Ethical questions about pricey Hickman Mills school contract emerge as construction costs soar

A multi-million dollar project to transform a mothballed Hickman Mills building into a revived pre-kindergarten learning center is under the microscope.

For one, district leaders acknowledge costs have soared millions of dollars over budget as crews race to complete work in time for the start of the school year in August.

But 41 Action News is also investigating after getting a tip that a major portion of the project was rigged, resulting in a consultant’s company winning a $4.2 million contract.

One expert told 41 Action News the details looked like a “grotesquely unethical” conflict of interest.

However, district administrators and the companies involved are defending the process.

Mothballed school building being renovated into early childhood center

Closed in 2010 as part of a district-wide reorganization, Ervin Middle School has sat vacant in its south Kansas City neighborhood.

But early this year, Superintendent Dennis Carpenter proposed re-opening the facility as part of his “Moving Forward” initiative. Once completed, the Ervin Early Learning Center will house hundreds of pre-kindergarten and kindergarten students.

The district hired Hollis+Miller, an area architectural firm, to design the blueprint and keep the construction schedule on track for the August deadline.

The architect decided to break up the project into two major approaches: a performance contract for all the mechanical, electrical and plumbing improvements, and general contracting for the remainder of the work.

In a performance contract, energy-related infrastructure is paid off over a 15- to 20-year period by the utility cost savings achieved from the more efficient equipment.

Hollis+Miller recruited an engineering design firm, Smith and Boucher, as a consultant. Smith & Boucher designed the scope of work needed to achieve the energy goals.

The design firm also assisted with drafting the request for qualifications (RFQ), the criteria used by the school district to select a contractor. The district published that request to the public in early March.

Only one bid received, questions about company relationship

However, only one company submitted a proposal: a relatively new company formed in 2011 called Navitas, LLC.

Steve Meyers, the director of facilities overseeing the project, told 41 Action News the tight timeline likely scared some companies away.

In late March, with only one bid to choose from, the school board awarded the guaranteed energy cost savings project to Navitas. And later in May, board members signed off on a price tag of $4.2 million for the energy-related work.

41 Action News uncovered Kansas business filings showing Smith & Boucher is owned by several of the same people who also own Navitas. In fact, the two companies even share the same suite at their Olathe office.

In its proposal, Navitas said it was “very comfortable” teaming with Smith & Boucher on the job.

During a lengthy interview, 41 Action News asked Meyers if he had concerns about the relationship between Smith & Boucher and Navitas.

“No, Navitas is a performance contracting company totally independent of Smith & Boucher,” Meyers said. “They are two totally different entities.”

But 41 Action News showed Meyers a photo of the shared suite during the interview.

“I’m not going to argue that it doesn’t look good, but I’ve never seen that before today,” Meyers said. “If they are working in the same location, I had no knowledge of that.”

Other questions surface about conflict of interest

41 Action News also obtained an email that shows one of the Navitas owners received a draft of the RFQ ten days before the district opened the competition to the public.

The lead architect on the project and author of that email, John Brown with Hollis+Miller, told 41 Action News he was getting an expert opinion to make sure the documents were accurately worded.

“There was nothing in the RFP at that point that would give an advantage to Navitas,” he said.

Meyers also downplayed the perceived conflict of interest, saying the scope of work could have been completed by any energy contractor interested in the project. There was no unfair advantage, he argued.

But Bill Black, a UMKC law professor and former financial regulator, said the district only receiving one response is concerning.

“You need something beyond a red flag as an image,” Black said. “This would be like a 50 by 100-foot skull and crossbones flag waving in front of the school.”

It’s clear some people saw the writing on the wall. 41 Action News received a tip before proposals were even due, and had a camera at the March 27 meeting when the school board selected Navitas.

That is where another surprising detail emerged. According to board documents and Meyers’ presentation at the meeting, Navitas came “highly recommended” by Smith & Boucher.

“It’s the sheer hutzpah of the thing. They were allowed to recommend themselves!” exclaimed Black. “It’s outrageous on multiple levels. It’s conflict of interest upon conflict of interest.”

Company owners deny unfair

influence, recommending themselves

Owners from Navitas and Smith & Boucher declined on-camera interview requests, but did meet with 41 Action News for more than an hour at their Olathe office space.

They said the relationship was disclosed to Hickman Mills, pointing to a section of the 158-page proposal that read, “Navitas is owned with common Smith & Boucher ownership.”

Brown, the architect with Hollis+Miller, told 41 Action News he was aware of the relationship.

“I knew of the ownership situation and it was discussed with the District, per my recollection,” Brown said via email. 

But 41 Action News noticed the relationship not referenced throughout the rest of the proposal. For instance, in the personnel section, one Navitas team member’s resume didn’t mention that he was also the president of Smith & Boucher.

The owners said there was no intent to be deceptive, while also insisting the consulting role provided no inside advantage for the project.

They also strongly denied ever recommending their own company.

41 Action News inquired about that detail several times during the interview with Meyers.

“I did ask Smith & Boucher for a recommendation as far as Navitas’ track record and they said it was good,” he said.

But Meyers said both companies are highly-qualified and well-respected for their work in the industry. He remains confident in the selections, despite saying he didn’t know about the joint ownership.

“It would’ve been nice to know, but it wouldn’t have skewed our evaluations,” Meyers said. “If their track record was shaky, I guess it would look worse.”

Navitas did recently win another performance contract in the North Kansas City School District. Six companies submitted proposals for that project, a district spokeswoman told 41 Action News.

Project already $2 million over planned budget

The proposed Ervin Early Childhood Center has faced other challenges, too.

There were problems selecting a company to do the general contracting work, which delayed the process several weeks.

The first solicitation of bids came back extremely over budget, about double what the district anticipated. They had to re-bid the revised project before selecting its general contractor. That selection still turned out to be 15% more than original projections, according to board documents.

The delay forced administrators to change expectations about when the project would be complete. The goal is now to complete the first phase of the project before school begins.

The remaining construction work will be finished while students and teachers are in the building.

And the price tag of the project remains a concern. Meyers said the district planned for a $7.5 million budget, but the costs have already surpassed that figure by $2 million.

“We’ve accepted that we are paying a premium for the time crunch,” Meyers said. “In the end, we’re going to have an excellent facility that will service pre-K and Kindergarten students.”

Black isn’t as quick to dismiss questions about the process, saying a lack of competition often contributes to a higher price tag.

“I think it was just grotesquely unethical,” he said. “It comes back to bite us in terms of these excessive cost overruns at a time when we have far too little money for our educational budget.”

Ryan Kath can be reached at ryan.kath@kshb.com . You can also follow him on Twitter or connect on Facebook .

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