Campus Construction Update, Apr. 10, 2019

Assistant Vice Chancellor for Finance and Operations Matt Dull shares how Appalachian has handled construction projects historically, and how the current west side campus construction differs from past projects.

Transcript

Dave Blanks: Hey folks, I’m Dave Blanks from University Communications and I am joined once again in the studio by Mr. Matt Dull. Hi, Matt.

Matt Dull: Hey, Dave.

Dave Blanks: I’m glad you're here again.

Matt Dull: Yeah. Glad to be back.

Dave Blanks: We’re doing it. We still have good weather going on.

Matt Dull: Amazing weather.

Dave Blanks: At least for now.

Matt Dull: At least for now.

Dave Blanks: Yeah, I think. I’m not sure what’s ... I don’t trust it. But, hey, listen, so normally what we do with the campus construction update has been you’ll give me updates for this week, what’s going to happen on-site, but no super earth-moving updates.

Matt Dull: Hey.

Dave Blanks: Pun intended. But, yeah, so there aren’t any big updates, right?

Matt Dull: Yeah, a lot of the same updates from the last report. Just, again, continue to try to get our parking deck ready to bring in the precast structure of the parking deck, and then also making our building pads ready to build building 100 and building 200.

So, continuing movement there. We’ve had great weather to keep those projects moving forward, but no significant change from last week’s update.

Dave Blanks: We thought we’d do something a little bit different for this one, and we just had Jeremy Doss from RISE Real Estate on the program, recently, talking to us about RISE as a partner with Appalachian State, everything that they’re doing for the project, and where they’re coming from, and a little bit about their background.

I thought it might also be interesting to look at how has Appalachian handled projects historically, what did we do before this kind of undertaking and how is this west side campus construction different. Can you give me an idea of how it was, how it is now?

Matt Dull: Yeah, sure. It’s probably good to start with the basics of thinking about the responsibilities when you’re building a project, or when you’re bringing a new building online, and so there’s an acronym that’s out there. It’s DBFOM, and it stands for design, build, finance, operate, maintain. Those are the different responsibilities, when you plan for, build and then operate a building; that acronym kind of helps us think about all the different responsibilities.

And then we design parties to each of those responsibilities. In a traditional approach with a capital project would be to look at each one of these responsibilities as separate and distinct, and probably a separate party that would be working on each one of those items. So, think about design. We’d go out and we’d hire an architect. We’d hire one architect, they would begin to work with the university and developing a program for a building, and develop some construction drawings, and getting to the point.

We then do the next phase, which is build. So, we’d go out and hire a contractor, and that contractor would take those construction plans and would be responsible for constructing the building. And some of our projects, some of our more recent projects we’ve done is what’s called design–build projects.

That means we would go out and we would hire the architect and the contractor at the same time, and that’s really awesome. There’s really some good advantages to that design–build process, and that would be where, basically, the architect and the contractor would work together to both design the building and construct the building from start to finish.

And there’s some real good advantages to that. So that really provides unified project recommendations back to university to make sure that our project goals are met, that our schedule’s met, our budget’s met. It’s nice to have both of those parties from the very beginning. And so we’ve kind of morphed into this design–build project finance.

Finance is a really interesting one. Usually, the university has to go and seek authority to build the buildings from our Board of Trustees, our Board of Governors, and then all the way to the North Carolina General Assembly, and so that would mean we would go through this process for every structure we’re building in this project. That might be five different times we’d be going through this approval process, through the state, and of course that would mean significant amount of time to do that for every single building.

And then we would also be working with a financial adviser to sell the tax-exempt bonds for the project, to help fund the construction of these new buildings, so the finance piece is pretty complicated, and it’s all on the university to really figure out and usher through, start to finish, the financing part of the project. Operate and maintain, those last two responsibilities; the university would operate the facility, as well as maintain those facilities, but there wouldn’t be a lot of input from the designer or the contractor on how you might operate and how you might maintain these buildings in the most efficient way.

Each one of these responsibilities are really separate and distinct in a traditional project. Each building would almost be a stand-alone project, and not really master planned in any way, so it can be fairly inefficient use of time and resources. That’s kind of our traditional way.

Dave Blanks: OK. How’s this one different?

Matt Dull: In our public-private partnership, we really asked each developer to respond to the request for proposals, and in a way that, really, they would take leadership and responsibility, not just of that design or build phase, but really helping us think through all five of the components. So, they would not only just help with designing the building, building the building, but they also have to bring in recommendations on how we would finance this, and what mechanism works best for the university to finance the project, and really take leadership on pulling together all of the financial structures and bond documents, and all of that.

Where, usually, that’s the university’s responsibility to do all of that work; they’re really taking on the leadership and trying to find the best financial makeup to make this project. They also have helped us think about how to operate and maintain these buildings, so think through the systems that are in the buildings, and the long-term life cycle management and operating costs of all these systems, so that we could really build a budget that would help support the maximum useful life of these buildings.

