It took more than 25 years of litigation before the state of New Jersey agreed to equalize public schools in rich and poor communities. Two years after a single state-run school construction agency was formed and funded to the tune of $8.6 billion, new facilities gleam in the state’s oldest and densest neighborhoods. But the story is far from over as the New Jersey Schools Construction Corp. copes with unforeseen costs and political uncertainty over dwindling funds for hundreds of facilities yet to be upgraded.

Spencer

Many observers credit SCC’s new CEO, John F. Spencer, a former engineering executive with the Port Authority of New York and New Jersey, and his predecessor, ex-Turner Corp. CEO Alfred McNeill, with extricating the agency from its bureaucratic roots and propelling results (see chart below.)

But now some worry that it’s done too good a job. At least $5.7 billion of the $8.6 billion originally earmarked by state voters to SCC in a 2000 bond issue has already been committed to projects. Officials, including Spencer, say the money could run out next year. "I’ll be at a point in early 2006 where we can’t commit to building schools because we won’t have the money," he says.

Schools Construction Corp. Touts Its Accomplishments

Initiated nearly 114 design awards for 133 schools    (Renovation/new construction) is worth approximately $200 million.

Originated 144 construction awards valued at $688 million.

Health and safety projects totalling $660 million have been completed at 344     schools.

Acquired 44 sites worth $101.2 million.

Executed 671 grants for non-Abbott projects with 238 districts in all 21     counties, with state share worth over $475.5 million.

Source: New Jersey Schools Construction Corp. 2003 annual report

That worries the stable of architects, engineers, contractors and program managers brought on to help Spencer get the job done. It also could touch off a political battle in New Jersey as legislators, city managers and school officials dispute funding sources and priorities to meet the legal mandate.

Completing the program in the state’s neediest urban districts could cost up to $15 billion alone, says Joan Ponessa, research director of the New Jersey Education Law Center, a Newark-based advocacy group that led the battle for fairer financing. She says she "doesn’t even have an estimate" for facility needs in other districts, which are eligible for lesser amounts from the state. "We’re being asked continually ‘when are you going back to court?’" says Ponessa, who says she is awaiting a fuller airing of SCC’s results and financial situation.

A 1990 state supreme court decision laid the foundation for the school construction program, ordering full funding for new and upgraded schools in 31 so-called "Abbott" districts, named for a lawsuit plaintiff. Non-Abbott school districts can apply for a proportion of state funds to cover facility construction costs. But continuing legal trouble, lack of funds and bureaucracy hindered real progress for several more years.

Gov. James McGreevey (D), who will resign his office Nov. 15 in the wake of a well-publicized sex scandal, backed the program and brought in construction-savvy McNeill to give it inertia. McNeill revamped many antiquated state contracting rules and sent a powerful signal that SCC was a desirable owner for which to work. A project labor agreement was negotiated with building trades’ unions. Some recent projects show keen competition, with the spread between low and third-lowest bidder less than 5%.

School Daze. New middle school in urban West New York (above) is packed with design features and amenities for students. Facility partly replaces an outmoded K-8 facility (left). ( Photo top by Guy Lawrence for ENR; bottom courtesy of New Jersey Schools Construction Corp.)

McNeill’s impatience with political dealings led to his replacement by Spencer, a 34-year port authority veteran. A clear, crisp contracting philosophy flows from Bronx-born Spencer: no bidding on less than 100% drawings, no rebidding to try to drive down the price of a properly estimated job and no sticking contractors with costs related to delayed site access. "We’re all in this together," he says.

Even so, the current SCC chief acknowledges the complexities of dealing with myriad stakeholders in New Jersey’s numerous local-run school districts. "At PA, I only had the governors of New York and New Jersey as bosses, and I built on agency property," he says. "Now I have many bosses and they all have agendas."

Spencer continued SCC’s early focus on fixing hazardous school conditions. The agency has spent more than $600 million on near-emergency repairs at 350 schools. He also eased state bureaucracy. "The [Inspector General] was involved way too much in the beginning," says an executive of one of 13 private-sector program management firms hired to manage work in assigned Abbott districts. "They were concerned about program integrity, but the oversight was way out of balance."

Observers and insiders admit that initial construction cost estimates have proved woefully inadequate. Early predictions of building for $125 to $130 per sq ft didn’t factor in such items as insulation, land acquisition, inclusion of all-day...