H.B. 508 State Facilities Modifications: transcript

Thank you, Mr. Chair and Committee. There's a a third sub that I'll be talking to, and I'd like to adopt that when it's appropriate.

So the third sub makes some minor changes about, um, referring to the government entity and also, um, puts in, allows the division of, of facilities and constructional management to be able to use, um, payment and performance bond or not when appropriate. It also changes the, the date to make it immediately effective. Sorry about that. That's all right. That's it. That's it.

Oh, this is for the sub? Yeah. Okay.

Thank Mr. Mr. Chair. I would make a motion that we delete entitled embody second substitute House bill 5 0 8 and replace with third substitute 5 0 8 Discussion to that motion. All those in favor of deleting title embody of second sub house bill 5 0 8 and replacement with third sub house bill.

Thank you Mr. Chair. So, um, HP 5 0 8 was a bill that we've worked on all summer long, myself and Senator Ipson to try to figure out why we've had such cost escalations in our, our state buildings. Um, some suggest that any building built by DFCM is an a 30% increase in cost. Um, DFCM has been absolutely fantastic to work with to try to identify all the aspects of what actually does cause cost escalation. Um, just like most government entities, they're trying to do their very best and they put rules and, and policies in place to protect taxpayer funds. But sometimes those policies actually raise the bar with no benefit, which causes an escalation in price. So we went through every single facet of a building, every single system, every single product, how we can, um, act more like industry and still build high quality products that will last. Um, we met with the, the governor's office and we talked about, well, you know, we build buildings for ourselves. We never sell them. But the reality is we do buy regular industry buildings like the, the Taylorsville building. Um, that was the Amex building that was built by regular Joe's, if you want to call it the industry. And it's phenomenal. We have several buildings like that, but we wanna make sure that our buildings are up to, to code and excel in every aspects. But how can we streamline the system to save money? So this was literally hundreds of hours that we met with DFCM. We are actually working with them and the Dixie Tech building, um, just that process, working with them, it reduced the cost $12 million on that building. And we haven't even gone into design phase. So the programming, just that piece of restructuring what this bill does has had a significant result in reducing the cost of our building. So, um, we can go through all these different line elements, but it basically allows DFCM to utilize all the tools that they can to make sure that we're building a high quality building to set the lowest cost. And some of those things are, excuse me. Um, when they go to, to build a building and they're working with, I'm gonna call it the owner, um, sometimes they love to spend whatever money they have available because it's really not their money, right? So they say, I really like this wall with all this glass. So what we put into the back end of it is this shared savings incentive. And I'll give you an example. So in one of the buildings we were working with, it was a $300,000 cost, but we could have done it for a lot, lot, lot cheaper. And the owner says, well, I really need that. That looks really nice, I really want it. But what the DF SIM is allowing them to do, if they save on that price, they're able to share in the savings. So half the money will come back to the state, half of it can be used for them for other capital improvement projects. So it nets a lower price in the building. And it was amazing after they knew they were able to retain $150,000 for, you know, paving a parking lot, that 300,000 building was not needed anymore. So they, it actually gives them incentive to try to find cost savings. And we reevaluated systems, for example, um, air conditioning systems, whether they're rooftop mounted systems or a big chiller. How does it perform in a building? Um, if it's a a mechanic shop, how do we make sure it's, um, cool and comfortable, but also not using the most expensive process out there. So the, it's really gave them a lot of tools to open up and figure out how to do things. Um, one of the main components in this bill is allowing, um, entities like DNR or higher education or any other department to be able to build their own buildings in a certain aspect. So, um, 25 years ago, the limit was a hundred grand. They could build a hundred up to a hundred grand. Today you could build a really nice doghouse for a hundred grand. It's not, not much. So we raised that level up for, um, basically $1.5 million for most agencies. Some of the smaller schools like tech schools, snow college, um, they can go up to a million dollars. But we put in a really, really robust MOU process, which requires them, if they're gonna build these type of buildings, they need to fill out 2D FCM, who's building it, how much do they expect it to be? What is the square footage, all those pertinent information for it so they can manage it. Um, what's gonna happen because the state is still on the hook, right? There's, it's still their building. They still have to maintain it, but they can actually watch the building and if it goes off the rails at all, then they have the authority to pull that back and underneath the DFM control. So all the pieces that we've allowed flexibility, we've enforced or made it more robust that they have the authority to have the control necessary to make sure that we're still building the best quality buildings, excuse me, for the best price. The last part of this sub is, is the bonding requirements. The, over the last 42 years, do you know how many times we've been able to revoke a bond? This is a committee, the answer is zero, which is over a hundred million dollars that we have spent for absolutely nothing. Be knowing that DFC MAs already have a process in place with their contracting methods and their contingency funds that they use to make sure that, let's say a contractor dies or a contractor doesn't pay his subs or any issue that we would find in this industry. We already have the, the financial reserves in place 'cause we still have to pay for it, but fighting for the bond actually costs more than the problem that we're fighting. So on the Dixie Tech building, for example, that saves a million dollars right there. So we have in here that they still have the ability to use payment and performance bonds, but when not a necessary that they have all the pieces in place, they can verify and vet their, um, contractors by other means rather than just bonding. Um, they are able to do so, which would result in cost savings to the state. And with that, it's pretty big and pretty complex. It goes through a lot of pieces, but those are the main components that it does. Um, I think it's a really well done. We have great response from both the CFM and other partners. And, and, um, with that I'm open to any questions.

So I, I'm gonna support this, but it's more of a comment than a question. I, I know I've had some people express concern by going from a hundred thousand to, to 1,000,005, and I just want to just flag that as, as an issue. There's been some, some discussion that I've been part of that, like to see that number come down. But I just wanna flag that issue.

So that, that's a very good question. That was one that's brought up quite a bit. Um, I'll give you an example why we settled at that 1.5 to Southwest Tech in Cedar City wants to build a two bay diesel mechanic shop. It's a metal building, it's $2.5 million. So we're talking about really small buildings like a, a metal utility building for football equipment or something like that. DFCM still has complete oversight and, and, um, visibility in what the project is. Um, they were concerned that they might raise too many of 'em that they can't control it. But the reality is, is the people who are bidding on these projects are already some of the best that we have in the state. And the contractor is the one that's on the hook to make sure with DFMs oversight still. So though I, I think was a valid concern, I think we made the necessary changes to make sure the state is protected.

