To: Board of Supervisors
From: Sheriff
Agenda Section: Departmental
Vote Requirement: Majority
SUBJECT:
title
Bid Action for the Community Corrections Re-Entry Resource Center Construction Project, Project Number 170223
end
RECOMMENDATION(S):
Recommendation
That the Board of Supervisors:
1. Receive and file the bid for the Community Corrections Re-Entry Resource Center Construction Project, Project Number 170223; and
2. Provide direction to staff on the scope, cost and direction of the Humboldt County Corrections Re-Entry Resource Center Project.
Body
SOURCE OF FUNDING:
2020 Finance Plan; AB-109 Community Corrections Partnership (3741); General Fund (1100); SB-863 Grant Funding
DISCUSSION:
California Senate Bill 863 (“SB-863”) appropriated $500 million for the design and construction of adult criminal justice facilities, with funding awarded to local California agencies on a competitive basis statewide. The state set aside $100 million of the SB-863 funding specifically for rural and small counties and placed a cap of $20 million on each award. The Board of State and Community Corrections (“BSCC”) is the state agency overseeing the award process, and in order to seek applications for funding it released a Request for Proposal on June 10, 2015. Agencies that were awarded funding were required to provide a match of up to 10% of the award in cash and/or via in-kind contributions.
On August 25, 2015, the Humboldt County Board of Supervisors (“Board”) adopted Resolution No. 15-89 authorizing the Humboldt County Sheriff to execute documents necessary to submit, on behalf of the County of Humboldt, a grant application and proposal to the BSCC for the purpose of building and operating the Humboldt County Corrections Re-Entry Resources Center as allowed by SB-863. Resolution No. 15-89 indicated the County of Humboldt’s intent to pursue the issuance of Certificates of Participation to fund $1 million of the County Corrections Re-Entry Resources Center project. The Certificates of Participation debt instrument, however, was not pursued, as existing financing capacity remains available within the County of Humboldt’s 2016 Finance Plan. The County of Humboldt was one of five final participants in the rural county category, and on January 12, 2016, the Board received notice and a presentation from the BSCC regarding the conditional award of $20 million in SB-863 funding.
The proposed Humboldt County Corrections Reentry Resource Center is planned to be built next to the Humboldt County Correctional Facility with a linkage between the jail and the new center. In the application to the State Public Works Board (“SPWB”), the initial rough net square footage for the proposed project was 23,712 square feet (35,568 square feet gross) consisting of two stories plus a parking garage. The first level would provide parking for the upper two levels, the second level would consist of non-secure out-of-custody re-entry programming, mental health and administrative areas containing a Day Reporting Center, space for the Sheriff’s Work Alternative Program, Probation Department and the Department of Health and Human Services. The third level would consist of 44 beds in multiple housing units, along with a mental health area. There would also be a connecting corridor from the new housing level to the third level of the Humboldt County Correctional Facility, located on the adjacent property allowing support services such as food and laundry to be provided from the existing jail facility.
On January 3, 2017, following a Request for Qualifications process, the Board approved a professional services agreement with the architectural firm of Nichols, Melberg, & Rossetto (“NMR”), to provide design services for the project. The design process consisted of Schematic Design, Preliminary Plans and Working Drawings with state agency reviews and approvals of each of these phases. At each of these phases, cost estimating was completed and checked against the project budget. This resulted in many revisions to the plans including a major reduction of planned on-site parking and some reductions to the square footage allocated to the program areas with hopes of keeping it on budget and still meeting the original program goals. A project design was established that appeared to meet both program and budgetary constraints.
On July 14, 2022, the Humboldt County Public Works Director released a Request for Qualifications pursuant to California Public Contract Code Section 20101(c) for prequalifying general contractors for bidding on the Community Corrections Re-Entry Resource Center Construction Project. Six contractors were found to be prequalified to bid on this project.
