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UNC Bond Report Higher Education UNC Bond Report to the Higher Education Bond Oversight Committee September 2005 UNC Bond Report to the Higher Education Bond Oversight Committee September 2005 Table of Contents Section Page Executive Summary 1 Section A: Overall Program Status; Cash Flow; Schedule 3 Section B: Expenditure and Scope Compliance; HUB Participation 12 Section C: Construction Manager at Risk Projects 20 Section D: Bond Program Management Practices 24 Section E: Institutional Summaries and Project Summaries 26 Appalachian State University (ASU) 27 East Carolina University (ECU) 36 Elizabeth City State University (ECSU) 45 Fayetteville State University (FSU) 57 North Carolina A&T State University (NCA&T) 68 North Carolina Central University (NCCU) 82 North Carolina School of the Arts (NCSA) 96 North Carolina State University (NCSU) 104 UNC – Asheville (UNCA) 129 UNC – Chapel Hill (UNC-CH) 136 UNC – Charlotte (UNCC) 163 UNC – Greensboro (UNCG) 173 UNC – Pembroke (UNCP) 184 UNC – Wilmington (UNCW) 195 Western Carolina University (WCU) 207 Winston-Salem State University (WSSU) 217 Affiliates UNC – Public TV (UNC-TV) 226 North Carolina School of Science & Math (NCSSM) 229 North Carolina Arboretum (NCARB) 232 List of Charts Chart 1 Building Cost Trends 4 Chart 2 Program Status by Institution 5 Chart 3 Funds Status and Commitments Status 6 Report – September 2005 Chart 4 Expenditures/Commitments as % of Campus Program 7 Chart 5 Cash Flow and Bond Sales 9 Chart 6 UNC Bond Program Master Schedule 11 Chart 7 Reconciliation of Project Count 14 Chart 8 UNC HUB Participation and State Goal 15 Chart 9 HUB Construction Dollar Value 3/05 Report – 6/05 Report 16 Chart 10 HUB Construction Percentages by Institution 17 Chart 11 HUB Construction Dollars by Institution and Classification 19 Report – September 2005 UNC Bond Program EXECUTIVE SUMMARY Current data shows steady progress in the program since the June report. The updated schedule indicates that 57 projects are under design, 142 are in construction and 117 of the 316 are completed. Since the June report, $155 million have been placed under contract, increasing the total contractual commitments to $1.992 billion, or 80% of the bond program. Of this amount, design contracts comprise about $123.3 million (6.2 %) and completed projects now equal $765.5 million (38.4%) of the committed funds. Current projections for contractual commitments indicate that the bond program will be approximately 90% committed or approximately $2.25 billion in the summer of 2006. The overall schedule completion for the program is December 2008 or about 7 months less than the Baseline Schedule. Some schedule accelerations and delays are occurring on individual projects, but overall progress is continuing at a pace that will allow the program to be completed within the initial schedule. The institutions remain unconstrained by allotments so that they are funded to execute their programs on schedule. A total of 19 projects at 10 campuses were completed and accepted in time to permit occupancy for the fall semester. The aggregate worth of these construction contracts is $255.3 million. The Construction Manager at Risk (CM at Risk) and Single Prime Bid project delivery methods continue to be utilized for the vast majority of bond funded projects. The CM at Risk delivery method has been adapted to the current construction market conditions by utilizing a preliminary Guaranteed Maximum Price process for some recent projects. This approach to sharing risk between the owner and the Construction Manager has permitted project bidding to proceed even during periods of market volatility. The CM at Risk delivery method continues to be one of the most effective means for increasing HUB participation. Recent CM at Risk projects have included HUB participation as a part of the construction management team. Bond funded design and construction contracts continue to provide business opportunities for HUB firms. To date, design and construction contracts reflect a HUB participation of 15.4% of the total dollar value of contracts awarded. Contracts for design reflect a total minority participation level of 13.9% of the dollar value awarded. Construction contracts reflect a minority participation of 15.6% of the dollar value of contracts awarded. Overall HUB performance has risen slightly since the last report. The University continues to exchange best practices across the system. Construction audits continued with the completion of seven audits and initiation of an 8th audit, which now focus on the financial aspects of project performance, as opposed to earlier audits Report – September 2005 1 UNC Bond Program that focused on process. Subsequent audits will continue this strategy. Additionally the University, the North Carolina American Institute of Architects, the Carolinas Association of General Contractors, the Department of Insurance and the State