A Mobile, Ala.-based construction management company is running out of money, leaving undone many of the projects it originally planned to do for the East Baton Rouge Parish public school system.
“We are approximately 50 percent into the 30-month period. We have completed approximately 40 percent of the projects, and we’ve expended 80 percent of your funds,” said Clay Slagle, senior program manager with Volkert Inc.
Of the 266 projects on the original slate, Slagle said he expected to complete only 130, unless money is redirected or new money is found.
Slagle said all this in a Sept. 15 presentation to the School Board.
The reason for so much work undone is that the $18.9 million that the school system budgeted, on the whole, grossly underestimated the true cost by approximately $5.9 million.
The money came from no-interest federal construction bonds through a program called Qualified School Construction Bond, or QSCB. The bond program was expanded as part of the 2009 federal stimulus act. The school system has sold two rounds of QSCB bonds. The money from both rounds has to be spent by late 2012.
In April 2010, the School Board chose Volkert to handle the first round. Volkert edged out six other firms that were also seeking the work.
Volkert hadn’t done work for the school system before, although the company aggressively, but unsuccessfully, sought to land a 2008 program management contract. The School Board voted narrowly to retain CSRS/Garrard Program Management, which had overseen school construction since 1999. That contract comes up for renewal again in 2003.
Volkert’s selection for the QSCB work caused controversy at the time.
The board chose Volkert even though three other firms, including CSRS, asked for significantly lower fees. The Baton Rouge Area Chamber urged the board to hold off on signing the contract to allow for an outside investigation. General counsel Domoine Rutledge conducted an internal inquiry that found the process was within legal bounds. Board President Jerry Arbour then signed the contract.
After landing the work, Volkert did its own estimates of how much all the work would cost and found the school system’s numbers were $5.9 million short of the mark.
Volkert first let the board know about this shortfall in 2010 and has mentioned it again in subsequent presentations to the board.
“That was our estimate versus the available budget,” Slagle explained to the board on Sept. 15. “Certainly not an unusual situation in any case,” he said. “Certainly, the district’s needs are greater than the amount of available dollars.”
Slagle said figuring out the costs of so many projects is filled with uncertainty.
“To have each of them fully scoped to point that you have a 95 percent-plus confidence in your budget estimates, that would have taken an inordinate amount of time, maybe more time than you would have to prepare the application to get the funding,” Slagle said.
In response to an emailed question, Catherine Fletcher, chief business operations officer for the school system, said the original budget numbers were developed by the school system along with Aramark, the private company that handles most support work for the school system, but did not elaborate.
Earl Kern, program manager for CSRS, remembers looking at those numbers in the spring of 2010 and scratching his head.
His office had nothing to do with the numbers, he said.
“We know what work costs. We do this every day,” Kern said. “I knew those numbers were not going to work.”
CSRS ultimately submitted a proposal, overruling Kern, who said he recommended not submitting a proposal, given how off he thought the numbers were.
Slagle said on Sept. 15 that fire alarm systems, canopies, tracks and exterior doors were the areas where the original numbers ended up being most wide of the mark.
The budget organized projects into 12 categories. In about six categories, Volkert has built, is building or is about to have built all the listed projects. But in the other six areas little work has occurred, which includes fire alarms, intercoms, security alarms and exterior windows.
“As I look at the budget, it seems we’re going to run out of money before we finish the job. How does that work?” asked board member Craig Freeman.
Slagle said Volkert stood ready to proceed with some or all of the unfinished work. He said there is about $1.5 million in unspent money that could be used elsewhere if the bond attorneys agreed.
Fletcher told the board these bonds come with a complicated formula for how to spend their proceeds and it’s not easy to shift money from one budget category to another.
In an email Friday, Fletcher said the school system won’t pump any more money into Volkert’s projects.
“Any current shortfalls in the budget must be resolved by re-allocating funds from one line-item in the project to another,” she said. “In addition, some projects not yet started will most likely be canceled.”
Board member Vereta Lee complimented Volkert for its work, but said she viewed fire and security cameras as more important than paving, the biggest single part of Volkert’s contract.
“We want to make sure our employees and our children are safe,” she said.
The work paid for by a second round of no-interest federal QSCB has been a much different story.
Rather than seek proposals for the second round, the School Board elected to add it to CSRS’ existing program management contract, an option it didn’t exercise during the first round.
Instead of splitting the money among an array of small repair projects, school officials decided to build a number of classroom additions. CSRS had built many similar such additions in the past.
Kern, in a presentation to the School Board in August, said CSRS was able to save enough money to expand the number of classroom additions from nine to 14, and to add more classrooms to two of the original additions.