Definition of Insanity
• Doing the same thing over and over and
expecting different results each time
Lease Leaseback for:
Public K-12 Education Projects
Education Code Section 17406
Public CCD Education Projects
Education Code Section 81335
Public Projects
Government Code 5956
Leigh Coop, Vacaville USD, Director of Facilities
Brian Whitmore, BCA Architects, Associate Principal/VP of Design
Jim Kordakis, Roebbelen, Director of Collaborative Construction
Other Scary Topics
• Documentation and Proof of Construction Delay
• Proving and Pricing Subcontractor Delay Claims
• Differing Site Conditions: The Big Game of Shifting
Risk
• Legal Implications of the Construction Schedule
• Recovery Schedules: Acceleration of the Hot Potato
TEAM BUILDING
• Get the Right People on the Bus
– Owner
– Architect
– Contractor
– Subcontractors
– Program Manager
– Testing/ Inspection
– Approving Agency
Hard Bid Process
• Gramma Leasa Leasaback’s Famous Lasagna
Gramma Leasa Leasback’s
Famous Lasagna Recipe
• As Specified

1 box of lasagna noodles

1 pound lean ground beef

28 ounces marinara sauce
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2 pounds ricotta cheese
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1/2 cup grated Romano
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1 egg
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1/4 cup freshly chopped parsley
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1 clove of minced garlic
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1 package sliced Italian sausage
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8 ounces mozzarella cheese,
shredded
Hard Bid Process
• Here’s your preferred Chef
Hard Bid Process
• Here’s who you end up with
“OR EQUAL”
• As Bid


81ounces
Top Ramen
Noodles
box of of
lasagna
noodles


11pound
poundSpam
lean ground beef


2/3
Ketchup
28 jar
ounces
marinara sauce


poundsgrated
ricottaVelveeta
cheese
22pounds


1/2cup
cupCheez
gratedWhiz
Romano
1/2


eggEgg Beaters
11cup


1/4cup
cupdried
freshly
chopped parsley
1/4
Parsley


clove of minced garlic
11Garlic


(8ounce)
ounce)Oscar
package
sliced
Italian
11(8
Meyer
Hot
Dogssausage
ouncesWhite
mozzarella
cheese,
shredded
88ounces
American
Cheese


