Belmont Learning Complex Request for Proposals

1. Belmont Learning ComplexRequest for Proposals Presentation of Evaluation Panel Findings February 12, 2002

2. Mr. Hamid Saebfar Division Chief, School Property Evaluation and Clean-up Division, DTSC Professor Michael Hoffmann, PhD James Irvine Professor of Environmental Science Executive Officer, Environmental Engineering Science, California Institute of Technology Mr.Thierry Sanglerat, P.E. Executive Vice-President, GeoSyntec Consultants Mr. Tim Buresh Director of Construction, Alameda Corridor Project Mr. Calvin Hollis Managing Principal, Keyser Marston Mr. David Dybdahl, CPCU, ARM American Risk Management Resources Network Mr. Colin Shepherd Vice President, Hines Corp Panel Members Construction Environment Finance Insurance Development

3. How the Panel Operated • An independent panel of experts was asked to review the proposals and provide the District with advice as to their quality. • Seven Panelists from five disciplines were selected: Environmental; Construction; Finance; Insurance; and Development. • Panelists opted to meet as a team several times as their subject areas were interrelated. • Panelists posed several follow-up questions to the bidders and held one set of in-person interviews to drill down deeper into the assumptions and plans reflected in the proposals.

4. Report of Panel Members

5. Environmental Issues Professor Michael Hoffman Mr. Thierry Sanglerat Panel Member, Mr. Hamid Saebfar of DTSC has also issued a separate letter on the proposals in his regulatory capacity.

6. Scope of Presentation • Current status of the site, the environmental investigation and related regulatory requirements • Evaluation Findings • What We Asked For • What We Got • Performance Against Criteria • Conclusions and Recommendations Environment

7. Current Environmental Status of the Site • Site Characterization is Essentially Complete • What is NOT on the site • Hazardous waste disposal site • Landfill • Industrial Waste Dump • What is at the site • Naturally Occurring Subsurface Gases and Hydrocarbon materials • Methane • Hydrogen Sulfide • Former Gas Station • Corner of 1st and Beaudry Environment

8. Selected Contractor Would Have to Meet Following Requirements • Complete Remedial Investigation/Feasibility Study (RI/FS). • Compile Detailed Design of Gas Migration Control System . • Optimize Monitoring System. • Obtain DTSC Approval of Design of Gas Migration Control System. • Obtain DTSC Approval of Monitoring & Reporting Plan. Environment

9. What We Asked For • Team Members and Relevant Experience • Approach to Site Characterization For Final Design and DTSC Approval • Gas Migration Control System Components and Layout • Operation, Maintenance & Monitoring Approach Environment

10. What We Got All Proposals Have • Same Objectives • Gas Control • Gas Extraction Systems • Monitoring Systems • Gas Treatment Systems Environment

11. ConceptualGas Control System

12. What We Got All Proposed Systems Have • Same Materials • Same Components • Same Monitoring Parameters Environment

13. Hoag Hospital 50% Methane Gas Hydrogen Sulfide - 4,000 ppm

14. Residential 17% Methane Gas Benzene Toluene Ethylbenzene Xylene

15. Sierra Point 60% Methane Gas Vinyl Chloride Benzene

16. Big Box Retailer Former Town Gas Plant Old Sewer Line Former Landfill Liquid Waste Injection Above Ground Storage Tank

17. Performance Against Criteria Team Members and Relevant Experience • Teams • All Bidders Have Qualified Staff. • Experience • All Bidders Have Gas Migration Control Experience. • All Bidders Have Local Experience. Environment

18. Performance Against Criteria Site Characterization • All Bidders have agreed to perform additional site characterization as required by DTSC. • Komex Proposes Oil Field Characterization As An Option • All Bidders Recognize the Need to Complete the RI/FS (AB 1301). Environment

19. Performance Against Criteria Gas Control Migration Systems • All Proposals Include Similar Systems. • The Selected Bidder Will Have to Compile Detailed Design of Gas Migration Control System and Get DTSC Approval. Environment

20. Performance Against Criteria Operation, Maintenance & Monitoring Approach • All Bidders Propose Essentially Similar Approaches to Operation, Maintenance & Monitoring. • The Selected Bidder Will Have to • Optimize Monitoring System • Get DTSC Approval. Environment

21. Conclusions and Recommendations Environment Environmental Issues

22. Conclusions • All Bidders Could Undertake Project. • All Bidders Could Complete Work to DTSC Approval. • Belmont Learning Center Can Be Completed And Be Safe. Environment

23. Recommendations • From Environmental Perspective, Proceed With Belmont Learning Center. • Undertake Negotiations on the Basis of • LAUSD Requirements for Environmental Remedy • DTSC Requirements Environment

24. LAUSD Requirements Should Include: • Gas Migration Control System Over Entire Site. • Active Gas Migration Control System. • Hydrogen Sulfide (H2S) Monitoring to Odor Detection Level with Best Available Technology. Environment Provides maximum environmental protection for students, staff and community as well as expedites the process.

