$4 million for the transit center and the estimate includes $9.1 million for the transit center and includes an escalation and both escalations and the budget escalation is based on escalations starting the first quarter of 2013 whereas the escalation starts the first quarter of 2014 since it's up to today's market conditions. >> i don't understand why design contingent changed as much as it did i can see everything else but the design -- why would that necessarily have the same kind of escalation?

>> when webcor/obayashi estimated the plans and a big part of that has to relate to the mechanical and electrical drawings they felt that the amount of conductors and so forth could increase between the 100 percent and the issue for construction documents the hundred percent cd's were completed in 2013 so there's a year lag and it's a contingency may not be used but it's a part of their estimates. >> if it's a percentage that's the highest differential as a percentage and you would think that design contingency since

basically our designers are in place and everything -- that would be the lowest if anything not the highest differential. >> in general, if you are estimating a bridge where the quantities are unknown then the contingencies will be very low but. >> we're proposing changes that's coming up in the presentation where the design is done we're going to be changing things to reduce cost so i think that creates some design risk. >> that's correct. >> the difference between the budgets for direct cost and the estimates is $136.4 million and as a result of this increase the fees increased and the contingencies increased by

$8.54 million so our target is $153.4 million. one of the differences is the changing market conditions. the escalation rate between the first quarter 2013 and third quarter of 2013 -- >> this is a depiction of the market conditions. there is approximately 13 projects currently under construction is shown in pink that are worth

approximately 4 billion dollars and this project is is shown in yellow it's quite a bit of work in our neighborhood and quite a bit of work in the silicon valley that's restricting the bidding pool basically. this is a graph that's showing the market trend in san francisco for for the last 5 years the yellow graph is the engineering record index which measures the change in cost in labor and materials and the blue graph is the consultants index which measures the bidding index measures the bidding environment which includes the margin the bidders are asking for as well as the increase and cost of materials as you can see in the 2009 and 2010 period during the great recession bids were coming in below budget that's why the

blue graph is below the yellow graph bidding below margin and as the market conditions improved and the economy improved in the 2012 period the bidders the bidders were asking for their margin and that's why you see an increase in the graph on the blue line. when we did the budget in july 2013 the projection for the 2013 first quarter bidding environment indicated a 2.2 percent escalation rate and that's is shown in the dashed gray line at that time we used 3.5 escalation rate to be prudent. >> the amount of scope that

took place since the completion of the construction drawings. the estimated completed in february assumed $9 million between the 100 percent of construction documents and the issue for construction documents and unique design is reflected in hundred percent construction drawings contributed to the increase in the cost estimates. >> our mitigation plan includes cost reduction as well as utilization as contingencies and reserves and we've had we've identified mitigation measures and we've also reduced mitigation and reduce the estimates and adjustments and

we've also evaluating another $5 million of litigation measures and proposing to use -- >> we've identified more than 40 elements that we can incorporate as reductions in the upcoming packages and planting and hard escapement elements on the roof top park and so that the construction so that the park can be constructed shortly afterwards we're also proposing to reduce --

>> does not have any park lighting elements in it it's not for safety it's just for visual and we're proposing to reduce some of the red u.n. dancies as well as reducing the number of cameras. we would reduce that by two-thirds and keep enough cameras just for safety and security reasons since these two levels will not be occupied during phase 1 and also includes the glazing system and standard see through glass will be used and the back of the glass will be painted instead and we're also

proposing to remove -- the cfrc is used to cover the exposed concrete and non structured elements and we'll paint the exposed concrete and we'll cover the other structural elements with prefinished panels instead and the mitigation plan will also be utilizing -- we have many elements in our transit. >> and the perimeter fence is stain less steel and by changing that to a painted galvanized finish we'd utilize

a savings of $3.5 million. on the bus deck we currently have custom made steel on the perimeter of the bus deck and the cost of that is approximately $5.5 million and by utilizing the concrete barrier we would reduce the savings but $2.6 million and we've identified other cost reduction saves and bringing the total to $52.8 million. >> we currently have $210 million contingencies in reserves this mitigation plan would increase the design contingency and reduce and

would reduce the program reserves to $115 million for a total contingency of 128.$3 million. the remainder of the contingency balance -- >> on that last slide to me is the most important slide of the whole thing it's where the bulk of our mitigation is happening and i'm not exactly clear on both how contingencies differ from reserves and what -- if you could give some examples of you know what a construction contingency is supposed to satisfy what are some of the events and what were the reserves supposed to do it would help me understand why certain amounts went further than others and certain amounts went in one direction versus the others if you could just go down through that one slide.

