Tuesday, July 29, 2008

Butz Construction: "Give Them Credit Where Credit is Due"

"They're just like Hess's."

That's what one smiling lady said as I stepped into the talking elevator, bringing back memories of strawberry pie, fashion models, strawberry pie, back-to school shopping, strawberry pie, the ride down the swirling parking parking deck and ... strawberry pie.

I was just across the street from that once proud department store, but was in the bowels of big business. Corporate America. I was in the belly of the beast known as Alvin H. Butz, Inc. This company has bragging rights as the oldest and largest construction company of its kind in the Lehigh Valley. Is there any large government project in the Lehigh Valley that Butz does not build? Builder of Bethlehem's $65 million Penn Forest Dam? Butz. Northampton County's over budget courthouse? Butz again. Additions and renovations at Lehigh County's courthouse? You got it, Butz has that deal, too.

Last week, I posted a blog criticizing Butz' Northampton County courthouse expansion. I claimed it was $2 million over budget because Butz and Architect RicciGreene "were milking the job and the county never had someone looking over their shoulders ... ." I relied on reports from County Controller Steve Barron and county engineer Steve DeSalva. You can read them here.

Not long after that blog, Lee Butz called and invited me to come see him. I confidently told him I had a report pointing out all the problems. This included Butz' failure to use CPM (Critical Path Method), a tool that enables a construction manager to identify untimely completion of one work activity and its effect on everything else.

"You couldn't be more wrong," Butz said, and asked me to hear him out.

On my way up in the talking elevator, I began getting cold feet. After all, these guys have real money. They probably know a lot of cement contractors. Someone might find me next to Jimmy Hoffa in a thousand years. As I pondered my demise, the talking elevator told me I was on the sixth floor. I thanked her, stepped out, and was ready to do a volte-face when a voice said, "Are you here to see Mr. Butz?" I thought it was the talking elevator, but this time it was a live human being - the receptionist. Almost immediately, a diminutive but smiling Lee Butz came out of nowhere to see me.

"Would you like a coke?," he asked. I was thirsty as hell, but said no, trying to prove I'm incorruptible, just like county exec John Stoffa.

Butz ushered me into a gigantic conference room, where we were soon joined by John Baer and Larry Rutt. These are two of the engineers who had worked on the project. After a lengthy meeting, I was convinced of one thing - I could not have been more wrong.

Butz did use the Critical Path Method (CPM) construction tool.

In Steve DeSalva's memo, he insists that part of the reason for delay was Butz' failure to use CPM, a complex depiction of the interrelating work activities, usually in the form of a large drawing or complex software program. Yesterday, Steve repeated that criticism. "Butz started it but it fell by the wayside."

Before Butz started anything, it had a CPM prepared by Wagner-Hohns-Inglis, Inc., detailing at least 450 individual activities and how each related to another. Monthly, that CPM was updated and an executive summary was prepared for the county. DeSalva was not the county engineer at that time.

When the focus of construction changed to renovation of an existing facility, the CPM was used less frequently because the work could be done more quickly than the time it would take to update the CPM. By this time, the project was already 2/3 complete. That's when Steve DeSalva came on board. As Butz explained, Steve was simply not there to see the extensive use of CPM throughout most of the contract.

The construction manager, as the owner's representative, is the clerk of the works.

DeSalva believes another reason for delay was the county's failure to have a Clerk of the Works, a person who would "ride herd over the A/E and Construction Manager." In a conversation yesterday, Steve conceded he was effectively the clerk of the works, and spent 15 hour days overseeing both the construction and all the other duties that must be performed by a director of public works.

Butz, however, believes a construction manager is the owner's agent and has a duty to minimize costs. It was Butz' job, as construction manager, to ride herd on all the contractors to ensure the work was done in a timely and cost effective manner.

John Baer inadvertently gave me an example of just how seriously Butz perceives its role. During the course of renovations to the criminal division, directly below Courtroom #1, he discovered a design defect that could have sent that historic courtroom tumbling into the basement. After determining how to overcome that design defect, his next job was to minimize the cost.

"Why would you do that?," I asked. "As long as you find a fix, what do you care what it costs?"

Baer told me he was the owner's agent and had a responsibility to find the cheapest fix possible that would work.

"What's your financial interest in minimizing cost?," I asked. "To get the next job" was Lee Butz' quick answer. Butz also noted that, had the county used a general contractor instead of a construction manager, the project would cost 8% more.

Roofing Contract Overrun

DeSalva identifies $657 thousand added to the $1.48 million roofing contract and calls it a cost overrun. Butz explains this actually saved the county money.

