Thursday, February 17, 2022

Cost Management and Best Value in Planning, Programming and Pre-Design

Obviously, the best time to assure the best value for a new construction project is well before shovels hit the ground. But where are those opportunities for achieving that value? We recently prepared a presentation based on our Maryland experience to demonstrate the various ways projects are tested, adjusted, and scrutinized to make sure they're both effective and efficient.  I apologize in advance for the numerous Maryland acronyms.  Here's a synopsis:

TYPICAL PROJECT TRACK: OVERVIEW

Most projects ultimately seen by the Board as part of the USM Capital Program follow a similar track to their inclusion in the CIP.  While this diagram is highly simplified as a linear process from left to right, the reality is that it can be extremely organic and involve multiple inputs, iterations, participation exercises, and opportunities for feedback. 

There are several steps taken, including a variety of inputs and checks along the way from a general need expressed by a campus department to a funded project in design.  Inputs and checks are both based in policies and best practices (top) as well as quantitative checks against financial and other data (bottom).

We’ll discuss this diagram in more detail below, but you’ll note that some of these steps occur at the campus level.  Others occur at the Board level, and then the State level; and, ultimately, the members of the project team (USM project managers and architects/engineers working with campus representatives) become heavily involved. 

In every case, the project concept is evaluated and revised to achieve the best value—maximizing the effectiveness of the solution while minimizing the impact of cost.


REVIEW OF CAMPUS-LEVEL ACTIVITIES

Needs expressed by a college or department rise through the campus process first as intended solutions or ideas for addressing that need.  What follows is very generalized, but the first major check is against the campus Strategic Plan, a document intended to:

  • Detail the mission and goals of the institution
  • Form the basis for the role of the institution moving forward
  • Act as a guide for other planning activities, like (in this case) Facilities Master Plan

For example, an idea or proposal for new research space for a particular department on campus would be weighed against statements in the Strategic Plan about building research capacity. 

Once a potential solution is deemed to be consistent with the Strategic Plan, the input of potential users of the proposed new (or renovated) facility is sought to help develop the concept further for consideration by the campus in general.   The project concept is evaluated in the context of

  • Benchmarks or similar projects
    • Commonly used technique for assessing validity of proposals
    • DBM considers comparisons when approving facility programs (types of space, sizes, cost, etc.)
  • The Facilities Master Plan
  • Existing space already available
  • General space guidelines for the type of facility being considered
  • Financial resources available to the campus and/or the possibility of State funding

This process can take several years and iterations to fully develop and, following input from campus facilities planners and (per our USM Capital Budget Instructions) a check of the proposed cost from the Service Center, the “concept” becomes a formal capital request that is considered by the institution’s president to be included as part of the prioritized list of project requests submitted annually for consideration by the Chancellor and Board of Regents for funding (and or submission to the State CIP).


REVIEW OF BOARD, STATE, AND PROJECT TEAM ACTIVITIES

Requests submitted to the USM Office come as priority lists of projects. There are two separate lists, one for State funding consideration (in the Governor’s CIP) and one for consideration in the System-Funded Construction Program (SFCP).  For simplicity, we’ll discuss primarily the process for State requests, but I’ll make note of any specific steps related primarily to the SFCP.

The first test of the project requests is one the State requires: weighing the proposal against available resources.  On the State side, this means paring down many priority requests that come from the institutions to a small number that are either already in the Governor’s CIP or would be considered the logical “next” priority needs for State funding consideration.  (On the System-funded side, this is where the affordability of a particular request—given an institution’s resources and the fiscal health of its auxiliary operations—is used to reduce a larger list of proposals down to a smaller list of projects that will move forward in the process.

At this point, the project Facility Program becomes critical to the process. If it hasn’t been prepared and submitted already, a formal Facility Program is required (by law) for the project to continue in the State funding process.  (Formal programs are not required for SFCP or auxiliary-funded projects, but a similar document can be extremely informative and is strongly recommended.)  The process of developing a Facility Program follows a prescribed process with several required topics and sections. 

Program writers (typically a campus Facilities Officer and/or an outside architectural firm), working with extensive groups of campus representatives to flesh out the details of a project and weigh a large amount of data.  These data are presented in the program document to:

  • Provide a description for designers (broad space relationships and detailed space requirements)
  • Help justify the project proposal for funding to decision-makers
  • Identifying facilities problem to be resolved
  • Highlight the consequences of not correcting problem (impacts on operation or service delivery)
  • Provide strong quantitative data support of the proposal (e.g., performance measures, guidelines, standards, revenue), both historical and projected
  • Review alternative scenarios and comparative data with other projects
  • Demonstrate validity and justification for recommended proposal

The development of a project program and its subsequent review process by the USM and the State (Department of Budget & Management) can take as long as one to two years or more. The State, in fact, has strict deadlines for submission of a program that occur well ahead of any funding consideration in the State CIP.  It is during this process that the project concept undergoes the most intense scrutiny toward the development of a final project scope that is fully justified and provides the best value.

