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Pennsylvania Association of School Business Officials

Mailing Address: Office Location:


P.O. Box 6993 2608 Market Place
Harrisburg, PA 17112-0993 Harrisburg, PA 17110
Telephone (717) 540-9551 www.pasbo.org FAX (717) 540-1796

Testimony of the PA Association of School Business Officials


Senate Education Committee
Mandate Waiver Program
March 17, 2010
Jay Himes, Executive Director

Good afternoon, I am Jay Himes, executive director of the PA Association of School Business
Officials (PASBO). We are an association of 3,000 members, two-thirds of which are K-12 non-
instructional administrators who provide finance, accounting, operations, facilities,
transportation, food service, technology, communication, human resources, purchasing and
safety services to support classroom learning in schools in Pennsylvania. I want to thank
Chairmen Piccola and Dinniman and the other members of the Education Committee for the
opportunity to present our comments on the Mandate Waiver Program.

The Mandate Waiver Program offers a practical and sound way for school entities to reduce
costs beyond their control. Local education agencies have to commonly adapt decades old
legal requirements for today’s operations. It is, in many cases, a bad fit. Yesterday’s outmoded
statutes create today’s problems, significantly reducing innovation, increasing costs and
creating roadblocks to the utilization of technology. Not only are schools given an opportunity
to reduce expenses via mandate waivers, but the law also allows other efficiency measures as
well.

Since its inception, the Program has afforded public schools meaningful relief from various
outdated, inflexible or cumbersome requirements in the School Code. For example, schools
(and municipal governments as well) are mandated to comply with public bidding thresholds
that have remain unchanged since 1990. The waiver process allows a common sense and
relatively simply remedy for making an inflation adjustment to the threshold.

The current process negates the need to enact a change to the School Code. Changes in the
School Code require, in most cases, a significant amount of time and effort by the General
Assembly and the executive branch. Instead, the mandate waiver process allows schools to
proceed on a case-by-case basis where efficiencies can be demonstrated in the application.
The waiver process creates a choice for schools to seek more reasonable, less costly and more
flexible courses of action that accommodate local circumstances. State law provides a “one
size fits all” approach to all schools regardless of local circumstances, needs, resources, school
size and a myriad of other factors. We strongly urge the committee and the General Assembly
to support, at a minimum, the reauthorization of the Mandate Waiver Program which is set to
expire on June 30, 2010.

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We believe the PA Department of Education has been effective in its administration of the
Mandate Waiver Program, and the program has produced many benefits. However, the
administration’s hands and the hands of school administrators have been tied much too
tightly. We therefore suggest expanding the Program’s very limited scope. Expanding waivers
to other School Code mandates and to restrictive mandates in other state laws will provide
local education agencies with real opportunities for cost reductions and other efficiencies.

In addition to expanding state laws subject to the mandate waiver process, we would
encourage a procedure to provide blanket waivers after a specific type of waiver has been
granted multiple times. Under the current law, we have had dozens of repetitive waivers for
certain construction and advertising mandates. For these situations, the department should be
able to issue a blanket waiver that all schools could utilize.

Here are some of our specific suggestions where we believe retaining or expanding waivers
are most critical. These are areas that can provide the largest savings of either dollars or time
(or both) and, in that respect, they are the most valuable in providing an incentive for school
consideration.

Property Tax Collection Practices: Section 683 of the School Code requires school boards in
school districts of the second, third or fourth class where a tax collector is not elected to
collect school taxes, or where there is a vacancy or where any new tax collector refuses to
qualify or furnish a bond, to appoint one or more persons as tax collectors.

Some school districts have significantly reduced their tax collection costs. However, a waiver to
allow schools to collect their own taxes would be a more efficient method to allow many other
school districts to reduce their tax collection costs. In school districts where tax collector
compensation has been reduced and/or there are no candidates for the position, bank lock
boxes to collect property taxes have been utilized. The lock box process is reliable, enhances
liquidity and interest earnings, improves reporting, reduces auditing expenses and is
convenient for taxpayers. They allow the tax collection process to be completely automated.