Good morning Chair Winterton and members of the committee. My name is Sean Guzman. I'm the Government Affairs Director for the City of St. George. I've been in that, uh, capacity for the last four years. Prior to that, I served 19 years as the St. George City attorney. And you might wonder why a local government is here on this bill. But as throughout as many governments throughout the state, Washington County and St. George City have participated in DFCM projects. For example, uh, Washington County contributed 10 million towards the renovation of our football stadium at Dixie Tech. And, uh, city of St. George is kicking in over 300,000, uh, towards the renovations of the Cox Auditorium. We also participated in the, um, uh, construction of the new courthouse in St. George, I say new, but it's probably been there for 20 years now. But, uh, there, there are many local governments that participate in these projects and as we see the costs, it was mentioned by Representative Brooks that we do look at it and say, the cost per square foot seems to be higher than what we're building our buildings for. And we look at the bonding requirements and the money that could be saved and the, um, capacity of DFCM with their personnel to go through and vet those contractors and, and say, those contractors are good contractors. They have a good history with us. And so there is no need to bond on this. And that cost savings on the bonds alone, to me, is worth it as a city and as a county down in Washington County and city of St. George to have this bill in place and give that option to DFCM. There are a lot of good technical changes in this bill too, and we would ask that you support the bill. Thank you. Thank

Thank you, Mr. Chair. Thank you. Committee. Uh, Gavin Gilbert on behalf of the Associated General Contractors of Utah, representing about, um, nearly 700, um, member firms throughout the state of Utah. First, want to thank the good sponsor on on, on his hard work with this bill. We've had a good relationship in working with him and the, and the state agencies through, um, the deep dives over the summer and, and the continued efforts to make, um, state project, um, cost cheaper for the state we're supportive of those movements and supportive, um, of, of those efforts. Um, again, appreciate the sponsor for, for working with us. Um, there's some changes in, in, in, um, sub three that, that he's been, uh, made for us. Um, the one piece that I, I'm not speaking for or against a i I suppose today is just on the bonding. There's some concerns that, um, my members have. Candidly, we've, we've, we've not had EE enough feedback to, to, to weigh in. I, we think it's probably workable, but want to continue those efforts to dial that in to make sure that the bonding requirements for the state are like that, those provisions work. There are some concerns with, with removing bonding entirely, but again, that doesn't mean that there's not room to make it up in, in this 11th hour. Um, but we think that there's ways that we can make that work. Um, but again, we have a great relationship with the sponsor and trust that we can, um, we, we, we could probably dial that in. Again, I, I, I'll just testify that the industry's still reviewing those provisions and trying to wrap, wrap our head around how the bond, the, the bonding provisions. But again, thank You. Thank you.

Alright. Uh, thank you for the time. Uh, my name's Wil Keefer. I'm with sapo. Uh, I am a bonding company. Um, the big concern that we would have with the bill, uh, tacking on too, uh, what, uh, Gavin Gilbert just spoke about would be towards, uh, you know, bonding provides protections with respect to lien rights. Uh, and contractors are unable to lean public projects. Um, and I'd be curious how the state plans to shoulder those potential costs, especially when, uh, bonding premiums are a fraction of a percentage of the total contract value that is, uh, being guaranteed by surety bonds. Thank you.

Thank you, Mr. Chair. I would make a motion that we favorably recommend third substitute, uh, what's the number? 5 0 8 House bill? 5 0 8 favorable recommendation.

Thank you. So I appreciate the comments that are being made. Um, since the state has bonding the whole time through the last decades, multiple decades, and they've never paid on 'em, they've already put those provisions in place because they've never been able to recoup on any of the bonds. So we have a, what's called an escalation, a consistency fund that also is there for this very purpose because we've been utilizing it for over 10 years in this very process. So I really appreciate the motion. I think this is a good bill that's gonna help the state maintain and, and build great quality buildings by, but still looking at the cost and build the best we can. Thank you.

Yeah, I, I agree with the sponsor. You know, I recognize there might be still a couple of adjustments that, uh, as we go, as we start experiencing, but at the same token, I feel actually good move forward.

Good morning, Mr. Chair and committee. Morning. It's, uh, a pleasure to be here. Before I start, I do have a second sub that we'll need to adopt and I'll be speaking to

