Magnus Stark/LAUSD
Los Angeles school costs have reached up to $480 per sq ft.

Soaring building materials prices and limited contractor availability have caused a minimum $1.6-billion shortfall

for the Los Angeles Unified School District’s construction and renovation program. “We’ve seen a 200% increase in bid prices over the last five years,” says Guy Mehula, the district’s chief facilities executive. “Construction costs have gone from $150 per square foot to between $450 to $480 per square foot since 2002.”

The $19.3-billion, 10-year school construction program, the nation’s largest, calls for 145 new schools, 59 additions, 30 early education centers and over 20,000 modernization projects. LAUSD, to date, has finished 65 new schools or 44.8% of those planned, plus 41 additions, 22 early education centers and 14,483 renovation projects. It previously had not built a new school in nearly three decades. Program spending will peak this year at $1.8-billion. Parsons Brinkerhoff Inc., New York City, is the program’s construction manager.

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    The program shortfall also stems from competition for contractors amid a record volume of private sector work in the Los Angeles area. The district had a bad reputation in contracting circles that is slowly improving through prompt payment, partnering and revised contract conditions. Contractors today are paid within 21 days, and retention funds are released within 60 days of substantial completion. Change orders are now billable in 45 days.

    “Cash flow is the lifeblood in contracting,” says Fred C. Smith, LAUSD’s director of construction support services. “And we had a track record that wasn’t very good.”

    The district recently implemented an inspection issue dispute resolution process and revised overly protective risk shifting contract conditions. It also offers an eight-week “boot camp” that helps smaller contractors win school work.

    LAUSD’s image makeover has yielded some tangible results with bid lists doubling in size. “It will never be as easy for us as the private sector, but we committed to becoming the owner of choice,” Mehula says. “We now have firms working for us that previously would have never bid our projects, including Turner, Hensel-Phelps, Clark Construction and PCL Construction.”

    But the Belmont Learning Center, now called Vista Hermosa, still haunts the district. Midway through construction, the district  discovered that the school was located on a site contaminated with methane gas. LAUSD spent $175 million on the project by 2004, with another $110 million earmarked for cleanup. The total tab is estimated at $300-million, a 71.1% increase over the original $87-million price tag. Some critics say it really is closer to $500 million. The school will open in 2008.

    “Belmont is a huge failure,” says Ken Hargreaves, LAUSD’s director of facilities operations. “There was a lot of pressure to get going and show some results. It hurt our credibility with the public and construction community. It has been a 150-lb sack that we’ve had to carry around.”

    The district still needs another bond measure, matching state funds, reallocation of other monies and/or project prioritization to complete the school construction program, says Mehula. Two bills, if approved by the state Legislature, could provide $870-million in aid. One would take into account rising costs when allocating state construction funds; the other would make LAUSD eligible for additional state aid. Local voters already passed school bond measures in 1997, 2002, 2004 and 2005.