School Ties

School Ties

government watch by Mark Gordon | Managing Editor

When it comes to Florida construction firms bidding for school jobs, local has several definitions. Few are as narrow as a new Sarasota School Board proposal.

The Sarasota County School Board is considering changing how it defines a local company in rewarding contracts for new construction, a debate that has roiled some executives of firms without a Sarasota-area headquarters.

The proposed change, which is still a few bureaucratic steps short of a vote, would essentially set up a stronger reward system for having a local headquarters - and in this case local would now be defined solely by where the company registers its main office with the Florida Secretary of State.

The current system, in place for about 25 years, defines locally based much more broadly and has smaller gaps in the points system for non- locally based companies.

The idea, school board members say, is to give local companies an edge in the bidding process to ensure he tens of millions of dollars the school system spends each year on new buildings stays local. The board included a discussion on the change in its bi-monthly meeting Sept. 18. "All things being equal," says Frank Kovach, the school board chairman, "it is the board's desire to use a local contractor."

The new wording is based loosely on a policy the Charlotte County school system recently adopted, although several Gulf Coast-based construction industry executives say Sarasota's hometown definition, if passed, would be one of the strictest in Florida in terms of what makes up a local company.

Many of those executives say the proposal is misguided, too, as construction companies tend to hire and employ local people when doing a job anyway, regardless of where the company is headquartered.

"This would hinder statewide contractors," says Steve Cona, president of the Gulf Coast chapter of the Associated Builders and Contractors, a national lobbying group. Cona wrote a letter to the School Board protesting the change.

"It gives an unfair advantage to local companies and would eventually drive up school construction costs," he says.

That's the big-picture view. On a smaller scale, on a bid-by-bid basis, Naples-based Kraft Construction stands to be the biggest loser, if and when the new definition of local is approved, according to school, company and industry officials.

Kraft, one of the biggest construction firms in the Southeast with almost $700 million in 2006 gross revenues, has maintained a Sarasota office for eight years. That's been good enough to be considered local under the current school district wording. And that's also been good enough to lead to $62 million in new construction jobs the last two years, says Chuck Collins, director of construction for the school district.

While that lags as much as $125 million behind Sarasota-based firms such as W.G. Mills and Willis A. Smith, Collins says Kraft is by far and away the leader in construction volume and jobs for companies based outside Sarasota.

But the definition of local in the new proposal would put Kraft as many as six points behind competing companies in the bid process. Since one or two points normally make the difference on most bids, the proposed change will sting.

"I don't know how we would be able to make a short list any longer," says John Pinholster, president of Naples-based Kraft Construction. "This could be painful."

Pinholster declined to put a dollar figure on how much the Sarasota Kraft office depends on the Sarasota School District. But it's significant. Says Pinholster: "The school board is one of our topmost strategic clients in keeping that office viable."

Both Kovach and schools Superintendent Gary Norris say the potential change isn't anti-Kraft, nor is it pro-W.G. Mills, Willis Smith or any other firm. Indeed, Norris and Kovach rave about the work Kraft has done for the district.

Instead, the proposal stems more from the current state of the real estate and construction market, where projects are scarcer and companies are hungrier. With fewer jobs to go around, says Kovach, the School Board wants to be more particular about local companies getting the work.

Still, even Kovach isn't convinced the current proposal to redefine local will accomplish those goals. "I support the concept and I support what it's trying to do," Kovach says. "But I don't necessarily support the wording of the proposal."

Local Definitions

The Florida Legislature has given county school boards a lot of autonomy when it comes to defining what a local contractor is and how to reward bonus points to companies in a bidding process for new construction jobs.

That autonomy has led to variety.

In Sarasota County for example, the School Board's current definition of local is broad: It rewards five points to a company with a presence in either Sarasota County or any other county that touches its borders. It then rewards four points to counties that touch the bordering counties, so that a company with only a presence in Lee County, for instance, would get four points. The scale goes down a point for each step outside the region.

The catch under the current definition is that having a presence in Sarasota or the connecting county is enough to be local. The county looks for more than just a storefront, says the school's director of construction Chuck Collins, but a Miami or Orlando-based company with everyday people in Sarasota currently counts as local.

The new wording proposal would significantly change that definition. It awards 10 points to a company that registers its headquarters with the state as being in Sarasota, Manatee, Charlotte and DeSoto counties; seven points to companies registered in Hillsborough, Pinellas and Lee counties and four points to companies in any other part of the state, including Collier County.

Here's an overview of how some other Gulf Coast school districts define local in the bidding process:

• Collier County: Collier County grades construction managers bidding on new school projects from 1 to 5 points in six categories, including office proximity. The closer the office, the more points are awarded. Collier opened three new schools this year for about $80 million.

• Hillsborough County: The county school system does not have a points scale for awarding construction contracts for new schools, but instead looks for the lowest and best bid from companies with a local service office on the Gulf Coast. The school system does give preference to contractors in a seven-county area that covers Hillsborough, Pinellas, Pasco, Polk, Hernando, Sarasota and Manatee counties. The county has opened four new schools and relocated one other this academic year.

• Lee County: For new-school construction, the school board awards 20 points out of 100 on the construction manager's office location. The closer the office, the more points are awarded toward a bid on a project. Lee County has spent about $95 million building three schools for the 2007-2008 school year.

• Manatee County: The district defines local on a sliding scale, with five being the maximum number of points a company can get. The total bid score is based out of 100. Companies with a presence in Manatee or Sarasota counties get five points; firms in Charlotte, DeSoto, Hardee, Hillsborough and Pinellas counties get four points; all other Florida counties get three points; and out of state businesses get one point. The district has spent $400 million on schools the past five years.

• Pasco County: For new school construction, the Pasco County School System awards construction companies more points the closer the company's local office is to Land O' Lakes, the geographic center of Pasco where the school board offices are. It does not matter if the contractor is not actually headquartered on the Gulf Coast, as long as it has a local service office. The county school system also looks at other criteria, such as financial strength of the contractor and its experience. The county has and will open five new schools this academic year at an estimated cost of about $145 million.

REVIEW SUMMARY

Industry. Construction

Organization. The Sarasota School Board

Key. The Sarasota School District is debating a change to its policy that would give local construction firms an advantge in bidding for schools.