Key data points used in developing a project program and reviewing it for approval include:

  • Enrollment and Strategic Plan data
  • Approved State Space Guidelines for various space categories
  • Metrics of space availability, utilization, and occupancy, including space surplus and deficiency reports (based on the State space guidelines, see note below)
  • Estimated replacement and renovation costs for campus space, and estimated deferred maintenance backlog

Note about Space Guidelines.  In planning buildings, institutions evaluate their space needs in certain categories (e.g., classroom and teaching labs for a new science building) and propose a new facility that accommodates their projected needs in those areas, as well as providing other desired amenities for students and faculty.  The limiting factor in terms of overall size is often what is deemed "affordable" to the State, but DBM also compares space guidelines data to be sure any new space is justified.  So what are these guidelines? And how are they used?

There are a variety of formulas established by the State for various segments of higher education to calculate the space an institution "should" have (in a number of categories), based on standard guidelines. There are 30 different categories of space guidelines.  The calculations can be somewhat complex, and the standards vary by type and size of institution, but here are some simplified examples:

    General Classrooms   1.11 to 1.71 NASF* per WSCH*
    Teaching Labs      4 to 7 NASF per (Lab) WSCH
    Research Labs      650 to 1,000 NASF per Module for PhD and Research Programs
    Faculty Offices      1.66 NASF per FTE Faculty or Staff
        *NASF=Net Assignable Square Feet; WSCH=Weekly Student Contact Hour

The guidelines are reviewed and revised periodically. The most recent change focused on research space.  The State recently announced they’ll soon begin a new review, this time focused on helping prepare institutions for the quick pivot in use of facilities should it be necessary to address a future pandemic-like situation.

Each year institutions prepare comprehensive reports through the Space Guidelines Application Program (SGAP) and submit updated calculations for various space types, as well as an updated inventory of space (by category).  These reports are, in turn, provided to MHEC, DBM and DLS.  The USM Office also prepares a two-page summary that includes actual inventory and projected inventory in major academic categories, and an estimate of "surplus" or "deficit" (current and projected) based on the accepted guidelines.

Links and examples are provided in the REFERENCES section below.  Copies of sample SGAP Reports, SGAP preparation Instructions, and annual Space Inventory Summaries can be obtained from the USM Office of Capital Planning upon request.

Once a facility program is approved, the project can then be considered for the Governor’s CIP.  The process of selecting which few projects will be recommended for State funding is the Board-driven “USM Capital Budgeting Process” with which the Board is familiar.  The annual process culminates in the approval of a new five-year capital request to the State (CIP) and a five year System-Funded Construction Program (SFCP).

Once funded for design and following the award of a design contract, the project team (including the architect/engineer and the user group) complete a specialized review of the scope of the project called a Program Verification.  Typically, the process involves a series of meetings to review room diagrams and project requirements outlined in the program, discussing the function of spaces, and confirming the information contained in the original program. The process can also involve confirming that space allocations contained within the existing program are adequate and seem to meet the needs of each space.

Information regarding the estimated project cost and scope is shared with DBM after the completion of each design phase.  This ensures that the intended (and budgeted) scope of the project has not changed since the project was funded.

Once the first estimates are prepared during the design process (and perhaps multiple times during the process), the potential construction cost of the project as it is designed is compared with the available budget.  Should there be insufficient funding to do the intended work, the project team (again, with the user group) will undertake a Value Engineering process to adjust the scope/budget of the project by suggesting changes in materials, methods, or project scope to bring the cost within budget.

 

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IMPORTANT REFERENCES RELATED TO THESE PROCESSES

Note: Links are immediately available via the websites listed. 

Documents are available from the USM Office of Capital Planning.

Link:  USM Strategic Plan
https://www.usmd.edu/strategic-plan/USM-Strategic-Plan-Outline.pdf

Document Available:  Benchmarking Similar Projects
Example of a comparison chart showing costs for USM projects against similar projects at other institutions

Link: Facilities Master Plan Guide
http://www.usmd.edu/usm/sustainability/docs/MasterPlanGuide.pdf

Link: Example of campus-specific space policies--College Park’s Classroom Master Plan
https://faculty.umd.edu/media/209/download

Link: Available Resources (Reference Governor’s CIP)
https://dbm.maryland.gov/budget/Documents/capbudget/Proposed/FY2023-CapitalBudgetVolume.pdf

Link: Facilities Program Required for State Funding
https://law.justia.com/codes/maryland/2005/gsf/3-602.html

Link: State Facilities Programming Guide (listing detailed requirements)
https://dbm.maryland.gov/budget/Documents/capbudget/Instructions/facilityprogmanual.pdf

Link: Example--Facility Program for Iribe Building (College Park); space data starts page 229
http://www.bidnet.com/bneattachments?/330393641.pdf