Um, this is A-D-F-C-M bill. It's a division of facilities and construction management. Um, we've probably all had bills like this. This, this is enormous. It's a, um, really complex and one of our great staff members in this committee. Ms. Jarvis, was critical in this, um, putting this together. So really appreciate her support and her help. Um, DFCM is designed to be able to help us, um, build buildings that are of high quality and at the best price. And it's been in, um, in existence for quite a long time. And like most government organizations in their attempt to save money, they cost more money. And I think some of these regulations that we put in place to make sure we have these safeguards of the public funds, um, those safeguards just cost more money. And in the end we get this big deviation between the, the goal and where we're at today. And this is nothing against DCFM. They, we have good, good people there that are doing a good job. Um, and they were very, very good to work with to try to figure out where are these problems that we're seeing at this deviation. 'cause typically, um, we've seen consistently state buildings have cost as much as 30% more than if the public sector had done it. And, um, one of the, the comments was, well, we build buildings to keep, not to sell like the public public sector except we buy public sector buildings. Like we bought the American Express building and we're looking to buy the Covey Center. We, we buy these buildings and they're phenomenal, they're great buildings, so we're just sometimes spending more money where it, it is not necessary. So again, they were great, um, to work with us to try to figure out what we need to do. And so this bill, I'm gonna go through a bunch of different things that it does. Um, one of the very first things was, uh, if you've been on an appropriation committee, particularly for buildings, they come in and, um, and this again, nothing against DFCM 'cause they're trying to be, uh, a service to let's say a higher ed, let's say, let's say Weber State or something. And they want to build a new building and they're like, okay, we've built other buildings. We think it's gonna be X amount of square feet, it's gonna be $90 million. But we have actually no idea how much that's gonna cost. We don't even know what kind of building. We don't know how many square feet it's gonna be. We don't know what's gonna be in the building. We call that programming. So we picked this number to make sure we could have the funds to cover it. And Loa and behold, the building costs $90 million. And this is my opinion because many of our architects who are there try to service the, the customer, which is, would be the, the school says, well, I got $90 million to spend. And they build a $90 million building. So one of the first things we, um, identified in here is before an agency that includes higher ed or DNR or anybody of the courts, they must have programming done before they come to, um, uh, the TI now of, um, committee to be able to get funds. We wanna make sure that we're following a prioritizing prioritization process. Um, we had some concern this year when this bill came out because we have already prioritized the number one, two, and three buildings that are to be built. Well. Number two got really nervous because, um, the number one building and number three building already had programming funds or were asking for them and they hadn't. So are they gonna get jumped? Because we did that in years past. We would say, well, hey, we're shovel ready, we can go. So let's, let's, um, give us the money and we'll go start building, building that. That is poor process. The process should be, is like, what are the priorities and then how do we make sure that we, um, ensure we get the best product possible. So we are kind of establishing a better process on, on how we get buildings higher. Ed has complete control over the prioritization, which is good. This bill also moves higher ed buildings out of the TI committee over to higher ed, so they can kind of be, um, together and understand all the needs that are going on there. Um, one of the issues in the previous bill that I, I felt strongly about was if an agency wants to build a building, there was a threshold of a hundred thousand dollars that they could do themselves If it didn't cost more than that. So they could build, um, a doghouse, um, maybe a skateboard ramp. I mean, there's not a lot of things you can build that's, um, gonna cost less than a hundred thousand. I'm being facetious if you can't tell. But, um, you can't build a lot under a hundred thousand dollars. So we raised that limit to 1.5 million and created an MOU process, which DFM already has, but clarified it so we can make sure that DFM understands what is being built, who's building it, what, how big is it, what is the expected cost? Because the reality is it's still a state building and DFCM still has responsibility over that building after it's done. So we wanted to make sure that they're involved in the process, but more importantly, if the process is going or the building is going awry, that they can step in and claw that back, that authority back if necessary. Um, one instance, uh, an agency wanted to add onto a facility, so they just got some boards and hammers and nails and started big, wasn't up to code, right? We don't want that kind of stuff. It's also called garbage. We, we don't want that in the state. So we want the, um, DFCM to be involved in this process, but, um, anytime you add management to any project, you increase costs. So we're trying to find a way where if, if there's a smaller project, let's say a million dollar football equipment, utility shed, 'cause it's gonna be a big metal building's, probably gonna cost close to a million bucks, then the entity is gonna go out and hire a contractor or get bids for them, have them build it, and it's the DSM is gonna come inspect it, make sure it's up to par. We don't need another layer of management there that's just gonna increase cost for no benefit. So we really went through every single line item that we could have. What are the, um, excesses that we have in staked requirements versus what we need? Um, there's one, um, piece in the, in the spiel that there are exceptions. Um, the legislature has passed a little more stringent fire protections, which is great. No one wants to be in Ophir. So, um, if there are excesses contrary to ICC code, which is the code we use to build any building in the state, um, then the director would justify those reasons to the legislature. So there's this transparency. Um, okay, that's one piece. Another piece is when we start funding buildings, um, oftentimes we know that there's gonna be a contingency line item there because we don't know what costs really are until they actually start putting the hammer to the nails. And sometimes we have cost escalations. So there's a line item there and we have addition to the money that was allocated to a project. There's another fund that the DFCM has for cost escalations. So let's say we funded $70 million and it came out to 73. Well, they have this other bucket they can draw from to make sure that they have all their covered, which is fantastic, right? They need to have that flexibility. They're also able to use that bucket for other smaller projects or emergencies that come up to get taken care of. What we didn't want happen, which was doing before, and it's not saying anything they're doing was wrong, but it's providing more clarity is let's say that $70 million building only costs $68 million. Well, that $2 million would now go into that contingency bucket that they would have or that reallocation bucket, and they could use that money for other projects. So this bucket could have money going in and out of it without any oversight from the legislature. So what we're saying is you can't pull out of that bucket for, or excuse me, you can't put the excessive funds into that bucket. They go back to the state 'cause we allocated 70 and if there's some savings, that money should come back to the state as this bucket draws down, then they would have an annual RFA to replenish that bucket. So they still have the funds necessary, but now the legislature, particularly the EAC, will be able to see the funds going out and the funds going in for what projects. There won't be the slush fund, if you might want to use that word. Okay. Um, we do require a, a space utility, uh, utilization plan as well as when they're doing their programming. Um, lemme go through a couple other little things. And one thing that we, we did add in here that I, I feel is, um, really important and, and the governor is what really brought this to the top is we don't have a lot of programs that incentivize cost savings, especially with state buildings. It's more of a golden goose, right? If you want to build a building, every architect loves it because we have the funds, that's their show piece. It's gonna be here for a long time, but there's really nobody trying to pull back the reins. And I'll give you a little example. There's a building that we've been working on and literally we've been working on this building probably every week, right? 'cause see for this whole last year, trying to figure out, we've actually been working with the programming phase with one of the buildings that's getting ready to be built. And I, I noticed an interesting trend, um, the owner of the building, so whether it's DNR or a university, whatever else they want to get the most out of it, I would call it my wife theory. If there's money to be spent, let's spend it on the house, right? Let's make it bigger, better, whatever else. But there's, so there's not any restraint. So who's gonna do that? If the owner's not gonna do that, who's gonna do it? So what we uh, put into place is through the programming phase. As they start making the design for the building, that the owner has an incentive now to pull back. If they can save, let's say a million dollars on a project, then they would be able to retain up to 50%. And this is at the discretion of the director in their own pocket to be able to use for other capital improvements. So when we floated this idea of we wanted to do this, I actually saw an owner say, well, I really want this piece. And I'm like, well, that's gonna be about $350,000. You could get back about 150,000 you could use on a parking lot or that little shed you need back. He goes, we really don't need that. And it was wonderful to see, uh, that this in incentives are really valuable and actually save money because half that money at least would come back to the state. So we wanna make sure that our, our entities are being taken care of, that they have an incentive to do what's best for the state financial services, but also what would be best for them. So, um, I covered only a part of this, but you can see how complex this can get. Um, we really wanna make sure that we increase the amount of people that can bid on a, on a building so we can lower, lower the cost. We have more competition. So that was the, the whole intent of this. And I think after the second sub, um, we've got to a point that I think we have a, a really good process set up that DFCM seems to be supportive of. I haven't heard too many bad things from them. They've been really great to work with to make sure that we can move forward and kind of reset what D Fs M was intended to do. And I think, um, they're on board to make sure that they're good stewards of the state. So with that, I'm open to any questions.

