A capital improvement project provides for the construction, repair, or improvement of buildings or grounds. This includes new construction, additions, renovations, renewals, repairs, site development, utility services, extensions and plant improvements, parking facilities, roads, fixed equipment installation and similar projects. Capitalization begins with a minimum project budget of $100,000 ($50,000 for UIHC).
34.2 APPROVAL PROCESS.
Capital improvements are developed in accordance with policies and procedures set by the Board of Regents, State of Iowa, and are accomplished by University administration in consultation with existing committees and facility users. The approval process for capital improvement projects is dependent on the project's budgeted costs:
|< $250,000||Approval is delegated to University administration|
|>= $250,000 and < $1 million||Approval by the executive director of the board office|
|>= $1 million||Approval by Board of Regents|
Existing Building Renovation
|< $250,000||Approval is delegated to University administration|
|>= $250,000 and < $2 million||Approval by the executive director of the board office|
|>= $2 million||Approval by Board of Regents|
34.3 ROLES IN PLANNING AND OVERSIGHT.
The responsibility for accomplishing capital improvements for projects has been delegated by the Board of Regents to the University administration.
b. Facilities Management. The University has assigned to Facilities Management the responsibility for managing the project from concept to completion including specific planning for project development. The planning responsibility is either shared or further delegated in certain units or services of specialization including University of Iowa Hospitals and Clinics, Utility Systems, Parking System, and institutional roads. The University Campus Planning Committee reviews, considers and advises the University administration on capital improvement activity that has an impact on the campus.
c. Capital Projects Review Committee. The Capital Projects Review Committee has been established as an advisory committee to the University President or the president's designees for the review and evaluation of non-UIHC capital projects valued at more than $1 million. The Committee will make recommendations to the President or designees regarding the approval, modification or disapproval of proposed capital projects along with priority and timing of projects.
d. Controller's Office. The Controller's Office is responsible for coordinating the determination of funding sources and monitoring applicable bond reporting compliance.
34.4 STEPS IN PLANNING AND CONSTRUCTING IMPROVEMENT PROJECTS.
Capital projects require initiation through Facilities Management or University of Iowa Hospitals and Clinics Capital Management. For non-hospital projects, an on-line requisition system is required to be utilized and is available at www.facilities.uiowa.edu/pdc/request-project.html. After initiation, the process is managed by Facilities Management or UIHC Capital Management to assure conformance to Board of Regents and state requirements and to provide design and construction quality assurance.
The following is a description of the major steps in planning and constructing improvement projects as required by the Board of Regents policy (www.regents.iowa.gov/Policies/Chapter%209/Chapter%209.pdf).
b. Retention of professional design assistance. Facilities Management administers the process for retaining architects, engineers and other design professionals as per the Board of Regent Policy. All projects exceeding $1million require the implementation of a specific selection process prescribed by the Board of Regents. The selection of architects for recommendation to the President and the Regents is the responsibility of Facilities Management and UIHC, where applicable.
c. Preliminary plans and project budget. Preliminary plans are prepared by the consultant or University's Project Manager in consultation with the users of the facility and appropriate administrative personnel. The plans are reviewed and approved by appropriate administrative personnel. Alterations to the campus under the review authority of the Campus Planning Committee are referred to that committee for advice and comment. The site selection, preliminary plans, project budget and source of funds, and other details as appropriate are submitted to the Regents for approval or revision.
d. Construction documents. Upon receipt of administrative and Regent approval of the preliminary plans and budget, the University's Project Manager is authorized to proceed with the further development of the plans and specifications. A second review of plans may be required by the Regents at the design development stage of planning. Otherwise, planning is authorized to proceed through the preparation of final plans and specifications for the project. The final plans and specifications become part of the contract between the project contractor and University and describe what the contractor is to build for the University. The review and approval of other agencies, such as the state building code commissioner, are also obtained as required.
e. Advertisement for bids. The project is advertised by the University and bids are received from contractors according to Regent policy and state law. Bids are opened and the University or the Board of Regents awards the construction contract.
f. Construction. Facilities Management of the University, or UIHC Capital Management, or their representative, oversees the construction of the project by the contractor(s). At the completion of construction, the project is accepted by the University, reported to the Board of Regents and the user occupies the facility.
