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Taxpayers, students, a storied contractor: School construction default in St. Bernard leaves trail of victims

What caused the death of D.A.G. Construction? 'The state drove them out of business'
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Posted at 6:54 PM, Feb 13, 2023

CINCINNATI — Allison Dawson remembers voting in 2016 on whether to fund a new building for St. Bernard-Elmwood Place City Schools. Six years later, she was picking up her niece at the high school, wondering why the new building isn’t finished.

“We don’t know when this project’s going to end. So, we’re all kind of frustrated,” Dawson said. “Everybody’s talking about it. We just want it done and over with and we want our school back.”

The school district is frustrated too. It spent $644,000 more than planned operating two elementary schools it expected to replace with the new building in 2021.

The Ohio Facilities Construction Commission shares in the frustration. The state agency that oversees publicly funded construction projects says its work “positively impacts millions of Ohioans,” but this job ended in default.

“It’s unfortunate,” OFCC said, “that the contractor abandoned the project they contractually agreed to complete.”

The contractor, D.A.G. Construction Inc., was one of Greater Cincinnati’s oldest and largest minority-owned construction companies. It helped build Paycor Stadium and downtown’s Hard Rock Casino. But it chose to go out of business rather than finish the St. Bernard school.

“A combination of COVID‐19, supply chain shortages and other challenges has made it very difficult for a small, family‐run business like D.A.G. to survive,” CEO Stephanie Hall wrote in a Sept. 26 letter to the state.

The head of a contractors’ trade group blames the state for D.A.G.’s demise, saying Ohio created a “race to the bottom” with an inflexible contracting process that makes it hard for companies to succeed.

“D.A.G. did not enter into this school project with the intent to get one over on the school district,” said John Morris, president of Ohio Valley Associated Builders and Contractors in Springboro. “They ran into difficult conditions, COVID conditions, supply chain conditions ... unforeseen circumstances, and the state drove them out of business. That’s a tragedy.”

OFCC declined to participate in interviews about the project, citing expected litigation. But it responded to written questions with public records and statements like this one:

“OFCC used the same documents and processes for the St. Bernard project as have been used in hundreds of comparable K-12 projects. Of all the OFCC projects underway during the pandemic, this is the only one where the contractor has walked off the project— leaving OFCC and the district to redo substantial portions of the contractor’s work.”

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A 2017 rendering by Elevar Design Group showed the vision for the new school.

No one’s talking
The WCPO 9 I-Team has been looking into the project since November, when the school district announced in a “community update” that D.A.G. would be replaced by its insurance company, which issued a surety bond in 2019 to guarantee the project’s completion.

“The board and the OFCC are extremely frustrated with the actions of D.A.G.,” wrote Mimi Webb, superintendent of St. Bernard-Elmwood Place City Schools. “We are hopeful that the departure of D.A.G. represents a positive turning point for the project that will enable us to obtain the labor, skill, and management the project needs to get it over the finish line in a reasonable time.”

Webb and D.A.G. declined to answer questions about the project, citing a threat of litigation. So, the I-Team talked to contractors who worked for D.A.G. but asked not to be identified. Those conversations led to written questions and answers from OFCC, supplemented by public records, school board meeting minutes and project updates on the district’s website.

To better understand OFCC contracts and other public records, the I-Team shared the documents with Morris, a former contractor whose local ABC chapter represents 350 construction companies in Southwest Ohio.

But it didn’t take an expert to notice considerable tension between D.A.G., state officials and Elevar Design Group, the project’s architect and engineering firm.

That tension reached a peak in November 2021.

“OFCC’s threat to withhold liquidated damages starting in December is just wrong,” D.A.G. President Stephanie Hall wrote to state officials on Nov. 1, 2021. “As we have discussed many times, the supply chain and other delays caused by the COVID-19 pandemic have wreaked havoc on our ability to progress the work.”

Hall claimed Elevar caused many of the delays for which D.A.G. was held accountable.

