Belmont Learning ComplexRequest for Proposals

Presentation of Presentation of Evaluation Panel FindingsEvaluation Panel Findings

February 12, 2002February 12, 2002

Environment

Panel Members

Mr. Hamid SaebfarMr. Hamid Saebfar Division Chief, School Property Evaluation Division Chief, School Property Evaluation and Clean-up Division, DTSCand Clean-up Division, DTSC

Professor Michael Professor Michael Hoffmann, PhDHoffmann, PhDJames Irvine Professor of Environmental James Irvine Professor of Environmental ScienceScienceExecutive Officer, Environmental Engineering Executive Officer, Environmental Engineering Science, California Institute of TechnologyScience, California Institute of Technology

Mr.Thierry Sanglerat, P.EMr.Thierry Sanglerat, P.E. . Executive Vice-President, GeoSyntec Executive Vice-President, GeoSyntec ConsultantsConsultants

Mr. Tim Buresh Mr. Tim Buresh Director of Construction, Alameda Corridor Director of Construction, Alameda Corridor ProjectProject

Mr. Calvin Hollis Mr. Calvin Hollis Managing Principal, Keyser MarstonManaging Principal, Keyser Marston

Mr. David Dybdahl, Mr. David Dybdahl, CPCU, ARMCPCU, ARMAmerican Risk Management Resources NetworkAmerican Risk Management Resources Network

Mr. Colin Shepherd Mr. Colin Shepherd Vice President, Hines CorpVice President, Hines Corp

Construction

Finance

Insurance

Development

How the Panel Operated An independent panel of experts was asked to An independent panel of experts was asked to

review the proposals and provide the District review the proposals and provide the District with advice as to their quality.with advice as to their quality.

Seven Panelists from five disciplines were Seven Panelists from five disciplines were selected: Environmental; Construction; selected: Environmental; Construction; Finance; Insurance; and Development.Finance; Insurance; and Development.

Panelists opted to meet as a team several Panelists opted to meet as a team several times as their subject areas were interrelated.times as their subject areas were interrelated.

Panelists posed several follow-up questions Panelists posed several follow-up questions to the bidders and held one set of in-person to the bidders and held one set of in-person interviews to drill down deeper into the interviews to drill down deeper into the assumptions and plans reflected in the assumptions and plans reflected in the proposals.proposals.

Report of Panel Members

Environmental Issues

Professor Michael HoffmanProfessor Michael HoffmanMr. Thierry SangleratMr. Thierry Sanglerat

Panel Member, Mr. Hamid Saebfar of Panel Member, Mr. Hamid Saebfar of DTSC has also issued a separate letter on DTSC has also issued a separate letter on the proposals in his regulatory capacity.the proposals in his regulatory capacity.

Scope of Presentation Current status of the site, the environmental Current status of the site, the environmental

investigation and related regulatory requirementsinvestigation and related regulatory requirements Evaluation FindingsEvaluation Findings

What We Asked ForWhat We Asked For What We Got What We Got Performance Against CriteriaPerformance Against Criteria

Conclusions and RecommendationsConclusions and RecommendationsEnv

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Current Environmental Status of the Site

Site Characterization is Essentially CompleteSite Characterization is Essentially Complete What is NOT on the siteWhat is NOT on the site

Hazardous waste disposal siteHazardous waste disposal site LandfillLandfill Industrial Waste DumpIndustrial Waste Dump

What is at the siteWhat is at the site Naturally Occurring Subsurface Gases and Naturally Occurring Subsurface Gases and

Hydrocarbon materialsHydrocarbon materials Methane Methane Hydrogen SulfideHydrogen Sulfide

Former Gas StationFormer Gas Station Corner of 1Corner of 1stst and Beaudry and Beaudry

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Selected Contractor Would Have to Meet Following Requirements

Complete Remedial Investigation/Feasibility Complete Remedial Investigation/Feasibility Study (RI/FS).Study (RI/FS).

Compile Detailed Design of Gas Migration Compile Detailed Design of Gas Migration Control System .Control System .

Optimize Monitoring System.Optimize Monitoring System. Obtain DTSC Approval of Design of Gas Obtain DTSC Approval of Design of Gas

Migration Control System. Migration Control System. Obtain DTSC Approval of Monitoring & Obtain DTSC Approval of Monitoring &

Reporting Plan.Reporting Plan.

