The state’s ambitious goal of cooling 1,000 public school classrooms by the end of the year is facing a major setback: All construction bids have come in over budget, meaning completion of the project will likely be delayed until next year, members of the Board of Education were told Tuesday.
The Department of Education has rejected some of the bids and is working to renegotiate other bids under the state’s procurement laws as the DOE anticipates rebidding most of the work in early July.
Using early estimates from the field, the department had been budgeting $20,000 to $40,000 per classroom for equipment and installation of air conditioners and other cooling and energy-efficiency measures. But proposals in the initial round of bids opened on June 10 were significantly off target. In the most extreme case, a bid came in at $135,000 per classroom.
|$20,000 to $40,000
Cost per classroom for equipment and installation of air conditioners, according to early estimates
Per classroom cost, the highest bid received so far for the project
“We were somewhat alarmed by what they were offering,” said Dann Carlson, the department’s assistant superintendent for school facilities, who is overseeing the project.
He pointed to a booming construction market and a limited pool of “pre-qualified” contractors for the high bids. “The equipment numbers that we were concerned about just from a supply-and-demand standpoint were not the factors for the high bids. It was primarily all due to labor,” he said.
Carlson added that the local market is flooded with public works projects in particular because certain capital improvement funds will lapse at the end of the month, when the fiscal year ends. He said the DOE alone has 74 capital projects out for bid totaling $180 million, not including the cooling initiative.
“There’s just a huge drain on the industry right now,” he said. “We’re going to do everything we can to get 1,000 (classrooms) by December, but I’m coming out and informing folks that, again, with these kinds of hurdles, we may be delayed beyond that. … It makes no sense for us to just push to make this December time frame at a huge expense that’s just not worth that trade-off.”
The 1,000 classrooms are spread across 33 public schools deemed to be the hottest in the state.
BOE members agreed with Carlson’s plan to hold off until the work can be brought within a “more reasonable level,” BOE Chairman Lance Mizumoto said.
In his State of the State speech in January, Gov. David Ige pledged to cool 1,000 public school classrooms by the end of 2016. Lawmakers approved legislation providing $100 million for the work, which is to include the purchase and installation of air conditioners as well as electrical upgrades to ensure schools can handle the increased loads, and efforts to make schools more energy-efficient to help offset energy use.
The governor said in a statement Tuesday that he was “extremely disappointed” that the bids came in so high. “We are committed to providing a healthier and safer environment for our public school students and we challenge the industry to be part of our solution,” Ige said.
Wilbert Holck, executive director of the Hawaii State Teachers Association, which helped shine a light on the sweltering conditions in many of the state’s classrooms, said he was “stumped” by the high bids.
“As the Legislature was grappling with this issue of funding heat abatement for schools, one of the things that the industry said was that they could do it cheaper than what the DOE had estimated, which at one time was $1.5 billion to air-condition all classrooms,” Holck said in an interview. “They were saying they could do it for around $20,000 per classroom for infrastructure, labor, everything. So it was shocking that only a few months later these bids are coming in at, I think the highest one was $135,000. I don’t get it.”
Holck pointed to the example of a local company that recently installed donated solar-powered air conditioners at two schools on Molokai for $20,000 per classroom.
“So, it can be done,” Holck said. “And it has to be done. Everyone has said we have to deal with this issue for our students and our teachers.”
Briand Achong, president of Honolulu-based Greenpath Technologies, the company that handled the Molokai installation, told the Honolulu Star-Advertiser that the work was actually completed for roughly $10,000 per classroom at Kaunakakai and Kilohana elementary schools.
He’s not sure why the bids are coming in so high, but said the Molokai schools did not require electrical upgrades or installation of other energy efficiency measures like the 1,000-classroom project. And the units for Molokai were donated by NextEra Energy.
“We did strictly air conditioning,” Achong said. “On the new bids, it’s a heat abatement project — a combination of active and passive cooling, like putting on cool roofs, putting in insulation, putting in fans. And a lot of the schools would require electrical upgrades.”
John White, executive director of the Pacific Resource Partnership, which represents the largest construction union in the state and more than 200 contractors, disputed that labor costs are driving up the cost of public projects.
He said there are laws in place requiring companies contracted for government projects to pay their workers a wage that reflects wages commonly received in the area, known as prevailing wages. These are fixed for current and future years.
“Labor costs are the most stable and predictable part of any contract, of any bid, and they are not the reason why projects are coming in way over budget, because the wage rate for public works projects are set by our prevailing wage laws,” White said in an interview. “Even if the marketplace is really booming, prevailing wage rates are going to be the same.”
He said the factors behind rising costs in general vary, including the availability of work in the market, perceived uncertainty or risk with government projects, and material costs. “The reality is there’s no one-answer-fits-all reason why costs are going up,” White said.
Earlier this month, the DOE announced it was reopening the process to qualify additional general contractors and expand its pool of “qualified” contractors for the cooling work. The count is now up to 50 contractors from 16, Carlson said, which he expects will help with the competitive bidding process.
He also said the DOE is looking at reconfiguring the work into more attractive bid packages to make the project worthwhile for contractors.