CAPITAL OUTLAY OVERSIGHT MCCBOA Spring Workshop March 1, 2007

1. Jennifer M. Granholm, Governor Lisa Webb Sharpe, Director CAPITAL OUTLAY OVERSIGHTMCCBOA Spring WorkshopMarch 1, 2007 Office of the State Budget Robert L. Emerson, State Budget Director

2. Office of the State Budget • Review capital project requests & Five-Year plans. • Develop Executive Budget Recommendation. • Review & recommend program statements / schematics designs. • Review & recommend project scope / cost changes. • Project Management Agreements. • Review Use & Finance Statements for self-funded projects. CONTACT INFORMATION: Lisa L. Shoemaker Capital Outlay Coordinator Office of the State Budget (517) 335-7192 phone (517) 241-5485 fax Shoemakerl@michigan.gov

3. Five-Year Plans • Required per DMB Act (MCL 18.1242). • Approval by governing board. • Reflect current priorities, anticipated facility needs, and existing capital base. • Include all projects (those with state cost participation & self-funded projects). • Copies shared with fiscal agencies. • Public documents subject to FOIA.

4. Capital Project Requests • #1 Priority in the Five-Year Plan. • Projects must address specific academic or research needs. • Preference given to those projects that: - Provide economic return on investment. - Creatively re-adapt, re-use, or renovate existing facilities. - Demonstrate innovative partnerships. • Consideration not given to single projects to renovate and/or construct multiple, independent facilities.

5. Review Questions Asked? • Does this project advance the academic mission of the institution? • What are the economic benefits for the local community, region, and state? • Is there sufficient rationale for the taxpayers of Michigan to invest scarce resources in this project? • Why should the state invest in one project over another competing higher education request?

6. ‘Best Practice’ Requests • Priorities aligned with Five-Year Plan. • Demonstrate clarity of purpose. • Performance outcomes. • Provide specifics of program/design plan. • Examine project alternatives. • Consistency (year-to-year, scope). • Proven track record in managing and delivering projects on-budget?

7. ‘Best Practices’ Cont’d. • Stay in communication! • Develop contacts with the Office of the State Budget and the Fiscal Agencies. • Make sure we have your most current information. If projects or priorities change during the year, it is in your interest to let all of us know. • Available for consultation (drafts). • Campus visits.

8. What We Don’t Want to See? • Non-academic focus. • Bundling. • Flip-flopping on projects. • Too succinct, or conversely too verbose. • Synergy, synergy, synergy….overreliance on academic jargon. • Avoid pressure for the lounge, café, gaming stations, movie theatre, billiard tables. • Bottom line: Respect the taxpayer dollar.

9. Navigating the Process The state Capital Outlay process has two key steps -- each requiring enactment of an appropriations bill before construction can begin: 1. Planning Authorization 2. Construction Authorization

10. Planning Authorization • $100 placeholder in appropriation bill. • Planning authorization allows College to expend its own funds for the development of program / schematic design plans. • Requires competitive selection of design professional. • Planning authorization does not guarantee construction authorization.

11. Construction Authorization • After the approval of the program statement / schematic plans by JCOS. • $100 placeholder in appropriation bill. • Construction authorization sets in law the total project cost and establishes the financing shares. • College share is required by boilerplate to be no less than 50% of the total cost of the project.

12. Project Scope / Cost Changes • Project scope or cost changes can only be done with JCOS & Legislative approval. • DMB Act allows for changes in either an enacted appropriations bill or concurrent resolution. • Approval takes time; may delay project. • Cost increase obligation of the institution.

13. The Legislature • Joint Capital Outlay Subcommittee (JCOS) • Includes both House and Senate members. • Representative Morris Hood III, is the current chairperson. Senator Michelle McManus is the vice chairperson. • JCOS provides approvals for state agency, university & community college projects, as well as State Building Authority financing. • Oversight responsibilities for JCOS and DMB are prescribed in the Management and Budget Act (Public Act 431 of 1984, as amended).

14. Reviews/Approvals After success in securing a planning authorization….. Step #1: Planning Authorization Appropriation Submit draft plans to Office of the State Budget Competitively Select Architect (at own expense) JCOS Approval Office of State Budget / DMB Transmit to JCOS Office of the State Budget / DMB Review Step #2: Construction Authorization Appropriation Construction Phase (to be continued…) Project Management Agreement ….series of DMB Facilities Administration reviews leading to the award of construction contracts, progress monitoring, and ultimately SBA financing.

15. Project Implementation DMB Facilities Administration provides technical review and oversight throughout the project’s implementation. • Reviews the project against capital outlay assumptions • Reviews design throughout the process • Reviews construction bids • Reviews construction progress • Reviews expenditures • Can provide project management

16. UNIVERSITY OR COMMUNITY COLLEGE CHOICE – SELF-MANAGE? • Universities and Community Colleges may self-manage their projects. OR • Universities and Community Colleges may have the Design & Construction Division (DCD) manage the project for ½% additional fee. If self-managing, the Project Management Agreement outlines responsibilities.

17. CAPITAL OUTLAY ASSUMPTIONS • The project is intended for an educational purpose. • The project is not an income-generating building. • The University or Community College owns the land or the building. • The land is clear, environmentally clean, and ready to build on. • The University or Community College has the matching funds required. • The architect, engineering firm, or construction manager has been competitively selected. • The completed project will have the equipment and furnishings required to function and will be ready to move into. (NOTE – re-use of existing furniture and equipment is strongly encouraged).