We have, by a new state law (Act 32 of 2008), restructured our Earned Income Tax Collection
statewide. It is time to give school districts the opportunity to reduce costs and increase
efficiency for property tax collection as well.

We strongly support amendments to the School Code and other appropriate state statues to
allow school districts to collect taxes by using banks or other agents. If that can not be
achieved, we recommend the Mandate Waiver Program be expanded to allow districts to seek
a waiver of section 683 and the Local Tax Collection Law.

Separations Act of 1913/Section 751 of the School Code: You will hear in more detail from Bob
Cochran, Director of Business & Operations at Unionville-Chadds Ford School District, the
benefits his district has experienced while utilizing a single prime contract. I am certain his
testimony will make it clear that a single prime contract process gives schools the flexibility
and opportunity to save dollars on school construction and create a much clearer line of
authority in the construction management process.

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The Separations Act and section 751 of the School Code require school districts to bid
construction projects with a minimum of four prime contracts (e.g. general, plumbing, heating,
electrical) and award a contract to the successful bidder for each prime.

School districts have sought waivers of the multiple prime contractor requirement for several
reasons. Single prime contractor projects reduce their costs and increase their efficiencies. In
contrast, with multiple prime contracts, overhead costs are incurred. In addition, school
districts must have multiple insurance coverage and multiple site supervision labor costs. A
single prime contractor project eliminates such duplicative costs. Additionally, the use of single
prime contractor construction puts schools on an equal footing with the private sector.

If schools are to be business-like minded, they need the same tools as the private sector to
achieve those efficiencies. Therefore, we strongly urge that the Mandate Waiver Program
continue to afford school districts the flexibility to seek multiple prime contract waivers.
Moreover, school districts should continue to have the option, rather than have another
mandate be imposed on them, to seek bids for projects using both single and multiple primes.

Prevailing Wage Act of 1961: This law provides that public entities in the Commonwealth pay
state-established wage rates to workers on public sector construction or renovation projects
which exceed $25,000. The Act is included among those provisions ineligible for waiver.

The intent of the Act is to insure quality workmanship; however, its success is questionable.
Some highly qualified contractors routinely do not bid on prevailing wage jobs because of the
added paperwork and regulation. If supply and demand drives marketplace costs, then it is
simple to conclude that the reduction in competition drives higher prices for school
construction jobs.

The Act also presents a financial burden in the form of increased labor costs on school
construction projects. According to school business officials and school building designers, the
Prevailing Wage Act suggests that construction costs are between 15 and 20 percent higher
because of the Act’s requirements.

We would like to see the Mandate Waiver Program be amended to allow school districts to
seek a waiver of the Prevailing Wage Act. Absent any legislative relief on increasing the
outdated threshold, the mandate waiver provides an option to at least relieve the mandate for
smaller projects.

Competitive Bid, Purchasing and School Construction Thresholds: The School Code specifies
dollar amounts at which competitive bids and written/telephonic quotes must occur; prohibits
school districts from using their own employees on work in excess of $5,000; and prohibits
school students from performing construction work on any school building. The thresholds are
outdated, inflexible and cumbersome.

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Fortunately, the Mandate Waiver Program has afforded school districts the option of applying
for a mandate waiver to raise thresholds and utilize vocational education students. These
waivers have provided real dollar savings to local education agencies.
However, PDE has chosen not waive the threshold requirements in their entirety but instead
provide a partial increase over the current law. In our opinion, this is just a temporary
exception, not a waiver.

The competitive bid and school construction thresholds vary, and have not been changed for
many years. We strongly support an increase in competitive bid and school construction
thresholds and to allow for cost of living increases hereinafter. Moreover, we call on PDE to
approve a waiver of the threshold rather than provide partial increases.

