$201 million is fair and reasonable cost of new JFK High School

New JFK to cost $201M

GovGuam will have to make an annual rent payment of $6.7 million for the next 30 years. That means, when the school is finally paid off, it will have cost local taxpayers about $201 million.

Only a few years ago, Guam built four new schools with less money. Liguan Elementary, Adacao Elementary, Astumbo Middle and Okkodo High schools were all built by the Guam Education Financing Foundation under a single agreement that also used rental payments to pay back investors.

GovGuam must pay the GEFF about $6.1 million annually for 20 years, according to Pacific Daily News files and bond market documents. Payments had started as of 2008, PDN files state. That means, when these four schools are paid off, they will have cost taxpayers -- in total -- about $122 million.

That is $79 million less than the planned price of the new JFK.

When asked yesterday to justify JFK's immense cost, governor's spokesman Shawn Gumataotao said the community demanded a school, and the price was within limits set by lawmakers. "This is an opportunity to finally put our JFK kids back at that upper Tumon campus," Gumataotao said. "The community has gotten behind the effort and we will continue to work with them to build the school and get the kids in it."

It should be pointed out that the decision to obtain financing and conclude the JFK solicitation came only after the Public Auditor sent a letter to the contracting agency saying that much of the cost analysis she had been concerned about had been "clarified" but some cost issues remained, and that she urged the

"key officials [to] continue their discussion with a reminder that each government official has a fiduciary duty to achieve the most reasonable final cost to the government for this project".

COMMENTARY: The JFK rebuild project was solicited under a Request for Proposal source selection method, which is a form of price-negotiated contracting.

Guam procurement regulations for RFPs require that the government must "negotiate a contract with the best qualified offeror for the required services at compensation determined in writing to be fair and reasonable". (2 GAR § 3114(l)(1).)

A memorandum of the "significant considerations relating to price" must be put in the contract file and made available to the public. (2 GAR § 3114(m).)

Only if fair and reasonable compensation is agreed upon (2 GAR § 3114(l)(2)), together with other requirements of the solicitation, can the contract can be given. (2 GAR § 3114(l)(3).)

In the negotiated contract process, price analysis is used to determine if a price is reasonable and acceptable. (2 GAR § 3118(g).)

Evaluation of cost or pricing data should include comparisons of costs and prices of an offeror's cost estimates with those of other offerors and any independent territorial price and cost estimates. They shall include consideration of whether such costs are reasonable and allocable under [cost principles specified in the regulations]. (2 GAR § 3118(i).)

If the government cannot negotiate a fair and reasonable compensation, it should not conclude any agreement with any of the offerors. (2 GAR § 3114(l)(6).)

Therefore, we now have new a benchmark, significantly higher than it was in 2008, for what is a fair and reasonable price to pay for construction on Guam.

Don't we?

That $201 million is payable over the next 30 years. The current JFK student body will be paying for it most of their working lives. And so will all the other taxpayers who don't go to JFK.

But, assuming 1500 students and a cost of $6.7 million per year for 30 years, that's roughly $4,500 per year per student to have a school built and maintained for them. Is that unreasonable? I'm in no position to judge.


FOLLOW UP: Regardless whether the price is fair and reasonable, it is entirely unlikely that DOE can afford it:

DOE expects to run dry in mid-September

It's a case of history repeating itself. Just a few weeks before the end of the fiscal year and the Department of Education says its coffers are just about dry. In the hopes to avert a complete shutdown of schools, the largest agency in the Government of Guam is taking some rather drastic measures to brace for the shortfall.

The outlook is grim: DOE will run out of cash in the next couple of weeks. Finance Deputy Superintendent Taling Taitano says officials are trying to avert the closure of schools with coffers running dry.

Public auditor: Deficit continues to grow

"We, as a government, continue to spend more than we take in," said Doris Flores Brooks, Guam's elected public auditor. "And we're going to have to do better than that because I don't know how long we'll be able to maintain a high deficit....

She said the cause of the overspending is that the government "consistently overestimates revenues and underestimates expenditures."

One example of expenditures paid every year that historically haven't been included in the GovGuam budget is the interest on tax refunds.

She said payments to contractors for construction of John F. Kennedy High School is another example.

"In this case, the information about payments for the new JFK was only made known last week, so it's not in the budget bill -- but it needs to be added and the source for those payments identified or else we'll end up just scrambling to find money," she said.