Thank you, uh, Mr. Chair. And thanks for your good work on this. This is big complicated. Two questions. One, you're increasing the amount that an agency can kind of do on their own, uh, from a hundred thousand to 1.5 million. That's, you know, more than a, that's a 15 x increase in size. That's pretty big. I wanted to talk about that. And then second, this idea of architectural programming first start and doing architecturals first, um, before doing things. Could you talk about the both

Of those? Sure. Those are both really good questions. So the per the first part about the raising the limit, right? Um, that limit hasn't been raised for years. I, um, Christy, do you remember how long? It's like over 20 years, I believe it hadn't been raised. So one of it's just because of cost escalations, it's necessary. Um, the DFCM was concerned about raising it that much 'cause all these projects could happen and they can't manage all of them. Well, again, my point is, when you go build a building, especially one of a million dollars, you don't hire your buddy Joe to come build this. I mean, you get a contractor that comes in, he's the manager, he's the one responsible. You go through a bid process. Um, but what's more important to that process? What makes it work in my opinion, is the MOU process that we put in. So there's a memorandum of understanding a written document between DFCM and the organization that talks about what is the re the building square footage times gonna start, who's managing it, who's at the organization, that's gonna be their contact point, all the pieces that they need. So now they actually have more clarity and more, um, understanding of who's doing what. So they have better supervision. So DFCM isn't necessarily directly supervising it, but they know what's going on. There's an agreement of how it'll be run. And they can say, okay, I I agree you can just go do this on your own without my direct Supervision. Correct. And they, they have these memorandum understanding already for, um, like the u they can, they build like a $300 million hospital on their own because Jim Russell used to be the director knows what he's doing, right? Right. So they have confidence in him. And so this gives the discretion to, um, the director. But we, I felt strongly about that 1.5 million mark. And there is, if you down on the bill will forward, we do on higher ed, lower for, um, community colleges and tech colleges to a million mark because they don't usually build as big of buildings and they, they just, they're lean machines, right? So they don't really have a guy on staff that can do it. So they felt like, let's let's pull that down a little bit. And so we did that as well.

Thanks. And, and the architectural,

architectural first before you come back and ask for other money again, This is won that Won't that increase the cost 'cause oh heaven Architects, architects love to do

No, it, it actually will. That's the single thing that will reduce costs more than anything because before they come in and ask for money, they need to have the program done. So the that means, and program's not the architectural part of it. It is like basically think of a building blocks. We got classrooms, we got mechanic space, we have office space, whatever. And we put it so they know this is gonna be a 50,000 square foot building or a 90,000 square foot building. We know what's going into the building and then they begin kind of designing what should it look like? Like not the architectural part of it, but we want it made out of like tilt up concrete or is it gonna be a block or is it gonna be a metal building? All those type of components. So we have a really good cost estimate of what we're building. 'cause we actually know where we're building before we're like $800 a square foot. That, that doesn't tell me a whole lot except it costs a lot of money. So as we met over this and we just with, we met with um, all the engineers and architects and contractors and myself and others, um, Senator Gibson and um, a bunch of other people, um, Marvin Dodge, DFCM, that's the single thing that we felt was gonna reduce the price the most because there's not this magical number that once you say it, it's out there 70 million bucks and they always meet it. So instead of doing that, they could come to us and say we want to do a building. DFCM would probably tell the committee or the EAC, we anticipate about this much money, but we don't know. So we can prepare for it. We can know that yeah we have at least $70 million over there, but we're not giving you any until you tell us what you're building. And that was the problem. We were funding people who had no idea what they were building or what it would look like or what it would cost. Now they come with that program and say, this is gonna be a $60 million building and then we fund it and then we try to work back from w cost savings from there. That was a good question. Thank you.

Thank. Thank you Mr. Chair. It seems like we just had a discussion about, from another representative passed a bill about, uh, making sure that DFS DCFM, you know who I'm saying D FM was more involved, was more involved. Could you speak to, 'cause it seems like this might be in conflict with

No, um, there's only one bill that I know of that's in conflict of saving money and that was a bill that I believe passed the committee that says we need to mandate certain pay levels for certain subs. I think that's can be counterintuitive to this process, but we want, we want DS M involved. Um, before, I think it's fair to say that if there's someone who's gonna go build a small project, let's say it's under a hundred thousand 'cause that was the limit before, they really didn't, they just went and did it. Right? So DFM is like almost surprised sometimes that they, where did this happen? Where did this building come from? So what we're trying to do is make sure we create a process that is more transparent and DF CM is aware and can follow each, each building through its process. So yeah, it's possible that more agencies could build their own facilities. But DF SIM's actually aware of them better I think with this. Okay. Because, because I I think we want have them be aware Oh sure. They know much better than than a school district superintendent and those guys trying to figure this all out than on their own. Yeah. And, and some of those superintendents are phenomenal because they have a, a skilled person there and some aren't because they're out in, you know, Podunk QSA and they don't have someone there to do it. But I, it's easy to kind of throw DSM under the bus because it's such a big organization, but they really are trying their very best and they follow code. What this done is finally trying to get some of their best ideas and a lot of these ideas come from them to be able to make sure that our statutes match the rules and policies that are in place for the driver of the, the best dollar. Okay.

Thank you Mr. Chair. Um, so I guess my question may not be exactly related, but I'm just trying to figure out, so when I look at um, higher education construction costs and I compare 'em to say public education construction costs, I think public education kind of does something similar to this right now where they do a lot of the architectural design planning before they go out for bonding typically or however they're going to, uh, essentially raise that money. But their construction costs are consistently much higher per square footage than even our higher ed costs. And I'm just curious if you could help explain, 'cause I know this isn't trying to follow that exact same process and it's a very different model, but I just want to, going back to representative Cutler's question about is this going to increase the cost we think or decrease? And I'm just curious if you can Sure.

