Methods CASBO CBO Symposium November 18 2016 Presented by Harold Freiman Megan Macy 2 What We Will Cover LeaseLeaseback Multiple Prime DesignBuild Construction Management How to Pick a Delivery Method ID: 752557
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Lease-Leaseback and the Latest Word on Construction Delivery MethodsCASBO CBO SymposiumNovember 18, 2016
Presented by:
Harold
Freiman
Megan
MacySlide2
2What We Will Cover
Lease-Leaseback
Multiple Prime
Design-Build
Construction ManagementSlide3
How to Pick a Delivery Method?
Which one best suits your project
?
Which one best suits your
District
?Slide4
LEASE-LEASEBACKSlide5
5LEASE-LEASEBACK (“LLB”)
The law as it exists today:
“[T]he governing board of a school district, without advertising for bids, may let, for a minimum rental of one dollar ($1) a year … any real property that belongs to the district if the instrument … requires the lessee therein to construct … a building … for the use of the school district during the term of the lease, and provides that title to that building shall vest in the school district at the expiration of that term.”
(Ed. Code, § 17406.)Slide6
Typical Lease-Leaseback
6
District leases land to Contractor
Contractor builds facility at own expense, subleases facility to DistrictSlide7
Potential Advantages of Lease-LeasebackFactors other than price are taken into consideration
Potentially fewer change orders
Pre-contract design review?
7Slide8
Potential Disadvantages of Lease-LeasebackRisk of
Davis
challenge
Potentially higher
contract price
Change orders and extra payments Prequalification Greater legal expense
8Slide9
9Court Challenges to Lease-Leaseback
Various challenges to
LLB
have been filed in court over the last few years.
A court clarified that competitive bidding is not required for
LLB. (Los Alamitos Unified School District v. Howard Contracting, Inc.
(2014) 229 Cal.App.4th 1222, 1224.)Slide10
Court Challenges to Lease-LeasebackJune 2015Davis v. Fresno Unified School District (2015) 237
Cal.App.4
th
261
Held that
an LLB agreement must contain lease terms and a financing component in order to be validHeld that a contractor or consultant hired to perform preconstruction services may have a disqualifying conflict of interest if the contractor is then hired to perform the work
10Slide11
Court Challenges to Lease-LeasebackMay 2016McGee v. Balfour Beatty Construction (2016) 247 Cal.App.4th 235Disagreed with Davis’ holding that an
LLB
agreement must contain lease terms and a financing component
Agreed
with
Davis’ holding regarding the potential conflict of interest issue 11Slide12
Lease-Leaseback: Legislative UpdatesAssembly Bill 566:Effective January 1, 2016Expanded prequalification requirements to all LLB contracts, except for school districts with less than 2,500 average daily attendance (ADA
)
Imposed additional labor requirements on
LLB
arrangementsMust have an enforceable commitment that the contractor and its subcontractors will use a “skilled and trained workforce” to perform all work that falls within an apprenticeable occupation.
12Slide13
Lease-Leaseback: Legislative UpdatesAssembly Bill (AB) 2316:Effective January 1, 2017Requires school districts to select LLB contractors through an extensive competitive process and based on a “best-value” procedure.
13Slide14
Lease-Leaseback: Assembly Bill 2316The new process for selection of LLB contractors will include the following requirements:Board adoption and publication of procedures and guidelines for evaluating qualifications of proposers. Must
ensure the best value selections by the District are conducted in a fair and impartial manner.
14Slide15
Lease-Leaseback: Assembly Bill 2316Preparation of an RFP that includes:An estimate of price, Precise description of any preconstruction services that may be required, Key elements of the contract,
D
escription
of the format to be followed and elements to include, standard to be used in evaluating proposals,
Date
when proposals are due, and Timetable for review and evaluation of proposals.
15Slide16
Lease-Leaseback: Assembly Bill 2316The RFP must identify the scoring criteria that will be used to select the LLB contractor. Once proposals are received, the District must score them according to the specific criteria and award the contract to the responsive proposer with the highest score.
16Slide17
AB 2316: Lump sum vs. Fee Proposal Lump Sum Proposal:RFP for
LLB
contractor cannot be issued until after
DSA
approval without including preconstruction services (which may not be possible for a lump sum proposal).Fee Proposal:RFP can be issued prior to DSA approval in order to include preconstruction services.