How?

Originally, the window contractor was supposed to do some screen walls, but felt uncomfortable doing that. So the roofing contractor agreed to do it, picking up an extra $657 thousand. The window contractor, however, lowered its price by $900,000. Instead of being an overrun, this actually saved the county $200,000.

What's the real reason for the delay?

According to Butz, the project was finished in 13 months (August '07) instead of the 11 months (June '07) originally planned. If it were not making effective use of the CPM, the project would have lasted 26 months. Here's why.

1. There was a four month delay in getting steel. As John Baer explains, "You can't do anything without a building." And you have no building without steel.

2. There was a delay in getting all the necessary approvals from fabricators, architect and county on the shop drawings. "There were over 1,000 drawings for the steel alone," said Baer.

3. There was another four month delay after the millwork contractor went bankrupt and the next highest bidder had to be begged into doing the job for the original bid.

4. There was a 2 month delay between the bids received and bids awarded. Butz would have to value engineer and try to get bids to come in at the right price. It took two months, but saved the county $2.1 million.

5. There were three months of delay in the renovation phase of the project, primarily the result of unforeseen conditions and having to adjust to the schedule of the court and other county functions. This includes the design issues in the criminal division.

Despite all these delays, Butz finished the project just two months behind schedule.

Did Butz do a good job?

Butz certainly thinks so, and "is frustrated and disappointed that people have the wrong idea about the project. It was superbly done. Glenn Reibman and John Stoffa should be extremely proud of the building they have."

What does Steve DeSalva say? Despite his criticism, DeSalva was complimentary. "Butz did a good job. They handled a messy job with a lot of changes that had to be made. Give them credit where credit is due."

Why was Butz taken off the job early? According to Steve, there were issues between Butz and the A/E. "I need the A/E."

19 comments:

Anonymous said...

Butz may be politically connected, and sometimes expensive, but he has always been extremely competent, and a class act.

Bernie O'Hare said...

He's an impressive man, proud of his company, but modest about himself.

Anonymous said...

I'm glad Lee Butz reached out, and for Bernie to meet w/ him (that elevator freaks me out too).

Now the next question - with Butz's answers and DeSalva's responses to those answers, it sure looks like DeSalva wrote a report with glaring errors in it - errors he could have cleared with just a little due diligence before writing the report. What's up w/ that?

I hope Butz is planning on meeting with Northampton County Council to present his side on this.

The Banker

Bernie O'Hare said...

Steve is definitely wrong about the roofing contract. That actually reduced the price to the county. As far as CPM goes, it was not used as frequently when he came on board bc the project was 2/3 done. The clerk of the works v. construction management approach is a matter of opinion.

Actually, I was wrong to have characterized Butz performance as "milking the job."

Michael Donovan said...

Dear Mr. O'Hare:

Your reporting of the complexity of managing a large project is a great service to your readers. I think that many of us (including me) struggle to comprehend what goes into orchestrating massive operations.

There is always difficulty with implementation in public policy. Private concerns are forced to overcome these difficulties or they do not prosper. Those in public policy are not subject to the same constraints, which means careful attention to the politics and personalities involved. In contrast, the Butz company and its employees certainly demonstrate management skill of utmost quality.

Again, thanks for the presentation. CPM is a vital tool, but as you note, it does have limitations in certain situations.

Best regards,

Michael Donovan

Anonymous said...

It does not surprise me that a successful business like Butz would operate, err ..., like a successful business.

Nor does it surprise me that local government entities do not run as well. If many of our public servants were left to swim in the deep end (read: private sector) of the pool, I don't think they'd last long. They're not necessarily bad people, just the quality we expect to get, versus that which is demanded and paid for in the private sector.

It's good to know that local companies, owned and run by stakeholders in the local community, exhibit the kind of integrity that protects taxpayers from the mismanagement and/or poor decision-making of their elected and appointed officials.

One of the most informative posts I've seen. Nice work.

Anonymous said...

The Alvin Butz co. also does small jobs. My garage was destroyed from hurricane Ivan in Sept.2004. The Butz Co. did in 6 days what I thought would have been a one month project. The workmanship is excellent. They did this while they probably had 20 other projects going at one time,including the NCGC building.

Anonymous said...

I am glad they had a chance to tell their side of the story. Sometimes Bernnie goes wild with his own perception of things and people before all the facts are known.
This is one classic example of why blogs are fine but they are not a reliable source of news.

Bernie O'Hare said...

