Issue 2 of 2014
First Performance-Based Civic Building Infrastructure Project in the U.S.
Completed last September, the Governor George Deukmejian Courthouse located in downtown Long Beach, Calif., represents the first major civic building project to be procured under the unique public-private partnership (P3) principles of Performance-Based Infrastructure (PBI) in the United States. It is the winner of two Design-Build Project/Team Awards from DBIA in 2014: a National Award of Merit in the Civic Buildings category and the National Award for Excellence in Design.
Performance-Based Infrastructure is an innovative delivery method that involves engaging a private team to finance, design, build, operate and maintain the court building, which allows for prescribed deductions from public sector availability payments if the infrastructure does not perform to set standards.
Using PBI and design-build project delivery, the California Administrative Office of the Courts (AOC) was able to leverage the private sector’s access to financing, technological expertise and management efficiency to complete the project ahead of schedule and within the established budget. The AOC signed a 35-year service agreement with Long Beach Judicial Partners (LBJP), a project company established by Meridiam Infrastructure, to design, build, finance, operate and maintain the Long Beach Courthouse. Clark Construction Group provided design-build services, with AECOM serving as Architect of Record and Edgemoor Infrastructure and Real Estate providing real estate development services. Johnson Controls is serving as LBJP’s operating services provider.
While the court now occupies the building, LBJP operates and maintains the facility and the state pays an annual service fee, which includes repayment of the initial project capital costs as well as operations and capital replacement costs. The state can take deductions, however, if at any time the court space or functionality is less than the agreed upon specification. This is what makes the PBI contract “performance-based.”
“The performance-based contractual arrangement enabled the team to achieve design-build delivery at its best, encouraging positive and open discussions with focus on the owner’s long-term needs from the very beginning,” said Chip Hastie, Vice President at Clark Construction Group, who served as Clark’s lead manager for the project. “At the same time, PBI delivery heightened the intensity and complexity of the design-build process. Many more parties were engaged, each with more tangible risks relative to the facility’s performance and with the backdrop of significant schedule constraints and penalties.”
The state will own the land and the building throughout the 35-year agreement and retain ownership when it’s complete. However, since LBJP maintains and operates the courthouse, they have an incentive to deliver a building that will be dependable and efficient to maintain for many decades. The total development cost of the project was approximately $490 million, including a design-build cost of $343 million.
The completed courthouse building includes 31 courtrooms, approximately 100,000 square feet of office space leased to Los Angeles County agencies and more than 10,000 square feet of retail and food service space to serve the estimated 4,000 daily visitors.
The AOC performed a rigorous cost/benefit analysis before choosing a performance based approach, comparing the cost of the project if the public sector designed, built, and operated the facility versus the private sector PBI approach. The value-for-money analysis demonstrated a modest cost savings with PBI over the life cycle of the new facility. In addition, rather than use a traditional design-bid-build process, design-build would allow the project to be delivered up to 30 months faster.
“PBI contracting provided us the opportunity to evaluate ‘best value’ in the context of a 35-year envelope. From product selections and system architecture to the logistics of move-in, alignment of long-term business interests strengthened the master builder perspective,” explained Hastie.
The PBI method drove the need for a fully integrated design process involving the architect, engineers, contractor and facility manager. In a traditional low-bid selection, the long-term operating and life-cycle costs are often driven upward as a result of the selection of shorter-lived equipment and less durable materials. Three important components led to this project’s success.
The team allocated all project risks, including development, design, construction, operations and maintenance, to the entity best able to control the price. This re-allocation of risk allowed the team to guarantee competitive pricing, schedule and performance at contract signing. In addition, the team provided 100 percent of the financing for the project, which was especially critical since California was experiencing budget challenges. The team also prioritized the benefits of a long-term view of the project instead of simply focusing on the short-term outcome and pricing.
Although PBI court and hospital projects have previously seen success in the United Kingdom, Australia and Canada, this method had not previously been utilized for vertical infrastructure in the United States. The state of California is now using this project to evaluate the effectiveness of PBI for other projects.
“Working on the Long Beach Courthouse project provided rich perspective to carry forward for future projects — PBI and non-PBI alike. This project has made the entire team better design-builders,” said Hastie.
American Institute of Architects Academy of Architecture for Justice: 2012 Citation Award; Justice Facilities Review
Construction Management Association of America, Southern California: 2014 Contractor Quality Partner Award
Bond Buyer Magazine: 2011 Deal of the Year Awards; Nontraditional Financing
Engineering News-Record: 2014 Global Best Project Award; Government Building
Euromoney/Project Finance: 2011 North America PPP Deal of the Year
Los Angeles Business Journal: Commercial Real Estate Award; 2014 Best Public Project
Partnerships Awards: 2012 Highly Commended; Best Accommodation Project
Governor George Deukmejian Courthouse
$490 million in development with design-build cost of $343 million
California Administrative Office of the Courts (AOC)
Long Beach Judicial Partners (a project company established by Meridiam Infrastructure) was selected to design, build, finance, operate and maintain the new Courthouse. Clark Construction led design and construction efforts. Edgemoor Infrastructure & Real Estate (Edgemoor) provided real estate development services. AECOM was the principal architect. Johnson Controls is the facility operator.
September 9, 2013
531,000 total with 416,000 of court space