IBEW Local 130 (New Orleans LA) Looks Forward to Convention Center--Finally After TWO YEARS

CENTER STAGE
Long entangled in litigation,
the expansion of the Ernest N. Morial Convention Center
is finally poised to get under way
Sunday, August 28, 2005
By Rebecca Mowbray
Business writer

An overgrown field next to the upriver end of the Ernest N. Morial Convention Center, the site of the center's ambitious Phase IV expansion, saw its first signs of activity in a long time this week.

Workers on Monday began clearing brush that accumulated during 22 months of litigation that nearly scuttled plans for the expansion. Their speedy report to the job site, only days after Convention Center officials and Broadmoor LLC signed a contract to build the 524,000-square-foot addition, is a sign of just how eager everyone is to move forward with what may be one of the largest state-financed construction projects in Louisiana's history.

"What happened has happened, and that's behind us now," said Ralph Brennan, chairman of the center's board, formally known as the Ernest N. Morial New Orleans Exhibition Hall Authority. "We need to get these construction workers going, and we need to start selling" the Phase IV space to convention groups. Construction of the expansion is scheduled to begin next month.

A lot is riding on the three-year project, which would expand the center from 1.1 million square feet to 1.6 million. Tourism officials are hoping Phase IV will help revive the state's sagging convention business, which has been in decline since shortly after the completed Phase III expansion opened in 1999.

Proponents say Phase IV's planned bright and airy environment, strong technological capabilities and elegant 60,000-square-foot ballroom overlooking the Mississippi River will enable New Orleans to crack the lucrative corporate meetings market and retrieve lost convention customers.

"We expect it to be a real catalyst for recapturing some market share that was lost by the building of all the new centers in other cities," said Stephen Perry, president of the New Orleans Metropolitan Convention and Visitors Bureau.

The fortunes of numerous small construction companies, many of whom had cleared their calendars in anticipation of a project that ended up being delayed for years, are also tied to the project, as is the future of downtown development.

Observers predict that Phase IV, to be located across Henderson Street from the rest of the convention center, will prompt development along the Mississippi riverfront. As more people participate in events in Phase IV, far from the major hotels along Canal Street, it may also renew demand for a Convention Center hotel near the upriver end of the exhibition hall.

"It's going to bring an awful lot of people to town. That brings new money into the community. I think you're going to see more hotels built, and you'll certainly see more restaurants," said Brennan, a restaurateur.

A tangled web

But the visions of new visitors and new development remained a dream while Phase IV languished in court.

The trouble began in October 2003 when the Convention Center accepted bids from three companies: Yates/Landis , a joint venture of W.G. Yates & Sons Construction Co. of Mississippi and Landis Construction Co. of New Orleans, which submitted the low bid of $274.8 million; Broadmoor, the middle bidder at $281.3 million; and McDonnel/PCL , a joint venture of the McDonnel Group of Metairie and PCL Construction of Denver, which submitted the highest bid at $284.2 million.

Broadmoor immediately challenged the winning Yates/Landis bid, citing several technical shortcomings including the fact that the Yates group did not have a certificate of builder's risk insurance.

In March of 2004, the Louisiana Supreme Court found in favor of Broadmoor and ordered the Convention Center to strip Yates/Landis of the contract. The center's board, unsure of how to proceed, decided to restart the bidding process from scratch. That action jump-started a new round of hearings about whether the board had acted properly in throwing out the first round of bidding. A court ultimately ruled that the Convention Center couldn't abandon the process it had started, and ordered the board to award the contract to Broadmoor.

But the project was destined to hit several other snags. In July 2004, Gov. Kathleen Blanco put the deal on hold while the state spent several months considering a proposal to scale back Phase IV and pair it with a new football stadium for the Saints. The idea was eventually abandoned.

A final hang-up involved costs cited in the original bid. Prices on key construction materials such as steel and cement had risen so dramatically since the original Broadmoor bid was submitted that the Convention Center again faced the possibility of having to start the bidding process over. Additionally, higher prices had pushed the project beyond the Convention Center's budget.

The final breakthrough came this spring, when the Convention Center made a bold move and got the Legislature to suspend public bid law so it could retain Broadmoor as contractor but still negotiate a new contract price that reflected the current prices of materials.

And in a final collaborative push, Broadmoor called on its subcontractors to come up with ideas for substitutions and other ways to whittle the price back into -- or at least closer to -- budget.

In the end, they got the construction price down to $315 million. The contract was signed Aug. 17.

"We believe that the facility is good for the city and the economy. We're thrilled that it's going to get built and that we're going to be able to help do it," said John Stewart, president of Broadmoor, a division of the New Orleans company Boh Bros. Construction Co. LLC.

Paying the price

Though the project is finally moving forward, the two-year delay exacted a price.

The Convention Center, a state entity, has spent $673,000 in legal fees since the litigation began in October 2003. And the figures would have been higher if the state didn't pay discounted rates for outside legal services.

Because of the delays, the Convention Center says it probably lost 20 to 30 conventions that had been considering holding meetings in New Orleans between 2007 and 2009, when Phase IV was supposed to be open.