I'll agree I'm no professional and lack the credibility of an objective news gatherer. I'll agree I should be viewed with those shortcomings in mind. I'll even agree I run wild from time to time.

But I am more interested in getting the facts right than in being right.

Your criticism is fair, but I don't think I went wild in this instance. My original account was pretty faithful to the info I had from the county controller and engineer. It is pretty close to the accounts I read in both papers.

Like me, neither of the papers called Butz for his side of the story. In fact, that's something Butz mentioned a few times. And Butz' version appears here, in a blog, not the papers. So actually the only place where you get both sides of the story is right here.

We are a source for news. Not as good as the paper, but a source. Sometimes the best source is the raw, unfiltered info.

Anonymous said...

I agree with your last line. All to often the people are treated like idiots. Give the raw unfiltered information and let people figure out the truth.
That may be one very good reason people are turned off by the newspapers and editorials. We are no longer in need of a parent figure telling us what is right and wrong.

Anonymous said...

Bernie,

Did you ask Mr. Butz why their fee's went over budget. I hate to break the news but Butz did not build the Government Center. They were strictly a Construction Manager Advisor on that project not a Construction Manager Constructor. If they were the constructor there would have been a hell of alot more Union contractors on the Job since Butz cannot hold a contract with many Non-Union subs.

Butz was strictly a consultant. You can call it a Clerk of the Works on Steriods.

Mr. Butz is WRONG by stating that the county would have saved 8% by not hiring a General Contractor. Actually they would have saved money by Hiring a General Contrator.

Here's why; Public Projects require the entity to advertise publicly for bids and in most cases they have to select the lowest bidder. There should be 4 bid packages for the project. General Construction, Plumbing, HVAC and Electrical. General Construction is obviously the largest contract, Roughly 70% of the value of the project. Now Butz eliminates the GC and break the bid package down to every trade. For example, masonry, roofing, carpentry, drywall, flooring etc. They end up with 12 bid packages that could be wrapped up into one GC package. The problem with the 12 bid packages is that you now have 12 subcontractors paying for bonds and you limit the amount of bidders to only subcontractors who have bonding capacity. One out of every 20 subcontractors in the Lehigh Valley have bonding capacity and those contractors are Union contractors. The cost of the bonds for the project has now just increased 500%. And considering the bonding for a $47 million project is probably in the tune of $200K, that is a signifigant amount of money.

So Butz was not the constructor, if you check Bernie you will find that the County held contracts directly with every subcontractor. Butz did not hold contracts with the subs therefore they were not the constructor.

As for Steve's letter. I can tell you that every word of it was written by Jamie Lynch of D'huy Engineering. I can almost hear Jamie saying it when i read it. D'huy is a competor of Butz on public projects. D'huy is not a constructor just and advisor therefore they can compete with Butz on Public Projects. D'huy is worthless. They do nothing, they have no authority on the job site. They are a complete waste of taxpayer dollars.

Anonymous said...

Also, CPM scheduling is a complete waste of money. It does nothing but give Consultants something to look at. If you hire a GC you make the GC control the schedule and allow him to use any method that he would like.

CPM scheduling for this project probably cost the taxpayers $100K - $200K. It's a joke.

The problem the county had with the schedule is the same problem Parkland had with their high school. They did not have a GC controlling 70% of the contracts and subcontractors. They had 12-16 different contractors each having a their own agreement with county and nothing with Butz.

Anonymous said...

I would bet that if you ask Steve if D'huy helped him write that letter he would say yes.

Anonymous said...

Anon 1248, what GC do you work for?

The Banker

Anonymous said...

Hi Bernie. I am glad you admitted that in your first posting about the Alvin Butz Company contract at the NCGC you were greatly misinformed. Thanks Henry

Anonymous said...

Butz charged the county 4 million for proffessional services. They were not the constructor, by law they can not be. I do not work for a GC! Never have. I'm in construction law. CPM scheduling is a joke. Cost overruns were not a result of the lack of CPM scheduling.

4 prime contractors = lower costs and less risks for the county.

Another important factor to consider is Liquidated Damages. If you look at the bid packages you will find that Butz did not include liquidated damages to be levied if the project fell behind schedule. If they did they are not enforcing it. This would allow the county to recover some of the additional money spent because the project fell behind schedule. Have Mr. Butz explain that one to you.

Bernie, I think you are still a little dizzy from the helicopter ride.

Anonymous said...

From his Lehigh County office, it is easy for Mr. Butz to say that a superb job was on this building. Now from my Northampton County home it is hard to say that this is the case. Here's why.

