DE02.01D
General State Facilities
Board of Public Works/Department of General Services
Construction Contingency Fund (Statewide)
GO Bonds $2,250,000 Recommendation: Approve
Bill Text: Bill Text: Provide funds to be credited to the Construction Contingency Fund to be
administered in accordance with Section 3 -609 of the State Finance and Procurement Article.
Project Description: The Construction Contingency Fund (CCF) provides funds for State
construction projects that exceed their previously authorized amounts or to cover change orders
during project construction. These funds may not be used for non-authorized projects.
Comments: The State Finance and Procurement articles allow a maximum of 1.25% of the current
year general obligation bond appropriation to go to the CCF. That maximum comes to
$8.313 million in fiscal 2006. As shown in Exhibit 1, the CCF balance is $3.675 million as of the
end of calendar 2004. The fiscal 2006 allowance brings the fund balance to $5.9 million which
should be sufficient for anticipated needs.
The Department of General Services (DGS) general close-out policy when capital projects are
completed with remaining funds is as follows: any amount between $10,000 and $100,000 is
transferred to the CCF; amounts under $10,000 go to the Bond Annuity Fund, and amounts over
$100,000 are de-authorized by the Department of Budget and Management (DBM). However,
recently DGS and DBM have transferred funds remaining from completed projects in excess of
$100,000 to the CCF rather than deauthorizing these funds. DGS should be prepared to discuss its
close-out policy and the reason why it has chosen to transfer amounts in excess of $100,000 to
the CCF rather than scheduling such funds for deauthorization.
For further information contact: Brian Baugus Phone: (410) 946-5530
Analysis of the FY 2006 Maryland Executive Budget, 2005
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DE02.01D – BPW/DGS – General State Facilities
Exhibit 1
Calendar 2004 Fund Activity
Beginning Balance (January 2004) $1,403,621
Fund Transfer 950,000
Fiscal 2005 Appropriation 2,000,000
Subtotal Available Funds $4,353,621
Authorized Use in Calendar 2004
Bloomsbury Square Demolition and Parking Lot 198,200
140-bed housing unit at Eastern Correctional Institute 950,000
Total $1,148,200
Year End Balance $3,205,421
Source: Department of General Services
Fund Data
Prior Program Activity – All Fund Sources
($ in Millions)
FY 2001 FY 2002 FY 2003 FY 2004 FY 2005*
Encumbrances n/a $2.216 $2.457 $1.051 $430
Expenditures n/a 2.216 2.457 1.051 0.430
*As of 01/21/05
Authorization Summary
($ in Millions)
Funds Balances
To Be To Be
Fiscal Year Authorization Encumbered Expended Encumbered Expended
Prior Years $8.758 $7.758 $7.750 $1.000 $1.000
2005 2.000 0.000 0.000 2.000 2.000
Total $9.758 $7.758 $7.750 $3.000 $3.000
Analysis of the FY 2006 Maryland Executive Budget, 2005
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DE02.01D – BPW/DGS – General State Facilities
Authorization Request
($ in Millions)
2004 2005 2006 2007 2008 2009 2010
Description Approp. Approp. Request Estimate Estimate Estimate Estimate
GO Bonds $1.000 $2.000 $2.225 $2.500 $2.500 $2.500 $2.500
Issues
1. Global Construction Costs Are Rising
World prices for construction materials have increased significantly in the past year. More
specifically there is a severe shortage of scrap metal which has caused a sharp increase in the cost of
structural steel and reinforcing bar. In the past year, prices for wide-flange structural steel beams
have increased over 7%, while prices for channel beams rose 5%. Rebar prices began climbing in
November 2003 and are now well over 10% above January 2004 prices. Scrap metal is the primary
raw material for “mini-mills” that produce most structural steel and rebar products in the United
States.
In addition to the increased cost of steel products, prices for concrete, lumber, plywood, gypsum
wallboard, copper, stainless steel, pipe, and fuel are all much higher than they were 12 to 18 months
ago. Typically, the cost of materials is calculated at approximately 40% of the overall cost of a
construction project, with the remaining 60% allocated to labor and equipment. This spike in
material costs could effect the 40% application by as much as an additional 15%, depending on the
types of construction materials being applied.
A number of capital projects have been recently bid or are scheduled for bidding in the next fiscal
year that will be affected by the sharp increase in material costs. Since the estimates that support
these projects were prepared prior to the spike in prices, these estimates did not include the impact
from the rising materials prices. DGS responds that projects recently bid, where the prices have
exceeded the estimates, include the Construction of Exhibits at the Banneker Douglas Museum in
Annapolis (a 20% increase), Improvements to the Maryland Dove Waterfront Site at Historic St.
Mary’s City (a 100% increase), and the Hammerman Area Beach Services Building at Gunpowder
State Park (a 50% increase).
DGS should update the committees concerning the current CCF fund balance and the
anticipated need to use the CCF during fiscal 2006 that serves as the basis for the proposed
fiscal 2006 appropriation.
Analysis of the FY 2006 Maryland Executive Budget, 2005
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DE02.01D – BPW/DGS – General State Facilities
Recommended Actions
Approve.
Analysis of the FY 2006 Maryland Executive Budget, 2005
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