Money lines the path of each crane and dirt mover that's transforming Kansas City.
Perhaps no other business in town has benefited from the building boom as much as the J.E. Dunn Construction Group. As I write this, J.E. Dunn's blue signs grace the construction sites of the Kauffman Center for the Performing Arts, the Federal Reserve Bank and the Power & Light District.
A company with local roots, J.E. Dunn has become one of the largest commercial contractors in the country, with revenues of $2.6 billion in 2006. Its offices stretch from Seattle to Orlando.
So why does it have to act like the lunch pal who breaks out a calculator whenever the bill arrives?
Kansas City is the land of milk and honey for contractors these days. Boosters say there's a $4 billion makeover going on in downtown alone. Yet J.E. Dunn's actions suggest a child unhappy that his Christmas presents can fit into a single room.
In May, J.E. Dunn sued a subsidiary of the Bernstein-Rein ad agency in a cost dispute over the construction of a ritzy development west of the Country Club Plaza. J.E. Dunn alleged that changes to the project had increased its costs by $22 million.
The suit reportedly caught ad man Bob Bernstein by surprise. Speaking to The Kansas City Star, Bernstein intimated that J.E. Dunn had opted for the prissy route by going to court instead of asking for a meeting. "[I]f I've underestimated something and it comes out a lot more than what I thought it would, I'll sit down with my client and try to work it out," he said. (Construction continues while the two sides "arbitrate confidentially," according to a Bernstein-Rein spokesman.)
Then, in August, we found out that J.E. Dunn was upset with the cost of the land on which it wants to build a new headquarters — with lots of help from taxpayers.
The city is condemning property for the East Village redevelopment northeast of City Hall. East Village is to be anchored by J.E. Dunn's new home. As part of the process, a judge must appoint a panel of commissioners to set prices on the land the city will take. The East Village panel said that the site of the future J.E. Dunn building — what is now a surface parking lot — was worth $70 a square foot.
The figure shocked J.E. Dunn officials. Company Chairman Steve Dunn told the Star that the price was "outrageous." The city agency assembling the land — which Dunn has agreed to pay for — is appealing the panel's decision.
J.E. Dunn was quick to play the Mayflower card. The August 14 Star story warned that the company would look elsewhere for its headquarters if the $70-a-foot price stood.
Here's what's galling: Isn't increased property value a good thing? Isn't that an objective of propping up all this development with tax-increment financing?
J.E. Dunn has benefited enormously from TIF, which subsidized the construction of the new H&R Block headquarters, the Plaza Colonnade and the new IRS Building — all built by J.E. Dunn.
So what happens when (thanks to TIF, if you listen to some people) things start to look up in Kansas City? The Dunns complain.
By my rough calculation, J.E. Dunn will have to pay $7 million for the parking lot, if the $70-a-square-foot appraisal stands. But the company will make nearly that amount when it surrenders its current headquarters for another phase of the East Village redevelopment. J.E. Dunn is getting less land in return, but its new building will sit on a more desirable piece of real estate. The city has also agreed to buy a second J.E. Dunn building on Charlotte for $4 million.
Even-steven? Not for the Dunns, who seem to think a good deal can always be made better. Just stamp your feet.
Recently, I've learned of a third major Kansas City project in which J.E. Dunn appears to have looked out solely for No. 1.
The company, in a joint venture with Turner Construction, won the job to manage the renovation of Arrowhead Stadium. Jackson County taxpayers are paying most of the costs associated with that $375 million project.
J.E. Dunn and Turner entered into what's known as an "at risk" agreement. With these contracts, the construction manager — in this case, Dunn and Turner — commits to quality, time of delivery and cost; in exchange for that certainty, the client — here, the Chiefs — pays more money.
The Arrowhead contract recently changed. The construction manager has been reclassified as an agent. In these arrangements, the construction manager generally doesn't guarantee construction costs or on-time delivery.
A Chiefs official says the change was made with a deadline in mind. (The Arrowhead renovation is supposed to be finished by December 31, 2010, according to the agreement between the team and the Jackson County Sports Authority.) Chiefs Senior Vice President of Administration Bill Newman tells me in an e-mail that the team "made a business decision to absorb the risk so we could move the project along in a timelier manner."
The Chiefs are responsible for cost overruns, so if they want to absorb risk, more power to 'em.
But from what I've gathered, J.E. Dunn has left the joint venture, and I don't think it's because the company developed a sudden aversion to football.
By leaving the joint venture, J.E. Dunn seems to have put itself in an unbeatable position: It will be able to bid on job packages it was paid to craft.
One person who works in the construction industry tells me that allowing J.E. Dunn to bid on Arrowhead work is "highly questionable."
J.E. Dunn officials did not comment on the company's intentions. Mike White, a lawyer for the sports authority, suggests that Dunn won't have an unfair advantage because contractors bidding for the same jobs would have "equal" access to the plans and specifications. He adds: "We are researching this to determine if there [is] anything in statutory or case law impinging on the issue."
Alone, these episodes don't amount to much. Taken together, they paint a picture of a company with a me-first attitude.
That's fine, I suppose. But at the same time, J.E. Dunn brags about its "commitment" to the city. Committed people don't threaten to storm off every time things don't go their way.