Trust the trustees?
CCSD’s change-order process should be watched closely
- Friday, September 4, 2009
Are the trustees of the Clark County School District wearing rose-colored glasses?
Or do they just want the public to do so?
After last week's CCSD school-board meeting, those are obvious questions.
A little background: The Clark County School District has a $4.9 billion capital improvement program, plus another $249 million in the district's bond-funding pipeline. Thus, when members of the public expressed concern last week over how the district hands out contracts for construction jobs, it was to be expected that trustees would exert themselves to appear diligent seekers of information before voting to award another construction contract.
It was the construction contract for Triggs Elementary School — awarded to Roche Constructors Inc. — that had people objecting. They raised concerns that Roche used suppliers outside the district's approved list and may not be able to supply skylights as specified. This sparked the trustees' discussion of the district's bidding and change-order processes.
A key issue here — long a topic among Southern Nevada architects and contractors — is whether and to what extent low-ball construction bids are being used to routinely win district projects, after which the low-bidding contractors use change orders to get true project costs back up to levels more profitable for them and more expensive for the district.
So, before casting their "yea" votes, trustees sought assurances and guarantees that the district's change-order process would prevent that from happening.
Trustee Sheila Moulton asked if the district had a way to track projects to see that increases don't happen down the road through change orders. Bill Hoffman, CCSD general counsel, didn't comment on that issue, but did hypothesize that a request for increased funds for the skylights would be a contractual issue between the general contractor and sub-contractor and should have no effect on the district.
Board President Terri Janison asked for assurances from Paul Gerner, district associate superintendent for facilities, that processes were in place to block such change orders.
"I just need to be assured we have processes in place so that doesn't happen," she said.
Gerner, like Hoffman, chose not to explain the change-order process in use by the district. Nor did he describe any procedural safeguards that would prevent the abuses trustees supposedly fear. Instead, Gerner offered his personal assurances: "You can rely on me to be my normal hard-nosed self. If for some reason my hard-nosed project manager doesn't catch it, I certainly will."
The optimistic hypotheses and personal promises seemed to appease the board members. While some board members indicated they were still concerned, none pushed for clarification about specific safeguards.
Perhaps the rosiest picture came from Trustee Carolyn Edwards. Assuring trustees and the public that school district change orders are within construction "industry standards," she added that many of those change orders also have to come before the board for approval.
"Our change orders, overall, tend to run between four and five percent, and ... the large ones always come to the board for approval. Even if you factor in all the ones that are large, our overall percentages are well within the industry's average of four to five percent," she said.
An authoritative answer, it would appear. Edwards, after all, is the board's liaison to the Bond Oversight Committee, an independent committee that oversees the district's capital building program. As such, she receives regular updates on the district's capital improvement program, including change orders. In fact, Edwards, along with Janison, was at the August 20 BOC meeting, just seven days earlier.
At that meeting, district staff told attendees that the district is exceeding the industry standard for change orders.
Excessive district change orders were said to range from .38 percent to 1 percent above what the district said was a four to five percent industry standard. In other words, the added costs to the district from change orders would range from 5.38 to 6 percent of the district's total authorized construction spending.
Given the huge construction spending of the district, merely being within the school district's so-called industry standard for change orders could cost Clark County taxpayers between $196 million and $245 million in contract overages for the 1998 Capital Improvement Program. Tack on another .38 to 1 percent increase, and taxpayers would be shelling out somewhere between $263 million and $294 million for overages.
Edwards' implicit assurances that the school board scrutinizes large and dubious change orders contradicted explicit previous remarks she has made. For at least a year now at the Bond Oversight Committee, the lack of oversight on change orders has been a hot discussion topic. That's because no one but staffers in the district's facilities division review the orders. Indeed, the district's own procedures manual specifies a process excluding school trustees from reviewing change orders. Thus, currently, the school board just looks at the "large" orders via a summary sheet, after the fact, and then ratifies them.
At the end of the night, after all the hypotheses, promises and trustee assurances were over, no one had answered whether CCSD's change-order process has safeguards to prevent low-ball bids and unnecessary change orders.
But, apparently, board members felt just rosy.
Karen Gray is an education researcher at the Nevada Policy Research Institute.