Construction Office are meeting periodically to identify and resolve common problems and identify opportunities for improvement. Report – September 2005 2 UNC Bond Program SECTION A: OVERALL PROGRAM STATUS; CASH FLOW; SCHEDULE Overall Program Status Overview The program is moving forward at a steady pace. All of the bond projects are under design, in construction or completed. Since the June report, $155 million have been placed under contract, increasing the total contract commitments to $2 billion or 80% of the bond program. The program has expended $1.6 billion dollars. The following summary provides a reminder of the bond program components and usage: • Program Components: o Infrastructure $302M 12% o Land Acquisition $ 48M 2% o Modernization $869M 34% o New $740M 30% o Replacement $541M 22% • Usage: o Science/Engineering/Computing $776M 31% o General Purpose Classrooms $506M 20% o Medical/Veterinary $320M 13% o Infrastructure $302M 12% o Student Services/Administrative $183M 7% o Humanities/Cultural Arts $165M 7% o Residence Halls $115M 5% o Libraries $ 85M 3% o Technology Infrastructure $ 48M 2% Construction Costs Although Engineering News Record (ENR) and other services that track construction costs have 2004 annual construction inflation at about 9%, and peaking out at over 10% late in the year, the rate has continued to drop through the first half of CY 2005 to about 4.6%, as shown in Chart 1. The cost of construction materials continues to fluctuate, with steel and lumber dropping as cement and fuel costs rise. Nationally, construction put-in-place is at a record setting pace, running 9.3% ahead of the first six months of 2004 according to ENR. The bond program has experienced much less market volatility in the past six months with more new projects bidding at or close to budget, and with fewer bid extensions due to inadequate number of bidders. This good fortune has been offset to some degree, however, by the nature of much of the remaining work and the tight market. Much of the remaining work is necessarily renovation, because in most cases, new space had to be provided to serve as swing space for renovation projects. Renovation projects are much more difficult to estimate and construct than new construction projects, due to the concealed and unknown conditions often involved, and are consequently less desirable. This has been Report – September 2005 3 UNC Bond Program as large a factor in construction delays and budget issues in the construction environment. The robust construction market of the past year allows contractors to choose their jobs and most would prefer to perform new construction over renovation. Therefore, in a tight market, contractors who chose to perform renovation work can get a premium for it. Chart 1 Building Cost Trends 12.0% 10.0% 8.0% nge 6.0% % Cha Annual 4.0% 2.0% 0.0% R R CT CT JAN APR JUL OCT JAN APR JUL OCT JAN AP JUL O JAN APR JUL O JAN AP JUL OCT JAN APR JUL 2000 2001 2002 2003 2004 2005 ENR/BCI All campuses, but particularly those with limited additional funding sources, are increasingly being forced to reevaluate the unexecuted portions of their programs and their facilities priorities. Value management changes that require redesign will continue to slip schedules. Chart 2, Program Status by Institution, presents a stacked graph showing program status by institution. 57 projects are under design, 142 are in construction and 117 of the 316 are completed. Appalachian State University, North Carolina School of the Arts, The University of North Carolina at Charlotte, Winston-Salem State University and all three UNC Affiliates have achieved the significant milestone of having all their projects under construction or complete. The North Carolina School of Science and Math has completed its program, being the first to achieve that goal. All Bond Projects are now started. Report – September 2005 4 UNC Bond Program Chart 2 Program Status by Institution 100% 3 90% 4 5 12 15 80% 5 6 77 6 10 8 7 1 7 5 7 70% 60% 9 12 50% 2 1 8 4 23 5 40% 23 5 5 10 2 30% 6 7 9 1 6 6 20% 7 6 5 5 5 10% 4 2 11 3 PROJECTS - PERCENT AND NUMBER 3 5 1 0% FSU ASU ECU WCU ECSU NCSA NCSU UNCP UNCA NCCU UNCC UNCG WSSU UNCW NCARB NCSSM NC A&T UNC-TV UNC-CH INSTITUTIONS Unstarted In Design In Construction Complete Report - September 2005 5 UNC Bond Program Funds and Commitments at the Program Level Chart 3, Funds and Commitments Status, presents the current status of funding, expenditures and commitments on a program basis. As of July 31, $1.599 billion of the $1.768 billion allotted to the campuses had been spent. $208 million of unallotted funds remain available. Over $155 million have been placed under contract since the June Report bringing the total commitment level to $1.992 billion as of July 31, 2005. Of this amount, current design contracts comprise about $123.3 million (6.2%) and completed projects now equal $765.5 million (38.4%) of the committed funds.
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