Transforming Capital Asset Utilization and Delivery - The Regents of

The Regents of the University of California

Transforming Capital Asset Utilization and Delivery

July 2005

Opportunities for Reducing Project Costs and Achieving More Program for the University’s Capital Dollar

TRANSFORMING CAPITAL ASSET UTILIZATION AND DELIVERY Opportunities for Reducing Project Costs and Achieving More Program for the University’s Capital Dollar Table of Contents

Table of Contents

I. Executive Summary .............................................................................................. 1

II. Background, Mission, and Work of the Expert Committee.................................... 6

III. Findings and Recommendations........................................................................... 9

1) Ownership and Accountability for Capital Asset Utilization, Delivery, and Performance.................................................................................................. 10

2) Capital Planning and Decision-Making Based on Formal Business Case Analysis ......................................................................................................... 13

3) A Shorter, Simpler Process ........................................................................... 16

4) A More Robust, More Flexible Contracting Environment .............................. 20

5) Systemwide Building and Project Metrics, Standards, and Data................... 24

6) A Process-Change Agent to Implement This New Business Model.............. 27

7) Other Cost-Saving Opportunities Examined, but not Specifically Targeted in the Committee’s Top Six............................................................................ 28

APPENDICES

Appendix A – Committee Members’ and Study Consultants’ Resumes

Appendix B – UC Capital Program – Core Purpose, Values, and Goals (as drafted by the “Internal Resource Group” that was formed to facilitate information gathering and provide staff support to the Expert Committee)

Appendix C – Potential Areas and Issues to Examine (as drafted by the “Internal Resource Group”)

Appendix D – 15 Committee Questions to Investigate Cost-Savings Opportunities

Appendix E – Report of the Committee Cost Consultant

E-1 – Questionnaire for Campus Executives and Project Managers

E-2 – Summary of Responses to Project Questionnaires and Key Observations

E-3 – Summary of Project Data Review and Key Observations

Appendix F – Office Building Benchmark Study by TMCS, Inc.

TRANSFORMING CAPITAL ASSET UTILIZATION AND DELIVERY Opportunities for Reducing Project Costs and Achieving More Program for the University’s Capital Dollar Executive Summary

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I. Executive Summary

The Regents of the University of California, through its Committee on Grounds and Buildings, have mounted a major initiative to explore opportunities for saving construction building costs on a large scale. The objective is to find ways to meet the capital needs of a continually growing academic program with what the Regents foresee as increasingly less capital construction funding being made available to the University.

The Regents’ Committee on Grounds and Buildings instituted an investigation of current practices and policies to determine more effective approaches for designing and constructing projects. To implement this investigation, a committee of six outside experts (herein referred to as the “Committee”) who are acknowledged leaders in their respective fields of design, construction, property development, and capital project management, was formed by the Office of the President in December 2004. The mission of the Committee was to render an informed professional opinion and make recommendations to the Regents’ Committee on Grounds and Buildings on opportunities for reducing UC building costs.

Over the course of six meetings from January to June 2005, the Committee convened to receive, review, and discuss information presented by the Office of the President, campus project personnel, and outside consultants. An independent consultant to the Committee conducted interviews with UC and non-UC project teams and administrators on behalf of the Committee using the Commiittee’s15-question format and 24 selected projects which served as interview vehicles. Results of those interviews were reported back to the Committee. The Committee acknowledges that these extensive background materials, briefings, and data supplied to the Committee, although extremely helpful in informing the Committee’s opinion, cannot in any way be construed as creating a complete and definitive understanding of the many nuances of a large institution such as the University of California.

The Committee’s focus, and consequently its recommendations, pertains to UC capital outlays for major construction. Minor capital-outlay projects such as room fit-ups, the replacement of building system components, and refurbishments, therefore, are outside the scope of this study.

At its second meeting the Committee chose to expand the mission of this study to address the effective planning for and delivery of capital assets, of which reducing the cost of constructing buildings is a subsidiary component, with the broader mission being facilitating the best economic solution to achieve program goals. Economic solutions to be considered include more efficient utilization of existing facilities, alternative procurement strategies (purchase, lease, build-to-suit), as well as non-brick-and-mortar strategies.

The Committee believes that its six recommendations for transforming policy and processes concerning ownership and accountability for UC


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capital asset utilization, delivery and performance will have a major dollar impact on its capital program. For a UC capital program portfolio on the order of $7 billion, the Committee believes there is a minimum of a 10%, or $700 million, capital dividend in cost reduction and capital preservation to be gained from implementing these measures. Given the compounding effects generated by achieving efficiencies (e.g., inflation, staffing, space) it is not inconceivable that a capital dividend of as much as 25% or more could be realized.

Based on its findings and the professional experience of its members, the Committee has developed six major recommendations for capital savings that it believes requires transformation in the way the University of California does business concerning the planning and construction of buildings.

1) Ownership and Accountability for Capital Asset Utilization, Delivery, and Performance

This is the Committee’s foremost and fundamental area of recommendation. The management of UC capital assets appears to lack individual accountability at the campus level. It is the Committee’s opinion that by creating individual accountability for capital asset utilization, delivery, and performance at a high level at each campus more value will be created from scarce capital funds, and projects will be built less expensively as the result of there being an individual with clearly defined authority and responsibility for capital assets. The Committee recommends that the utilization, delivery, and performance of capital assets on campuses be made a significant and material component of each Chancellor’s responsibility and performance review. Further, the Committee recommends that a function of “capital asset chief” be created on each campus reporting to the Chancellor, with the ownership and authority for the effective utilization, delivery, and performance of capital assets, and be accountable to the Chancellor for results.

2) Capital Planning and Decision-Making Based on Formal Business Case Analysis

It appears to the Committee that the current UC response to ascertain long-term academic priorities at the campuses often jumps quickly to architectural planning of possible construction solutions to support program growth. The Committee recommends instead that the first-step, and the primary driver, for all capital planning become the Business-Case Analysis and Plan, and that each campus develop a high-level function for executing business case analysis and planning. Business case analysis and planning examines non-building solutions and alternatives to building construction, and when construction alternatives are pursued, it determines best construction solutions from a business planning perspective. The Business-Case Analysis and Plan is the key instrument on which the Committee recommendations for simpler, streamlined processes are based. The expectation of the Committee


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is that this change in planning process will improve the utilization of increasingly scarce capital funds relative to program mission supported and greatly simplify the capital approval process.

3) A Shorter, Simpler Process

The Committee believes that the University of California’s capital project processes can be made significantly more straightforward, streamlined, and faster, with more clearly defined decision-making and authority. The Committee recommends greatly shortening the lengthy pre-planning and pre-design phase, doing away with the three-step “Preliminary Plans, Working Drawings, Construction” approval processes for state funded projects, and utilizing the streamlined capital outlay process for all state funded projects on the “streamlined” track. Instead of having many slowly evolving projects in the funding pipeline, taking up to as long as 7 to 10 years, fewer projects would enter the capital funding approval pipeline based on their Business Case Analysis and Plans, and they would receive funding once for efficient execution. The result will be fewer projects in the pipeline, and all projects will complete faster. Cost savings are expected in staff man-hours at both the Office of the President and campuses, avoidance of construction cost escalation expense, and the elimination of costs associated with start-stop project schedules.

4) A More Robust, More Flexible Contracting Environment

The Committee believes that three aspects of the UC contracting environment present overall cost-saving opportunities: 1) moving to a “Best Value” contracting model (based on a criterion that combines competitive pricing with assessments of contractor capabilities and past performance), 2) modifying UC contracts to be less restrictive and onerous for contractors (for example, by changing requirements that the contractor be responsible for any hidden underground conditions that may exist on the site), and 3) changing laws and policies that currently preclude UC projects from benefiting from early design consultation that could be provided by qualified subcontractors. The Committee recommends that the University aggressively pursue these changes. The Committee’s expectation is that these changes will yield significant overall cost-savings across the UC portfolio of capital expenditure activity, as well as project outcomes that are more predictable with less litigation and fewer disputes, and a smoother project delivery process with less UC project oversight.

5) Systemwide Building and Project Metrics, Standards, and Data

There appears to be a lack of system-wide standards concerning mission-relevant metrics (for example, project cost per student, bed, principal investigator), and no system-wide methodology or infrastructure across the campuses (and between the campuses and the Office of the President) for collecting and using project administration data. These represent two


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opportunity areas for achieving, over time, the kind of construction economies of scale envisioned under the Committee’s recommendations on “simpler, shorter process.” The Committee sees very substantial cost savings being realized from a common project administration system that facilitates automated roll-up reporting for monitoring and tracking projects, and better and faster planning resulting from the system-wide use of mission-relevant metrics and standards. As a start, campus project systems should be compliant with systemwide standards and criteria, and have the predictive capacity to project and help mitigate project over-runs, delays, disputes, scope delivery issues, and claims.

6) Process-Change Agent to Implement This New Business Model

Consistent with the Committee’s recommendations on ownership and accountability, it is the Committee’s recommendation that the implementation of the recommendations set forth in this document be assigned to a single change-agent (not a committee, and not left up to the individual campuses) who has the responsibility, tools, resources, and authority to implement these changes. It is the Committee’s opinion that to be effective this process-change agent must be supported at the highest levels (the Board of Regents, the President and his Cabinet, and the Council of Chancellors). This person’s job performance should be evaluated on, and their job tenure dependent upon, success in accomplishing this task.

Twelve additional cost-reduction opportunities were identified and examined by the Committee and are referenced in this report with the Committee’s comments. These represent areas of investigation that were either targeted in the Committee’s original list of 15 questions, or they became discussion points during the Committee’s deliberations. As noted, the twelve additional opportunity areas are considered by the Committee to have already been addressed in its primary list of six recommendations, or were felt by the Committee to be of secondary importance.

The Committee notes that various campuses have pursued implementation of portions of the above six recommendations, and met with varying degrees of success, perhaps constrained by external and systemic factors. It is the Committee’s strong recommendation that in spite of barriers to change that may appear to exist in the form of existing state laws, long-established practices, firmly entrenched organizational structures and cultures, and large numbers of people affected, a fundamental change in the way the University does business with respect to its capital assets is necessary if significant cost savings and capital expenditure avoidance are to be achieved. It also believes that the necessary changes will not be implemented unless a single individual is given the responsibility, resources, and authority for orchestrating this recommended change of business model, and has the necessary support from the highest levels in the University (the Board of Regents, the President and his Cabinet, and the Council of Chancellors).


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In summary, the Committee’s view is that the University of California has a major opportunity for significant cost reduction and capital preservation by dramatically changing its up-front capital project planning, development, and funding processes. The Committee believes strongly that without such a change, significant capital savings and increased value from capital expenditures for the University of California will not be realized.

Respectfully submitted

Steven L. Westfall, Ph.D. Committee Facilitator and Scribe

TRANSFORMING CAPITAL ASSET UTILIZATION AND DELIVERY Opportunities for Reducing Project Costs and Achieving More Program for the University’s Capital Dollar Background, Mission, and Work of the Expert Committee

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II. Background, Mission, and Work of the Expert Committee

A committee of six outside experts (the “Committee”; refer to Appendix A for Committee membership and resumes), who are acknowledged leaders in their respective fields of design, construction, property development, and capital project management, was formed by the Office of the President in December, 2004 to render an informed professional opinion and make recommendations to the Regents of the University of California on opportunities for reducing its building costs. The reasons for this undertaking are two-fold: 1) the University expects continuing growth in its campus populations over the next 10 years, and 2) at the same time, it expects an increasing scarcity of capital funds with which to build campus buildings to accommodate the population growth. The Committee’s recommendations, therefore, are intended to identify courses of action that will accommodate the needs of a growing academic program with fewer capital dollars.

At its second meeting the Committee chose to expand the mission of this study to address the effective utilization and delivery of capital assets, of which reducing the cost of constructing buildings is a subsidiary component, with the broader mission being facilitating the best economic solution to achieve program goals. Economic solutions to be considered include more efficient utilization of existing facilities, alternative procurement strategies (purchase, lease, build-to-suit), as well as non-brick-and-mortar strategies.

An important feature of the Committee’s work was to focus on recommending opportunities for savings, rather than looking for problem areas. This had two implications for the work of the Committee. The first concerns instances where the University might have processes or results comparable with other institutions. Where such findings were apparent, the Committee’s view was that its mission was to identify opportunities for cost savings on all fronts, even those where problems were not evident. The second implication concerns areas of process and results where in the Committee’s view a definite problem might exist. In these instances, the Committee agreed that it would look for the cost-saving opportunities associated with solving such problems, and if solving the problem constituted only a minimal cost-saving opportunity, it would be dropped from the list of the Committee’s recommendations.

Over the course of six months the Committee convened six times. At the first four meetings, the Committee received, reviewed, and discussed information presented by the Office of the President and testimony from both UC and non-UC persons on the conduct of UC projects. This included:

a) A briefing from UC Office of the President on University Core Purpose, Core Values, and Visionary Goals (refer to Appendix B), prepared by a group of campus and OP staff (“Internal Resource Group”), formed to


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facilitate information gathering and provide staff support for the Committee;

b) An extensive list of potential areas for the Committee to examine (refer to Appendix C), as prepared by the Internal Resource Group;

c) Testimony on capital project processes at UC Irvine;

d) Testimony from a construction consultant on a detailed cost study done on a recent Davis construction project (refer to Appendix F);

e) Background information from the Office of the President on the different organizational structures, widely varying site conditions, maturity, and local town political environments that exist on the different campuses;

f) A formal report (refer to Appendix E) from the Committee’s consultant, Peter Morris (a Principal of the firm, Davis Langdon), on (i) the results of interviews conducted with UC and non-UC project teams on specific questions posed by the Committee, and (ii) the data review of 24 UC and non-UC projects.

Early in its deliberations, the Committee formulated 15 questions that it felt would identify the most significant cost-saving opportunities (refer to Appendix D), and it selected 24 specific UC and non-UC projects to serve as vehicles for obtaining answers to those questions.

Live computerized note-taking projected onto a screen seen by all Committee members was used to track and build the Committee’s meeting proceedings. Formal proceedings notes were distributed to all members after each meeting for comment, corrections, and additions.

Based on the findings of the Committee’s consultant relative to the list of 15 questions, the Committee conducted a working session to draft individual “opportunity sheets” indicating target areas, proposed actions, pertinent UC conditions, and expected results. Opportunity sheets were converted into flip chart exhibits and posted on the walls of the meeting room, and members used colored post-it tabs to register their priority votes of “Do this,” and “This might be hard to do, but well worth the effort.” This session set the priorities and tone for the Committee’s final report.

A draft report was written by Committee scribe, Steve Westfall (President, Tradeline Inc.) based on meeting proceedings, the Consultant’s findings, and the outcome of the Committee’s working meeting. At the Committee’s subsequent meetings the draft and final reports were reviewed and discussed to develop the final Committee statement.

The Committee’s findings and recommendations set out below are based on a necessarily broad understanding by Committee members of University of California policies, processes, and history concerning capital projects. While Committee members bring to this study their own extensive professional


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experience in the planning, design, and construction of institutional buildings, and while some members have had personal experience with specific UC capital projects, they are not experts in all the intricate details of current UC systems, organizations, or governing laws. The extensive background materials, briefings, and data supplied to the Committee by the Internal Resource Group and the Office of the President, although extremely helpful in informing the Committee’s opinion, cannot in any way be construed as creating a complete and definitive understanding of the many nuances of a large institution such as the University of California.

Thus, the collective opinion rendered here should be viewed as that of a panel of outside experts whose opinions are informed to the extent possible by the time limitations and the format of their involvement in this study.

TRANSFORMING CAPITAL ASSET UTILIZATION AND DELIVERY Opportunities for Reducing Project Costs and Achieving More Program for the University’s Capital Dollar Findings and Recommendations

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III. Findings and Recommendations

The Committee has developed six major recommendations for capital savings that it believes would result in a transformation in the way the University of California does business concerning the planning and construction of buildings. It is the Committee’s opinion that the economic environment for the University of California has permanently changed, and that a fundamental change in business processes is necessary to capture significant cost savings, avoid unnecessary capital expenditures, and create greater value from increasingly scarce capital funds. The Committee believes that without such a change significant capital savings and increased value from capital expenditures will not be realized.