“Throughout the construction process, (Elevar) has refused to meaningfully collaborate with D.A.G. to advance the work,” Hall wrote. “Its adversarial approach has hindered timely responses to critical items in the field.”

Elevar declined to comment for this story. But it repeatedly criticized D.A.G. in documents requesting additional compensation from the state.

“Work on the new school is progressing at a slow pace and is considerably behind schedule,” Elevar principal John Rademacher wrote to OFCC on Nov. 9, 2021. “Only $17.2 million of work has been completed over the past 31 months.”

On Nov. 17, 2021, OFCC sent D.A.G. a notice of breach, a first step toward terminating its construction contract, for “failing to process the work with due diligence.” In January 2022, D.A.G. promised to finish the building in four months, OFCC said in one of its written responses to I-Team questions.

“D.A.G. refused to provide an updated schedule in September, shortly before walking off the job,” OFCC said. “We never want to see a contractor fail and it is unfortunate that this was the outcome. OFCC, in cooperation with the district, took all steps possible under state law to work with the contractor by providing additional funding and time extensions.”

Morris said it all points to a larger problem.

“What happened here, unfortunately, resulted in the death of a good contracting firm, but I can show you countless instances of organizations, contractors of all different shapes and sizes, who have participated in OFCC projects and at the end of it have said, ‘I’m never doing another school project.’ Because they are contentious from day one. They are difficult projects to do, frequently pushing the boundaries of budgets and schedules,” Morris said.

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John Morris, president and CEO, Ohio Valley Associated Builders and Contractors

Introducing the characters
D.A.G. had 30 employees and revenue of $21 million in 2021, when it ranked as the region’s 10th largest minority-owned company, according to the Cincinnati Business Courier. Founded in 1990, the company’s project list included Paul Brown Stadium in 2000, Horseshoe Casino in 2013 and the $93 million Clifton Court Hall at the University of Cincinnati in 2021.

But those were all projects on which D.A.G. was a subcontractor to larger companies that assumed the risk of managing all costs. St. Bernard offered a chance for D.A.G. to assume that risk as a prime contractor with a $32.6 million construction budget and 1,132 days to get the job done.

Elevar Design Group is the largest minority-owned design firm in Southwest Ohio, according to its website. It’s also a partner in two of the region’s major sports projects: TQL Stadium in the West End and the redesign of Paycor Stadium downtown. It played a key role in bringing St. Bernard’s school project to life in 2016, when it created preliminary design concepts that helped to attract $27 million in state funding. It also contributed to a tax levy campaign that secured $10 million in local matching funds for the project.

Campaign finance records show Elevar, then known as SFA Architects Inc., contributed $1,000 to the levy campaign, or 14% of all money raised by the St. Bernard-Elmwood Place Levy Committee.

“Our team also supported the district by providing graphic material support and social media management for the public campaign,” Elevar wrote in a 2017 blog post announcing the school’s design.

In December 2016, the project was defined in state bidding documents that invited proposals from architects and construction managers. The district wanted to build a 144,000-square-foot school next to its Tower Avenue high school, replacing two elementary schools that would be demolished when construction was finished. In addition to the state-funded work, the district added a $3.7 million natatorium to the project and $950,000 in improvements to the site’s gym, cafeteria and central office facilities. The original plan called for construction to begin in March 2018, with all work to be completed by November 2020.

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Elevar's design was introduced on its own website and the school district's in 2017.

Pricing problems
Before D.A.G. joined the project, budget problems forced a one-year delay in the start of construction. That’s because the original contractor, Columbus-based Elford Inc., couldn’t agree with the state on a price tag for Elevar’s initial design.

Elford was hired to be a construction manager at risk, meaning it was expected to set a guaranteed maximum price — and cover all costs above that price. OFCC said Elford’s price “exceeded the approved budget.” So, Elevar conducted value engineering, which means it made design changes to reduce the cost of construction.

