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Impact of Rising Construction Costs on the Measure B Bond Program

In response to unprecedented cost escalations within the construction industry (local, national, and world-wide), the Chabot-Las Positas Community College District Board of Trustees has authorized staff to “fast-track” the delivery of the Measure B Bond Program funded projects. This will be a focused effort to minimize the further loss of purchasing power achievable with Bond revenues. This “fast-track” delivery will be one among other measures that will be implemented by the District to minimize the impact of these cost escalations to the larger Bond Program. Two of the primary objectives of fast tracking the delivery of the program will be to reduce the Program Schedule by two years and to realize the corresponding cost savings.

A staff presentation to the Board of Trustees on February 21, 2006, demonstrated that from 2003 - 2005 the related escalations costs exceeded thirty percent (30%) and the projected cost escalations, to the “industry standard” of the mid-point of construction of the overall program (2009), could rise as much as sixty percent (60%). This magnitude of escalation was virtually impossible to predict at the time of voter approval of the Measure “B” Bond in March 2004. Prior to 2003, annual escalations were not exceeding an average of approximately three percent (3%).

The reasons for this unprecedented escalation in construction costs stem from multiple factors including the extraordinary demand for labor and construction materials as a result of expansion of construction activity (public and private) in the Bay Area and California. Other factors include competition from other bond programs and public works projects, the global demand for construction materials in the expanding economies of China, Asia, India and Eastern Europe, as well as rebuilding from the hurricanes in the Gulf Coast, and the Iraq and Afghanistan war efforts.

The Chabot-Las Positas Community College District Board of Trustees, the Chancellor and all District Staff, are working diligently to bring the Measure B Bond Program scope of work within the parameters of current financial realities. This effort is also actively addressing the development and introduction of creative measures to schedule educational programs to accommodate this acceleration.

To ensure that the projects will be delivered within budget and on schedule the Board of Trustees also approved at the February meeting the issuance of a Request of Qualifications (RFQ) for Value Engineering consultant services. Value Engineering is one form of project review conducted during the schematic and design development phase to ensure projects are designed within the allocated project budgets. Authorizing the solicitation for Value Engineering services is one of the continuing efforts of the Chabot-Las Positas Community College District to ensure responsible fiscal management of the Measure B Bond Program.

Please see the accompanying slides for further detail.

Slide Presentation on the Impact of Rising Construction Costs on the Measure B Bond Program