Ward 7 site. Credit: Darrow Montgomery

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Mayor Muriel Bowser’s administration has known for months that the construction of two new family homeless shelters intended to partially replace D.C. General, the city’s largest family homeless shelter, is “significantly behind schedule” because of contracting issues, documents obtained by City Paper show.

But the administration has nevertheless committed to closing the ailing shelter this fall.

Construction schedules for two short-term family housing sites in Wards 7 and 8, each designed to house up to 50 homeless families, have fluctuated significantly as quibbles between the District and its general contractor intensify. The shelters are two of the three smaller sites scheduled to open this fall when D.C. General closes, and two of seven total shelters the city plans on building by the end of 2020.

City Paper obtained hundreds of pages of contracts and internal communications from the D.C. Department of General Services—the agency responsible for overseeing the development and construction of all seven shelters—through a Freedom of Information Act request. They indicate that the city’s plan to open homeless shelters in Wards 7 and 8 has been plagued by mismanagement from the outset.

As early as February 1, emails show, top officials in DGS were aware of delays at both the Ward 7 and 8 sites. Just over one month later, in March, agency leaders floated the idea of cutting ties with the companies it hired to build and manage the shelters, DGS Director Greer Johnson Gillis confirmed to City Paper.

D.C. councilmembers, advocates for the homeless, and other city officials have publicly called Bowser’s plan to close D.C. General, the city’s largest and oldest family homeless shelter, an ambitious one. It required securing contracts and permits for the development of a homeless shelter in nearly every ward in D.C.—no easy feat—then building them while simultaneously deconstructing large swaths of D.C. General’s more than 16-acre campus.

That’s all before moving nearly 800 homeless people, or about 250 families, out of D.C. General out of the building and demolishing the main shelter itself.

It’s an expensive plan that requires speed and precision. In May of 2017, Bowser submitted to the D.C. Council two contracts to hire MCN Build as a general contractor for the Wards 7 and 8 shelters, valued at roughly $14.5 million and $18.4 million, respectively. (Bowser did not respond to City Papers requests for comment by press time.) MCN Build has a long history working for D.C., leading dozens of projects in the city in recent years, many of them primary schools. The company is also currently the general contractor for Parkway Overlook, an affordable housing complex managed by DC Housing Authority. A senior executive at MCN Build referred to DGS, in records obtained by City Paper, as “our most valuable client.”

To execute the mayor’s plan on time, MCN would need subcontractors—the construction companies responsible for physically building the shelters—with the capacity and record to deliver “beautiful and dignified” housing, as Bowser described the new shelters.

Enter: Z Modular, a construction company that specializes in modular buildings and calls its model “the only way to build.” It touts modular units as “stronger” and “faster” than traditional, or “stick built” structures, with “higher savings.” Z Modular advertises the capacity to construct units that are 95 percent finished upon delivery. The bulk of MCN Build’s job, after delivery of the units, is to oversee their installation. “Your building can open its doors for full occupancy almost immediately!” Z Modular’s website reads.

But letters sent from MCN Build executives to project managers at DGS this spring imply that the decision to hire Z Modular was one forced upon on them by DGS, and that they were uncomfortable with the decision. In fact, neither MCN Build nor DGS had ever worked on a modular construction project before, their communications show.

Neither, it seems, had Z Modular. An individual with intimate knowledge of the projects, who requested anonymity to speak freely about the city’s progress building each shelter, characterized the development of the Wards 7 and 8 shelters as behind schedule nearly from the beginning. The individual says Z Modular wowed the city when it presented officials with a flashy video presentation. (In a phone interview, Gillis cited Z Modular’s “innovation” as a draw for the company.)

But early this year, Z Modular’s lack of experience building modular structures became apparent to city officials, the individual says, and email communications show that officials appeared to grit their teeth and move ahead with the company despite a series of delays that threatened to destabilize the projects’ entire timelines.

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“This was their first go-around. These were their guinea pig shelters,” the individual says. “The city [has] known for months that they’re behind schedule.”

Business entity records in Delaware and Alabama, where it is incorporated and has a plant, respectively, show that Z Modular wasn’t registered as a limited liability company until April 18, 2017. Four months later, in August of 2017, Z Modular signed two contracts with MCN Build for the Wards 7 and 8 shelters—$3.67 million for Ward 7, and $5.67 million for Ward 8. It wasn’t until about two months after that, in October of 2017, that Z Modular acquired its first manufacturing plant in the U.S.

