Contractor David Herman has received building contracts worth $27-million without bids.
By CHUCK MURPHY and SHARON TUBBS
© St. Petersburg Times, published May 17, 2002
Without competitive bids, the Catholic Diocese of St. Petersburg has awarded a series of construction projects to a friend of Bishop Robert N. Lynch.
In less than five years, David S. Herman's construction company has received contracts and jobs with the local diocese worth more than $27-million. In each case, Herman Construction Services of Broward County faced no competition from established local contractors who had previously done work for the church.
Several projects controlled by pastors at individual churches in the five-county Diocese of St. Petersburg have gone through a bid or interview process and have been awarded to other contractors during the six years Lynch has been bishop. Herman has received every contract over which Lynch exercised sole control. Lynch solicited no other bids and conducted no interviews with other contractors before awarding the jobs to Herman.
Among those contracts is the largest construction project undertaken by the diocese, the $22-million Bishop McLaughlin High School being constructed in Pasco County. Herman is being paid a management fee of 10 percent of the construction cost. That fee is 4 or 5 percentage points higher than Pasco County's school district has paid contractors on similar projects, and it is an arrangement that one veteran local architect called "a sweetheart deal."
"They're paying 10 percent on that job?" asked John Petrashek, director of new construction for Pasco County Schools. "That's high."
The arrangements with Herman do not follow the diocese's policy, which requires churches to seek proposals from more than one contractor before beginning a project. Lynch said the Herman projects are exempted from that policy because they are under his control.
"That's within my prerogatives actually," Lynch said in an interview Thursday. "The bishop has the power to make those contracts."
In an arrangement unique in the diocese to the Pasco high school project, Herman is being paid $50,000 more by the diocese to serve as Lynch's personal representative on the job. That allows Herman to make decisions about everything from "infrastructure design" to "the selection of colors and other finishes" -- decisions that could increase the amount Herman's company earns from the job.
Lynch said the extra fee was justified because the school, near Hudson, is too far from St. Petersburg for diocese officials to be on site as much as necessary. Others question the arrangement.
"This is commonly called putting the fox to watch the henhouse," said St. Petersburg architect Randy Wedding, a former St. Petersburg mayor who reviewed Herman's contract at the Times' request. "It is unusual. I can't say that I've ever seen a document like that in 40 years of practice."
Lynch said the arrangements with Herman are appropriate because of the quality of the work Herman's company has done for the diocese and because of the level of trust Lynch has in him.
"The friendship has developed in the last three years, three-and-a-half or four years," Lynch said. "Understand . . . he gets it (the high school contract) because myself and others are absolutely confident that he will deliver the product that we want at the price we want to pay. Our experience with him has been that he saves us money.
"There's no question, it's a judgment question. But I believe, and I will stand by, that he has done very well by the projects that he has had. (The church has had) very satisfactory experience with him, and he has been very helpful to us in the design phase at controlling the costs."
Herman said he has earned the confidence Lynch has placed in him. He said the extra $50,000 to serve as Lynch's representative was suggested by the diocese, not him.
"Maybe I've done above and beyond what a normal contractor would do," Herman said.
Herman, 40, moved to the Tampa Bay area from Broward County in late 1997 at Lynch's request, both men said. Lynch had met Herman during construction of a school at the Broward County church where Lynch had been pastor before becoming bishop of the St. Petersburg diocese in 1996.
The company founded by Herman's father, Herman Construction Services, remained in Broward. But David opened the company's first satellite office in Tampa and immediately began doing work for the diocese. Over nearly five years, the Tampa office of Herman Construction Services has worked exclusively for the Diocese of St. Petersburg.
The first job was relatively small, a new media center at St. Petersburg Catholic High School on Ninth Avenue N. That project grew into $2.7-million in locker rooms and a residence for Salesian priests who run the school. The diocese awarded those contracts without interviewing or getting bids from other contractors.
From there, Herman continued to get other business from the diocese:
In November 1998, the company was hired to build new offices for the diocese. The $4.2-million, 46,000-square-foot Bishop Larkin Pastoral Center in St. Petersburg was partly modeled after Lynch's former offices at the National Conference of Catholic Bishops in Washington. The job was awarded to Herman without bids from or interviews with other companies.
Just as the new offices were completed, Herman began work on a new science building at Clearwater Central Catholic. The science building was part of an estimated $1.58-million in work Herman did at that school in 2000 and 2001, according to Pinellas building records. Herman's company got that job after Lynch recommended him in a phone call to the school's principal, Lynch said.
