Design-Build Contracting Offers Time & Cost Efficiencies For New School Construction

Chris, Governor Davis recently signed legislation AB1402 allowing school districts to utilize design-build for new construction projects and to be reimbursed for it. Give us a sense as to what this means for school districts. What the advantages are for using design-build for school projects? Will design-build save the districts any money?

The state has always had legislation that allowed schools to do design-build. So now there's state reimbursement, if you have a state funded job, which is probably the majority of the school work in California. There is a little bit of a time advantage with design-build. In simplistic terms, you don't have to go through bidding, which requires a couple of months. A contractor puts together a guaranteed maximum price and that guaranteed maximum price is a fixed number that the district knows. If they have to bring things down, they can do it at a very preliminary phase. So when you're talking numbers, instead of having an architect estimate it, you've got a contractor giving you real numbers.

The contractor also can start a construction phase early. You can start on the site work before the plans are approved by the State Architect. You could start on various phases and get those done and out of the way before you start construction, which is another time saver. So, time savings and knowing the dollar value are probably the two biggest advantages.

Is it a less expensive way of doing school projects? I don't think it's any cheaper, except I think school districts, because of the method, have their pulse more on what the cost of what they're asking for is. It's a lot easier for someone to control budgets and costs with this kind of a method.

What are the projects that are most appropriate for design-build?

Design-build is a great thing to do in combination with conventional bidding and construction. A perfect scenario for a school district might be doing three jobs conventionally and one job design-build because then they know what the product costs, they know that they bid these two high schools and it cost them $190 a foot to do this high school. When they're negotiating with the contractor doing a design-build, they can say, ‘hey, we want to get this down to $170 a foot.' Then you can work with a contractor to find out where your real dollars are. It's more of an open book in a design-build job.

A messier job that has multiple phases and complex work, like the Ambassador Hotel site, would be an excellent example of a job that should probably be done design-build-there is so much investigation of the existing building, there are historic preservation issues and a lot of inherent give and take. You want a contractor and board that actually know all those costs. For an architect, it would be really difficult to estimate those complex items if you're doing historical upgrades and you have existing utilities, and it's a much messier job so it's good to have as many intelligent people on board during the process as possible.

Is design-build inconsistent with good planning and good design?

No, I think good planning and good design is a process that involves multiple levels of people; people in the community, the school districts. I'm not sure having a design-build process makes it any better. With design-build, you simply know the cost of those things more quickly. Instead of estimating when a community member says they want a pool, you can instantly go out and talk to a pool contractor and he can give you a quote for that pool and then you automatically know that number. You're just a more intelligent consumer, but I don't know if it's a better design process. You still have to go through the right process to make the design best for the community.

Give us examples of projects that you are aware of or engaged in that show the advantages of design-build for our readers.

The Santee Dairy site in Los Angeles that we worked on is one example. Originally, the district had a 2008 date and they were thinking about accelerating it to 2005. When we started going through their project, because we knew their dates, we accelerated that job and they are actually going to open it in 2004. And the only way that could've possibly been done is with design-build. We started the abatement and the remediation of the site concurrently while doing the drawings. We started the site work and we did a lot of the grading work before the drawings were approved at DSA. By the time we got DSA approval, we were ready to start construction. Because of that, we also pushed a lot on the drawings because the timeframe was part of the negotiation with the school district. So, we figured out a real aggressive timeframe, including a lot of overtime, to get the project done in a manner in which they could get the school done. I think because of that they gained a product that was at least a year ahead of schedule; some people say it was three.

Design-build is done in the private sector all the time because you have a building to lease, you know the lease rates are say $2.25 per square foot. That developer knows what he has to work to so he puts together a pro forma of what he can build upon. So he's got to build an office building on a site for $100 a square foot to make that lease rate work out for that $40,000 square foot building. He puts together a pro forma of how much he can spend for every system and then you design and you build to that pro forma and then that building is built and then you lease it and you make money on it.

Are joint-use school facilities compatible with doing design-build? Or, do you have a problem on the front end getting all of the parties together and saving the time as you just described?

Having multiple parties sometimes makes the design process a little slower because you have to get both parties to buy in and approve it. But every school job you do is mostly joint-use, particularly high schools. You're always laying them out for weekend activities because they're used all the time on the weekends: the sports fields, etc. There are a lot of school districts we work with that have joint-use agreements where the parks donate the land and the school develops the land, the grass, and the fields. They end up having a joint-use agreement and it's not really something that would typically cause delay at all. It actually makes perfect sense. We do a lot of joint-use libraries where the school district doesn't have a lot of money to actually equip the library with books. They're funding out of the state is very minimal in that area. If you have a joint-use with the city, it's very easy to find books, but they can't find facilities.