Documents Available related to Annual Reporting of Space Data

    Annual Space Utilization and Occupancy Report
    Annual Space Surplus/Deficit Report
    Annual Replacement and Renovation Cost Comparisons
    Annual Deferred Maintenance and Backlog Reporting

Link: MHEC Space Guidelines Study and Confirmation
https://mhec.maryland.gov/publications/Documents/Finance/MDCipCapFacRep.pdf

Link: Key space metrics for USM Institutions
https://facilities.umd.edu/sites/default/files/pdf/space1999.pdf

Link: Revised Research Space Guidelines for Maryland Higher Education
http://dlslibrary.state.md.us/publications/JCR/2016/2016_246.pdf

Link: Statewide Study of Higher Education Funding (see pages 37-42 for capital recommendations)
http://www.msa.md.gov/megafile/msa/speccol/sc5300/sc5339/000113/011000/011441/unrestricted/20090330e.pdf

Link: USM Capital Budgeting Process
http://www.usmd.edu/usm/adminfinance/CapPlanMatrix.pdf

Document Available: Program Verification
Example—USMSM Program Verification Report

Document Available: Value Engineering Report
Example from USM Project

Document Available: Bid Report with Alternates
Example from USM Project


Friday, September 11, 2020

A Brief Diversion for 9/11


A construction web page linked an interesting article about the origins of traditional "topping out" ceremonies from a 2013 issue of Slate magazine (also the source of the photo).  Having witnessed the placement of trees and other secular and religious symbols on the top of buildings in at least two different countries, I was fascinated by the universal similarity of the tradition that seems to have sprung up spontaneously from a number of different sources and has remained, according to the article, almost unchanged into our modern era.

According to the article, "the purpose of the ceremony—at least for shining skyscrapers—is usually couched in comfortably post-pagan terms: a celebration of a so-far safe construction site, an expression of hope for the secure completion of the structure, and a kind of secular blessing for the building and its future inhabitants."

The article includes a number of photos from the topping out ceremony during the construction of the World Trade Center towers in New York City.  Seeing these photos today was a sobering reminder of the events of 19 years ago and the hope embodied in the topping out ceremony that was lost that day.  It's worth sharing today to remember those who perished and to extend anew the hope that we can, through traditions like these, find a way to come together as a human civilization and avoid such tragedies in the future.

Thursday, August 20, 2020

A Call to Action: Resilient Building Design for the Post-COVID Era

The optimal configuration and functional characteristics of buildings have changed forever. Even if the current Coronavirus pandemic can be safely and effectively mitigated with a vaccine and/or therapeutic drugs, there will be a “next time.”  Like the permanent security protocols for travel that were instituted following the tragedy of 9/11, we cannot ignore the lessons of the last few months, nor can we assume we’ll ever really be able to go back to the way things were before 2020. 

Facilities planning is in the midst of a paradigm shift.  We should embrace this change and steer capital resources to those projects and renovation solutions that provide the most flexible and functional facilities into the future.  Projects that address deferred maintenance problems will continue to be a priority.  New (especially replacement) facilities and renovation work will also continue.  A comprehensive change in the overall way we approach the design of these projects, however, is needed.  And that change will have to be universal.  After all, unlike most natural events that jeopardize only local or regional communities, the current pandemic has impacted the entire World.       

We have seismic codes that dictate the construction of buildings to withstand earthquakes.  We also have engineering design and site restrictions for construction in flood zones.  In the same way, it will be necessary to fundamentally change the way we design new and retrofit educational and work spaces with sufficient flexibility to preserve maximum operational effectiveness during times of “normal” health and during a pandemic. 

To this end, projects in design and those programmed in the budget pipeline should be reevaluated in light of what we now know about the potential spread of a serious communicable disease through human interaction in buildings. We don’t yet know everything about how best to address this problem through design, nor is it likely we’ll have a whole new set of proven standards in the near term.  But we can’t allow spending to continue toward construction of buildings that could be partially unusable upon completion.  Yet this is what will happen if we don’t consider the reality of the future. 


Taliesin-based architect Aaron Betsky penned an opinion piece in the AIA’s Architect Magazine (also source of photo above) earlier this summer saying:

Designers should mobilize, I believe, to respond to these issues. At the most immediate level, we need to figure out how to develop materials and forms that are safer for common use, that don’t require the endless application of disinfectant, and that aren’t manufactured using petroleum-based or metal products. If that’s impossible in practice, then we need to design objects, from operating buttons to tabletops, that can withstand social use with limited cross-infection. Gesture-based controls might be one high-tech solution, but if gas stations and fast food restaurants can kluge together plastic guards, can’t designers do something better?

