EMERGING ALTERNATE DELIVERY LEASE LEASEBACK FOR COMMUNITY COLLEGES CCFC 21 ST ANNUAL CONFERENCE SEPT 9 TH, TUESDAY 10:25 AM 11:40 AM WORKSHOP #1 (CC

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1 EMERGING ALTERNATE DELIVERY LEASE LEASEBACK FOR COMMUNITY COLLEGES CCFC 21 ST ANNUAL CONFERENCE SEPT 9 TH, TUESDAY 10:25 AM 11:40 AM WORKSHOP #1 (CC ROOM 202)

2 agenda LEGAL PERSPECTIVE & FRAMEWORK OWNERS PERSPECTIVE CONTRACTOR S PERSPECTIVE ALIGNMENT OF TEAMS RFP/RFQ S: QUALITY PROJECTS BENEFITS OF LEASE LEASEBACK SAMPLE PROJECTS / SHORT CASE STUDIES

3 Lease-Lease Back: What is it? Education Code section 81335: Thegoverningboardofacommunitycollegedistrictmaylet,ataminimum rental of one dollar ($1) a year, to any person, firm, or corporation any real property that belongs to the district if the instrument by which such property is let requires the lessee therein to construct on the demised premises, or provide for the construction thereon of a building or buildings for the use of the community college district during the term thereof, and provides that title to that building shall vest in the community college district at the expiration of that term. The instrument may provide for the means or methods by which that title shall vest in the community college district prior to the expiration of that term, and shall contain such other terms and conditions as the governing board may deem to be in the best interest of the community college district.

4 Education Code Section 81335: What it Means In plain English: A community college district leases any real property that belongs to the District to a person, firm, or corporation (the Builder ) for $1.00 per year\ The agreement between the community college district and the Builder must provide for the construction of the building on the district property

5 What does any real property that belongs to the district mean? A community college district may use Section if it: owns the property has an option to purchase the property (See Ed. Code 81332)

6 Lease-Leaseback can be used for the construction of Building(s) For purposes of Section 81335, the term building is defined as: One or more buildings located or to be located on one or more sites The remodeling of any building located on a site Onsite and offsite facilities necessary for the operating or function of the building Permanent improvement of campus

7 Difference from K-12 llb statue Section does not contain exactly the same verbiage as K-12 statute, Education Code section Section does not contain words without advertising for bids Meaning of difference? Potential Role of Validation Actions Prequalification

8 Other Requirements Section requires that the community college district have DSA approved plans and specifications Selection Procedures

9 Structure of Lease-Lease Back There are many variations Typically, a Lease-Lease Back contractual arrangement includes three documents, and an additional optional professional services agreement: Optional: Professional Services Agreement (Pre-Con) A Site Lease A Sublease A Construction Services Agreement

10 The Site Lease The Site Lease is the instrument that leases the community college district s property to the Builder: The minimum rental rate is $1.00 per year The Site Lease terminates upon the following events: End of term of the Site Lease End of term of the Sublease Termination of the Construction Services Agreement

11 The Sublease The Sublease is the instrument that leases the community college district s property from the Builder back to the community college district A monthly Sublease Payment to the Builder The Sublease Payments are based on the Guaranteed Maximum Price ( GMP ) for the Project and an agreed upon monthly fair market rental value of the property

12 The Sublease cont d Some Subleases provide for optional Sublease Prepayments to the Builder The Sublease terminates upon the following events: End of the natural term of the Sublease. End of the term of the Sublease as a result of the payment of Sublease Prepayments. Termination of the Construction Services Agreement.

13 Construction Services Agreement The Construction Services Agreement is similar to a typical construction contract. Requires the Builder to perform the construction of the project. Contains the general legal requirements pertaining to community college district construction contracts.

14 Construction Services Agreement cont d The Construction Services Agreement is different from a typical construction contract. The Builder s compensation for the Project is negotiated ( Guaranteed Maximum Price or GMP ). The GMP is the price that the parties agree will be the maximum price paid for the Project. Exceptions = Contingencies & Allowances The Builder is paid for work completed pursuant to the provisions of the Sublease Agreement.

15 Lease-Leaseback Advantages: Legal Perspective 1) Single point of responsibility 2) Early involvement of Contractor creates more collaborative approach (i.e., value engineering/ constructability reviews) 3) Assurance that Contractor is qualified and experienced 4) Fewer claims and/or change orders 5) Less litigation/disputes

16 OWNERS PERSPECTIVE Lease-lease back method for RSCCD is currently being utilized with its projects. Santa College 65 acre site, Settled in 1947, College serves 27,000 students a semester. Centennial anniversary in District / Campus is looking to undertake an aggressive campus development program over the coming years

17 RFQ Process at rsccd 2 step process RFQ for LLB Pool qualifications for similar work RFP for LLB / Preconstruction services or Construction Services Elements of RFQ/RFP: High quality Low cost Collaboration & cooperation Project specific experience Preconstruction Services (drawing reviews, estimating costs, scheduling, value engineering where appropriate, prequalification of subcontractors, bid development of an initial and final GMP coverage,

