Price for Helsinki’s new Music House could rise too high for YLE

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Under the present funding system the price for the new Music House must not rise more than by EUR 25 million from the current estimate of EUR 106 million, as the Finnish Broadcasting Company (YLE) will not tolerate any higher increase, says YLE’s Director General Mikael Jungner.
      The formal bidding process for the new music complex ended at the beginning of May. At that point it turned out that none of the contractors was willing to sign a contract at the estimated price. Moreover, the lowest quotation implied that using a lump-sum contract the house would cost up to one and a half times as much as estimated.
      YLE is expected to finance 27 per cent of the construction costs of the music centre, while the share of the City of Helsinki will be approximately the same. The rest of the costs will be covered by the State of Finland.
     
According to the present budget, YLE will have to pay close to EUR 29 million. However, if the house costs up to one and a half times as much as estimated, the share of YLE would amount to something closer to EUR 40 million.
      As Jungner sees it, YLE’s absolute price ceiling is EUR 35 million, which the company is not willing to raise - not even by a cent.
      On the basis of this, the maximum price of the entire project will be close to EUR 130 million. However, following the ongoing construction boom, prices have increased sharply. What if it will absolutely not be possible to build the house within the budget constraints?
      "There are two alternatives: either the music complex will be built in a cheaper way, or another institution will be found to cover the cost overrun over the original budget", notes Jungner.
     
The chairman of the YLE Administrative Council , Kimmo Sasi (National Coalition), is not willing to comment as yet whether or not YLE would opt out of the venture entirely if the costs increase too much.
      "The Administrative Council will make a decision on that issue in due course", Sasi reported.
      For the time being, all financiers state that the original budget of EUR 106 million is still accepted as the basis of negotiations, as new tenders are being expected until the autumn.
     
If the current budget frame cannot be complied with, either new funding for the venture could be found or the entire project could be postponed, said Harri Kauppinen from the City of Helsinki’s Public Works Department.
      According to the current plan, the new Music House will be completed in the spring of 2010.
      The funding of Helsinki’s new Music House will be decided upon by the government and in the end by Parliament. However, Helsingin Sanomat could reach neither Minister of Finance Jyrki Katainen (National Coalition) nor Minister of Education Sari Sarkomaa (National Coalition) for comments on Monday.


Previously in HS International Edition:
  Helsinki Music House could be "cheaper solution" than originally planned (4.5.2007)
  YLE gives approval for funding of new Music House (17.11.2004)

Helsingin Sanomat