In July, a group of Richmond officials told elected leaders that the cost of building three new schools was increasing again.
But there was also some good news: Richmond’s construction costs per square foot were still slightly below those of neighboring Chesterfield County.
However, Richmond’s construction costs to build its three new schools are significantly higher than Chesterfield’s. And to reach its comparison, Richmond added millions of dollars onto Chesterfield’s construction costs.
While Chesterfield is building three elementary schools for about $75 million, Richmond is spending $71 million on just two elementary schools. An analysis from the Virginia Contractor Procurement Alliance found that the city is paying significantly more per square foot for schools than neighboring Chesterfield.
The alliance said a major factor driving that higher cost is the city’s decision not to use a competitive, sealed bid for school construction, as Chesterfield and Henrico County do.
Jack Dyer, president of the alliance and owner of Gulf Seaboard, a general contractor in Ashland, said the group of small to midsized contractors used the Freedom of Information Act to analyze comparable elementary and middle school construction costs in Chesterfield and Suffolk to the schools Richmond is building through a method of procurement called “construction manager at risk.”
When government uses a competitive, sealed bid, it must award the contract to the contractor who proposes to do what the government wants at the lowest cost. Under construction manager at risk, the government asks contractors to submit their qualifications to do a project and then uses a variety of subjective criteria — not just lowest cost — to pick the winner.
Dyer said during an interview with the Richmond Times-Dispatch that this is the first time he is making his concerns public. The analysis of schools is as close to an apples-to-apples comparison as his group has found, he said, and had Richmond used competitive, sealed bidding, the city could be building four schools for what it’s spending to build three.
“When you eliminate competition, the cost of your project is going to increase,” he said.
Richmond’s school facilities problems go back decades, but years of deferred maintenance have left many schools in feeble shape.
Under the process the city used, cost is 20% of the selection criteria. Other factors, according to city records, include reference checks, experience, the developer’s approach to managing a schedule, and who is on the developer’s staff.
“It’s an easy type of procurement,” Dyer said, which actually involves no risk for the contractor. “But there are dollars associated with that type of construction.”
Robert Stone, interim chief capital projects manager for the city; Betty Burrell, the city’s procurement director; Robert Steidel, the city’s deputy chief administrative officer; and Lincoln Saunders, chief of staff to Mayor Levar Stoney, defended their decision to use an alternative procurement method on numerous fronts.
First, they said, Richmond needed to open its three new schools in fall 2020. The process the city chose allows a quicker construction start, while using a competitive, sealed bid would have taken up to a year longer, they said.
City officials also said they chose to build to environmental standards that cost more than Chesterfield schools, which do not seek the same certification. And they said building in an urban environment is costlier because of congestion around the sites and unexpected items under the ground.
The contractor alliance used public records to calculate the known construction costs per square foot of new schools in Chesterfield and Suffolk and the known costs per square foot in Richmond.
Chesterfield’s new school construction costs, as approved, for elementary schools from 2017 to present average $250.20 per square foot, according to the analysis. For Richmond’s two new elementary schools, the city is paying $324.56 per square foot. According to the Virginia Department of Education, the statewide average for new elementary school construction in 2018-19 is $262.52 per square foot.
Since that analysis, there are newer figures.
City records show that the new middle school is expected to cost more than $57.3 million and George Mason Elementary School is expected to cost nearly $34.6 million. The costs of the new E.S.H. Greene Elementary are not finalized but are over $36.5 million.
In contrast, Beulah Elementary School in Chesterfield, which opened in 2018, cost $24.6 million.
Instead of building four of the five new schools outlined in the first five years of a School Board-approved facilities plan, the city is building just three. Woodville Elementary and George Wythe High remain open in poor condition with no set plans to be rebuilt.
City officials announced in March that the price tag to build the three schools had risen from $110 million to $140 million, and in July a city official announced that the estimate was up to $146 million. That leaves just $4 million from a meals tax increase the City Council approved in 2018, which was expected to generate $150 million for new school construction.
During the March disclosure, the city’s Burrell and Stone criticized the initial $110 million estimate, which was prepared by the former interim superintendent, saying it was too low given the bustling construction market in Richmond, among other factors.
George Mason was almost closed in 2017 because of rodents, poor air quality and leaking bathrooms, among other problems. Greene and Elkhardt-Thompson Middle School are also in poor shape, with the new schools providing relief for the school facility itself and overcrowding in South Side schools.
With the widespread issues, school and city leaders have said they need to get as many students in new schools as soon as possible. Under the current construction plans, that’s the fall of 2020.
The city could not use competitive, sealed bidding “to be able to make the schedule to get the kids in, to be able to get started as soon as the money was available, because, remember, the money was available from the meals tax, and get everything done and delivered within a very, very tight timeline,” said Steidel, the city’s deputy chief administrative officer.
Stoney’s team estimated that had they not used the alternative process, the three new schools would probably not open until fall 2021 instead of fall 2020.
Stone and Steidel also said the city’s school development sites are packed over many foundations, something that adds costs to an urban area like Richmond that Chesterfield and Suffolk don’t have. The procurement process they used, city officials said, allows them to consider more than just cost when selecting a contractor, like the experience and staff of a contractor.
In comparing the city construction costs to Chesterfield’s, Stoney’s team added an increase for inflation. To that they added 6% to Chesterfield’s cost to account for the optional environmental standard Richmond is pursuing. And they added an additional 5% for “other factors” to Chesterfield’s costs. Only then, Richmond officials said, would the comparison be fair. And it showed that Richmond’s construction costs were actually lower than Chesterfield’s.
