Melrose project raises questions over allowances, insurance premiums and bond commitments

Project staff told the Putnam County Bond Oversight Committee that the Melrose campus project has substantial allowances and early‑release packages included in its GMP to cover known but not fully designed work, and that those allowances help the project proceed while designs and bids for specific scope elements are completed.

Chris Shepard, a member of the project team, said the Melrose scope includes complex utility rerouting and demolition work that produced several unknowns when the GMP was established. That uncertainty led the construction team to include allowances to cover items such as a not‑yet‑designed wastewater treatment plant and a lift‑station relocation.

Committee members pressed the team about insurance and bonding costs after reviewing the GMPs for several schools. One member noted that the Melrose GMP shows insurance and bond costs at a higher percentage than the other projects. Project staff explained the construction team uses subcontractor‑default insurance (SDI) in some packages; SDI can add roughly a 1.3% premium but is intended to allow the construction manager to restart work quickly if a subcontractor fails, rather than pursue a long bond claim process.

A committee member said the difference can amount to roughly a half‑million dollars on this contract and asked staff to provide supporting invoices and contract language so members could see whether the extra cost is justified. Staff agreed to follow up and to provide documentation of what the insurance line items cover and who receives the premium payments.

Bond fund status and commitments also consumed much of the discussion. Staff distributed a ten‑page packet of February and March expenditures and an 'other' summary showing total bond proceeds, expenditures and an unexpended fund balance. As of the March packet staff cited approximately $79.3 million unexpended with $5.9 million encumbered; after removing interest the staff presented roughly $63.4 million in total bond dollars remaining. Several committee members cautioned that committed GMPs, pending furnishings budgets and architect fees reduce that available balance and asked staff to provide a reconciled summary that includes awarded GMPs and known furnishings commitments.

The committee also asked staff to follow up on whether the state intends to perform a detailed audit of project costs or whether the district should engage an independent auditor. Jonathan (construction management staff) said he had contacted state oversight and would seek clarification; staff agreed to return with the status of state review and recommendations on an independent audit if needed.

What happens next: staff will provide additional documentation on insurance/bond premiums and subcontractor default insurance, and will produce a reconciled, commitment‑inclusive statement of bond proceeds, encumbrances, commitments and remaining available funds for committee review before the next meeting.