The Committee’s recommendations involve:

1) Ownership and accountability for capital asset utilization, delivery, and performance

2) Capital planning and decision-making based on formal business case analysis

3) A shorter, simpler process

4) A more robust, more flexible contracting environment

5) System-wide building and project metrics, standards, and data

6) A process-change agent to implement this new business model.

The Committee notes that various campuses have pursued implementation of portions of the above six recommendations, and met with varying degrees of success, perhaps constrained by external and systemic factors. It is the Committee’s strong recommendation that in spite of barriers to change that may appear to exist in the form of existing state laws, long-established practices, firmly entrenched organizational structures and cultures, and large numbers of people affected, a fundamental change in the way the University does business with respect to its capital assets is necessary if significant cost savings and capital expenditure avoidance are to be achieved. It also believes that the necessary changes will not be implemented unless a single individual is given the responsibility, resources, and authority for orchestrating this recommended change of business model, and has the necessary support from the highest levels in the University (the Board of Regents, the President and his Cabinet, and the Council of Chancellors).

TRANSFORMING CAPITAL ASSET UTILIZATION AND DELIVERY Opportunities for Reducing Project Costs and Achieving More Program for the University’s Capital Dollar Findings and Recommendations: 1) Ownership and Accountability

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1) Ownership and Accountability for Capital Asset Utilization, Delivery, and Performance

Issue: Accountability for project performance and ownership

Potential Opportunity: Improve the efficiency of capital dollars spent (more mission per capital dollar) and save construction costs by clearly assigning authority and responsibility for capital project performance

Questions:

1) To what extent are project management responsibility, authority, and rewards for project management excellence, and project performance criteria, clearly defined for in-house staff (job performance review)?

2) Does the campus “CEO” make decisions between competing capital projects, suffer campus planning consequences of over-budget projects, “own” the delivered project, pay for energy and maintenance, and have building performance count as part of his or her overall job performance evaluation?

Summary

This is the Committee’s foremost and fundamental area of recommendation. The management of UC capital assets appears to lack individual accountability at the campus level. It is the Committee’s opinion that by creating individual accountability for capital asset utilization, delivery, and performance at a high level at each campus more value will be created from scarce capital funds, and projects will be built less expensively as the result of there being an individual with clearly defined authority and responsibility for capital assets. The Committee recommends that the utilization, delivery, and performance of capital assets on campuses be made a significant and material component of each Chancellor’s responsibility and performance review. Further, the Committee recommends that a function of “capital asset chief” be created on each campus reporting to the Chancellor, with the ownership and authority for the effective utilization, delivery, and performance of capital assets, and be accountable to the Chancellor for results.

Findings

Consistent with the “shared governance” philosophy at the University of California, ideas and input are sought from stakeholders and users at the earliest stages of academic planning, physical needs assessment, and development of a capital plan. However, this system of “shared governance” may hinder establishment of a well-defined structure for authority and responsibility for campus building projects. In fact, it appears from the Committee’s investigation that the current system effectively diffuses individual accountability for the utilization, delivery, and performance of capital assets. Testimony from campus interviews, in addition to the


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testimony of individual Committee members who have working experience with the UC system, indicate that there is no one person, or for that matter persons, whose jobs rest on the success or failure of a particular project. If a job “goes south,” apparently one would look to a multiplicity of committees, staff, and finally senior officials on the campus for accountability.

The typical campus decision-making structure for building projects appears to be the Building Committee, and under this structure, there appears to be no firmly established “campus owner” criterion for limit on scope as projects progress toward the stage of developing the detailed project funding schedule and budget.

With respect the question of who “owns” projects, the Committee notes that in the normal current process for capital project development, the Chancellor, who the Committee believes would be the logical person to “own” campus capital assets, is not required to participate in specific decision-making (especially scope or alternate solutions) until relatively late in the process after projects have already been evaluated by a committee and are ready for consideration in the five-year plan. At that point in time it may not be realistic or feasible to stop or radically change projects that might not meet the test of best use of capital funds. Since it is reported that projects in the five-year capital plan are rarely removed from the plan once they are “in,” and since they are funded generally as proposed, the Chancellor is put in the position of assuming assets he or she may not have had much opportunity for extended involvement in shaping or approving. As such, it is hard for the Committee to find a real campus “owner” who can be strategically guiding and knowingly signing up for the ongoing operating costs of assets being built on campus.

Recommendations

The Committee recommends that the strategic planning for and management of campus capital assets, as well as the operating costs associated with those assets, be formally made part of the job performance review of the Chancellor on each campus. Further, it recommends that each campus develop a strong functional capability under the Chancellor akin to an office of the “capital asset chief” that is accountable to the Chancellor and has the authority for the effective utilization of capital, including planning, delivery, and overall performance of capital assets. The Committee believes that the current capital-projects business model at the campus level lacks the asset management performance metrics and the general management philosophy that the assignment of responsibility for capital asset performance to individuals requires. Therefore a necessary condition of this recommendation would be the development of management performance and ownership measures by which accountability will be measured, and the Committee envisions the Office of the President developing and administering of such measures, acting in the capacity as agent for, and with an explicit mandate from, the Regents. The Committee also believes that it will require a shift in the University’s thinking on appropriate and inappropriate use of


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collaborative, collegial, consensus management when it comes to accountability for the capital assets of the university.

Expectations

The Committee expects that by establishing individual ownership, authority, and accountability for asset utilization, delivery, and performance at the campus level in combination with necessary performance metrics, better projects will be proposed which will evidence higher program/capital ratios (better use of capital funds), and generate savings in construction costs. It is the Committee’s expectation that these results will occur because the Chancellor, and in turn one functional office of the “capital asset chief” on each campus, will be assigned these responsibilities and will be evaluated based on performance metrics for capital utilization, project planning and delivery, and facilities operation costs.

TRANSFORMING CAPITAL ASSET UTILIZATION AND DELIVERY Opportunities for Reducing Project Costs and Achieving More Program for the University’s Capital Dollar Findings and Recommendations: 2) Business Case Analysis and Planning

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2) Capital Planning and Decision-Making Based on Formal Business Case Analysis

Issue: Business-case analysis and planning

Potential Opportunity: Avoid spending unnecessary capital or capital on low-yield plans

Question: What processes are used by UC, other institutions, and private industry to perform formalized, up-front business-case analyses (business value justification and alternatives) for proposed capital projects (including the evaluation of third-party, private party alternatives)?

Summary

It appears to the Committee that the current UC response to ascertain long-term academic priorities at the campuses often jumps quickly to architectural planning of possible construction solutions to support program growth. The Committee recommends instead that the first-step, and the primary driver, for all capital planning become the Business-Case Analysis and Plan, and that each campus develop a high-level function for executing business case analysis and planning. Business case analysis and planning examines non-building solutions and alternatives to building construction, and when construction alternatives are pursued, it determines best construction solutions from a business planning perspective. The Business-Case Analysis and Plan is the key instrument on which the Committee recommendations for simpler, streamlined processes are based. The Committee’s expectation is that this change in planning process will improve the utilization of increasingly scarce capital funds relative to program mission supported and greatly simplify the capital approval process.

Findings

Interviews conducted with campus personnel in the course of this study indicate that formal business-case analysis and planning, as envisioned by the Committee, is not applied to individual major building projects in the UC capital planning process. The Committee believes that this is a significant area of opportunity for cost savings because it can lead to less-capital-intensive, and non-capital-expenditure program solutions.

Formal business-case analysis and planning is defined by the Committee to be the determination, by an experienced business analyst, of the best economic option for achieving specific academic program goals. Business-case analysis and planning produces a formal written document setting out the best business solution based on the economic examination of non-building solutions, off-campus solutions, third-party developer alternatives or leases, best land use, and multi-program shared-facility solutions.


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UC’s existing business model for capital spending typically starts with the establishment at the campus level of long-range academic program priorities. Academic program priorities are then translated into physical facility requirements that end up as proposed building construction projects in the campus five-year capital plans. The initial process of translating academic program activity to building plans then seems to move rapidly to an architect – that is, on the assumption that the solution is to be a building of a particular scope at a campus location that meets campus urban planning goals.

The cumulative elapsed time from perceived academic need to finished construction is generally quite long, extending as much as 7 to 10 years. This appears to be the result of the cumulative time taken to develop a consensus on the building concept for an academic program requirement; the time for the project to make it into the five-year capital plan; the waiting time before actual project funding approval is granted; and the time for design and construction. Once the project is in the five-year plan, campus planners generally proceed with the understanding that that particular project will be built according to the original scope and budget proposed, regardless of how economic or academic situations might have changed from the time of the original planning exercise.

There does not appear to be anywhere in this process, either at the very beginning when it is assumed that a building, and a building of a certain scope, is the right answer, or when the project is put in the five-year capital plan, or when funding is actually approved, that a formal business-case analysis is developed as part of the project plan.

This suggests that project construction funding can be locked in without a thorough and up-to-date business assessment of less capital-intensive or non-capital alternatives to achieve program goals. It also indicates that capital plans can be developed without a full analysis of potential opportunities for construction economies of scale, the verification of the match between capital commitment (a 50-year building) vs. a specific program life-expectancy (of shorter duration), the reexamination of the current business validity of old assumptions, or the determination of the amount, source, and extent of future annual operating resource requirements.

Non-UC Practices With Respect To Business Case Analysis

For non-UC projects, planning for revenue-generating projects, such as parking and housing, tend to be strongly subjected to business case analysis. Committee members cited such non-UC institutions as the U.S. Coast Guard, the National Park Service, Brigham Young University, the University of British Columbia, and Kaiser as using formal Business Case Analysis as the underlying basis and starting point for all capital planning. U.S. Federal agencies are now required to execute business case analysis for all budget submissions for ongoing and new proposals for capital assets (Office of Management and Budget Circular No. A-11, Part 7,2004). For institutions that use business case analysis for capital projects, the result for an individual


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capital project is generally a formal, written document setting out the business case for a capital project and its implementation plan. It contains a situation analysis, needs assessment, the financial analysis of alternatives and solutions with respect to pros and cons, capital costs, operating and other costs, and ROI, and a complete capital expenditure schedule including a scheduled opening date. The Federal format for its Capital Asset Plan and Business Case document is set out in a 15-page exhibit (Exhibit 300) in the OMB document found at:

http://www.whitehouse.gov/omb/circulars/a11/current_year/s300.pdf

Recommendations

The Committee recommends that each campus formally develop a high-level function of Business Analysis and Capital Planning as part of the office of the “capital asset chief.” This function needs to have the authority under the office of the “capital asset chief,” and the responsibility, tools, and experience to serve as the primary early lead in translating academic program priorities into business plans that may or may not require construction solutions. This function will be responsible for the conduct of business-case analysis, the development and evaluating of business alternatives, the definition of capital and non-capital solutions in terms of economic outcomes, and the preparation of the formal business-case reports upon which campus capital plans are to be based. This function needs to embody the skills and authority to develop and pursue what the Committee members refer to as “deals” with non-campus entities or with other campuses to achieve academic objectives with creative business solutions. Where on-campus capital projects prove to be the best business solutions, the function of Business Analysis and Capital Planning is to define those projects in terms of their required economic outcomes prior to the commencement of preliminary design activity. Further, it is recommended that the capital approval process require a Business-Case Analysis and Plan, authored by the Business Analysis and Capital Planning function, as part of the project evaluation and funding approval process.

The Committee also recommends that a campus incentive system be designed that financially rewards campuses that demonstrate excellence in their mission-focused vetting of capital projects and the aggressive development of creative and effective solutions.

Expectations

The expectation of the Committee is that this change in process will increase the number of non-capital and reduced-capital solutions for accommodating program growth and change, lower the number of new square feet being proposed for capital funding, and increase the program-achieved-to-investment ratio of projects that are funded. The Committee also expects this change in process to shorten the project development schedule and deliver more predictable project outcomes by ensuring that the business case and economic outcomes are firmly defined before any preliminary design begins.

TRANSFORMING CAPITAL ASSET UTILIZATION AND DELIVERY Opportunities for Reducing Project Costs and Achieving More Program for the University’s Capital Dollar Findings and Recommendations: 3) Shorter, Simpler Process

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3) A Shorter, Simpler Process

Issue: Long project time-lines, cost escalation

Potential Opportunity: Save construction dollars by reducing cost escalation

Question: What are the opportunities to shorten UC’s project cycle-times, and at what estimated cost savings?

Summary

The Committee believes that the University of California’s capital project processes can be made significantly more straightforward, streamlined, and faster, with more clearly defined decision-making and authority. The Committee recommends greatly shortening the lengthy pre-planning and pre-design phase, doing away with three-step “Preliminary Plans, Working Drawings, Construction” approval processes for state funded projects, and utilizing the streamlined capital outlay process for all state funded projects. Instead of having many slowly evolving projects in the funding pipeline, taking up to as long as 7 to 10 years, fewer projects would enter the capital funding approval pipeline based on their Business Case Analysis and Plans, and they would receive funding once for efficient execution. The result will be fewer projects in the pipeline, and all projects will complete faster. Cost savings are expected in staff man-hours at both the Office of the President and campuses, avoidance of construction cost escalation expense, and the elimination of costs associated with start-stop project schedules.

Findings

Four time segments in UC’s capital project development process were of interest to the Committee. 1) First is the time period for pre-planning and conceptual design that precedes a project’s getting into the five-year capital plan, which for UC projects is judged to be significantly longer than for non-UC projects. 2) The second is the waiting period once a project is in the capital-plan queue. 3) The third is the actual time period for design, which tends to be longer for UC projects than for non-UC projects, but to a lesser degree (except in the case of UC lab buildings that seem to take 9 months longer to design than non-UC lab buildings). 4) The fourth is the actual time for construction, for which UC and non-UC projects were judged to be comparable. In other words, with regard to the construction period, once construction starts, the calendar is set by factors other than an institution’s planning process.

The University of California’s capital project processes can be made significantly more straightforward, streamlined, and faster, with more clearly defined decision-making and authority. The examination of non-UC organizations suggests achievable goals with respect to approval and funding processes. For non-UC developer-led projects, the approval process appears to be a straightforward matter of developing the correct business case and


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financing strategy. Other non-UC projects examined generally have a significantly simpler and clearer approval process than those for UC projects. These other non-UC projects exhibit direct reporting links between the project manager and the managing board (supervisors, board of directors, or board of trustees) and have lines of decision-making authority more clearly defined than UC projects. Funding is similarly much more streamlined for non-UC projects, with fund distribution typically driven by the schedule, and with funding more assured once projects have been started.

Typically, the UC process for early concept development begins with an architecturally defined Detailed Project Program (which provides design goals and criteria, describes building functions, organization, and room requirements, and includes pre-design architectural feasibility studies) and a Project Planning Guide (which justifies the project, locates it in the context of the campus physical and space plans, and documents its scope, cost, and schedule), which may take six to nine months to develop and incur design fees of $150,000 or more for a larger-sized project. Following this phase of concept development, a two-sheet Capital Improvement Budget (which provides the funding schedule and detailed project budget with costs broken down by hard, soft, and space type) is submitted as the basis for getting a project into the five-year capital plan.

The early concept work done in the Detailed Project Program and Project Planning Guide stages seems to focus on project details such as room datasheets, building features, and overall cost estimates. These project development stages involve architectural services, building-committee formation, deliberations and consensus-building, and the review and comment from Office of the President staff. (Of interest to the Committee was that fact that the present formal UC capital planning process at the campus level typically starts with architectural planning, rather than with rigorous analysis of the best economic option for achieving specific program goals.)

Once a state-funded project has been selected for funding, it is typically only funded for the first of three steps, which is the preliminary drawings stage (P). It then moves to the working drawings stage (W), and finally construction funds (C). Steps P, W, and C may get funded in different budget years even if the actual work time for each approval step may be less than a year. Additionally, if for some reason the campus comes back for the next phase approval and has its project sent back for re-work, there are added months of delay. Since there is no assurance of construction funding (C) even if a particular project is approved for P or W, campus planners and their project counterparts at the UCOP may devote meeting time, design fees, travel, man-hours and attention to P and W activities for projects that may not be funded for C. For non-state-funded projects, funding for (P), (W), and (C) is approved as a single action. However, for both state- and non-state funded capital projects, there is a separate, additional, Regents’ approval process for design. If the campus is ready to move at the wrong time in the Regents’ meeting cycle, there can be up to two months of added delay.