Consequences of Substitutions:
• What Went Wrong?
Real Reason for Failure
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Lack of Communication?
People?
Planning?
Execution?
Intent?
THE PROCESS
The Hard Bid Process
• Allows Substitutions
• Results in Silos
– Not a true Team
• GC/Subs are uninvited guests
• Parties have Different Definitions of “Success”
– Get what you pay for
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Owners Perspective
AE Team Perspective
GC Perspective
Subcontractor Perspective
What do Owners Want?
•
What You Ordered:
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Honesty (Trust)
High Quality
On Time/Within Budget/Zero Accidents
No disruption to daily operations
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Power/Low Voltage
No Claims
No Risk
ENJOY your job
Lease Leaseback vs Design/Bid/Build: Overview
•
Design/Bid/Build
– No collaboration or teamwork in design
– Reliance on architect for cost estimates
– Low bid wins
– Adversarial relationship
– All changes are in Change Order format and have a typical mark-up of
15% - 50% or more
• Lease Leaseback
– Contractor pool is selected on a qualifications basis ahead of specific
projects
– Choice of contractors
– Transparency in fees, bonds, insurance, general conditions
– Dialogue, collaboration, gaining expertise of contractor during design
phase
– Shared risk, or at least – planned risk
– Contractor profits by having a good project. Why? Because he or she
may get the next job!
Lease Leaseback vs Design/Bid/Build:
•
Lease Leaseback (cont.)
– Contingencies and Allowances instead of Change Orders
– TBR – Total Base Rent – or GMP – Guaranteed Maximum Price
– The TBR will designate the “Contingencies” that have been reviewed by
the Project Team ahead of time. There are three types of contingencies,
the Project Contingency, the District’s Contingency and the Permitting
Contingency
• The Project Contingency is intended for E & O related issues, misc.
buyout expenses that weren’t anticipated when the TBR was
finalized and small changes in the field
• The District’s Contingency is established to cover an unanticipated
necessity that the School District must incorporate into the work.
• The Permitting Contingency is specifically intended to cover the cost
of and changes that are required by DSA during their review and
approval process
– Both the Contingencies and Allowances are reviewed and approved by
the Project Team on a regular basis during construction. This approval is
required before the contractor is authorized to use that money
Lease Leaseback vs Design/Bid/Build: Examples at VUSD
• For similar scope on identical campuses, LLB delivery method
reduced the construction by 5 months (less time spent in interim
housing and fewer site disruptions) and delivered the project
with a net savings of $ 75K to the District
• Middle School Modernization Project – Reduced the original
schedule from 14 months to 3 months – no interim housing
portables and no General Conditions for 11 months. Even with
overtime premium, District saved $1 million and had fewer
disruptions to the educational process
• LLB saved $75,000 on underground utilities unknown condition
on a middle school shade structure project in the middle of
campus. We estimated possible cost, included it as an
allowance, and did not experience the typical hard-bid markup
for change orders
So why Hard Bid?
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School boards often think it’s the best price
Lack of time to learn new method
Lack of appropriate legal advice and experience
Boards must trust staff to manage the project
Often, school district personnel are not capable of
managing this type of project
Outside interests/misinformation
What is LLB?
What is LLB?
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Financing Mechanism for funding projects
Sealed bid/low bid is not required
Can be used for all Project types/sizes
including Modernizations, Retrofits and New
Construction
Preconstruction Services Agreement
Site Lease Agreement
Facility Lease Agreement
Deciding whether to use LLB
• Education of the Board: special board
workshop
• Education of the Citizens’ Oversight
Committee
• Education and outreach to the local contractor
community
Implementation and Rollout
• Resolution of the Board to authorize the use of
Lease-Leaseback
• Specify projects or blanket authorization
• Have an experienced legal team to develop the
contract documents
– Integrated contracts or by reference
• Use of Program Managers experienced in LLB
or construction processes is essential (at least
at beginning).
LEAN Construction with LeaseLeaseback
•
Eliminate Waste
– Waste = $
•
Value Stream Mapping
Target Cost Design
Last Planner: Project is a series of commitments
Reverse Phase Scheduling
Ask the person actually doing the work what would make their job easier
Just in Time: Last Responsible Moment
Refine the Process: Plan, Do, Review, Revise
Building and Process designed together
Meaningful BIM
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Clash Detection During Design, Pre-Fabrication Opportunities, Meaningful AsBuilt’s, Fully Embedded O&M’s
Shared Contingency (Not necessarily available to the public process)
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• Collaborate, Really Collaborate
Total Amount of Risk in Project:
Total Amount of Risk Owner pays for:
LLB Risk Sharing:
Contractor:
•COW (initial)
•Coordination
(incl. “E&O”)
•Means &
Methods