After completing the project establishment, schematic design and preliminary planning phases of design, including acceptance by the appropriate state agencies, the working drawings were completed by NMR. The working drawings were reviewed and approved by the Office of the State Fire Marshal, the state authority having jurisdiction over this project. These plans and specifications along with the ground lease, cooperation agreement, construction estimate and other documents made up the working drawings packet which were submitted to the BSCC in early December 2022. The working drawings packet was approved by the BSCC and then submitted to the SPWB and approved to proceed to bid on February 17, 2023. The bidding package consisting of the approved plans and specifications for the project were then ready for bidding. At this time, the estimated hard construction cost was $23,329,019.
As designed, the 28,522 gross square foot structure would be made up of 4 levels. Level one of the structure would contain 3 parking stalls, electrical equipment, a generator, elevator lobby and other mechanical spaces. The gross area of level one is 3,587 square feet.
Level two of the facility would focus on out-of-custody re-entry programing. The current Day Reporting Center located at 404 H Street, Eureka would move into this facility and gain much needed space. The Sheriff’s Work Alternative Program would also move into this facility, thus allowing that program to expand its re-entry programs. These out-of-custody programs would incorporate additional intense case management, evidence-based programs, mental health, and substance abuse services geared toward reduction of recidivism in Humboldt County. The facility will provide offenders with transition from an institutional setting to independent and responsible community living. The gross area of level two is 9,404 square feet.
Level three would house a small locked minimum security in-custody unit focusing on programing that would prepare inmates to successfully re-enter society. These 44 minimum security beds, 28 male, 10 female and 6 mental health, would help relieve the Humboldt County Correctional Facility of much needed higher security beds to house the shift from inmates previously sentenced to State prison. A secure bridge connection to the existing facility is provided at this level to allow for inmate and staff access between the buildings, and a pathway for food and laundry service to be provided by the Humboldt County Correctional Facility. Mental health offices serving the in-custody population would be included on this level as well. The gross area of level three is 10,731 square feet.
Level four would contain a large enclosed mechanical space to protect the building’s HVAC equipment from the elements, and a secure server room for security electronics equipment. The gross area of level four is 4,800 square feet.
On February 28, 2023, the Board authorized advertisement for bid of the Community Corrections Re-Entry Resource Center Project, the project was advertised publicly and released to the prequalified contractors, area builders exchanges and posted on the county’s bidding opportunities web page.
The County of Humboldt received and opened one (1) bid on April 11, 2023. The results were as follows:
|
Contractor |
Base Bid |
Bid Alternate 1 |
Base Bid + Alternate 1 Total |
|
Broward Builders, Inc., Woodland, California |
$34,997,000 |
$401,000 |
$35,398,000 |
The conditions set forth in the contract documents require the project to be awarded as follows. The apparent low bid shall be based on the sum of the Base Bid plus Bid Alternate 1. If no apparent low bid for the Base Bid plus Bid Alternate 1 is less than or equal to $22,043,920, then the apparent low bid will be based on the Base Bid. The project estimate at the time of bidding was $22,043,920. As noted above, the single bid received was $34,997,000, with an add-alternate value of $401,000. The bid exceeded the estimate by nearly $13 million, or 58.76%. Public Works staff and the design team have reviewed and tabulated the bid, finding it to be sound, but it exceeded the budgeted construction cost by approximately $13 million.
As indicated in Exhibit A - Scope of Services, 6.2.3 of the architect’s agreement, if the bid is returned with a value greater than 10% over the last cost estimate, the County may direct the Consultant to “…revise the scope of work to be performed by the Contractor or its quality, or both, so as to reduce the project’s estimated construction cost for the work to be performed by the Contractor, while still meeting [the County of Humboldt’s] project objectives. Consultant shall at its expense, if so, directed by [the County of Humboldt], modify the working drawings in order to reduce the project’s estimated construction costs for the work to be performed by the contractor within the project budget for that contractor’s work.” There are a number of factors which appear to have led to this overage. Staff believes that these factors were out of the design team’s control and could be considered an “act of god.”
