Show Us the Money
Denver's first 1,000-room hotel, the expanded Adam's Mark, is supposed to help revitalize the upper end of downtown and make Denver a major convention destination. But those who are first in line to reap the financial benefits of the publicly subsidized project--the subcontractors who actually did the work--claim they're being shortchanged by the hotel's owner and general contractor, St. Louis-based HBE Corporation.
"We survived the airport," says a lawyer for one of the subcontractors. "Now we're going to be taken down by [HBE chief executive officer] Fred Kummer."
The subcontractors "are getting paid their contract amount," the attorney acknowledges. But because their expenses have doubled from original projections, "HBE is financing that hotel with their life savings."
Now two of the largest subcontractors--including the demolition company that some blame for the delays that have contributed to cost overruns--have filed claims against HBE for more than $500,000 apiece. Several other subcontractors are contemplating claims as well.
HBE vice president Ed Regelean says the subcontractors knew what was expected of them going in. "The schedule we finished the project with is the same schedule we reviewed with all the subcontractors in May 1996," he says. "They all knew it was a big, tough project and to be completed in that amount of time. That was the condition for awarding contracts."
Drywall subcontractor Ron Lundquist agrees, but says construction delays have saddled subs with backbreaking expenses. "I've never seen anything like this in my career," says Lundquist. "And the other subcons haven't seen this, either. We got that hotel open for Fred Kummer and HBE, and we just want to be treated fair. It's our money in there."
In recent weeks the subcontractors have gone to the city for help in getting their money back. The city, of course, has had its own problems with HBE. The controversial decision in 1995 to award HBE $25 million in Denver Urban Renewal Authority loans was made even though HBE had recently lost a $5 million federal racial discrimination suit.
A jury in 1994 awarded two employees at the Adam's Mark in St. Louis--one black and one white--$5.1 million in damages, claiming the hotel unfairly fired the one employee for being black and the other for protesting the firing. In February 1996, a federal judge required that Kummer--who personally faced allegations of racist behavior--hire a neutral third party to oversee the hotel's compliance with new guidelines aimed at improving what many called a racially hostile environment. To get the city subsidy in Denver, Kummer had to agree to similarly stringent rules about such things as minority hiring.
The company's problems, though, have continued in Colorado. In November 1996, five employees of the Denver Adam's Mark filed a suit claiming race and gender discrimination.
City officials say they're trying to stand up for the local subcontractors without taking sides against the hotel, for which an I.M. Pei-designed department store building had to be demolished--yet another controversy involving the project.
"HBE understands that negative publicity doesn't serve them any good, nor does it serve the city any good," says Wayne Cauthen, head of the Mayor's Office of Contract Compliance. "They understand it's important to go ahead and deal with the issues at hand and I think they'll do that. But the proof is in the pudding, so we'll continue to monitor it."
Subcontractors claim that early delays in demolition and asbestos removal threw off all the subsequent work, and say HBE made no attempt to adjust the work schedule. As a result, subcontractors had to hire extra workers to get the job done on time.
Lundquist says he's out more than half a million dollars because he had to double his personnel. Chuck Jordan, general manager of another major subcontractor, Intermountain Electric, says his firm is also owed about $500,000.
"We found ourselves on every floor more than one time," Jordan says. "We might have to go back four or five times to complete a floor. I've never seen this before. Somewhere along the line, someone put this thing behind."
And it's still behind. Though the hotel did manage to open its doors August 21, the place is not finished. Guest suites remain under construction, as do bars and gift shops, employee dining rooms and storage areas.
Regelean says some confusion has to be expected on such a large project. "You can't have several hundred people working on the building and have the last couple of floors not be crowded," he says. "Maybe some contractor didn't man the contract appropriately to complete the work in the time allotted, or he ended up having to stack his own work. It's not something we feel responsible for."
Regelean insists that he and his subordinates "worked with contractors throughout the project, listened to their comments, helped them out, assisted them. We never shut the door." Still, he admits that few substantial changes to the work schedule resulted.
Bill Berger, the project manager for Intermountain Electric, describes the work environment as chaotic and says tempers flared when different crews worked in the same place at the same time. HBE, he says, "did not make any allowances or take into consideration that asbestos removal was so far behind. They made no changes. They could have adjusted the schedule but they didn't."
Berger adds that HBE project manager Bill Impens was unreceptive to workers' complaints about delays. "Daily, weekly, hourly, someone was always in there complaining," he says. "And it was always, 'Read your contract. If you don't do it the way we want, we'll replace you.'"
"If you're objective," says Larry Johnson, project manager for Empire Construction, which oversaw work on the hotel's new entrance on the 16th Street Mall, "you have to say that this guy [Impens] got the job done. It was an ambitious task and an aggressive schedule. But in the meantime he cost these subcontractors a whole lot of money because the scheduling was all wrong." (Impens declines comment.)
A few weeks ago, the subcontractors sat down with the MOCC, DURA and City Councilwoman Ramona Martinez for what Martinez calls "a pretty emotional presentation." Says the councilwoman, "Some of the issues they brought up are very legitimate."
However, Martinez says she's holding her breath on whether HBE will compensate contractors. "You're talking to a person who never supported the [DURA] subsidy," she says. "I thought there were probably other chains and other companies I would feel more comfortable with. I didn't have a good feel for this one."
But Cauthen and Regelean both say HBE has already begun contacting the subcontractors to try to resolve the disputes. Mike DeRito, head of Misers Sheetmetal, which in April filed a $587,000 claim with HBE, says he has agreed not to speak with the press until an upcoming meeting with HBE officials. Demolition man Wayne Gomez, who recently filed a $758,000 claim, declines comment as well.
Lundquist says he, too, plans to talk to the company.
"I would like to sit down with these people and address the issues," he says, "but I don't know how fair they'll be. It's very upsetting to the owners of these companies to see all this money going down the drain. But there's not a whole lot you can do. You're kind of at their mercy.
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