of the project, and the projected completion date was now April 2023.
Central Otago Mayor Tim Cadogan said despite the significant cost increase, setbacks and complications the project has faced, the Central Otago District Council remained focused on the positive outcomes for the community in delivering the Lake Dunstan Water Supply.
"The project will provide good quality low-lime drinking water, and a safe and resilient water supply for people living and working in Alexandra and Clyde.
"The level of treatment that will be provided will give confidence that Alexandra and Clyde water supplies will meet the New Zealand Drinking Water Standards in what will be a more regulated industry."
He also recognised people in Alexandra had been waiting a very long time for better quality drinking water, and the delays leading to an April 2023 completion date would be unwelcome news.
"However, with shipping issues effecting components coming from overseas, there is little council can do about that."
The $16.1 million project includes a $3.7 million contract to Pall Marshall Water Consortium for the membrane treatment process equipment.
The contract for the remainder of the project scope has been awarded to Fulton Hogan and works include construction of the water treatment plant building, reservoirs, pipe works, telemetry systems and the bore field.
At its November meeting the council resolved for $6.92 million to be included in the 2022/23 annual plan to fund the increase in scope and cost of the Lake Dunstan Water Supply project.