Pandemic-induced volatility:
The COVID pandemic kicked off a period of very volatile construction escalation driven by construction commodity price fluctuations, material shortages, and uncertain labor availability. In the single month of the bid, April 2023, the California Construction Cost Index measured construction escalation at approximately 6.6%. Previously, a number like this might represent a year or more of construction escalation. Cost estimators use monthly escalation factors in their estimates to account for anticipated escalation to the start of construction and to the mid-point of construction from the time of the estimate. Under normal circumstances, these estimated escalation costs are somewhat accurate, but not perfect. They are typically in the fraction of a percent range, and not fluctuating wildly between -0.1% to +7% on a monthly basis. When bidding on a project contractors may take a more conservative approach when trying to anticipate escalation during the course of construction. This doesn’t account for all of the overage on our bid, but certainly is a big factor.
Number of Bids/Contractor Response:
It was requested that Public Works prequalify contractors for bidding on the project. This may have been detrimental to the County of Humboldt receiving more bids. The goal of this process is to identify and vet contractors who have the appropriate experience, and financial means to complete the work in a satisfactory manner. During this process, in addition to advertising the prequalification widely, there were reach-outs to correctional contractors and local contractors to encourage them to submit prequalification packages. The prequalification process was run twice, with the first run prequalifying 5 contractors, and the second prequalifying 6 contractors (the first list expired after a year). All of the prequalified contractors were from outside of Humboldt County. No local contractors submitted a package for consideration during the prequalification periods. It should be noted that NMR advised the County of Humboldt that the prequalification process may limit the number of bids. Typically, fewer bids mean higher prices.
During bidding, there were additional reach-outs to the contractors on the prequalified list to encourage their participation in bidding. There were other correctional projects bidding in California around the same time as the Community Corrections Re-Entry Resource Center Construction Project. With a limited pool of contractors working in the corrections arena, and some of the larger contractors on the County of Humboldt’s prequalified list winning bids in other locations, several of the prequalified contractors had a reduced capacity to bid on the Community Corrections Re-Entry Resource Center Construction Project. This forced contractors to choose between projects to bid on, or not to bid at all, and ultimately the County of Humboldt received only one bid for the work. This was likely known to the bidder and reduced their incentive to cut costs covering unknowns.
Regardless of the solo-bidder status, the single contractor who bid on the project was also shocked by the numbers they provided and communicated this with the design team after submitting their bid. As an example, the contractor’s expected cost for masonry in their preliminary estimating was around $3 million. They reported receiving 3 separate masonry subcontractor bids each in the vicinity of $9 million. Local subcontractors providing sub-bids were also noted to be above anticipated costs by the contractor. This indicates the bidding environment was volatile. For a contractor who is regularly bidding on projects of a similar size to have surprises of this magnitude from subcontractors illustrates this point, and also shows the difficulty of estimating construction costs given the global and local economic factors at the time. When providing a construction cost estimate with the bid date months away, consistent and known monthly escalation factor estimates are typically provided, but when the reality is fluctuating so wildly (6.6% in a month) these estimates are extremely difficult to produce with any accuracy.
Project redesign:
Prior to bringing the results to the Board and wanting to provide appropriate options, the Sheriff’s Office and Public Works made the decision to explore the feasibility of redesigning the project on a conceptual level with NMR, at no cost to the County of Humboldt, and the BSCC to see if achieving an affordable project within the given scope was even possible. In order to reduce the cost of the project to be more in-line with the available funding, major changes to the fundamental building type have been contemplated, which necessitate almost entirely changing the design of the building from the foundation to the roof.
