If They Build It, U Will Pay

Flawed contracts. Cut corners. Inadequate inspections. Complaints about conflicts of interest. University of Minnesota president Mark Yudof might be getting out just in time.

And while insiders begin to wonder whether the U has received what it has paid for, there's no question that the institution has paid. Plenty. Since 1999, the school has spent or committed some $271 million on a total of 14 projects. "There's been some piss-poor management around here. And everyone knows it," says one midlevel staffer involved with the Coffman and Riverbend projects. "But nobody wants to talk about it publicly, because they'll just get hammered. They call it design-build. But the joke around here: 'It's not design-build. It's just build.'"

 

The vast majority of publicly funded construction in Minnesota is carried out under a time-honored protocol known as "design-bid-build." An architect or engineer is selected to design a project, a set of detailed plans is devised, and those plans are submitted to contractors interested in the job. The contractors then calculate how much it will cost to perform the work and submit a bid. The state (or other public agency) then awards the contract to whoever offers the best price. During construction, the architect or engineer acts as an agent of the public and ensures that the design is executed according to precise specifications. The process can be cumbersome and contentious.

Design-build is a less adversarial, more fluid approach to construction. The client solicits an architect and contractor to jointly come up with the plan for and price of a project. Touted as quick and efficient, design-build has been used with increasing frequency over the past decade. But the flexibility comes at a cost. The budgets for design-build projects are often approved before all the plans are finished; as a result, there are often changes in both the design and the bottom line. What's more, because each prospective design-build team is working on its own plan, it becomes difficult, if not impossible, to know with certainty if any given proposal for a project constitutes the best value. That troubles State Auditor Judi Dutcher. "This is why we have competitive bidding statutes," she says. "I'm not here to say design-build doesn't have its benefits. It's faster. But my concern as auditor is: Are taxpayers able to say, 'We got a good deal on this project'? And you can't say that if objective criteria are removed."

Over the past two years, Dutcher has observed a big push at the state legislature to expand the use of design-build. "When I've gone to the legislature to testify, the supporters always say, 'Private businesses do it this way.' Well, we're not a private business. We're the government," Dutcher says. "People seemed very emotional about wanting to get this through. I remember one of the lobbyists screaming at me in the halls of the capitol, saying, 'You don't know anything about design-build.'"

Larry Whitcomb, a professional engineer, says there's a simple explanation for the fervor: Bureaucrats like design-build because it is quick and clean; contractors like it because of the profit margins. "Design-build is very lucrative. If it wasn't, there wouldn't be all sorts of people trying to pass new laws to approve its use."

Until recently, Whitcomb was assistant director of planning and design at the state Department of Administration, where he oversaw one of the three major design-build projects carried out by the state government under a special legislative exemption: the construction of the Minnesota Employees Retirement Systems Building in St. Paul. Whitcomb didn't like what he saw: $5 million in extra costs and, he alleges, rampant corner cutting. His complaints to supervisors fell on deaf ears, however, and he says he was scolded for not being "a team player." Last August, Whitcomb, fearing he would be fired, took early retirement. But before he left, he requested a full audit of the project. In December, the Department of Administration concluded an internal review, dismissing all but one of Whitcomb's complaints. Whitcomb says the review was a "bureaucratic whitewash."

Although Whitcomb's complaints about design-build were met with little enthusiasm at the Department of Administration, he found a sympathetic audience in Dutcher. As it happens, Dutcher serves on the board of the Public Employees Retirement Association, the entity for which the St. Paul building was constructed. "Everything that could have gone wrong did," says Dutcher of the project. "Originally, I was opposed to design-build on a theoretical level. Now, having dealt with the process, I'm more against it than ever."

While Dutcher and Whitcomb were waging their respective little-heeded campaigns against the expanded use of design-build, the University of Minnesota had already embraced the method.

 

October 23, 1998 was the second annual Beautiful U Day. To mark the occasion, Mark Yudof climbed into the cab of a 50-ton crane and swung a maroon and gold wrecking ball into the East River Road Parking Ramp, an aging above-ground structure located on the school's East Bank. After demolition, the U planned to construct an underground replacement ramp to make room for a parklike plaza on the banks of the Mississippi. The regents authorized $29 million in bonds to pay for the new ramp and then, between February and September of 1999, approved a combined funding package to include extensive landscaping, improvements to surrounding infrastructure, and a 500-bed housing complex. The entire endeavor is commonly referred to as Riverbend Commons.

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