18 Sample projects at rsccd Dunlap Hall Renovation -The work includes the addition of two elevators, monumental stairs, circulation balconies, and related site work. In addition, existing guard rails and handrails will be replaced, accessibility upgrades for restrooms, and roof penthouse upgrades to ensure code compliance. Central Plant Project -the work includes three phases. First, is the construction of a new Central Chilled Water plant that will include ice storage to reduce peak power loads. Second, will be the construction of new distribution piping throughout the campus for the chilled water as well as domestic water, fire water, sewer and storm water piping. Power and signal conduit and wire will also be replaced and/or added where needed. The final phase will be the connection of eight existing buildings to the new central plant piping. This New Johnson Student Center Project the project is a renovation to repurpose and create more efficient spaces to support the new program requirements as outlined in the college s master plan. New elevators are planned to address accessibility requirements as well as demolishing the old bookstore annex.

19 Sample projects at rsccd Science Technology Engineering and Mathematics Project this project is a new building construction of approximately 63,100 square feet to house science, technology, engineering and math laboratories, classrooms, lecture halls and faculty offices. This project is still in planning and is pending the start of programming. Health Sciences Project this project is eligible for statue funding and it s a new building construction of approximately 55,138 square feet to allow for the consolidation and growth of the Health Sciences programs including, Nursing, Occupational Therapy Assistants, Medical Assistants, Emergency Medical Technicians and Pharmacy Technology.

20 Value definition and alignment session Objectives: 1) Develop a clear and actionable definition of what value means for client / project team. 2) Develop specific metrics related to the value definition that will be used throughout the project to evaluate options and track performance.

21 Example of values definition & Alignment sessions

22 CONTRACTORS PERSPECTIVE Traditional hard bid: - GC/Subs low price, potential for uncooperative subs, -Potential for schedule delays, claims, inefficiencies, - unknown or no contingency, scope gaps - teaming, collaboration, partnering tend to be missing. Best Value delivery using Lease Lease Back method: - Offers flexibility and customization to the needs of the district

23 Best value What is BEST VALUE? Is it?: Financial Strength Firm Experience / Approach / Philosophies / Methods Firms resources (Pre-construction / Construction / Post Construction) Staff resumes / experience / certifications Specific Project Experience Statement of Qualifications Location of office and staff Organizational structure References SAFETY LOW EMR? Quality Assurance & Quality Control Price / Costs Building Project Life Cycle long term vs short term costs

24 Best value Offers flexibility and customization to the needs of the district and will vary from district to district. RFQ / RFP approach, content, defined criteria, and selection process are crucial. Should be simple, clear and with well defined criteria for what constitutes best value. Best Value can be defined based on the specific needs of a project and goals of the district. For example, achieving 25-30% local, small business, and disabled veteran business participation. The selection criteria for best value can be weightedbased on importance and priorities.

25 Sample Traditional LLB rfq/ rfp 2 step process RFQ 35 PTS (Legal, financials, sample contract / gc s, resumes, experience) Shortlist typical of 3-5 firms (scores from RFQ carry over) RFP 65 PTS (incls: interview 20 pts., technical approach 30 pts., price 20 pts.) TOTAL 100 PTS (Highest scoring wins contract)

26 Sample rfq 2 step process re-defined RFQ (Legal, financials, sample contract / gc s, resumes, experience) Shortlist typical of 3-5 firms / Part of a Pool of prequalified LLB Firms Firm Selection for PRE-CONSTRUCTION (based on best value GC s / fee) Development of preliminary GMP, work with design team early on and work together on the development of the final construction drawings, project estimates, scope validation, constructability reviews, field verification, value engineering, value enhancements and development of a final GMP. Negotiate CONSTRUCTION SERVICE CONTRACT OR OPTION FOR RFP.

27 Benefits of lease leaseback Allows for transparency of process / Open-book approach GC owns the Risk protects the district Option to define and include contingences and allowances that are tracked and owner approved during the course of the project Collaboration, effective communications and integrated team approach. Ability to bring your builder and key trades into the Pre-Construction phase. Ability to begin with constructability, teaming, cost estimating, and value engineering during the preconstruction phase while partnering with Architects Ability to still be competitive through extensive outreach processes that alight with district goals. Able to develop a GMP (Guaranteed Maximum Price) before you begin the work to ensure you stay within the district s budget. Reduction and/or elimination of claims, change orders and similar. Opportunities for off-site fabrication and procurement early in the process. Establish a team approach and partnership with all stakeholders Higher quality projects Projects likely to complete ahead of schedule or on time. Ability to bring in top talent and best in teams.

28 Additional Benefits CAN USE ON ANY CONSTRUCTION PROJECT. PREQUALIFICATION OF SUBCONTRACTORS DURING OUTREACH PROCESS ADVANTAGEOUS ON MODERNIZATION, COMPLICATED OR PHASED PROJECTS. PRECONSTUCTION ELEMENT WITH SUBCONTRACTORS PROVIDES FLEXIBILITY AND STRUCTURE FOR PROJECTS THAT SETS UP SUCCESS PHASING AND INCREMENTAL GMP S CAN BE DEVELOPED