That’s a little different from a normal project, ’cause they’re really helping us think long term. Not just once we get the building and that certificate of occupancy where we can put residents in these buildings, but also helping us think about the lifelong use of that building, and what’s the best systems to put in place that are going to last. And they’ve really also helped us think through the Green Building Requirements, and we’re gonna use the Green Built Alliance, it’s an independent group that reviews and rates the environmental and sustainability components of the buildings and of the project that we’re constructing.

RISE, the developer, and Choate our contractor, joining together to really make sure that we are meeting those requirements, those Green Building Requirements that are set forth by that Green Built Alliance. Their role is much bigger than, say, a traditional architect or contractor role. So when you hire a developer, you’re really hiring a single manager or a single point of contact for all of these different responsibilities, and they’re bringing in experts in the field, in our case, in the field of constructing and operating residence halls.

This is what they do every day, and they’re really bringing that expertise and their consultants to the project every single day to help the university make the best decisions for these buildings.

Dave Blanks: Alright, Matt, so you’ve mentioned the term master plan. What does that mean exactly? And does that procedure translate to savings for Appalachian State University, or is it just a different way to organize the project?

Matt Dull: That’s a really great question. The real beauty of the project is really thinking about this 14-acre site as one big project. I think, traditionally, we would’ve split this up into all these different projects, four or five different building projects, and to really have one group of designers and contractor really think about, "What if we could transform 14 acres all at once?" Versus five different distinctly designed and planned projects, but really is one big project that had multiple phases and multiple buildings, that had the same designer and brought the same thoughts about what should be in the buildings.

And thinking about it from an efficiency perspective, about the staff, for example and our housing staff, having to go to meetings with three, or four or five different designers, and having to re-tell the same thing to this designer, to that designer, and, "Did that translate?" and, "Did the designer actually carry what we learned in one building to the next building in the phase?"

Dave Blanks: Which designer do we tell that? Was it ... ?

Matt Dull: Yeah, exactly. You were doing this as multiple procurements and multiple designers and multiple contractors, you could end up with a pretty disjointed project in the end.

Dave Blanks: There’s just so much more room for error when you’re—

Matt Dull: Right, so much more room for error. If you think about hiring one firm, one developer firm to look at this as one big master plan project, it really allows for a single designer, a single contractor, and everything to be much more unified. And so what you learn in, say, phase one of a project, what we learn on building and designing building 100 and 200 will then inform building 300, and then inform building 400, and it’s the same team, and it’s the same group of people that are designing all of these buildings, and so we all learn from each other.

It really is very collaborative compared to doing these as different separate procurements of design teams and separate procurements of contractors. There’s a lot of efficiency there, and efficiency means cost savings.

Dave Blanks: Right.

Matt Dull: This also allowed us not to only think about adding new buildings, but thinking about a lot of the aging underground utilities and infrastructure on that side of campus, and really having a single designer for replacing a lot of that infrastructure, as well as a single contractor to be responsible for replacing that aging infrastructure.

So, a lot of times we think of things as singular individual building projects. This really allowed us, again, to think about this not only as the buildings that are above the ground, but also all of the utilities and infrastructure below the ground, and things like sidewalks, and making sure that we have sidewalks that make sense, that they actually connect together and lead to campus and not to random places, like you may have if it was designed as separate projects.

So really being able to master plan this allows us to really think through what west campus might look like and have a really congruent plan that, when executed, will make it feel like it was all done at the same time and not by lots of different parties and lots of different timelines.

Dave Blanks: Absolutely.

Matt Dull: You don’t often have an opportunity to really think about redesigning what 14 acres of your campus looks like.

Dave Blanks: That’s a pretty big chunk.

Matt Dull: It’s a very large chunk of our campus, and it’s just that kind of once in a generation opportunity to rethink what it looks like, and our campus, imagine what this look like in its most recent campus master plan, and this has allowed us to carry that campus master plan into a kind of subversion of that just for this section of campus, and the RISE team really helped us design out that master plan for this 14-acre site.

Dave Blanks: Having this holistic master plan approach to this project, I mean, it sounds like it’s just gonna save a lot of time.

Matt Dull: Yeah. Absolutely, and construction time is money, and if you think about, if we’re able to save a year to two years in the construction of this, because centrally it’s all done as one master plan, one procurement. Current construction inflation nationally is around 5–6% annually, and we’re actually seeing even higher inflation rates for construction in the High Country.

Dave Blanks: It is?

Matt Dull: 5–6%.

Dave Blanks: Build it soon.

