There were few surprises for the Morgan Hill School Board in an
audit report on the construction of Barrett Elementary School. The
report, which was requested by the board and prepared by Brad
Saylor of Saylor Consulting, cited four main causes in the cost
overruns for Barrett
’s construction. According to the report, Barrett cost taxpayers
23 percent more than a typical school of its size.
There were few surprises for the Morgan Hill School Board in an audit report on the construction of Barrett Elementary School.
The report, which was requested by the board and prepared by Brad Saylor of Saylor Consulting, cited four main causes in the cost overruns for Barrett’s construction. According to the report, Barrett cost taxpayers 23 percent more than a typical school of its size.
“Checks and balances were absent,” Saylor said at last week’s board meeting, referring to the district’s contract with Jacobs Facilities, Inc., the firm that built the school, completed the first two phases of the Live Oak High renovations and the Live Oak temporary campus and was slated to build Sobrato High. “There were no adequate records to show the district how much it was paying.”
“It was no surprise all to me,” Board President Tom Kinoshita said last week. “The environmental issues, the whole craziness of where the economy was, all that was not a surprise. The missed estimates also was not a surprise.”
Barrett, a 47,667 square-foot K-6 school, was built at a total cost of $16,741,749. The Saylor report gives a cost model, including extra costs specific to Barrett and unusual site costs, of $11,013,172, or $231 per square-foot. A typical cost model, without all the extras, according to the report, is $9,813,172, or $205 per square-foot. Barrett’s cost, without furnishings and fees was $13,141,210, or $275 per square-foot.
The four causes for the excessive cost cited in the report were: site difficulties and city requirements; inaccurate bond program cost estimates, lack of “value engineering,” and over-design due to inaccurate building estimates; contractual issues and relationships; and market/bidding conditions.
“The Barrett site was not typical in terms of work required to make the site building ready,” Saylor said in the report. “The site required $300,000 worth of demolition and a variety of city-required improvements typically paid for by developer impact fees.”
These costs, which included a traffic signal at the intersection of Juan Hernandez Drive and Tennant Avenue, a water retention basin and additional square footage added to the multipurpose building so it could be used by the community, were at least $600,000, and possibly as high as $1 million.
“The unanticipated costs for city services were certainly a part of it,” Kinoshita said. “The district had to assume them all.”
Trustee Mike Hickey asked during the meeting if the City of Morgan Hill had been approached about reimbursement of these costs. Kinoshita replied that they had been asked “many times.”
Saylor said in his experience, the city typically pays these costs.
“This is very rare, very atypical, that they haven’t paid,” he said.
Hickey said the issue is not settled in his eyes.
“We’ll ask (the city for reimbursement) some more,” he said.
Another factor in the inflated cost was poor estimates, Saylor said.
“The original (bond) program was some $2.5 million short of the total considered necessary to design build and furnish a typical school, and was some $3.5 million short when adapted for the Barrett design and site,” Saylor said in the report.
This led to even more problems, as the design for the school was modified.
“The understatement of costs fed the growth in design because management felt that the Barrett project was on budget,” according to the report. “Subsequently, the designers added many desirable features and extras like the extensive covered walk system. In reality, the project was already over budget, and the added features exacerbated the problem by another $500,000.”
The third cause identified by the report concerns the way the construction of Barrett was managed.
“The contract by combining the role of designer, program manager and construction manager took away the normal checks and balances of competing cost estimates from designer and construction manager,” according to the report. “Consequently, faulty estimates went undetected and caused over design of some of major site elements like the extensive site concrete and covered walks.”
Factors beyond the control of the district were the fourth cause identified by the report.
“We saw a rate of escalation (in construction costs) nearly double what we had seen the past couple of years,” Saylor said during the meeting.
The report also cited Jacobs for a failure to allow for market conditions.
“There was a tremendous capacity shortage in the 2000-01 market,” according to the report. “This further increased the construction costs by approximately 10 percent at the time of bidding. The JFI (Jacobs Facilities, Inc.) project manager failed to account for the above market pressure and properly mitigate by aggressively soliciting bidders.”
Jacobs’ contract to build Sobrato was not renewed. The previous board recommended sending out requests for proposals (RFP’s) once a milestone in the contract had been reached. When the selection committee, led by Trustee Del Foster, recommended on Nov. 18 extending Jacobs’ contract, the motion was defeated 3-3.
The board recently selected Turner Construction of San Jose to build Sobrato.
Trustee Shellé Thomas questioned effect the Barrett timeline had on the cost of construction.
“Did the timeline used escalate the cost and contribute to the project’s going over budget,” she asked.
Saylor replied that an overly aggressive timeline could contribute to cost overruns.
“Regarding future projects, if we have a date we need to open by, if we put a definite end date on the project, does that escalate costs?” Thomas asked.
Saylor said that could be a factor in cost escalation.
“If you provide the contractor with an unreasonable date, yes,” he said. “It is extremely important that the district plan a master schedule that meets district needs but also is achievable.”
Saylor said the report outlines four recommendations.
“I appreciate the recommendations; they will serve as a really good tool for us as a board,” Kinoshita said. “This will help us do a better job of oversight. And it becomes clear that we need a really good facilities person for the district. This would be a key position for the district.”
The recommendations included reviewing budgets and hiring a professional cost management firm. An independent monitoring firm or in-house professional should be hired to oversee the rest of the Live Oak renovations and the construction of Sobrato High, the report said.
“I think this would be a tremendously valuable tool,” Saylor said during the meeting. “There are also ways to contract out for these services.”
Kinoshita said he sees that recommendation as an important part of the Sobrato project.
“It’s still a matter of oversight,” he said. “We need a person or persons critically looking at all of that.”
The report also recommended a “thorough review” of the district’s accounting procedures and contract payment procedures.
“This review should identify the areas that need modification in order to prevent confusion regarding contract maximums and billing,” according to the report.