We need a post-air conditioning world: well-ventilated and open spaces that replace the hermetically sealed environments in which so many of us work, live, and play. The spaces we occupy together need to be designed so we can do exactly that—be together—while minimizing disease transmission. We realize now more than ever that offices, restaurant, public spaces, and cultural and sport venues are, above all else, social spaces that define us through our collective actions, interactions, and affinities. We cannot redesign them to separate us but must shape them to bring us together as safely as possible. We now know that some us can work from home, but isolation is not the answer. We need more, not less, physical conference rooms and hang-out spaces, more places of interaction and density. The means of bringing us together need to be safer, cheaper, and more accessible.

A FEW EXAMPLES

Architects and space planners are beginning to discuss general guidelines by which we can begin to evaluate architectural programs and building plans.  For higher education, some of these may include:

·        Large lecture spaces and open meeting areas.  For existing buildings, this means the use of large facilities with fixed seating by a much smaller occupancy for social distancing.  For new facilities, the use of moveable chairs or desks (in lieu of fixed seating) could allow for larger student numbers in “normal” times that could be easily converted as needed.  Large auditoriums and theaters may have to be re-imagined to maintain the same type of flexibility.  Large scale lectures or other mass gatherings may have to be done remotely as a matter of practice.

·        General classrooms.  Moveable partitions could provide the use of moderate size classrooms for use as smaller class and conference rooms during “normal” times, while the same spaces (without partitions) could accommodate a more moderate, physically distant population.  Placement of barriers and shields would not impede normal operations.  Design could include the technology to incorporate remotely located students or recorded lectures.

·        General building configuration and operation.  New facilities could be designed with multiple entrances and exits, as well as wider corridors and other accommodations for safe and effective flow of students, faculty and staff.  Common areas that provide collaboration opportunities during “normal” times could double as expanded circulation space when needed (much like HOV lanes on the highway). HVAC standards will have to be reevaluated, in light of the need for better ventilation, filtration and airflow.  Facilities to accommodate improved sanitization, cleaning and PPE availability (as needed) will be important.

·        Campus spaces of other types, including teaching laboratories, research labs, and auxiliary or athletic functions, would require similar consideration for ongoing safety and flexibility. 

These are but a handful of the kinds of suggestions that could provide needed flexibility for university facilities of the future.  As guidelines and commendations related to the transmission of disease in buildings evolves, likewise plans for new buildings should be reevaluated and modified as necessary to preserve the best possible outcome.

NEXT STEPS

1.     Begin with a broad conversation involving interested facilities planners and other campus stakeholders.

2.     Pursue a variety of potential changes and guidelines in more detail; and, as you identify specific recommendations that may affect approved space guidelines, involve your funding partners and oversight agencies.

3.     The topic should be added to facility programs for future projects and to the scope of facilities master plan updates.

4.      A parallel process would look carefully at the scope of construction projects (both those in design and those in the capital queue).

Wednesday, August 19, 2020

COVID Series: Beyond Cleaning and Distancing

Universities worldwide are either in the midst of welcoming students, faculty and staff back to campus or planning for their eventual return.  We’ve been scrambling ourselves to address the critically needed changes to facilities like signage, separation screens, strategic placement of sanitizing supplies and HVAC modifications.  Operational changes, personnel schedules, testing and illness evaluation regimens, and a host of restrictions and suggested behavioral changes are being made.  Even so, most classes are being held remotely.  Institutions are learning as they go, borrowing the best ideas (and discarding those that aren’t) from other campuses.  The “welcome back” documents I’ve seen published by schools and businesses are lengthy.  The impact of the COVID-19 reality is significant. 

ADAPTING TO THE "NEW NORMAL"

Campus safety has always been paramount in every decision we’ve made. But this new era brings this priority to the next level.  So what does COVID mean in terms of existing buildings?  Forbes magazine recently published a list of ten college space and function adaptations that they expect to be the “new normal” for all of us moving forward.  They include:

1.      Large lecture halls and open spaces will become “mid-size” classrooms for lecture-style classes. Universities have found reductions of up to 80% are needed (i.e., a 100-person classroom now accommodates 20 students) to maintain the recommended 6-ft. social distancing.

2.      All classrooms, of all sizes, will be modified to provide (a) options for physical barriers between instructors and the class, (b) signage and/or floor markers indicating required spacing of student seats, and (c) technology needed to accommodate remotely located students (synchronous learning) and/or recording of lectures (asynchronous learning).

3.      Some conference rooms, teaching labs, and other shared spaces expected to see reduced usage will be converted into small classrooms or multimedia studios for class production.

4.      Buildings will have designated entrance and exit doors rather than allowing all doors to be used for both. Guidelines and signage will be used to direct personnel flow (direction of movement) in all buildings. Hand sanitizing stations (and PPE stations where appropriate) will be placed on all floors of all buildings.

5.      Dining halls will significantly reduce seating occupancies, relying instead on more take-away service. To accommodate variety in meals available, dining services may move to pre-ordering meals by a daily menu app. Self-serve food stations will be eliminated. Some cafeteria-style service may be possible but only with addition of barriers between food service workers and students. Indoor and outdoor spaces elsewhere on campus may need to be added for students to eat their take-away meals.