Walk through that. That's a good question. Um, using public ed to this, it's, it's hard because public head's so scattered. We have buildings that are built up north here that are just ridiculous in public head. But in the southern Utah, Washington county builds the cheapest per square foot buildings than anywhere in the state because they pick a building and they build 15 of 'em. And that's usually tilt up cons, um, tilt up concrete construction that they're all the same so they can just go and just pound 'em out. And they have done a phenomenal job. They got, they got an architect on staff, they have their construction manager on staff, that's what they're driving for and they've done a really good job for the people of Washington County. So I wish other public ed would follow that process, but um, and that's kind of where we're getting at is the reason that it saves money is 'cause they know what they're building. Oftentimes the ones that we've seen, the concerns up here is 'cause they're competing with the Joneses, right? And they're trying to build the best thing that's next and there's no cost concerns with that. And what our bill is trying to do, this bill particularly is trying to do just that piece is what are the needs and then what we can build to those needs rather than build to how much money you have. So I mean, you see that around, you have people who build a house of what they can afford or they build a house 'cause they got a lot of money and they want everyone to know about it. Right? Some of our public ed buildings look like that. So I think A higher ed too sometimes. Oh yeah, we call 'em Taj Mahals, right? Mm. Sometimes and, and it is a concern and there's a co the cost per square foot, I think sometimes not a fair, um, metric because we have let's say a classroom which is just seats or a lab or we want a building that's really the showcase for, and I'm, I'm modeled for that to build that one building that's on the campus that really stands out. That's, that's great to build that type of building 'cause it's gonna last a long time. But what are we really trying to get to? Um, we also measure in that square foot we call FF and e, which is furniture fixtures and equipment. And so there's that also accelerates the price. We're like wow, $800 but you got like medical labs and medical gas and all this other stuff in there. So some I we're trying to get DCFM and they're gonna be doing it with this is breaking those pieces out so we can see construction costs per square foot and then ff and e. So we really can have uh, a side by side metrics to see what buildings cost.

Thank you Mr. Chair. No, there's no sub here, right? Second sub. We gotta approve the Second sub. Okay. I, uh, would make a motion to adopt a second sub for HP 5 0 8.

Thank you. I'd like to make a motion that we pass for the favorable recommendations second substitute HP 5 0 8 state facilities modifications.

Yeah, I would like to make a comment on this. Um, this was such a heavy lift. We could not have done it without dfc M'S. Help, without Marvin Dodge and the governor's office. Without Ms. Jarvis and, and our drafting attorney, they put in so many hours to get this where it needs to be. So I'm really appreciative of all the people to help get this across the line. Okay. Appreciate that. Thanks for the work. Alright.

Yeah, I'll just say real quickly I agree with, uh, you representative, uh, looks like a very collaborative, collaborative and successful, uh, project. Putting this bill together.

Thank you Mr. Spreak. ProAm, I think each one of us has probably taken on a challenge that's taken all your time. You work on it all year 'cause it's a really deep and complex project. And, and this bill is, is that one for me? It's the DFCM or the Department of Facilities and Construction Management. They're the people that oversee all of our state buildings and make sure that they're get built in the best way possible. Unfortunately, what's tend to happen is they cost 30% more to build a building than if you went lost A year after her husband's death appeared in court today for the first day of her murder Trial. The autopsy, toxicology and report show That Eric, that commercial was brought to you by, I'm just kidding. Um, anyway, so, um, working with DFCM, they have been absolutely fantastic. We have really great people over there that are trying to do the best, but over time statute has changed a little bit. Rule has changed a little bit that's basically re elevated the requirements and elevated the processes that's cost more money. So they've worked with me really, really, really well to try to figure out how we can save, save money. One of the biggest issues that we deal with in the state is an agency will come and want to build a building. And so DFCM does their best guess of how much that building would be built, but they don't know what we're building. They don't know how big the building is. No, don't know how many square feet the building is. So it really is a, a, their best guess. And so let's say it's $85 million Loa and behold, when it gets built, it cost $85 million because they did no planning. It's kind of like your wife coming to you and saying, we want to build a building and it's gonna be a new house and it's gonna be a million dollars. And you say, well how big is it? It's gonna be a million dollars big. Right? So there's there's no blueprints, there's no plan, there's no effort to really put the, the preliminary work in. So this bill addresses that. It also takes, um, where agencies, let's say whether it's DNR or a school, the limit before them doing their own projects was a hundred thousand dollars. You can't build much than a really nice doghouse for a hundred thousand dollars anymore at the state. So we raed that level up to $1.5 million. But by doing so, we also increased the transparency between the agencies and the state. So they know exactly what's doing this. We called it a memorandum and understanding they, when the building's gonna be built, how much it's gonna cost, who's managing it, all those type of things. So we actually have more transparency if they're building a, let's say a nice big $1.5 million metal building and things start getting sideways because DFCM still is the inspector, they are still responsible for that building. They have the ability to claw back that authority and make sure the building is built to code and properly. If, um, for some reason we want a building to have higher than what we call IC standards the code, then the director can approve that, but he has to justify why those are there as well. Um, we make sure that all higher ed buildings are now moving from the TI committee to the higher education committee because we wanna make sure we're following the process of what buildings need to be done and not have leapfrogs in, in years past. Someone may have not done their programming yet and another school will say, Hey, we're ready to be billed, we're shovel ready. And they would leapfrog the process. This makes sure that the higher ed board is in control of what buildings we need. 'cause we want to build the most important buildings, the biggest need first, rather than someone who has more political crowd or put their, you know, have the money ready for it. So this kind of solves I some of those problems. Um, it it's pretty lengthy, but I think you get the idea of what we've done is try to make sure that we have a, a transparent streamlined system that gives us the highest quality buildings with the, the best process in place. And with that Mr. Speaker, em, I am open to questions.

Thank you Mr. Speaker. I wanna rise the support of the bill. Um, I attended a couple of these meetings with the sponsor from, uh, St. George. He did a fantastic job working with, uh, the government ops, uh, in, within the, uh, executive branch all through the interim. And I think this is a really, uh, excellent bill that covers the bases very well for future construction. So I'd recommend everybody support it. Thank you.

Thank you. I, I'd like to give a lot of kudos to those people. That helps. I, one of our good representatives from Ogden was also part of this process to make sure that we are addressing the needs for the state and making sure that we're having a fair process. So more contractors have the ability to compete on these projects, which eventually drive the price down as well. And with that, I, I appreciate your support. Thank you.