Advertising Thresholds for Competitive Bids and Other Legal Notices: Sections 106 (Publication
of Notices, etc.; proofs of publication), 751 (Work to be done under contract let on bids;
exception) and 807.1 (Purchase of supplies) of the School Code include advertising
requirements.

The cost to advertise for bids is significant. It is not atypical for advertising costs to be in
excess of $1,000 for projects or supplies that exceed the $10,000 bid threshold. Multiply
thousands of dollars times dozens of projects and 500 school districts, and the amount of
savings school districts and taxpayers can realize is in the millions of dollars.

School districts have therefore sought waivers to allow for the publication of purchasing
notices and legal notices on the district’s Internet website using Hypertext Markup Language
(HTML) format, or an equivalent format, or in a community paper of mass dissemination.

As you will likely hear later this afternoon, the newspaper lobby wants the publication of
competitive bids and legal notices in newspapers to be preserved. However, technology has
grown, and prohibiting its utilization where it can reduce costs is an undue burden to school
districts and taxpayers. Electronic public notice of procurement allows for a better process and
reaches all necessary parties.

We strongly support amendments to the School Code to allow for electronic publication. This
would give school districts much needed latitude and flexibility as well as savings. Moreover,
we urge the General Assembly to not be swayed by special interests that may want to stay
PDE’s approval of any advertising waivers.

Finally, regarding the Program generally, we recommend that in those areas in which waivers
have been repeatedly approved by PDE (e.g. advertising thresholds for competitive bids and
other legal notices as well as bid thresholds for construction and purchasing), all LEAs (school
districts, intermediate units and career and technical schools) should be afforded the benefit of
the waiver, regardless of whether they applied for it or not. Earlier in my testimony I referred
to this as a blanket waiver. This would expand the scope of the Program while offering
opportunities for efficiency to all LEAs.

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Our time this afternoon does not allow us to delve into all the imposed mandates that drive
costs in public education and that may have been more necessary or at least more justified
when originally enacted. However, we do believe the suggestions we have offered would
implement the recommendations of various work groups and task forces heretofore as well as
vastly expand and improve the Mandate Waiver Program and, in effect, provide significant cost
reductions to schools.

Thank you again for the opportunity to discuss the reauthorization of the Mandate Waiver
Program. PASBO looks forward to working with the committee on this issue and ensuring that
Pennsylvania’s public schools are further able to increase their efficiency and decrease their
costs of operation through the Mandate Waiver Program.

P:\Testimony\2009-2010\10Feb10Testimony-MandateWaiver-Final.docx

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Pennsylvania Association of School Business Officials
Mailing Address: Office Location:
P.O. Box 6993 2608 Market Place
Harrisburg, PA 17112-0993 Harrisburg, PA 17110
Telephone (717) 540-9551 www.pasbo.org FAX (717) 540-1796

LIST OF STATUTES/MANDATES

YEAR OF YEAR OF
CITATION TITLE
ENACTMENT AMENDMENT
Act of May 1, 1913, P.L. 155, Separations Act 1913 1981; Act 104
No. 104
Act of August 15, 1961, P.L. Prevailing Wage Act 1961 1963; Act 342
987, No. 442; 43 PS Section
165 et seq.
Act of May 25, 1945, P.L. Local Tax Collection Law 1945 2006; Act 80
1050, No. 394; 72 P.S. 5511
et seq.
Act of March 10, 1949, P.L. Public School Code of 1949 1949 --
30, No. 14; 24 PS Section Publication of notices, etc.;
106 proofs of publication
Act of March 10, 1949, P.L. Public School Code of 1949 1949 --
30, No. 14; 24 PS Section Appointment of tax collector in
683 certain cases
Act of March 10, 1949, P.L. Public School Code of 1949 1949 1990; Act 38
30, No. 14; 24 PS Section Work to be done under contract
751 let on bids; exception
Act of March 10, 1949, P.L. Public School Code of 1949 1949 1990; Act 38
30, No. 14; 24 PS Section Purchase of supplies
807.1