One of the large drivers of cost for the project as bid was the construction type. The construction type is driven by the use of the building, and in this case the in-custody correctional facility nature of the program drove how the building was designed. When occupants are confined in buildings and are unable to freely leave in the event of an emergency, the construction type must be highly fireproof and use non-combustible materials such as concrete and steel with heavy fireproofing. After the bid, it was determined that the program could be changed to a staff-secure halfway-house type program. This has allowed for the building to be conceptually redesigned using a much less restrictive and thereby less-expensive construction type. This conceptual redesign would reduce the number of levels from 4 to 2, and will require complete redesign of the structural system, as well as building services such as mechanical, plumbing and electrical systems. Because the program has changed, this project requires a complete redesign to meet the goal of bringing the project into budget, from architectural to structural, to all other engineering and detailing. All of these sub-consultants would need to be re-engaged to redesign the project. See further discussion in Option 3 below.
The following options are available to the Board at this time:
Option 1: Accept Base Bid.
Funding for this option is not available at this time, and with the elapsed time since bids were received the bid has expired. Staff does not recommend this option.
Option 2: Reject and Rebid (with no changes to approved plans).
This option is unlikely to produce the savings necessary to bring the project into conformance with the County of Humboldt’s identified budget, even if the rebidding were opened up to all bidders beyond the prequalified list. With construction escalation and other factors included, the project appears to require approximately $23,000,000 in supplemental funding. Staff does not recommend this option.
Option 3: Reject Bid, Redesign and Rebid.
Because the bid came in $13 million over budget, and to investigate the feasibility of this option, the Sheriff’s Office, Public Works and the design team have been working on a conceptual redesign of the project to reduce costs while preserving the SB-863 awarded program and scope to the maximum extent feasible. For this option to be viable, the project budget would need to be supplemented with an additional $8.4 million dollars in the near future, with further supplemental budgets likely to be needed later.
The crux of the matter is: Can the project be brought into budget without sacrificing the overall scope as defined in the original SB-863 project award? There are two interrelated guiding issues which affect the potential for continuation of the project: (1) viable change of project scope with the BSCC/SPWB; and (2) viable revised construction budget for proposed new facility
Scope Change:
The Sheriff’s Office and Public Works staff have been working with our BSCC representatives to process a (minor) scope change based on the proposed redesign of the SB-863 facility. This has taken some time, and although the BSCC representatives are willing to move this forward, they cannot guarantee a scope change will be successful with the BSCC and the SPWB. As noted by our BSCC representative:
“Another challenge is gaining approval from the BSCC board. There have been previous attempts to scale back projects based on high bids or lack of funding which were denied. This is made more problematic as there are counties that applied for the SB-863 funding that are/may still be awaiting funds if there are relinquishments.”
To date, County of Humboldt staff have been working to reduce the project construction cost without reducing the scope of the programs to be housed in the new facility. The intent has been to avoid a major scope change requiring project re-establishment and the time needed to essentially start the project over with the state, or disapproval by the BSCC and SPWB resulting in relinquishment of funding. The schematic redesign process has been largely successful in terms of preserving the number of beds, program rooms, Probation, Mental Health, Sheriff’s Work Alternative Program and other functions in the building without losing too much square footage. To make these changes, a different approach to the correctional component of the project was needed.
As mentioned previously, the high construction cost as reflected in the bid is partially attributable to the proposed building’s construction type. Because program participants are detained and cannot exit the facility directly in case of an emergency, this type of facility requires an extremely high level of safety and robust construction. To mitigate this cost issue, Sheriff staff proposed maintaining the same number of beds, but altering the facility to be a “staff-secure” type facility where all occupants wear ankle monitors and are able to exit the facility directly in case of an emergency. In addition to allowing the use of less-costly construction techniques, this would also allow the re-entry programming to expanded work release programming for participants.
Construction Budget:
If the scope change were successful with the BSCC, gaining approval at the SPWB level will require dedication of further funding to match our current cost estimate for the project. Although the proposed redesigned project will be less expensive than the original design in today’s dollars, the time involved in redesign will add a significant amount of escalation cost to the project. Current projections for the total project cost (hard and soft costs) based on preliminary construction cost estimates and estimates of the necessary schedule for redesign, bidding and construction indicate a project budget deficit of approximately $8.9 million. The County of Humboldt would need to identify funding for this deficit. Please note the deficit is in addition to funds previously dedicated by the County of Humboldt in the amount of $7,883,955.
