Table Of ContentThe Regents of the University of California
Transforming Capital Asset
Utilization and Delivery
Opportunities for Reducing Project Costs and Achieving
More Program for the University’s Capital Dollar
July 2005
TRANSFORMING CAPITAL ASSET UTILIZATION AND DELIVERY
Opportunities for Reducing Project Costs and Achieving More Program for the University’s Capital Dollar
Table of Contents
Table of Contents
I. Executive Summary .............................................................................................. 1
II. Background, Mission, and Work of the Expert Committee.................................... 6
III. Findings and Recommendations........................................................................... 9
1) Ownership and Accountability for Capital Asset Utilization, Delivery, and
Performance.................................................................................................. 10
2) Capital Planning and Decision-Making Based on Formal Business Case
Analysis ......................................................................................................... 13
3) A Shorter, Simpler Process ........................................................................... 16
4) A More Robust, More Flexible Contracting Environment .............................. 20
5) Systemwide Building and Project Metrics, Standards, and Data................... 24
6) A Process-Change Agent to Implement This New Business Model.............. 27
7) Other Cost-Saving Opportunities Examined, but not Specifically Targeted
in the Committee’s Top Six............................................................................ 28
APPENDICES
Appendix A – Committee Members’ and Study Consultants’ Resumes
Appendix B – UC Capital Program – Core Purpose, Values, and Goals (as drafted
by the “Internal Resource Group” that was formed to facilitate information gathering and
provide staff support to the Expert Committee)
Appendix C – Potential Areas and Issues to Examine (as drafted by the “Internal
Resource Group”)
Appendix D – 15 Committee Questions to Investigate Cost-Savings Opportunities
Appendix E – Report of the Committee Cost Consultant
E-1 – Questionnaire for Campus Executives and Project Managers
E-2 – Summary of Responses to Project Questionnaires and Key
Observations
E-3 – Summary of Project Data Review and Key Observations
Appendix F – Office Building Benchmark Study by TMCS, Inc.
TRANSFORMING CAPITAL ASSET UTILIZATION AND DELIVERY
Opportunities for Reducing Project Costs and Achieving More Program for the University’s Capital Dollar
Executive Sumary
I. Executive Summary
The Regents of the University of California, through its Committee on
Grounds and Buildings, have mounted a major initiative to explore
opportunities for saving construction building costs on a large scale. The
objective is to find ways to meet the capital needs of a continually growing
academic program with what the Regents foresee as increasingly less capital
construction funding being made available to the University.
The Regents’ Committee on Grounds and Buildings instituted an investigation
of current practices and policies to determine more effective approaches for
designing and constructing projects. To implement this investigation, a
committee of six outside experts (herein referred to as the “Committee”) who
are acknowledged leaders in their respective fields of design, construction,
property development, and capital project management, was formed by the
Office of the President in December 2004. The mission of the Committee was
to render an informed professional opinion and make recommendations to
the Regents’ Committee on Grounds and Buildings on opportunities for
reducing UC building costs.
Over the course of six meetings from January to June 2005, the Committee
convened to receive, review, and discuss information presented by the Office
of the President, campus project personnel, and outside consultants. An
independent consultant to the Committee conducted interviews with UC and
non-UC project teams and administrators on behalf of the Committee using
the Commiittee’s15-question format and 24 selected projects which served as
interview vehicles. Results of those interviews were reported back to the
Committee. The Committee acknowledges that these extensive background
materials, briefings, and data supplied to the Committee, although extremely
helpful in informing the Committee’s opinion, cannot in any way be construed
as creating a complete and definitive understanding of the many nuances of a
large institution such as the University of California.
The Committee’s focus, and consequently its recommendations, pertains to
UC capital outlays for major construction. Minor capital-outlay projects such
as room fit-ups, the replacement of building system components, and
refurbishments, therefore, are outside the scope of this study.
At its second meeting the Committee chose to expand the mission of
this study to address the effective planning for and delivery of capital
assets, of which reducing the cost of constructing buildings is a
subsidiary component, with the broader mission being facilitating the
best economic solution to achieve program goals. Economic solutions
to be considered include more efficient utilization of existing facilities,
alternative procurement strategies (purchase, lease, build-to-suit), as
well as non-brick-and-mortar strategies.