Thank you Mr. President ProAm. So This bill requires Representative Brooks done a lot of works as a summer on this with the FCM to get this to, I think, a good place to help curb our costs in building buildings. This bill requires programming before funding to clarify the project scope up front. How can we fund a building when we don't even know what's being built? Talks about that in the bill. This bill clarifies a memo member of understanding process that allows state entities to directly supervise projects up to one and a half million up from a hundred thousand hasn't been changed. That figure hadn't been changed for years. It provides an additional transparency for D-C-F-M-D-F-C-M of who the contract building is, expected costs, timelines, et cetera. It also gives DFCM authority to pull back control if the project has any hiccups. It gives the director of DFCM the ability to use incentive programs to encourage cost savings from the owner that can be shared with the owner and the state. This bill does not eliminate bonding. It gives flexibility to DFCM where appropriate it, where it is appropriate. And it's shown in lines 9 0 9 to nine 17. D-F-C-D-F-C-M can claw back projects that pose risk or not meeting standards to the state. The director may approve designs and change resulting in cost savings or betterments where appropriate can be justified. And it requires higher education buildings to go through higher education approval process with Adam. Open to questions.

Thank you Mr. President. Pro tem. Um, sponsors yield to questions? Yes. The sponsors yielded. So, um, I'm concerned when you mentioned clawback, uh, project from, um, an entity that's working on it, would this limit the ability for local agencies to have local control over their buildings and have local people building those buildings? I know places like, um, you know, uh, in our far corners they actually, this is, this is a lot of industry that comes to their part of their, their neck of the woods. And would this limit their ability to hire their local workers? Senator Ipson?

No. What it does do is give them the, the ability to get a crop project back under control. It doesn't control who they use. Senator Rebe, Thank you.

One more follow up question Please. Please. Um, so I I I'm concerned about the definition of whether they think it's being responsibly built or there is some discrepancy between DFCM and the contractors. I see. Is there an appeal process where they can, um, work out that conversation? Because if you're in the middle of a project and DFCM comes in and says they think you're doing it poorly, that might be a, a big, um, a big hindrance for our contractors to wanna start working with our state offices. They follow ICC code and it, they know if it's not in following code, that's when they'll pull it clo back. So there's no appeal process? Pardon me? I didn't hear that. Senator, if, since she asked if there's an appeal process. Yes. Um, I didn't see it. Can you tell me what line that's on? 'cause I couldn't find it on there. It, it, it follows the code. That's why it's not in the line. It follows the code. So there is no appeal process if they disagree upon if it's following code or not. If it follows the section code, it's in the bill.

Thank you. I think Mr. Speaker brought to question to the sponsor, uh, Has yielded Yes. The, uh, in the presentation it was, it was clear that the DFCM can still require bonding and, and that that's an important tool and it also allows 'em not to, uh, require bonding. That's correct. Right?

That is correct. They have the discretion to do that Discretion.

Uh, in the case they elect not to, uh, require bonding. What, uh, the, the bond an owner with a bond, uh, can threaten the general contractor not performing to, uh, uh, uh, can, can threaten the, the contractor. They're not performing to call the bond. And that's a, that's that really puts the contractor that they're, that they need to get, get themselves in shape. Uh, then also a subcontractor working for the general contractor. If the general contractor's outta line, they can use the bond to manipulate. I understand there's some safeguards in the bill, uh, to address those concerns. Is that correct?

Yes. Well, under this procedure they'll have a 5% holdback that they're holding that they can pay 'em anyway. And it, the DFCM has, has done enough work and they're professional enough with their supervisors that I think we're okay with that.

Thank you. I, is there a fund that's gonna be worked on to a safety fund as well? Yes. There, there's, we already have a bucket of money set aside for that. And there is a process in this bill that will give them the opportunity to put money in and over a period of time we won't need bonding. Thank you. Uh, one more question, if I may. One of the, one of the, the opportunities here is to look at a savings on because of this. Do you have a sense on what the savings would be?

It's in the millions. Thank you Mr. P ProAm.

Uh, will the sponsor yield? Yes. He has yielded, yes. Okay. I, I read in this bill that, that, uh, we're going to save $10 million. Is that right? Senator Ipson? Yes. So I I I'm kind of curious. I I Why isn't that, uh, in the fiscal note?

Sorry, I thought, um, Senator Ipson show The 10 million Anyway. Already passed. So this is Mark yellow because we don't know exactly what it's gonna be. Each building's gonna be different. That's what it's projected to be. So the, so the, The Dixie Tech building that's under construction is, we figured we've been able to save $12 million so far what we've done with this bill, Senator Johnson.

So are you saying that the fiscal analyst made a mistake? Check The status of it.

Senator Ipson Say that again. He's asking if the analyst made a mistake. We don't know. That's why it's yellow. If you look the fiscal notes marked in yellow, we don't know what the projecting savings total is going to be. We can only estimate that. But there will be savings. We're sure of that.

I must be missing that in the fiscal note. It's not included in the fiscal note, but the fiscal note by the fiscal analyst was marked unknown with the, that's why it's marked in yellow on the board. Third Paragraph. Thank you.

down, it says it'll save at least $5,000 a building.

Uh, thank you. Uh, just following up on, Uh, the last line of question. I think I heard the sponsor say that the cost of, uh, the cost savings on one building in St. George would be $12 million. Is that the same? That's

Not on bonding. That's the total cost we've saved by using the process in this bill.

Senator Fillmore Thank Mr. President. What is, what is the cost savings on bonding Senator Ipson? Million?

1 million? Yes.

And is, is that typically, uh, we pay between one and 1.5% on a bond from what I understand. Is that correct?

Senator Ipson up as much as 2%? Pardon? It's up as much as 2%. Okay.

So I just wanna lay out a scenario and see if I can get, uh, an answer to this. So, uh, there's a building going up and we're, we pay the, uh, you know, the standard, uh, calendared payments over the, that are based on the level of completion of the building. Of course, we don't know exactly what the subcontractor uses that money for, but we would hope that the, that the, the general contractor is using that to pay his employees for the work that they are doing and the subcontractors for work that they did. Uh, I think the point of a bond like this is to ensure against a general contractor that goes under right and leaves, leaves the project incomplete and leaves maybe subcontractors, uh, or is on own employees potentially unpaid in that situation where we have paid. Um, but the building is incomplete and some subcontractors are unpaid. What happens then in the absence of a bond? What is the state's liability in that situation?

