Capital budget shortfall to affect campus construction

COLUMBUS -- The long-awaited fiscal year 2005-06 State Capital Appropriation bill, signed by Gov. Bob Taft on February 3, provides $89 million for construction and renovation projects on all campuses of The Ohio State University. This represents a 20 percent reduction to the university’s September 2003 request.

Senior Vice President for Business and Finance William J. Shkurti briefed the Fiscal Affairs Committee of the university’s Board of Trustees Friday (2/4) on the impact the cut will have. Six months behind schedule, the late passage of HB16 poses some cash flow issues that need to be addressed, and provides little flexibility as four of the seven projects requested for the Columbus campus are in design or under construction, having been approved by the state of Ohio in the previous biennium, he said.

The four projects, and their status are the Thompson Library renovation (in design), and the Peter L. and Clara Scott Laboratories (Mechanical Engineering), Larkins Hall replacement and the Psychology Building (all under construction). Those four account for 90 percent of the requested amount. The other three projects — the Cancer Center expansion, Smith Lab rehabilitation and Brown Hall replacement — are currently in the planning phases. Shkurti told trustees all seven projects are necessary to carry out and support the Academic Plan.

Specific recommendations to address funding issues will be presented at the March 4 Board of Trustees meeting.

According to Shkurti, a number of factors need to be weighed before making specific recommendations pertaining to funding adjustments.

“Over the short run, stopping or modifying projects already under construction is not a viable option; therefore, additional resources will need to be identified,” Shkurti said. “Over the longer run, gradual state disinvestment in capital support to colleges and universities threatens Ohio State’s ability to protect these important assets from aging and obsolescence.”

The problems are likely to get worse in the future as obsolescence of facilities built in the 1960s and 1970s continues, he said.

“Taken collectively, these trends will require changes in strategy for how the University will protect its critical assets and continue to grow,” Shkurti said.

2004 capital projects scoreboard tallied
While the public spotlight sometimes focuses on the lone construction project that lags behind or exceeds its budget, overall capital projects completed in 2004 actually finished 8.9 percent under budget, equal to a savings of $14 million, Shkurti told trustees. The annual report is a follow-up to the core process improvement recommendation regarding capital projects presented to trustees in April 2004.

In 2004, 32 projects were completed with budgets greater than $200,000, with 90 percent completed on time and 90 percent completed on budget, Shkurti said. The marks were even higher when examining 15 of those projects under $1 million — 100 percent were completed on time and 93 percent on budget.

Last year the capital projects scorecard reported to the board 37 projects completed in 2003 with budgets greater than $200,000. Approximately 85 percent were completed on time and approximately 80 percent were completed on budget, Shkurti said.

“This year’s numbers were very good and actually improved over last year’s,” Shkurti said. “In most cases it takes time to receive a significant return on the investment for policy changes, but in this case I believe stricter requirements imposed by the Office of Facility Planning and Development have been extremely effective.”

Shkurti said outmoded state laws requiring use of multiple prime contractors and other rigid management regulations continue to be a hidden tax and a barrier to improved performance.

University Architect Jill Morelli attributed improved performance to major policy changes in managing the scope of projects and contingencies. Changes in the scope of a project are now limited once construction has begun, and the party requesting changes absorbs the cost. Concurrently, project budgets are being protected by reserving contingencies for unforeseen circumstances, rather than changes in scope.

A number of factors — external economic conditions, project delivery method and the university’s infrastructure — can contribute to fluctuations in a project’s schedule or budget, Morelli said. For example, the recently completed renovation of Hagerty Hall for the College of Humanities and World Media and Culture Center was delayed three months and the cost increased $2 million when hazardous material was identified and abated during construction, she said. External counsel has been hired to recover the portion of the $2 million attributed to the removal of the hazardous material.

Three projects were affected when a prime contractor filed for bankruptcy in the middle of construction, while another encountered an underground stream.

“Working on an older campus is inherently challenging due to the age of the infrastructure,” Morelli said.

“Completing projects under budget and on time is important to our Ohio State community and throughout the state. From a taxpayer or student’s perspective, they should be able to rest comfortably in knowing that we are responsibly managing the resources we have, addressing the deferred maintenance issues of the campus, and investing in the future by building quality facilities.” Morelli said.