How Much Will Prop. S Cost Taxpayers in the End?

Erica Holloway Erica Holloway 8 Comments

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A little news item crossed my desk today from the Associated General Contractors regarding a financial report on the status of Proposition S.

As you’ll recall, that $2.1 billion bond measure became a major battle between labor and merit shop interests over proposed construction projects in the San Diego Unified School District.

According to the release, the school district plans to discuss the financial findings on the Project Stabilization Agreement (PSA) further tomorrow during a news conference.

Stay tuned …

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News Release
December 8, 2011
Contact: Brad Barnum
858-731-8158

Internal Documents Show San Diego Unified School District’s Union-Only Construction Program Costing Taxpayers Millions of Dollars

In documents obtained from the San Diego Unified School District’s Facilities Department, the construction industry has found that the District’s union-only Project Stabilization Agreement (PSA) for construction projects financed by the $2.1 Billion Proposition S bond measure has been a dismal failure. The document, prepared at the request of the firm hired by the District to “conduct a study of the impact and effect of the Projects Stabilization Agreement (PSA),” covers the bidding results of all construction projects bid utilizing Proposition S funding since its inception in 2009.

Learn more here from District documents here: PLA Costs Taxpayers

The PSA was negotiated between the San Diego Building and Construction Trades Council and the District in 2009. The first project imposing the terms of the PSA was bid in February 2010. Ten Proposition S projects were bid in 2009 before the PSA was implemented, and six other projects were bid in 2010 and 2011 that were not covered by the terms of the PSA. 17 projects were bid under the terms of the PSA in 2010 and 2011.

One of the documents, “Proposition S Construction Contracts Bidding Review,” shows that on average the District is paying a 21.9% premium for projects bid under the union-only terms of the PSA. This 21.9% premium amounts to approximately $16 million in additional construction costs that the District has incurred in the two years in which they have imposed the union-only condition on the projects. The document shows that while PSA project bids were 9.7% under the District’s budget, the projects bid without the imposition of the union-only PSA were 31.6% under budget…a 21.9% difference. If this trend continues, the imposition of the union-only PSA could cost taxpayers over $200 million in unnecessary construction costs.

Jim Ryan, Executive Vice President of the Associated General Contractors of America, San Diego Chapter, Inc., stated that “the reason for the 21.9% premium is obvious. On the union-only Prop S PSA projects, the District has only been able to interest an average of 5 responsive general contractor bidders, compared to 10 responsive general contractor bidders on Proposition S projects in which the PSA was not a condition of the contract. General contractors also tell us that the union-only PSA projects receive only about 50% of the subcontractor bids that the non PSA projects receive. When there are more bidders, the District receives better construction bids. It’s that simple.”

Scott Crosby, CEO of the Associated Builders and Contractors, San Diego Chapter, noted that “the District has also spent several hundred thousand dollars to administer the PSA. This includes additional staff to administer the numerous grievances and jurisdictional disputes on the union-only PSA projects, pay consultants to conduct seminars to explain the complex provision of the PSA to the industry, and market the bid opportunities to contractors in areas throughout the Southwest. These expenses were incurred because the local contractors have shown little interest in bidding the union-only PSA projects.”

Another failure of the union-only PSA relates to local workers. The Building Trades promised that 70% of the craft workers would be residents of the San Diego Unified School District. As of December 1, 2011, only 40% of the craft workers working on the projects reside in the District.

The District will hold a “closed to the public” news conference Friday, December 9 to detail the results of a study by Rea & Parker Research, which was commissioned by the District’s Board of Trustees at the cost of $71,825.

The news conference will be held at Hoover High School’s Woodshop Building, which was the first Proposition S project bid under the union-only terms of the PSA. The project had to be bid twice. Only five bidders bid the first time, and the low bidder from Stanton, California was 35% over the District’s budget. All bids were rejected, and the District rebid the same project. This time there were only four bidders, and the low bid was about 26% over budget. A comparable project was bid about the same time by another school district that does not impose a union-only PSA on its projects. 17 bids were received, and the low bid was about 25% under budget.

