The Facility Development Process

1. Start Planning the Project

a) Determine the reason you are considering a project. Typical reasons include:

  • To correct health, safety or regulatory problems — indoors or outdoors
  • To address deferred maintenance or needed repairs
  • To create space that reflects and enhances the quality of your program
  • To serve a new age group or expand the number of children
  • To add features – workspace for adults, a natural play area, better security systems, or other improvements
  • To create a permanent home for your program

b) Develop a plan with your goals for the project and a realistic review of program finances and organizational capacity. For a good overview and more detail, and to help assess your readiness for a facilities project, please see the CICK Resource Guide, Volume 1: Developing Early Childhood Facilities.

2. Creating a Development Budget

a) The budget for your project includes revenue sources for the project and expenses. It is often called a Sources and Uses Budget.

b) Sources typically include:

  • Equity or savings that the program has on hand
  • Capital Fundraising or grants
  • Funds borrowed from Children’s Investment Fund, a bank, or other lender

c) Uses typically include:

  • Land or building acquisition
  • Soft Costs (architect, legal, development consultant, etc.)
  • Hard Costs or Construction Costs
  • Demolition and disposal
  • Site work, grading, excavation, parking, landscaping
  • Construction and finish work
  • Furnishings and Equipment for the new space
  • Outdoor Play Space, including fencing, equipment, surfacing, landscaping
  • Moving costs if applicable

Other expenses related to the project but not part of the Development Budget include an operating reserve for 3 to 6 months, marketing and enrollment expenses, and staff recruitment. For a preliminary format and more information, please see the Low Income Investment Fund’s (LIIF) “Child Care Facility Development Budget Guide”.

3. Soft Costs

a) Soft costs are the fees paid for professional services and fees related to the purchase and/or construction of your facility. These costs may include, but are not limited to the following:

  • Appraisal
    Report on the value of the property commissioned by a lender
  • Architectural and engineering
    Fees for design and technical specifications, site survey
  • Environmental testing and reports
    Inspection and report on any hazards on the property
  • Construction manage
    Oversees the construction to ensure that the project is built to specifications
  • Project manager
    Oversees all aspects of the project, communicates with the rest of the team
  • Fundraising Consultant
    If you plan to raise private funds or solicit grants
  • Loan fees
    Application fees, other costs charged by a lender
  • Legal fees
    Loan documents, negotiating contracts with architects, contractors, etc.
  • Title and recording fees
    Verifying title, recording loan as a lien on the property
  • Building permit
    Cost of local permit
  • Insurance
    Related to the loan transaction and construction process
  • Real estate taxes
    If applicable
  • Soft cost contingency
    A reserve amount for unexpected soft costs (10% of soft costs)

If you are renovating a leased space, some of the costs above will not apply. However, there will be legal costs related to lease negotiation and allocation of renovation costs between your program and the property owner. Before making significant improvements to a leased property, negotiate a long term lease with an option to renew. If the property owner is doing all or part of the build out, be sure that the lease protects your interests regarding space design, choice of materials and quality of the work to be done.

4. The Development Team

a) You need a team of qualified and capable professionals to assist with your project. But they will need your guidance. You and your staff know best what the space should include and how it should work to best meet the needs of the children, staff and parents. Professionals (architects, designers, contractors) can incorporate that knowledge into designs. The effective interaction between educators and professionals who design and build facilities generates high-quality ECE and OST facilities.

b) The team is headed by your organization’s representative as both the “Owner” and the “Developer” of the project.

c) Other team members you may need:

