The University and the P3

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UC Berkeley’s Architects & Engineers Building, image ©2017 Google.

AIACC spoke with Emily Marthinsen, AIA, Assistant Vice Chancellor and Campus Architect for UC Berkeley, about the changing procurement landscape for college and university construction. We met in her third-floor corner office, stacked with planning documents, in the Architects & Engineers Building, a handsome, early twentieth century structure tucked quietly off the northern end of Sproul Plaza.
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AIACC: What’s the financial context today for new construction on the University of California campuses?
Marthinsen: For years, almost all buildings at the UCs were funded by state bonds. That money has gone away, at least for now, so we are left with two ways to finance construction: it can be donor-funded, or we can form a partnership with a private developer, who will be responsible for securing financing. In the past, UC Berkeley was also able to borrow money, but for now, we have reached our debt capacity.

When people first started talking about public-private partnerships—P3s—it was the greatest thing since sliced bread. Everybody has ideas for buildings—deans, advocates for all kinds of programs, faculty researchers who think they’re going to win a Nobel Prize, students—and there was hope that P3s would make all of these ideas possible. But what we’ve discovered is that the only thing developers are really interested in is student housing and sometimes parking—depending on location—because there’s an income stream, opportunity for profit. A developer’s not going to want to build a library.

For housing, a ground lease would typically be for 25 to 30 years, although terms for any specific project, of course, vary. During that time, the developer-managed entity gets the revenue and pays us ground rent. At the end of the term, we get the facility. We aren’t doing this to make money from the ground rent—we don’t make that much—but to get the projects built. We don’t have the borrowing capacity to do the construction ourselves.

But most projects have to be funded through philanthropy. When project sponsors suggest projects like research labs, they’re suggesting that they be completely donor-funded, so the campus’s development team has to sort through all the proposals with respect to the university’s strategic plan, the true capacity of donor community, which projects actually have a chance.

Donor-funded projects are of two sorts. More commonly, donors fund a building, and the university hires the architect. But we also have a few projects for which the major donors are also real estate developers. These donor-developed projects are idiosyncratic, very complicated, because they’re not business relationships. Our new Aquatic Center is donor-developed. We had a ground lease with a 501c3 that the donors created to build the facility. The 501c3 raised the money, hired the project manager, the architects, and the contractor. When it was done, the lease ended and the 501c3 gave the project back to the university. The donors had no interest in generating revenue, they just wanted to get an aquatics facility built, and they thought it was a way to get it done faster and cheaper.

How does the rise of the P3 affect the selection of the architect?
In the conventional design team selection process for a public agency like UC Berkeley, we ordinarily advertise a Request for Qualifications. Design firms submit a qualifications package, we screen the submittals, select a smaller number to interview, then we pick one. We do that for any project with fees over $100,000. It’s a qualifications-based selection process; we do not select design teams based on fee proposals.

In a P3, we put out a call for a developer to submit qualifications. The developer puts together a team that includes the architect and the contractor. The developer’s qualifications include the architect’s qualifications, but also the developer’s financial ability to deliver the project and ideas about what a deal might look like. So we ask developers to come to interviews with a financial proposal. It’s not the final deal—that is negotiated once we pick the team—but the proposal has to be attractive to us. The architect is in a contractual relationship with the developer, not with us. So, while the architect is an important part of the team, that’s not the main thing we are evaluating.

Given that, how to you assure design quality?
We interview the developers along with their design team. In rare cases, the developers have brought poor design teams, and we’ve asked the developer to find another firm. And we pay attention to how the developer and the architect interact. I’m particularly sensitive to whether the developer defers to the design professionals on design issues. We have a rigorous campus design review process, so we want development teams—developers and architects– to be able to work with that.

Sometimes, the developer and designer haven’t worked together previously, haven’t sorted it out, which can be problematic. Others know exactly how to do it. For a current housing project on Bancroft Way, developer American Campus Communities is working with SCB, which has worked with this developer in many places, so they have it down. It’s seamless. The developer/architect/client partnership is working well; they collaborate with us on design issues. The developer attends our design reviews. That has not always been true with other projects.

What advice do you have for architects who want to do this sort of work?
I tell architects it’s a good idea to develop relationships with developers with whom they have rapport—about design, about work. Some developers ask us for recommendations of architects. We can’t really provide these except by category—firms who have already designed housing for the University, for example. A lot of architecture firms don’t know how to find developers, so we can say the same thing to them: here’s a list of developers with whom the University has already worked. But we can’t endorse any of them. I think the development world and the architecture world have historically attracted different sorts of people, so maybe they’re just getting to know each other as potential partners. Professional organizations (SPUR comes to mind) seem like good places to make these connections.

Most of the architects are concerned that they’re not going to have a place at the table; that’s an issue for us, too, so we’re trying to keep our design review robust. We’re interested in campus urban design, in campus character, in cutting edge sustainability, other goals that are unique to UCB. The architects are concerned that the developers are going to squeeze their fees. Development teams come to interviews having done quite a bit of thinking, considered concepts, produced images and diagrams, so the architects have done a lot of work; they’re investing a lot of time, but I don’t know if they’re getting paid appropriately.

What are the broader issues raised by P3s?
Public-private partnerships link us much more to the economy as a whole—the construction ups and downs—than we might have been in the past. That’s one thing.

But the thing I like to talk about with my colleagues is how you make these new ways of procuring projects part of a bigger picture. If you have different developers and donors doing projects here and there, how do you structure it to have an integrated campus? That’s the challenge for the institutions.

It’s also an educational process for the developers if they want to be a part of UC. What’s the future of higher education? That’s not necessarily a core interest of developers, who probably work in a variety of markets. How much of recent change in the campus experience is important for delivering these projects? How much isn’t? And you have to ask about and be vitally interested in and committed to addressing this question: What’s the future of the physical campus?

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Tim Culvahouse, FAIA

Tim Culvahouse, FAIA, is Editor-in-Chief of the AIA California Council and an architect specializing in the public communication of design ideas through his firm, Culvahouse Consulting.

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