Cover Story

Back to the Drawing Board

by Nathan Stubbs

Major public projects, including a new downtown theater and a fiber optics facility, suffer setbacks as local government grapples with volatile construction prices and wary contractors.

When construction bids finally went out last month for the second phase of the Acadiana Center for the Arts, it seemed the long awaited dream of having a top flight concert and performing arts theater in the heart of downtown would soon be a reality. But, rather than being a cause for celebration, the bid presentation for the project, held at City Hall, quickly took on the somber air of a funeral.

One by one, the three construction bids presented revealed shockingly high price tags. The low bid, from the local firm M.D. Descant, was for $12.8 million, more than 50 percent over the $8 million budgeted for the construction. It also represents a construction cost of more than $600 per square foot, more than double that of other ongoing commercial construction projects. The high bid on the project, from BEO contractors, was for approximately $13.4 million, a cost approaching $650 per square foot.

"Nobody expected those prices," says Lafayette Economic Development Authority Director Gregg Gothreaux. "And nobody wanted those prices. Even the contractors because, chances are, they lose the deal."

The second wing of the ACA ' a project that has already been four years in the making ' isn't the only local project to recently find itself in limbo due to skyrocketing construction costs. When Lafayette Utilities System went to bid out a head-end facility for its nascent telecommunications business, prices came back nearly 100 percent over budget, at $580 a square foot. LUS has now opted to go with a pre-fabricated building, bids for which are expected at the end of this month. Lafayette Consolidated Government also suffered a setback on building Doc Duhon Road earlier this year, when bids came in approximately $3 million, or 30 percent, over budget. The problem hasn't been limited to Lafayette. In Baton Rouge, LSU recently had to find more money and scale back the design of its new softball and baseball stadiums. Bids for the baseball stadium came in almost 40 percent over budget, while the softball stadium was approximately 70 percent over budget.

The upswing of costs has largely been associated with the booming construction industry, where skilled labor and building materials are becoming more and more of a prized commodity. The cost of steel has doubled in recent years, with concrete and copper also up significantly, largely due to increased global demand sparked by China's rapid development. Competitive labor is also an issue, especially in south Louisiana, which is still rebuilding from hurricanes Katrina and Rita.

Lafayette architect Steve Oubre, the lead designer of the second phase of the ACA, notes that these factors are putting a particular strain on public projects, which operate on tight budgets and are viewed unfavorably by some contractors because of the government bureaucracy involved.

"I am finding that generally speaking, public [projects] are not looked at as hard as they once were," Oubre says. "We're getting that all over the state." For the ACA project, Oubre's firm had to go out and solicit contractors to bid the job when, two weeks after opening its request for proposals, no one had come to pick up design plans. "There's enough private sector work to where the contractors just don't have to look at government [jobs] right now," Oubre says. "Obviously the different governments do have different protocols, and having to deal with protocol at all is never easy, but it's not that difficult."

According to Scott Hines, area manager of the trade association Louisiana Associated General Contractors, many contractors are very wary of taking on public projects, especially when there's so much other work to choose from. He says Lafayette, in particular, has historically had a poor reputation with contractors ' an issue that prompted him to work with LCG on improving some of its practices for contracting out capitol outlay projects. "In most areas, the city of Lafayette has been looked up to as a model," Hines says, "but not in the construction industry."

City-Parish President Joey Durel doesn't believe local public projects are experiencing any more inflation than the private sector is right now; nevertheless, he says, LCG is revising some of its policies with the hope that it could draw in more competitive bidding on projects. "If we are dealing with extreme times," Durel says, "that requires taking some extreme measures including changing some of our policies, and we'll see how much of a difference that makes."

The second wing of the Acadiana Center for the Arts, funded entirely by state capitol outlay dollars, was originally set to go out for bid in the fall of 2005, until hurricanes Katrina and Rita intervened.

"We would have an open theater right now if Mother Nature had not had other plans," says Acadiana Arts Council Director Buddy Palmer.

The hurricanes bumped the ACA down the state's priority list, at the same time setting off an ongoing spike in construction costs. Acadiana Arts Council officials were forced to request more money for the project but also had to rein in the project's designs. "At several times during the project, we scaled back," Palmer maintains. "Acoustically, at first, in terms of some of the technology, the sound system. We felt like there were certain things that were over-designed."

With the over-budget bids that came in last month, Palmer was recently forced to go back to his planning committee to determine how to proceed. He says the committee was near unanimous in deciding to seek the additional funds necessary to build the project as designed, rather than try and further cut costs. "We don't feel like we can significantly cut any more costs out without jeopardizing the integrity of the project," Palmer says. Palmer recently submitted an application for next year's state capitol outlay budget to obtain the additional funding needed to build the second wing of the ACA. He also says he is working with local officials and Lafayette's legislative delegation in "exploring all other options" to come up with the funds. Going through another capitol outlay request would set the project back at least another year.

The theater is envisioned to be of a quality on par with Austin City Limits and the Manship Theater in Baton Rouge. It would host events by the Arts Council, PASA, the Acadiana Symphony, Louisiana Crossroads, Louisiana Folk Roots, as well as other groups and touring acts. Based on feedback collected from the community, Palmer says the theater was designed to be highly flexible, with retractable seating (for up to 350 people) that allows for alternate stagings for concerts, theater in the square, and other options. The technical nature of the building, along with limited competition among subcontractors and high material costs, all contributed to the project's abnormally high cost. "It really factors across the board construction-wise," Palmer says. "Everything from the size of air ducts, to insulation to cement. We can't really point to any one thing." Designed to be built on top of the ACA's existing parking lot on Vermilion Street in the heart of downtown, the site also posed several challenges for construction crews to stage materials for the job.