Well, we don't pay it till it's done. And that's why we keep retention. And there's always the risk that the general contractor holds the money back and doesn't pay the subs. But the credibility of the contractors that we use in this state and we've, the bonds have rarely ever been used. We, uh, the subcontractors have to produce their draws are based on an itemized list. And we were, we will be working with the generals to make sure that they're paying as they go.

Yeah, uh, I appreciate that answer, but I don't think it was an answer to the question I asked. In a scenario where a general contractor does not fulfill its responsibilities to both complete the building and pay subcontractors, what is the state's liability in the absence of having issued a bond? They'll Take over the contract, they'll take over the job, they'll take the place of the bonding company and they'll, and in fact take the place of the general contractor and replace it with another contractor. And to be clear, BFCM will supervise the finish. So I, I just wanna be very clear, the state's liability under this bill would be to pay to finish the building with some other contractor probably and to pay all unpaid subcontractors. Is that correct?

Senator Epson? Yes. To a point. 'cause the paying the bills in tranches. So they're already paid up to a point. All it's required is to finish the building.

Uh, I think I heard a contradictory answer there, Mr. President. I heard that it is the responsibility of the state to a point and that point was to finish the building, is I think that's what I heard. Is that correct?

Well, that's correct. But if also if there's unpaid bills, they're, that's part of the bonding process that the state's going to assume in. The money that we set aside to take the place of the bond will be to draw on that.

Okay. Money. So yeah, obviously if, if the building was incomplete, there will be a five, at least a 5% holdback plus the one or so percent set aside that we do. So we've got 6% of the cost of the building. I'm being very specific here 'cause I want this on the record because this is the question that I am, uh, being asked about by stakeholders on this bill. Out of that 6% or whatever is owed above that 6%, the state is liable to pay any unpaid subcontractors who worked on that facility. Is that correct? That's right. Okay. Alright. And that's what the, that's what the money that's put in reserve is held for

Uh, thank you Mr. President Prote. As I, as I'm listening to this back and forth, I'm thinking a little bit about, um, my other day slash night job where we are in a medical space and the decision has been made to self-insure. So like in the University of Utah Health System, there's a, a self-insurance process by which we do take on some, the, the system takes on some risk, but then also pays out. Am I kind of hearing the same sort of a, a setup in what you're envisioning?

Senator Vickers? That's exactly what this is the University of Utah self insurees at the, um, met Center. And this will follow a similar format.

Thank you. Thank you Senator.

Anyway, uh, I would just like to be in support of this bill. You know, we're basically self-insured in most everything in the bond. We are actually self-insuring ourselves. We pick our contractors pretty much, and it costs us much to go after these bond companies sometimes. And you may not even get it from them, uh, to cover these costs. And so being self-insured, our state's big enough to do that. And we've had very little default in this process that we've had going for several years. And so I would just say that we need to, uh, save the money where we can. And I believe this is saving us money.

Uh, I really like this bill. I think that it makes a whole lot of sense. Uh, let's zoom out a little bit and think about what we're talking about here. Uh, oftentimes what happens when you try to get a building is it's, it's a really rough process that they give to DFCM and tell them, Hey, give us an estimate on how much this is going to cost. And what this says is before they have to give an estimate, the requesting body actually has to do a little bit more work so that they can narrow in on what the actual pricing is. And then they say, Hey, there's a few elements in this that may not be the best elements or are not value engineered. And they say, and you're incentivized to try to get that down if you think it's worth it. And so now they've got a little bit of skin in the game to keep costs down as opposed to say, let's just build what we can get and let the state bear the brunt. So what that means is this allows for more buildings to be built out of, out of, uh, when we have, uh, income tax money, but it also allows for more projects to be built when we have general fund money because the money goes further because the estimates are more precise. And when you don't have precise estimates and you're trying to manage within a budget and you don't want to come in over budget, everything comes in over budget on the estimate so that you're not getting out of control in your cost. This is a fantastic way to manage it. And the way that I put it is, you know, if you've ever heard of the prisoner's dilemma, it's the idea where you kind of pit pit projects against each other by creating an incentive for the receiving entity to cut down on their costs. You're creating a prisoner's dilemma for them where they now have, have skin in the game. It's not, you know, it's not just the state. You know, they want their building and the state is keeping it from them. Now they want their building and they're in the process of trying to keep the cost low so that the state can give it to them. So those buildings that you've been needing in your area that you're trying to get to, now we get to those faster because the cost goes down. Second, let's talk about the bonding issue. This is not a new issue. We have been bonding for about a century now, if not more. We have a really good idea which contractors we trust and which ones we don't. And I promise you that those contractors value the state's business far more than they value an insurance claim against a bond that is going to fight them. Now this does not say that the state can no longer do bonding to the contrary. If you go to line nine 11, it says subject to section two, the division may require performance bond. So let's say it's a new contractor who doesn't have a who, who doesn't, you know, the state hasn't shown that they have a good track record. And so now they say, you know, you are a new contractor and we are requiring you to get a bond this time. Your bid came in lower than we expected, lower than what we feel is necessary. But you're promising you can, you can perform on this. So what we're going to do on this bid is we're going to require a bond and they're authorized to do that. But if they have a contractor that they have built 25 projects in a row and never had a problem and they say, you know what? I'm pretty sure 26 is not the pro is not the one that's gonna be the problem. They can forego that. And let's talk about the numbers. This is last year there was about 200, a little over $250 million sent to DCFM and I screw up the acronym every time, whether it's DFCM or DCFM, I don't think it matters, but I probably have screwed it up and switched a few times. Me too. In any event, $250 million. Now most of that is project based, meaning that is going directly to projects. So if you, if you pull back 1%, you know that's a lot of money that the state is paying for that bonding and it even in one year, it does not come anywhere close to the liability cost of paying out every single claim the state has ever had for the past like 30 years. So in one year of savings, we probably cover the liability that we would've had for like 30 years of claims. Senator Vickers, this is an absolute no brainer. Like the things that are being said are protectionist and they don't help the state. This is a bill we should pass. It saves on cost and it moves the needle in the right way and the protections are there that we need. Thank you.

