Linda Blackford: Two Well-connected Firms Profit.
Two well-connected firms profit
By Linda B. Blackford
Most cost-effective way to build is debated
The concentration of contracts given to Codell Construction highlights a debate over the use of construction managers versus general contractors in building projects. Each side says that it provides more value for the dollar.
In construction management, the manager gets a flat fee, then it takes the bids from different contractors to build. Construction managers are seen as a protective layer to prevent cost overruns or work by unqualified contractors.
With general contracting, an architect oversees a host of different contractors without a construction manager as the middleman.
Some new justice centers have been built with general contractors; Garlan VanHook, who oversees courthouse building for the Administrative Office of the Courts, said the costs have been roughly the same as those built with construction managers. However, some say that construction management adds another layer of costs.
Rep. Harry Moberly, D-Richmond, would like to know whether construction management is really the most cost-effective way to build capital projects.
"The whole issue of whether to use a construction manager or whether to use the traditional general contractor needs to be revisited, as do many things having to do with facilities, with the new chief justice," he said, referring to recently appointed Chief Justice John D. Minton Jr.
Since 1998, the state has designated more than $880 million to build 65 courthouses. Of that, more than half of the contracts — without competitive bidding — have gone to two Kentucky firms whose political connections have included a former transportation secretary, state senators and the son of former State Supreme Court Chief Justice Joseph E. Lambert.
Codell Construction of Winchester has served as the construction manager on 38 of 65 projects — nearly 60 percent of all the jobs — while Ross Sinclaire & Associates has done the bond work on more than 68 percent of the projects in the past decade, according to the Administrative Office of the Courts, which oversees the program.
In addition to the 38 new buildings Codell has handled, the company's Web site lists an additional six courthouse renovations or additions, including those in Madison, McLean, Clark and Webster counties and two in Pike County.
Codell sits at a powerful intersection of money, politics and business.
James Codell IV, president of the company, is the son of James Codell III, who was transportation secretary from 1996 to 2003 under Gov. Paul Patton. Since 2000, Codell relatives and employees have given almost $61,000 to county judge-executives and other local officials involved in deciding the contracts for courthouse work, according to state reports on political contributions. That includes about $3,500 to the campaigns of Lambert's wife, Debra Lambert, for family court judge and circuit court judge.
The company also employs state Sen. Johnny Ray Turner, D-Drift, to lobby on its behalf. Turner, who pleaded guilty last year in a vote-fraud case, serves on the powerful Senate Appropriations and Revenue Committee, which approves the state budget as well as local projects.
State legislators can work as lobbyists, but they are not allowed to vote on measures in which they hold a personal interest.
In all, Codell Construction employees have given $193,500 to Kentucky politicians since 2000.
Many large businesses give generously to politicians on both sides of the aisle. In Codell's case, it has been a good investment: Codell officials said they have earned $11 million in courthouse business since 1993, some of it for projects still under construction. (Thirty-seven of the total 65 projects approved since 1998 are under construction or in the design phase.) Codell has received contracts for other projects it has not yet been paid for.
Both Codell and the AOC declined to say how much the company will earn under contracts going forward. But if Codell receives a typical average payment for such jobs, it could earn more than $18 million total on courthouses planned or built since 1998.
The AOC, which is not subject to the state's Open Records Law, said it did not track the exact amounts paid to Ross Sinclaire or Codell.
Under AOC rules, prices for all major contracts are set in advance. Construction management is one of the major contracts that does not require firms to bid for the work.
Instead, each local courthouse committee — a group made up mostly of judicial officials — issues a request for qualifications, allowing companies to present their background and experience. Because Codell has built the most courthouses, it is usually considered to have the best qualifications.
The same is true for Ross Sinclaire, which gets the lion's share of courthouse bond business. While that company's political giving is dwarfed by Codell's, it employs two legislators: state Sen. R.J. Palmer, D-Winchester, a vice president for financial advising and client development; and state Rep. Bob Damron, D-Nicholasville, who wrote the 2000 legislation that codified the AOC's building process.
In addition, for a few months this year, it employed the son of former Chief Justice Lambert, who pushed for new justice centers in every county and sees the program as his greatest legacy.
State Rep. Brent Yonts, D-Greenville, a member of the Budget Review Subcommittee on Justice and Judiciary, says the rules might need to be changed.
"I don't know why these groups are getting most of the business, but it may be something we need to look at," Yonts said. "Philosophically and ethically, the business ought to be open and ought to be bid in any way possible to get the maximum value."
Friends in high places
The Codell Construction Co. started out in heavy construction in 1908, but in past years has moved into construction management, mostly of municipal projects such as schools, jails and justice centers.
