Loudoun County, School Staff Plan for Growing Construction Crunch

Loudoun School Board members and staff members were startled earlier this month when only a single construction firm entered a bid to build a new middle school—and that bid was $23.4 million, or about 25%, over the project budget.

The district administrators were able to scrape together the money for the much-needed middle school, which is hoped to relieve overcrowding at other schools in the area, especially Brambleton Middle School. They did it through a mix of new grant funding from the state, scrapping plans to renovate an old school building for a new Staff Training Center, and trimming $6.3 million in project costs. But it also prompted a warning from Chief Operations Officer Kevin Lewis that those cost-cutting measures were particular to that middle school, and School Board members to ask if that sort of problem would come up again.

The Loudoun County government and the school system have aggressive Capital Improvement Programs, the parts of their budgets that plan for new construction, as both the county administration and schools work to keep up with the county’s continuing growth. But they are also facing growing prices to get those projects built.

At their Aug. 9 meeting, School Board members expressed concern that only one firm bid on the middle school project, when four contractors had been pre-qualified to handle a project that size. Lewis said the other three pulled out on bid day.

“What everyone is dealing with right now is the pressures on the market,” Lewis said. “There’s a tremendous amount of work out there.” He said one contractor expressed concern that it wouldn’t have the labor force to complete the project on time.

Those concerns have also prompted school staff to consider an alternate method of procurement for some projects, less common than the typical lowest-cost bid war to build a project that has already been largely designed. Called “construction manager at-risk,” the alternate method would see a construction contractor brought in earlier in the process, consulting on the project’s design and cost estimates. Once the project is ready to build, the construction company commits to deliver it within a certain maximum price, absorbing any cost overruns beyond that—thus, at-risk.

Lewis told the School Board that the staff will be looking into that method as they look for ways to expedite a planned elementary school.

Lewis declined to be interviewed for this story through school Public Information Office Wayde Byard. In an emailed response to inquiries, Lewis wrote that school staff members are evaluating construction market conditions to see whether they will need to make any changes to the capital budget.

But the county government, for its part, is already doing that budget work, with long-standing contingency planning and a budgeting process that virtually never stops. County budget staff members began their work on the next annual budget almost as soon as the current fiscal year began and have already held their first meeting with supervisors on the county’s economic and financial outlook and budget priorities for next year.

At that meeting July 12, County Administrator Tim Hemstreet warned supervisors that they will face budget challenges that Loudoun County hasn’t seen in years, as real estate values slow their growth, the massive pandemic-era infusions of state and federal funding stop, inflation drives up prices, and new General Assembly legislation take a bite out of data center taxes—all of which will hit the county government’s tax revenues.

But County Department of Finance and Budget Deputy Director Megan Bourke in an interview Monday said, while the county’s day-to-day operating budget may be hit, the capital budget will see less of an immediate impact.

“The CIP is a huge cargo ship, where it really takes a lot to slow down and pause capital projects because there’s so much planning,” she said. “The timeframe to design and then execute capital projects is so long that you don’t get a lot of benefit from just stopping projects.”

And, she pointed out, the capital budget, which includes everything from roads to fire stations to parks, is based on long-term planning and direction from the county board: “It’s so prioritized and so based on other standing direction from the board, through the comprehensive plan or the Countywide Transportation Plan or the various master plans we have, that at some point we’re going to have to do that project,” she said. “It’s not going to go away.”

The county, too, has seen some projects go over budget estimates. Bourke said there has been an influx of construction projects and contractors have their pick of projects to bid on. And that is already factored into the county’s budget planning.

“We over the last few years have made a really deliberate effort to build up our contingency planning,” Bourke said. “So we include contingency budgets not only in a central account, but we also include construction contingency in our project estimates to mitigate some of the risks of fluctuation and inflation.”

She pointed out that staff members annually recommend allocating some of the county’s year-end fund balance—unspent funds at the end of a fiscal year, such as from savings from vacant jobs or unexpectedly higher tax revenues—to the contingency fund, conscious of an “ambitious” capital program.

“The board really buys into that pre-planning to mitigate that risk, so I will say that we’re prepared to weather this construction environment, because the board has placed such a deliberate emphasis on planning for a properly-funded contingency program,” she said.

It also helps, she said, that the county government has a reputation for paying its bills on time.

She said impacts to the county’s capital plans will most likely be seen in projects farther into the future, beyond the county’s six-year window for funding capital projects. Those projects have less-specific estimates for costs, and supervisors have not yet approved specific funding plans for them.

“Where I think we’ll see the impact of this environment is likely in the out years of the CIP, whether we have to not add as many projects, or increase the amount of contingency we’re planning for those projects,” she said.

4 thoughts on “Loudoun County, School Staff Plan for Growing Construction Crunch

  • 2022-08-25 at 11:38 am
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    As someone who bids and executes construction projects around the world, I can tell you that construction problems are not going away any time soon. The same problems described in the article that effect Loudoun can be found across the country and across the globe. Supply chain issues with all kinds of products, labor shortages, and hyper-inflation on long-term firm fixed price projects all make for a very demanding construction environment. Enjoy!

  • 2022-08-25 at 6:59 pm
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    OK. This issue is new compared to what the prior school boards dealt with so how about we start with WHY? ALL schools in Loudoun are almost complete duplicate designs by category so there is no RISK regarding determining what the building will cost or how long it take to build or even. who are the suppliers. So again WHY only one bidder? Is the land this school board chose somehow compromised? Did the seller of the land donate to school board members to look the other way and now the builders see the absurd risk? In my experience as Chair of the finance committee for 7 straight years this is a paradox that the article does not explain nor should it be acceptable to any prudent school board member or BOS member. Are there any left? 🙂

  • 2022-08-25 at 9:37 pm
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    So enrollment has been decreasing, but the school board says we still need to build more schools and the message from Loudoun Now is that schools are more expensive? And no mention that maybe the fact that costs have gone up are due to the runaway inflation we have seen in the last 18 months?

    https://www.loudounnow.com/2021/09/15/loudoun-school-enrollment-again-declines/

    My hope one day is that Loudoun Now will do some actual journalism, not just report some political or administrative talking point. Alas, today is not that day.

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