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It is the Committee’s opinion that the University of California, given how much and how often it constructs buildings, has a significant opportunity for cost-reduction in realizing economies of scale through a re-designed process. The Committee sees the existing process as creating a pipeline of slowly evolving capital projects which, from their earliest concept development stages, are managed as “one-off, Magnus opus” efforts, and that the process of moving these projects through the pipeline is unnecessarily cumbersome and inefficient.

Recommendations

The Committee recommends process streamlining and the shortening of timelines in three areas: 1) Early concept development, 2) Design, and 3) Approval. This can be achieved by setting early project priorities and developing five-year capital plans at the campus level on the basis of Business-Case Analysis and Planning, submitting to the Regents only fully prepared projects as candidates for funding, and making one-time awards for design and construction together.

Specifically, the Committee recommends eliminating the Detailed Project Program and Project Planning Guide steps for project concept development, and replacing those steps with an Initial Business-Case Analysis and Plan. It is then the Initial Business-Case Analysis and Plan that defines a project’s proposed economic outcome in terms of the academic program mission to be achieved and an estimated preliminary capital budget based on University-determined cost and space standards. Projects then get put in the campus’ five-year capital plans based not on actual design work, but rather on the basis of a business plan with a conceptual capital cost number.

The Committee recommends that the Capital Improvement Budget be revamped to become the Initial Business-Case Analysis and Plan, with that document submitted only once to the Regents and the state for project funding and design approval (not in the current three-step “Preliminary Plans, Working Drawings, Construction” approval processes). A capital project would be submitted only after a “pre-design intensity bubble” has occurred which includes an updated Final Business-Case Analysis and Plan in which business and design alternatives are evaluated, outcomes identified that are feasible with value-based solutions, and everyone is on the same page with respect to the project and its execution. Funding approval, then, is a one-step event that includes design and construction to a fixed budget.

The Committee recognizes that there are outside factors that dictate the present “Preliminary Plans, Working Drawings, Construction” funding cycle, but it sees the implementation of an “all-projects-streamlined” result, including the financing process, as a key part of the University’s cost avoidance strategy. It recommends doing away with the “Preliminary Plans, Working Drawings, Construction” approval processes, and where necessary putting forth the effort to change state law and/or creating new financing strategies if necessary to achieve a more streamlined, straight-through process.


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The Committee also recognizes that its recommendation removes the formal mechanism for funding preliminary drawings for contemplated projects in the early stages, and they suggest instead that a fixed annual allocation of funds be made to each campus for this purpose, leaving it to the campuses to decide how best to spend that money. This is felt to create an incentive for spending on those planning efforts that the campuses view as their greatest priorities, with the use of those early stage planning funds evaluated as part of the overall performance of the “capital asset chief.”

Expectations

The Committee believes there is an opportunity to save significant design/construction costs and internal oversight costs by simplifying and shortening the process for concept development, design, and funding approval. In particular, the Committee sees savings in cost-escalation avoided, reduced consultant and architect fees, avoiding hidden costs of start-stop discontinuities, and reduced staff expense at both the UCOP and campus levels. With these process changes, the campuses will assume the risk of cost escalation, but the faster process will reduce that risk.

TRANSFORMING CAPITAL ASSET UTILIZATION AND DELIVERY Opportunities for Reducing Project Costs and Achieving More Program for the University’s Capital Dollar Findings and Recommendations: 4) Robust, Flexible Contracting Environment

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4) A More Robust, More Flexible Contracting Environment

Issue: Contracting

Potential Opportunity: Save construction dollars by getting lower priced bids

Question: What contracting formats (and standard contract forms) are being used to open up the contracting process to a larger number of qualified subcontractors in order to obtain more favorable pricing? What are the associated risk-sharing arrangements?

Summary

The Committee believes that three aspects of the UC contracting environment present overall cost-saving opportunities: 1) moving to a “Best Value” contracting model (based on a criterion that combines competitive pricing with assessments of contractor capabilities and past performance), 2) modifying UC contracts to be less restrictive and onerous for contractors (for example, by changing requirements that the contractor be responsible for any hidden underground conditions that may exist on the site), and 3) changing laws and policies that currently preclude UC projects from benefiting from early design consultation that could be provided by qualified subcontractors. The Committee recommends that the University aggressively pursue these changes. The Committee’s expectation is that these changes will yield significant overall cost-savings across the UC portfolio of capital expenditure activity, as well as project outcomes that are more predictable with less litigation and fewer disputes, and a smoother project delivery process with less UC project oversight.

Findings

In the view of the Committee, there are three areas where UC contracting methods and the UC contracting environment are impacting UC projects unfavorably. They are: 1) the requirement that contracts be awarded to the lowest responsible bidder, 2) restrictive contract language, and 3) legal constraints that prevent university projects from obtaining beneficial, cost-saving, early design and planning inputs from qualified, knowledgeable subcontractors.

The Committee observed that use of a modified design-build project delivery method available to the University under current law, provides a contracting method that mitigates some of these issues.

Low-Bid Requirement

Apart from the modified design-build project delivery method, the state-mandated low-bid selection process, in the view of the Committee, is preventing UC project management teams from establishing efficient working relationships with qualified groups of contractors and subcontractors who are


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known in the contracting community, and more importantly by their UC performance, to be high-performing constructors. There are two reasons for this. First, the low-bid system does not allow the ranking of factors such as qualifications, relevant experience, management competency, or financial strength, in the award of a contract. As such, it tends to create conditions that favor less experienced or low-performing firms who may bid low out of ignorance, or by design, and count on disputes or corner cutting to accomplish profitability goals. In its most extreme form, in the words of one Committee member, “For UC jobs, if you breathe and are bonded, you can bid.” Another Committee member commented, “A system where you have the same low performing contractors back on jobs every time is not smart.”

The second reason the Committee believes that the low-bid model prevents relationship-building with qualified firms is that many of the most qualified firms will not bid UC jobs because key features of their service offerings, namely quality, value, and experience, are not given due weight in the bidding process.

Whereas a quality-based selection process does not demonstrably deliver a lower initial construction bid, it is widely believed by the campuses, by the Committee, and by private sector firms, that the use of quality-based selection delivers lower total project cost and a lower overall program cost across multiple projects. In other words, quality-based selection is, overall, a lower-cost business model that yields more predictable outcomes with less litigation and fewer disputes.

Restrictive Contract Requirements

UC construction contract requirements appear to be discouraging many qualified firms from bidding on UC jobs. Examples of such terms include the requirements that the contractor is responsible for any hidden underground conditions that may exist on the site, and that the bids must remain open for 90 days. In the words of one Committee member, “I looked at the UC contract, and I understand why contractors wouldn’t respond – the risk is all on their side. I know good contractors who won’t bid UC work.” Additionally, testimony presented to the Committee by an outside consultant who performed a comparative analysis of UC versus private sector construction costs for the Davis campus (see Appendix F) observed that the UC contract requirements for complex and lengthier processes for inspections and submittal approvals results in higher direct and indirect costs for the contractor and subcontractors, which are reflected in higher bids. Moreover, unlike UC, private owners typically do not require performance or payment bonds from the general contractor for projects below certain thresholds.

Restrictive contract clauses typically drive up bid prices by limiting bid response and increasing the price of bids that are received due to the action of bidders to self-insure against hidden risks in the contract by submitting a higher bid number to cover the risk clause. In response to the opinion of one Committee member that such adverse events end up getting “negotiated


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away,” the observation was made by another member, “Yes, but then that means you pay [bid price] for something in the bid that you later give up.”

Legal Constraints, Qualified Subcontractor Design Consulting

Under present legal constraints, subcontractors who provide early planning and design consulting services on projects are precluded from bidding on those projects. Our study findings indicate that the campuses are frustrated that contractor and (especially) subcontractor participation in the early planning and design cannot be encouraged, because those who participate in design can therefore not bid on the project.

The opinion of the Committee is that this aspect of the UC contracting environment is precluding projects from reaping considerable construction cost savings by not benefiting from up-to-date, cost-saving purchasing and construction planning ideas that qualified subcontractors can offer. Contracting models that allow subcontractors to participate in design decisions early in the design process yield cost-savings that cannot be obtained after jobs are awarded (for example, a Committee member reported that mechanical, electrical, and plumbing (MEP) subcontractor input reduced the MEP budget for his projects by as much as 10%).

Recommendations

The Committee recommends that the University vigorously pursue whatever legislative or policy changes are needed to allow “Best Value” contract award processes to be used and permit subcontractors to provide early design and construction consulting services without being disqualified from project bidding. The Committee believes strongly that these end results are financially worth devoting considerable UC effort and resources to achieve.

“Best Value” contracting is taken here to mean the awarding of contracts not solely on the basis of bid price, but rather on a criterion of “Best Value,” which combines competitive pricing with assessments of contractor capabilities and past performance. At the same time the University is pursuing the “Best Value” contracting model, the Committee recommends the development of alternative contracting methods to effectively achieve the same results of a quality-based selection process, and the ability of the campuses to develop efficient working relationships with qualified firms. As part of the “Best Value,” quality-based selection process, the Committee recommends that the campuses, with the assistance of the UCOP, develop a pool of pre-qualified architectural and engineering firms and general contractors from which to solicit bids. The firms selected for this pool would be continually reevaluated with respect to their demonstrated performance and capabilities.

The Committee is aware of UC efforts to get a “Best Value” contract award criterion adopted by the State Legislature. The Committee heartily endorses that initiative and strongly recommends that the UC System take an active role in achieving that result.


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The Committee further recommends that UC construction contracts be modified to eliminate, or make more flexible, currently restrictive and onerous contract clauses that are discouraging qualified bidders from bidding on UC projects. In particular, this would involve eliminating or substantially modifying contract requirements such as those that: a) hold the contractor responsible for hidden underground conditions that may exist on the site, b) require bids to remain open for a stipulated number of days, c) impose cumbersome processes for inspections and submittal approvals, and d) dictate costly insurance and bonding requirements for contractors that may not be necessary when working with qualified firms or may be satisfied through lower-cost University-initiated channels.

Expectations

It is the Committee’s opinion that UC has a significant cost-saving opportunity in creating a more competitive and robust contractor environment, encouraging more highly qualified firms to bid on UC projects, and obtaining early design inputs from highly qualified subcontractors. The expectation is that UC will realize project outcomes that are more predictable with less litigation and fewer disputes, a smoother project delivery process with less UC project oversight, and an overall cost savings across the UC portfolio of capital project activity. Where these contract provisions are required by State law or regulation, the Committee recommends that the University pursue changes to those requirements, or develop alternative methods to satisfy the requirements in a manner that does not discourage bidders.

TRANSFORMING CAPITAL ASSET UTILIZATION AND DELIVERY Opportunities for Reducing Project Costs and Achieving More Program for the University’s Capital Dollar Findings and Recommendations: 5) Systemwide Metrics, Standards, and Data

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5) Systemwide Building and Project Metrics, Standards, and Data

Issue: Metrics, standards, historical data

Potential Opportunity: Lower costs by leveraging system-wide construction experience

Question: To what extent do system-wide standards and uniform historical project performance data help define and shape new projects?

Summary

There appears to be a lack of system-wide standards concerning mission-relevant metrics (for example, project cost per student, bed, principal investigator), and no system-wide methodology or infrastructure across the campuses (and between the campuses and the Office of the President) for collecting and using project administration data. These represent two opportunity areas for achieving, over time, the kind of construction economies of scale envisioned under the Committee’s recommendations on “A Shorter, Simpler Process.” The Committee sees very substantial cost savings being realized from a common project administration system that facilitates automated roll-up reporting for monitoring and tracking projects, and better and faster planning resulting from the system-wide use of mission-relevant metrics and standards. As a start, campus project systems should be compliant with systemwide standards and criteria, and have the predictive capacity to project and help mitigate project over-runs, delays, disputes, scope delivery issues, and claims.

Findings

The results of campus interviews indicate that whereas each campus develops their specific design standards (lineal feet of bench-top per lab worker, office sizes, net-to-gross, etc.), and that there exists a system-wide accounting method for construction costs, there is no evidence of universal, system-wide design standards in use. Further, cost accounting for soft costs and the roll-up and reporting of those costs are not systematically and consistently implemented across the campuses or from project to project. There also appears to be no system-wide methodology for collecting and analyzing full and accurate final project costs and post-occupancy performance metrics in a format useful for future project planning.

Of particular interest to the Committee is the apparent lack of system-wide standards and data-collection concerning mission-relevant metrics such as project cost per student, bed, principal investigator, or cost per vehicle, and energy cost per square foot, student, occupant, or principal investigator.

There appears to be wide disparity among project managers, from project to project, and among the campuses, in the categorization and allocation of soft costs (project costs over and above actual construction costs) for cost


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accounting purposes. Further, for a number of campuses, the information that does exist on soft costs within the individual campus accounting groups tends not to be systematically fed back to the project management group, so that project managers generally do not have a comprehensive idea as to what the total project costs are running as their projects progress.

There is also a diversity of practice in the closeout of projects where systematic analysis and documentation of project performance would be expected to occur. While the campuses indicate that some project managers are diligent in this effort, for most the tendency is to move on to the next project rather than devote time to the jobs that are “behind you.”

The Committee’s view is that the lack of a system-wide set of standards and common methodology across the campuses for collecting and using project performance data pose a significant barrier to achieving, over time, the kind of construction economies of scale envisioned under their recommendations on “A Shorter, Simpler Process.” The current system of separately kept standards and lack of a central repository of project data certainly seems to allow, if not encourage, a business model of “one-off, Magnus opus” project development in which individual projects do not appear to be systematically benefiting from system-wide thinking, experience, and lessons learned.

Recommendations

The Committee recommends that the University of California develop and keep up-to-date universal design and construction standards that describe the kind of construction project and value-outcomes they expect to see on the individual campuses. These standards should meet the criteria of enabling campus planners to speed up the processes of design decision-making, project development, and project review. Such standards should include broadly defined, Regent-determined standards for such issues as building appearances, “sense of place,” and floor-area-ratios (for land-use purposes), all of which should further the creation of value (not cheap buildings) relative to campus missions, the streamlining of the design and approval process, and the delivery of projects that meet long-term, system-wide outcomes envisioned by the Regents.

The Committee also recommends the development and universal use of mission-based metrics and standards with which to evaluate Business Case Plans and capital project proposals. These would include metrics designed to show outcomes achieved relative to capital dollars spent. Examples would be: cost per bed (housing), cost per vehicle (parking), cost per principal investigator (research buildings), cost per additional undergrad student capacity, cost per increased number of graduates, land utilization efficiency ratios, etc.

The Committee highly recommends that in place of current practice in which campuses each have stand-alone IT systems for project management, administration, data collection, and reporting, which don’t “talk” to one


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another or integrate with the Office of the President, the University implement a system-wide, consolidated standardized system for this function. As a start, campus systems should be compliant with systemwide standards and criteria, and the systems should facilitate automated roll-up reporting for monitoring and tracking projects systemwide. A common system would serve as a shared communication platform for standardizing processes, project performance reporting, and benchmarking across campuses and with the Office of the President. The intended benefit of this system is in its predictive capability (i.e., to yield information helpful in managing future projects), and not in a prescriptive capacity (e.g., not one of prescribing specific forms or control-oriented). It is the Committee’s opinion that in order for such a system to be effective in contributing to long-term project cost reduction, it must be automated, systematic, and standardized, and not dependant upon manual, hand-entry data that requires laborious, non-standard data-inputting and updating by specific individuals on the campuses. The Committee sees the implementation of this system as being the responsibility of the process-change agent described in the Committee’s recommendation on “A Process-Change Agent…” and should be funded centrally to be consistent with the system-wide benefits of the undertaking. In recognition of the expense of such an undertaking, implementation and funding could be done in phases.

Expectations

The Committee believes strongly that an automated shared information system (i.e., one that automatically feeds a central project database as part of normal campus project implementation activities), that facilitates standardized processes, project performance reporting, and benchmarking across campuses, will significantly reduce construction costs through tighter management and systematic project analysis.

