Lease-Leaseback
What is Lease-Leaseback?
Lease-Leaseback is a construction project delivery method in which the district selects a “Developer Contractor” (DC) to develop and construct a new building for the district. Basically, the district procures property and then executes a lease of the property to the DC, who then develops the property and constructs the facility (which includes a Guaranteed Maximum Price, or GMP). The district then leases back the property and facility from the developer. At the end of the lease, the district owns the project. The district selects/approves the site and project plans. In addition, the Division of the State Architect (DSA) must also approve the plans for fire, life, safety, accessibility, and structural considerations. The plans and specifications are then approved by the district’s Board of Trustees. The Lease-Leaseback construction delivery method is authorized by California Education Code 17406 and 81330.
What is the philosophy behind Lease-Leaseback?
The philosophy behind Lease-Leaseback is to engage the contractor and architect at an early enough stage so as to minimize costly change orders once construction begins, thus staying within the GMP originally set by the DC. It fosters architect-builder coordination early on and throughout the process. This coordination doesn’t always happen with the traditional Design-Bid-Build process, since the design documents are finished before the contractor becomes involved.
What are the advantages?
- Higher percentage projects completed on-time
- Higher percentage projects completed on or under budget
- Facilitates architect-contractor-owner partnership
- Facilitates project financing/funding requirements
- Provides more opportunity for “Value Engineering”
- Saves time
- Guaranteed Maximum Price (GMP) is set early during design
- Encourages participation of local subcontractors
- Identifiable track record
- Allows “Best-Value” contracting based on qualifications the district considers important