Value-engineering vs. The Covenant Club’s cost problem
On Feb. 22, 2016, the Covenant Club Design Subcommittee announced that the estimated cost of the project was $15.8 million, an astonishing 45 percent increase from the $10.9 million preliminary estimate provided in the late fall of 2014.
I’ve reviewed the Covenant Club project with several project managers, estimators, and project cost managers who have all said the $15.8 million amount is probably much too low, and the estimated cost at this stage should be in excess of $20 million because there are too many “unknowns.”
Recently, I heard that the Association plans to reduce the cost estimate by “value-engineering.” I understand why the Association is doing this, but what is the “target” cost? If it is $10.9 million, it would mean a reduction of approximately $9 million from $20 million or more indicated by the construction professionals I’ve consulted. A cost reduction of that magnitude cannot be achieved by “value engineering” alone and will require radical changes to the size and scope of the project
The following are some of the “unknowns” that could negatively impact the cost of the project:
• The current estimate includes 4 percent escalation cost for the entire 39-month design, permits, and construction period. The current escalation standard for many construction estimators is 6 percent — per year!
• The Chairman of the Covenant Club Design Subcommittee, Jerry Yahr, said an Environmental Impact Report (EIR) will cost approximately $500,000. This $500,000, and the time and the cost to make any changes dictated by the EIR don’t appear to be included in the $15.8 million cost estimate.
• The Covenant Design Review Committee (CDRC) has not reviewed the project and the cost estimate does not appear to include the cost of changes resultant from the CDRC process.
• The chosen site for the Covenant Club has significant water issues and it will be necessary to prepare a comprehensive plan in order to comply with the recently updated requirements of the San Diego County Watershed Protection, Storm Water Management, and Discharge Control Ordinance (WPO). Compliance may require designing and constructing a very large and expensive facility underneath the paved surface of the parking lot to capture storm water, store it, filter it, and release it slowly into the soil to avoid flooding.
• The cost estimate does not appear to include any costs required to incorporate changes required by San Diego County following its review.
• There is no allowance for the initiation fees, dues, dining and other income that will be lost by the Golf and Tennis Clubs during construction.
In summary, “value-engineering” can be very worthwhile in order to reduce the cost of a project, but it was never conceived to reduce the cost of any project by approximately 50 percent and therefore will not resolve the cost problems of the Covenant Club.
Dean Ninteman, Rancho Santa Fe Homeowners Group
Drop the Covenant Club project
Dear Ms. Boon and RSF Association board,
Let’s just make a rash assumption that whatever the cost of the Covenant Club project starts out at, it will always go beyond estimates and chances are good that whatever savings your finance committee is hoping to make, the project cost will still end up around $16+million. In the 18 months this design has been explored, we have yet to hear any cogent financial data as to how this project will be financed! I think Mr. Ault made a thorough presentation regarding the finances of this project as being too expensive and with the growing resistance from Covenant members, I urge you to simply drop the project as not feasible without spending any more of the Association funds.
It is hard for me to understand that when you say you, and your board, represent the homeowners of the Covenant as a neutral party, how is it that six out of seven directors say they are proponents for the project?
I wish you could focus on projects that affect more of the HOA members such as the fiber optics to each home, that in my opinion is more worthwhile than dealing with 120 people who might be interested in funding the Covenant Club.
Ole Prahm, Rancho Santa Fe
The April Fool’s Joke That Wasn’t
I read the April 1 email bulletin from Ann Boon with sadness. Her main message is that we won’t be repairing community relations any time soon.
The big news is that, despite its estimated high cost, the Covenant Club is still being considered. More of our money will be spent, more design subcommittee meetings will be held, and a community vote will be scheduled in September. So, the beat goes on.
It was disappointing to hear once again the implication that the idea for a pool and fitness center came from the Golf Club. As somebody heavily involved in the Golf Club for many years, I can say with confidence that the idea of turning our club into a country club has been discussed often in our planning meetings but has never gained any traction. Why? Most of us felt that such a change would dramatically alter the iconic feel of the club we love, not to mention the substantial financial investment it would require.
It might be true that the Golf Club asked the Association and an outside consultant to help with declining membership. I don’t know. But it is not true that the RSF Golf Club came up with the fitness/pool club solution. From the initial meetings through the focus groups and the subsequent Golf Club survey, until now, when more than half of our members have joined the RSF Homeowners Group, the message from the Golf Club has been clear. We don’t want the Covenant Club next to the Golf Club. And we don’t want to take on that kind of financial risk.
Mischaracterizing and/or misreading the opinions of Covenant members is not limited to the Covenant Club project. This board misread the community on roundabouts and 95-foot cell towers, two of the other projects Ann tried to explain in her bulletin. I won’t even comment on the “technical planning issue for the Inn property,” as Ann calls it.
Why all the missteps? I think it goes back to a key element of what this board promised, and failed to deliver. They talked endlessly about transparency but didn’t say anything about listening. There has been far too little listening. None of these decisions would have gotten so far off track if our elected officials made an earnest effort to hear what the community is saying. Transparency alone is not enough.
I assume that the board supports the positions that Ann outlined in her April 1 missive, especially her decision to spend more of our money reworking and re-promoting the Covenant Club. But, if they are not in agreement, now is the time to make their voices heard. We don’t need more apologizing and explaining, especially with an election just around the corner. We need more plain talk and common sense.