Cost estimates for several Omaha Public Schools construction projects have come in higher than anticipated.
School officials cite a number of factors in the early cost overruns for OPS’s $421 million bond issue, including a crowded construction market leading to higher and fewer bids and projects that have been expanded to add features such as science and technology labs.
Cranes, backhoes and crews with hard hats are a common site across the metro area with numerous private and public projects underway. Several school districts, including Papillion-La Vista, Elkhorn and Millard, are in the midst of school construction projects.
The early cost trend in OPS has some wincing and worried about escalating costs and schedule delays that could put future projects in a pinch.
But the team handling bond projects and others in the construction field say it’s too soon to hit the panic button.
According to the latest construction report, eight school projects are currently estimated to come in over budget. The overages total $4.9 million, though projects where costs have come in lower than expected bring that figure down to $4.2 million.
The report was prepared by Jacobs Project Management Co., the company OPS is paying $15.9 million to manage its bond program. School board members will be given an update on the bond projects at today’s meeting.
The budget for renovations at Ponca Elementary, originally estimated at $3.3 million, has swelled to $4.5 million, an increase of $1.2 million.
The projected budget to tear down and rebuild Western Hills Elementary has grown from $15.5 million to $17.2 million, and even several small jobs, such as installing card-swipe access systems at Monroe and McMillan Middle Schools, are now forecast to be more expensive.
Reasons for the higher costs vary, but they include higher-than-anticipated bids, increased demolition costs and added space for some schools.
OPS has a $37.9 million contingency fund to cover budget overruns and changes to the plans, plus another $29.3 million to pay for other extras, including portable classrooms and hazardous material removal.
At a citizens bond oversight committee meeting on July 22, Jacobs representatives addressed concerns about costs.
“I want to make sure everybody does understand that the program is on track and well within its budget,” Jacobs program manager Mark Sommer said.
Oversight committee member Jim Vokal said he worries that the committee, which operates in an advisory capacity, lacks the teeth to rein in costs if project costs start creeping up.
“If you go over the $37 million in contingency, you either have to ask taxpayers for more or projects start to get scrapped,” said Vokal, who is CEO of the Platte Institute for Economic Research.
The current overages are based on cost estimates for a series of smaller, so-called quick-start projects that OPS identified as being able to start this summer.
Just $5.2 million of the $421 million bond program has actually been paid out so far.
Several officials said the real test will come next year when OPS bids out more of its bigger projects, such as classroom additions or new school construction.
“I think it’s a little too early to be alarmed,” said school board member Matt Scanlan, who also sits on the bond oversight committee. “It’s a good thing we’re watching and keeping an eye on it, but as a lot of projects go through there’s going to be adjustments.”
The sheer volume of construction work in the Omaha area has created stiff competition for contractors and trade workers, those in the industry say. Ongoing projects include the city’s $2 billion sewer overhaul, a $400 million Google expansion in Council Bluffs, the $323 million Fred & Pamela Buffett Cancer Center at the University of Nebraska Medical Center and a slew of school bond work.
“I don’t think OPS could be in the construction market right now at a worse time,” said Rob Stargel, the director of business development for Lund-Ross Constructors. “But there’s no way they could have foreseen this market even six months ago.”
Stargel said he hasn’t seen this level of construction demand in 20-plus years, a boom that could be partially chalked up to schools, hospitals and private developers finally giving the green light to projects delayed during the recession. The amount of available work, coupled with a labor market that’s stretched thin, allows vendors to be choosier about the projects they work on and focus on the jobs expected to deliver the biggest profit margins, Stargel said.
That demand has led to fewer competitive bidders for some OPS projects, according to Sommer.
Several projects, including $1.4 million in upgrades for Lewis and Clark Middle and $940,000 in updates at North High, attracted only one bidder. No one bid on work at three elementary schools — Catlin, Masters and Edison — so the projects will be re-bid in the fall.
Timing the projects right is key, Scanlan said.
“If projects are put out to bid in the fall, when things are starting to wind down and people are hungrier,” he said, “maybe they’ll sharpen their pencil and bid a little tighter.”
Officials in other districts with bond construction say the market has ebbed and flowed.
A spokeswoman for Papillion-La Vista schools said all of the bids tied to its $59.6 million bond issue approved in 2012 have been awarded, allowing the district to lock prices in before the latest spurt of construction work. The district will open the new Prairie Queen Elementary this month and a new middle school in 2016.
About three-quarters of the projects tied to Millard’s $79.9 million bond issue approved in 2013 have been bid, spokeswoman Rebecca Kleeman said. Some bids in March and April came back high but were re-bid with better results, she said.
“Our bond was kind of out of the gate before a lot of these,” Kleeman said.
In February, the Millard school board signed off on a $9.75 million contract for a new entrance and second-floor corridor for Millard North High, about $1 million over initial estimates. Officials blamed the tight bidding market for the higher cost.
In Elkhorn, an addition for Elkhorn South High was $1 million under budget, but the $10.4 million winning bid for a new elementary school was about $1 million over initial projections. Ryan Lindquist, Elkhorn’s director of business support services, said he questioned the contractor about the price difference and was told costs are up for plumbing, electrical and masonry work.
“It’s just supply and demand,” Lindquist said. “The demand is there, and the supply for the workforce is not. They can charge a premium for the work they’re doing.”
Elkhorn, which has built 10 new schools since 2000, draws from a reliable pool of contractors and received an average of five to seven bids on recent projects. More bids can help keep project costs competitive.
The current landscape might make estimating future work challenging, especially as districts like Westside, Bennington and Gretna, which passed bond measures in May, gear up for their own construction projects, Lindquist said.
“Are we concerned moving forward with all the projects that are out there? Absolutely,” he said. “We’re concerned that might drive our prices up.”
In OPS, Jacobs’ officials said they’re trying to create a contractor-friendly environment by listening to concerns and softening deadlines for some projects.
The firm is also considering sending feelers out to contractors and laborers in nearby markets like Kansas City to lure them to Omaha. Unions across Omaha have also been recruiting out-of-state workers for local projects.
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