6.      Recreational spaces (gyms, courts, pools, workout spaces, playing fields) will be strictly controlled for access. Students will sign-up for times via an app.

7.      Residence hall density will be significantly reduced. All rooms will be transformed to single occupancy. Common areas either be converted to additional single rooms or restricted for use. Common bathrooms will have restrictions on occupancy. In essence cutting the on-campus housing by half, colleges will be forced to explore off-campus options (hotels, apartments) or consider the use of temporary housing units. Those institutions that typically offer housing for students in their first two years will only guarantee housing for first-year students. Off-campus housing apartments will be marketed at a premium and the available housing stock will quickly be tapped out.

8.      Greek houses and other social houses under the university’s jurisdiction will either be forced to close or have severe restrictions for occupancy/use be placed upon them. Off-campus or unofficial Greek or social houses may continue to exist with limited or no restrictions, providing a nexus of unsanctioned activities that attract large numbers on weekend evenings.

9.      Student centers will see dramatic restructuring of their programming, usage, and spaces. Maintained will be open areas for studying (with social distancing), coffee and light food services (take-away), and student services offices. Eliminated will be large dining or event spaces, dense retail (e.g., bookstores), restaurants and pubs, theaters, etc. Some spaces may be able to be repurposed as classrooms or even student housing. Major student gatherings and events will be held virtually or not at all.

10.   Varsity athletics facilities will remain in use subject to decisions by the NCAA and individual athletic conferences. However games will be played with very limited (or no) spectators in attendance. Teams (athletes, coaches, staff, medical, and supporting personnel) event/facility management personnel, and media personnel will be subject to strict testing protocols. Indoor sports will be particularly impacted by attendance restrictions. Virtual fan experiences will be created for online audiences."

 Students at Duke University (from Duke's Instagram Page)

 WHAT COMES NEXT?

While it’s almost impossible to imagine right now, what of the “post-COVID” era?  What do we expect well into the future? How do we plan for what comes next?  Physical distancing for safety fills available space quickly; and will impact what kinds of space we can best utilize (e.g., open concept, efficient HVAC, enhanced flexibility). 

One thing we know for sure is that the physical assets of our institutions will continue to require ongoing modification, protection, and repair.  Reduced campus occupancies in the near term may actually facilitate renovation in occupied buildings.  And yet the need for new facilities to support critical facilities like health care and research will continue.  These critical functions have a direct positive impact on the populace.  Investment in construction itself also helps sustain economic recovery.

A series of blog posts produced by Gensler outlines a variety of impacts the pandemic will have on the future of the built environment.  A post related to highereducation asks the question:  “In the long-term, what can we learn from this experience that we can carry forward to future-proof our campuses?” They suggest a paradigm shift, arguing that “this crisis (is) a catalyst for change.”  They cite an observation that seems to becoming mainstream:  “Schools won’t return to the status quo. Everything — from building design and curriculum to operations and maintenance — may need to adapt to a new normal.”  Some suggest it could be that way forever.  We can’t assume the next pandemic (or similarly dire circumstance) will wait another 100 years.

The office furniture giant Steelcase shared a research piece titled “Designing Post-COVID Learning Spaces.”  Never before has the value of physical interaction in business and education meant more, now that such interaction is not possible.  The Steelcase article notes:

As we look toward the future, learning spaces will be reinvented to enhance the benefits that face-to-face educational experiences can offer. Pedagogies and calendars will consider which activities are best online and in person, and our spaces will need to reflect those new priorities. There will be greater emphasis on safely supporting social and spontaneous learning in addition to finding new ways to enhance a scholarly atmosphere and energy in the physical environment that can’t be replicated online….

This means educational space planning paradigms of the past, driven by density and cost, need to shift. Flexible and fluid spaces will better support the adaptability expected of educators and students. And enhanced blended learning connections will bring online and physical experiences together to create an elevated sense of community.

Many parents and student supporters have come to realize the tremendous value of great educators and educational systems during the pandemic. Learning institutions that have been most successful have had a robust blended learning platform, student-led educational experiences and have created a community of support for all students. 

Those who try to hold too tightly to the past may fail to excel as they try to navigate what’s next. In the future, schools and campuses will be more important than ever.

Exactly how that new campus looks and what we will need to do in order to build it and operate it safely will be the subject of future entries.


Friday, March 6, 2020

Why So Expensive?

Recent questions from a variety of sources within and outside the institution have prompted a discussion surrounding a fairly common topic for those of us who plan and build facilities for colleges and universities.  Specifically:  Why do our buildings cost so much? And what can we do to help reduce those costs?  Here are some of the responses we prepared.

WHAT DRIVES COSTS FOR PROJECTS AT PUBLIC COLLEGES AND UNIVERSITIES?

