Business and Finance News: January 2006

CAPITAL PLANNING, DESIGN AND CONSTRUCTION
Elvyra F. San Juan, Assistant Vice Chancellor

Executive

Proposed Legislation: SB 1724 (Runner), the Higher Education Omnibus Bill, has one provision proposed by CPDC, which would allow the CSU to certify its own projects for access compliance rather than have Department of General Services, Division of the State Architect (DSA) do so. This is the second year that CPDC has brought this proposed legislation forward. Last year the language was stricken from the omnibus bill in anticipation that the CSU would be amended into AB 462 (Tran). That never occurred.

The CSU currently reviews and approves its own building construction contract documents for seismic safety, constructability and adherence to the California Building Code. However, prior to undertaking any construction over $25,000, the CSU must secure confirmation that its plans conform with the access compliance chapter of the California Building Code from DSA. The CSU has incurred significant delays in securing these access compliance approvals in the past. Conservative cost savings on the order of $1.8 million annually to the CSU are probable if the low-end delay of four weeks can be eliminated from the current CSU plan approval cycle.

Capital Training Program 2006: On March 22, the CSU Mechanical Review Board (MRB) will present Commissioning; a course intended to provide planners, project managers, plant managers and other responsible campus parties with an overview of the CSU Commissioning guidelines. On the following day, March 23, Steve Taylor and Richard Henrikson (MRB members) will present Central Plant Optimization and Demand Side Management Strategies; a session designed to bring together capital planning, design, and construction project managers with facility operation personnel to promote integrated facility and system design.

In April there will be two trainings for plant operations staff: April 19, a closed session for managers on Labor Management Issues, presented by Sam Strafaci and Bill Candella from Human Resources; and April 20, Hiring Practices, presented by Laurie Walton, CSU Northridge. Laurie conducted a breakout session at the CSU Facilities Management Conference in October 2005 on this topic. The session received rave reviews with the only negative being that it was too short. Therefore, this training will allow for in depth discussions with Laurie on a very important topic.

The complete training calendar, session details, and online registration are available at http://www.calstate.edu/CPDC/Trg2006.shtml.

Nancy Freelander-Paice, Executive Program and Fiscal Manager

Legislative Analyst's Office on the 2006/07 Capital Outlay Program:The Legislative
Analyst’s Office (LAO) released its analysis of CSU projects proposed for the 2006/07 Capital Outlay Program on February 23, 2006. Questions were raised on seven of the 19 projects included in the Governor’s proposed budget with respect to project cost, space entitlements, and programmatic appropriateness.

The LAO recommended that the Legislature reduce the budgets for the East Bay Student Service Replacement Building, Long Beach Peterson Hall 3 Replacement, and the Northridge Performing Arts Center because of the substantial increase in estimated project costs since the last time the program was presented to the Legislature. The CSU proposed the cost increases based on recent bid results systemwide addition, project budgets also include escalation from project start to the midpoint of construction, a new budget procedure directive from the Department of Finance in 2006/07.

The LAO did not approve of the proposed Channel Islands Infrastructure Improvement project on the grounds that portions of the requested improvements were not justified by the campus enrollment. The LAO suggested that the project could be funded from the CSU Capital Renewal program. CSU notes that the Channel Islands campus has one of the fastest growing enrollments systemwide, yet academic facility development is severely hindered by the advanced age and frequent failure of the existing utility infrastructure. The CSU Capital Renewal program is designed to fund replacement of building systems that have exceeded their useful life, such as roofs and HVAC and is currently limited to $2 million per project. The program was not intended to fund comprehensive major capital renovation projects.

The LAO also opposed the construction of a new> Social and Behavioral Sciences building at San Marcos, again citing the enrollment growth relative to present and projected capacity needs. Conversely, the LAO argued for the deletion of the San Luis Obispo Center for Science stating that the proposed replacement building provided only a small amount of additional instructional capacity over the existing antiquated facility. Finally, the LAO withheld approval of the equipment list request for the Monterey Bay Infrastructure Improvement project.

Draft Five-Year Capital Improvement: The CSU Draft Five-Year Capital Improvement program for 2007/08 through 2011/2012 will be presented at the March 2006 Board of Trustees’ meeting. In keeping with Budget Letters issued by the Department of Finance, the project cost estimates include a five percent year-to-year cost increase, plus escalation in costs from project start to the midpoint of construction. This increase is expected to help bring projects budgeted for the 2007/08 Capital Outlay Program in line with current market conditions at the time of bid.