Same thing with parks and recreation. Sometimes they have money for lighting and bleachers, and things like that where the funding the school district gets from the state typically doesn't allow for money for those kinds of things. You're pretty much lucky to get grass and irrigation into those kinds of areas because the budgets are restricted. So getting that partner in there makes a lot of sense and a lot of school districts do that.

Why isn't that the standard course of business from your experience?

Not every city has the money. Typically you talk about joint-use but the city parks and recreations sometimes don't have any funding. A lot of cities don't have any money they can bring to the table to leverage.

I want to explore this a little more, Chris. We've got a state library bond and a local library bond. We've got a number of state park and local school bonds. We've got $100 million in the state school bond, a $50 million traunch from this latest bond. How do you think the money ought to be used to build these joint-use schools everywhere? How do you align the funding streams to make it happen?

Not all of those multiple fundings work-the library bond is not very much money. It's about $350 million over the state of California. That might end up being one or two libraries in every county. To apply for that is very difficult; it's a very rigorous application process. Part of it is where the funding gets channeled. City budgets and county budgets, with the state budget, are going to be radically cut. All of the bonds you mentioned are on the school district side and they are sized not to fund lavish school facilities, but more minimal ones. It is not a decadent funding source by any means. So it's really about merging two different funding sources toward the ultimate thing you need. I know LA Unified has been focused pretty hard on increasing their facilities. The high school we're doing in the Santee Dairy site, has a pool. We've probably done ten high schools within the past five or six years, and we have hardly ever been able to afford a pool with a state funded school. On a completely state funded school, you could never afford a pool, or bleachers, or lighting for the courts or field and those are things L.A. seems to be funding on a regular basis for their projects because they seem to be very community oriented.

Are there enough dollars allocated to allow the architects to do the kind of collaborative open planning that could allow considering the participation of other departments during the design phase? Or, do time and minimal funding make it hard to do that?

I would say it really just depends on partnerships. Cities and school districts could develop a more "partnering" agreement where they look at every school project as an opportunity for the city-what they could do with a city library and its facility. You're doing theatres and gymnasiums at every school district, and you're doing libraries. Gymnasiums become community gymnasiums. The purpose behind every high school you build is a giant community center. The theatre is a giant community theater and with the library, you can have a city agreement to lay out that library on a public edge where people could come in off-hours to use it.

There are a lot of school districts that have joint-use agreements with counties or cities and joint-use libraries. You have to work out agreements, because it's difficult to have the public enter during elementary school hours. You can't have any public person entering the school at the same time an elementary school kid is there. There are a lot of people, counties, and cities and people who are doing those kinds of joint use agreements all throughout California. They're doing it in almost every school in Arizona and Nevada. It's a very common thing.

Let's go back to the central theme. What are the arguments against design-build that had to be overcome in the pasage of AB1402 and in your work and experience to date?

The design-build takes a sophisticated client. It takes someone who understands the value of a product. That's why if you are building two or three other schools, you know when you negotiate a guaranteed maximum price that it's a good value. Sometimes that's a difficult thing to look at. But mostly there is a bit of design-build that involves trust. You need to make sure you‘ve got everything covered because you're putting together prices based on very preliminary plans; not all the details are done yet. So when you put together a price you have to trust that that entity has everything you want. Not everything is on paper when they give you that price; there is a little gray zone in there and sometimes there is an ability within the design-build process for someone to not be honest, and I think people get nervous. So you have to deal with companies that are forthright in the industry, you have to deal with larger companies that have an investment and good reputation in the industry.

Was that the central argument in opposition all these years or were there any other arguments?

The bottom line is when you do a public bid project, you bid it and you get the value that the market has to bear for the exact product you want. So you know you're getting the most competitive price and it's completely trustworthy. In a design-build you are getting a guaranteed maximum price on a very preliminary basis. That's pretty much the argument. You look at other states and there has been a fair amount of corruption, or at least alleged corruption, with design-build.

Chris, let's end with this question. If you were the czar of new school facilities in the 51st state of the United States, and you had to build 100 schools, how would you improve the system that we currently have here? You've looked at California as a case study. What would you do differently and what would you do the same?

I would fund projects just once. You would apply if you were deemed eligible. Now, the state makes you get in line twice. You apply for design money and then you get in line for design money and then once you get design money, you have to finish drawings and get DSA approval and then you have to get in line again and get money for construction. They're long lines-depending on the district, it might take a year and a half to get into the next line. By then the bond money is gone.