“Elford’s estimate still could not be reconciled with the construction budget,” OFCC said. “As a result, OFCC and the district exercised their option to terminate Elford’s contract.”

That was followed by another round of value engineering and a second bidding process that D.A.G. won in February 2019. Elford did not return the I-Team’s calls for this story. OFCC did not explain what design changes were made to reduce cost or what Elford thought the price should be.

Elford’s contract included a construction budget estimate of $30.7 million. D.A.G. ended up with a construction budget of $32.6 million after a bidding competition that drew two proposals and was extended by a month to encourage more competition.

“What that tells me is that the budget was very tight,” said Morris. “There wasn’t a lot of competition on the project. But because it was a state project and had a firm budget, they were really looking for somebody to take a large risk to build that building at that specific price. When they found there weren’t a lot of takers at that level, they extended the bid. D.A.G. came in and won the work, but unfortunately it drove them out of business.”

In its written responses to the I-Team’s questions, OFCC said “it is possible that D.A.G. underbid the project to get the job” but added, “contractors in fixed-price situations include inflation and contingency in their bids.”

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Google Earth images show a time line of construction on the D.A.G. Tower Ave site.

Underground obstructions
In March 2019, OFCC sent D.A.G. a notice to proceed on its $32.6 million construction contract, requiring it to “fully complete the work within 1,132 consecutive calendar days or by April 22, 2022.”

In the months that followed, OFCC approved time extensions totaling 198 days, including 19 for weather problems, 24 for COVID-19 issues and 155 for “unforeseen site issues.” That means D.A.G. had until Feb. 5, 2023 to complete all work.

But within that nearly four-year window, D.A.G. began to miss construction milestones. Its contract said the new building was to be substantially complete by May 2021. The demolition of two elementary schools was supposed to happen by December 2021. Each new delay put pressure on the budget and caused friction on the job site.

“It was contentious from the start,” said Morris. “You’ve got three people who seemingly weren’t all on the same page. They didn’t really want to work together cohesively to get this building built.”

The first major irritant involved the remnants of old buildings, records show:

  • Quality control inspectors visited the site 135 times in the project’s first two years for “poor soils,” including construction debris and foundations that no one expected to find, according to activity logs submitted to the state.
  • One photo, posted on the district’s web page in February 2020, shows a truck-sized slab of concrete that was partially excavated to make way for the new building. “Our guess is this is from one of the original (school buildings) dating back to early 1930s,” said the photo caption.
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    Unforeseen circumstances like this foundation delayed the St. Bernard school project in 2019.
  • Elevar responded to the delays by requesting two contract amendments that boosted its inspection budget by $129,490. It blamed D.A.G. for the delays, saying its original bid was based on an 18-month construction schedule that D.A.G. kept extending.
  • Those additional fees would later form the basis of OFCC’s notice that D.A.G. breached a section of its contract that required it “not to interfere with, disturb, hinder, or delay the services” of other contractors.

OFCC said D.A.G. received additional funding for approved delays but didn’t provide details.

Morris said D.A.G didn't get enough help from the state, since underground obstructions were out of its control.

“When you extend time. you extend costs,” Morris said. “Now, we have to change the schedule completely. But we still have an end date in mind. They need this school opened on this date to get these students in these seats or face liquidated damages. So now the risk involved has gone precipitously up.”

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Here's how the construction site looked in August 2020, according to the district's website.

The COVID years
The project’s photo galleries show foundations were poured in August 2019 followed by the building’s first walls in September and October of that year. But another round of delays was on the horizon, increasing tensions between D.A.G., Elevar and state officials.

“The COVID-19 pandemic … caused disruptions to all phases of the construction process,” Westfield Insurance attorney Gus Yogmour wrote to OFCC in December 2021. “D.A.G. has been dealing with not only COVID breakouts with its subcontractors and suppliers but also the numerous COVID-caused labor and material shortages, trucking and supply chain issues.”

