Higher-Ed Construction and the Recession Budget

Despite the recession, many colleges and universities have building and renovation projects planned or in progress. But, are the recession and shrinking budgets affecting the choices institutions make in these projects?
We spoke with Mary Beth McGrew, associate VP of Planning + Design + Construction at the University of Cincinnati, and Tom Woodward, VP of Heery International (a professional services firm specializing in architecture, engineering, and construction management), about their current experiences in higher-ed construction at a time where budgets are shrinking.
So, has the recession affected colleges’ and universities’ construction choices? “It definitely has,” stated Woodward. “In some cases, maybe they’re changing their processes or procurement methods for design or construction. In other cases, there are some kinds of projects that can actually proceed without concern.”
Woodward explained that mostly, colleges are postponing construction, except where the projects are bond funded. “They have a longer-term financing window, and they aren’t necessarily prone to temporary economic cycles.” A good example, Woodward offered, is the University System of Georgia, where they have a six-year bond-funding plan for each campus. “So, the year-by-year changes in the economic situation aren’t really postponing these projects.”
Other projects that may not be postponed are self-liquidating projects. “Those are projects like student housing, student centers, rec centers, and parking garages.” These projects are self-funded from student activity fees, parking fees, or room and board charges.
McGrew said the University of Cincinnati is feeling the effects in staffing and project dollars available. “The State of Ohio, while it has a capital budget, has not yet issued a Capital Bill, so we are unsure of our appropriates for capital projects this biennium… At the University of Cincinnati we are meeting to review different scenarios to move forward with our most critical projects.” She explained that the scenarios include postponing projects, issuing debt for projects, and holding off on projects.
While some universities are reviewing what projects they can delay or avoid, other institutions are looking at their process. “The University System of Georgia,” explained Woodward, “has shown a clear preference in the recent years for the construction management procurement method, where they bring the contractor on board early in the design process.”
The Technical System of Georgia is taking a different approach this year. “They are going back to a design-bid-build mode, where they prequalify contractors and take the lowest bid after that. “They think they will actually be able to get more bang for the buck due to the current shortage of projects,” Woodward stated.
Where renovation is cost-effective, colleges are choosing that option. Schools may also be shifting money to preventative maintenance to fix buildings that are out of date, rather than tearing them down and building new.
Schools may also be looking for ways to cut square footage out of projects. Woodward offered this example: “Our Fayetteville State University Science and Technology Center project in Fayetteville, NC, was originally approved as a $27M project. A year ago it was a $20M project with the idea that a phase two would be built later on, and now a year later it is a $17M project. What we’re looking at with that kind of project is trying to deliver the same kind of laboratory, classroom, and teaching space for less square footage.”
The University of Cincinnati is also getting creative to find solutions to their shrinking budgets. McGrew included that they are “providing much of the planning work in-house, where in the past times we may have hired consultants. We are also looking very closely at our opportunities to save operating dollars through energy savings in our buildings.”
Woodward offered another solution to extend building life: offering larger class sizes, more courses in the evening, or even weekend classes to accommodate rising enrollments. Although, he mentioned, administrators might face some resistance from overworked faculty with that idea.
In North Carolina, two pieces of new legislation are also helping with higher-ed construction. “There’s new legislation that calls for advanced planning for any project over 20,000 sq. ft.,” explained Woodward. This allows campuses to get a head start for when funding might become available in the next year or so. “I’ve also heard that there’s a North Carolina law that allows for the extension of things like environmental permits. If the funding gets delayed,” Woodward added, “they won’t lose that and have to start over with that process.” This allows colleges to keep projects on track where possible.
As McGrew mentioned, colleges and universities are looking to still save money through energy efficiency and green building, a trend that doesn’t seem to have been stopped by the recession. Woodward agreed that more and more universities are looking to follow green building standards. “They realize that the long-term impact on their operating budgets is a big advantage to going with sustainable design now.”
Overall, colleges and universities are looking to energy efficiency, renovation, and cutting square footage where they can. If projects can be put off, they will be. Schools are also looking towards different procurement strategies and ways of designing their construction to accommodate smaller budgets and uncertain sources of funding.