A closer analysis of NVC finances

By Lee Broad

I, like most people I know, want Napa Valley College to provide an exceptional educational environment for many reasons.

In the past, because I know little of what kinds of facilities are required for NVC, I have relied on the judgment and experience of the administrators and trustees (collectively, the administration) of NVC. I had faith in the administration’s proposal when I voted five years ago in favor of picking up my share of the $133 million bond issue.

However, my faith was shaken deeply by the events of the past few years. Apparently others felt similarly, with the result being the defeat on Feb. 5 of the proposed Measure L. It is now time to determine how to go forward and provide the facilities needed to support NVC and its many deserving students.

What I, and I believe many others, want to know is what happened and what would be different in the future. I would like to see a classic failure analysis, the elements of which would cover the following topics:

1. Five years ago the administration said that NVC needed certain kinds of buildings with specific functions and capabilities. Also, some buildings needed specific kinds of refurbishment. In proposing Measure L, the administration said that NVC needed more and different kinds of buildings and refurbishments. I would like to know what the factors were that led the administration to alter the long-term facilities requirements in just these few past years. How were these factors overlooked five years ago ,and what tells the administration that they have it right now?

2. In the discourse over Measure L, we heard a lot about the impact of inflation. Let’s look at a traditional accounting price/volume variance analysis. For example, if I plan to bake a cake using three eggs at 10 cents each, but I end up using four eggs that cost me 12 cents each, I have a “variance” of 18 cents above my estimated cost of 30 cents for the eggs. Of this 18 cents, 6 cents is because my three eggs cost 2 cents more (a “price” variance) than I thought they would; 10 cents is because I used one more egg (using my cost estimate of 10 cents per egg) than I planned (a “volume” variance); and 2 cents is because that extra egg cost 2 cents more than I planned (a “price and volume” variance). The administration can do the same thing with each major cost component: cement, wood, labor, electric wire and whatever else was a material cost of construction. This way they (and we) will know how much of the inflation in construction costs was because of increased cost of the materials (or labor) and how much was because NVC used more materials and labor than planned. Then, I would like to know why these volume variances occurred and what actions would be taken in future construction projects to ensure such variances do not recur.

3. If I understand the bid process correctly, bids were received from contractors based upon designs, detailed construction drawings and specifications provided to them by NVC. Those bids were based on building those designs to those specifications. I think most of us understand that once construction begins, modifications to the designs or construction drawings and specifications can be very costly. In my view, all good construction contracts require that the costs to implement material “change notices” be estimated and approved by the customer, in this case, NVC. I would like to see the contribution of such change notices toward the increased cost of construction. (A large number of change notices generally means that the front-end design process was poor.) In addition, I would like to know the impact of “allowances” (allowances are the contractor’s cost estimates to perform specific work, but which are not fixed prices committed to by the contractor) on the construction cost overruns. If change notices and allowances were major factors in the cost overruns, I would like to know what actions the administration has taken to strengthen the design process and to materially reduce the amount of allowances in future construction contracts.

I believe that the failure analysis outlined above would be very valuable to the administration. I hope they have performed this analysis already. If I were to review such an analysis and be comforted that the administration now knew how to plan and effectively execute large-scale construction projects, I would support additional funding for NVC. As it stands today, I cannot.

To do my part, I volunteer to lead a community task force, chartered by the administration, to perform the analysis I have outlined. In proposing these next steps, I am reminded of George Santayana, philosopher and writer, who said, “Those who cannot remember the past are condemned to repeat it.”

(Broad lives in Napa.)

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