LIST OF WORKGROUPS/TASK FORCES

TITLE YEAR
A Report to the Governor: Recommendations for Improving the Efficiency of 1992
Publicly Supported Education in Pennsylvania
PDE’s School Construction Work Group 2004
Task Force on School Cost Reduction (Pursuant to SS Act 1 of 2006) 2007
Task Force on Mandate Waivers: A Report to the Governor and General 2009
Assembly (Pursuant to Act 61 of 2008)

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Senate Education Committee
Mandate Waiver Program
March 17, 2010
Separations Act of 1913 / 24 PS 7‐751
Robert W. Cochran, CPA, Director of Business & Operations
Unionville‐Chadds Ford School District

Good afternoon, my name is Bob Cochran and I am the Director of Business and Operations for
Unionville‐Chadds Fords School District, a K‐12 public school district serving just over 4,100
students in Chester and Delaware Counties. I would like to thank the members of the Senate
Education Committee and Chairmen Piccola and Dinniman for the opportunity to address the
matter of the Mandate Waiver Program, in particular as it relates to single prime contractors
for construction projects and the Separations Act of 1913.

You have heard some overview remarks regarding the Separations Act and section 751 of the
Public School Code from PASBO Executive Director Jay Himes. Mr. Himes touched upon the
duplication of administrative and supervisory services, surety bonds and insurance that can
occur with multiple prime contractors on a construction project. He also referenced the desire
for public schools to function in a more business‐like fashion as the private sector operates.
This latter point is especially true in the Act 1 world within which schools must operate in the
Commonwealth today.

Allow me to add some real world experience from a project currently underway at Unionville‐
Chadds Ford that is being performed by a single prime contractor. As background, the
Unionville High School has 18 modular classrooms throughout the campus housing over 1,350
students in grades 9‐12. With students ranking in the top of the state in PSSA scores, the
School District continued to see growth with projected high school enrollment as high as 1,650
by the 2017‐2018 school year. The proposed renovation project, which was controversial in the
community, projected construction costs of $55.7 million and total costs of $69.7 million in the
PlanCon documents. The architect prepared these estimates based on her experience with
traditional multiple prime contractor construction projects.

As the design phase proceeded and the debate over need‐vs‐cost raged in the community, the
School Board took up the discussion of applying for a Mandate Waiver to allow consideration of
the single prime contractor option. As heated as the community debate was over the scope of
the project, the single prime contractor option was the area that both sides thought had merit.
Upon applying for, and receiving the Mandate Waiver of section 751 to use a single prime
contractor, the project was finally bid in the Spring, 2009.

As noted earlier, the PlanCon Part D estimate of construction costs was $55.7 million while total
costs were projected at $69.7 million. The actual bids came in with construction costs of $54.0
million and total costs of $64.6 million, a construction cost savings of $1.7 million and savings of
fees and construction related costs of another $3.4 million. A large portion of these additional
savings was the amount associated with project supervision, or construction management.

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This has provided the background, and bottom line, of the Unionville High School addition and
renovation project. As to the benefits of the Mandate Waiver for single prime contractor, they
break down into three general categories: cost, schedule, quality of work.

Cost
Although the bid results I just mentioned give an indication of the cost savings, this needs to be
expounded upon. There were fears by some that we would not receive many bids for this
project. In fact, ten bids were received, with nine of them ranging from $51.8 million to $60.3
million with one outlier at $70 million. What we learned is that the single prime contractor may
continue to negotiate with multiple sub‐contractors, even after the award of the bid. A part of
this negotiation is based on the single prime contractor’s ability to make certain the scope of
each sub‐contractors quote they have received is correct and consistent. This also affords the
opportunity for value engineering and has already resulted in over $161,500 of additional
savings on this project.