The Committee believes that its six recommendations for transforming
policy and processes concerning ownership and accountability for UC
1
TRANSFORMING CAPITAL ASSET UTILIZATION AND DELIVERY
Opportunities for Reducing Project Costs and Achieving More Program for the University’s Capital Dollar
Executive Sumary
capital asset utilization, delivery and performance will have a major
dollar impact on its capital program. For a UC capital program portfolio
on the order of $7 billion, the Committee believes there is a minimum of
a 10%, or $700 million, capital dividend in cost reduction and capital
preservation to be gained from implementing these measures. Given
the compounding effects generated by achieving efficiencies (e.g.,
inflation, staffing, space) it is not inconceivable that a capital dividend
of as much as 25% or more could be realized.
Based on its findings and the professional experience of its members, the
Committee has developed six major recommendations for capital savings that
it believes requires transformation in the way the University of California does
business concerning the planning and construction of buildings.
1) Ownership and Accountability for Capital Asset Utilization,
Delivery, and Performance
This is the Committee’s foremost and fundamental area of recommendation.
The management of UC capital assets appears to lack individual
accountability at the campus level. It is the Committee’s opinion that by
creating individual accountability for capital asset utilization, delivery, and
performance at a high level at each campus more value will be created from
scarce capital funds, and projects will be built less expensively as the result
of there being an individual with clearly defined authority and responsibility for
capital assets. The Committee recommends that the utilization, delivery, and
performance of capital assets on campuses be made a significant and
material component of each Chancellor’s responsibility and performance
review. Further, the Committee recommends that a function of “capital asset
chief” be created on each campus reporting to the Chancellor, with the
ownership and authority for the effective utilization, delivery, and performance
of capital assets, and be accountable to the Chancellor for results.
2) Capital Planning and Decision-Making Based on Formal Business
Case Analysis
It appears to the Committee that the current UC response to ascertain long-
term academic priorities at the campuses often jumps quickly to architectural
planning of possible construction solutions to support program growth. The
Committee recommends instead that the first-step, and the primary driver, for
all capital planning become the Business-Case Analysis and Plan, and that
each campus develop a high-level function for executing business case
analysis and planning. Business case analysis and planning examines non-
building solutions and alternatives to building construction, and when
construction alternatives are pursued, it determines best construction
solutions from a business planning perspective. The Business-Case Analysis
and Plan is the key instrument on which the Committee recommendations for
simpler, streamlined processes are based. The expectation of the Committee
2
TRANSFORMING CAPITAL ASSET UTILIZATION AND DELIVERY
Opportunities for Reducing Project Costs and Achieving More Program for the University’s Capital Dollar
Executive Sumary
is that this change in planning process will improve the utilization of
increasingly scarce capital funds relative to program mission supported and
greatly simplify the capital approval process.
3) A Shorter, Simpler Process
The Committee believes that the University of California’s capital project
processes can be made significantly more straightforward, streamlined, and
faster, with more clearly defined decision-making and authority. The
Committee recommends greatly shortening the lengthy pre-planning and
pre-design phase, doing away with the three-step “Preliminary Plans,
Working Drawings, Construction” approval processes for state funded
projects, and utilizing the streamlined capital outlay process for all state
funded projects on the “streamlined” track. Instead of having many slowly
evolving projects in the funding pipeline, taking up to as long as 7 to 10 years,
fewer projects would enter the capital funding approval pipeline based on
their Business Case Analysis and Plans, and they would receive funding
once for efficient execution. The result will be fewer projects in the pipeline,
and all projects will complete faster. Cost savings are expected in staff man-
hours at both the Office of the President and campuses, avoidance of
construction cost escalation expense, and the elimination of costs associated
with start-stop project schedules.
4) A More Robust, More Flexible Contracting Environment
The Committee believes that three aspects of the UC contracting
environment present overall cost-saving opportunities: 1) moving to a “Best
Value” contracting model (based on a criterion that combines competitive
pricing with assessments of contractor capabilities and past performance),
2) modifying UC contracts to be less restrictive and onerous for contractors
(for example, by changing requirements that the contractor be responsible for
any hidden underground conditions that may exist on the site), and
3) changing laws and policies that currently preclude UC projects from
benefiting from early design consultation that could be provided by qualified
subcontractors. The Committee recommends that the University aggressively
pursue these changes. The Committee’s expectation is that these changes
will yield significant overall cost-savings across the UC portfolio of capital
expenditure activity, as well as project outcomes that are more predictable
with less litigation and fewer disputes, and a smoother project delivery
process with less UC project oversight.