The bottom line is that regardless of what happened it has been proven that there were signifigant cost overruns. Everyone has admitted that. The question is why did we pay Butz $4 Million and the Architect $4 Million if they did not do their duty in protecting the owner? Why is it that someone is not being held accountable? I would guess that Butz has a hold harmless contract given that they are not the constructor. Someone should be held accountable and the county should be able to take legal action to recover the money.

And the BS about a cabinet maker going out of business held up the project is one of the dumbest things i have ever read. That is why the county required every sub to carry a bond. If someone goes out of bussiness, the bonding company could take over and continue the project. Plus cabinets are one of the last things to go into a building, they can't say that not having cabinets on time slowed down any of the other trades.

All of this is BS, the Butz excuse and the County excuse. Mr. Butz is looking out for himself and the county had D'huy engineering pamper their response to the tax payers.

Bernie O'Hare said...

Perhaps, but I need no helicopter ride to feel dizzy. I doo know this much:

1) Butz was retained as the county's construction manager by Brackbill.

2) Reibman continued using Butz.

3) The project was started that way, and it is just a pointless academic exercise to argue now that the county should have used a GC.

4) Both Steve DeSalva, the county engineer, and Butz agree on the importance of maintaining a CPM. I saw how it was used and consider it an important tool.

5) Butz demonstrated to me how the county could have saved money if it had not used a GC for the prison.

6) There most certainly were liquidated damages clauses - the county learned that lesson after its expensive experience w/ Brackbill.

7) The suggerstion that D'Huy wrote a letter on behalf of DeSalva is an attack on the integrity of another professional.

8) Butz did not use subcontractors, it used contractors, and it used 19 of them. Because of the nature of work involved, they damn well better have bonding capacity. Anything less would be irresponsible.

9) You never did explain how the use of one GC saves money. Butz was quite emphatic.

I am no expert on either construction or construction law. But I'm pretty good as sizing people up and can sdspot a bullshitter a mile away. Butz is no bullshitter. He's a decent and honorable man and so are the people who work for him. Unlike you, he identifiesdd himself right away and asked to meet with me, just to tell his side of the story.

Whatever your background, you obviously have an agenda. You'd have more crdibility if you identified yourself. If you are a construction law expert, great. But that does not make you an engineer. Therefore, your assessmsnt of CPM is spurious.

Now excuse me while I hop back on the chopper.

Anonymous said...

Anonymous 249

I have met a number of the people quoted in this article and I can say with confidence that the CM and Architect worked very hard as a team to provide the county with a first class government center.

AHB as the CMa performed the services they were contracted for and often went the extra mile. If the county had purchased GC services the GC would have needed to carry a large contingency and marked-up all the subs due to the fact that the new building and the renovation of the existing buldings were priced as one project. The renovation projects had too many unforseen conditions that it was near impossible to accurately price and schedule the work for this part of the project.

These two were treated as separate phases however but anyone who knew about the historic courthouse knew that they were in for additional costs mostly as a result of lacking information for these buildings.

I am also curious about the statement regarding the "milking" of this project. I would ask if these people had first hand knowledge of the endless hours architects normally spend (long after the 8-to-4 employees go home) refining their work. Architects take great pride in their work and I'm sure this architect is no different. Just look at the level of detail in this building, from the top of the skylight to the stonework in the Coutrooms - it is a work of art. My hat off to RiccGreen Associates.

I have also been told that this architect continued to service the project long after their contract had expired. I would ask the architect RicciGreene Associates if their services were performed at a profit or were there many "free" hours logged in.

The county always fails to recognize that had this project been bid just two months later the costs would have been much greater.

The architect and cm have provided the county with a first class building, I don't know of ay other building in this area that can compare to it in terms of function and design. The workmanship of the various trades is exceptional, the attention to detail extraordinary.
This building is worth a lot more than what the county paid for it. Future buildings in this area will have much to compete with.

The county should also stop complaining about the design and construction fees. These fees would be much higher had the county used other NYC firms, and I don't know of any local architectural firms that are producing quality designs as that of the new addition of this government center.

I have also met Mr. DeSalva. I understand that he did come in late in the process but very quickly took charge of all the issues. Steve has performed admirably, his concerns have always been sincere, and has always fought for the county's best interest, Steve is a true government official. It is unfortunate that he has received poor advice from certain people with their own agendas.

I am sure that Steve will continue to serve the County well.

I don't agree with the idea that the consulting CM and Architect be held responsible for the "cost overuns" as some would call it. If anything can be said about "cost overuns" is that the CM and Architect held these inevitable cost events to the absolute minimum.