The company is a subsidiary of Zekelman Industries, a Chicago-based steel pipe and tube manufacturer. Gillis confirms that Zekelman approached D.C. sometime around the agency’s request for proposal process, in late 2016, months before Z Modular was legally considered a company. (The Senior Vice President of Z Modular, Richard Rozycki, declined City Paper’s request for comment. President Mickey McNamara, did not respond to City Paper by press time. McNamara is also the Executive Vice President of Zekelman.)

City Paperasked Gillis to describe the agency’s vetting process for Z Modular. She said that “at the end of the day, it was the contractor’s decision to bring them on and do the vetting,” acknowledging that the city did not vet the company.

When City Paperasked Gillis whether the city was aware of any modular construction projects Z Modular had successfully completed before it signed a contract with MCN Build, there was a heavy pause. “We were not aware of the amount of work they’d done,” she finally said. “We knew this would be a new entity or new work they’d do. But we still felt confident. We still felt based on the due diligence that our contractor had done that they’d still be able to [support] the project.”

All told, the documents City Paper obtained indicate that city officials have long maintained concerns that the shelters in Wards 7 and 8 will not open as scheduled in their contracts.

“[Z Modular] is literally building a team as they go,” the unnamed individual says. “They’re building this company from scratch, and we’re paying for it.”

***

In March of 2018, a staffer in the mayor’s budget office sent an email internally that summarized how many contracts D.C. agencies secured for each of the seven new homeless shelters. It characterized six of the shelters as “behind schedule.” City Paper obtained this email in April and reported its contents. At the time, a spokeswoman for DGS sent City Paper a statement from Gillis, which said, in part, that “I can confirm that construction for all projects is on schedule, including the programs in Wards 4, 7, and 8.”

Email communications City Paperalso obtained through Freedom of Information Act requests in May and June show how intensely DGS orchestrated its response to the April article. Joia Jefferson Nuri, a spokeswoman for DGS, looped in 20 different city officials across four different agencies to consult on the agency’s response to City Paper. She also reached out to a private consultant with boutique PR firm tb&a.

But just one week before City Paper published its story and received that categorical denial from Gillis, communications obtained by City Paper show that Gillis was copied on an email from an MCN Build executive acknowledging that both shelters were behind schedule.

In the contract it signed with the city in May of 2017, MCN Build agreed to a substantial completion date of August 31, 2018 for the shelters in Wards 7 and 8. A compressed schedule for the construction of Ward 7’s shelter sent to DGS on February 16, 2018, and obtained by City Paper, pinned the first major completion benchmark—for the south half of the second floor—to March 26.

But on March 2, about three weeks before that deadline, email records show that the associate director of DGS’s contract and procurement office, George Lewis, sent a “Notice to Accelerate” to Frank Lefler and Bassem Boustany, two of MCN Build’s top executives, for each shelter project. These notices were, essentially, warnings that MCN Build wasn’t moving quickly enough on them. (Neither Boustany nor Rudy Seikaly, another MCN Build executive copied on these communications, returned City Paper’s requests for comment.)

In one of the letters discussing the progress of Ward 7’s shelter, Lewis references a February 1 meeting between DGS officials and MCN Build executives. In that meeting, he wrote, DGS raised concerns “that the delivery date of the final 4th floor unit is August 30, 2018, which is one day short of the August 31, 2018 contractual substantial completion date. This still does not consider the additional time that the Construction Manager would need to complete its work.”

Lewis then requested that MCN Build produce two new construction schedules, with timelines for both a modular construction and traditional structure, “one continuing with Z Modular and another without Z Modular.” He noted that doing so “will give DGS an opportunity to fully evaluate which construction process (modular v. stick built) is best for the Department at this time.”

A subsequent letter Lewis sent to MCN Build, on March 2, said that DGS “was notified [on February 1] by MCN that the Ward 8 Z Modular production schedule was significantly behind” MCN Build’s own schedule.

Ward 8 site. Credit: Darrow Montgomery

Email communications show that the agency hired JDC Construction LLC, a consulting firm that specialized in construction management, to assist in crafting the acceleration notices. Public presentations on the Ward 7 short-term family housing site and email communications obtained by City Paper show that Marcus Brummer, a former project manager at DGS, is now a consultant at JDC advising the agency on its management of the shelters. D.C. has paid out millions of dollars in contracts to JDC since 2017.

In response, on March 23, MCN Build’s Senior Project Manager Frank Lefler, issued a slight rebuke to Lewis, noting that “as was stated previously, pursuing the modular construction option is not something MCN (or anyone locally) has any experience with.”

Lefler continued: “When we agreed to investigate and pursue this path it was at great personal risk with the sole beneficiary being the District and its furtherance of the goals of the Short Term Family Housing Initiative.” Lefler added that, because the city waited months to finalize the cost of the project, it “put the [shelter] three months off pace at its inception.”