As we see it, there are two basic tiers of impact: (A) the requirements for our building projects that can increase their cost vis-à-vis the private sector; and (B) the more recent, market-driven issues that appear to be driving costs for all sectors even higher.  The former is often a local, regional or state-level impact, while the latter can involve national trends.

Cost Implications Inherent in All Public Higher Education Projects

Public university projects are complicated and subject to a host of requirements related to the operating demands of the campus and the laws/regulations of the state wherein they reside.



Regulatory

As state entities, public universities are subject to regulatory requirements that, in addition to the direct cost of compliance, can generate “opportunity costs” in a rising market.  Contractors or subcontractors, in some cases, elect to raise prices in response to added paperwork and more requirements or, as has been the case, elect not to bid a job at all and thereby increase the cost by reducing competition. Not every item applies to all projects, but the following examples (listed in order of their likely applicability) are useful:
  • The university’s own policies and state statutes and regulations can introduce multiple levels of approval and extensive documentation that makes our projects less attractive, by lengthening bid periods and time between time of bid and contract awards, as well as change order processing.
  • Some states have requirements to purchase materials and services from specified vendors or suppliers.  A requirement to “Buy American Steel,” for instance, will limit competition, though the benefits of such a provision in terms of quality and economic development may outweigh the initial cost premium.
  • Union participation, minority business goals and prevailing wage requirements are sometimes part of a public university project, whereas they may not be required of a private developer building in the same town.  Again, contractors and subs take these into consideration when bidding work on campus.  Like the purchasing provisions mentioned earlier, however, often the good will generated by such practices outweighs the added cost, though the capital budget is affected either way.
  • Bonds and Insurance may not be required in private sector.
  • Environmental requirements (green building certification, storm water management, sediment control, reforestation, historic preservation, etc.) may be requirements on state projects, whereas the private sector may not be as restricted.  Again, however, there’s no argument here that these aren’t worthy and beneficial goals for the state.  They sometimes do, however, come with a need for a greater short-term capital investment.

Logistics

Campus environments are uniquely crowded, busy places, often 24 hours a day.  Timing of projects around class schedules and academic calendars to minimize disruption of campus operations is an issue.  Often, facilities being renovated must continue in operation (at least in a limited way). Parking, staging and access issues are exacerbated in an urban campus setting.  Contractors build these temporal and spatial restrictions into their bids as contingencies.

Scope

University projects are typically more comprehensive than comparable private sector projects. University projects may include the elements noted below.  And although some of these may be required of a private developer, they are generally not included in quoted cost-per-square-foot comparisons.
  • Demolition and abatement costs
  • Central Utility Plant upgrades
  • Developer quoted $/sf often does not include all tenant fit-out costs
  • New utility connections such as electric, telecommunications, steam, or chilled water beyond what would typically be in a private development
  • Extensive site work outside the project limits, such as roads, sidewalks or new quads
  • Phasing or enabling work; ancillary construction to permit the main work to proceed
  • Public Safety issues, lighting, security systems, emergency communication, etc.
  • Standards of construction, university buildings are built to be highly efficient and maintainable throughout a fifty year life, with the structures themselves built to stand up to 100 years or more; with the internal flexibility to reconfigure and replace components throughout that life.
  • Higher levels of system reliability and redundancy for some University projects, particularly teaching and research lab facilities. 
Comparable Projects

Many university projects, especially research oriented projects, lack good examples of comparable private sector construction. In other words, valid comparisons of higher education projects with those in the private sector cannot be easily made, nor should they be the basis of policy decisions at the state level.

Institutions in other states experience the same types of unusual impacts on construction cost.  A recent presentation (link here) by the facilities office from the University of California, Santa Cruz stated that, “when comparing cost per square foot, cost per bed, or total project costs of apparently similar projects, it is important to know the scope of the projects in the comparison. The scope of a public UC project is likely to be different than a similar project in the private sector.”

Issues listed included: Occupancy by the owner, program complexity, a long-term investment in durability and operational efficiency, the obligation of the project to support campus infrastructure.  Ultimately, the presenters determined that “UC may expend greater initial cost to gain greater long-term value…. Public university projects represent long-term investments in the on-going development and re-development of campus buildings and infrastructure in support of the academic mission… Costs for equivalent scope (are) usually higher within the UC than for projects built by private developers.”

Another recent post by the Helbling Associates (link here) includes the headline: “U.S. Higher Education Construction Shows No Signs of Slowing Down.” The article includes the following:
     
Not only are there a multitude of projects going on, but the costs of some of the capital construction programs are astounding. And, there's no end in sight. Competition is strong in higher education, and institutions need to keep pace by building new facilities and modernizing/updating old ones for aesthetic and operational purposes and to continue attracting students.

