The current inflation, supply chain and staffing uncertainties have unfolded in slow motion for the construction industry.
But for the team expanding the America's Center, the main convention center in St. Louis, the overall project manager for the work says a critical three-to-six month delay plunged the bidding, award and prices into a far more unforgiving atmosphere than had developed to that point.
Postponed bidding led the project team to award phase one to a single bidder, at tens of millions of dollars more than the estimate, and may have deprived the project's second phase of any bidders at all.
Originally set for early last October, the first phase bidding instead was delayed until close to Christmas. When bids finally came in March, things had changed. "That’s a significant delay from what we wanted to see and we were in a much different market," said Craig Lucas, vice president of Kwame Building Group in a meeting with city and county officials April 18.
The expansion project's lone, high-priced phase-one bid and bidless second phase are just the latest symbols of a punishing national construction market for owners.
As contractors try to control risk and maximize profits, local news reports indicate solicitations for smaller public projects across the U.S., such as schools and fire stations, have recently yielded similar results as the convention center project. Bids are coming in higher than anticipated, leaving officials to either find more money, revise their plans or hold off until market conditions have calmed.
Calm may not arrive any time soon in the St. Louis area. Contractors are busy working on, among other projects, a large soccer stadium and a sprawling headquarters for the National Geospatial Agency.
Financing Set in August 2020
The convention center project financing was initially set in August 2020. Even as the pandemic devastated tourism and travel, St. Louis leaders and its former mayor looked ahead to the positive impact of an expanded facility. Competing Midwestern city Chicago has 4 million sq ft of convention-related space built out, while Indianapolis has 1 million sq ft to offer potential visitors.
St. Louis' America's Center convention center has about 750,000 sq ft of space. Its expansion plan calls for creation of tens of thousands more square footage of exhibit, meeting and support spaces, improved loading docks, a park plaza and freshened entrances and other areas. St. Louis County and the city agreed to each sell $105 million in bonds to pay for the work, which was estimated to cost $175 million at the time.
Kathleen Ratcliffe, president of Explore St. Louis, which operates the convention center, said in a statement at the time that '"once final design work is completed, businesses and residents in our region who work in the construction trades will have a lot of work to do! We couldn’t be more pleased.”
When St. Louis County did issue its bonds, the interest rate was 3% higher than the rate at the time the project was first approved. Also, an influential county council member from outside the city, according to the St. Louis Business Journal, came out against the project in August. County and city officials took until April "to resolve the standoff" by agreeing to fund a $40-million recreation facility in North County, about 20 miles from St. Louis, the Business Journal reported.
By October, the city and Explore St. Louis had already spent millions to keep the project on track. The spending included $5.5 million of a planned $13-million contract with Fentress Architects and $1.3 million of a planned $9 million contract for Kwame Building Group, the St. Louis Post-Dispatch reported. Another $1.5 million had been spent for demolition needed to clear the way for the expansion.
At the April 18 meeting, Kwame Building's Lucas sought to explain to the construction project committee why prices had jumped and contractors seemed newly picky about the work. Only one company, locally based Ben Hur Construction Co., submitted a bid at $123.9 million, far above the $75.4 million estimate.
The planned expansion had broken its budget before it even got out of the gate.
The project had been planned in two phases, Lucas said at the meeting. Pre-bid meetings with interested companies were followed by five addendums and two clarifications.
Holiday Bid Stirred 'Little Action'
Plans anticipated bid invitations going out starting Oct. 8, 2021, but that did not happen until Dec. 22, almost three months later.
That had "a significant impact," said Lucas. "That was a couple of days before Christmas" when there was "not lot of action from [the] contracting community."
Bids from contractors were due March 29, but by then the project team "was in a much different market due to COVID-19, supply chain issues [and] oil price increases," Lucas told the committee. Russia's invasion of Ukraine and its jolt to global fuel prices added to the uncertainty. "And it all had a negative impact as far as the market for bidding construction out," said Lucas.
After looking at the market, Lucas said, Kwame "did not see any value" in rebidding that would "lead to additional bidders," so the firm recommended awarding the work to Ben Hur.
At that, the committee went into private session to discuss terms. When it emerged, members voted to approve the award at $8 million below the bid amount with a "negative change order" lowering the overall price but with no cut in project scope.
On the morning of May 17, the champions and team members working for the America’s Center expansion had a chance to celebrate all they had done so far. Vowing to see the project through to completion, shovels in hand, they lined up at a part of the jobsite where ground had been cleared, and tossed some soil forward.
The last few years have been trying for the event planning industry, noted Ratcliffe, president of Explore St. Louis, “and that makes today even more important: We are back and building something new that will benefit St. Louis and event planners for many years to come.”