5) Systemwide Building and Project Metrics, Standards, and Data
There appears to be a lack of system-wide standards concerning mission-
relevant metrics (for example, project cost per student, bed, principal
investigator), and no system-wide methodology or infrastructure across the
campuses (and between the campuses and the Office of the President) for
collecting and using project administration data. These represent two
3
TRANSFORMING CAPITAL ASSET UTILIZATION AND DELIVERY
Opportunities for Reducing Project Costs and Achieving More Program for the University’s Capital Dollar
Executive Sumary
opportunity areas for achieving, over time, the kind of construction economies
of scale envisioned under the Committee’s recommendations on “simpler,
shorter process.” The Committee sees very substantial cost savings being
realized from a common project administration system that facilitates
automated roll-up reporting for monitoring and tracking projects, and better
and faster planning resulting from the system-wide use of mission-relevant
metrics and standards. As a start, campus project systems should be
compliant with systemwide standards and criteria, and have the predictive
capacity to project and help mitigate project over-runs, delays, disputes,
scope delivery issues, and claims.
6) Process-Change Agent to Implement This New Business Model
Consistent with the Committee’s recommendations on ownership and
accountability, it is the Committee’s recommendation that the implementation
of the recommendations set forth in this document be assigned to a single
change-agent (not a committee, and not left up to the individual campuses)
who has the responsibility, tools, resources, and authority to implement these
changes. It is the Committee’s opinion that to be effective this process-
change agent must be supported at the highest levels (the Board of Regents,
the President and his Cabinet, and the Council of Chancellors). This person’s
job performance should be evaluated on, and their job tenure dependent
upon, success in accomplishing this task.
Twelve additional cost-reduction opportunities were identified and examined
by the Committee and are referenced in this report with the Committee’s
comments. These represent areas of investigation that were either targeted in
the Committee’s original list of 15 questions, or they became discussion
points during the Committee’s deliberations. As noted, the twelve additional
opportunity areas are considered by the Committee to have already been
addressed in its primary list of six recommendations, or were felt by the
Committee to be of secondary importance.
The Committee notes that various campuses have pursued implementation of
portions of the above six recommendations, and met with varying degrees of
success, perhaps constrained by external and systemic factors. It is the
Committee’s strong recommendation that in spite of barriers to change that
may appear to exist in the form of existing state laws, long-established
practices, firmly entrenched organizational structures and cultures, and large
numbers of people affected, a fundamental change in the way the University
does business with respect to its capital assets is necessary if significant cost
savings and capital expenditure avoidance are to be achieved. It also
believes that the necessary changes will not be implemented unless a single
individual is given the responsibility, resources, and authority for orchestrating
this recommended change of business model, and has the necessary support
from the highest levels in the University (the Board of Regents, the President
and his Cabinet, and the Council of Chancellors).
4
TRANSFORMING CAPITAL ASSET UTILIZATION AND DELIVERY
Opportunities for Reducing Project Costs and Achieving More Program for the University’s Capital Dollar
Executive Sumary
In summary, the Committee’s view is that the University of California has a
major opportunity for significant cost reduction and capital preservation by
dramatically changing its up-front capital project planning, development, and
funding processes. The Committee believes strongly that without such a
change, significant capital savings and increased value from capital
expenditures for the University of California will not be realized.
Respectfully submitted
Steven L. Westfall, Ph.D.
Committee Facilitator and Scribe
5
TRANSFORMING CAPITAL ASSET UTILIZATION AND DELIVERY
Opportunities for Reducing Project Costs and Achieving More Program for the University’s Capital Dollar
Background, Mission, and Work of the Expert Committee
II. Background, Mission, and Work of the Expert Committee
A committee of six outside experts (the “Committee”; refer to Appendix A for
Committee membership and resumes), who are acknowledged leaders in
their respective fields of design, construction, property development, and
capital project management, was formed by the Office of the President in
December, 2004 to render an informed professional opinion and make
recommendations to the Regents of the University of California on
opportunities for reducing its building costs. The reasons for this undertaking
are two-fold: 1) the University expects continuing growth in its campus
populations over the next 10 years, and 2) at the same time, it expects an
increasing scarcity of capital funds with which to build campus buildings to
accommodate the population growth. The Committee’s recommendations,
therefore, are intended to identify courses of action that will accommodate the
needs of a growing academic program with fewer capital dollars.
At its second meeting the Committee chose to expand the mission of
this study to address the effective utilization and delivery of capital
assets, of which reducing the cost of constructing buildings is a
subsidiary component, with the broader mission being facilitating the
best economic solution to achieve program goals. Economic solutions
to be considered include more efficient utilization of existing facilities,
alternative procurement strategies (purchase, lease, build-to-suit), as
well as non-brick-and-mortar strategies.