The Committee expects the documentation of standards to take three to six months off of the project development timeline, and the centralized repository of project data to deliver savings by identifying best design solutions for mission goals. It also sees standards and the methodology for collecting project data across the system as providing necessary infrastructure to realize cost savings associated with its recommendations for “Capital Planning and Decision-Making Based on Formal Business-Case Analysis,” “A Shorter, Simpler Process,” and “Ownership and Accountability for Capital Asset Utilization, Delivery, and Performance.”

TRANSFORMING CAPITAL ASSET UTILIZATION AND DELIVERY Opportunities for Reducing Project Costs and Achieving More Program for the University’s Capital Dollar Findings and Recommendations: 6) Process-Change Agent

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6) A Process-Change Agent to Implement This New Business Model

Issue: Change management

Consistent with the Committee’s recommendations on ownership and accountability, it is the Committee’s recommendation that the implementation of the recommendations set forth in this document be assigned to a single change-agent (not a committee, and not left up to the individual campuses) who has the responsibility, tools, resources, and authority to implement these changes. It is the Committee’s opinion that to be effective this process-change agent must be supported at the highest levels (the Board of Regents, the President and his Cabinet, and the Council of Chancellors). This person’s job performance should be evaluated on, and their job tenure dependent upon, success in accomplishing this task.

TRANSFORMING CAPITAL ASSET UTILIZATION AND DELIVERY Opportunities for Reducing Project Costs and Achieving More Program for the University’s Capital Dollar Findings and Recommendations: 7) Other Cost-Saving Opportunities

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7) Other Cost-Saving Opportunities Examined, but not Specifically Targeted in the Committee’s Top Six

Issue: Other opportunity target areas considered

Potential Opportunity: Other possible cost-saving opportunities worthy of consideration

Question: What other things did the Committee consider?

a) Outsource or Privatize the Delivery of Projects

More than one Committee member raised this idea. The proposition was that construction costs might be saved if the campuses, once they established the need for a building, would simply order their building from an outsourced project delivery company that would turn building requirements and specifications into designs and then a final product. There were two financial versions of this idea: 1) buildings would be built turnkey and paid for by UC upon completion, and 2) buildings that would be built and financed by the delivery company and leased to the University.

The Committee concluded that the main savings to be realized from outsourced delivery could come from more efficient processes and contracting methods, and quicker up-front planning and design time-lines, but not necessarily significantly lower hard construction costs. A detailed cost study conducted by an outside consultant on a recently completed Math-Science building at the Davis campus (refer to Appendix F) indicated that hard construction costs for a building built on a UC campus which had to meet UC standards and requirements would be approximately the same whether implemented by a private developer or the in-house projects group. The issues of more efficient processes, new contracting methods, and project time-lines are among the top recommendations by the Committee for the UC capital projects business model.

With respect to the financing proposition of a leased building, the Committee could not envision a private firm having access to capital at lower interest rates than those achievable by the University.

b) Use of Black-Cape (“Signature”) Architects

The Committee’s impression is that the practice of using high-end-design “signature” architects is an increasingly rare event in the UC system, and the Committee heard testimony that where such architects are used there have been both good and bad results. Thus the Committee chose not to single-out this issue among its recommendations. The Committee does recommend, however, that consistent with its recommendations under “A More Robust…Contracting Environment” and “Ownership and Accountability…” that building committees not be allowed to be the primary forum for the selection of design architects, but rather that design architects, like other


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contractors, be chosen on some form of “Best Value” basis with input by the building committee, the campus project management group, and the Office of the President. The final decision, however, should rest with the campus “capital asset chief” who is being held accountable for performance.

c) Internal Soft-Cost Burden, Redundant Layers of Staffing

The Committee believes that its recommendation under “A Shorter, Simpler Process” will yield efficiency improvements in this area as a by-product of addressing the larger issue of “process.” In particular, the Committee expects that its recommendations will transform what is now a project pipeline consisting of a large number of slowly evolving projects, which involves UCOP and campus staff personnel in management work spread out across multiple projects at multiple stages for multiple years, into a project pipeline of fewer projects that move through the pipe quickly.

d) Shorten Project Time-Lines

The issue of shorter project time-lines is addressed under the Committee’s “A Shorter, Simpler Process” recommendation. Shorter time-lines are the expected results from these process changes.

e) Incentives

The issue of incentives came up repeatedly in this study in connection with contractors and individual responsibility at the campus level for project performance and the ownership of assets. The Committee believes that its recommendations for contracting changes that reward high-performing contractors, and ownership and accountability at the campus level, address the core issue of incentives.

f) High Capital Expenditures Being Made to Avoid the Need for “Unavailable” Maintenance Funding

In general, the Committee found that a lack of maintenance funding did not drive project-specific design and construction decisions at the campuses, i.e., that the operating budget concerns did not motivate the campuses to design more costly buildings, for long-term operating savings. Concerns regarding maintenance funding and costs of future alterations did factor into some specific campus standards. In general, the practice of utilizing formal Life Cycle Costing does not appear to be common in the UC system, although it has recently come to the fore as a result of sustainability design initiatives. The Committee believes that procedures that will result from its recommendations on Business Case Analysis and ownership and accountability will drive sound economic decisions to be made with respect to capital vs. operating cost tradeoffs.


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g) Scope-Creep Control

The issue of scope-creep control has to do with projects growing in size, without considered controls or limits, during the programming stage. Findings suggest that while projects may have a tendency to expand in the early planning stages, the realities of funding availability may actually be creating the reverse problem, which is that funding constraints can lead to the construction of buildings that are too small relative to an efficient use of land. The Committee’s recommendations under Business Case Analysis and Planning address this issue and suggest that part of the business case planning include, and in fact be guided by, efficient land use, which may lead to building fewer, larger, more efficient (higher net-to-gross ratio and better utilization/sq-ft) structures to house multiple program initiatives.

h) LEED™ Design and Construction

The Committee found no evidence that sustainable (“green”) design and construction principles, as they are being used by UC planners, significantly increase building costs in relatively moderate-climate California. UC’s present policy of including sustainable design as one part of a multi-faceted design decision-making process is consistent with UC values, and the Committee sees no significant cost reason to abandon those values. This is not to say that the Committee recommends the pursuit of LEED™ Design Awards, which it does not, since the LEED™ Award process does involve significant projects costs.

i) Formalized Project Delivery Plans

Formalized project delivery plans, which set out at the beginning of a project how the entire project is to be run, including the number of bid alternates and down to how parking is to be handled, were not found to be in common use either at UC or at other institutions. While such plans no doubt would improve the management of projects, the campuses already believe they have protocols, policies, systems, and manuals that add up to the “project delivery plan,” and the Committee was not unanimous in its belief that this issue would be a major contributor to construction cost savings.

j) Architectural Team Selection

While not addressed as a separate issue, architectural team selection is considered to be part of the Committee’s recommendations under “A More Robust, More Flexible Contracting Environment” wherein it was suggested that campuses, with the assistance of UCOP, develop a pool of pre-qualified architectural and engineering firms from which to solicit proposals. Beyond this, it was suggested by a Committee member, that the Regents, acting through the Office of the President, pre-qualify a group of design firms who have exhibited the ability to deliver pre-determined design standards. Although, this undoubtedly would streamline the design process and aid in


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turning out more predictable design outcomes, the Committee was not unanimous in believing that this was a major cost-saving recommendation.

k) Design Review and Evaluation of Design Alternatives

The Committee believes strongly that this is a key cost-savings area, and it is an issue that was specifically targeted in the Committee’s original 15 study questions. It is the Committee’s view that design review and the evaluation of design alternatives should be an integrated part of the Committee’s recommended Business Case Analysis and Planning process which includes a “pre-design intensity bubble.” Whereas all of the campus project teams interviewed reported that design review and evaluation of design alternatives is being done, and that they use value-engineering workshops in that process, in the view of the Committee these late-in-design efforts may not be as effective as evaluating design alternatives very early in project planning during the pre-design business case planning period.

l) Core Purpose, Core Values and Visionary Goals of the University

Whereas the Committee considered the possible costs associated with such University goals as safety (seismic, environmental), and the creation of built environments with a unique sense of place, the Committee was not able to determine what if any cost was associated with these goals, nor what value the University placed on them (refer to Appendix B for documentation on the University’s core purpose, values, and goals). Certainly the Committee did not see itself recommending that construction costs could be reduced by building less safe buildings or by creating campuses with poorer aesthetics or appeal.

One area of Core Values that is addressed in this study, however, is the area concerning what is referred to as “shared governance,” which the Committee sees as leading to a multiplicity of committees with no identifiable individual accountability for outcomes. The Committee believes strongly, as indicated in its recommendations on “Ownership and Accountability…,” that the “shared governance” philosophy at the University of California, as the Committee understands it, needs to be moved to a second-tier position subordinate to “in-charge,” accountable persons, if new cost-reducing and capital-preservation processes for capital asset utilization are to be effective.

TRANSFORMING CAPITAL ASSET UTILIZATION AND DELIVERY Opportunities for Reducing Project Costs and Achieving More Program for the University’s Capital Dollar Appendix A: Committee Members’ and Study Consultants’ Resumes

Appendix A

Appendix A Committee Members’ and Study Consultants’ Resumes

Expert Committee Members

W. Carter Chappell – President - Southern California Division, McCarthy

Building Companies, Inc., Newport Beach

Michael A. Covarrubias – Chairman and Chief Executive Officer, TMG Partners, San Francisco

J. Stuart Eckblad, AIA - National Director, Project Administration Services, Kaiser Permanente, Oakland

Robert J. Kain, AIA + ACHA – Chairman of the Board/Director of Healthcare, HMC Architects, Ontario

Patrick MacLeamy, AIA – Chief Executive Officer, HOK Group Inc., San Francisco

Wayne C. Twedell, AIA, CDS, FCMAA – President and Chief Executive Officer, The JCM Group, Los Angeles

Expert Committee Facilitator and Scribe

Steven L. Westfall, Ph.D. – President, Chief Executive Officer, and Founder, Tradeline Inc., Orinda

Cost Consultant

Peter Morris – Principal, Davis Langdon, Sacramento

[Expert Committee Members’ and Consultants’ resumes follow]

Appendix A

McCARTHY BUILDING COMPANIES INC. BIOGRAPHY

W. CARTER CHAPPELL

PRESIDENT, SOUTHERN CALIFORNIA DIVISION

As President of the McCarthy Southern California Division, Carter Chappell is

responsible for the division’s financial performance and overall operations. These duties include overseeing the marketing, estimating, scheduling, safety, administrative and financial functions of the division.

With 26 years of experience in the construction industry, Chappell has been a member of the McCarthy team for more than 20 years. During this time, he has held positions as executive vice president / regional manager, executive vice president of operations, senior vice president of operations, project director, project manager, project superintendent, carpenter foreman and carpenter.

Chappell holds a Bachelor of Science degree in marketing from the University of

Colorado in Boulder. A member of several professional organizations, Chappell has served on the board of directors for the Associated General Contractors (AGC) of Orange County since 1999. He also served as executive committee and chairman of the Building Division for the AGC of California in 2000/2001.

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Appendix A

Michael A. Covarrubias

Member Profile

TMG: Michael A. Covarrubias, Chairman and Chief Executive Officer, oversees all of the company's operations. Mr. Covarrubias has directed TMG Partners since 1995. Prior: Mr. Covarrubias' professional background includes 17 years with Union Bank, including commercial and real estate lending as well as administrative management. In his last position, he served as Senior Vice President and Manager of Union Bank's Silicon Valley Regional Real Estate Center. In 1988, Mr. Covarrubias resigned his position at Union Bank to join TMG Partners. Credentials: Mr. Covarrubias is a member of the Boards of Directors of The Bay Area Council, The Bay Area Forum, and The J for Jobs Committee. He also is an active member of the Urban Land Institute. Mr. Covarrubias is a graduate of the University of San Francisco with a bachelor's degree in business administration. About the Firm TMG Partners focuses on San Francisco Bay Area and other California real estate markets, specializing in urban in-fill projects. The company acquires, develops, and manages all types of real estate: office, residential, and commercial for its own account and third party clients. Since the Company was founded in 1984, TMG (formerly The Martin Group) has acquired and developed a diversified portfolio valued at over $3 billion and 15 million square feet. Our regional focus provides the company with unparalleled knowledge of local markets, communities, and politics. In addition, TMG has established unique relationships with local brokerage, financial, and construction companies, providing the Company incomparable resources to acquire assets and implement development projects. Our approach is to develop partnerships with local communities, capital sources and end users in order to structure projects that respond to market and community needs. TMG’s projects are directed by the Company’s principals who have a minimum of 15 years of real estate experience and expertise in finance, leasing, government and construction (new, rehabilitation and historic preservation). Experienced management and unique local relationships have been instrumental in TMG’s 21-year track record of financial success and award winning projects.

Appendix A

Biographical Sketch for J. Stuart Eckblad Director of Project Administration for Kaiser Permanente National Facilities Services. Responsible for nation wide programs, procedures, systems and controls for managing the design and construction process including procurement, contracts, and compliance. Specific responsibilities include management of the Design and Construction Alliance Program (a Collaborative Project Delivery method), Project Tracking and Cost Model systems, Construction Management Services, Inspection Services, and National Diversity Program. Prior positions include Associate Director of Facilities Design and Construction for Kaiser Permanente’s Northern California Region, Team Manager for Facilities Design and Construction for Northern California’s North Bay Medical Facilities, and Manager of Facilities Planning for Northern California. Licensed Architect (California). Affiliations AIA Collaborative Process Institute - Founding member and past President

Appendix A

Robert J. Kain, AIA + ACHA Director of Healthcare / Chairman of the Board HMC Architects Leadership As Director of Healthcare, Robert is responsible for overall project delivery, commitment of quality staff, and contract management. He participates in the initial development of planning and design alternatives, and will ensure full-time commitment to design excellence and value to every client. Robert brings and outstanding reputation for innovation in the overall delivery of healthcare projects “on time and within budget”. He oversees all healthcare projects and provides mentoring and guidance to HMC’s healthcare practice teams. In addition, Robert in his role as HMC’s Chairman of the Board provides the overall leadership of the firm’s corporate governance and the strategic vision for the future growth and direction of the practice. Affiliations Member of American Institute of Architects; Member of AIA Academy of Architecture for Health; Member of TEC International; Chairman of San Bernardino County Childrens Fund; Member of San Bernardino County Museum Foundation Board; President of California State University Pomona Educational Trust Board; Founding Member of American College of Healthcare Architects. Education Bachelor of Science in Architecture, California State University Pomona, 1973

Appendix A

Patrick MacLeamy, AIA Chief Executive Officer HOK Patrick MacLeamy is Chief Executive Officer of HOK, a global architectural design and services firm. Appointed to this position in March 2003, he leads the firm’s strategic vision and direction. During his 36-year tenure at HOK, Mr. MacLeamy has served in leadership roles in design, project management, marketing and management. He also has overseen the establishment of several HOK regional offices in the U.S. and Asia. Mr. MacLeamy is committed to helping establish standards of quality, reliability and efficiency in the building industry. He advocates changing the fragmented nature of the industry into a vertically integrated, highly efficient system that emulates the manufacturing industry. Mr. MacLeamy has supported this vision as a founder and international Chairman of the International Alliance for Interoperability (IAI), an organization which fosters standards for data exchange in the building industry. He is also an active speaker and panelist for building industry forums including Construction Users Roundtable (CURT), and the Construction Industry Roundtable (CIRT).

Appendix A

WAYNE C. TWEDELL, AIA, CDS, FCMAA Wayne Twedell is the founder of The JCM Group and has been its President and Chief Executive Officer since 1983. His leadership has been the catalyst for JCM's growth to a nationally ranked company providing professional management services for the planning and execution of capital improvement projects worth more than $2.4 billion. Mr. Twedell is a licensed architect in the State of California, and received his Bachelors and Masters degrees in Architecture from the University of Southern California. Prior to forming JCM, Mr. Twedell was Campus Architect and Director of Project Management for the University of California, Los Angeles. In this capacity he was responsible for campus planning, design and construction inspection, budgets and administration of a $200 million capital program. Mr. Twedell also served as the liaison to community groups, City, County and State agencies. Mr. Twedell is a recognized expert in capital project planning and management, at both policy and practice levels. He is a former National President and a Fellow of the Construction Management Association of America, a member of the American Institute of Architects, certified by the CCAIA as a Development Strategist, a corporate member of the Society of College and University Planning, and a former member of the Association of University Architects.