According to ARC, a technology and document solutions company for facilities management, competition and changes in enrollment are challenging colleges and universities of all sizes. The firm says a survey commissioned by the Association of University Directors of Estates (the UK’s equivalent of our APPA/Facilities Officer organization) reported that 67% of respondents (students) viewed facilities as critical to making their college decision, while only 47% said reputation was important. What do they pay the most attention to? - Recreation centers, dining halls, career services, and other similar facilities…

A recent construction brief in College Planning & Management that outlined what keeps these professionals up at night resonated with us...

Top challenges of major capital construction programs on higher education campuses

·       Aging workforce - Numerous retirements within design, construction, and facilities teams expected over the next several years.
·       Allocating and building adaptable/flexible space.
·       Following rules and regulations for zoning and permitting.
·       Balancing reactionary vs. proactive approaches to diverse projects.
·       Preparing space and facilities for future technology advancements.
·       Weighing the benefits of public-private partnerships versus conventional funding, and initiating the concept when appropriate.
·       Minimizing inconvenience and distractions, and maintaining operations through construction and renovations, while also making process efficient. Determining optimal times for projects to be completed.
·       Mitigating potential negative impact of bureaucracy on delays and costs relating to vendor selection and procurement.
·       Addressing and adequately planning for deferred maintenance.
·       Finding construction materials that match those used in older buildings.

The bottom line is that higher education projects are unique among construction projects in general, yet they are similarly complex and higher cost no matter where they’re built.



Market-Driven Impacts on Cost

In general, there appears to be some increases in certain materials and equipment, but these tend to be cyclical.  An even larger issue affecting construction Nationwide appears to be labor costs.  Currently, this situation will not be resolved until the market slows down.  

Material costs are fluctuating. Recent project bidding on a Baltimore area project has resulted in a 20 – 30% increase in metal based materials (steel, reinforcing, metal studs, curtain wall, ductwork, piping, metal panels, and conduits).  With material costs accounting for approximately 40% of the budget, this has been a tremendous impact on project budgets. This can be attributed to tariffs, but is also seasonally affected by major storm damage across the U.S., fires in California, storm damage across the mid-west, the south and the U.S. Virgin Islands, all areas where restoration and re-building is still occurring. The need for materials such as drywall and lumber in these areas has led to high demand, low supply and higher costs nationwide.

On the labor front, subcontractors are able to decide what projects they want to be involved with and avoid those projects with inherent “risks” to their profit (e.g., difficult access, transportation, regulation). Where hard prices are sought, they often include a significant increase to account for these risks.  Here in Maryland, we’ve noted that regional differences within the state are enhanced in this market, with the state’s eastern shore posing a particularly difficult challenge.  An article in the Baltimore Sun (link here) last December, included the following:

Some construction projects in Maryland are costing tens of millions of dollars more than original estimates, in large measure because of a lack of skilled trades in the region…  “It was about 2014 when the labor shortages started appearing, first in the D.C. submarkets then in Baltimore a couple years later, then fairly prevalent throughout the state now,” said Maryland Center for Construction Education & Innovation President Bob Ayudkovic.  He said that the labor shortages in Maryland, and nationally, can be traced back to the Great Recession of 2008 to 2009….

Issues include a high demand for and low supply of skilled workers, which result in higher wages, adjustments to the scope of projects and rebidding trade packages. [Project] documentation also indicated that multiple large mechanical, electrical, and plumbing contractors are no longer in business….

Lt. Gov. Boyd Rutherford said during the board meeting that Maryland lacks skilled workers who are able to fill in-demand, high paying jobs.  “I would like to see more students in Maryland be exposed to apprenticeships and skills training opportunities so they are aware of all of their options for employment,” Rutherford said in a statement…

The cost of labor increases in part because people have to make the lumber and materials, which includes production cost, said Aydukovic.  The cost of professional services, such as architecture, engineering and financing, also has an additional cost.  Ayudkovic said that there is wage inflation among construction companies across the United States, “from the lumber yards, to the skilled craftspeople on site, to the professionals in the office that are contributing to the increasing costs of construction.”  He said that these jobs, which include the groundwork of being electricians and plumbers, and laborers of a certain sort, take a lot of brains and dedication.  

In an October 2019 report in the trade publication EC&M, the Associated General Contractors’ (AGC) Ken Simonson said:  "Even more states probably would have posted gains in construction employment if firms could find enough people to hire. They are finding most craft positions hard to fill, even though average pay in construction pays is higher than the all-industry average in nearly every state."

Longer term this situation will exacerbate.  According to NCCER’s report ‘Restoring the Dignity of Work’ of 2018, “The average age of a craft professional is 47. In 2019, the last of the Baby boomers turn 55. By 2024, many will begin retiring. Eight years from now, 29 percent of the current construction workforce will retire in 2026. Thirteen years from now, 41 percent of the current construction workforce will retire in 2031. Considering the time it takes for an individual to become fully trained as a construction craft professional (8 to 12 years depending on the occupation), we should have already started addressing this challenge.”