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Comments 8

  1. Hat Tip to Pat Flannery who holds the Career Record
    for attending the most closed-to-the-public events
    which-affect-the-Public, and then asking pointed
    questions once he gets there. He has taken his
    share of body blocks and physical confrontations
    for doing so.

    Like Captain Kirk, he boldy goes where no Blogger
    has gone before.

  2. Erica,

    Sometimes you have to dig a little deeper into the numbers:

    “Another failure of the union-only PSA relates to local workers. The Building Trades promised that 70% of the craft workers would be residents of the San Diego Unified School District. As of December 1, 2011, only 40% of the craft workers working on the projects reside in the District.”

    The above is a true statement. However, a deeper look tells an interesting story. When the craft worker was one of the contractors’ “core employees,” less than 20% resided in the district. However, of those workers that were referrals from a Union, 53% (more than 2 1/2 times the rate that would have been seen without the PSA) resided in the District.

    Now let’s look at the numbers from targeted ZIP codes, those from the poorest areas of the District. The PSA set a goal that 35% of the craft workers would come from these areas. Of the contractors’ core employees, only 13-14% reside in one of the targeted ZIP codes;On the other hand, 41% (more than triple the rate that would have been seen without the PSA) of those who were referred by the Unions come from the targeted area.

    The PSA may not be perfect, but if theobjective is targeted local hire (jobs, jobs, jobs), then it has proven that having the Unions provide the work force is an effective way to meet that objective.

  3. This is Horrid.

    http://www.sandi.net/site/default.aspx?PageType=3&ModuleInstanceID=19400&ViewID=047E6BE3-6D87-4130-8424-D8E4E9ED6C2A&RenderLoc=0&FlexDataID=38931&PageID=1

    and

    http://www.sandi.net/cms/lib/CA01001235/Centricity/Domain/138/psastudy12-7-11.pdf

    All they did was take 16 PSA projects and 4 non-PSA projects (without saying why) and then compared the averages. They made no efforts to say whether or not the PSA and non-PSA projects were similar or tried to control for size.

    This is about as bad as it gets and makes absolutely NO sense. Scott should absolutely no better (BTW, he endorses prop S). Really a bad way to start the weekend.

  4. Post
    Author

    Dear Erik:

    Thanks for posting the reports. Very interesting.

    I’d like to know the bottom line of the project list after accounting for anticipated cost overruns.

    Best, Erica

  5. You can find that on pg. 179 of the full report.

    Here is what they did (and if this doesn’t convince you that SDUSD is COMPLETELY corrupt and without morals nothing will – and ditto Rae and Parker.

    Without explaining methodology they took 20 projects: 16 built under PLA and 4 not. They then derived the average total cost of those 2 sets. They were about equal. Thus the conclusion (worthy of Clinton’s lawyer) that “PLA and non-PLA projects cost the same”. In other words, no effort to control for different sizes, types, dates, etc. No explanation for selection. It is the same as saying that I can find 16 minority children; 4 non-minorities; compare the AVERAGE test score and conclude – “no achievement gap”.

    Most studies, pro and con, have used “cost per square foot” to try to START comparisions because, all things being equal, we would expect a 10,000 square foot building to cost less than a 50,000 square foot one. These scholars then use regression techniques to control for things like the number of stories, inflation, presence of pools, difficult construction settings, etc. etc. Rae and Parker did none of these things. Again, they took 4 non-PSA and 16 PSA projects and found the average total cost of projects were about the same.

    What you COULD conclude is that from these 20 projects the SIZE of the CONTRACT for the 2 sets were abuot the same. But that is far different then the question that most were asking when they directed P&R to compare the cost of construction under and not under a PSA.

    I hate saying it, because I believe in public education, but I am now really mad. I promise (Rider are you listening) to work TIRELESSLY to drive this district into recievership because it is clear that only a top to bottom house cleaning will end the joke that is the district’s leadership. They have proven themselves to be craven fools and dishonest brokers.

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