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Sunday, 22 November 2015 22:50

K-12 bond proposals lead to strong backlog of work for contractors

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Grand Rapids Public Schools was among the districts that successfully passed school bond proposals in elections earlier this month. For GRPS, the $175 million initiative will go for across-the-board improvements, as well as the construction of a new high school on the city’s northwest side. Grand Rapids Public Schools was among the districts that successfully passed school bond proposals in elections earlier this month. For GRPS, the $175 million initiative will go for across-the-board improvements, as well as the construction of a new high school on the city’s northwest side. COURTESY PHOTO

A burgeoning K-12 construction market brought on by the passage of recent school bond proposals stands to create a windfall of new projects for West Michigan’s general contractors.

In early November, voters in at least five regional school districts approved more than $441.5 million in proposals that will assist in new construction, renovations and technology upgrades.

Because of the steady volume of work in the region’s construction industry and the bidding process for K-12 districts, much of that work remains more than two years out. The lengthy timeframe means that contractors such as Grand Rapids-based Triangle Associates Inc. and Owen-Ames-Kimball Co., each of whom have built strong books of business in the K-12 markets, have a pipeline of work that extends through at least 2018.

The volume of work stands as a marked difference from the recession and post-recession years, according to construction industry executives.

“The school market has continually improved,” said Mitch Watt, president of Triangle Associates. “We constantly track those bond issues. There was a downward (passage) rate during the recession, and now it’s slowly creeping back up. It’s a good sign for schools and for general contractors.”

Triangle Associates works on a national scale, with K-12 work making up about 35 percent of its total book of business. However, public school projects account for about 70 percent of the work the general contractor does in the West Michigan area, Watt said.

While some of Triangle Associate’s upcoming school work will be new construction, the vast majority of the projects will consist of renovations and upgrades as many West Michigan school districts put off those plans during the economic downturn, Watt said.

Likewise, OAK expects a strong pipeline of school projects in the years to come, said Business Development Director Josh Szymanski, who noted that the volume of work serves as a strong economic indicator for the region.

“(School work) really does help us look forward,” Szymanski said. “We can see out two to three years, so it really does help with long-term planning.”

The K-12 market accounts for approximately 60 percent to 70 percent of OAK’s business, and the company has about $300 million of work under contract from previous bond proposals across the region.

Grand Rapids Public Schools and Portage Public Schools had by far the largest successful bond campaigns, at $175 million and $144 million, respectively. Mona Shores Public Schools, Hastings Public Schools and Kentwood Public Schools also passed multi-million dollar bond packages.


LOOKING TO THE FUTURE

Because of the ongoing growth period in the general contracting and subcontracting markets, construction executives point to lengthy lead times for school district work. That’s also coupled with the process districts must go through to bid out the projects.

Once the bond proposal passes, the districts then enter the design phase — meaning that many of the projects won’t go out to bid for at least eight to 12 months, according to construction executives.

According to Ken Klomparens, executive director of facilities and operations at Grand Rapids Public Schools, the process to actually complete a construction project takes two tracks.

First, the district’s CFO must determine the ideal time to sell bonds to pay for the projects. Once the bonds are sold — a process that’s expected to occur before the end of 2015 for GRPS — the district then will begin bidding out work to architects and general contractors. The bidding is done on a project-by-project basis, as opposed to all of the district’s projects going to just one contractor or architect, Klomparens said.

Because of the competitive bidding market and the desire on the part of GRPS to award as much work as possible to local contractors and suppliers, it has pushed many of its construction projects to summer of 2017, Klomparens said.

As a contractor with an established record in the K-12 market, the two- to-three year backlog of work in the space is good news for executives at OAK.

“The school market is healthy and we like to see it,” Szymanski said. “It’s another reflection of the economy and how people are feeling when they go to vote.”

Despite that “healthy” market, voters were far from unanimous in considering school bonds. A bond proposal for Kenowa Hills Public Schools was narrowly defeated, while voters in other districts only approved the measures by narrow margins. That was true even in Grand Rapids, where the $175 million millage passed by a margin of just 6 percent.

According to GRPS superintendent Teresa Weatherall Neal, the district spent several months marketing its “Transformation Plan” to voters. The bond proposal — which allows for significant, across-the-board improvements to all the district’s schools — makes up one part of the plan, Neal said.

“We tried to get the message out,” Neal told MiBiz. “(The narrow passage rate) tells me we need to continue work with the Transformation Plan.”

That the GRPS plan passed by 6 percent didn’t come as a surprise for Watt of Triangle Associates, who noted that turnout tends to be low in off-election years.

The passage of the GRPS bond proposal will allow for the construction of one new high school on the city’s northwest side, as well as renovations and technology upgrades at nearly every other facility the school district operates, Neal said.

“Our bond was not just about bricks and mortar,” Neal said. “(We asked:) How do we transform the Grand Rapids Public Schools to be the best district in the state? So we went to the community with that. In order to be the best, we need to have great facilities.”

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