Working Together to Provide the Best Quality and Select the Best Building Components in Student Housing Development
Universities have a variety of reasons for considering a Public-Private Partnership (or P3) over more traditional design-bid-build models of project delivery based on specific goals and objectives of the institution. The most common reasons generally seem to include 1) supplementing university expertise and staffing, 2) improving speed-to-market, 3) expanding access to private capital/ insulation from balance sheet impacts, and 4) transferring budget, delivery and/or operational risks. No matter the reason for choosing the P3 method of delivery, the selection of a trusted, appropriately experienced partner with a proven record of addressing your specific goals and objectives is paramount. Once your development partner is selected, how does a university and its P3 partner effectively evaluate quality and life cycle considerations inherent in new student housing projects during the development process?
During the design phase, there will be a myriad of decisions to be made in the selection of building systems, finishes, and materials for a particular project. While the transaction and ownership structure selected will often influence which party has ultimate responsibility for delivering the maintenance, custodial and long-term facility management or “capital renewal” of the new student housing buildings, the approach to making these important decisions should be relatively agnostic to these influences. Accordingly, the mantra we suggest to our university partners is “maximizing quality and sustainability within the budget and rental rate parameters mutually established with our P3 partners.”
Accomplishing this objective requires close collaboration and alignment among all development team members: architect, engineer, contractor and property management specialists together with the developer and university from the outset to develop design specifications, energy models, construction cost estimates, operating budgets and pro formas, and capital renewal plans. With this information in hand, you and your development partner can adequately evaluate ‘Good, Better and Best’ systems and finishes for incorporation into the project, paying particular attention to not just the first cost, but also the life-cycle cost analysis and operational impact of such decisions. This open-book collaboration helps to ensure that each decision is the correct one for the project, which is critical to successful outcomes for the P3 partnership.
Sometimes, despite best efforts, volatile market influencers, such as the COVID-19 pandemic, financial market swings, impacted building materials pricing, or other unforeseen challenges can arise. In such cases, it may be necessary to evaluate a variety of operating, design and construction decisions to achieve previously established budget targets and thus reach financial close. These efforts can often be balanced by specifying and including a variety of ‘bid alternates’ that allow a team to move a project price up or down within previously considered, acceptable parameters as part of the finalization of a Guaranteed Maximum Price (“GMP”). Subsequent to construction initiation and as the project budget allows, add-alternate upgrades, priced as part of the GMP, can be integrated into the project by utilizing budget savings/ remaining project contingency funds as the project progresses. This strategy has proven successful on a number of projects, helping the P3 partnership maximize quality, durability and sustainability while balancing this with the increasingly important goal of rental rate affordability for students.
Life cycle analysis does not stop during the design and construction phases, but continues into the operational phase. To read more on Caring for Student Housing Facilities, please see the recent blog post by Dr. Matthew Brown and Robert Brown here. A good development and operational partner should be in it for the long-term and be committed to turning over a building to you at the end of the ground lease that has been well built and maintained so that the facility reverts back to you in an acceptable condition. This way, the university gets a building that students can continue to thrive in for years to come.