Moreover, because of price increases, taxpayers are paying $34 million to $40 million more than they would have if Yates/Landis or Broadmoor had moved forward on the job two years ago. William Yates, president of W.G. Yates & Sons Construction, the company that was stripped of the contract, is bitter about the outcome.

Yates said he felt that Louisiana politics ultimately came into play. "We underestimated the power of the Boh family. We thought it would be so ridiculous that the Legislature would suspend public bid law for one job, for one company."

Though Yates conceded that it is Broadmoor that will build Phase IV, his company hasn't ruled out suing for damages. "We're still evaluating that. We're not necessarily giving up," he said.

The costly delay for the many small construction companies that plan to work on the project is ironic because one reason the state supported the project is the construction impact on the economy. At the peak of the job, there will be 50 to 60 subcontractors and 1,200 to 1,400 workers on the project.

The project is one of the largest publicly financed capital outlay projects ever in Louisiana, according to Jerry Jones, director of facility planning and control for the state, but it's not the biggest if you adjust for inflation. The Louisiana Superdome, which cost $163 million to build in 1975, would cost $610.5 million in today's dollars, about 25 percent more than the $455 million total budget for the Phase IV project.

Derrell Cohoon, chief executive officer of the Louisiana Associated General Contractors trade association, said the delays wreaked havoc on many local companies because they had cleared their decks of other jobs in anticipation of the Phase IV project. When the job got tied up in court, they found themselves short on work but unsure about looking for more, because the duration of the litigation was unclear.

But now that it is moving forward, hundreds of union employees are looking forward to picking up work, said Robert "Tiger" Hammond, business manager of the International Brotherhood of Electrical Workers Local No. 130 and president of the Greater New Orleans AFL-CIO.

"This is the kind of project we've been waiting for for many years," Hammond said. "It's going to put many meals on many families' tables."

For some, the Convention Center job is a catalyst for growth. At Gallo Mechanical Contractors Inc., which will install the heating, air-conditioning and plumbing systems in Phase IV, the Convention Center job represents more business than what the entire company would do in a normal year. Gallo is using the job as a means to expand, and plans to increase its work force from 128 full-time employees to about 175 employees. "This job is by far the largest job we've ever tried to tackle," said David Gallo, president of the 60-year-old New Orleans firm.

But the nearly two years of waiting has been difficult. To make sure Gallo would be able to devote all of its resources to the Convention Center job, it refrained from taking on other jobs, and as the litigation dragged on throughout 2004, sales at Gallo ended up dropping about 10 percent.

Gallo said other subcontractors and suppliers are in the same position. "The bottom line is, it's everybody's largest job. From the smallest subcontractor on up to Broadmoor, everybody's held off on doing other things," Gallo said. "We're excited about moving forward. It was a long 22 months."

The story is similar at Capitol Steel of Slidell, which will provide the reinforcing steel bar, or rebar, for the concrete structure of the building. The job is so big that it will take half of Capitol Steel's production capacity for a year.

Unlike Gallo, which says the cost escalations negotiated by Broadmoor and the Convention Center will take care of the increases in the prices of pipes and ducts, Capitol Steel says it's still a gamble because steel prices may yet change from the price in the contract.

"We're still rolling the dice," said Guy Davis, general manager of the firm.

The big question

Where the convention business will be when the expansion opens in 2009 is anybody's guess.

Michael Hughes, director of research at Tradeshow Week, said that right now attendance is up. The number of exhibitors at trade shows, and the amount of space they're using, is also increasing. However, a boom in convention center construction in recent years means there is now far more space available than what is needed by exhibitors, and very few new trade shows are being launched.

New Orleans has been hard hit by competition from other centers. Attendance at the Convention Center peaked in 1999 at 885,997 attendees when Phase III opened but then fell for five years straight to 523,761 in 2004, a drop of 41 percent.

Fortunately, business appears to be rebounding, as occupancy at the Morial Convention Center is projected to increase from a low of 46 percent last year to between 57 percent and 59 percent over the next few years. But that's still well below the period of 1999 to 2001, when Convention Center space was in use 69 percent to 75 percent of the time.

Not everyone is optimistic that Phase IV will bring new convention business to New Orleans.

"The likelihood is that more space will not bring substantially increased attendance. The reality that New Orleans faces is that a lot of cities are expanding," said Heywood Sanders, a public policy professor at the University of Texas at San Antonio who studies the convention business nationally.

More likely, Sanders said, New Orleans will increasingly find itself doing what its competitors are doing: offering incentives, offering discounts or just plain giving away the trade show floor space to fill the building.

Jimmie Fore, general manager of the Convention Center, doesn't agree with that assertion. He hopes Phase IV's first client in early January 2009, the Professional Convention Management Association, will give expansion an auspicious start and ignite a buzz in the industry. "You couldn't pick an event that would highlight the building more than that event," Fore said.

Brennan, the exhibition hall's chairman, said it's imperative that the Convention Center and convention bureau sales staff continue to increase their collaboration and find new ways to sell the additional convention space. That's the next frontier. "We need to be able to increase our efforts and the efforts of the CVB to sell the Convention Center," Brennan said. "This is a huge investment for the state, and we need to make sure it pays off."

. . . . . . .

Rebecca Mowbray can be reached at rmowbray@timespicayune.com or (504) 826-3417.