Once-Shy Firms Warming to District’s Dollars

By DANNY KING

Staff Reporter

A couple of billion dollars in potential business has a funny way of changing people’s perception.

With the Los Angeles Unified School District planning to add 78,000 student seats in four years by way of 80 new schools and 60 additions to existing facilities its long-held reputation for bureaucratic lethargy is quickly becoming a thing of the past among contractors looking for work.

“We were leery as to whether things had improved,” said Steve Rosenfield, vice president of Santa Fe Springs-based Kemp Bros. Construction, which broke ground in April on Huntington Park Elementary School, its first LAUSD project. “But you have to follow the money.”

With more than $1.8 billion earmarked for construction costs alone, as well as $869 million in land purchases, there is a lot to go around.

All told, LAUSD’s 159 projects in its Phase I expansion plan (including 19 playgrounds on top of underground parking lots) could mean nearly $1 billion combined to subcontractors in four primary areas: wood framing, heating/ventilation/air-conditioning, concrete foundation and electrical.

“A lot of these guys weren’t willing to do the work, but so far it’s worked out well,” said Randy Burns, director of special projects at McCarthy Building Cos. Inc.’s Pacific Division, whose firm was general contractor for the recently completed Beachy Avenue Elementary School in Pacoima.

The LAUSD has also earmarked $150 million for design purposes, enough to attract major local architectural players like Gensler, AC Martin Partners Inc. and Johnson Fain Partners among the architects working on Phase I. (At least 40 more schools are planned later.)

Despite the district being obligated to pick the lowest qualifying bid from general contractors, margins are consistent with other public institutions and private entities, according to Rosenfield, whose firm’s clients also include Lockheed Martin Corp. and Universal Studios.

“The margins on these projects are very good,” said Rosenfield, placing them in the 5 percent to 8 percent range. With the LAUSD expected to account for about a third of the firm’s revenues during the next few years, “we’re pleasantly surprised we’re able to get these jobs at what I consider to be a fair margin,” he added.

Additionally, administrative changes have made doing business with the school district a less painful process, according to Armando Gonzalez, principal at Pasadena-based Gonzalez Goodale Architects, which has been working on LAUSD projects for about a decade.

Before the district’s new construction division was created three years ago, payment could take as long as three to six months, according to Gonzalez, whose firm is designing four schools and has been doing the renderings for the proposed schools at the Ambassador Hotel site.

Now, with payments usually received between 30 and 60 days after billing, “they are now appropriately dealing with accounts receivables,” said Gonzalez.

Still, working with the nation’s second-largest school district can be a trying experience. “The man hours are much higher for the LAUSD from a service standpoint,” Henry Johnson, principal at Trammell Crow Co., who is lead broker on the district’s $32 million, 400,000-square-foot build-to-suit storage facility under construction in Pico Rivera.

And the LAUSD’s past challenges with vendors, which include a $17 million breach-of-contract decision involving contractors for the Belmont Learning Complex in 2001, are not lost on Jim McConnell, the district’s chief facilities executive.

“Maybe you’ve done business with the LAUSD and the experience wasn’t that good,” said McConnell, addressing a group of potential contractors at the district-sponsored Small Business Expo. “But we feel we need to become another client. We will pay you on time.”