Hundreds of thousands of community college students suffer from homelessness every year and a recent report estimates that one in five California community college students experienced homelessness in 2020. California’s recent budget has allocated $1.4 billion to 26 public universities and community colleges in order to help address this crisis. The budget also included a pledge of an additional $900,000 for the 2023 and 2024 budgets to establish a revolving loan program to issue interest-free loans to campuses to build student and employee housing. (Budget Act 2022. Sec. 19.54)
With an influx of funds, many community college districts (District(s)) have an opportunity to begin student housing projects. Yet, public work construction can take many forms and often presents Districts with complex and challenging legal questions. A District should undertake a construction project, whatever its size and cost, only after careful consideration and planning. Districts must develop a design that is compliant with California law, select an appropriate project delivery method, and ensure the construction contract addresses the risks that occur during construction. The following sections outline some of the main legal considerations for Districts undertaking construction projects.
Develop a Compliant Design
- Division of the State Architect
The Division of the State Architect (DSA) must review and approve the project to ensure the plans, specifications, and construction comply with DSA requirements and the California Building Code. The DSA plan review is comprised of four disciplines: (1) accessibility, (2) fire and life safety, (3) structural safety, and (4) sustainability. Without DSA certifications, board members could incur personal liability for accidents at the project site. (Ed. Code, §81177.)
- California Building Code
Public work construction projects must comply with Title 24 of the California Code of Regulations known as the California Building Standards Code. The District’s architect should be familiar with and design the project in accordance with these regulations. The regulations cover structural safety, sustainability, and accessibility.
Select the Appropriate Delivery Method for the Project
Each District should analyze the facts and circumstances to determine the appropriate project delivery method for each specific project. The following are some of the project delivery methods available to Districts for housing projects.
- Design-Bid-Build
Design-bid-build is the most popular delivery method Districts use for public construction. Districts must use this method for public projects involving an expenditure of $15,000 or more unless another statutory vehicle applies to the project. This method requires the District to (1) retain an architect to design the project, (2) solicit and receive bids for the construction, (3) award the contract to the lowest responsible and responsive bidder, and then (4) construct the project. (PC Code, § 20651, subd. (b).) Utilization of this method places the responsibility for completeness and accuracy of the plans and specifications on the District. (PC Code, § 1104.)
- Design-Build
With the design-build delivery method, the design and construction scope is under one contract with the District. The District may select a design-build contractor either by a competitive bidding process awarding the contract to the lowest responsible bidder or by the selection of a design-build contractor based on qualifications and other criteria. Districts may utilize the design-build delivery method for projects with an expenditure that will exceed $2,500,000. (Ed. Code, § 81702, subd. (a).) The process involves the District first preparing a request for proposal that sets forth: (1) the desired design character of the buildings and site; (2) performance specifications covering the quality of materials, equipment, and workmanship; (3) preliminary plans or building layouts; and (4) or any other information deemed necessary to describe the District’s needs. (Ed. Code, §81703, subd. (a)(1).) The success of this method largely relies on a clearly defined project and the selection of a qualified design-build contractor.Benefits of this delivery method include that the District may establish a procedure to prequalify design-build entities and develop a short list of contractors. (Ed. Code, §§81703, subd. (b), & 17250.25, subd. (b).) The District may also reserve the right to hold discussions or negotiations with responsive bidders. (Ed. Code, §81703, subd. (a)(2)(C)(v).) If the District elects to use the best value selection, the District must make a determination based on price, technical expertise, life-cycle costs over 15 years or more, and an acceptable safety record. (Ed. Code, §81703, subd. (d)(2).)
This method may reduce claims and change orders that would otherwise result from the deficient design of the project because it integrates the design and construction work from the beginning of the process.
- Public-Private Partnerships
Generally, a public-private partnership is a collaboration between a public entity and the private sector for the purposes of studying, planning, designing, constructing, developing, or financing a project. Public-private partnerships have become more popular in recent years, likely due to rising housing needs and the budget constraints felt by the COVID-19 crisis. Education Code Section 81004 expressly permits the use of public-private partnerships for the purpose of constructing education buildings or education centers. This statute further provides that Districts and private parties may construct these facilities on a site donated through the public-private partnership or on the Districts’ existing land. (Ed. Code, §81004, subd. (a).)This delivery method may transfer some of the risk associated with construction projects away from the District and to the private sector partner. It may also serve to provide access to private sector financing and expertise. This delivery method is also subject to the requirements outlined in Education Code Sections 17200-17204.
- Lease-Leaseback
A lease-leaseback involves the District entering into two leases with a developer/contractor as well as a preliminary services agreement. (Ed. Code, §81335.) The District leases land to a developer/contractor who then constructs the building on the leased land. The District then leases the building from the developer and ownership of the building vests with the District at the expiration of the lease. This method permits Districts to select contractors by qualifications rather than by the lowest bid. It also limits the number of change orders or other typical delays associated with construction projects. However, this delivery method is often more expensive than other options and has been challenged in the courts.
Negotiate a Construction Contract that Protects Districts from Risk
While Districts often spend a considerable amount of time planning the project, they must also pay close attention to the construction contract itself. Aside from the statutorily required provisions, a contract should lay out the deadlines, expectations, obligations, and duties of the parties. It is critical to the success of a project for the District to anticipate issues that can arise during construction and negotiate provisions to address such risks.
Conclusion
Since funding is now available to community colleges to address the housing crisis, Districts must consider their processes for construction projects to develop housing. Design, project delivery method, and construction contract negotiations are just some of the key issues Districts will face.
LCW’s Business and Facilities practice group have invaluable expertise in public education construction law and best practices for community college districts planning to undertake these projects.