Another specific matter that provides savings to the owner is project management. There is
less of a need for outside construction management services in a single prime contract project.
These costs can amount to 3% to 5% of construction cost. Unionville‐Chadds Ford is able to
utilize an in‐house staff member to manage the project with the single prime contractor’s
representative and architect. Additionally, the sub‐contractors are not providing, and therefore
not billing for, duplication of on‐site supervision and management. Pay applications, RFI’s,
schedule reviews, surety bonds and similar administrative tasks are only coming from one
contractor, thus allowing for a more streamlined administrative process. Also, change orders
are more cost effective with a single prime, especially when they affect multiple trades.

The final cost area to be addressed revolves around what I refer to as the finger pointing. First,
legal action and costs incurred in previous multiple prime projects have been directly related to
disagreements in scope of work between contractors, owner, architect and construction
manager. Secondly, there is the impact one prime contractor’s performance has on other
prime contractors, and the delay claims against the owner that often result. With a single
prime contractor, there is a common purpose and a common goal.

Schedule
Much of the above mentioned cost impact results from the single point of contact that is
experienced in the single prime contractor environment. When a project has a single prime
contractor, the contractor takes ownership of the schedule as opposed to an owner or
construction manager prepared schedule of which multiple prime contractors may not take
ownership. There is much better control over sub‐contractors as opposed to contentious
interaction between multiple prime contractors who may not be performing to scope. Simply
stated, there is less finger pointing and fewer delay accusations. There is better control over
coordination drawings and shop drawings when using single prime as opposed to passing the
drawings between multiple prime contractors. The single prime has direct control over all the
sub contractors and, therefore, can expedite the process.

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Likewise finalizing change orders, especially where there could be offsets between trades, or a
decrease in one trade’s scope of work, is much less of a hassle to the owner with a single prime
contractor. Job conferences are more efficient, orderly and to the point, often not lasting more
than 30 minutes as compared to hours on end with multiple prime contractors. There is also a
higher assurance of appropriate phasing throughout the project. The single point of contact
with a single prime contractor allows construction, administration and coordination to flow
much more efficiently and effectively. We are currently ahead of schedule, despite the
weather, and under budget.

Quality of Work
Again, I stress the single point of contact with a single prime contractor when dealing with work
quality issues. There is no finger pointing, delay excuse or other lay‐off of responsibility we
have seen with multiple prime contractors. The site is cleaner and safer as one contractor has
both responsibility and control. This is important for our students, staff and public who may be
exposed to the project, but is even more important for the safety of all trades’ men and women
who are working on the site. Infighting between contractors about who created a mess and
who is responsible to clean it up is not a concern.

We have observed that one contractor is more conscientious of the overall project, cleanliness,
safety, noise levels, deliveries, scheduling, etc. as opposed to the finger pointing that often
occurs with multiples. Perhaps most important to the operation of the School District, there is
minimal disruption to the student education process from the construction activities with a
single prime contractor.

When the project is completed, the ability to obtain accurate as‐built drawings covering the
entire project is far greater with a single prime. The only multiple prime project we have
received accurate and complete as‐built drawings for was an HVAC renovation where the
preponderance of the work was under the HVAC contract. The punch lists are also less
extensive, better coordinated and more likely to be fully completed without the need to
withhold a retainer.

Conclusion
We would like to see the continuation of allowing the Mandate Waiver Program, in particular as
it provides for the option to use a single prime contractor for public school construction
projects. This allows for the common purpose, common goal in school renovations, additions
and construction. The primary argument against the single prime contractor option does not
seem to be coming from the schools districts but rather from contractors and construction
managers. School districts’ interests are the education of students and the efficient and
effective project completion for the benefit of the community, including the taxpayers.
Allowing the option also affords a degree of local control. Schools can choose to apply for the
waiver or choose not to apply. Why not? What’s the down side to allowing single prime
contract as an option?