Appendix A

Steve Westfall, Ph.D. Steve Westfall is President, CEO, and Founder of Tradeline Incorporated, a nationally recognized conference production and publishing company in the field of design, construction, and management of corporate and institutional facilities. Since founding Tradeline in 1975, Dr. Westfall has developed and directed 186 national conferences for which he was responsible for analyzing new industry trends, developing conference topics and content, recruiting speakers, moderating general session and forum events, and speaking on special topics. He also serves as the executive editor for the firm’s associated publishing activity. Prior to 1975, Dr. Westfall was Vice President of Lawrence Systems, a financial services subsidiary of INA Corporation (now CIGNA), specializing in collateral control services for the commodity lending divisions of major banks throughout the U.S. and Canada. From 1970 to 1973 he was Director of Special Projects for CERRO Corporation, a NY-based copper mining and manufacturing firm, working on west coast corporate acquisition projects. Prior positions include Professional Staff Member of Laird Systems, a NY-based venture banking firm; Project Manager for South American industry development projects under the Engineering Department of UCLA; and Project Engineer for Bausch and Lomb’s Applied Research Laboratory. His South American industry development work involved small-industry development projects in the interior of Northeast Brazil. Dr. Westfall holds a Bachelor of Science in Electrical Engineering from the University of California at Berkeley, an M.B.A, and a Ph.D. With Distinction in Management from the University of California at Los Angeles. His Ph.D. fields of study were Management, Economics, International Business, and Engineering Design for Industrial Development. His dissertation topic, Industrial Franchising in Northeast Brazil, was based on his field research in Brazil on barriers to entrepreneurship and industrial development in underdeveloped regions. He was the recipient of the 1968 UCLA Executive Program Alumni Association Award.

Appendix A

PETER MORRIS Peter Morris, a Principal with Davis Langdon, has over 27 years of experience in facilities evaluation, and construction cost planning and management, with expertise in building surveying, construction cost planning and estimating, auditing, scheduling and life-cycle costing. As head of Davis Langdon’s research initiative, Peter is currently leading a project to compile a database of construction costs from the thousands of projects that Davis Langdon has done nationally and abroad. Peter has also spoken at several major conferences on the topics of cost benchmarking, cost planning, and the cost of sustainable design. Professional Preparation Peter has a Bachelor of Science in Building Surveying from Reading University in 1976, a CDip in Business Accounting and Finance, and is a member of the Royal Institution of Chartered Surveyors. Synergistic Actives

• Curriculum development for the Understanding LEED Project Costs & Returns workshop, for USGBC. Curriculum includes workbook.

• Creation of construction cost knowledge base, compiling data from hundreds of national and international projects covering a wide range of building types, sizes, and programs. Provides functionality to analyze and compare components costs between similar projects.

• Creation of a database of sustainable design costs, specific to the LEED rating system, gleaned from hundreds of national projects. Functionality is provided to analyze and compare costs per LEED rating level, as well as at a point-by-point basis

Selected Publications and Presentations Understanding the Cost of the Labs21 Environmental Performance Criteria presented at the Labs21 Conference, St. Louis, MO, October 7, 2004 What does it cost to be green? presented at the “Building Confidence: From Sustainable Policy to Practice” Conference, UC Santa Barbara, June 23, 2004 Costing Green: A Comprehensive Cost Database and Budgeting Methodology presented at the AIA 2004 National Convention in Chicago, Il, June 11, 2004. Understanding LEED Project Costs & Returns, Pre-conference Workshop conducted at the USGBC Conference in Pittsburg, PA, November 12, 2003. Cost of International Projects, Factors to consider in Planning and Budgeting, a Masters in Construction Management class conducted at the University of Washington, Seattle, WA, May 13, 2003 Construction Cost Planning in Early Design presented at Carnegie Mellon University, Pittsburgh, PA, February 7, 2003. Cost Impact of Code Changes presented at SCUP Pacific Regional Conference, Las Vegas, NV, April 29, 2002. Benchmarking Construction Costs presented at the Tradelines Annual Conference, Hilton Head, NC, November 9, 2000. FEMA 2000 Market Capacity and Impact Evaluation, FEMA, vol 156, October 1999

TRANSFORMING CAPITAL ASSET UTILIZATION AND DELIVERY Opportunities for Reducing Project Costs and Achieving More Program for the University’s Capital Dollar Appendix B: UC Capital Program – Core Purpose, Values, and Goals

Appendix B

Appendix B UC Capital Program – Core Purpose, Values, and Goals

As noted in Appendix B, an “Internal Resource Group” (“Group”) comprised of University staff from the campuses and the Office of the President, was formed to facilitate information gathering and provide staff support to the Committee.

The Group discussed and subsequently drafted a document describing the highest-level goals, values, and design standards that guide development of the University’s built environment.

This document, entitled, “UC Capital Program – Core Purpose, Values, Goals” was presented to the Committee and is provided here.

UC BUILDING COST REDUCTION OPPORTUNITIES STUDY UC CAPITAL PROGRAM – CORE PURPOSE, VALUES, AND GOALS

Appendix B Page 1 of 2 January 2005

UC Capital Program – Core Purpose, Values, Goals (Refer to the “Guide to Terminology” on the second page)

The core purpose of UC’s capital program is to create built environments that support the University’s teaching, research, public service and patient care mission. The capital program:

• creates the environment within which all University activities take place

• defines and shapes the University’s learning space within its classrooms and labs, and the living space outside of them

• is integral to the success of the institution

The core values of UC’s capital program are:

• excellence – demonstrate quality in all aspects of our operations, services, and products, and adding value at each step of a process

• service – understand and be committed to meeting the needs of clients and stakeholders

• innovation – creatively respond to the demands of the ever-changing environment and needs of our clients

• integrity and ethical behavior – be fair, open and honest in all our communications, decisions, and transactions

• collaboration and collegiality – understand and respect the perspectives, needs, and opinions of our clients and co-workers, and leverage contributions by all to achieve our common goals within a structure of shared governance

• balance – seek optimal and fair resolution of competing and conflicting demands

• accountability – assume responsibility and ownership for our decisions and actions

• optimism – embody and encourage a positive outlook to foster a productive and affirmative work environment

The visionary goals of UC’s capital program are to:

• create built environments with a unique “sense of place”, cohesiveness, and timeless design; that are contextually sensitive and provide opportunities for memorable experiences; and which enhance the University’s ability to attract and retain students and faculty, and satisfy other stakeholders (staff, community, donors, etc.)

• deliver the capital program such that it: fulfills the University’s visions of its academic and built environment; supports the stated goals of its capital and master plans; is consistent with University-specific scheduling needs and minimizes disruption to operations

• maximize the effectiveness of constrained resources (land, people, funds) available to create the built environments

• create safe (seismic, environmental, fire/life-safety), secure, and accessible physical environments for our students, faculty, staff and visitors

• design and construct facilities that: are environmentally sustainable, energy efficient, flexible, adaptable; adhere to University-defined standards; and, minimize major maintenance and life-cycle costs

UC BUILDING COST REDUCTION OPPORTUNITIES STUDY UC CAPITAL PROGRAM – CORE PURPOSE, VALUES, AND GOALS

Appendix B Page 2 of 2 January 2005

Guide to Terminology

1. Core purpose is the entity’s idealistic reason for being – the answer to the question “Why does it exist?”

2. Core values are deeply held, central priorities in the organization’s culture, reflect its core ideology, and guide how members think, behave, and approach situations within that organization. They are enduring and do not change, even if the environment or circumstances within which the organization operates change. They are the values that the organization lives, breathes, and reflects in its activities (not just ones that they think they should have). Examples of values are: ambition, competency, individuality, equality, integrity, service, responsibility, accuracy, respect, dedication, diversity, improvement, enjoyment/fun, loyalty, credibility, honesty, innovativeness, teamwork, excellence, accountability, empowerment, quality, efficiency, dignity, collaboration, stewardship, empathy, accomplishment, courage, wisdom, independence, security, challenge, influence, learning, compassion, friendliness, discipline/order, generosity, persistence, optimism, dependability, flexibility.

3. Visionary goals are the intended outcomes that require actions to satisfy institutional needs about what is possible, desired, achievable and allowed. These are the lofty goals that the organization chooses to pursue. “Visionary” goals are longer term and more challenging than “strategic” or “tactical” goals, and are more general than specific objectives.

TRANSFORMING CAPITAL ASSET UTILIZATION AND DELIVERY Opportunities for Reducing Project Costs and Achieving More Program for the University’s Capital Dollar Appendix C: Potential Areas and Issues to Examine

Appendix C

Appendix C Potential Areas and Issues to Examine

An “Internal Resource Group, “ comprised of University staff from the campuses and the Office of the President, was formed to facilitate information gathering and provide staff support to the Committee.

The Internal Resource Group met in December 2004 and discussed potential areas and issues to examine for cost reduction opportunities and drafted a document summarizing these ideas for the Committee to consider.

The resulting document, entitled, “Potential Areas and Issues to Examine” is provided here.

UC BUILDING COST REDUCTION OPPORTUNITIES STUDY POTENTIAL AREAS AND ISSUES TO EXAMINE

Appendix C Page 1 of 4 January 26, 2005

Potential Areas and Issues to Examine Background and Comments 1. Core Purpose, Values, Visionary Goals, Standards,

and Policies • What are the core purpose, values, and visionary

goals and that guide the development of the University’s built environment?

• What standards and policies have UC established for space programming and facility design, and how do these assist UC in achieving its visionary goals?

• What references to external standards and benchmarks does UC incorporate for various types of space and facilities?

• What cost-control design strategies does UC employ to aggressively manage project costs?

• Refer to the document entitled, “UC Capital Program

– Core Purpose, Values, and Goals”. The core purpose of the University’s capital program is to create built environments that support the University’s teaching, research, public service and patient care mission. The core values of the capital program include: excellence, service, innovation, integrity, collaboration, balance, accountability and optimism. The visionary goals of the University’s capital program include: design cohesion and context sensitivity; fulfillment of academic vision and goals of capital and master plans; maximize effectiveness of constrained resources; create safe, secure and accessible physical environments; and construct facilities that are environmentally sustainable, energy efficient, flexible, adaptable, adhere to University-defined standards, and minimize major maintenance and life-cycle costs. UC further articulates these goals in specific design and construction policies.

• Consider the degree to which UC’s goals and values are in conflict or tension, how UC balances competing goals and values, and the consequences of making trade-offs.

• Consider the extent to which UC’s space programming and facility design standards are appropriate for, and conducive to, meeting its goals consistent with its values.

• Consider whether alternative programming and design standards might be utilized, and what impact they might have on UC achieving its goals.

• UC cost-control design strategies include examination/incorporation of: design ratios (including floorplate length-to-width, net/gross, exterior cladding/floor, roof+foundation/floor), cost-effective architectural detailing and decisions on locating large-scale articulation, consolidating non-lab functions and locating them in lower cost adjoining structures, concentrating fume hoods and utility risers into a central “wet zone”, concentrating lab support areas in the central core, close column spacing in labs, favoring generic or standardized modules (office, lab, residential) over highly-customized layout/design, use of conventional structural/seismic/ foundation systems, and use of conventional or generic interior finishes and acoustic materials.

• Determine whether alternative or additional cost-control design strategies might be employed to reduce costs (e.g., designing interstitial floors within lab buildings to accelerate construction schedule; enclosing rooftop mechanical systems in penthouses to simplify roof design) while still being conducive to meeting its UC’s goals consistent with its values.



Potential Areas and Issues to Examine Background and Comments 2. UC Organizational Structure to Deliver Capital

Projects • What organizational areas at the campuses and OP

are integral to the delivery of capital projects? • How is the process coordinated: among functional

areas; between the campuses and Office of the President; and with The Regents?

• Refer to the OP/campus organizational charts in the

Committee binder. The structure and relationships that exist to deliver capital projects are interwoven and complex. Moreover, organization and reporting relationships tend to differ at each campus.

• Evaluate performance data to determine whether and how UC’s organizational structure impacts the efficient, timely, and cost-effective delivery of capital projects.

• Consider whether authority, responsibility, and accountability for capital project delivery are appropriately and efficiently delegated within the UC organizational structure.

3. Program Scope Development • What is UC’s process for developing project scope? • How are program choices made and who is involved

in the programming process? • What is the nature of the timing and iterations in

setting program scope, and how is value-engineering incorporated within that process?

• How are scope controls, and references back to UC design benchmarks and standards, incorporated in the scope development process?

• How does UC’s performance in delivering scope compare to the research universities with which UC competes to attract and retain students and faculty?

• What effect does developing tighter programs have on potential cost savings and value to be derived from the project?

• Program choices are critical cost drivers that are

under UC control, and therefore represent feasible areas to explore for cost reductions.

• Explore whether the level and amount of user participation in the UC process are appropriate and result in cost-effective projects that support UC’s goals.

• UC has a prescriptive process for project scope and budget approval, including campus, Office of the President, Regents, and outside agency approvals. Are there opportunities for realizing cost reductions by creating a more efficient approval process?

• UC has a separate, subsequent (to scope and budget) process for project design review involving campus, Office of the President, Regents, and outside agency approvals. Are there opportunities for realizing cost reductions by making changes to this process?

4. Project Budget Development • When are the cost expectations for a project agreed

upon? • What is the process and who is involved in it? Does

the process contain inherent incentives or disincentives to project cost-control?

• What is the degree of interconnectivity between scope development and budget control?

• How does funding/financing availability affect project budget and cost-control?

• How does UC’s process differ from that of other entities?

• How are external cost standards and benchmarks incorporated in UC’s budget development process?

• Do any (budget/process) incentives exist that might facilitate cost-control?

• Within UC, project budgets (and the approval

process) are significantly impacted by the source of the funding, e.g., state-funded vs. non-state funded, donor-funded, financed, or funded via research grant (overhead).

• Consider any differences between the ways in which UC project budgets are formulated (and the parameters, controls, and constraints that impact the setting of those budgets) versus the manner in which external institutions set their project budgets.



Potential Areas and Issues to Examine Background and Comments 5. Project Schedule Development

• What is UC’s process for developing a project schedule?

• What entities are involved in the process? What factors must be taken into account?

• How are schedule constraints accommodated developing program scope and budget?

• What schedule constraints must UC accommodate that comparison entities might not be concerned about?

• In general, should UC adopt goals for shortened project schedules?

• UC requires approval of a preliminary project

schedule at the time of budget approval. Modifications to that schedule do not require the same degree review and oversight as changes to project scope and budget.

• UC project schedules are often significantly impacted by academic calendar concerns, e.g., opening of classrooms and dormitories in time for the new academic year.

6. Design and Construction Contract Provisions • What provisions within UC’s design and

construction contracts limit or transfer risks associated with cost, schedule, (insufficient delivery of) scope, and quality?

• What is the impact on net overall cost to the University in transferring risks to contractors, subcontractors, or insurers?

• How does UC tailor its contracts for specific projects and what controls are in place to assure conformity with the original contract provisions?

• UC publishes an on-line “Facilities Manual” that

documents policies, procedures, and guidelines for its facilities. The manual is based on Regents' policy, federal and state laws, regulations, case law, and results of UC's dispute resolution. Design and construction contracting is a subsection of that Manual, and includes the approved contracts and provisions available for UC capital projects.

• Determine the degree to which the UC agreements depart from industry standards, and whether the differences are appropriate, given the regulatory environment within which UC must operate.

• Consider the extent to which contract provisions appropriately balance the risks to UC versus the costs incurred by utilizing those provisions to manage (or transfer) risks. Specific UC requirements that could be reviewed include provisions related to: payment and performance bonds, builder’s risk insurance (levels, deductibles), liquidated damages, and transferring site condition risks to the general contractor.

7. Federal/State Legislative & Regulatory Constraints • What are the major legislative and regulatory

constraints that impact the UC design and construction process?

• How do these constraints impact project schedule, cost and scope?

• What is the feasibility of eliminating or modifying these constraints at the legislative or agency level?

• What strategies does UC utilize to mitigate these constraints? Are there alternative strategies that could be utilized?