Midway through 2001, Herman got the contract to build McLaughlin High in Pasco County. His company might be paid up to $19-million on that job, the first undertaken by the diocese under Lynch's Our Journey In Faith capital campaign. That campaign has raised more than $60-million in pledges toward the new high school, renovation of other schools and the construction of a Catholic retreat in Hillsborough County.
Lynch and former customers of Herman Construction in Broward County praised the company's quality of construction and service.
Throughout the projects, Herman has talked frequently with Lynch. The pair talk by phone "three or four" times each week and visit each other in their homes, Lynch said.
The high school is by far Herman's largest local job, and one of the biggest his company has handled anywhere.
When completed next year, the school will have room for 800 students, along with a gymnasium, auditorium and classrooms wired for the latest technology.
But despite its size and complexity and a requirement in diocese policies that the diocese construction office be consulted on every project, Lynch chose not to interview contractors besides Herman for the job. Though the diocese has a construction manager, the woman in charge at the time was not involved in selecting the contractor for the high school project. Instead, contracts were executed by Lynch's secretary for administration, Betty Deptula, former city manager of Clearwater. She retired from that city job in 1997 in the midst of an audit relating to a lack of oversight on a municipal construction project.
The cost of the 154,400-square-foot school is $22-million, or $142.48 per square foot.
That's considerably more than the last public high school built just a few miles south in Pasco County. Mitchell High cost $26.2-million, an average of $114.45 for the architect, site development, furnishings and construction, according to Petrashek of Pasco County schools.
A difference in cost remains after deducting the architect's fee and the cost of the land and site preparation. According to the contract signed last April by Herman and the diocese, Herman's company is being paid a guaranteed maximum price of $19-million for the job, including the 10 percent fee. Lynch and diocese construction manager Richard Kolhoff, who joined the bishop's management team last fall, said that $4-million of that price is being spent on extensive site preparation that Herman's company is handling.
That leaves $15-million, or $97.15 per square foot for the construction and management.
At Mitchell, Pasco County paid $84.02 per square foot for construction and management, Petrashek said. Robert Brown, building director of the Archdiocese of Miami, said they typically pay $90 to $100 per square foot for new schools in Broward or Miami-Dade counties after competitive bidding.
"Normally, our projects all go out for bid," Brown said, adding that three to six contractors typically participate. "We like a competitive bidder. . . . It doesn't mean that that's the only way you can do it."
Wedding, the St. Petersburg architect, said the Pasco high school contract, particularly the 10 percent fee to Herman, is overpriced.
"In a job this size, I would describe that as a sweetheart deal," Wedding said. "On a $19-million contract a 10 percent fee is really high. You could buy that all day long for 3 or 4 percent less than that. They could have lowered that fee by 3 percent with a couple of phone calls."
Herman said he doesn't think his fee is out of line. He said his father's company has received more on jobs on Florida's east coast.
"It's the low end of what we charge for projects," said Herman, who added that when he removes the overhead costs, his actual profit is 3 or 4 percent. "We have projects that we get 20 percent on."
Another contractor, Hawkins Construction Inc. of Tarpon Springs, has been working with the diocese on a planned renovation of Tampa Catholic High School. Though the company does not yet have a contract on that job, they have what Lynch described as a "commitment" from the diocese. That would make Hawkins the first contractor other than Herman to win a major high school or other job controlled by the diocese since Lynch arrived in 1996.
Lynch said he was not directly involved in negotiations with Herman on the Pasco high school. But he said the contractor regularly saves the diocese money throughout the design and building process. Herman estimated that he has identified $200,000 to $300,000 in savings on the project in landscaping and other areas.
Additionally, Lynch said, Herman sits in on months of preconstruction meetings with diocese workers and project architects without being paid. Even now, Herman is involved in designing the diocese's planned 200-acre retreat in Hillsborough County. Lynch said there is no guarantee that Herman would be awarded that $8-million contract for the first phase of construction.
Lynch recently has convened a building commission of staff people and parishioners who will review projects the diocese is considering and help select contractors and architects.
"David Herman has been meeting with us in getting the (government) approval but there's no contract," Lynch said of the retreat project. "And we have a building commission. They will be making the decisions on contracts for diocesan projects."
-- Times researchers Cathy Wos and Kitty Bennett contributed to this report.