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What We Asked For

Team Members and Relevant ExperienceTeam Members and Relevant Experience Approach to Site Characterization For Final Approach to Site Characterization For Final

Design and DTSC ApprovalDesign and DTSC Approval Gas Migration Control System Components Gas Migration Control System Components

and Layoutand Layout Operation, Maintenance & Monitoring Operation, Maintenance & Monitoring

ApproachApproach

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What We Got

All Proposals HaveAll Proposals Have Same ObjectivesSame Objectives Gas ControlGas Control Gas Extraction SystemsGas Extraction Systems Monitoring SystemsMonitoring Systems Gas Treatment SystemsGas Treatment Systems

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ConceptualGas Control System

What We Got

All Proposed Systems HaveAll Proposed Systems Have Same MaterialsSame Materials Same ComponentsSame Components Same Monitoring ParametersSame Monitoring Parameters

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Hoag HospitalHoag Hospital50% Methane Gas50% Methane Gas

Hydrogen Sulfide - 4,000 ppmHydrogen Sulfide - 4,000 ppm

ResidentialResidential17% Methane Gas17% Methane Gas

BenzeneBenzeneTolueneToluene

EthylbenzeneEthylbenzeneXyleneXylene

Sierra PointSierra Point60% Methane Gas60% Methane Gas

Vinyl ChlorideVinyl ChlorideBenzeneBenzene

Big Box RetailerBig Box RetailerFormer Town Gas PlantFormer Town Gas Plant

Old Sewer LineOld Sewer LineFormer LandfillFormer Landfill

Liquid Waste InjectionLiquid Waste InjectionAbove Ground Storage TankAbove Ground Storage Tank

Performance Against Criteria

Teams Teams All Bidders Have Qualified Staff.All Bidders Have Qualified Staff.

ExperienceExperience All Bidders Have Gas Migration Control All Bidders Have Gas Migration Control

Experience.Experience. All Bidders Have Local Experience.All Bidders Have Local Experience.

Team Members and Relevant Experience

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Performance Against Criteria

All Bidders have agreed to perform All Bidders have agreed to perform additional site characterization as required additional site characterization as required by DTSC.by DTSC.

Komex Proposes Oil Field Characterization As An Komex Proposes Oil Field Characterization As An OptionOption

All Bidders Recognize the Need to All Bidders Recognize the Need to Complete the RI/FS Complete the RI/FS (AB 1301).(AB 1301).

Site Characterization

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Performance Against CriteriaGas Control Migration Systems

All Proposals Include Similar Systems.All Proposals Include Similar Systems.

The Selected Bidder Will Have to The Selected Bidder Will Have to Compile Detailed Design of Gas Compile Detailed Design of Gas Migration Control System and Get Migration Control System and Get DTSC Approval.DTSC Approval.

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Performance Against Criteria

All Bidders Propose Essentially Similar All Bidders Propose Essentially Similar Approaches to Operation, Maintenance Approaches to Operation, Maintenance & Monitoring.& Monitoring.

The Selected Bidder Will Have toThe Selected Bidder Will Have to Optimize Monitoring SystemOptimize Monitoring System Get DTSC Approval.Get DTSC Approval.

Operation, Maintenance & Monitoring Approach

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Conclusions and Recommendations

Environmental IssuesEnvironmental Issues

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Conclusions

All Bidders Could Undertake Project.All Bidders Could Undertake Project.

All Bidders Could Complete Work to All Bidders Could Complete Work to DTSC Approval.DTSC Approval.

Belmont Learning Center Can Be Belmont Learning Center Can Be Completed And Be Safe.Completed And Be Safe.

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Recommendations

From Environmental Perspective, From Environmental Perspective, Proceed With Belmont Learning Proceed With Belmont Learning Center.Center.

Undertake Negotiations on the Undertake Negotiations on the Basis ofBasis of LAUSD Requirements for Environmental LAUSD Requirements for Environmental

Remedy Remedy DTSC RequirementsDTSC Requirements

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LAUSD Requirements Should Include: Gas Migration Control System Over Gas Migration Control System Over Entire Site.Entire Site.

