The development team selected this week to redevelop the former World Trade Center building into a Four Seasons hotel intends to invest nearly $130 million in minority- and women-owned businesses by testing out a new strategy for meeting the city’s DBE participation goals.
Instead of making deals solely with prime contractors, who would get the largest share of a contract and then pass some of the work and money on to DBE and other subcontractors, the Four Seasons developers submitted a plan that calls for prime contractors and subcontractors to partner together and for the latter to get the greater share of the contract money.
“We wanted to turn the traditional model on its head,” said Earl Robinson, a local equity investor in the development, who crafted the DBE plan. “So if you want to be at the table with us, you’ve got to agree to this fundamentally different way of doing business.”
The development team of Carpenter & Co. and Woodward Design + Build on Tuesday won the right to negotiate a lease agreement with the city for redevelopment of the riverfront building. The team has proposed investing $364 million to turn the vacant 33-story office tower into a Four Seasons hotel with 350 guest rooms, 76 hotel-serviced residences and public amenities, including a cultural museum and observation deck.
The proposal was the clear favorite of a five-member selection panel tasked with choosing among five plans for redeveloping the dilapidated 1960s building.
The panel and the city seemed particularly impressed with the Carpenter/Woodward team’s proposal for meeting the city’s disadvantaged business participation goals.
DBE participation made up 10 percent of each committee member’s score for each proposal. The DBE proposals were graded on their commitment to DBE participation, identification of subcontracting opportunities for minority and women-owned businesses, history of working with such businesses and the dollar impact on DBE firms.
The Carpenter proposal was the only one to receive a perfect score of 10 from any of the selection panel members. It got three 10s and a total of 47 points from the five committee members. The next-highest total was 39.5.
The Carpenter group said that $127.4 million, or 35 percent, of its budget would go to DBE firms. That was in line with the other firms and met the minimum goal set by the city. But because the Four Seasons project budget was almost $100 million higher than any other plan proposed, the absolute dollars it promised would go to DBE firms exceeded the other groups by $30 million to $45 million.
To reach that goal, the Four Seasons team is requiring prime contractors in the largest construction fields, including mechanical, electrical and plumbing, to partner with a DBE on the front end, instead of using “good faith efforts” to get work into the hands of such firms after a contract is awarded. The companies will work together to hire subcontractors and tackle other elements of the project, with the larger contractor shepherding the growth of the DBE.
For instance, the plan calls for Gallo Mechanical Inc. to oversee the $30 million redevelopment of the building’s HVAC and plumbing systems. Gallo will subcontract 75 percent of its mechanical work to A Cubed Corp., a certified DBE, and will mentor the company through the project, according to the plan.
“We wanted to compel them to work together, and I say ‘compel’ in a good way, with real incentive,” Robinson said. “We wanted to say to the prime (contractor), ‘You’re going to support and allow the smaller DBE to leverage your infrastructure, and they’re going to get the lion’s share of the contract.’ ”
The idea is to create sustainable DBEs that can hire more local workers, Robinson said.
“If you had a $50 million contract, historically, you’d (give) $45 million to the larger prime and $5 million to the DBE subcontractor,” Robinson said. “We’ve totally flipped that model because in our mind the way you ensure change is to create wealth and as African-American companies hire African-American workers. The real way to move the needle, quite frankly, on workforce too, was to flip the model.”
That structure is part of a package of initiatives the Four Seasons team will introduce including plans to provide a multimillion-dollar credit facility that would lessen the likelihood that DBEs and local small businesses will encounter cash-flow problems, to break down the scope of work into jobs that are manageable for small firms, and to provide formal and informal mentoring programs.
The DBE plan also calls for several related businesses and services to be owned, co-owned or managed by a DBE after the hotel opens, including the parking contract and a cultural exhibit proposed for the site.
Although it is now part of a team being praised for its inclusiveness, Woodward was the subject of a 2010 lawsuit by a contractor who accused an employee of the company of using racial epithets.
The matter came to light last year when Woodward was a consultant on one of the proposals to build a new terminal at Louis Armstrong International Airport. Woodward President Paul Flower denied the claims and pointed out that Woodward did not have to pay monetary damages for racial bias as a result of the suit.