But what the investigation clearly found was that the original $23 million cost estimate for the now $50 million project was "underestimated from the beginning." It also found a pressing need for improved oversight and accountability to the school construction process.
The cost increase was the primary cause of the review, a 57-page report that not only compares the local project to others but also details a timeline of events and offers several recommendations to state education officials on how to oversee future construction projects, which have traditionally been managed by school districts.
"The Harlan County School project should serve as a valuable lesson for policy makers," said Luallen, whose report found that the initial $23 million projection did not include site cost and architectural and engineering fees.
"It would have been simply impossible for the school to have been built for the original cost estimate and, in fact, the cost doubled. Once a project begins, it becomes almost impossible to stop, and we are not recommending that construction stop," Luallen said.
Luallen's office released its findings Wednesday afternoon following a review by an audit subcommittee of the Kentucky Board of Education, which requested the review earlier this year due to the project's escalating costs.
It was the first time such a request had been made.
"If the actual costs had been known, building the new school may not have been as compelling to the decision-makers," Luallen said. "It is critical that accurate cost analysis be conducted at the beginning of the process so that policy makers can make decisions based upon accurate data."
Delays outlined
While "impossible" to construct the project - a 220,000-square-foot facility designed for a student capacity of 1,300 - at its initial $23 million, Luallen said more of Kentucky's students "need modern facilities like the high school being built in Harlan County" to compete in the world economy.
It was more than a decade ago that the pressure to consolidate the county's three high schools - Cumberland, Evarts and James A. Cawood - began to intensify. But between now and the time that local school officials began to take action in 2000, setback after setback occurred, doubling the price of the project and delaying the new school's projected 2006 opening.
"During the period of time this project was being developed, the construction industry experienced back-to-back years of double-digit inflation post-Katrina," the report states, backing much of what the local school board and the Kentucky Department of Education have explained throughout the construction process.
The construction bid process did not begin until 2006, partly due to the lack of an approved state budget during the 2004 General Assembly, the auditor's office noted.
"During the three-year interval, construction projects throughout the nation underwent an annual 15 percent inflation rate caused, to some extent, by the increased cost of construction materials as a result of Hurricane Katrina repairs," a statement from the office said. "The cost of fuel also skyrocketed during this time period."
The project, one of the state's most scrutinized in recent years, was also delayed by higher-than-expected bids, as well as a lengthy legal process that began when Clover Fork and Tri-City residents sought alternatives to consolidation.
But factors forcing the issue of consolidation were the county's declining enrollment - it has lost 3,000 students since 1987 - suffering curriculum and aging facilities.
"This project is as much about curriculum as it is bricks and mortar," Mark Ryles, who oversees school construction for the state education department, said during Wednesday's Kentucky Board of Education meeting. "I wish we could've done this 10 years ago and it would've been a lot less. ... In 1993, we could build an elementary school for $3 million. It's four times that now."
The drastic rise in construction and fuel costs has also been attributed to the Iraq war.
'A learning experience'
In reviewing the project, the state auditor's office evaluated construction management by the local school board and the Kentucky Department of Education. It also evaluated compliance of project-related bids, contracts, payments, change orders and invoices associated with the project, and conducted interviews of several persons involved, including those who have adamantly opposed consolidation.
The initial $23 million estimate, though too low, is a situation not limited to Harlan County, the auditor's report said.
Superintendent Timothy Saylor, who took office in 2000, said he welcomed the review.
"This has been a massive project, and it's been the most scrutinized school project, I believe, in Kentucky history," Saylor said. "And for a new superintendent coming into office, which I was, there's no training for this. It's been a learning experience. It's been an interesting experience."
Saylor said the school district has been made aware of some procedural errors during construction of its state-of-the-art facility, which will include a large athletic complex for football, baseball, softball, soccer, track and tennis.
"We did make some procedural errors, there's not any question about that. But none of these errors added to the cost or detracted from the project," he said. "And that's the bottom line."
The report found that the site chosen for the new school was a portion of farm land assessed by the Harlan County Property Valuation Administrator at $90,350 for 488 acres, which "represented agricultural value only not fair market value." Based upon a real estate appraisal, the school district bought 105 of those acres for more than $1 million, but the Kentucky Real Estate Appraisers Board later disciplined the real estate appraiser because the appraiser was not appropriately licensed to do work on a project of that size, the report said.