There are two variables which make relying on this estimate difficult. The first is time. The estimate assumes an aggressive schedule of 39 months to the midpoint of construction and relatively quick anticipated state agency review times. State review may in-fact extend this period out many months which unfortunately was the case with the original project. The second variable is the escalation costs. As discussed previously, recent years have brought excessive construction escalation costs which has placed the County of Humboldt in its current situation. Although easing in recent months, escalation remains an unpredictable factor which could have a significant impact on the ultimate cost of the project.
The latest hard construction cost estimate puts the anticipated hard construction figure at $29,917,976. This number is derived from averaged estimates of the construction cost of the preliminary schematic design provided by our design team’s cost estimators on October 5, 2023. This included anticipated escalation through the midpoint of construction as mentioned above, a 5% design contingency and a 5% construction contingency as shown below.
• Construction Estimate: Derived from the average of 3 estimates received by the design team.
• Adjust CCCI to current: California Construction Cost Index adjustment for the months between the original estimate and current date.
• Escalate to Midpoint of Construction: Multiplies the construction cost by the number of months and an escalation factor (multiplier) on a monthly basis. The escalation factor is an estimated number provided by the design team.
• Design Contingency: Due to the preliminary schematic nature of the current plans, this 5% contingency covers costs of unknowns to be worked through during design. As design progresses and more detail is added, this contingency will decrease.
• Construction Contingency: This 5% contingency covers the unknown issues which will be uncovered during construction.
Additional anticipated soft costs associated with the redesign include architectural and engineering redesign costs, additional staff costs, additional plan check costs and other costs associated with rebidding the project. These costs are estimated to total $1,047,460.
The current anticipated total project cost, including hard construction costs and soft costs is $36,454,307. As shown below, the County of Humboldt has already committed $7,558,955 in cash to fund the project (not including in-kind land value of $325,000).
The state budget template includes three funding columns for identifying and classifying the funds included in the project budget. These are State/BSCC funds, County of Humboldt cash match and in-kind funding. Since the required matching funds are met by the County of Humboldt’s cash match, in-kind and other contributions made by the County of Humboldt have been reclassified as “other funds” (shown in County Expense column in red below) which eases the accounting burden for the difficult to track in-kind contributions of staff time.
To obtain authorization to proceed with the scope change from the SPWB, the County of Humboldt would need to provide an additional cash match resolution. This will provide assurance to the state that the project will be covered by dedicating an additional $8,404,405 in funds to the project as “Cash Match.” Additional funding to cover the remainder of the County of Humboldt’s costs removed from “in-kind” and classified as “other funds” are estimated to be $490,334 for a total of $8,894,739 of additional funds necessary to cover the current estimated project budget. With the existing dedicated contribution of $7,558,955 this would bring the County of Humboldt’s total cash contribution to the project to $16,453,694, representing a 44.39% cash match. For reference, to date the County of Humboldt has spent approximately $2,341,013 towards this project over its lifetime.
Further cost reductions:
An approach to redesign consisting of more radical cuts to program and space could produce a building with much less square footage, and thereby a smaller cost. However, in discussion with the BSCC, a change to the scope of this magnitude is not likely to be accepted by the state and will likely result in the state rescinding its funding offer.
If the Board chooses to proceed with this project, the dedication of the additional funding identified above to the SB-863 project will likely be needed within the next 3-4 months to be able to achieve the scope change with the SPWB. Depending on this timeline, there will likely be additional escalation costs to be added to the above additional fund total. Staff has not been able to identify funding in the amount needed to provide the cash match resolution. As a result, Staff does not recommend this option.
Option 4: Reject Bid & Terminate Project.
The Board may reject the bid and direct staff to initiate cancellation of the project and forfeiture of the state lease revenue bond award. This option would close the door on the Community Corrections Re-Entry Resource Center Construction Project. Staff would begin termination of state agreements and all ongoing consultant agreements and close the project out.
