Tuesday, July 19, 2011

School board switches high-school project back to multiple prime contracts (Updated 5)

Update 1, 2011-07-19 16:30: minor edits for clarity.

Update 2, 2011-07-19 18:45: added link to the school district’s mandate-waiver application. (Thanks to David Huston for bringing it to our attention.)

Update 3, 2011-07-19 22:52: School-board president Josephine Posti writes about the switch back to multiple prime contracts.

Update 4, 2011-07-21 10:25: Dirk Taylor, president of Taylor Structural Engineers, Inc., and a member of the Community Advisory Committee that the school board formed to review the high-school plans, has written a public letter to the school board, condemning the recent switch back to multiple primes.

Update 5, 2011-07-25 15:56: Resident and frequent Blog-Lebo contributor Bill Matthews has also written a public letter to the school board, questioning the recent switch back to multiple primes.

Last night, the Mt. Lebanon board of school directors, on the advice of its architects and construction managers, reversed its decision to have a single prime contract for the high-school project.

Recall that a year ago, when the school board settled on a single prime contract, it did so to reduce the “all-in cost” of the project. As single-prime contracting was explained at the time, it would cost more up front but save money in the long run by reducing our exposure to delays, change orders, and legal claims, which are often expensive and have burned Mt. Lebanon in past projects.

At the time of the decision, school director Josephine Posti wrote on her blog, “The School Board and Community Advisory Committee both identified the application for this waiver [which allows single-prime contracting to be used] as a possible cost-savings to the project, and the Board approved application for the waiver in March.” In Section 4 of that application, the school district claims that, “without a waiver, the cost of completion of this project may be significantly and unnecessarily increased.”

So, if we originally chose single-prime contracting for cost savings, why switch to multiple-prime contracting now?

“Cost savings.” Yes, that was the explanation offered by our hired experts last night at the school-board meeting.

School director Elaine Cappucci found that explanation, for what appeared to be a big contradiction, somewhat lacking. “I’m not going to let you off the hook that easily,” she said. She reminded our hired experts that cost savings has always been an important issue, so why, she asked them, did they wait until now to push so hard for the supposed cost savings of multiple prime contracts?

Our experts: “Because [back then] the project was under budget, or within budget. And now we’re struggling to find ways to bring the project within the budget.”

Now we get to the heart of the matter: the budget. What matters to our experts is not so much the project’s actual cost, but the project’s cost on paper, at bid time.

They’re probably looking ahead to the next round of bidding and wondering what’s going to happen to them should those bids, like the first bids, exceed the project’s price cap. As foolish as they looked the first time the bids flopped, if it happens to them again, their reputations are going to take a ringing blow.

So now they’re urging us to switch to multiple-prime contracting to lower the bids. In effect, they’re advising us to buy lower bids by exposing ourselves to the very real possibility of substantially higher “all-in” costs down the line.

How much higher? According to Mrs. Posti’s earlier blog post, “The Master Builder's Association has estimated cost increases of approximately 13% for projects using multiple primes.”

So here’s the question: Does multiple-prime contracting truly hold the greater promise of cost savings, or did the high-school project, once again, just get more expensive?

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Anonymous Anonymous said...

“Using a single prime contractor for public school building projects would increase
accountability and decrease costs. At the beginning of Mt. Lebanon's recent $50+ million
renovation of seven elementary schools, our construction manager estimated that we
would save between $1.5 million and $2.6 million (3-5% of the project cost) by utilizing
a single prime contract. In addition, scheduling conflicts and duplication of effort would
have been greatly reduced with a single contractor in charge. Our project would have
operated more efficiently and economically under a single prime system.” - Carol Walton, Master Design Team member and former Mt. Lebanon School Director

David Huston

July 19, 2011 5:54 PM  
Anonymous Anonymous said...

I'll bet few in the public recall that the renovation of the 7 elementary schools that was to begin in 2003 was cost estimated and bonds issued at a budget of $44 million.....and the final cost ended up being $52 million !

And Jan Klein now claiming the cost over-run was only 7% ? ? How about 18%, Jan....school math is as bad as the spelling.

The District would have you believe the $50 million 2003 bond issue proceeds were just for the elementary renovations....the factual record will show that $44 million was allocated for the renovation, $5 million for a pool across Horsman where the new Taj Mahal athletic building is now to be sited, and $1 million for the stadium.....all 3 projects were to be 100% debt financed; however the pool and stadium were canceled and the funding reallocated to fund the cost over-runs of the schools. To *add insult to injury* to the taxpayers, the $50 million bond issue was wrapped, resulting in a total debt service cost of $103 million which represents an excess interest cost due to wrapping of $10 million in order to minimize the initial tax hike to pay the debt service...to *schmooz* and fool the public !

It's business as usual in the MTLSD...where proper behavior lessons are never learned.

Bill Lewis

July 19, 2011 11:49 PM  

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