RVC’s ‘creative’ financing and construction

By Jeff Havens

Staff Writer

“Creative financing” is a term Rock Valley College (RVC) President Roland Chapdelaine has often spoken of, according to RVC sources. The term refers to raising money for college construction costs through $61 million in non-voter approved bond sales, and at least $200,000 of “in-kind” contributions.

Combine creative financing with “naming opportunities,” and part of a system is in place that allows circumvention of competetive bidding laws and awarding multimillion-dollar contracts in the name of philanthropy.

Chapdelaine and the RVC board of trustees’ move upset contractors who wanted the opportunity to bid on the project. Also, the move may have cost the community as much as $1 million more than what needed to be spent on at least one building now under construction, sources said.

In the fourth installment of this series examining RVC leadership, this article explores Chapdelaine’s recommendation and the RVC board’s awarding of a $5,583,893 contract to build RVC’s Support Services Building (SSB).

Also, Chapdelaine’s demand for a “lightning” quick pace for construction and frequent changes in the original purpose and plans for the SSB are called “very unusual” by sources.

The contract included money for “con-struction manager” services to Robert Stenstrom, a general contractor and president/CEO of Stenstrom Companies Ltd., according to sources.

Sources said Stenstrom was awarded this and another contract under “very unusual” circumstances that involve Stenstrom’s pledge to RVC for $800,000 cash and $200,000 for “in-kind” services.

Sources said there is little doubt that the SSB was required by law to be put out for competitive bids. According to sources, this is because Stenstrom is acting as a “general contractor” rather than a “construction manager.”

What is not clear is an area of the law that Chicago attorney John S. Mrowiec, an attorney with Chicago-based Conway and Mrowiec, a construction and public contracts law and litigation practice, describes as “developing.” That area of the law concerns the terms “construction manager” versus “general contractor.”

The law is developing in this area because there is only one known case that has been challenged in court. However, the court’s ruling left many questions unanswered, Mrowiec said.

Other community colleges such as Lake County and Elgin Community require that the facilities director for the college have construction manager experience. This job experience eliminates the need for a construction manager from outside the college. Sources said that RVC’s current facilities director, Bill Sjostrom, does not have or has inadequate experience in this area. Sjostrom was hired by RVC in March 2001, two months after he resigned from the RVC Board of Trustees.

Last week, The Times repeatedly tried to contact RVC’s “construction manager” Stenstrom for this story. A staff member at Stenstrom’s office said that Stenstrom “didn’t have time” and “absolutely” refused to speak with reporters.

In addition, on Jan. 24, a question was submitted in writing to RVC officials asking why Stenstrom was awarded the construction manager position. As of publication, that question, and others, remain unanswered by RVC administration.

The Rock River Times’ Editor and Publisher Frank Schier said, “We are being stonewalled by the administration of RVC. The tactics are obvious. They will not grant interviews; instead, all questions must be submitted in writing, then they do not respond. RVC and its attorney only partially responded to our Freedom of Information Act requests, violating the statute’s time requirements. Our requests dating from October of last year have not been fully answered. Dr. Chapdelaine is not acting as an accessible, open public official.”

Sequence of events

Among the RVC board reports are numerous “naming opportunities” that specify a price to get a classroom, conference room or even a building named after almost whoever or whatever, for a specified amount of money.

• January 2001—Chapdelaine and the board approved naming opportunities for RVC’s former Samuelson Road Center. The center eventually would be called the Stenstrom Center for Career Education by May 2001.

The facility is named after Robert and Jan Stenstrom. Chapdelaine asked for $2 million for naming rights for the Samuelson Road Center, but settled for $1 million in May 2001.

• March 2001—Stenstrom submitted bids for four RVC construction projects that total $1,587,204. When the bids were publicly announced, Stenstrom was not the lowest bidder for any of the four projects.

Specifically, Stenstrom bid $148,000 to remodel the graphic arts lab at the Samuelson Road Center, but had a qualifier attached to his bid that indicated he would like RVC to consider a $30,000 “in-kind” contribution to be applied to the contract.

The term “in-kind” means a contribution of anything of value, other than cash, made directly or indirectly to the college. Anything of value includes services or goods, regardless of whether they are of measurable monetary value.

Larson & Larson Builders, Inc., was identified as the lowest bidder at $120,628 at the March meeting where the bids were announced. Larson won two other RVC projects at the meeting totaling $1,027,062.

• April 2001—The April 10, 2001, RVC board report indicates Stenstrom as the lowest bid at $118,000 ($30,000 was subtracted from Stenstrom’s original $148,000 proposal as an in-kind contribution to be applied to the contract to remodel the graphic arts lab).

Sources called the events surrounding the awarding of the contract to Stenstrom unprecedented and unusual. Larson was upset but took no action to formally complain.

Mrowiec, said if Larson had complained, it would have achieved little because current Illinois construction laws are not worth the contractor’s time or effort.