  • Architect
    An absolutely critical team member for all but very small projects. Find an architect who has experience in the design and construction of ECE or OST facilities. Take a look at other centers they have designed, and talk to the provider occupying these sites to see how well they function. The architect will assess sites with you, develop preliminary design options, work with you and your staff to create a use and design program, take the project through design development, participate in identifying and negotiating with contractors, produce construction documents, monitor construction, and sign contractor payment requests.
  • Attorney
    You will need an attorney to review and negotiate site control agreements, leases, purchase agreements and construction contracts. If you are seeking financing secured by a mortgage, your attorney will secure title insurance and provide zoning and other legal opinions to your lender. Involve your attorney early in the process. The more informed your attorney is about the project, the more useful she/he will be during the later phases.
  • Contractor
    Search for and select a contractor with a good reputation for delivering projects on time .and on budget. The contractor should be licensed and fully insured. If you can identify one who has built other centers that is a plus. Identifying and including your contractor early in the planning will be a benefit. Their ideas and experience can add to the planning process. Let the contractor know early in the process the numerous agencies that have project oversight and the level of documentation and certification that must be submitted to each in order to get a Certificate of Occupancy and an EEC license.
  • Development Consultant/Project Manager
    A development consultant will provide technical services regarding real estate development, including: preparing development and operating pro formas; assisting with permitting and zoning approvals; submitting financing applications; and negotiating and closing financing. Some development consultants also provide project management services.
  • Project Manager
    The project manager coordinates the activities of all the team members. Identify someone who has the time to play this role, is highly organized, and communicates well. Their responsibility will include defining tasks for team members and keeping the work of the team on schedule. Hiring an experienced project manager takes a major load off the shoulders of the program director. It is critically important to the success of your project and can result in construction cost savings. Though not formally part of your development team, the following will play key roles in your project. The more they are involved and informed, the smoother it is likely to go.
  • Licenser
    Involve your EEC licenser early, even in the early conceptual phase of the project. Make your licenser aware of your project and your schedule, and seek periodic feedback on your plans.
  • Local Building Department
    Let the local building inspector know of your plans early in the planning process. You should hear their concerns earlier rather than later.
5. The Design Process

There are several phases in the Design Process. Once you select an architect, the process generally proceeds as follows:

a) Site visits/programming
This stage includes a visit to two sites —your existing program and the location of your new facility, if it is different. At your facility, the architect should meet with key staff, parents, and perhaps children. This meeting will produce a program inventory, including: age and number of children, group sizes, staffing, curriculum goals, range of activities, designated spaces, square footage requirements, necessary regulations/standards, and aesthetics. If you are considering a new site, the site inventory should include photos of the site, existing structures) and abutting structures, location of existing landscaping and plantings, orientation of sun, site drainage, access to public utilities, condition of the buildings) and mechanical equipment, preliminary sketch of floor plan of existing building(s). Click here for a Site Assessment Check List.

b) Conceptual design/schematic design
Based on your overall vision, the site visit inventories, and the zoning status of the site, the architect will develop an overall conceptual design of the building and site. At this point, the design may be very generic, using “bubble diagrams”, rather than specific design elements. The goal is to develop the correct uses, sizes, and adjacencies of spaces. Once a conceptual design is approved, the architect will develop schematic designs. At this stage the conceptual design is detailed to include floor plans and building elevations containing rooms, room sizes, mechanical and structural elements and basic furniture layouts. The specifics of the design are emerging at this stage.

c) Design Development
The design continues to go through iterations and improvements with more and more specifics added. Rooms are now in correct size and shape. Outline specifications are developed listing the building’s materials and finishes.

d) Construction Documents
Once you approve the design, the architect prepares detailed drawings and specifications, which the contractor will use to establish construction costs and to build the project. These drawings and specifications become part of the construction contract.

e) Hiring the Contractor
Ultimately, you select and hire the contractor. However, your architect should be involved in this process. The architect should be willing to participate in the interviews and assist you in assessing contractor’s proposals. The architect can help prepare bidding documents, invitations to bid and instructions to bidders to ensure that bids are consistent.

f) Construction Administration
The architect will assist in making sure the building is built according to the plans and specifications. The architect can make site visits to observe construction, review and approve change orders and the contractor’s applications for payment, and generally keep you informed of the projects progress.

6. Project Operations

If the project is of significant size, or means a dramatic change in the size or complexity of your facility, be sure to include a plan for post-development project operations in your planning. You should consider:

a) Taking possession
Once the project is completed, the general contractor should take the owner, or the owner’s facility or property manager, through the entire building and explain how all mechanical systems operate.

b) Warranties
When the general contractor is finished and turns the building over to you, he will pass on the warranties for equipment and installations from all the subcontractors. These are vital warranties as they represent the contractors’ and subcontractors’ obligations to repair any defects for a specific time period (usually one year). Someone within the organization should understand these warranties, know where they are, and know who to contact if there are problems during the warranty period.

c) Maintenance
You will need to determine how the new facility will be maintained, and who will maintain it. It is important to develop a standard maintenance program for your staff or your contracted maintenance service to implement. Monitor the program periodically to make sure it’s effective. Be sure to budget for maintenance in your new operating budget.

d) Repairs
Repairs are typically handled by maintenance staff or a contracted service. Budget for repairs in your new operating budget.

e) Replacement reserves
In order to replace furnishings which will wear out (i.e. carpeting, paint, appliances, etc.), budget an amount to be set aside each year for replacements. This replacement reserve account can fund ongoing replacements in a planned and budgeted manner.