In hot construction market, UH pharmacy school bids come in well over budget

In hot construction market, UH pharmacy school bids come in millions over budget
Dan Meisenzahl (Source: Hawaii News Now)
Dan Meisenzahl (Source: Hawaii News Now)
(Source: University of Hawaii)
(Source: University of Hawaii)
John White (Source: Hawaii News Now)
John White (Source: Hawaii News Now)
(Source: Hawaii News Now)
(Source: Hawaii News Now)

HILO, HAWAII (HawaiiNewsNow) - The University of Hawaii is trying to figure out what to do after bids for a new pharmacy school in Hilo came back millions over budget, a sign prices are on the upswing because of a record-breaking construction market.

UH had $30 million in its budget to build a new College of Pharmacy building at UH Hilo, where facilities are spread among four or five buildings now.

But when construction proposals were opened in November, the lowest bid came back at $32.5 million, $2.5 million over the original estimate. The highest of the five bids was $35.5 million.

"So right now, the University of Hawaii, we're trying to determine what's the best path forward. And there's a lot of different options out there, as there are in cases of this nature when bids come back too high," said Dan Meisenzahl, a spokesman for the University of Hawaii.

Since the pharmacy contract has not been awarded, Meisenzahl could not explain what specific actions are being taken in that case. But in general, the options include scaling back the design to save money, known as "re-scoping."

"There could be a re-bid, there could be an effort to find more money so you can match the bids that came out, or a combination of two or three of those," Meisenzahl said.

Because of the huge volume of construction going on around the state at the same time, including the massive rail transit project on Oahu, private and public sector projects are seeing much higher price tags.

John White, executive director of Pacific Resource Partnership, which represents the Hawaii Carpenters union and 240 contractors, said, "This is the hottest construction market that has ever existed in the state of Hawaii. Last year, there was about $5 billion of construction projects permitted alone. That was about a 23 percent increase over the previous year."

With more than 28,000 people on Oahu working in construction last year – a record high -- it's harder and more expensive to find workers, White said.

White said UH's construction bid estimates made one to two years in advance can't keep up with the market changes.

"An estimate that is one to two years old in a market that exists today is just not going to be as accurate as if we were in a slower construction market," White said.

Meisenzahl said the high bids have created a delay of about two months so far in the UH Hilo pharmacy project, but the delays could grow depending on how long UH takes to resolve the situation.

UH has already spent $5 million on designing the pharmacy school that was originally estimated to cost around $50 million.  But the university already downsized the project once to make the $30 million cost estimate, Meisenzahl said.

The two-story pharmacy school would consolidate all of the college's facilities into one place, including lecture halls, labs, faculty and administration offices, lounges and other rooms.

Even some smaller projects are coming in over budget, according to UH project documents. Repair and replacement of air conditioning in some information technology rooms at Honolulu Community College were budgeted at $400,000.  But when the bids were opened Feb. 3, the five bids ranged from $500,737 to $716,300.

In late 2014, bids for the first phase of the Culinary Institute of the Pacific at Kapiolani Community College on the slopes of Diamond Head came in over budget as well.  UH had $23.5 million in funds available but the lowest of five bids came in at $25 million.

UH was able to move forward with the culinary project by moving some of the planned work to a second phase and doing some extra fundraising, Meisenzahl said.

To cut down on delays and cost overruns, UH plans to hire a single company in the future to design and build large projects, instead of hiring separate design and construction firms. It's a concept known as design-build.

"That's the thing that we've identified as being a more efficient way to get these projects completed on budget and on time. And that's obviously our very important goal," said Meisenzahl, the UH spokesman.

Meisenzahl said the first major UH project that will follow the design-build model will be a new creative media center at UH West Oahu. But that project won't move forward unless lawmakers approve funding for it, he said.

Copyright 2016 Hawaii News Now. All rights reserved.