Facing tough questions about why Public Works estimates for numerous construction projects are as much as 50 percent less than what the final building actually costs, Administrator Ward Patrick said those estimates are prepared without projecting inflation.
He admitted that projects including three large buildings in the University system have effectively doubled in price since they were first proposed in the 2015 legislature because of double digit-inflation in the construction industry.
Public Works was criticized by staff for its seemingly ineffective process in projecting inflation and final construction costs. Patrick said they’ve been trying to develop an index that can help better estimate costs but a major problem is the time lapse between when planning for a building starts and the construction contract actually goes out to bid two to four or more years later.
Senator Chris Brooks, D-Las Vegas said earlier testimony from Public Works indicated some of the bids were missed by 30 to 50 percent and asked Patrick to explain the process.
Patrick used the two most recent DMV building projects as an example saying when site specific costs were removed they’re similar. The Sahara DMV in southern Nevada, he said, went to bid in 2015 as a $20 million project. But just four years later, the south Reno DMV went to bid at about $50 million, more than 50 percent higher.
He said the UNLV Engineering Building, Nevada State College Building and College of Southern Nevada Health Sciences building were originally $21 million, $31 million and $41 million. Now, he said, they’ll all be in the $50-$60 million range.
He said because the planning estimates are used to develop architectural fees, “it behooves the state to not overestimate construction on a planning project.”
He said that estimate doesn’t include furniture, Fixtures and Equipment, doesn’t include inflation, or remaining design fees.
Patrick said the initial cost estimate is developed for the planning process that, for this cycle, started almost a year before today so one year of inflation has already happened since the initial estimates were made. He added that it will be at least another year before this year’s projects go to bid so there will be two years of inflation to add to the cost.
“When you present estimated construction costs, you don’t include inflation in that cost knowing it (construction) is going to be a couple of years out,” said Sen. Ben Kieckhefer.
“Correct,” said Patrick.
The joint Senate Finance, Assembly Ways and Means Subcommittee took no action on the CIP budgets.
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