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July 4, 2015

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School Board raises concerns about costly, unchecked change orders on construction, renovations

As the Clark County School District prepares for a potential capital improvement overhaul, its School Board is looking more closely at the mounting cost of change orders to school construction and maintenance projects.

School Board members said Wednesday there was a widespread public perception that contractors are “gaming the system” by bidding low on building projects to receive the contract, and then getting more money by putting in change orders, which alter the terms, breadth and cost of the project.

“I think there is a perception out there that it hasn’t been on the up and up,” School Board President Linda Young said during a work session Wednesday. “We’re airing our concerns in public. These (change orders) need to come to the forefront.”

Change orders usually occur when unforeseen site conditions are discovered, when design deficiencies are found, a government agency levies a requirement or the School District changes the scope of the project under construction.

Examples include finding a cavern underneath the construction site of East Career and Technical Academy, having to install additional ramps to comply with the American with Disabilities Act and having to change out piping because the design called for the wrong size.

Oftentimes, these change orders cost more money than originally estimated.

That’s a problem for the cash-strapped district, which saw an increase in the number of change orders for new construction projects over the past decade. (There has been a decrease in the number of change orders for renovations, however.)

While designers have been billed in the past to offset the cost of excessive or unwarranted change orders, School Board members are now discussing stepping up standards. They are also contemplating fundamentally changing how the district accepts bids and awards contracts.

This comes in advance of a November ballot initiative that calls for a six-year capital levy to fund high-priority school rehabilitations, which if approved would raise property taxes about $74 annually on a house valued at $100,000.

Currently, the district follows the Design-Bid-Build model. Officials first hire an architect who designs the school project. Building out the design then goes out for contract bids. The construction company awarded the contract would then execute the design.

This model poses several concerns, district officials and School Board members said.

Construction estimates are made public during the bidding process for transparency, which is to the contractors’ benefit when casting bids, Weiler said.

Furthermore, budgets include a line item for “change order forecasts,” which on a recent $12.4 million project ran upwards of $600,000, or nearly 5 percent of the total cost.

“That’s basically telling the company you have built-in wriggle room,” said School Board member Deanna Wright, who called change order requests for shoddy work or inattention “just unacceptable.”

Moreover, to meet construction schedules contractors often plow through with project changes before the School Board approves formal change order requests.

School Board members found the potential for contractors bidding low and putting in larger change orders without great oversight troubling. Some called the practice near “corruption” while others called it an abuse of the process.

The School District is looking at using change order rates as one basis for hiring and firing contractors. It is also looking at bringing together project managers, contractors and architects early in the process to decrease the number of change orders due to design deficiencies.

Officials are also considering not approving School District-requested change orders, and even stopping work on any projects until all change orders are approved before work recommences.

School Board member Chris Garvey said she was concerned about ensuring timely construction however.

“We have children in these buildings,” she said. “We need to make sure we’re not putting them in dangerous situations and losing instructional time.”

The School District even may change its contracting model from Design-Bid-Build to a more streamlined model. That could mean hiring a single design-builder instead of two companies to design and build the project, or hiring them together early in the process.

The School Board is expected to take this issue up again later this month.

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