An important feature of the Committee’s work was to focus on recommending
opportunities for savings, rather than looking for problem areas. This had two
implications for the work of the Committee. The first concerns instances
where the University might have processes or results comparable with other
institutions. Where such findings were apparent, the Committee’s view was
that its mission was to identify opportunities for cost savings on all fronts,
even those where problems were not evident. The second implication
concerns areas of process and results where in the Committee’s view a
definite problem might exist. In these instances, the Committee agreed that it
would look for the cost-saving opportunities associated with solving such
problems, and if solving the problem constituted only a minimal cost-saving
opportunity, it would be dropped from the list of the Committee’s
recommendations.
Over the course of six months the Committee convened six times. At the first
four meetings, the Committee received, reviewed, and discussed information
presented by the Office of the President and testimony from both UC and
non-UC persons on the conduct of UC projects. This included:
a) A briefing from UC Office of the President on University Core Purpose,
Core Values, and Visionary Goals (refer to Appendix B), prepared by a
group of campus and OP staff (“Internal Resource Group”), formed to
6
TRANSFORMING CAPITAL ASSET UTILIZATION AND DELIVERY
Opportunities for Reducing Project Costs and Achieving More Program for the University’s Capital Dollar
Background, Mission, and Work of the Expert Committee
facilitate information gathering and provide staff support for the
Committee;
b) An extensive list of potential areas for the Committee to examine (refer to
Appendix C), as prepared by the Internal Resource Group;
c) Testimony on capital project processes at UC Irvine;
d) Testimony from a construction consultant on a detailed cost study done
on a recent Davis construction project (refer to Appendix F);
e) Background information from the Office of the President on the different
organizational structures, widely varying site conditions, maturity, and
local town political environments that exist on the different campuses;
f) A formal report (refer to Appendix E) from the Committee’s consultant,
Peter Morris (a Principal of the firm, Davis Langdon), on (i) the results of
interviews conducted with UC and non-UC project teams on specific
questions posed by the Committee, and (ii) the data review of 24 UC and
non-UC projects.
Early in its deliberations, the Committee formulated 15 questions that it felt
would identify the most significant cost-saving opportunities (refer to
Appendix D), and it selected 24 specific UC and non-UC projects to serve as
vehicles for obtaining answers to those questions.
Live computerized note-taking projected onto a screen seen by all Committee
members was used to track and build the Committee’s meeting proceedings.
Formal proceedings notes were distributed to all members after each meeting
for comment, corrections, and additions.
Based on the findings of the Committee’s consultant relative to the list of 15
questions, the Committee conducted a working session to draft individual
“opportunity sheets” indicating target areas, proposed actions, pertinent UC
conditions, and expected results. Opportunity sheets were converted into flip
chart exhibits and posted on the walls of the meeting room, and members
used colored post-it tabs to register their priority votes of “Do this,” and “This
might be hard to do, but well worth the effort.” This session set the priorities
and tone for the Committee’s final report.
A draft report was written by Committee scribe, Steve Westfall (President,
Tradeline Inc.) based on meeting proceedings, the Consultant’s findings, and
the outcome of the Committee’s working meeting. At the Committee’s
subsequent meetings the draft and final reports were reviewed and discussed
to develop the final Committee statement.
The Committee’s findings and recommendations set out below are based on
a necessarily broad understanding by Committee members of University of
California policies, processes, and history concerning capital projects. While
Committee members bring to this study their own extensive professional
7
TRANSFORMING CAPITAL ASSET UTILIZATION AND DELIVERY
Opportunities for Reducing Project Costs and Achieving More Program for the University’s Capital Dollar
Background, Mission, and Work of the Expert Committee
experience in the planning, design, and construction of institutional buildings,
and while some members have had personal experience with specific UC
capital projects, they are not experts in all the intricate details of current UC
systems, organizations, or governing laws. The extensive background
materials, briefings, and data supplied to the Committee by the Internal
Resource Group and the Office of the President, although extremely helpful
in informing the Committee’s opinion, cannot in any way be construed as
creating a complete and definitive understanding of the many nuances of a
large institution such as the University of California.
Thus, the collective opinion rendered here should be viewed as that of a
panel of outside experts whose opinions are informed to the extent possible
by the time limitations and the format of their involvement in this study.
8
