McCormick Place officials, driven by a tight construction schedule that left little room for mistakes, knew as early as 10 months ago that the cost of their expansion project was spiraling out of control.
Yet F.R. ”Rick” Duran, the project director, told legislators last month that he and the McCormick Place board were shocked to learn that the $252 million hall would need another $60 million in state bond funds.
In reality, project documents show Duran and key board members had been working behind the scenes since last autumn to keep what had become a government spending fiasco from alarming the legislature or the public.
Internal documents show McCormick Place officials were warned last October by their outside construction managers that the project was already $10 million over budget and on the verge of another $10 million in overruns.
Instead of calling public attention to the problem, documents show, Duran quietly began chopping expensive features and reducing consultants` fees, all the while declaring the project ”on time and within budget.”
The strategy ultimately failed, highly placed sources within the project say, because of a ”fast track” construction schedule that led to repeated mistakes on cost estimates, permit approvals and insurance procurement. The approach may also cause future cost increases or delays.
”It`s like trying to build the Panama Canal in a weekend,” said James Brick, who has monitored the project as the city`s director of technical inspections.
Brick and other experts agree that many of the project`s woes can be traced to a pivotal event: the board`s decision last year to book the prestigious Consumer Electronics Show into the new hall for June 1, 1986.
The show is one of the major national expositions–courted by other cities with their own new convention centers–that McCormick Place officials said had outgrown the existing hall.
As a contractor said of the 21-month construction schedule dictated by the electronics show: ”They put themselves on the fast track, where the tradeoffs are between time and money . . . lots of money.”
The early warnings on cost overruns were contained in a series of memoranda sent to McCormick Place officials over the fall and winter by the joint venture of Schal Associates and James McHugh Construction Co., the professionals hired to build the hall.
A letter from Schal/McHugh to the project office dated Oct. 19, 1984, warned that $20 million more might be needed to meet the May 15, 1986, target completion date. A similar letter dated Dec. 19 estimated the final deficit at $30 million.
But instead of leading to an open reassessment of the project, the caveats appear to have touched off a behind-the-scenes feud between Schal/
McHugh and Duran.
Duran did not mention the warnings in open board meetings, apparently to avoid alarming the legislature or the public, though he told board members privately.
He also brought in consultants who challenged the Schal/McHugh figures. One rebutted both Schal/McHugh`s cost estimates and their prediction that three extra months would be needed to finish the job. Another ”management diagnostic audit” concluded the original budget and schedule could be met, but only if ”clouded” lines of authority were reorganized.
Duran said recently that the board then decided to try to wrestle the project back within budget rather than convey Schal/McHugh`s warnings to the legislature.
”We had the responsibility to redesign and solve the problems ourselves,” Duran said.
Unfortunately for Duran and his board, events didn`t work out that way, and they were forced to go public with the problem on June 15.
A lobbying team was dispatched to secure another $60 million in bonds from the General Assembly, even though lawmakers had only two weeks left in the spring session.
Angry legislators in the House and Senate created special committees to determine why the project was suddenly in danger of shutting down for lack of funds.
The House committee is to meet next Thursday, and the Senate`s has scheduled its first meeting for Aug. 2. And a special session of the legislature may be called later this summer to approve funds to keep the project alive until the autumn ”veto” session, when the requested bailout likely will be arranged.
But before that happens, legislative investigators are sure to ask Duran why he repeatedly declared at public sessions of the Metropolitan Fair & Exposition Authority, the board`s official name, that the project was ”on time and within budget.”
State investigators may also discover that Duran, a 33-year-old architect-manager on the biggest job of his short career, and Schal/McHugh were fighting over, rather than cooperating on, the complex project.
Documents show Duran and his staff tried to silence Schal/McHugh, made up of two of the area`s largest and most politically connected construction concerns, and even accused them in an internal memo of ”making erroneous statements . . . to cover up their own nonperformance.”
Schal/McHugh executives, in turn, quietly lobbied the McCormick Place board to have Duran fired.
The dispute played a supporting role in the alarming string of errors that have plagued the project, according to some people involved in the construction.
But a more fundamental cause of the errors, according to interviews with several highly placed sources within the project, has been the hurried, design-as-you-go construction schedule.
More often than not, the haste-makes-waste phenomenon at McCormick Place presents itself not in overtime payments to workers but in expensive do-it-again work that might have been avoided by working at a more deliberate pace. There are, for instance, the 458 custom-made water supply boxes that will be imbedded in the convention hall`s concrete floor.
Fabrication of the 400-pound cast-iron fittings had begun before construction officials received a city plumbing inspector`s demand to redesign them to include ”back-flow preventers” and other changes. Making the fittings again will cost an extra $500,000, sources said.
Then there is the huge steel truss roof that is to be suspended by cables hung from 12 huge concrete support towers.
Two years ago project managers brushed aside suggestions by prospective insurance carriers that the steel frame be coated with fire-retardant paint. Architects at Skidmore, Owings & Merrill argued their design offered state-of- the-art fire prevention without the paint. The insurance underwriters have held their ground, however, and now the truss will have to be fireproofed on site, after the steel is riveted into place. A knowledgeable source places the cost at $3 million or more, far more expensive than if the steel had been fireproofed at the factory.