Thank you. Uh, we've had a good discussion here. I believe that D-C-F-D-F-C-M has the expertise. I'm doing it too. They have the expertise, they have building supervisors on the job that are supervising these jobs. We know what we're doing, that they know what they're doing. I ask for your vote on this bill. All right, so the motion is shall third sub. I make a motion that this under suspension rules that third substitute house bill 5 0 8 pass.

Thank you Mr. Speaker motion to concur with this Senate amendments. Thank you representative. That motion is an order. Would you like to speak to it? Yes, I would. It was actually my amendment that I made into the Senate. Um, this bill was a pretty hefty bill and it took some time to get the language from DFCM into this bill about this component. It's about bonding. The meat of this is on line 52 in the summary that says that it authorized the division to require performance and payment bonds when necessary to protect the division from financial loss or performance risk. And on lines 9 0 9 to about nine 14 is where it's spelled out in code and that's the meat of the amendment. With that, I'm open to questions.

Thank you Mr. Speaker. I just wanna stand in support of this bill. I appreciate the sponsor coming to the table and helping us work through some critical, uh, bonding issues that were of concern to a lot of people. Uh, this puts it in the hands of, uh, DFCM, who is very capable of understanding where these risks exist and, uh, we'll, we'll have the best interest of the state in mind, so appreciate the sponsor, willing to make those changes.

Mr. Speaker, will the sponsor yield to a series of questions? Yes, Representative Brooks, will you yield? Yes, representative.

Thank you Mr. Speaker. I was just wondering, on line 50 where it talks about it, it exempts construction contracts administered by the division. So that was just above the line 52 where you were talking about authorizing the division to require the performance and payment bond. What is it exactly talking about? About exempting the construction contracts administered by the division from statutory performance and bond payment requirements?

Thank you Mr. Speaker for that question. Um, currently in law, the state requires payment bonds on every single building that we've built. So what this does is it accepts us from that requirement and allows DFCM to use their discernment on which buildings are necessary to bond on which ones are not.

Thank you Mr. Speaker. And then my next one was just about on line 90 about the failure of the government entity to obtain bond payment and the right of action. I just wonder if you could go into that a little bit more as well.

On line 90, that's the existing code. Oh, I'm sorry. It shows up red on the comparison, so I just wanted to make sure for section one, section 14 dash one dash 19, it just says it's amended to read this and it's all in red. So Yeah, so it, it refers to that in, in code, but basically it's the same, um, concern that we had before. So if an entity is failure to get a bond, they have the discretion to make sure that they have qualified contractors doing work that they feel comfortable with. That's not necessary because bonds are extremely expensive. For example, our beautiful north building was built by a very reputable contractor, but we spent a million dollars just in case they didn't do their work and they've done tons of jobs for us and the millions and millions of of dollars and we could have saved a million dollars for this unnecessary requirement.

Okay, thank you Mr. Speaker.

Thank you Mr. Mr. Speaker. Would the sponsor yield to, uh, a question? Representative Brooks will yield to a question?

Yes, I will. Yes. Representative Collen,

Uh, there are some who are, are concerned that subcontractors aren't, uh, protected because on public projects they can't, uh, place a lien against the, the primary, uh, contractor like they can in the private sector. And if we do away with these bonds that they won't be protected. How, how, how would you respond to these or, uh, these folks that are concerned about that, what's the best way to address that concern?

But I have to refer to my rural folks to use some farm orders for that. But the reality is we have to pre-qualify contractors that don't do what you're suggesting. The the whole idea is that, um, if someone fails on it, the contractor is still responsible. So we have a lot of tools with DFCM. One of 'em is a contingency bug, so there's funds there in case such a thing arises too is they had another tool is called retention. So when a contractor does work, which is really the subs doing the work, um, bef when they get finished, they submit it for a draw. That draw gets paid out to the contractor to pay the subs, but the state retains 5% of that to make sure they are falling through to the end. So we actually retain money to make sure that's being taken care of. D Dfcm feels very confident this is all the tools are in place to make sure it happens.

Thank you Mr. Speaker. That'll help me, uh, explain this to my constituents.

Thank you Mr. Speaker. Uh, I had a chance to talk this sponsor of the bill be before this, uh, about some of my concerns I've been in, in the business for a long time in construction and where we had to pay for performance and payment bonds and they cost about one or 2% of the project. Uh, so the costs are, you know, they can be expensive. What they do is assure that if a contractor fails to perform, then they can, the owner can, uh, contract with someone else and the performance bond will cover the difference between the cost of the first contractor and the new one. And then also if they have some quality issues, they can take care of that. The, the payment bond. Make sure that the subs and suppliers are paid. And I think, you know, when you're a bonding company and you're gonna bond a contractor, you're gonna make sure they're reputable or you won't give them e you either won't give them a bond or you won't give them a favorable rate on the bond. And so there are some protections that way, but this might, you know, with, I think this may be okay to try out and see because I think that, uh, you know, there's, there's some keys. You gotta have a good prequalification, um, process and a de qualification process and then you've gotta have some protection for the substance suppliers and uh, where this is kind of optional, depending on the job, I think we can kind of put our foot in the water and see how it works. But um, I think we just need to be aware of those risks and manage that. But it's probably worth, uh, seeing if we can save some money as a state. So thank you. I think I'll support this and see where that goes.

Yes, thank you. I really appreciate the comments, especially from our good representative from Lehi. He's been in this industry, he knows the ins and outs and sometimes the shady things that some contractors can do. Um, the reality is that over the last 42 years we have very little opportunity or had, um, incidences where we've had to revoke a bond and where there were cases, the difficulty for the bonds actually paying is would cost us more to try to do it than it was actually what we're trying to save. So DFCM in their wisdom has actually built these tools in place to make sure that we have contingency buckets. We have qualifications more than just if they can bond or not, that are they qualified to build a project and make sure that within contingencies there's, which are basically a little extra on each line item that we're concerned that may have some risk. So we don't have that loss in turn to the state. So I have great confidence after working with DSM to this project too. I was kind of quite suspicious about their great people and great professionals that know what they're doing and have put this in place as we move towards self-funding and self bonding for the state. With that, that's my presentation.