>> i will for design contingencies if you have got plans that are 65 or 80 percent complete -- that's what design contingencies are for theoretically speaking as you mentioned earlier but to be honest you never have 100 percent plans there's always an incremental amount you need to cover so design contingencies are normal practices that you assign to trade packages before you bid them so you would allocate a certain amount of contingency for each trade packages the difference between the scope that you think you have in the plans and the scope that the contractor is estimating okay so that design contingency will be used before you award the project it's between the finish of the project and the award of the

project. construction contingencies is to deal with un foreseen conditions during construction after the project has been awarded. it's utilized to mitigate conflicts between trades so also another form of construction contingency and program wide contingent that can be used whether it's soft cost or higher bids or construction conflicts in the field. >> so just a broader contingency? >> yeah, it covers all un foreseen program wide and escalation is accounting for escalating between the time that the plans are completed and the midconstruction period. >> yeah i still have the same problem with the design contingency when you are at 100

percent designed documents -- >> that estimate included a design contingency of $9.14 million we don't know yet it's just a contingency there to account for things that they didn't catch in their estimates or things that scope requirements that takes place between the time we advertise the project to we award the project it's a contingency again it's not for sure but it's a normal practice. >> just to follow on the point it seems that it's escalation and it's not un foreseen construction conditions that we're trying to solve for here. is there a reason that you are proposing such a big draw of the construction contingency as opposed to the escalation reserve? >> no the escalation is going

to be utilized so they are part of the estimate so i'm drawing from the construction contingency to fund the gap between the estimate and the -- >> so that escalation line is already spoken for? >> as we bid projects out. >> but i thought -- what i understood from the earlier slide is that 153 million was based on the current estimate based on our expectation of that escalation. >> yeah. >> or do we think there's going to be escalation beyond that 153? >> no it's the total difference between the total budget and the total cost and the cngc estimate which includes escalation. >> all right so i still don't understand why would we be drawing so much on construction

contingency which is really meant for un foreseen conditions during construction there's a lot of construction to go and as soon as we get these awarded we'll have that locked down. down. >> okay so we have a total of 153 dollar difference $5 $55 million that $153 million number includes the escalation already in it so it's already escalated so the only other sources of funds to fill in the gap would be the program reserves and construction contingencies. did that make

it clear or did i confuse you more. more. >> i don't know we're still going to have -- maybe it doesn't matter. >> let me clarify that. >> let me clarify that you are making a very good point what this shows is the total contingencies currently in the budget the fact of the matter is the design contingency and escalation they will be utilized as we bid out projects they are attached to trade packages. they will remain after all trade packages are utilized with the program and they will be used for construction conflicts and mitigation and construction challenges or any un foreseen conditions after we bid out all the projects. this chart was

developed based on the model and even though -- they separate them from the base cost. after this mitigation plan is implemented the total construction contingency will be 73 million dollars and 41.73 will be cngc contingency that will amount to $7 million of the total construction budget. this is a before or after breakdown of the construction. again, this mitigation plan allows us to live within our means and be within budget it increases the construction costs

excludeing the other program costs will remain the same. >> the success of this plan hinges on receiving responsive bids and harper your previous question regarding how many number of bidders we need in general we need 3 or 4 bidders that's the price in the market if we have one or two bidders you run the risk of people bidding higher than the market allows. we've retained the services to conduct a bidder

survey to help us determine some of the reasons. so we can reduce our risk and exposure to higher bids with that i'd like to present natalie tailor to present her findings. she will be followed by west core and he will speak to that and share with us the program as well as the trade group schedule with that i'd like to turn it over to natalie. >> thank you: mark. lee land tailor associates was asked to perform a bidder survey. we polled them about possible

mitigation measures to reduce risk and make the project as attract active as possible. secondarily most of the bidders thought the design was unique and very custom and designed to an extremely narrow tolerance that was almost un constructible and so you pay for that level of complexity and in the trade packages currently on the street several of the bidders mentioned that the language in the bidder manual gave a perception to the perceived responsibility for the design even though the