34.5 TOTAL-COST-OF-OWNERSHIP DECISION FRAMEWORK.
The University of Iowa employs a broad project decision-making framework based on the total-cost-of-ownership. The total-cost-of-ownership is a composite of financial obligations consisting of the costs for the initial capital design and construction; operations and maintenance; utilities and energy; renewal; and decommissioning or demolition. To take future costs into consideration and aid decision making during the design and construction phases, the University has established the following design standards, policies, and procedures.
b. Utilities capacity and infrastructure growth funding. All capital project budgets requiring approval of the Board of Regents, State of Iowa, shall include contributions to a utilities infrastructure growth fund for central plants, where connection to central systems is available. Central plants provide the most cost-efficient production of utilities due to economies of scale. The offset amount apportioned to a capital project will be no more than the estimated cost to install gas-fired boilers and electric-powered chillers in the building, sized to meet building capacity, including 50 percent redundancies, which is the minimum redundancy for a stand-alone system. This offset contribution is to cover the cost of increased capacity in the central plants necessary to meet the demand created by the new and renovated facilities on campus.
c. Life cycle cost investments. All new construction and major renovations of facilities that are heated or cooled by a mechanical or electrical system shall implement the recommendations of a life cycle cost analysis. Project budgets for new construction and major renovations must support meeting the best overall life cycle investment. Minor renovation projects must invest in conservation improvements up to a seven-year payback level. The provisions of this section may be appealed through the Capital Projects Review Committee.
d. Energy rebates. For General Education Fund (GEF)-supported facilities, the energy rebates offered on individual projects will be placed in a University energy conservation account and will be reinvested to further other campus conservation efforts that will help offset the demand created by the new project. For non-GEF facilities, rebates shall be managed by the auxiliary or by University of Iowa Hospitals and Clinics, and must be used to reinvest in energy conservation opportunities.
e. Emergency power. All capital projects requiring emergency power shall include the design and installation of an emergency generator, ancillary support equipment, and connections in the scope and budget of the project. Where effective emergency power is available from a central plant, emergency power shall be furnished by the central plant and the project shall include budgeted, capital contributions to the utility enterprise for that emergency power service. The offset amount apportioned to a capital project will be no more than the estimated cost to install an emergency power generator at the building site.
f. LEED certification. The goal for all new major building and major capital renovations initiated after January 1, 2009, is to meet or exceed the U.S. Green Building Council's guidelines for silver level LEED certification. A major building is defined here as a new building or addition over 20,000 gross square feet, and a major capital renovation is defined as construction that will cost more than 50% of the facility's replacement value. LEED Silver refers to a certificate program by US Green Building Council's Leadership in Energy and Environmental Design (LEED) Green Building Rating SystemTM. When financially prudent, sustainable best practices in building design and site planning should be incorporated into non-major project construction and renovations.
34.6 CAPITALIZATION AND RECONCILIATION.
Building, infrastructure and land improvement projects with estimated budgeted cost of $100,000 or greater ($50,000 for UIHC) are considered to be capital projects for accounting and asset valuation purposes. Projects with budgeted cost of less than $100,000 ($50,000 for UIHC) are expensed as the cost is incurred. Projects are ready to be capitalized when they are deemed to be substantially complete by Facilities Management. Substantial completion indicates that the building is ready for occupancy. The Capital Assets Management department will capitalize construction projects three times per year based on information provided by the Business Office Capital Project Accountant, Facilities Management and UIHC.
(2) professional fees (architects, attorneys, appraisers, etc.)
(3) building permits
(4) interest on indebtedness
c. Fixed equipment. Building components such as lighting, electrical systems, plumbing, air conditioning, and elevators shall be considered fixed equipment rather than movable equipment. The cost of this fixed equipment will be capitalized with the cost of the building project and will include acquisition, transportation and installation charges. Fixed equipment may be componentized and depreciated separately from the original building project. Moveable equipment, artwork or any other type of asset that is not a building component should not be capitalized as a part of the building asset.
d. Leasehold improvements. Improvements made to buildings and other structures on property that is leased to the University are capitalized if they meet standard University capitalization policies. The valuation method, or the costs to include in the capitalization of leasehold improvements are the same as for improvements to University-owned property -- see paragraph b above.
e. Purchased land. Land is non-expendable, real property. The cost to include in the capitalization of land includes all of the costs incurred in preparing the land for its intended use. These include but are not limited to purchase price, appraisals fee, assessments fee, broker's commissions, legal and recording fees, title insurance and site preparation costs (including draining, clearing, and grading).
f. Reconciliation of construction-in-progress. Construction-in-Progress (CIP) is the cost of capital projects that are under construction at a balance sheet date. CIP represents a temporary capitalization of labor, materials and equipment of a construction project. Recurring review and reconciliation of CIP balances is required by the Balance Sheet Reconciliation policy and must be performed by staff with knowledge of the construction capital projects. This review will be performed by the Business Office Capital Accountant. Reconciliations will be maintained and available for audit purposes. Balances will remain in CIP until a constructed asset is capitalized at the time it is deemed to be substantially complete by Facilities Management (ready to be utilized or occupied).
g. Reconciliation of capital assets. Projects that have reached substantial completion will be capitalized from CIP to full capital assets by the Capital Assets Management (CAM) department. CAM will lead the effort to componentize building components as appropriate. On a quarterly basis, CAM will reconcile the capital asset balances in the Asset Management system with balances in the General Ledger system. Reconciliations will be maintained and available for audit purposes.