The report confirmed that administrative and technical problems, "as with any project of this magnitude," have occurred during the construction of the new high school. "However, the issues identified did not create the cost increase," the report said.
While it adds "validity to the project," Saylor said school officials still don't agree with the report in its entirety. For one, the report has the project's overall cost reaching as high as $53 million, $5 million more than school officials are estimating.
"There were some issues we certainly questioned," Saylor said. "We still feel like there is some information in there that isn't right, but we had an opportunity to address each issue."
Saylor also noted that all construction-related decisions made by the local school board were "made with the advice or consent of the Kentucky Department of Education, the state Board of Education and the professionals contracted by our local board."
Overall pleased
Perhaps the most scrutinized aspect of the project has been its change orders, which have been similar to or lower than those of similar projects. According to the report, "the number of change orders that occurred on the Harlan County High School project is not out of line with other school construction projects."
In fact, the county school district had a total of 13 change orders upon completion of the state's review. That's "substantially lower" than the 123 that occurred during construction of Knox Central High School in nearby Barbourville.
"Most of our change orders have been to add back into the project what we took out," Saylor explained.
Other school projects compared to Harlan County's include Letcher County High School, a 140,130-square-foot facility that had 87 change orders throughout the duration of its construction, and Bryan Station High School in Lexington, which had eight change orders during the construction of its 276,700-square-foot building.
Those schools were designed to hold a student capacity of 1,000 and 1,800, respectively.
"The cost per square foot and the number of change orders were comparable to other school construction projects," the report said.
Some of the procedural errors in the report pointed to incorrect computations of pay requests and change orders that were overstated on at least three pay requests, none of which resulted in "overpayments to the contractor," however.
The report also noted that the school board "did not always maintain original invoices for disbursements" and did not follow board policy for the disposal of surplus property - galvanized culvert pipe that had to be removed from the construction site for a second entrance to the school.
However, local school officials are overall pleased with the state's findings.
"I'm very pleased with the overall outcome," said Mike Howard, assistant superintendent of finance for the county school system. "I wish we hadn't made the mistakes that we did, but everything we did, we did at the advice of our architect or a recommendation from KDE."
'Going forward'
The issue of oversight remains key in "going forward" with future school construction projects, said John Cubine, director of the financial audit division within Luallen's office.
Cubine said the General Assembly and Department of Education "need to make a decision" as to how projects should be managed. Traditionally, local school boards have managed their own projects, with guidance from the state education department.
But with four employees at the state level managing approximately 1,000 projects, roles may need to be switched, or resources made available for more on-site oversight by the Department of Education, Cubine said.
"The bottom line is your $23 million to start with just wasn't sufficient to build this project," he said.
The project is funded up to $40 million, which includes $16 million provided by the state.
Local school officials say $8 million is needed to finish the project in its entirety. Instructionally, however, the high school will be ready to open next year. Of the $8 million still needed, $5 million to $6 million will go to the construction of the athletic fields.
But during the school's opening year, sporting events will likely take place at James A. Cawood High School. Saylor said the school district is hopeful the fields will be constructed by the new school's second year of operation. Ideally, he'd like to at least have a football field in place next year, but that's more of a "hope."
The school district has maximized its bonding capacity and will utilize operational savings, about $447,000 a year in salaries, from the closed high schools to pay for the project. But the school district will continue to see financial hardships with the new school due to the county's consistent loss of population, the auditor's office said.
"All we're trying to do is build a school for our students. ... And we plan to do that," Saylor said. "And again, I think it will be a facility that all of Harlan County can be proud of."
During Wednesday's Kentucky Board of Education meeting, Ryles said he's anticipating a light at the end of the tunnel for the embattled school project.
"Everything that I know and every bit of experience that I have," he said, "tells me that this project ... will be successful."
Keith Travis, chairman of the Kentucky Board of Education, could not be reached for comment on Wednesday. Lisa Gross, spokeswoman for the Kentucky Department of Education, referred a phone call to the state auditor's office.
Post a Comment