ActiveActive Gas Migration Control System. Gas Migration Control System.

Hydrogen Sulfide (HHydrogen Sulfide (H22S) Monitoring to Odor S) Monitoring to Odor Detection Level with Best Available Detection Level with Best Available Technology.Technology.

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Provides maximum environmental protection for students, staff and community as well as expedites the process.

Estimated Costs

Estimated capital costs for the remaining site Estimated capital costs for the remaining site characterization, design and construction of an characterization, design and construction of an active gas migration control system should be active gas migration control system should be between $10-$15 millionbetween $10-$15 million

Estimated ongoing monitoring should be Estimated ongoing monitoring should be about $1.5 million on a net present value about $1.5 million on a net present value

basis (over 30 years)basis (over 30 years) or, about $150,000 per year for 30 yearsor, about $150,000 per year for 30 years

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Construction

Mr. Tim BureshMr. Tim Buresh

Current Conditions Buildings are completely designed and DSA Buildings are completely designed and DSA

approved.approved. Buildings are approximately 60% complete. It Buildings are approximately 60% complete. It

is hard to assess the state of completion is hard to assess the state of completion accurately.accurately.

Work has not yet begun or is mostly Work has not yet begun or is mostly incomplete on several planned joint use incomplete on several planned joint use facilities and the outdoor, common, facilities and the outdoor, common, landscaped and athletic areas of the site.landscaped and athletic areas of the site.

The buildings are weather protected and being The buildings are weather protected and being maintained at LAUSD expense.maintained at LAUSD expense.

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What We Asked For Scope definition – what would be completed, Scope definition – what would be completed,

changed or deleted.changed or deleted. Construction approach – how the facilities will be Construction approach – how the facilities will be

built and completed.built and completed. Management plan – who is responsible contractually Management plan – who is responsible contractually

and in the field.and in the field. Completion schedule – total delivery time including Completion schedule – total delivery time including

design and environmental assessment process.design and environmental assessment process. Cost-to-Complete – broken down by major cost Cost-to-Complete – broken down by major cost

element and pricing mechanism.element and pricing mechanism.

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What We Got All three proposers were in compliance with All three proposers were in compliance with

the criteria.the criteria. Scope – All proposed construction of entire core Scope – All proposed construction of entire core

school; variations on joint use facilities, athletics, school; variations on joint use facilities, athletics, etc.etc.

Management - It became apparent that LAUSD Management - It became apparent that LAUSD could not take “hands off” approach to project could not take “hands off” approach to project delivery, project management, project quality and delivery, project management, project quality and project cost control.project cost control.

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What We Got

Schedule - All proposed delivery in 3 years or less. Schedule - All proposed delivery in 3 years or less. Faster alternative to complete buildings while Faster alternative to complete buildings while completing RI/FS.completing RI/FS.

Cost – Proposals contained wide range of Cost – Proposals contained wide range of contingencies and pricing formats. Cost range to contingencies and pricing formats. Cost range to complete buildings and environmental systems should complete buildings and environmental systems should be $60-80 million. It became apparent that the lump be $60-80 million. It became apparent that the lump sum cost to complete approach forces proposers to sum cost to complete approach forces proposers to increase costs excessively because of perceived increase costs excessively because of perceived uncertainties. uncertainties.

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Recommendations

Install LAUSD Project Management team to Install LAUSD Project Management team to negotiate details, control quality and manage negotiate details, control quality and manage cost risk elements.cost risk elements.

Take aggressive schedule approach, Take aggressive schedule approach, completing buildings in parallel with completing buildings in parallel with environmental process. environmental process.

Negotiate IMAX/GMAX pricing instead of Negotiate IMAX/GMAX pricing instead of lump sum pricing.lump sum pricing.

How to Improve the Proposals

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IMAX Process

IMAX GMAX

LAUSD negotiates Initial Maximum LAUSD negotiates Initial Maximum Price (IMAX) with proposer.Price (IMAX) with proposer.

Go through project evaluation and Go through project evaluation and subcontract bidding process (several subcontract bidding process (several months). Reduce uncertainty and costs months). Reduce uncertainty and costs accordingly.accordingly.