“We’re going to say you can’t necessarily come to an apples-to-apples comparison when you’re comparing two different school constructions in two different localities, with two different processes ... done at different times at two different places in the construction process,” said Saunders, Stoney’s chief of staff. City officials “used a process they felt was best for the schools and the kids in Richmond public schools.”
Another member of the contractor alliance, Tony Biller of Nielsen Builders Inc., based in Harrisonburg, said the use of construction manager at risk bids is increasing in localities in the Shenandoah Valley area. He said he finds it especially concerning when the schools being built are based on a prototype, as Richmond’s are.
“They’re using it as a convenience, not as a necessity, at the taxpayers’ expense,” he said of the alternative procurement method. And that has affected his business, he said.
It’s not just the contractor alliance raising questions about Richmond’s use of data.
After Steidel in July told officials Richmond’s costs were slightly below Chesterfield’s, the county’s school spokesman, Timothy Bullis, noted that Richmond arrived at its figures by assuming a cost of inflation even though the contracted price of Chesterfield schools had been set, and then adding the 6% for environmental certification Chesterfield did not pursue and 5% for the other factors.
“This is a what-if, apples-to-oranges comparison,” Bullis wrote of the city’s calculations. Chesterfield’s costs were nearly 16% lower than Richmond’s, he wrote.
Chesterfield uses a competitive, sealed bid because bids “are based on complete documents and provide contractors with a better opportunity to accurately estimate all costs,” Bullis wrote in an email for this story. “This provides a level playing field for all contractors, while also allowing the school division to determine what is fair and reasonable pricing by being able to compare contractor bids.”
The environmental certification Richmond pursues is called LEED and is done through the U.S. Green Building Council. Asked if building a LEED-certified elementary school costs more than not, Jenny Wiedower, senior manager for K-12 education at the council’s Center for Green Schools, said in a statement: “Building green does not have to cost more than building a conventional project.”
The Virginia Contractor Procurement Alliance said state and local governments have increasingly used alternative options because the process is easier.
Under the alternative procurement, a government agency puts out criteria for a project and companies submit packages outlining their development experience. Government procurement officers then choose who gets the job based on criteria the government established.
In August 2018, the lobbyist for the contractor alliance, Matt Benka, sent a letter to Stoney asking him to procure at least one of the schools through a competitive, sealed bid, saying the comparison to the other schools would prove which method costs more.
For the three new Richmond schools, city and school officials ended up selecting large contractors: Howard Shockey & Sons in Winchester to build the new Elkhardt-Thompson Middle; S.B. Ballard Construction Co. in Virginia Beach to build E.S.H. Greene Elementary; and Branch and Associates in Roanoke to build the new George Mason Elementary.
The city chose Shockey to build the new middle school even while acknowledging that parts of Shockey’s proposed costs were higher than Ballard’s proposal, according to city records.
Ballard proposed certain costs of $756,723 less than Shockey, and also proposed a lower fixed fee than Shockey. In total, that means Ballard proposed more than $1 million less than Shockey to manage construction of the middle school, Dyer said.
“The taxpayer is paying close to $1.2 million more money to go with Shockey vs. Ballard,” Dyer said.
Stoney’s team said that doesn’t mean Ballard would have built the middle school for less.
“It’s unknowable as to who would have built the school for less,” said Stone, the city’s interim chief capital projects manager. “I don’t know that they would have built it for less, or more, or the same. It’s unknowable at that stage of that game. It’s an unknown and an unknowable.”
That’s why the contractor alliance wants local governments to use a competitive, sealed bid — because it requires government to go with the lowest cost to taxpayers, Dyer said. Otherwise, smaller companies like his end up getting shut out of doing public works while larger companies land contracts at higher costs, he said.
A Richmond review panel gave scores to contractors who were interested in building the three schools. For Greene Elementary, Shockey had a higher score. But the city chose Ballard.
Because Shockey stated in writing that it wanted to be selected for only one school — and won the contract for the middle school — Shockey was not available for selection by the city to Greene Elementary, Stone said.
A construction groundbreaking ceremony took place in December.
The city uses an international consultant, AECOM, for a variety of projects and asked AECOM to review the city’s school construction needs. AECOM recommended the city not use competitive, sealed bidding, according to records provided by the city.
On July 2, 2018, an AECOM vice president, Charles Malacarne, sent three separate letters to Donald Summers, the city’s capital projects manager at the time. Each letter contained three sentences. And for each school, the AECOM engineer said he had reviewed information supplied by the city.
“Based upon my experience as a Professional Engineer in construction and project management, with particular utilization of the Construction Manager at Risk delivery method; I find the only viable construction delivery method that will meet the end users’ schedule requirements is the Construction Manager at Risk method.”
Summers then wrote to Burrell, the city’s director of procurement services, to say it was AECOM’s recommendation that “the only viable construction delivery method to meet the school division’s schedule requirement of a September, 2020, opening is the construction manager at risk method.”
And then Burrell wrote letters “for the record” to say that using a competitive, sealed bid would be “neither practical nor fiscally advantageous” and that her decision to use the “construction manager at risk” was supported by the professional recommendation of AECOM.
The company is overseeing Richmond’s school construction.
The city also contracted with AECOM under former mayors L. Douglas Wilder and Dwight C. Jones, who preceded Stoney.
The consultant has been involved in overseeing school construction and also working on other projects like the Stone Brewing facility and Monroe Park redevelopment. At times, some City Council members have suggested AECOM’s work should be done in house to save money, but they have been in the minority.
AECOM got a new contract in 2016 that was renewed in 2017 and 2018. On April 1, Burrell, the procurement director, signed an $11.4 million contract with AECOM that lasts through March 2020.
EDITOR'S NOTE: This story was updated Nov. 14 to clarify the AECOM engagement with the City of Richmond.