• UC has determined that amending the Stull Act (state

code provisions concerning competitive bidding) is a high institutional priority, and has proposed several amendments to public contract code (see Committee binder, tab #10 from the first meeting for proposed amendments).

• To help mitigate competitive bidding exposure, UC utilizes prequalification tools, and is in the process of implementing a performance-based evaluation system for construction contractors and design professionals.

• Additional potential areas of legislative and regulatory constraints to explore include: prevailing wages, project labor compliance, third-party reviews (especially OSHPD, State Fire Marshal), and State Public Works Board review/approval.

• In addition to federal/state legislative and regulatory constraints, UC is also impacted by the planning and political processes at the regional and local levels.



Potential Areas and Issues to Examine Background and Comments 8. Construction Administration

• What project management processes and tools does UC employ to control contract performance and overall project budget and schedule?

• How do these processes and tools compare to those utilized at comparison institutions?

• What are typical owner-provided items, how does UC implement these within the construction process, and what strategies are used to manage conflicts and delays?

• Construction administration areas to consider include:

the RFI/change order process, types and degree of utilization of project management systems, schedule management, cost projection/budget control process, and documentation & records management systems (especially to address information needs during contract dispute mediation and litigation).

• Consider the percentage/amount of design errors & omissions, change orders, and schedule delays as compared to the experience at comparison institutions.

9. Project Management – Staffing & Training • What level and quality of staffing does UC employ

for project design and construction delivery? • How does this staffing level and quality compare to

that of comparison institutions? • What strategies does UC use to attract and retain

capable project management staff?

• UC runs a “Project Management Institute” to provide

ongoing training for new and continuing project managers, and to facilitate sharing of best practices.

• Consider the extent to which market factors influence UC’s ability to attract and retain capable staff, and whether UC is competitive.

10. Other? • Comment • Comment

• Comment • Comment

TRANSFORMING CAPITAL ASSET UTILIZATION AND DELIVERY Opportunities for Reducing Project Costs and Achieving More Program for the University’s Capital Dollar Appendix D: 15 Questions to Investigate Cost-Saving Opportunities

Appendix D

Appendix D 15 Committee Questions to Investigate Cost-Savings Opportunities

Early in its deliberations, the Committee formulated 15 areas of inquiry that it believed represented the most promise for yielding significant capital savings opportunities. The 15 Committee questions are provided in this Appendix.

These Committee questions formed the basis for an investigation by the Committee’s Cost Consultant, and the results of that investigation are reported in Appendix E.

UC BUILDING COST REDUCTION OPPORTUNITIES STUDY DRAFT QUESTIONS FOR STUDY

Appendix D Page 1 of 3 February 9, 2005

1. Issue: Business case analysis processes POTENTIAL OPPORTUNITY: Avoid spending unnecessary capital or capital on low-yield plans QUESTION: What processes are used by UC, other institutions, and private industry to perform formalized, up-front business-case analyses (business value justification and alternatives) for proposed capital projects (including the evaluation of third-party, private party alternatives)? 2. Issue: Business case rationales and standards POTENTIAL OPPORTUNITY: Reduce total capital spend through the pursuit of alternative solutions and higher occupancy and utilization criteria QUESTION: To what extent are new projects being tested against alternates to conventional building solutions and making use of planning standards for occupancy density, grant revenue, flexibility, shared space, multiple-use, and high-cost/low-cost space segregation to achieve lower (or eliminate all together) capital expenditures per person (student, faculty, researcher)? 3. Issue: Long project time-lines, cost escalation POTENTIAL OPPORTUNITY: Save construction dollars by reducing cost escalation QUESTION: What are the opportunities to shorten UC’s project cycle-times, and at what estimated cost savings (% of construction cost)? 4. Issue: UC project oversight – internal soft costs POTENTIAL OPPORTUNITY: Improve oversight efficiency and eliminate some soft costs QUESTION: How do UC’s soft-cost project burden rates compare to other institutions, private industry, and to projects at the different UC campuses? How are UC soft-costs on projects allocated between campus project staff and Office of the President staff? 5. Issue: Incentives POTENTIAL OPPORTUNITY: Save capital dollars by clearly assigning authority and responsibility for project performance QUESTION: To what extent are project management responsibility, authority, and rewards for project management excellence, and project performance criteria, clearly defined – both for in-house staff (job performance review) and contractors?



6. Issue: Campus ownership/Incentives POTENTIAL OPPORTUNITY: Reduce the demand for capital projects at the campus level QUESTION: Does the campus “CEO” make decisions between competing capital projects, suffer campus planning consequences of over-budget projects, “own” the delivered project, pay for energy and maintenance, and have building performance count as part of his or her overall job performance evaluation? 7. Issue: Contracting POTENTIAL OPPORTUNITY: Save construction dollars by getting lower price bids QUESTION: What contracting formats (and standard contract forms) are being used to open up the contracting process to a larger number of qualified subcontractors in order to obtain more favorable pricing? What are the associated risk-sharing arrangements? 8. Issue: Capital investments for maintenance avoidance POTENTIAL OPPORTUNITY: Save capital project dollars by right-sizing and assuring maintenance funding QUESTION: What capital project cost savings would be realized if in specifying architectural and mechanical systems for this project it was assumed that funds for a normal level of maintenance, repair, and replacement would be available? 9. Issue: Scope-creep control POTENTIAL OPPORTUNITY: Save incremental project dollars by eliminating scope creep QUESTION: Was this project designed to a fixed budget? How much did the budget grow after initial programming and project approval? 10. Issue: LEED™ projects POTENTIAL OPPORTUNITY: Save incremental capital dollars associated with LEED™ design and construction QUESTION: How much could have been taken out of the construction budget, and how much time saved, if this project had not been done for a LEED™ rating, or incorporated sustainable (“green”) design principles in general? 11. Issue: Subcontractor involvement in design POTENTIAL OPPORTUNITY: Make greater use of subcontractors to discover construction cost savings early in the design process before costly construction ideas have been designed in – get less costly designs, lower subcontractor price bids, and shorter design time-lines QUESTION: To what extent did the design process get early input from subcontractors and serve to improve design, get better, more informed bids from subcontractors, and shorten project time-lines?



12. Issue: “Hard to work with” reputation of UC campuses amongst contractors POTENTIAL OPPORTUNITY: Get lower construction bids by improving the contracting and project management environment for contractors QUESTION: Do you (contractor, subcontractor) have recommendations on where the University of California can streamline its contracting practices and get more favorable price bids? 13. Issue: The cost impact of a formalized project delivery plan POTENTIAL OPPORTUNITY: Lower construction costs (bids) by making project delivery requirements (the number of bid alternates, worker parking, storage, etc.) a formalized part of up-front project planning. QUESTION: Was a formalized, detailed project delivery plan developed for this project? When and in what level of detail? Was there a cost impact? 14. Issue: Architectural team selection POTENTIAL OPPORTUNITY: Get lower bids and avoid capital augmentation problems by implementing a better selection process for all subcontractors QUESTION: What is the process and criteria for selecting project team members? To what extent does it apply to subcontractors? 15. Issue: Design review and evaluation of design alternatives POTENTIAL OPPORTUNITY: Get lower-cost design solutions through a better process for up-front analysis and decision-making on design alternatives, and early and frequent Value Engineering analysis during the design process. QUESTION: How, when, and by whom was the analysis of alternative designs done, and was there a project cost savings that resulted?

TRANSFORMING CAPITAL ASSET UTILIZATION AND DELIVERY Opportunities for Reducing Project Costs and Achieving More Program for the University’s Capital Dollar Appendix E: Report of the Committee Cost Consultant

Appendix E

Appendix E Report of the Committee Cost Consultant – Questionnaire, Summary of Responses to Questionnaire, Project Data Review, and Key Observations

As noted in Appendix D, the Committee identified 15 areas of inquiry that it believed would yield significant capital savings opportunities. It selected 24 specific UC and non-UC projects, in four categories (classroom/office, laboratories, housing, and parking). Within each category, three UC projects and three external projects were chosen. The twelve selected UC projects are located at all campuses except UC Merced and UC Santa Cruz, and include projects that experienced budget augmentations. The external projects include privately-developed laboratories, housing projects, and parking structures, as well as higher education facilities at CSU, private universities, and a community college. Delivery methods include traditional lump-sum bid, design-build, and construction management-at-risk. Both union and “open shop” contractors are represented among the selected projects.

Based on the fifteen areas of inquiry identified by the Committee (Appendix D), the Cost Consultant developed a detailed questionnaire and conducted in-depth interviews with project management teams and campus vice chancellors, and gathered cost, schedule and process data for all the projects.

The detailed questionnaire is provided here, entitled, “Questionnaire for Campus Executives and Project Managers.”

The Cost Consultant presented a summary of project benchmark indicators, process attributes, and responses to the questionnaires at the Committee’s February and March meetings.

The Cost Consultant’s summary is provided in this Appendix in two parts, entitled, “Summary of Responses to Project Questionnaires and Key Observations,” and “Summary of Project Data Review and Key Observations.”

UC BUILDING COST REDUCTION OPPORTUNITIES STUDY QUESTIONNAIRE FOR CAMPUS EXECUTIVES AND PROJECT MANAGERS

Appendix E1 Page 1 of 6 February 28, 2005

On the last page of this document, there is a list of campus projects that were selected by the EXPERT COMMITTEE of the Regents’ UC Building Cost Reduction Opportunities Study for in-depth examination and data collection.

The EXPERT COMMITTEE is interested in receiving information, especially as it relates specifically to your campus project, for the areas of inquiry listed below.

The areas of inquiry targeted by the EXPERT COMMITTEE pertain to both (i) broad-based high-level campus activities and (ii) detailed project implementation activities. Thus, as appropriate to the nature of these activities, separate interview sessions will be conducted with (i) high-level campus executives (generally Administrative Vice Chancellors) and (ii) project managers. Those questions denoted with an asterisk* below are ones that would be especially pertinent for high-level campus executives to respond to, in addition to any input from project managers.

The Cost Consultant for the EXPERT COMMITTEE is Mr. Peter Morris (Principal, Davis Langdon, Sacramento). Mr. Morris will be contacting campus executives and project managers to arrange for the separate interview sessions.

A. Quantitative Data for This Project

1. Gross area, assignable area

2. Building costs: initial approved budget, final budget, and actual cost Provide any explanatory detail that will facilitate consistent treatment of, and adjustment for, costs that may vary widely from project to project, including: fixed equipment within building cost, data & communications, external infrastructure, landscaping, hardscape, demolition or relocation of existing facilities, and extraordinary program elements. Please provide breakdown as follows:

- construction (CIB line 1)

- additional “hard” costs: site clearance, exterior utilities, site development (CIB lines 0,2,4)

3. Soft costs: initial approved budget, final budget, and actual cost Soft costs to be included in this study are detailed below. Soft costs to be excluded from this study are costs related to: land/easement acquisition and financing, construction loan interest, moving, and surge space. Please provide soft cost breakdown as follows:

- external consultants associated with basic design and management of the project (CIB line 5)

- in-house University services and staffing, including: project management, contract administration, accounting, inspection, and EH&S (CIB line 6)

- surveys, tests, soils investigations, advertising, and specifications reproduction (CIB line 7)



- costs related to “special services” provided by external consultants and internal staff that are outside of the normal design process; agency reviews; plan check fees (portion of CIB line 8; see above for exclusions)

- construction contingency (CIB line 9)

4. Change orders included in final actual cost. Please provide: - total dollar amount

- dollar amount attributed to design coordination, errors, and/or unforeseen conditions

- dollar amount attributed to scope adjustments

5. Other costs not included in #1, #2, #3, and #4 above, e.g., claims, unresolved issues

6. Schedule durations. Please provide durations: - FROM project start-date (defined, for the purposes of this study, as the date of

institutional approval of the official project budget), TO final completion (defined, for the purposes of this study, as the date of the issuance of the “Notice of Completion”)

- FOR project design and construction phases (from milestone to milestone); milestones would be completion dates for: program planning/feasibility, schematic design, design development, construction documents, contract bid/award/execution, construction, and occupancy

- FOR project institutional approvals (from milestone to milestone); milestones would be the institutional approval dates for the project’s scope/budget/schedule/design. Because certain internal approval milestones may differ from campus to campus, please provide additional explanatory detail for milestones that are not standard across the University system.

B. EXPERT COMMITTEE Questions

*1a. At the earliest planning stages for this campus project, describe the up-front business-case analysis that was conducted to assess feasibility. What did the business value justification entail (i.e., “what is the business value that compels us to undertake this?”) and what business alternatives were considered (e.g., third-party, private party, lease, purchase/rehab)? What were the specific factors evaluated in the analytical model and process?

*1b. If the formalized business-case analysis for this project was atypical, discuss the nature of a more typical business-case analysis and modeling used for your other campus projects. What factors are evaluated, what business alternatives considered, and what is the nature of the decision-making process? Discuss any examples of capital projects that did not go forward as a result of such an analysis.



2a. In the conceptualization and design of this project, describe any creative or non-conventional planning/design solutions that were considered to achieve lower capital expenditures per person (student, faculty, researcher). Were any of the following considered: flexibility, shared space, multiple-use, high-cost/low-cost space segregation, and planning standards for occupancy density?

*2b. Discuss any projects at your campus that are exemplary of creative planning/design solutions to yield more efficient occupancy and effective utilization of resources.

*3. In retrospect, for this project, discuss any opportunities that existed that would have shortened the project’s schedule durations (e.g., for pre-planning, institutional/Regents’ approval, design iterations, and construction). Describe any costs associated with delays or lengthy schedule durations.

*4. How was this project typical of, or different from, the method by which your campus generally allocates “soft costs” for construction projects? (Refer to Section A.3 above for the soft costs included/excluded from consideration for the purposes of this study.) Because soft cost data specific to this project will be gathered in Section A above, this question is intended to elicit information on the general approach used by your campus in allocating, managing, and controlling soft costs for all projects.

*5. For this project, which UC individual had the responsibility for overall project management performance? What authority did this individual (or individuals) have for all the issues involved in project management, e.g., (academic) program requirements, scope, functionality, budget, planning, schedule, design, and construction? Provide any formal description or definition used to delineate this individual’s authority. What constraints were there to this individual’s authority? Were criteria established to judge this performance? Was there an evaluation of this performance? Were rewards available for project management excellence?

*6a. For this project, which campus officials were involved in the resolution of any high-level competing or conflicting issues? Describe the issues involved, and the process by which resolution was reached.

*6b. With regard to all campus projects, which campus executive (or executives) has/have overall responsibility for all aspects of delivery and performance of capital projects, i.e., (academic) program requirements, scope, functionality, budget, planning, schedule, design, construction, and occupancy costs (energy and maintenance performance)? What is the nature of any evaluation, specific to projects’ performance, that is included within this executive’s formal performance review?

7a. For this project, describe any contracting methods or contract provisions utilized to facilitate responses from the largest number of qualified contractors and subcontractors.



*7b. For your campus projects in general, discuss any increased costs that could be attributed to the University’s approach to project risk allocation (i.e., risk as allocated among the University, architect/consultants, and construction contractors). Discuss the nature of the balance between these costs and the protection afforded to your projects.

8a. For this project, discuss any considerations regarding funding availability for maintenance, repair, or replacement costs that affected the planning, programming and/or design of this project.

*8b. Describe the planning, budget and design considerations for any recent projects at your campus for which the (non)availability of funding for maintenance, repair, or replacement costs significantly impacted the project. Describe any formal models utilized to evaluate the comprehensive up-front capital costs and on-going life-cycle costs for projects.

*9. For this project, how and when was the program scope established? How and when was the project budget set? Who was involved, and what was the process for resolving any scope and budget tensions or conflicts? What internal campus scope and budget controls were utilized, and who was responsible for oversight? How was this project typical of, or different from, the scoping and budget-setting process for your campus projects in general?

10a. For this project, describe any LEED™ ratings and/or sustainable (“green”) principles considered or incorporated in the design. Discuss any additional costs to including these in the design and construction of the facility. Discuss whether and how these costs were formally evaluated against on-going or life-cycle costs.