At end of evaluation period, negotiate At end of evaluation period, negotiate Guaranteed Maximum Price (GMAX) Guaranteed Maximum Price (GMAX) with specific contingencies identified.with specific contingencies identified.

Proposer responsible for costs in excess Proposer responsible for costs in excess of GMAX; shares savings if costs under of GMAX; shares savings if costs under GMAX.GMAX.

LAUSD shares some risk elements.LAUSD shares some risk elements.

Reduced Uncertainty reduces costs

Conclusion These proposals are an adequate starting These proposals are an adequate starting

point for negotiations should the Board opt point for negotiations should the Board opt to complete the school through this RFP to complete the school through this RFP process.process.

The school can be completed more quickly The school can be completed more quickly and at less cost than other alternatives.and at less cost than other alternatives.

The LAUSD Facilities Management team is The LAUSD Facilities Management team is capable of managing the project to meet capable of managing the project to meet Board goals.Board goals.

Financial Issues

Mr. Calvin HollisMr. Calvin Hollis

Current Conditions District purchased the land for the BLC for $60 District purchased the land for the BLC for $60

million, all provided by the State.million, all provided by the State. The District issued COPs to fund the non-land The District issued COPs to fund the non-land

portions of the project.portions of the project. District has spent $94 million in non-land project District has spent $94 million in non-land project

costs (including $15.1 million arbitration award).costs (including $15.1 million arbitration award). Approximately $3 million remains in unused Approximately $3 million remains in unused

COP proceeds.COP proceeds. The variable rate on the COPS was The variable rate on the COPS was

approximately 2.10% last week.approximately 2.10% last week.

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What We Asked For

Financing Proposal.Financing Proposal. Flexibility to use a range of sources to fund Flexibility to use a range of sources to fund

the school construction.the school construction. Financially responsible parties to limit Financially responsible parties to limit

District exposure to cost uncertainty.District exposure to cost uncertainty.

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What We Got Financing proposals that ranged from simple “District to Financing proposals that ranged from simple “District to

provide” to privately placed, long term, lease-backed provide” to privately placed, long term, lease-backed financing paid from general fund.financing paid from general fund.

All proposals can be structured to allow use of local All proposals can be structured to allow use of local bonds, state bonds, certificate proceeds or other local bonds, state bonds, certificate proceeds or other local sourcessources

Environmental insurance can be financed through Environmental insurance can be financed through insurance company affiliate.insurance company affiliate.

Short term financing was offered, however it requires Short term financing was offered, however it requires permanent financing.permanent financing.

All proposals are dependent upon District credit.All proposals are dependent upon District credit.

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Were Criteria Met Each proposal can be efficiently financed.Each proposal can be efficiently financed. None are dependent upon unproven or risky None are dependent upon unproven or risky

financing techniques.financing techniques. Each can be adapted to meet Districts Each can be adapted to meet Districts

specific financing objectives.specific financing objectives. Each proposal contains a combination of Each proposal contains a combination of

bonding and insurance programs to mitigate bonding and insurance programs to mitigate risks of cost overruns or failure to complete.risks of cost overruns or failure to complete.

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Recommendations

Preserve financing flexibility until costs are Preserve financing flexibility until costs are known and District sources analyzed.known and District sources analyzed.

Avoid locking in long term pledge of general Avoid locking in long term pledge of general operating funds in favor of options to prepay operating funds in favor of options to prepay with bond, State proceeds, or other local with bond, State proceeds, or other local sources (such as Developer Fees) immediately sources (such as Developer Fees) immediately or in the future.or in the future.

How to Improve the Proposals

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Insurance

Mr. David DybdahlMr. David Dybdahl

Current Conditions

The District currently has an The District currently has an environmental insurance policy. environmental insurance policy.

The policy will cover the Belmont The policy will cover the Belmont Learning Center when an “NFA” or “No Learning Center when an “NFA” or “No Further Action” notice is issued by the Further Action” notice is issued by the DTSC.DTSC.

The current policy limits are $100 The current policy limits are $100 million for 20 years. We have 17 years million for 20 years. We have 17 years remaining on the policy.remaining on the policy.