MCN Build had already ordered Z Modular to reduce the scope of its work “dramatically,” Lefler said in a letter, so that it is just responsible for the “structure, sub-floor, exterior sheathing, and air barrier.” (He made no mention of who would complete the rest of the units, or with what money. In a March letter to Lefler and Boustany, Lewis himself conceded that “the sole purpose for mentioning Z Modular in this notice is that they are responsible for delivering the supermajority of the structure.”)

Even after significantly reducing the scope of Z Modular’s responsibilities, Lefler told DGS that MCN still couldn’t deliver the Ward 7 and 8 shelters until October 1 at the earliest—at best a full month after its contractually obligated completion date, assuming the rest of the project runs smoothly.

Yet even if D.C. decides to step in and terminate Z Modular’s contract for Ward 8, its substantial completion date would move to an estimated completion date of July 18, 2019, Lefler’s revised schedule says, making the site nearly one full year behind schedule. Gillis toldCity Paper that DGS expects Ward 7’s shelter to open October 15, and Ward 8’s to open October 31.

***

At the Ward 8 shelter site, which nearly hugs the bottom of D.C.’s border with Maryland, there is very little noise. A handful of construction workers mill around the site, and aside from a small office trailer at the mouth of the shelter’s driveway, the only notable structure on the property is a steel base erected to support the modular units, when they arrive. Z Modular has not yet delivered a single modular unit to the property.

Eventually, the anonymous individual says, “there’s going to be no way to hide it. The steel will be sitting there for months. It’s going to sit, it’s going to sit. People will start asking questions: ‘Why can’t we move people in?’ Here’s why. Because we hired a contractor that doesn’t have the manpower to finish these things.”

In Ward 7, the frame of the shelter is all there: four floors of steel chassis stacked on each other. These are the exoskeletons of the modules, but none of them are outfitted, as was the purpose of Z Modular’s involvement. They were meant to be delivered as move-in ready apartments with kitchens, bathrooms, and even baseboards. City Paper spoke to the site supervisor, Mark DeMoura, on the morning of June 15. When City Paper commented that its understanding of the project was that the units would arrive fully furnished, DeMoura laughed.

“That’s what we thought too,” he said. Z Modular, in his words, “wasn’t performing,” so MCN Build had to dramatically reduce the scope of its responsibilities. It delivered only the chassis for its units on the Ward 7 project, slowly, over the course of six weeks.

DeMoura told City Paper that while MCN Build is committed to its August 31 deadline, completing the project as-is will be “a monumental task.” It will require MCN Build’s crew working seven days a week—it’s currently seeking a permit from the city to work on Sundays, DeMoura says—and increasing the crew from about 70 to 100 people. He declined to comment on whether MCN Build has approached the city for more money.

For her part, Gillis says that DGS views the fiasco with Z Modular as “a win-win,” arguing that Z Modular’s early exit gives the city a chance to hire more locals for the project. “Before, that wouldn’t have happened,” she says. Brian Butler, a project manager at DGS, told City Paper that the city is renegotiating Z Modular’s contract, which it plans to “substantially reduce” commensurate with the work it completed. Gillis answered an emphatic “no” when City Paper asked whether the agency was prepared to spend any more money on the project.

Officials at the highest level of D.C. government are aware of the delays in the Wards 7 and 8 shelters. In one email, a DGS project manager mistakenly copied Kristy Greenwalt, the director of D.C.’s Interagency Council on Homelessness, on MCN Build’s notices to accelerate for Wards 7 and 8. (“I haven’t been super involved in Wards 7 and 8,” Greenwalt wrote in the email, forwarding it to another city employee.)

Bowser meets quarterly with her Cabinet members, a roster that includes DGS’ Gillis, for a progress report on each agency’s projects. The last publicly listed Cabinet meeting was early last December, but Gillis confirmed to City Paper that she has had “conversations with the entire executive leadership team” about the progress of the shelters. She declined to discuss the contents of those conversations.

Yet the mayor remains committed to closing D.C. General this year, despite having repeatedly predicated the closure of D.C. General on the successful and timely opening of its replacement shelters. On any given night, between 700 and 800 people stay in the shelter. In City Paper’s June primary election guide, the mayor answered “yes” to a question asking whether the city should pursue the closure of D.C. General this year.

In her 2016 State of the District address, Bowser addressed concerns about conditions in the shelter. “We’re going to close D.C. General by opening up small, short-term family housing across the District. Beautiful and dignified places where families can thrive, and where little children can be little children,” she said. “If we fail to act—or if we do not move forward with one of the sites—we will not be able to close D.C. General. Not now, not any time soon, and maybe never.”