Matt Dull: Yeah, the quicker you can build it, the shorter time frame you have in construction saves significant amount of money. So taking a year or two off, shaving a year or two off from the timeline to build all of these buildings, and doing this one single procurement, doing this master planning, you could be talking about tens of millions of dollars in savings.

Dave Blanks: Enormous.

Matt Dull: Huge savings in construction by trying to create a much smaller, much tighter construction time frame.

Dave Blanks: So, time savings, that means cost savings. Are there other ways that the master plan approach has benefited the university? Are there innovations, maybe, that it’s lead to?

Matt Dull: Yeah. I mean, I think there are some things that, when we started the process, we may have even overlooked, because maybe we were a little too close to the problem, and bringing in outside people often helps you see something from a different lens, or a different way.

And I think RISE really helped us do that, in one way, one big way. Originally, we did not have a parking deck in the plans. We were talking about basically replacing the surface parking we’re taking up with more surface parking, so really netting zero new parking places.

Dave Blanks: Not losing any.

Matt Dull: Not losing any, but also not gaining any. We were gonna spend a lot of money to create a lot of these really temporary parking spaces, because one of the things we wanted to make sure was that we never lost parking spaces for students at any point during the project, and so that meant we were moving around just kind of a lot of dirt, from place to place to place, to create these temporary parking situations that would be for one year.

And then we’d move those students to another little parking lot, and those students to another little parking lot, so every year, almost every six months, we were moving parking spaces around, which, that’s a lot of money spent on temporary parking, and in addition to that, we started with four phases.

So, we actually were gonna take a full extra year. And like we talked about before, that’s probably another 5–6% increase in overall project costs, because we’d have to move it into a fourth year of construction, and would mean that our whole project wouldn’t be done until fall of 2023 instead of fall of 2022.

The RISE team came up with a solution to add a parking deck to the project, which would not only limit the amount of temporary parking lots we were having to create, kind of every semester.

Dave Blanks: All that dirt moving.

Matt Dull: All the dirt moving, which is, that’s a lot of money, creating all these temporary parking lots, and then eventually ending up with the exact same number of surface parking spaces as we had before, but it also added an additional 250 parking spaces to west campus, which is needed.

As the university grows, we need to address parking concerns for students, faculty and staff. Adding 250 additional parking spaces came along with that idea of adding that parking deck. That also, adding a parking deck, reduced the number of phases of the project from four to three phases, and so, that really allowed us to deliver our beds and parking an entire year earlier.

That saves a significant amount of money in construction inflation costs. So, again, if construction inflation is about 5–6% a year, you’re talking tens of millions of dollars of savings right there, just in decreasing your project by one year. It also meant we weren’t spending a lot of money on temporary parking, and because it reduced by one phase, it also reduced the cost of issuing additional bonds.

Instead of having to do four bond issuances, we had to do three bond issuances, and there are a lot of costs related to all of the work that goes into each one of these financing phases, so even reducing that by one probably had close to half a million dollar savings in the project. Just by not having to do a fourth round of financing on the project.

So, significant savings came from creating that parking deck. So that’s where you have ... bringing in those outside set of eyes really allowed for some real innovation in the project that we weren’t really expecting.

Dave Blanks: That’s a awesome benefit. It’s a additional perspective, there. Are there other ways in which we benefit from that aside from the cost savings, the overall additional parking spaces?

Matt Dull: Having that parking structure there actually allows us to have more parking spaces that are closer to some of our big event spaces on campus. So, you think about Schaefer Auditorium, School of Music, these facilities that we have that lots of people, both from our campus as well as our community, are coming to enjoy the arts on campus. It provides a really great parking facility and space for those folks to be able to quickly access those facilities we have, also, on west campus.

So, we’re really excited about all of the opportunities this parking deck provides for all of our special events we have on campus.

Dave Blanks: And people currently park in the ... if you’re going to an event at Schaefer, you could potentially park in the parking deck on River Street, but this is just a little bit of an ... it’s closer. It’s gonna be a little more convenient.

Matt Dull: Absolutely. It’s much closer, and right now, also, a lot of people park across the street from Schaefer Auditorium for events, like in the Peacock Parking Lot, and of course that means people are having to cross traffic. This would be able to, if people parked in that stadium parking deck, they’d be able to easily get over to Schaefer Auditorium, Rosen Auditorium, the School of Music, to be able to watch events and participate in those events without having to cross the road.

Dave Blanks: A ton of benefits. Awesome. Well, Matt, is there anything else you wanna cover today?

Matt Dull: I think that’s it for this week. We’re just excited to have some things coming out of the ground and really having, especially, our two new residents halls, building 100 and 200 underway. It’s just exciting to go to west campus. It’s just exciting to see everything happening over there.

Dave Blanks: Big changes. It is exciting. Thanks a lot, Matt.

Matt Dull: Big changes. Thanks so much, Dave. Appreciate it.