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What We Asked For

Insurance for the ProjectInsurance for the Project Clean-up Cost CapClean-up Cost Cap Contractors PollutionContractors Pollution Professional LiabilityProfessional Liability

Pollution Legal Liability (environmental)Pollution Legal Liability (environmental) We requested $100 million in coverage We requested $100 million in coverage

for 70 years.for 70 years.

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What We Got Proposals that included all the types of coverage Proposals that included all the types of coverage

specified at the limits specified or higher.specified at the limits specified or higher. Pollution Legal Liability was for a maximum of Pollution Legal Liability was for a maximum of

30 years; with a GIC (guaranteed investment 30 years; with a GIC (guaranteed investment contract) proposed to purchase a new policy in 30 contract) proposed to purchase a new policy in 30 years to cover the remaining required yearsyears to cover the remaining required years

Options to bundle the cost of the environmental Options to bundle the cost of the environmental mitigation measures as a part of the insurance mitigation measures as a part of the insurance premiums were provided by some teams. premiums were provided by some teams.

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Were Criteria Met The coverages proposed would address the insurable The coverages proposed would address the insurable

risks of the District associated with the project.risks of the District associated with the project. All proposers have demonstrated they can obtain All proposers have demonstrated they can obtain

insurance to protect the District.insurance to protect the District. Market rates for these types of coverage are reflected Market rates for these types of coverage are reflected

in the quoted costs.in the quoted costs.

There is no apparent “risk premium” associated with There is no apparent “risk premium” associated with the Belmont Learning Center site or any of the the Belmont Learning Center site or any of the proposers– as reflected in the rates quoted.proposers– as reflected in the rates quoted.

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Recommendations

Keep the District’s options open with regard to the Keep the District’s options open with regard to the ultimate level and configuration of the insurance ultimate level and configuration of the insurance package.package.

Give serious consideration to utilizing the Give serious consideration to utilizing the District’s basic environmental liability insurance District’s basic environmental liability insurance policy as a part of the ultimate package.policy as a part of the ultimate package.

Consider having the District purchase the Consider having the District purchase the coverage directly.coverage directly.

How to Improve the Proposals

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Estimated Costs

Estimated insurance costs (+/- 20%) for the Estimated insurance costs (+/- 20%) for the $10-$15 million estimated environmental $10-$15 million estimated environmental mitigation are as follows:mitigation are as follows:

Pollution Legal Liability 30 years (environmental) Pollution Legal Liability 30 years (environmental) - $2 million - $2 million

Clean-up Cost Cap - $2.25 millionClean-up Cost Cap - $2.25 million Contractor’s Pollution Liability - $700,000Contractor’s Pollution Liability - $700,000 Professional Liability - $2 millionProfessional Liability - $2 million

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Total = about $7 million

Summary

Summary

Today’s presentation focused on the Today’s presentation focused on the responsiveness of the RFP proposals.responsiveness of the RFP proposals.

The primary conclusion shared by all evaluation The primary conclusion shared by all evaluation panel members is that the BLC can be completed, panel members is that the BLC can be completed, safely, and at a reasonable cost and timeline, with safely, and at a reasonable cost and timeline, with one of the proposal teams.one of the proposal teams.

Summary of Estimated Costs

Onetime CostsOnetime Costs

Environmental MitigationEnvironmental Mitigation $10-$15 million$10-$15 million

ConstructionConstruction $50-$65 million$50-$65 million

InsuranceInsurance $7 million$7 million

Pre-funded Operations and Pre-funded Operations and Maintenance (30 years of Maintenance (30 years of monitoring)monitoring)

$1.5 million$1.5 million

TOTALTOTAL $68 – $88 million$68 – $88 million

Another Way of Looking at Operations and Maintenance Costs

Environmental System Maintenance CostsEnvironmental System Maintenance Costs

Ongoing Maintenance and Ongoing Maintenance and MonitoringMonitoring

$150,000 per year$150,000 per year

Senior High School Operations Costs Senior High School Operations Costs (Belmont Sr High)(Belmont Sr High)

Utilities Utilities $450,000 per year$450,000 per year

Custodial Svcs & SuppliesCustodial Svcs & Supplies $700,000 per year$700,000 per year

TOTALTOTAL $1,150,000 per year$1,150,000 per year

Next Steps

District StaffDistrict Staff