Background
Monterey Peninsula College started an aggressive construction program in 2003 that will last 15 years. The plan is to rebuild the main campus including the construction of 6 new buildings, demolition of 7 existing buildings, renovation of all remaining buildings on campus, and construction of new facilities for a satellite campus. Total costs were initially estimated at $212 million. The largest portion of funding was from a local $145 million bond and remaining amounts were to come primarily from state capital outlay funding.
The Challenge
Initial projects including a new library technology center and plant services complex were completed as budgeted; however, bids for more recent projects, even after being value engineered to bare bones, are coming in 30% higher than planned. Just factoring in construction escalation of the past 2 years and guessing 15% for the upcoming year would indicate the total costs for the district’s facility plan will be closer to $300 million.
Although there isn’t much that can be done to control the escalation of construction costs, the district has worked aggressively to manage project budgets by limiting scope creep, establishing campus standards, and insuring accurate drawings and specifications for bids. In addition, each project has a team that includes the campus stakeholders (department faculty and staff, the director of maintenance, etc.), the project architect, and a construction manager (CM). Architect and CM fees are established based on the initial budget and their contracts make them stakeholders in having the project designed and bid within budget. Where a bid is over budget, they are required to redesign the project without additional architectural or CM fees to the district.
The original plan was to keep all projects within budget by reducing scope and cutting to the bare essentials. In some cases it is possible to reduce the size of a new building or to limit the renovations to an existing building. In many cases, the option of reducing scope sufficiently to stay within budget is not possible. Seismic and accessibility issues can not be left undone. Failing roofs, HVAC, and utilities can’t be left as is. The length and width of the football field can’t be made smaller. With the significant increases recently seen in construction costs, reducing scope alone isn’t going to bring budgets back into balance. The only way to complete many projects is to increase their budgets, which will require the elimination of some projects altogether.
The Response
The district is currently in the process of redoing its facility plan to account for increased costs of construction. Faculty, staff and administration are included in the painful process of re-establishing priorities and budgets based on updated cost estimates and timelines. Unfortunately, the reality is that the district will not be able to do all it had hoped and dreamed. Projects are being downscaled, some new facilities will need to be dropped, and complete renovations will be changed to facelifts only. And, with the current volatility of construction costs, this review and reallocation process will need to be done annually for the plan to remain realistic. For more information you can contact the author Joe Bissell, Vice President for Administrative Services, 831-646-4040 or jbissell@mpc.edu.
Editor’s Note: The problem outlined at MPC is not uncommon to campuses throughout the state. The escalation of construction costs have required districts to re-evaluate the scope, change timelines to move lower cost facilities up, look into re-financing opportunities and face the tough decisions to put a facility on hold until more funds can be identified. The approach outlined must be considered as districts explore ways to meet the expectations of the voters and insure their colleges serve students successfully. But more importantly, while the districts must be good stewards of the tax funds provided, it has become readily apparent that the system requires more support from the state to address the basic needs of our campuses. And, possible state propositions to be considered in November may go a long way to address these issues.
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