*10b. With regard to the costs of implementing capital projects on your campus and maintaining those facilities, describe any cost/benefit assessments or evaluations that your campus has conducted pertaining to the University’s new clean energy and sustainability policy, and discuss any preliminary findings.

11a. For this project, at what point did contractors and subcontractors participate in the design process or issues? Discuss the nature of their input, and any resulting benefits to the project.

*11b. Discuss any projects at your campus that are exemplary of early involvement of contractors and subcontractors and for which that involvement served to improve design, bid responses, and/or shorten the project schedule.

12a. For this project, discuss any opportunities to streamline or improve contracting and project management practices, especially as relates to construction contractors and subcontractors, which might have facilitated more cost-effective delivery of this project.



*12b. For your campus projects in general, discuss any opportunities to streamline or improve contracting and project management practices, especially as relates to construction contractors/subcontractors, which would facilitate submission of favorably priced and responsive bids.

13. For this project, describe the attributes of any formal project delivery (implementation) plan developed. At what stage in the project was the plan developed? Who signed off on that plan? What specific aspects of project implementation did the plan cover (assigned responsibilities, approval and management authority/oversight, scope, budget, schedule, delivery method, project-specific contract requirements, bid alternates, parking/staging/ storage)? Who had formal authority to approve changes to the project delivery (implementation) plan?

14a. For this project, what processes and criteria were utilized to select the architectural team? To what extent did these specifically consider mechanical, electrical, plumbing, and other subspecialties?

*14b. For your recent campus projects, discuss the use of “signature” architects and architectural firms. Describe any cost impacts or pressures on the project which might not have occurred had a “non-signature” architect or architectural firm been used. Discuss any practices or methods employed by your campus that focus upon managing the unique challenges presented by the use of signature architects.

15a. For this project, what alternative designs were considered during the earliest stages of planning and design? Discuss any cost savings that resulted from consideration of these alternatives.

15b. For this project, when did value-engineering analyses occur, what factors were considered, and what decisions and costs savings resulted from the analyses?

*16. If you could make any changes that would significantly reduce project costs at your campus, what would those changes be?



CAMPUS PROJECTS SELECTED BY THE EXPERT COMMITTEE FOR STUDY

Berkeley Channing-Bowditch Student Housing

Davis

Mathematical Sciences South Entry Parking Structure

Irvine

Natural Sciences Unit 2 Los Angeles

Health Sciences Seismic Replacement Building 1 Southwest Campus Housing, Phase 1 (Weyburn Terrace)

Riverside

Campus Surge Building San Diego

Campus Multipurpose Building (Pepper Canyon Hall) Gilman Drive Parking Structure

San Francisco

UC Hall Replacement Santa Barbara

Campus Parking Structure 2 San Rafael Student Housing Addition (Manzanita Village)

UC BUILDING COST REDUCTION OPPORTUNITIES STUDY REPORT OF THE COMMITTEE COST CONSULTANT

Appendix E2 Page 1 of 15 May 13, 2005

UC Building Cost Reduction Opportunities

Summary of Responses to Project Questionnaires and Key Observations

Introduction

In order to collect information on issues that may impact the cost of buildings on University of California campuses, the Expert Committee developed a Questionaire for Campus Executives and Project Managers. This questionaire was composed of two sections. The first section focused on quantitative data from a number of recently completed construction projects (both University of California and Non-University of California). Data collected included building areas (in square feet), building costs (initial and final budget and actual total cost), soft costs (such as land/easement acquisition, loan interest, surge space, external consultant fees, in-house staffing, surveys and tests, special services, and any contingencies), and change orders. Participants were also asked to provide schedule durations for design and construction, including time from start of design to institutional design approval (where applicable). The second section was a questionaire composed of sixteen (16) questions about construction process and experiences – focusing first on the projects highlighted in the first section, and then on the campuses’ and contractors’ overall construction experience in building on the University of California campuses. These questionaires were sent to selected Administrative Vice Chancellors and project managers at all ten University of California campuses, as well as to project managers of the selected Non-University of California projects. Interviews for the sixteen questions were then conducted over the phone with representatives from all UC campuses and with project managers and other representatives of the Non-University of California projects. A summary of responses received from the interviews, collated at an individual question level, is included below. A matrix of quantitative data, with benchmark indicators and key process attributes, is included at the end of this section as well.



Expert Committee Questions

1. Business Case Analysis: University of California In general, the business case1 for a project was developed as part of the campus planning process. As such, there is not typically a formal business case analysis, rather a planning direction set by the campus leadership. This establishes the academic programs that the campus will pursue as a priority. In conjunction with this, the physical plan defines the campus urban planning goals. The campuses do not develop economic business models for individual programs. As projects become defined, they are incorporated into the campus 5-year plan. This plan is usually finalized at a higher level than the Vice Chancellors we spoke with. Once a building gets onto this 5-year plan, it rarely, if ever, is removed. By the time the Vice Chancellors get involved, the question of whether or not to build the building, as well as the program that is getting the building, has already been established, and the business model for the program or project is not typically revisited. It was acknowledged that the duration of the process could lead to buildings taking many years from initial inception through incorporation in the 5-year plan, and ultimately to design and construction. This leads on occasion to projects becoming less relevant or justified, as priorities shift. Non-University of California The degree of business case planning varied widely over the projects we reviewed. In most cases, there was, however, a fairly strong level of economic evaluation undertaken, particularly for commercial projects such as parking structures and housing, where revenue is the driving force. For buildings that are not revenue driven, the business case analysis was more akin to that of the University of California, where the goal was to meet a recognized need at an acceptable cost, rather than demonstrate a specific revenue payback.

Commentary A noticeable difference was the overall speed of project development. Whilst specific durations for the early conceptual phases could not readily be documented, since the early conversations and positioning is not usually systematically recorded, it was evident that for the Non-University of California

1 For the purpose of this questionnaire, the term ‘Business Case’ is defined as the method by which feasibility for the new building was assessed by each campus or NUC owner This included not only financial implications, but academic as well, with value justification including question such as “what are the values that compel the campus to build a new building” and “what other alternatives were considered which could meet the needs – third-party construction, private party lease, purchasing and/or rehabilitating an existing building, leasing space off-campus.”



(non-UC) owners, projects typically moved more quickly through from inception to development. The slower progress can impact projects in two significant ways. The impact of inflation is greater, the longer the project duration, both directly in cost increase, and indirectly in the cost of inflation risk management. There is also the danger that the business case will change over the life of the project, and that a well-targeted project will be less important by the time it moves into construction.

2. Planning and Design Process: University of California Decisions regarding space use and density are usually made with reference to standards for specific programs, and through the programming process with design teams. Typically the standards are set by the campus, with reference to generally accepted guidelines, and in consultation with the University Office of the President. The programming process usually involves design professionals familiar with programming similar buildings, who can bring specialist expertise to bear on the standards. The building committee will often consider alternative program solutions such as incorporating flexible space, modular design, and the separation of expensive areas from the less expensive areas. The use of open plan, generic lab design with a separate office suite, for example, is quite widespread, and has now become the de facto standard. Many standards are set with reference to other institutions; residential units are increasingly being developed as bedroom clusters as opposed to traditional dormitory buildings at both University of California and other universities. There is, however, no common set of standards in use across the campuses. Non-University of California The non-UC owners in the study typically did not have more developed standards or more innovative ways to address planning or space use decisions. For commercial projects, the planning was based on the experience of the owner or designer in developing what was expected to provide the highest return on investment. For non-commercial institutions, we found a similar mix of internal standards and peer comparison by the design team. We did not find, for example, that space allocations in the privately owned laboratories were significantly different from those in academic laboratories, nor did we find that gross square feet (GSF) per car in parking structures, or GSF per bed in housing projects, were significantly different. We also did not find a greater readiness to try radical alternative concepts which might improve space planning, or reduce overall building area per primary unit of occupancy.



Commentary While there was not a significant difference in the degree of innovation in space planning, or consideration of alternative concepts, there were two factors that were evident as possibly hampering development of better or lower cost planning and design solutions. The first is the time it takes for a University of California project to be developed. This means that space and design decisions are often set early in the process, and it can be difficult to reprogram spaces to reflect changes in practice or understanding of the programs, and to adopt better concepts. The second is the focus on certain key measures, in particular cost per gross square foot. This can limit innovations which reduce area allocations, and reduce the overall project cost, but which increase the cost per gross square foot2.

3. Project Duration: University of California The general consensus of all the persons interviewed was that there were two major sources of delay. Most of the delays experienced during the projects highlighted revolved around the approval processes at each level: campus, Office of the President, and the Regents. They noted that pushback from the Regents can cost anywhere from 2-6 months delay in a project, and in some cases much longer. One problem noted was the fact that the Regents meet only every other month, so if a project couldn’t be reviewed, it had another 2 months of delay. Another issue that tended to lengthen the duration of projects was the way funding is allocated, with the separation of Preliminary Design (P), Working Drawing (W) and Construction (C) funding. For many projects these funds come in successive budget years, although it is sometimes possible to obtain combined funding; however it is also possible for funding to be delayed leading to a gap of one or more years between phases. This delays the projects because the P phase and the W phase do not necessarily take a year to complete, and, for example, a process that could be competed in 12 – 14 months is extended to two years by funding cycle. This has secondary effects, the most significant of which is the disruption to project & design teams, where staffs have to be demobilized or reassigned between the completion of one phase and the start of the next. This leads to inefficiencies and loss momentum. In addition, it also tends to lead to changes in the composition of the project team, both from the building committee and the design team, leading to revisiting earlier design or programming decisions.

2 For example, increasing the efficiency of a laboratory building by five percentage points will reduce the overall area of the building by almost 8%. Since many of the fixed equipment items have not been reduced, the overall cost of the building will be reduced, but not by the same 8%. If, for example, the overall cost were to reduce by only half as much, (4%), the cost per GSF would go up by 4%, even though the building had become more efficient and less expensive overall.



One other time consideration raised in the interviews was the approval and protest time for bids. Typically UC projects require bids to be held open for sixty (60) days after submission. While this causes some delays to the project, particularly where it pushes a project into a winter start, the greater impact is on the overall bid response, particularly in period of low competition. Generally, the construction phase of the project is not markedly longer than in Non-University of California projects. Non-University of California There were significant differences in project duration in non-UC projects, typically between revenue-based projects and non-revenue based projects. The Stanford parking structure, for example, was competed in roughly 16 months, including design & construction. By comparison, the Allergan project took 20 months in construction, quite comparable to similar University of California projects. Commentary In general, it was noted that University of California projects took significantly longer in the pre-planning or conceptual phase, and that the design phases were longer, but to a lesser degree. The two most notable factors were the extensive approval process and the funding cycles. Non-UC projects typically did not experience anything similar to either of these. For developer led projects, the approval process was simply a matter of developing the correct business case and financing strategy. For other non-UC projects, all had a significantly simpler and clearer approval process than UC projects. Even for the institutional projects such as the County of Sacramento (Airport parking), Allergan and the Gladstone Institute, there was a direct reporting link between the project manager and the managing board (supervisors, board of directors, or board of trustees). The lines of authority were clear, as were the decisions that lay with each party’s responsibility. Funding was similarly much more streamlined, with fund distribution typically being driven by the schedule, and with funding being more assured once the project had started.

4. Soft Costs: University of California For UC projects, soft costs are typically limited to 18% for new construction, excluding special costs such as EIR fees, specialty consultants, financing costs, etc. These special costs are typically funded on line 8 of the CIB form, commonly known as Sub-8 costs. The 18% includes the construction change order



contingency of 5%, leaving 13% for design fees, inspection and testing, and campus project management recharge. Each of the campuses felt that the 18% rule for soft costs was ineffective. In some cases – such as for fairly straightforward projects like parking structures – soft costs could be kept under this limit; in a majority of projects, however, the 18% limit was too low. This leads to the shifting of commonly occurring, but special expenses into Sub-8. One item noted that led to higher soft costs were the requirements placed on the campuses for specific types of consultants and documentation – especially for the regental approval process. Models and documentation could cost over $100,000 each time the project had to be submitted (especially if the campuses elect to do a visual simulation instead of a model); additionally, some campuses gave anecdotal comments about specific projects where delays and pushback on design (for various reasons) increased the overall cost of the project substantially. Non-University of California It was difficult to establish comparative soft cost information for the non-UC projects, since there is no consistent systematic way of evaluating soft costs, and there are significant variations in what is charged to a project, and what is absorbed in general overhead. In most cases it was possible to obtain information on design, permits and inspection, and contingencies, broadly comparable to the UC 18%. As with project durations, there were significant differences in soft cost allocations among the non-UC projects. Developer led projects tended to have much lower design costs, especially in the design build teams. It is worth noting that the engineer for the Stanford parking structure felt that they could make more profit on the much lower fees offered by the design/build contractor than they could on other higher fee projects, because they had a much more streamlined design process, and less reiteration in the design. For non-developer projects, the design fees and contingencies were very similar to those experienced on UC projects. Commentary For laboratory and office/classroom buildings, there is little difference in the design fees paid by UC and non-UC owners, nor is there a marked difference in the other customary soft costs, such as testing and inspection or contingency. There are significant differences in the cost of recharge, interest, permits and fees. In many cases these are the result of differences in the structure of the projects; private sector projects will usually have permit fee costs, UC will not. Some of the differences are, however, substantive. The degree of recharge of owner project management and the cost of owner project management is an area where there



were noticeable differences between UC and non-UC owners, and even between campuses within the UC system. For the residential and parking structures, developer led projects had markedly lower design fees than the UC projects, reflecting a more streamlined approach to design and construction for these types of project.

5. Project Management Authority: University of California Each of the campuses felt that they had a well-defined structure of authority for making decisions, and taking responsibility for, campus building projects. The typical structure is the Building Committee. This is established to ensure that the various interested parties have a voice in the design & construction process. In most cases, campuses required that a dean or vice chancellor be on the building committee, in order to provide leadership for the academic participants in the project. The campuses all believed that the building committees were effective and a positive contribution to the project development. They served to provide a forum for input from the users early in the project, rather than creating changes or conflict later, and they ensured that interested parties became invested in the success of the project. The campuses recognized that a poorly managed building committee could create significant problems for a project, but that, since the project is being developed to provide for many interests on the campus (users, maintenance, campus environment), it is essential to engage them in the delivery process. All the campuses noted that there is no one person, or persons, whose jobs rest on the success or failure of a particular project. An additional observation, related to the single point of authority was that it was difficult to get clear statements of project cost for UC projects. In discussions with project managers, they all had good access to project cost reports for the portions of work under their control, and many had their own tracking process. There appeared, however to be no single point of contact for a comprehensive project closeout accounting of costs. Non-University of California There was typically a more direct line of authority for the non-UC projects. This was clearest in the revenue based projects, both developer and non-developer. In these projects there was little, if any, user input, and the design criteria were usually less critical as they were usually not in a campus setting. For the two non-university laboratory buildings, the user input was limited by virtue of the users



not being identified at the early stages. This was also true, however for the UCSF UC hall replacement building. Closeout project costs were similarly difficult to obtain, and it would appear that the non-UC owners in many cases so not have as thorough an accounting system as UC campuses, particularly for the non-construction costs. Commentary In general, non-UC projects appeared to have clearer project management authority structures, both in the authority devolved to the project management team, and in the degree of authority retained by the ‘board’. In addition, the lines of authority were much clearer and shorter, such that there were fewer areas where confusion or conflict could arise. While non-UC owners have clearer lines of communication, neither non-UC nor UC have high quality comprehensive data feedback on cost of projects.

6. Resolution of Issues: University of California As in question 5, each campus felt that they had an authority structure which took issue resolution into account. How this is handled does differ between campuses – whether the issues are resolved by committee or by a single person, as well as the level of person(s) involved. Typically the ultimate campus arbiter is the chancellor, often acting in conjunction with a committee of the senior vice chancellors on the campus. Non-University of California See above, Question 5 Commentary See above, Question 5

7. Contracting and Delivery Methods:

University of California Each of the campuses has tried, and had varying levels of success with, different delivery methods. For example, UC Irvine has had extremely good success with a modified Design Build method, to the extent that they have managed to establish a working relationship with a core group of contractors. Other campuses did not feel that Design Build worked as well for them. All of the campuses would like to continue to have a range of choices open to them, so that they can pick the method that worked best for a given project and for their own campus expertise.