Additional competitive process applies for selecting contractor’s selection of subcontractors following DSA approval. 17Slide18
MULTIPLE PRIME CONTRACTORSSlide19
Two Types of Competitive Bidding
19Slide20
Potential Advantages of Single Prime ContractorContractor locked into low lump sum price
Simple and familiar procedures
Pre-bid
constructability review and value engineering
Contractor or District may perform post-bid value engineering
Limits appearance of bias or favoritism
20Slide21
Potential Disadvantages of Single Prime Contractor
Little
control over selection of contractor
Bid protests
Contractor may be less cooperative
Contractor cannot perform pre-bid services
21Slide22
Potential Advantages of Multiple Prime ContractorLower total price of construction contracts
Potential to start sooner
Potential flexibility to match
budget
Flexibility in scheduling
22Slide23
Potential Disadvantages of Multiple Prime ContractorDistrict
stands in the shoes of the general contractor:
Added costs
Increased liability risk
Difficulty in assessing damages
Potential for greater legal expense
23Slide24
DESIGN-BUILDSlide25
Design-Build: OverviewEducation Code sections 17250.10, et seq.
One entity designs and builds the project
Specific selection process required
May award based on best value
25Slide26
Design Build: Recent LegislationAssembly Bill (AB) 1358:Signed by Governor Jerry Brown on October 10, 2015Applies to any RFP issued on or after July 1, 2016Lowered the threshold of eligible projects from $2.5 million to $1 millionSimplified the process for letting and awarding design-build contracts.
26Slide27
Design-Build: Recent LegislationSignificant procedural changes made by AB 1358:District’s governing board no longer required to make specific written findings regarding the benefits of using the design-build methodDistrict is allowed to develop its own prequalification questionnaire and rating system.More freedom to districts when awarding the contract on factors other than lowest price.
27Slide28
Potential Advantages of Design-BuildQuality can be used as a selection factor
Unity of design and construction
Eliminates the “liability gap”
28Slide29
Potential Disadvantages of Design-BuildLoss of some control over design
Higher price
Design problems may still cause delay
Change orders may still be needed
No checks and balances
Potentially greater legal expense
29Slide30
CONSTRUCTION MANAGEMENTSlide31
Use of Construction ManagersTraditional “Agency” Construction Managers
Selection
Process
Role will vary depending on
LLB
, multiple prime, design-build, etc.
31Slide32
TakeawaysAll delivery methods have advantages and
disadvantages
Best
delivery method for a project depends on the project itself, and depends on the D
istrict’s
objectives and risk tolerance
32Slide33
Questions
33Slide34
Attorney BiographyHarold Freiman
Partner
Harold M. Freiman is a Partner in Lozano Smith's Walnut Creek office and co-chair of the Technology and Innovation Practice Group. He represents school districts, county offices of education, and community college districts in such areas as school facilities, property, general education law, governing boards, student issues, business, and general litigation. He is a recognized leader on such topics as developer fees, school district reorganization, surplus property, the Brown Act and the Public Records Act. Additionally, he provides advice and litigation services related to the California Environmental Quality Act (CEQA) to cities, special districts and educational agencies. He has been with the firm and representing public entities for over 20 years. Mr. Freiman has appeared before the California Supreme Court on behalf of the California School Boards Association's Education Legal Alliance, and has been named a Northern California "Super Lawyer." He also received the 2014 CASBO Associate Member of the Year Award for his exemplary service to schools and to CASBO for many years.
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Walnut Creek Office
2001 N. Main St., Suite 500
Walnut Creek, CA 94596
T: (925) 953-1620
F: (925) 953-1625
hfreiman@lozanosmith.comSlide35
Attorney BiographyMegan MacyPartnerMegan Macy is a Partner in Lozano Smith's Sacramento office and an active member of the Labor and Employment and Charter Schools Practice Groups. She is also co-chair of the firm's Facilities and Business Practice
Group. Ms
. Macy provides general counsel to school districts and special districts with a focus on fire protection districts, routinely advising clients on the Brown Act, Public Records Act, conflict of interest issues and development of governing board policies. Her primary goal is to assist educational agencies in maximizing their limited resources through risk management, preventative legal services and effective
planning. Ms
. Macy utilizes her litigation background to counsel clients on effective risk management strategies in the facilities and business arena, including public bidding issues, real property transactions and negotiation of school facilities agreements related to new residential development. Those skills are also invaluable in handling the array of labor and employment issues school districts routinely encounter, from employee discipline issues to labor disputes.
35
Sacramento Office
One Capitol Mall, Suite 640
Sacramento, CA 95814
T: (916) 329-7433
F: (916) 329-9050
mmacy@lozanosmith.comSlide36
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Disclaimer:
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