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Hernando Today

New Approach To Funding Projects

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By MICHAEL D. BATES

Published: September 7, 2008

BROOKSVILLE - Hernando County has discussed two major capital improvement projects – a new judicial center and an expansion to the crowded jail.

Both are expensive and both could be a huge drain on county revenue.

However, it may not have to be that way. Especially if the county considers the way it typically goes about designing and bidding out projects.

Hernando Today has looked into other communities that have switched to a process that is increasingly coming into vogue.

It's called the "design-build process" and is a way for counties and municipalities to design and construct projects with the private sector.

What we have found is that such a process allows for great accountability, lower costs, removal of the county as "middleman," and projects that are generally delivered on-time and in-budget.

It also keeps the county's role in building projects to a minimum, which can be a good thing.

Once the county starts assuming too much control over a project, it starts hiking up costs and usually ends up with the unenviable task of county commissioners having to approve change orders and alterations to the original specifications.

The design-bid option is already being embraced by some in the county, including County Administrator David Hamilton.

It was also advocated three years ago by a 25-member county commission-appointed citizens committee on capital improvements.

The Traditional Way

Frank Percaciante, controller of Cleveland-based Design-Build Solutions Inc, said many counties like Hernando County and others still cling to the traditional three-pronged design-bid-build concept of funding capital projects.

Under that process, the county hires an architect/designer for about 8 to 10 percent of the total contract cost.

The architect's design is submitted to a general contractor under a separate contract, which is usually the low bid.

The traditional process creates two separate trails of accountability and makes the county, rather than the designer, responsible to the general contractor for ensuring the proper specifications and design.

In the traditional process, the county can end up assuming too much control over the project and there is a danger of running up costs and unforeseen changes to the original specifications.

"The county is the middle-man between the designer and the contractor and that can be a problem if there are disagreements," Percaciante said.

How Design-Build Works

Under the design-build process, the county hires a design firm to write a set of project specifications and defines the work scope.

The county then has these specifications vetted through a peer-review before a request for proposals hit the streets.

There are a number of reviewing companies that will do the job. However, to save even more money, the county could use the U.S. Marshall's Office in Virginia, which performs free reviews.

In fact, that agency did the peer review on the original county courthouse, back in the 1980s.

Once the requests are sent out, interested firms submit their proposals to the county. The firms that don't meet the specifications are thrown out.

The county looks at what's left, carefully considering the cheapest costs.

The county hires the firm that answers the requests for proposals with the best response and capabilities and lets that firm do the work.

With design-build, there is single-source accountability and the county keeps its role to a minimum.

The key is getting a competent set of specifications, having them well-vetted. This still gives the county control of the process.

The eventual builder spells out all design specifications up-front: project construction, delivery, dates and budgets. Costly and time-consuming redesigns, with the associated change orders, are eliminated.

"In the design-bid (process), everything is designed before its bid out to the contactor to build it," Percaciante said.

Reaction Is Positive

Hamilton said he's familiar with the design-bid process and saw it successfully used on a multi-million state highway project in Rochester, Minn.

It has the potential for cutting costs and delivering a quality product, he said.

Hamilton said it can also be a recipe for disaster.

"Unless it's properly managed and the criteria are laid out right from the start, with a lockdown on the budget, it has the potential for chaos," Hamilton said.

Hamilton called the design-bid process a "promising option" for the proposed judicial enter and one that he will explore.

County Commissioner David Russell said he too would be willing to consider design-bid on future capital projects such as the jail and judicial center.

Russell said one of the few times the county did use it was on the Emergency Operations Center, a $4 million–plus project that suffered delays and last-minute design changes.

"With the EOC, a lot of it had to do with not having all the necessary criteria up front when we went to contract," Russell said.

Russell said he believes the design-bid process is viable because it spurs more private sector involvement and "removes the government bureaucracy to some degree, which can muddle things."

Judicial Center

County commissioners in July authorized staff to negotiate an agreement with the DLR Group to prepare requests for proposals for locating, financing and constructing a new judicial facility in downtown Brooksville.

The county administrator's office has presented a capital plan that includes a new 125,000-square-foot judicial complex at a projected cost of $49 million, which covers the cost of site acquisition, design, construction and outfitting.

To pay for it, Hamilton is proposing a blend of traditional funds and bonds and is suggesting various methods of private-public alternatives.

According to his proposal, Hernando County would contribute $20 million to the project – "a significant contribution but would not deploy all of our resources and bonding capacity for a single project," Hamilton said.

The judicial courthouse would be located in downtown Brooksville, at a site still to be determined.

The county would enter into a lease-to-own agreement with the DLR architectural firm to pay a monthly or yearly payment over a period of time. Hamilton said the county's initial $20 million down payment would be matched by about the same amount by the private developer and paid back over several years.

In the end, the county would own the building.

A pre-determined date of occupancy would be set up front with penalties to the developer for late completion.

Officials contend the county needs a larger judicial center to accommodate the needs of a growing population.

The Jail: A Major Drain

In a similar fashion, the county has been approached by Tennessee-based Corrections Corporation of America (CCA) to design, build, maintain and operate a new jail facility.

The cost to Hernando County would be the yearly lease of the facility which, after a pre-determined amount of time (typically 20 years) the county would own.

It's no secret the Hernando County Jail has been a major drain on the county's budget.

The county budgeted just over $4.4 million for the jail in 2003. In 2008, that number was over $16.2 million, according to Budget Director George Zoettlein.

The county is anticipating the jail budget will come in $3 million less this fiscal year, which ends Sept. 30. 2008.

"As we look forward to the 2009 budget, based on the current jail spending, we are able to reduce the 2009 jail budget by $5.7 million," Zoettlein said.

That's due to an unanticipated decrease in the number of prisoners at the jail and a subsequent drop in costs.

In 2003, the average daily inmate population for the Hernando County Jail was 280 people, according to the county administrator's office.

The budgeted number of daily inmate population for the 2008 budget was 723. Right now, the numbers are running lower than that.

So if you take the $4.4 million budgeted in 2003 for jail costs and run it forward, factor in the population growth of the county plus the consumer price index, then the 2008 budget for the jail is $6.1 million as opposed to the previously expected $16.2 million, Zoettlein said.

The county's budgeted contract with Corrections Corporation of America (CCA) -- a private company that runs the jail – increased from $12 million in 2007 to $15.3 million in 2008.

The estimated jail budget for 2009 has been readjusted down to $13 million.

Reporter Michael D. Bates can be reached at 352-544-5290 or mbates@hernandotoday.com.

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