Vol. 38, No. 18

2-18-2005
By: Randy Gammage

2004 capital projects finish 6.1 percent under budget

Adjustments result in savings of $14 million

While the public spotlight sometimes focuses on the construction project that lags behind or exceeds its budget, overall capital projects completed in 2004 actually finished 6.1 percent under budget, Senior Vice President for Business and Finance Bill Shkurti told the Ohio State Board of Trustees Feb. 4. That equates to a savings of $14 million.

The annual report is a follow up to the core process improvement recommendation regarding capital projects presented to trustees in April 2004.

In 2004, there were 32 projects completed with budgets greater than $200,000, with 90 percent completed on time and 90 percent completed on budget, Shkurti said. The marks were even higher when examining 15 of those projects under $1 million — 100 percent were completed on time and 93 percent on budget.

Last year, the capital projects scorecard reported to the board 37 projects completed in 2003 with budgets greater than $200,000. Approximately 85 percent were completed on time and approximately 80 percent were completed on budget, Shkurti said.

“This year’s numbers were very good and actually improved over last year’s,” Shkurti said. “In most cases it takes time to receive a significant return on the investment for policy changes, but in this case I believe stricter requirements imposed by the Office of Facility Planning and Development on scope changes after construction and other changes in the way we manage large projects have been extremely effective.”

Shkurti said outmoded state laws requiring use of multiple prime contractors and other rigid management regulations continue to be a hidden tax and a barrier to improved performance.

University Architect Jill Morelli attributed improved performance to major policy changes in managing the scope of projects and contingencies. Changes in the scope of a project are now limited once construction has begun, and the party requesting changes absorbs the cost. Concurrently, project budgets are being protected by reserving contingencies for unforeseen circumstances, rather than changes in scope.

A number of factors — external economic conditions, project delivery method and the university’s infrastructure — can contribute to fluctuations in a project’s schedule or budget, Morelli said. For example, the recently completed renovation of Hagerty Hall for the College of Humanities and World Media and Culture Center was delayed three months and the cost increased $2 million when hazardous material was identified and abated during construction, she said. External counsel has been hired to recover the portion of the $2 million attributed to the removal of the hazardous material.

Three projects were affected when a prime contractor filed for bankruptcy in the middle of construction, while another encountered an underground stream.

“Working on an older campus is inherently challenging due to the age of the infrastructure,” Morelli said.
Completing projects under budget and on time is important to the OSU community and throughout the state.

“From a taxpayer or student’s perspective, they should be able to rest comfortably in knowing that we are responsibly managing the resources we have, addressing the deferred maintenance issues of the campus and investing in the future by building quality facilities.” Morelli said.

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