package is essentially complete and that added risk in their eyes and language in the bidding manual possibly made them feel they had some responsibility for certain elements of previous subcontract or's work and that also added to the risk and potential costs and where you are bidding out trade packages over long periods of time to make sure the project came together also adds risk to the project. in terms of general requirements -- a few subcontractors mentioned that certain items like site logistics there was more of a burden to the subcontractors than they normally saw and that added to some of the complex tee and lastly most of the subcontractors mentioned because of the increasing activity in the community it

was reaching capacity and there were concerns about possible availability in packages to come. >> i just have a question on that. >> yes. >> you have the perception of design responsibility perception of -- were they mistaken in their perception? >> i can only go by what they told me we did not do an extensive review of all the bid documents but i do believe there's language there that would suggest that they are responsible or partially responsible for the design. >> so they weren't entirely mistaken about that. >> that is my understanding. going onto mitigation measures a lot of these were recommendations by the subcontracting pool some recommendations we came up with based on the previous comments

obviously capture current market pricing looking like it's already been done and the bid manuals to eliminate perceived responsibility for design if the package is already complete or alternatively many of the subcontractors would like to bid on performance specifications and felt like they could come up with solutions that are cost effective and anything that has a narrow design tolerance somehow make the design more flexible where it's not such a narrow tolerance that's difficult to construct. review the bid packaging to better match scope to trade this is not a large item but some of the contractors mentioned for instance there might be some concrete in the electrical package review the general

requirements and so that the subs can focus on what they do best and survey the sbe availability per trade as the market gets hotter they want to make sure the goals match the sbe's and that concludes my portion of the presentation. >> director metcalf? >> i'm really glad you did this survey and these recommendations seem really good i'd love to know which of these you guys want to take and which you don't. >> we're taking all of them we're really looking at all of them, director metcalf and steve humphreys is going into what webcor/obayashi is doing now that they have these findings and recommendations. >> okay. >> good morning directors. so

as we mentioned earlier i think one of the keys that we attract bidders to the project and they show up on bid day we've had pretty good success on getting bidders prequalified so we've had many of them dropout so we've taken the information that was gleaned from the survey and made a number of adjustments that we think are going to help to attract bidders to the project we're doing a lot more personal outreach to the bidders and continuous communication with them during the bid process so we know if they have any issues that are going to cause them to perhaps not bid the project so we can address those during the bid process before they just don't show up on bid day. we're also developing fairly

detailed scoping documents that we're presenting to the bidders during the preconstruction or prebid meeting so that they can clearly understand what it is we're asking them to bid actually walking them through specific sheets of the drawing and highlighting them on the drawings and showing them our what our anticipated scope is there's over 2500 sheets of documents just plans plus a lot of specifications for them to go through it's a lot of information so we feel by specifically pointing out to the bidders what it is we're asking them to do that it will help them to bid the project and not perceive that there's more risk than there really is as we mentioned earlier there was language in the bid manual which was our instruction to bidders that might have been perceived by the subcontractors as adding risk to their scopes

and the entire team and turner and have gone through the bid manual provided comments back to the nothing of great consequence but anything in there that might that might be construed by the bidders as causing any confusion as to what it is we're asking them to do on the project. as we mentioned earlier the design build trades in particular the glazing packages and w 1 the exterior awning system we went through a process over 3 years with contractors on board to bid those and by the time they actually were able to bid the plans were completed and the

design was prescriptive as a result the glazing bid and w 1 bids were rejected and now in the process of rebid those trades with far less prescriptive requirements and do a true design build and bring the value to the project and there were comments on the mep trades the documents we had at that time were not complete we didn't know for sure how complete the final bid documents were going to be and if it was the intent that the bidders were going to have to finish those drawing on their own we had to describe that in

the documents and we did. and we know they are complete enough that they are really not design built and we've removed that language from the bid instructions. we've implemented well via the engineering effort that's being undertaken is requiring reduction of scope in a number of trades and rather than waiting for the drawings to be fully completed to reflect those changes we're working with the design team to come up with ways to describe those changes to the bidders in narrative form or sketches so they can clearly understand what they are being asked to bid so if we can bid the packages out now not later i'll show you later our schedule. but we want to get the bids out as soon as possible