18. DCD REVIEWS • PROGRAM & SCHEMATIC DESIGN • PRELIMINARY/DESIGN DEVELOPMENT • FINAL DESIGN/CONSTRUCTION DOCUMENTS • BIDDING AND AWARD • MONTHLY CONSTRUCTION REPORTS • EXPENDITURES & REIMBURSEMENT

19. PROGRAM/SCHEMATIC DESIGN • Office of the State Budget and DCD concurrently review submittal • DCD reviews submittal for conformance with: • Capital Outlay Request • Major Project Design Manual • Building Requirements • Space Utilization Guidelines • Area Calculations -- Efficiency • Schedule • Total Project Cost • If acceptable, recommends Joint Capital Outlay Subcommittee (JCOS) submission to the Office of the State Budget.

20. PRELIMINARY/DESIGN DEVELOPMENT • DCD reviews submittal for conformance with: • Capital Outlay Request • Major Project Design Manual • Building Requirements • Space Utilization Guidelines • Area Calculations -- Efficiency • Schedule • Total Project Cost • Constructability • If acceptable, authorizes the University or Community College to proceed to Final Design/Construction Documents phase.

21. FINAL DESIGN/CONSTRUCTION DOCUMENTS • DCD reviews submittal for conformance with: • Capital Outlay Request • Major Project Design Manual • Building Requirements • Space Utilization Guidelines • Area Calculations -- Efficiency • Schedule • Total Project Cost • Constructability • General Conditions/Contract • If acceptable, authorizes the University or Community College to proceed to Bidding.

22. BIDDING • Prevailing wages required – obtain from DLEG Wage & Hour Division • Competitive bidding required, even with Construction Management. • DCD reviews bid tabulations. • If acceptable, authorizes the University or Community College to award contract(s) for construction.

23. CONSTRUCTION REPORTING • University or Community College provides monthly reports on construction to DCD. • Progress and activity • Change orders • Budget status • Schedule status • Report requirements can be found in the Project Management Agreement. • University or Community College issues the Certificate of Tenantability – equivalent to substantial completion of the project.

24. EXPENDITURE • Project Management Agreement contains requirements for project expenditures. • IRS regulations and the Major Project Design Manual determine allowability, whether the purchase is from “local” funds or not. • Universities or Community Colleges must expend their entire share before receiving reimbursement. • Universities or Community Colleges assume cash flow burden until State Building Authority financing is complete. • Expenditure is allowed until 23 months past the Certificate of Tenantability but can not be used to “enhance” the project.

25. ALLOWABLE CHARGES • Professional Design, Survey, Architectural, and Engineering Services • Professional Inspection and Testing Services • Audit Review (out of DMB-FA fee) • Insurances • Moving expenses to move operations out of remodeling or construction area • Specialized Consultants -- programming, furniture, communications, acoustical, legal, and environmental contractual services - verify prior to charging or hiring with DMB-FA • Construction Trades, including general conditions • Utilities to construction site and within construction site • Site work (walks, drives, landscaping) • Equipment • Furniture, furnishings • Demolition (for renovation only) of U/CC buildings • Telecommunications, computer networks, computers • Advertisement for Bids • Plan Review Fees

26. NON-ALLOWABLE CHARGES • Land Purchase Cost • Fundraisers, promotional costs • Renderings, models • Ground breaking event costs • Force Account labor (work performed by any University/College staff or student labor during regular working hours or in overtime whether limited term or otherwise) • Relocation expenses (rent on temporary space, relocation consultants) • Moving expenses to move operations into the completed space or move operations within campus or other Agency building • Parking meters • Artwork, sculptures, fountains, non-instructional displays • Cost of preparing Phase I Environmental Study and/or subsequent environmental studies • Cost of title search • Bonding, legal or loan costs associated with local share raising. • Alcoholic beverages, food, drink • Investigation or research travel by University committee members

27. NON-ALLOWABLE CHARGES (Cont’d) • Office equipment, computers, office furniture if not installed in the project building • Software • University/college overhead - phones, internal printing, copying, utilities, motor pool vehicles, staff expenses, including overtime • Charges incurred prior to planning authorization • Demolition of a prior building to clear site for construction • Internal University or Community College Administrative Fees • Repair or maintenance of the building.

28. EXPENDITURE REPORTING • Report expenditures monthly, starting after Legislative Authorization. • Format per the Major Project Design Manual or Project Management Agreement. • Certification is required, whether reimbursement is due or not. • Provide backup with proof of payment.

29. EXPENDITURE REVIEW • DCD reviews expenditure reports against allowability, payment and budget. • If acceptable, DCD transmits report to Financial Services. • Financial Services records amounts and creates reimbursement when local share is met and financing exists. • If not acceptable, DCD notifies the University or Community College of the issue and holds the report until resolution.

30. WHAT IF? • IF – the Program must change • The University or Community College must re-submit the Program/Schematic Design submittal through DMB to JCOS. • IF – Bids exceed the Budget • Redesign the project to meet Budget, while retaining the furnishings and equipment necessary for function and meeting the Program. • Obtain additional local funding and return to JCOS for approval and re-appropriation of the additional funding.

31. WHAT IF? • IF – the project will be done in phases • Authorizations with multiple buildings and/or phases may be considered separate projects • IF – environmental contamination is found on site • The University or Community College must perform a separate, self-funded project to investigate and clear the site contamination.

32. Questions? BUDGET – Contact: Lisa L. Shoemaker Capital Outlay Coordinator Office of the State Budget (517) 335-7192 phone (517) 241-5485 fax Shoemakerl@michigan.gov FACILITIES – Contact: Irene Jackson Henry ----- OR ---- The Facilities Administration Project Director for your project Section Manager Facilities Administration (517) 241-3133 phone (517) 373-3562 fax Henryi1@michigan.gov