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Cost Control

Mar 1, 2009 12:00 PM, By Mike Kennedy (mkennedy@asumag.com)

Managing school construction expenditures in a rapidly changing environment.

Yale University, Kroon Hall New Haven, Conn. Architect: Centerbrook Architects and Planners Photographer: Michael Marsland/Yale University

When Fayette County (Ky.) school officials began putting together estimates for upcoming renovation projects at two elementary schools, they based their projections on their district construction projects from 2007.

"The information we were getting on the construction market was that costs were continuing to inflate," says Bill Wallace, Fayette County's director of facilities design and construction.

But by February, when construction bids were opened for the renovations of Cassidy and Russell Cave elementary schools, the building market had become a different place. In this upside-down world, education institutions like Fayette County are saving millions of dollars because the bids for their construction projects are well below estimates.

"Certainly, we were pleased," says Wallace. "Cassidy was 21 percent below estimates, and Cave was 11 percent below estimates. We had more bidders than we've ever had before."

The economic recession that has dragged down the stock market, wiped out savings and put millions out of work has hurt schools and universities as well — resulting in some building projects being mothballed (see sidebar, p. 24), jobs lost and campuses targeted for closing. The grim financial climate has made it more difficult for many education institutions to acquire the funds needed for facility improvements. However, for those that have funding in place for capital improvements, the combination of declining prices for some materials and the intense competition among contractors for projects has taken the sting out of the sticker shock that often accompanies capital improvement projects. And administrators aren't about to apologize for their good timing.

Need job, will work cheap

Fayette County is able to move forward with construction because voters in 2007 approved a property tax increase. By the time bids were solicited, the district benefited from price drops for oil and other materials. At the same time, the residential construction market was stagnant, and more companies focused their attention on submitting proposals for school projects.

"There is so little construction work out there," says Wallace. "School projects are the largest portion of what is getting constructed. We've drawn back experienced contractors, and we've seen a lot of new folks, too."

Below-estimate bids are not limited to Fayette County schools. Other examples in recent months:

• The bid accepted in December for Morgan Village Middle School in Camden, N.J., was about $21 million; the cost estimate was $27.1 million.

• The winning bid in December for an elementary/middle school in the Egg Harbor City (N.J.) district was $15.2 million; the cost estimate was about $18 million.

• In Medford, Ore., the bid for renovating Lone Pine Elementary School was $700,000 less than the $12 million estimate.

• Officials in the Bismarck (N.D.) district had estimated that a new elementary school would cost $12 million, but when bids were opened in January, the low bid was $8.8 million.

• The town of Marblehead, Mass., had estimated that renovating its Village School would cost $16.3 million; the bid in February was about $11 million.

• The Mountain Home (Ark.) board accepted in February a bid of $15.3 million for a 115,000-square-foot intermediate school; the cost estimate was $17.5 million.

• The Indianola (Iowa) Community School Board approved a $1.9 million construction contract for a new athletic facility; project engineers had estimated the cost at $2.5 million.

• The Richardson (Texas) district had estimated that a new elementary school roof would cost $1.2 million, but the winning bid came in at $895,000.

Before the recession altered the construction market, many schools and universities found it difficult to control expenses and prevent climbing costs from jeopardizing projects. But even now, when many education institutions are benefiting from the scarcity of construction work, administrators must be vigilant about managing costs and planning thoroughly to avoid budget-busting surprises.

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