The AGC says: "Contractors across the nation are taking steps to alleviate labor shortages, including hiking pay, expanding training programs, and becoming more efficient. But they cautioned that many firms report labor shortages are affecting construction schedules and costs. They urged Congress to pass measures to boost career and technical education and provide a lawful way for more immigrants with construction skills to enter the country."

Just one example of this market impact on a recent project here in Maryland is the recent release of bid packages for the new major science teaching and research building on the eastern shore.  As the project moved through the bidding stage, two of the four intended mechanical bidders dropped out when the state announced they’d soon begin repairs on the Bay Bridge, the only link between the urban centers of Washington DC and Baltimore and Maryland’s eastern shore.  As subcontractors are more able to “pick and choose” their work, and as more suffer from a shortage of skilled labor, it is likely more projects will suffer.


The extremely busy construction market has resulted in a high demand for skilled workers but the supply of qualified workers is low, driving up wages as contractors compete for workers.  We are currently seeing the lowest unemployment in the construction market in over a decade.  The union benches are empty of employable trade workers.  The deficit of trade workers has given the ability of the unions to ask and have annual salary increases, and there is another 4% salary increase expected this year. 

As an example of the extreme shortage of skilled trade workers, at a project at one of our constituent institutions, a builder needs 60 carpenters to meet the schedule, but they are only able to find 30 carpenters that have the qualifications to work on a multi-story building.  Similarly, on another projects, weather delays that would be best mitigated by working two shifts are causing schedule extension due to insufficient manpower availability. 

A study published by the AGC in August 2019 (link here) by the AGC reported that “eighty percent of construction firms report they are having a hard time filling hourly craft positions that represent the bulk of the construction workforce… Association officials said the industry was taking a range of steps to address the situation but called on federal officials to takes steps to assist those industry efforts. ‘Workforce shortages remain one of the single most significant threats to the construction industry,’ said Stephen E. Sandherr, AGC’s chief executive officer. ‘However, construction labor shortages are a challenge that can be fixed, and this association will continue to do everything in its power to make sure that happens.’”
  
In Maryland, market conditions and the lack of skilled labor forces have resulted in higher bid numbers and/or low interest in bidding which in some cases have resulted in the need to re-bid packages to garner adequate competition  Other factors also contributed to this problem.  The construction industry in this region lost multiple large Mechanical, Electrical and Plumbing subcontractors that went out of business following the 2009 recession, and those companies have not been replaced.  Trade sub-contractors are not able or willing to expand their companies at this time, as there is no availability of labor to expand if they wanted to. 

The unpredictability of these factors has driven sub-contractors to carry additional contingency in their bid numbers.  Contractors working on non-university projects are having to negotiate with sub-contractors rather than getting a hard bid from them. 

Finally, a recent meeting of the Construction Managers Association of America (CMAA) here in the Washington DC region concluded simply that “market capacity is the biggest driver affecting project costs.”  Period.
WHAT SOLUTIONS CAN HELP REDUCE COSTS?

Many of the following best practices are already being implemented by the two project Service Centers at UMCP and UMB.  Both groups are dedicated to continuous improvement and are working together on shared solutions to common problems.

Selecting the Most Effective Project Delivery Method

Choosing the most effective way of delivering a project is one means of getting the best value from our limited budgets in this constrained market.  A 2015 report for the Joint Chairs of the Budget Committees of the Maryland General Assembly, we prepared jointly with two other state agencies, clearly demonstrates this value.  Our regent policy-preferred Construction Manager At Risk (CMAR) method is a big part of our success to-date; and a number of projects are also being managed as Design-Build, which further enhances the benefits to schedule and cost. 

Adopting Creative Construction Techniques

Technology is changing quickly. It's critical that we stay abreast of new trends and other changes that may help improve quality and reduce cost.  Modular construction, for example, is discussed in detail in this blog (link here).  Furthermore, we design the structural components of our buildings to last 100 years, knowing that the systems and internal structures will change over time.  We should discuss the value in this longevity and find ways to improve flexibility for the future.  We may also wish to reconsider the designers we use and seek to broaden the lists of firms (where possible) to capture the most creative ideas.  Finally, contracts should be regularly updated to capture best practices from all sources.


Strategic Capital Budgeting Decisions

Improved utilization of existing facilities and even changing the nature of the type of projects we include in the capital queue (e.g., our continued focus on renewal and renovation in lieu of new construction) could impact the affordability of our capital program in the short term.  All are potential considerations now or in the future.

Cooperation and Communication Among Project Teams

The internal groups managing our projects have traditionally worked well together.  Improved coordination among these groups in terms of sharing information and best practices is, however, always a goal for all of them.  We find that cost per square foot data provided by our project teams are fairly consistent for new construction when the comparison includes the costs for both structure and equipment.  The renovation costs per square foot, however, are more difficult to compare because they often include required infrastructure improvements to the existing facility. All of our project teams have scheduled periodic collaboration meetings to exchange cost information, market conditions, procurement ideas, and lessons learned.