Significantly, the $3 million doesn`t include any ”delay claims” that other contractors may file should their work be interrupted by the spray-painters working overhead.
Anticipated ”delay claims” by contractors already account for $10 million of the $60 million currently being sought to complete the project.
Contractors on the job have been quick to file such claims, project sources said, because of devices the McCormick Place board used to protect itself financially against delays. It included ”liquidated damage” clauses in all major contracts, penalizing contractors, by $10,000 a day or more, for slow performance. Concerned that they couldn`t meet tough deadlines, contractors generally raised their bid prices, and once on the job kept a sharp lookout for potential delay claims of their own, some sources said.
”Here`s one for $2.7 million,” Duran recently said to reporters in his office.
He held up a bound set of papers from Bristol Steel Co., the Virginia firm awarded a $30 million contract to fabricate and install the hall`s steel frame. Now Bristol is seeking compensation because delays by other contractors stalled its work.
To his credit, Duran`s strategy of quiet cost-cutting design changes appeared to be working as of late winter.
He had Schal/McHugh trim nice-to-have but nonessential features from the building`s design for a savings of $11 million. Classy materials such as terrazzo floors and glazed brick gave way to plain concrete and cinder block. And the original multitiered team of consultant-managers, which included architects from Skidmore as well as a platoon of administrators and engineers from Lester B. Knight & Associates Inc., was slimmed down, with a commensurate fee savings of $6 million. One of the board`s consultants had suggested that some of the professionals were being overpaid, records show.
Besides those savings, Duran knew he could rely on a $9.3 million
”contingency fund” that was set aside from the original bond proceeds. That money plus another $5.7 million in bank interest would give him a $15 million cushion by the time the final bills came due.
”We had it all back in line by Feb. 1,” Duran now recalls.
But the plan fell apart by the end of May.
First came the problems that followed a Chicago Sun-Times report that a plastic-filled aluminum panel called Alucobond, the material chosen for the building`s exterior, presented a fire danger.
Duran and the McCormick Place board at first defended the material as safe, pointing out that Chicago and other cities had approved it. But when the city suspended its approval pending further tests, McCormick Place officials switched to an all-metal panel rather than await the results. Duran said the change plus attendant delays will cost $4.8 million.
That was small change, however, compared with the next budgetary disaster: an unexpected $25 million increase in the cost of three of the final major jobs on the project.
On this matter, several knowledgeable sources blame Schal/McHugh, not Duran. Its estimators had said it would cost $28 million to wire the building for electricity, install ”finish” work such as locks and handrails, and pave exterior roadways.
But even after redrawing the specifications, no combination of contractors could be found to do the jobs for less than $53 million.
Duran blames Schal/McHugh for the underestimates, but others contend their estimators originally were given only ”concept drawings” on which to base their numbers. Detailed architectural and mechanical drawings were not ready until the jobs were put out for bid in late winter.
Another factor that threw estimates off, experts say, is the current boom in construction here that pits the O`Hare International Airport expansion against numerous downtown office and apartment projects in a bidding war for the best contractors.
Duran and others also point out they were not alone in underestimating costs.
The Illinois Capital Development Board, the agency that oversees construction of major state buildings, was asked in May, 1984, to double-check the McCormick Place estimates to make sure sufficient bond issues were being requested.
The capital development board, which has come under heavy fire for the 100 percent overrun on its own $170 million State of Illinois Center, determined that a construction budget of $200 million would be sufficient at McCormick Place–$5 million less than the Schal/McHugh estimate.
Many sources familiar with the project agree it won`t be easy to assess blame on a project of this magnitude.
Much of the negative publicity on the project has centered on political cronyism. There was State Rep. Larry Bullock`s (D., Chicago) quiet ownership of one of the subcontracting firms on the job, a relationship now being investigated by state and federal grand juries.
Bullock`s firm got the work under an affirmative action program that requires that 20 percent of all contract payments on the project go to minority-owned firms, a program insisted upon by Mayor Harold Washington`s appointees to the McCormick Place board.
And there was the contract for designing the building`s security system that went to a firm owned by the brother of Ald. Edward Vrdolyak (10th), even though another firm appeared to be the lower bidder.
Close associates of Gov. James Thompson also have benefited from the project or played key roles in managing it.
Attorney John Simon, a close friend of the governor`s, handled lucrative legal work on the project`s bond issue; and two of Thompson`s former proteges and successors as top federal prosecutor here, Anton Valukas and Dan Webb, have alternated in recent years as treasurer of the McCormick Place board.
But the root problem–the one that cost an extra $60 million–has more to do with political shortsightedness than corruption, with unreasonable expectations rather than theft.
”I don`t see any point in throwing stones,” said Herbert A. Stade, the McCormick Place director who chairs the board`s construction committee.
”We could have played it safe,” Stade said. ”We could have waited until we had a complete set of plans before we let the first contract. But that would have taken at least a year, and in the meantime we might have lost the electronics show to Las Vegas or New York. That`s what our sales people said was at stake.”
Stade describes the 21-month schedule as ”modified fast track,” and insists the building can still open on time if the legislature comes through.