• May 2001—Chapdelaine recommended the board approve renaming the Samuelson Road Center the Stenstrom Center for Career Education in honor of Robert and Jan Stenstrom. The May 8, 2001, board report indicates the Stenstroms’ “pledge [of] $800,00 to the [RVC] Foundation and $200,000 in-kind to” RVC.

Gary Larson, president of Larson and Larson Builders, Inc., said, “It’s nearly impossible to verify that the college received the in-kind services that they [the college] were supposed to get [from Stenstrom], no matter what the contract reads.” Other sources confirmed Larson’s assessment. RVC Board reports indicate the in-kind contributions will be tracked by invoices.

• August 2001—Chapdelaine recommended that the RVC board approve more naming opportunities at the newly-named Stenstrom Center for Career Education.

• September 2001—Bradley and Bradley (B&B) architects estimate the cost of constructing RVC’s SSB at $6.6 million.

Sources said an architect, who understands local construction costs, nearly always uses this estimate as the maximum a project should cost. The original plan calls for a larger facility, but Chapdelaine ordered several thousand square feet lopped off several months later in January 2002.

This move would eventually upset many by January 2003 because that space would be needed due to more changes that concerned moving the Human Resource Department from the Student Center to the SSB.

• December 2001—Chapdelaine’s guest column for the Dec. 3, 2001, Rockford Register Star said the RVC Foundation received a $1,000,000 gift from the Stenstroms in October 2001.

• B&B completes SSB drawing and documents.

• B&B’s drawings are sent to Hanscomb, Inc., in Chicago to estimate construction costs for the SSB. Hanscomb eventually estimated the cost of building the SSB at $7.2 million. Sources said Hanscomb’s estimate could be seen as inflated because it probably didn’t take local construction costs into consideration. Hanscomb representatives declined to comment about this story.

Hanscomb’s estimate can be used as a guide to compare contractors’ proposals. However, in this case, sources said Hanscomb’s estimate could be a questionable indicator of the actual SSB construction costs, which pointed to the need for an open bid process.

• B&B sent invitations to contractors to bid on construction of the SSB.

• B&B sent a letter to contractors dated Dec. 19 retracting the invitation to bid on the construction of the SSB. The letter identifies Stenstrom as the “general contractor” for the SSB, not as the “construction manager.”

Larson said he was surprised the project was not put out for competitive bidding. He said he would have liked the opportunity to bid on the project.

Brent Johnson, President of Ringland-Johnson Construction, Inc., said, “Yes, had the opportunity been available, Ringland-Johnson would have aggressively pursued the RVC construction manager proposal had there been a public invitation.”

• January 2002—Stenstrom submits a construction cost estimate for SSB that comes close to B&B’s $6.6 million estimate.

• RVC administration orders B&B to redraw plans for a smaller SSB and to lower the cost to $5.6 million.

By Jan. 17, 2003, this decision to reduce the size of the SSB results in departments such as public safety, plant operations and maintenance losing much-needed space for areas such as an evidence room for campus police, office space and shop-work areas, sources said.

The decision also requires B&B to redraw existing plans. Sources said the administration’s frequent changes in construction plans, “normally doesn’t happen” when projects are thoroughly thought through to completion and the construction pace is appropriate. The pace of construction at the college is described as “moving too fast,” which leads to problems such as frequent changes in plans.

Sources said there was no formal bid opening for construction of the SSB and, had the SSB contract been subject to competitive bidding, the cost of the SSB could have been “significantly less,” perhaps as low as $4.6 million.

By May 2002, Stenstrom’s title would evolve from “general contractor” to “construction manager.”

The construction industry recognizes three types of project delivery systems: general contractor, adviser-construction manager and at-risk-construction manager, according to an Illinois Fifth District Appellate Court opinion issued in May 2002 (Shively v. Belleville Township High School District No. 211).

The appellate court’s opinion looked at the awarding of construction management contracts and if they are subject to the competitive bidding process. However, the case involved the Illinois School Code (105 ILCS 5/10-20.21), not the Illinois Public Community College Act (110 ILCS 805/3-27.1), by which RVC is governed.

The appellate court overturned the lower court’s ruling that voided the school district’s contract with Korte Construction Company, which is in downstate Illinois near St. Louis.

Mrowiec said the Illinois Supreme Court has yet to address the issue of awarding construction management contracts and if they are subject to the competitive bidding process. Mrowiec also said the appellate court’s ruling left many questions unanswered regarding construction managers.

Sources said Stenstrom has acted as a general contractor rather than a construction manager for the SSB.

Mrowiec explains in an online article: “In Illinois and Wisconsin, statutes do not presently address directly the procurement of construction management services. Instead, in those states, the question of whether a construction management contract must be competitively bid depends on whether the construction manager is viewed as a ‘professional.’ If so, no competitive bid is required.