Adding to the frustration is the fact that designers on the project contracted with a national consulting firm, Foxcor, which ran three cost estimates (two of which were post-Katrina), indicating that bids should come in within budget. "We certainly never would have gone to bid if we had anticipated this," Palmer says. "Even our contractors were very surprised."

Architect Oubre says cost estimates are not an exact science but typically are not off as far as they were in this case. "They just weren't that great," he says. "It was wrong." Oubre adds that architects cannot get any assurances on cost estimations. "Those guys don't sign contracts having accountability," he says. "I wish we could, but there's no way to do that."

Lafayette Utilities System Director Terry Huval experienced similar sticker shock when LUS went to bid the headend facility of its new fiber-to-the-home telecommunications business. "We were very surprised," Huval says. "Our instructions to our architect were that we had a $1.4 million budget for this facility and that we needed to stay within that budget. We relied on the architect's best advice during the design process and we were all surprised with the high bids." Huval says cost-estimating was done by LUS' fiber consultant, CCG Consulting out of Georgia. He says the firm based its estimate on costs it experienced in other places and escalated those by 30 percent to account for the high construction costs in post-Katrina south Louisiana. They were still off by 93 percent.

Because costs came in so high, LUS has now scaled down to a pre-fabricated building, 1,500 square feet smaller than what it originally planned to build. "The pre-fab building will have all the critical elements we need for the first several years of the fiber-to-the-home business," Huval says. "We can always expand the building at the time we need to do so. The customized building would have served us for more years without an expansion."

Lafayette Public Library Director Sona Dombourian found herself in a similar situation two years ago when initial estimates for the library's new south branch were more than $300,000 over budget. At first it appeared as if some of the library's more coveted features, including a 100-seat auditorium and a variety of public meeting rooms, might have to go on the chopping block. However, Dombourian says her planning team was able to find ways to cut corners by scaling back on the size of the parking lot and limiting furniture expenses in order to make the budget work. "The rationale on that," Dombourian says, "was, we can always add furniture and other things, but you get one shot really to build the facility."

The $8 million project was bid out last fall and came in at a cost of approximately $215 a square foot. "We were very fortunate we bid the project out when we did," Dombourian says. "I feel like when we bid it, we were just at the beginning of this cost upswing within the construction industry, which may just now be nearing its peak."

It's impossible to predict how far costs will soar and when they will settle down. In the meantime, however, Durel says he is willing to bend to some of the suggestions he has heard from local contractors on how the city can be more business-friendly and hopefully encourage more competitive bidding on its projects.

Contractors complain that many municipalities, including Lafayette, have overblown insurance requirements, and a lengthy approval processes for change orders and for getting work declared substantially complete, which triggers payment. Says one respected local contractor, who wishes to remain anonymous because of his occasional work for the city, "Right now, contractors have a lot of choices and when you have that, you're going to look for your better opportunities. Municipalities in general are harder to work for than private sector clients. However, Lafayette is one of the least desirable municipalities to work for in the state."

He broke down the high costs on the ACA project this way: "You have a job that is fairly technical, has a lot of site restrictions for a client with a reputation of not being an easy one to work for. That's not a job that generates a lot of interest from contractors and subcontractors."

Several local contractors have also alluded to a recent survey by the Associated General Contractors. The survey allegedly shows LCG having one of the poorest reputations among contractors in the state. Despite repeated efforts to obtain the survey, which included a public records request to LCG, neither the AGC nor local government provided The Independent Weekly with a copy of the survey by press time.

Hines says the survey isn't a rebuke of the current administration but rather is a result of "an inbred culture of bureaucracy that has taken a strong hold within the personnel departments and has existed for a couple of decades now."

LUS' Huval says that while he has heard several contractors comment on the city not being a preferred client, he doesn't believe that is necessarily attributable to any city policy that is not required by law. "I think the reason we are receiving less bids for government work," he says, "is the contractors are simply making more money in the private sector as opposed to competing on the strict governmental lowest qualified bid requirement. Any time the contractor supply-to-project demand curve shifts to the advantage of the contractors, governmental projects awarded based on the lowest qualified bid will be less attractive to contractors."

Without going into detail, Durel says he's not convinced all of the policy changes he has heard from contractors are in the best interest of the public. However, he says LCG will be making some significant changes, most of which involve aligning its policies with the state's Office of Facility Planning & Control, which handles state capitol outlay projects. (Because it was state funded, the ACA project automatically followed Facility Planning's procedures). One of the more significant changes involves when the city grants "substantial completion" on a project, which triggers payment to contractors. LCG is revising its policy to grant contractors "substantial completion" on building projects with minor work still pending. This typically occurs at the stage when a building is ready to be occupied but may still require some cosmetic work, like carpeting or painting.

Durel says LCG's public works is also looking at standardizing some of its bid documents and making project specs more uniform. He adds that city-parish government has approached these changes cautiously, not wanting to put any public tax dollars at risk. "Whenever you change a policy that's been engrained for a long time it takes a little bit of effort and discomfort," he says.