25. Estimated Costs • Estimated capital costs for the remaining site characterization, design and construction of an active gas migration control system should be between $10-$15 million • Estimated ongoing monitoring should be • about $1.5 million on a net present value basis (over 30 years) • or, about $150,000 per year for 30 years Environment

26. Construction Mr. Tim Buresh

27. Current Conditions • Buildings are completely designed and DSA approved. • Buildings are approximately 60% complete. It is hard to assess the state of completion accurately. • Work has not yet begun or is mostly incomplete on several planned joint use facilities and the outdoor, common, landscaped and athletic areas of the site. • The buildings are weather protected and being maintained at LAUSD expense. Construction

28. What We Asked For • Scope definition – what would be completed, changed or deleted. • Construction approach – how the facilities will be built and completed. • Management plan – who is responsible contractually and in the field. • Completion schedule – total delivery time including design and environmental assessment process. • Cost-to-Complete – broken down by major cost element and pricing mechanism. Construction

29. What We Got • All three proposers were in compliance with the criteria. • Scope – All proposed construction of entire core school; variations on joint use facilities, athletics, etc. • Management - It became apparent that LAUSD could not take “hands off” approach to project delivery, project management, project quality and project cost control. Construction

30. What We Got • Schedule - All proposed delivery in 3 years or less. Faster alternative to complete buildings while completing RI/FS. • Cost – Proposals contained wide range of contingencies and pricing formats. Cost range to complete buildings and environmental systems should be $60-80 million. It became apparent that the lump sum cost to complete approach forces proposers to increase costs excessively because of perceived uncertainties. Construction

31. Recommendations How to Improve the Proposals • Install LAUSD Project Management team to negotiate details, control quality and manage cost risk elements. • Take aggressive schedule approach, completing buildings in parallel with environmental process. • Negotiate IMAX/GMAX pricing instead of lump sum pricing. Construction

32. IMAX Process Reduced Uncertainty reduces costs • LAUSD negotiates Initial Maximum Price (IMAX) with proposer. • Go through project evaluation and subcontract bidding process (several months). Reduce uncertainty and costs accordingly. • At end of evaluation period, negotiate Guaranteed Maximum Price (GMAX) with specific contingencies identified. • Proposer responsible for costs in excess of GMAX; shares savings if costs under GMAX. • LAUSD shares some risk elements.

33. Conclusion • These proposals are an adequate starting point for negotiations should the Board opt to complete the school through this RFP process. • The school can be completed more quickly and at less cost than other alternatives. • The LAUSD Facilities Management team is capable of managing the project to meet Board goals.

34. Financial Issues Mr. Calvin Hollis

35. Current Conditions • District purchased the land for the BLC for $60 million, all provided by the State. • The District issued COPs to fund the non-land portions of the project. • District has spent $94 million in non-land project costs (including $15.1 million arbitration award). • Approximately $3 million remains in unused COP proceeds. • The variable rate on the COPS was approximately 2.10% last week. Finance

36. What We Asked For • Financing Proposal. • Flexibility to use a range of sources to fund the school construction. • Financially responsible parties to limit District exposure to cost uncertainty. Finance

37. What We Got • Financing proposals that ranged from simple “District to provide” to privately placed, long term, lease-backed financing paid from general fund. • All proposals can be structured to allow use of local bonds, state bonds, certificate proceeds or other local sources • Environmental insurance can be financed through insurance company affiliate. • Short term financing was offered, however it requires permanent financing. • All proposals are dependent upon District credit. Finance

38. Were Criteria Met • Each proposal can be efficiently financed. • None are dependent upon unproven or risky financing techniques. • Each can be adapted to meet Districts specific financing objectives. • Each proposal contains a combination of bonding and insurance programs to mitigate risks of cost overruns or failure to complete. Finance

39. Recommendations How to Improve the Proposals • Preserve financing flexibility until costs are known and District sources analyzed. • Avoid locking in long term pledge of general operating funds in favor of options to prepay with bond, State proceeds, or other local sources (such as Developer Fees) immediately or in the future. Finance

40. Insurance Mr. David Dybdahl

41. Current Conditions • The District currently has an environmental insurance policy. • The policy will cover the Belmont Learning Center when an “NFA” or “No Further Action” notice is issued by the DTSC. • The current policy limits are $100 million for 20 years. We have 17 years remaining on the policy. Insurance

42. What We Asked For • Insurance for the Project • Clean-up Cost Cap • Contractors Pollution • Professional Liability • Pollution Legal Liability (environmental) • We requested $100 million in coverage for 70 years. Insurance

43. What We Got • Proposals that included all the types of coverage specified at the limits specified or higher. • Pollution Legal Liability was for a maximum of 30 years; with a GIC (guaranteed investment contract) proposed to purchase a new policy in 30 years to cover the remaining required years • Options to bundle the cost of the environmental mitigation measures as a part of the insurance premiums were provided by some teams. Insurance

44. Were Criteria Met • The coverages proposed would address the insurable risks of the District associated with the project. • All proposers have demonstrated they can obtain insurance to protect the District. • Market rates for these types of coverage are reflected in the quoted costs. • There is no apparent “risk premium” associated with the Belmont Learning Center site or any of the proposers– as reflected in the rates quoted. Insurance

45. Recommendations How to Improve the Proposals • Keep the District’s options open with regard to the ultimate level and configuration of the insurance package. • Give serious consideration to utilizing the District’s basic environmental liability insurance policy as a part of the ultimate package. • Consider having the District purchase the coverage directly. Insurance

46. Estimated Costs • Estimated insurance costs (+/- 20%) for the $10-$15 million estimated environmental mitigation are as follows: • Pollution Legal Liability 30 years (environmental) - $2 million • Clean-up Cost Cap - $2.25 million • Contractor’s Pollution Liability - $700,000 • Professional Liability - $2 million Insurance Total = about $7 million

47. Summary

48. Summary • Today’s presentation focused on the responsiveness of the RFP proposals. • The primary conclusion shared by all evaluation panel members is that the BLC can be completed, safely, and at a reasonable cost and timeline, with one of the proposal teams.

49. Summary of Estimated Costs

50. Another Way of Looking at Operations and Maintenance Costs