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Lease Method Approved For Gym
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Riverbank school district trustees have decided to build the additional Riverbank High gymnasium and probably the new elementary school also by a method called "lease-leaseback." The name derives from an Education Code section under which a school district may skip calling for competitive bids and lease its real property for a minimum rent of $1 a year to a company on condition the company constructs buildings on that site and gives the school district title to them once they are complete. What happens, according to an attorney from the KMTG law firm out of Sacramento who addressed the board on Nov. 6, is the district issues a request for proposals and chooses a building contractor who works closely with the architect to design the building before any ground is broken. Meanwhile the district, architect and contractor negotiate a maximum guaranteed price. This method has been used by Modesto City Schools District to design Gregori High School on which construction is imminent following the overly expensive construction of Enochs High, said Riverbank's maintenance operations and transportation director Rick John. Dardin Architects of Fresno, which is currently designing Riverbank's gymnasium and elementary school, is also working on a lease-leaseback project for the Manteca school district, which uses this method a lot, he added. The estimated construction price for the gym is $11.3 million and for the elementary school $17.6 million, John noted. There is no guarantee the final negotiated price will be less than one obtained by bidding, the KMTG attorney said, but the lease leaseback method at least avoids unpleasant surprises such as expensive change orders once construction has begun. It also allows for negotiating early "product substitutions," to achieve cost savings, specifying steel pipe, for example, where an architect originally called for more expensive copper or substituting composite roofing instead of more costly tiles. There are some risks with this method. The district could choose a building contractor "invest a lot of time and money in negotiating on the design" and then have the architect, contractor and district fail to reach agreement on design and price. The law allows the parties to give up at this point and start over but it would be expensive. Negotiation and cooperation between the architect and contractor appear to lie at the heart of the arrangement. In the usual competitive bidding process, the contractor comes in after the architect has done his work and must follow his specifications to the letter. Lease leaseback allows the contractor and architect to get together early on to discuss and modify design and materials ahead of breaking ground. Trustee Eliseo "Jeep" Oliveira commented it appeared to be a way of "getting around the bid process." Not so, said the attorney. The district will still take requests for proposals from several contractors but it can choose according to qualifications and is not obliged to award the contract to the lowest bidder as required under the bid process. Architect and contractor often come as a team with previous experience in working together under the lease leaseback method, the attorney said. Trustee Ron Peterson said the method appeared to be "more efficient" although it would not necessarily yield the lowest price, adding it would be important to choose an experienced and a reputable contractor. Dardin's plans for the gymnasium are well advanced but it is not too late to bring in a contractor at this point, said John. Although the agenda proposal was offered for discussion and/or approval, trustees decided to take action and approved the idea by a unanimous vote.