Yogmour was writing on behalf of Westfield subsidiary, Ohio Farmers Insurance Co., which issued a surety bond to guarantee the project’s completion. He was trying to broker a compromise that would keep D.A.G. on the job as OFCC threatened to impose liquidated damages against its contractor for being behind schedule.

“D.A.G. has submitted certain requests for extensions of time which have been denied by the OFCC and D.A.G. does not agree with those denials,” Yogmour wrote. “Nevertheless, D.A.G. remains committed to completion of the project as quickly as possible without sacrificing quality.”

Yogmour said the insurer retained Boston-based Beacon Consulting to advise D.A.G. He requested a meeting to discuss “problems, issues and delays encountered on the project.”

Although OFCC granted time extensions of 24 days for COVID-caused delays, it rejected others that could have given D.A.G. more time to finish the project. OFCC cited Elevar’s analysis in rejecting at least one of those claims, records show.

In July 2021, D.A.G. requested a 50-day extension because its roofing contractor said materials it ordered that month would not be delivered until September 1. The request was later reduced to 15 days. But it was rejected after Elevar determined D.A.G. wasn’t ready to install the roof when it finally arrived. D.A.G. appealed the decision. OFCC rejected the appeal in January 2022, the same month it met with D.A.G. and its surety to discuss a potential compromise.

“The idea that liquidated damages were dropped on this contractor, which forces them into an adversarial situation and pushes a schedule forward, should never have happened,” Morris said. “I mean, they could have worked together to come to a resolution. A company did not have to fail because of this project.”

Records show the dispute intensified in 2022:

  • In May, OFCC approved $509,000 in additional funding for Elevar, citing an “elongated construction schedule due to D.A.G. caused delays.”
  • In June, OFCC withheld $500,000 from D.A.G.’s pay application for liquidated damages, the first in a series of withdrawals that would reach $3 million by December.
  • In September, D.A.G. announced the “difficult decision” to close its doors after 32 years. “Please know that this decision was not reached lightly,” CEO Hall wrote to OFCC.

Beacon Consulting took charge of the job site in October. OFCC now expects the building to be finished by May 2023.

“This project should have been completed in December of 2021,” OFCC told the I-Team. “However, we are now in 2023 and still months away from students entering their new school.”

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WCPO Sky 9 shot of St. Bernard school in early December.

The cost of delays
At a school board meeting on Jan. 30, Bruce Helwagen provided an update on the building’s progress.

“We’re doing above-the-ceiling punch lists right now,” said Helwagen, director of business and technology for the district. “All the ceiling pads are taken out and you look at everything that’s up there. You’re going to see plumbing, you’re going to see data cables, light wires. We’re looking at all that to make sure it’s in the right spot.”

As work crews installed flooring, they found “some areas need to be leveled out,” Helwagen said. Outside, crews are waiting for warm weather to pour replacement concrete.

“We’re going back and refilling some of the areas (Beacon) tore out because of incorrect workmanship,” he said.

While the district is eager to take possession of the building this summer, it will not sacrifice quality, Helwagen said. The district is working with Elevar to make sure all work was done right, he added.

“And who pays for that?” Board President Linda Radtke asked.

“Not us,” Helwagen said. “It’s Beacon, Westfield, the surety company’s responsibility to do it correctly.”

Beyond the cost of construction, the district incurred unplanned operating costs of $644,000 after December 2021, according to a school district spreadsheet obtained in an I-Team public record request. Those unplanned costs included utility and maintenance expenses for two elementary schools built in 1960 and 1974.

Elevar’s compensation is another “discussion we probably need to have with the board,” Helwagen said. “The architect is spending more time on the site. There’s a price to that. Like the plumber who went in to do a two-hour job and six hours later he walks out. He didn’t do those four hours for free … but again, that’s a conversation, when we’re ready, we’ll come to the board, and we’ll have that discussion.”

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