This option could potentially allow for alternate facility development without the State restrictions on the project program. A facility (or facilities) with reduced square footage and different programs meeting the current needs of the Sheriff’s Office, Probation and DHHS Mental Health could be planned for and executed in this or another location in coordination with the County of Humboldt’s 2020 Facilities Master Plan efforts.
If this option is chosen by the Board and the Community Corrections Re-Entry Resource Center Construction Project does not move forward, there remains a programmatic need for the facilities originally intended to be included in the project. Elimination of the project mainly impacts the need for a new Day Reporting Center. The current location on 404 H Street is not adequate and very limited on space. Reevaluating the County of Humboldt’s needs and determining how the programmatic elements can fit into a masterplan should be made a high priority.
Staff recommends the Board reject the bid and direct staff to work with the State to terminate the existing SB-863 lease revenue bond agreements and consultant agreements related to this project. Staff further recommends the Board direct staff to reevaluate the current needs of the Sheriff, Probation and Department of Health and Human Services - Behavioral Health and propose alternate options for addressing these needs.
FINANCIAL IMPACT:
To date the County of Humboldt has spent approximately $2,341,013 towards this project over its lifetime. If Option 1 were to be selected, the County of Humboldt would need to identify and appropriate an additional $12,953,080 to proceed, however selection of this option is not possible due to the expiration of the bid.
If Option 2 is selected, the relatively minor costs of bidding the project a second time would need to be used to advertise the bid and pay for staff time to manage the bidding of the project. Following the bid, an unknown amount of additional funds estimated to be approximately $23,000,000, which are not currently available would need to be identified and appropriated to award the project.
If Option 3 is selected, and a scope change is approved by the BSCC and SPWB, an additional $8,404,405 in cash match would need to be identified and dedicated to the project in the next several months. This number is an estimate and may need to be adjusted at the time the resolution would be brought to the Board.
If Option 4 is selected, there will be some staff costs to terminate the project and shut down existing agreements and contracts. The remaining funding intended for the project would be deallocated.
Allocations for this project since the start have included $20 million in state funding, $3,850,000 Community Corrections Partnership, $3,044,455 2020 Finance Plan, $539,500 AB109 Public Safety Realignment, $95,000 Criminal Justice fund, $30,000 General Fund and $325,000 Land in In-Kind value. Should the Board choose Options 1, 2 or 3, additional funding would need to be identified as the County of Humboldt’s cash match assurance for the State.
STAFFING IMPACT:
Options 1 and 2: Under the initial program scope, the Humboldt County Sheriff’s Office would add fifteen (15) additional Correctional Deputy positions and five (5) Senior Correctional Deputy positions for a total number of additional positions of twenty (20).
Option 3: After changing the design to a “staff-secure” type facility, it would reduce the number of additional Correctional Deputy positions to ten (10) and no additional Senior Correctional Deputy positions would be needed bringing the total to ten (10) additional positions.
Additionally with Options 1, 2 and 3 additional funding would need to be allocated to fund new positions.
Option 4: Termination of the project eliminates the need for any new positions, and once the project is shut down will free up staff time to work on other projects.
STRATEGIC FRAMEWORK:
The recommended actions support the Board of Supervisors’ Strategic Framework by providing for and maintaining infrastructure.
OTHER AGENCY INVOLVEMENT:
Board of State and Community Corrections, State Public Works Board, Department of Finance
ALTERNATIVES TO STAFF RECOMMENDATIONS:
Board discretion.
ATTACHMENTS:
1. Bid Results
PREVIOUS ACTION/REFERRAL:
Board Order No.: C-7; H-4; H-1; C-16; C-9; C-13; E-1; H-1; C-21; C-4; I-1
Meeting of: 10/22/13; 1/20/15; 2/10/15 7/14/15; 8/25/15; 1/12/16; 2/9/16; 5/24/16; 11/14/17; 8/21/18
File No.: 20-1291; 21-379; 21-692; 23-229