All of the campuses would prefer to no longer have to deal solely with competitive bids for selection of contractors and subs; all expressed a preference to be able to use a selection process which includes quality and performance in the selection criteria. This would allow them not only to establish working relationships with a group of contractors and subs, but to also be able to negotiate bidding and design instead of being tied to the low-bid structure. Most of the campuses noted that they have received feedback from contractors over the years, in one form or another, that restrictive language in the university contracts discourages some contractors from ever bidding for university projects. Examples of such terms include the requirement that the contractor is responsible for any hidden underground conditions that may exist on the site, that the bids must remain open for 90 days, limitations on the availability of compensable delay for weather, etc. Overall, most campuses agreed that too much risk is placed on the contractors. Two campuses, however, indicated that they felt that, while the contracts were strict, they made project management easier by holding the contractors to a very high standard. Recognizing that strict contracts may lead to higher initial bids, they felt that they ultimately provided lower cost at completion of the project. Several of the campuses indicated that they have some form of outreach program for contractors to increase the contractor participation. Irvine in particular runs workshops and seminars on its design/build process for the local contracting community. Other campuses have less formal programs, but recognize the importance of maximizing their contact with the contracting community, in order to encourage the highest bid response. Non-University of California The public sector non-UC owners experienced many of the same problems experienced by the UC project owners. In many cases, their processes were more restrictive, allowing only lump sum competitive bidding. The private sector had a lot more latitude, particularly in the areas of quality based selection, relationship building, and negotiating with the preferred contractor. It was not clear that this latitude provided overall lower costs, but it certainly allowed for the design and construction to move more rapidly. It also tended to reduce the level of the adversarial relationship between owner and contractor during construction, leading to lower claims for additional money or contract extension. When questioned, the private sector owners indicated that they did not believe that the quality based selection process delivered a lower initial construction cost, but they did believe that it delivered a lower total project cost, and an overall lower program cost across multiple projects. Non-UC public sector owners also experienced many of the issues related to restrictive contract terms. Private sector owners, however, were more able to tailor contracts to specific situations, and to accept more of the risk, in return for



lower initial costs, and better working relationships. Typically these contracts are more flexible on delay or change terms, and on unforeseen conditions. Commentary Private sector owners had a wider range of contracting opportunities available to them, and so were more able to select the process that best suited the individual project. They were also more able to react to changing conditions quickly by modifying or switching contracting methodologies. Typically, private sector owners within the group interviewed did not choose to use the competitive lump sum bid process, because they believed that it did not deliver the best value for the project. Our experience in other private sector areas shows that there are many private sector owners, typically larger institutions, who are committed to competitive lump sum bids, however. The relative restrictiveness of contracts can have a major impact on bid prices – by limiting bid response, and increasing the price of the bids which are received –as bidders, in effect, self-insure against the inherent risks of the contract. Of particular note recently was the inability of contractors on most public sector projects to recover any of their loss for the rapid and unprecedented increase in material cost experienced last year. Many private sector owners worked with the contractors to some degree, and were able to provide some relief, while public sector owners insisted that the responsibility and the loss were entirely the contractor’s.

8. Maintenance Funding vs. Design:

University of California The campuses noted that lack of available maintenance funding did color their design standards. However, when pushed on the topic, most of them agreed that they would not change their building standards even if maintenance funds were more available; that the lack of an operating budget did not drive them to design more costly, for longer term. One exception to this was noted by UC San Francisco, where they are building a new campus at Mission Bay. The interviewees noted frustration that because they have been given no funding for a central plant, redundant MEP systems have been required, since each building has to be designed and maintained as a separate entity. If a central plant was funded, and could have been planned for, they feel they might save costs in the long term. Campuses do not typically use formal Life Cycle Cost studies, except in very limited circumstances, such as for specific energy reduction measures, including heat recovery or evaporative pre-cool systems.



Non-University of California The availability of maintenance funding is an operational concern to most building owners, both in the public and private sectors. However, there was no indication that availability of maintenance funding influenced the design of any of the projects reviewed. None of the non-UC owners undertook a systematic Life Cycle Cost study for the selected projects, but all indicated that they took life cycle cost into account over the anticipated life of the project. Commentary Our experience with UC and non-UC projects bears out the interview responses that maintenance funding does not usually enter into project specific decisions. We would, however, note that it has factored strongly into the development of campus standards, which do influence design decisions on projects. In many cases these standards are more focused on the cost of future remodel or alteration, rather than maintenance. Institutional non-UC owners also have well developed campus or system-wide standards, but these are usually less constraining. Life cycle costing is rarely used in either UC or non-UC, in our experience. It has recently come to the fore as a result of sustainable design initiatives, but we find that it is not well understood, and so is not usually well applied. Additionally, it is very unusual to find the connection between capital and operating costs which is at the heart of Life Cycle Costing practice.

9. Program Scope and Budget:

University of California For the UC projects, the scope typically led the budget; that is, the scope was defined first, based on identified program requirements, and a budget developed based on meeting the desired program. This is balanced by budgetary constraints, so there is a degree of budget led design, where the budget is set, and the program adjusted to match the available funds. The reconciliation of program and available funds typically occurs during the programming phase of the project, prior to submission of the formal DPP or PPG. Non-University of California For developer led projects, the budget will normally lead design, since the project must meet a defined pro-forma in order to be viable. For non-developer led projects we found that budget and program setting was broadly similar to the UC system, with an active balancing between program and budget during the programming stage of the project. The relative weight of each component varied between projects, but that was also evident in UC projects. Commentary One additional factor that was raised in the discussions was the way that budget limitations may lead to sub-optimal utilization of sites. This was raised both by



UC and non-UC interviewees. The concern was that fund limitations may lead to smaller than optimal buildings being developed for given sites, examples being two story buildings being put on a site that should accommodate a four or five story building. Resolving this issue would necessitate site specific budgeting, and possibly aggregating building programs to achieve an optimal build out for a site. Since budgets are developed based on individual programs justifications, or on fund raising capacity, this is not typically possible in the UC system. UCI indicated that they often try to combine buildings with parking structures to maximize site build out, while avoiding the budgeting constraints of programmed spaces. Developer led projects will usually maximize site capacity, since they seek to maximize profit and land value.

10. Regents’ Sustainable Design Requirements: University of California The campuses did not feel that sustainable design goals had appreciably increased the construction cost for their projects. Generally they recognized that they were already building mostly sustainable buildings, based on their own design standards. However, when faced with budget cuts, removal of the ‘green’ elements (as well as other, non-green elements) could, and did, save them money. Non-University of California This was not an issue for any of the projects in the study, since most were initiated before the recent demand for sustainable design. Commentary From our experience, we are finding a mix of sustainable design responses in the non-UC sector, both with developer led projects and institutional projects. Many are finding approaches to sustainable design which are not appreciably increasing their costs, some are undertaking specific sustainable or energy saving measures which increase cost, but are justified by life cycle savings, or by alignment with the owner’s core values, and some are avoiding sustainable design, since they find that, for their projects, the added cost is too great.

11. Contractor / Subcontractor Design Participation: University of California In general, campuses did believe there was benefit to be gained by getting contractor involvement in design, particularly in selection of cost effective materials and detailing. While at first most of the campuses thought they were getting adequate participation through design build or GC/CM, when pressed, they realized that subcontractor participation, which was the most useful, was significantly missing.



There was an overall feeling of frustration over the fact that participation from contractors and subs cannot necessarily be encouraged, not only because those who participate in design can therefore not bid on the project, but perhaps more importantly, there is no incentive for subs to become involved in the design; it does not give them any preferential treatment when bids are later considered. When the campuses made use of Design/Build delivery methods, contractors did participate in design Non-University of California The public sector non-UC owners experienced similar issues to those experienced by UC. Typically they were not able to involve contractor or subcontractors in the design process, even though it was recognized as having value. This was not an issue for the private sector non-UC owners, who were able to engage contractors and subcontractors freely. Typically this was done more through the informal relationship process, as opposed to a formal contract to engage (and pay) for design support services. Commentary We did not find widespread formal use of subcontractor input, either in the UC or non-UC projects, except in the design build projects, where design control is transferred to the design/build contractor.

12. Project Manager / Contractor Improvement Opportunities: University of California There was general agreement among the campuses that removing the competitive bid requirement and establishing a better allocation of risk between campus and contractor were the key elements to improve the working relationships between contractors and the owners and hence the contracting practices. Additionally, a number of campuses noted a desire to be able to work with contractors and subs during design, to leverage local and existing expertise. Non-University of California The public sector non-UC owners experienced the same issues as for UC projects, with the adversarial relationship inherent in the public low bid being seen as one which increases the costs of construction through delays, claims, and such like. Commentary The traditional Design/Bid/Build process also makes it difficult to accelerate projects by overlapping some construction with design. The use of a CM process, either GC/CM or multiple-prime contracting, is a way of streamlining to some degree.



13. Formal Project Delivery Plan: University of California None of the campuses used a project specific plan as a tool for managing projects. However, each campus has an established policy manual (or manuals), which determines how projects are to be run overall. Each campus believed that this policy, combined with project specific structures such as the building committee, achieved the same goal, and that all of the elements that would be in a project specific plan were present, just not collected into a single document. Non-University of California None of the non-UC owners interviewed had a formal project delivery plan for any of the projects in the study. Many had established procedures, similar to UC, which set out how projects should be run overall. Commentary All of the institutional owners, both UC and non-UC, recognized the necessity of clear formal project procedures. Of those interviewed, all believed that they had well established procedures that were clearly stated, and none felt that a project specific plan would strengthen their project management.

14. Architecture Team Selection Process:

University of California Most of the campuses allow the architects to set their own architectural team (to handle MEP and other specialties), but reserve the option to request changes. On occasion, however, some campuses prefer to select the architect and the MEP subs separately. The issue of using signature architects3 brought mixed answers from the various campuses. Some campuses have no problem with using them, while others prefer to avoid them due to a perception that signature architects are less likely to be willing to design something that fits within the campus vision. The campuses that were comfortable with using signature architects recognized that there were some additional controls necessary within the architectural process. As to the perception that signature architects cause more problems, and are more difficult to manage, most of those who had worked with these types of people noted that non-signature architects can have the same problems; that these issues are not unique to the name or the level of fame. Non-University of California For the institutional and public sector non-UC projects, architect selection is undertaken in a very similar manner to that of the UC projects. In the private

3 The term ‘signature architect’ is used to define architects who (either by perception or reputation) seem to design buildings which place more emphasis on artistic expression than on durability and quality.



sector, particularly in developer led projects, the selection process can be quite informal, based strongly on prior working relationships. None of the projects reviewed used signature architects. Of the non-UC interviewees, none were inclined to use signature architects for future projects, although some had had experience of working with them. Commentary There were no significant differences in architect or design team selection processes, except in the developer led projects. Both UC and non-UC expressed the need to select a complete design team that was qualified, but they also saw a need to have teams that were accustomed to working together. For this reason, there was a general preference towards allowing the design team to be proposed as a single unit, rather than be selected as individual consultants, with the option to recommend substitution of team members if needed. Signature architects were not an issue for any of the projects reviewed. Typically the reasons given for not using signature architects were that both UC and non-UC wanted buildings that would fit within a campus setting rather than stand out, and which would be responsive to the user needs. There was also a sense that the management of signature architects required more work.

15. Alternative Design Consideration: University of California Most of the projects went through a formal Value Engineering process, with either one or two workshops during design. In addition, most looked at several design options during the programming phase. Non-University of California The non-UC projects typically did not have formal Value Engineering workshops. In most cases, alternative design options were considered during the normal course of design in informal design workshops. Commentary From our experience with UC projects, the depth of value engineering analysis is quite widely varied, with some workshops simply looking for opportunities to reduce overall cost by working at details, and others looking at widely varying design solutions. In many cases, with constrained budgets, there is little opportunity to undertake true value engineering, since the lowest first cost option is selected early in the process, and there is little left to consider. There are no mechanisms for using life cycle cost savings to fund qualitative improvements in the buildings.



UC Building Cost Reduction Opportunities

Summary of Project Data Review and Key Observations As part of the study, we collected cost and contract data on twenty-four projects, in four building type categories:

• Office & classroom buildings • Laboratory buildings • Parking structures • Student housing

In each of the four categories, three UC projects and three non-UC projects were selected. The projects were not selected at random, or as exemplars of typical projects of their type; rather, they were selected to highlight certain issues, which are known to be of concern. Those issues include planning and construction delays, congested sites, differing procurement methods, union versus open shop contractors, external agency reviews, gateway sites, etc. As a result, the data analysis was useful in identifying cost factors, and areas where opportunities for improvement may lay. They do not, however, allow for a direct comparison of the difference in cost between a typical UC project and a typical non-UC project. Costs were normalized for time & location. From the analysis, the following conclusions can be drawn:

(1) In general, UC projects take longer than non-UC projects in the planning and design phases. When the projects are funded wholly without state funds they can occasionally move much more quickly, comparable to unconstrained developer projects. These types of projects are the exception, however, and the typical UC planning period is longer, both on state and non-state funded projects.

(2) The UC and non-UC projects are generally built to similar quality levels. (3) Prevailing wage requirements had little impact, except for housing as discussed in

item (7) below, since both the UC and non-UC projects used major contractors for construction, where wages match the prevailing wage scale.

(4) The UC office & classroom buildings, and laboratory buildings are generally within the cost range of the non-UC projects, except in one case, where the project experienced delays and very high bids due to adverse market conditions.

(5) A noticeable difference in laboratory buildings is that non-UC projects will often include significant shelled space, in order to maximize the site build-out within limited funds, and allow for smaller fit out projects later.

(6) There was a small but nonetheless relevant difference in the cost of UC and non-UC parking projects, with UC projects costing more than comparable non-UC parking structures. There were two primary reasons for this.

a. The non-UC projects were typically larger, which diluted the higher cost elements such as cladding and vertical circulation.



b. The UC projects were generally more architecturally finished, since they were more likely to be in highly visible locations on campus (gateway locations).

(7) There was a marked difference in the cost of UC and developer housing projects, with developer projects typically costing around $100/SF, whilst the lowest UC housing cost was around $130/SF. Recent CSU housing projects are comparable to the UC projects, costing in the range of $130 - $160/SF. Specifically identified differences between UC and developer housing projects are:

a. Prevailing wages – Developer projects do not use prevailing wages, and can realize significant savings in cost.

b. Campus standards – Developer projects are typically built with lower quality components, and amenities, as opposed to the UC projects which are built to comply with the institutional campus standards. For example, two of the developer projects did not have elevators to serve the upper level units. It is worth noting, however, that, in the developer projects included in the study, the developer intends to hold the properties in the long term, and so is responsible for any maintenance & management costs. This would indicate that the developer finds that building to the lower initial capital cost, and accepting the higher maintenance costs over the life of the building provides the best overall life cycle cost for the project. It is possible that this decision is influenced by the higher cost of money faced by developers, which results in a higher discount rate, and thus a greater discounting of future costs than would be the case for public entities. Tax issues such as depreciation and expensing may also be considerations.

c. Rents – Developer rents are usually higher than on-campus housing.

TRANSFORMING CAPITAL ASSET UTILIZATION AND DELIVERY Opportunities for Reducing Project Costs and Achieving More Program for the University’s Capital Dollar Appendix F: Office Building Benchmark Study by TMCS, Inc.

Appendix F

Appendix F Office Building Benchmark Study by TMCS, Inc.

The Committee heard testimony on a detailed cost study performed by TMCS, Inc. on the recently completed Math-Science building on the Davis campus. Testimony by the study leader, Tony Moayed, concluded that if this project had been completed by a third-party developer in accordance with existing UC processes, standards and requirements, construction costs would not have been substantially less. This testimony reinforced the Committee’s conclusion that the main cost savings for UC capital projects is to be found in process change.

The goal of the TMCS study was to “analyze the influences, values, choices and processes that affect the costs of developing office buildings on campus compared to those built in the private market place” (University of California Davis Office Building Benchmark Study, TMCS, Inc.).

The Executive Summary from that study is provided in this Appendix.

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Appendix F

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Appendix F

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Appendix F

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Appendix F

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Appendix F

Documents

Transforming Capital Asset Utilization and Delivery - The Regents of