Owner:
•Weather
•Unforeseen
conditions
•Scope
changes
A/E:
•Professional
Negligence
•Code/
Design
Intent
School District: Choose Your Team to
Reduce Risk
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Selection of LLB Entities
Selection of Architect/Engineering Firms
Establish a qualifications-based RFP
Solicit firms and advertise
Emphasize requirement to “buy-in” to LLB collaborative process
Establish a proposal screening/scoring system
Conduct Interviews
Recommend pool of LLB Entities to School Board
Assign LLB Entity to specific projects according to work capacity, timing
and phasing, types of work
Recommend at least two LLB Entities in order to create competitive spirit
and motivation to perform even better!
Recommend pool of A/E firms to Board
–
Lump Sum Architect Agreement, NOT Percentage-based of project bid
Risk
•
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Discuss Risk openly and try to assign it
reasonably (THE SINGLE MOST
IMPORTANT STEP IN COLLABORATION)
We give $ for what can be quantified
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Targeted Allowances for what cannot be quantified
What cannot be quantified = Risk
How do I know it’s Competitive?
Typical Contract for Construction:
Qualifications Based (GC):
- OH, P and I/B:
6-8%
Cost to Manage (GC):
- General Conditions:
10%
Competitive Bidding (Subs):
- Sub Trades:
82-84%
LLB allows for 92-94% Competition/ Cost
When to bid Sub-Trades?
After Agency Approval is preferred
(minimize risk)
If “fast tracking” is necessary… options are
available:
- Following Agency Submission, or
– Following Agency Comments
– But build in contingency to manage Agency
approval
How to choose Sub-Trades?
You are not required to select the “lowest
responsible bidder”
LLB allows you to select the “best value
subcontractor”
What is the GMP or TBR?
• The GMP is a “ceiling” not a “floor”
• The intent is to build in enough contingency
for all reasonable unforeseen conditions,
errors/ omissions, and scope changes
• Change orders still occur, but they occur
within the GMP
• Never go back to the governing board…
Construction
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Extension of Pre-construction
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Operations Team completes project with same open
book approach and weekly collaboration with the
project team
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No Contingency/Allowance spent w/o Approval
Motivated Subcontractors
Enhanced Closeout as Team completes
documentation during the project
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No Hand-off
BIM
Meaningful Warranty
Recent Legal and Legislative Issues
• Los Alamitos USD v. Howard Contracting, Inc
14 C.D.O.S 11029 Confirms LLB
• Pre-Qualification for GC’s and MEP
– Project’s over $1 Million
– State Funded (or reimbursement anticipated in
future)
• Ed Code 17406 for Public K-12 is most
accommodating, Ed Code 81335 for CCD is
different but recent case law supports
LLB: A Great Process
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Choose your Team when, how and in the order you want
Effectively use Preconstruction to Achieve Success including
Operations Team actually building the project
Eliminate Claims & Change Orders outside the GMP
Design your project to maximize Program within your budget
Drive Value into the Project
Share Risk
Bid what is Specified
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Competitively Bid
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But also get Subs VE ideas
But don’t have to take low-bidder
Deliver the Project On Time and In Budget
Lessons Learned
• LLB Requires constant education of the School Board and
Public
• Don’t be afraid to get Expert Advice. It will cost more in the
short run but save big in the long run (liability & construction
cost)
• Assemble a Great Team based on qualifications, experience
and trust
• Start as early as possible in the process (Schematic Design
Phase)
• Build in enough contingency so as not to de-rail the project,
but so as to effectively Guarantee a Maximum Price
• Use LLB Properly
– Implement a Collaborative Pre-Construction Process
• No Pre-Con = Getting Married w/o Dating
Public Case Studies
• CHP Grass Valley
• CHP Mojave
California Highway Patrol
Grass Valley Field Office Replacement
First CHP facility to be completed using Design-BuildFinance project delivery model
State obtained option on property; Developer
purchased
State’s Request for Lease Proposal (RFLP):
Team Qualifications
Lease Proposal for 25 Year Term w/ Options for
Buyout at Set Periods
CHP Grass Valley Field Office Replacement
Developer Responsible for Maintenance During
Lease Term
Entitlements/Land Use Approvals/Permits Have
Tremendous Impact on Success/Failure of Project
Architect’s Perspective: Keep Criteria
Documentation Minimal
Systems Performance Requirements
Site Elements & Building Spaces Adjacencies
Room Descriptions
Lease and Process Requirements
CHP Grass Valley Field Office
Replacement
Contact Information:
• Jim Kordakis – Roebbelen
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jimk@roebbelen.com
530-919-1642 (cell)
916-939-8352 (office)
• Leigh Coop – Vacaville Unified School District
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leighc@vacavilleusd.org
707-453-6138 (office)
916-213-8825 (cell)
• Brian Whitmore – BCA Architects
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brianw@bcaarchitects.com
916-626-1303 (cell)
QUESTIONS