“But that question raises the related questions, such as is a ‘construction manager’ any different from a general contractor who self-performs none or little of the work? What is to stop a local government from using a political favorite by simply re-characterizing a ‘general contractor’ as a ‘construction manager’?” Sources said this is exactly what happened in the case of Stenstrom and RVC.

Mrowiec continued: “If an ‘agency construction manager’ is a ‘professional,’ is an ‘at risk constructor’ also a professional as far as public procurement laws are concerned? Can an ‘agency construction manager’ also be awarded a separate trade contract for some of the construction work by competitive bid?”

• February 2002—Site preparation begins for the SSB, which marks the beginning of construction.

Glen Turpoff, executive director of Northern Illinois Building Contractors Association (NICCA), said that sometime between January 2002 and April 2002, his board “discussed” the awarding of the RVC contract to Stenstrom but cited “proprietary” information between board members as a reason to not discuss the details of the meeting.

Turpoff said Stenstrom is a “modified construction manager.” Turpoff added that the association was told of what type of contract the college wanted and the association’s board proceeded to discuss the college’s move. The association had no role in telling the college what kind of contract they should approve, according to Turpoff.

Kathy Odling, president of Odling Construction Co., said the “entire [NICCA] board” discussed the RVC/Stenstrom issue. “We didn’t vote on it, we just discussed it. I don’t believe there were any hard feelings coming out of the meeting.”

While there may not have been hard feelings in the meeting, contractors such as Larson and Johnson eventually voiced their wish to have had an opportunity to bid on the SSB project.

• May 2002—The May 14, 2002, RVC Board Report 5993, signed by Chapdelaine, reads: “In 2001, the Stenstrom family presented a cash donation to the Rock Valley College Foundation capital campaign and an in-kind gift to be applied to a College building project. The total gift from the Stenstrom family is $1 million.

“The application of the Stenstrom gift is in accordance with the established Foundation and College principles/parameters regarding cash and in-kind contributions. It was mutually agreed that the in-kind gift would be applied to the Support Services Building.

“Through the efforts of Stenstrom, their subcontractors, and the architect, a number of design changes were made to reduce the overall size and cost of the facility without losing functionality for the eventual occupants of the Support Services Building.”

Sources dispute Chapdelaine’s claim that the building didn’t lose its functionality. Those arguments are based on the loss of space for public safety, business services and operations and maintenance (the SSB’s original name downsizing).

Chapdelaine’s report continued: “All subcontract work has been bid through Stenstrom Construction, in accordance with the drawings and specifications as provided by the architect. The College has reviewed all bids, and has participated in the preliminary selection of qualified and cost effective contractors for the project.

“In accordance with the established principles/parameters, an independent cost estimate for the construction project was obtained. Hanscomb Associates, a construction cost estimating firm, has used the construction drawings and specifications to provide a comprehensive, independent cost estimate report. This report has been used to substantiate the project cost estimate as summarized by Stenstrom Construction following receipt of bids.

“The College recommends Stenstrom Construction as construction manager for the Support Services Building. The total construction cost, including building construction, electrical, mechanical, and site work is $5,633,000. The project costs will be closely monitored throughout the construction period and the application of the in-kind gift will be verified by invoice.

“It is recommended that the Board of Trustees approve Stenstrom Construction as the construction manager for the Support Services Building project at a cost of $5,633,000 and approve an additional amount of $200,000 as a project contingency. The in-kind donation of services will reduce the actual construction cost to $5,433,000.”

Sources said the actual contingency was $170,000.

Chapdelaine’s contract recommendation to designate Stenstrom as the construction manager for the SSB was approved unanimously by the board.

• June 2002—Stenstrom began work on the SSB. Sources said Stenstrom’s company performed the excavation and carpentry work on the building.

• January 2003—With construction of the SSB about one-third complete on Jan. 17, 2003, Chapdelaine orders cuts in the areas dedicated to Business Services and Public Safety departments to make room for Human Resources, which was originally to be housed in the Student Center.

Sources question the wisdom of Chapdelaine’s cuts but will not go on record to voice their concerns for fear of being fired. Concerns ranged from a lack of window space for people in the Business Services Department to the loss of showers, evidence room and work room for Public Safety.

The sources also call Chapdelaine’s decision “highly unusual” and one that could have cost the college greatly, considering the project was a third of the way complete. Because of the change of plans, again, the pace of construction will be reduced to allow for blueprint modification.

Editor’s Note: In the spirit of full disclosure, it should be noted that Jeff Havens was an employee at Rock Valley College (RVC) from 2000 to 2002 before he was fired by the board of trustees after publicly criticizing the president and the board of trustees and calling for their resignations. Havens also was one of the leaders of a union organizing effort for staff at the college.

RVC’s administration alleges Havens interfered with students’ ability to learn and exercised undue influence on a student trustee.

None of the information included in this series, was obtained while Havens was an employee of the college.

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