Land Acquisition Responsibilities: Land Use
Planning & Environmental Review (LUPER) has seen an upswing in its land acquisition responsibilities in the last two years. In 2004 and 2005, 3,776 acres were given to the CSU, for a total value of $10 million. This included acreage for wild lands preserves and parcels from the federal government, primarily at the Monterey Bay campus. In the same timeframe, several campuses used housing and parking revenues to acquire a total of 40 acres of land and improvements worth $176 million. Currently, LUPER is working on ten significant acquisitions for CSU campuses including land exchanges, transfers of jurisdiction from other state agencies, gift property from the federal government, as well as purchases using parking and housing revenues. These acquisitions can be complicated and, the most complex are probably those funded by the capital outlay program. LUPER works with the Departments of Finance, General Services and the Public Works Board on these acquisitions, since CSU does not have independent authority to purchase real property using state appropriated capital outlay dollars. The LUPER staff is exploring possible ways to streamline and facilitate future acquisitions with additional actions that could be done in-house. David Rosso, Chief of Land Use Planning & Environmental Review forecasting, recent changes in construction law, and the latest electronic project management systems.

CONSTRUCTION MANAGEMENT
Western Council of Construction Consumers Annual Conference: Jim Corsar, Chief of Construction Management, CPDC, and Tom Kennedy, Chief of Architecture and Engineering, CPDC, and Darryl Dearborn, SB/DVBE Advocate, Contract Services & Procurement, participated in the Western Council of Construction Conference on March 2 at the Airport Hilton in Los Angeles. They manned the CSU booth and attended some of the most interesting sessions, in particular, those addressing alternative construction delivery methods. After reviewing the methods that are used in Arizona and Nevada, they concluded that the CSU’s methods of construction procurement are at least as effective and flexible as those neighboring states.

The conference was well attended and had a broad selection of session topics dealing not only with design and construction, but also economic forecasting, recent changes in construction law, and the latest electronic project management systems.

Proposed Common Building Lease and Acquisition Policy: In response to the growth in CSU activities in off-campus locations a Common Lease and Building Acquisition Policy is being proposed to establish a uniform, seismic safety standard for leased and acquired buildings. This new lease policy would be common to the California State University, the University of California, the State Department of General Services, and other state agencies. Under this proposed policy, relative to the CSU, its foundations and auxiliary organizations, an off campus building or space would need to meet these standards for occupancy under the trustees’ Seismic Policy. The current CSU Seismic Policy would continue to govern for all on-campus CSU locations.

This common policy is crafted to make the leasing of space to the State, and its allied organizations, more attractive to private owners in that all of these agencies would use the same set of requirements to qualify a proposed building as meeting minimal seismic life safety standards. The policy is a practical document and includes appropriate waivers and exceptions for small spaces and short term uses. The standards would apply to future leased spaces and building acquisitions. Property and leases currently in place would not be affected until leases were up for renewal.

The CSU Seismic Review Board has recently completed trial assessments at several campuses to confirm that associated reviews and impact on currently leased properties is workable, not unduly restrictive, and consistent with the intent of the trustees’ Seismic Policy.

Campus vice presidents are making comments to the proposed policy; trustee review is currently planned for the July 2006 Board of Trustees’ meeting.

Comprehensive Energy Services Master Enabling Agreement (CESMEA):a new project delivery tool, the Comprehensive Energy Services Master Enabling Agreement (CESMEA), which provides campuses with an alternative method of contracting for energy- saving infrastructure projects. The seven participating Energy Service Companies (ESCO): AMERESCO, DMJM Harris, APSES, Chevron Energy Solutions, EMCOR, NORESCO and Sempra Energy Solutions, executed agreements in January 2006. The alternative streamlined delivery method will help campuses reduce the growing deferred maintenance backlog of energy and infrastructure projects. This three-step delivery process is already underway with the first major construction project expected to begin at CSU San Bernardino in May 2006 with DMJM Harris.

A special thanks to Tom Brown, Teri Carr, Jim Corsar, Russ Decker, Marlene Jones, Tom Kennedy, Aaron Klemm, Barbara Nicholson, Irene Patriotis, Matt Roberts, Tom Roberts, Elvyra F. San Juan, LeRoy Wilke, and George Wright for their significant contribution in developing this important systemwide program.

Electricity Purchase: The Electricity Contract Oversight Board (ECOB) continues to draft the new Request for Proposals (RFP) for electric commodity services that will provide more flexibility and cost savings for future energy purchases for execution in September 2006. In the interim, the ECOB is monitoring energy markets to strike an agreement for purchasing electricity supply for June 1st through September 30th or longer should forward prices prove favorable.

Energy Efficiency Partnership: Energy project submittals to be considered for $25 million in energy incentive funding have been received from 16 of the 23 campuses. A CSU team comprised of campus and CPDC staff is currently reviewing the submittals and will provide recommendations to the energy partnership management team by March 27th, 2006, with project funding approval from the utility partners anticipated in April. It is important for the campuses to continue to submit energy related projects to the Energy Program Manager on a continuous basis, so that CPDC may build a backlog of need in anticipation of receiving additional funding from the Investor Owned Utilities (IOU).