In 1996, Patton appointed company scion James Codell III transportation secretary. State ethics laws forbid executive branch officials from owning companies that do business with the state, depending on the business and the office held. Codell resigned from the company, and a spokeswoman said at the time that the company did no state business.
John Hays, an attorney for Codell who responded to the Herald-Leader's written questions, said that at the time, Codell also placed his shares, worth about 33 percent of the company, in a blind trust.
Codell remained transportation secretary throughout Patton's two terms, but the company continued to work on schools and judicial centers.
Although the General Assembly provides the funding to pay off the county bond issues that pay for courthouses, Hays disputed that courthouse work is state business.
"In fact, courthouse projects are local projects that are let by local development boards selected for each project," he said in a written statement. "By giving good service for a fair price, they developed an excellent reputation for managing courthouse construction."
The state's Executive Branch Ethics Commission did not issue an official ruling on the company's continued work for the state because no complaint was ever made, officials in the ethics office said.
Complaints have been lodged in the past about Codell's dominance of judicial center contracts. In 2003, Paducah architect Nick Warren asked then-Attorney General Ben Chandler to investigate the number of contracts awarded to the company.
Chandler's office declined. At the time, Chandler told the Herald-Leader that Warren had not brought enough evidence forward. Warren said he thinks Chandler was influenced by the $7,000 in campaign contributions given by the Codells and their employees in his run for governor — a charge that Chandler, now a member of Congress, flatly denies.
Warren asked for the investigation because he was — and still is — convinced that counties that hired Codell Construction would get road projects funneled their way by Transportation Secretary James Codell III.
Warren cites as an example McCracken County. After hiring Codell to build an exposition center in Paducah in 2000, Warren says, the county got a new overpass to an industrial park.
"I was angry because our general contractors were being cut out of the work," Warren said recently, adding that Codell got a much higher number of contracts "than is normal in our business."
Hays said Codell "categorically denies" these allegations, saying they would have to be based on a "grand conspiracy ... that encompasses numerous individuals."
Politics versus qualifications
Steve Branscum, the head of Branscum Construction, also does construction management. Branscum is a close friend and political ally of former Gov. Ernie Fletcher, and his company has gotten the contracts on three new justice centers.
"We pursue some of the judicial centers, and Codell and others have as well," Branscum said. "I think the facts would show that they've got the most of them."
When asked whether politics was involved in those decisions, Branscum noted that the decisions are made by county leaders and AOC officials. "It's just the procurement process of those projects," he said.
Representatives from Alliance and Messer Construction, two statewide construction firms, did not return calls seeking comment.
AOC facilities director Garlan VanHook expressed amazement that the most experienced company wouldn't get the most contracts.
"They're competing for who is the most qualified and who makes the best impression," he said. "It's qualification-based. Sometimes it's about personal relationships, but they aren't the means to an end."
Former Chief Justice Lambert also defended the process, saying the "use of the project development board has worked well, bringing good, solid input."
Pendleton County Judge-Executive Henry Bertram said his project development board hired Codell because "they had the best credentials. If I've built one courthouse and somebody else has built 10, who will you accept?"
Need for bids?
The other powerful company that gets the vast majority of business is Ross Sinclaire, which advises counties on their bond issues to pay for the new justice centers. In addition, Ross Sinclaire also wins most of the contracts for other bond work in the state, including schools and other municipal projects.
Ross Sinclaire is a full-service securities brokerage and investment banking firm based in Cincinnati, but has 80 employees in 10 states, including Kentucky.
Most of its public bond business in the state is done in its Frankfort office, where it helps local governments get the best deal on bond sales to finance public projects, said Damron, who works for the company, mostly in South Carolina.
The financial adviser is paid through a complicated formula that can give it about 1 percent of the bond total. So the company could make as much as $6 million on judicial projects approved since 1998. AOC officials dispute that number, but would not provide an amount. Ross Sinclaire officials did not return calls for this story.
In February, the Louisville office of Ross Sinclaire hired Joseph P. Lambert Jr., the son of former Chief Justice Lambert, who created and oversaw the courthouse building program. Lambert Jr. no longer works at the firm and declined to comment on a potential conflict of interest for a Herald-Leader article in May.
Chief Justice Lambert resigned in June to join the Senior Judge Program.
Ross Sinclaire is headed by Murray Sinclaire in the firm's Cincinnati office. The firm's other founder, the late Terrell Ross, was a businessman from Fleming County.
The AOC program shows much more diversity in the awarding of contracts for architecture, which are awarded under the same "request for qualifications" process. Of the 65 courthouses built since 1998, two firms got the most judicial center jobs —19 were awarded to CMW and nine to Brandstetter Carroll, both of Lexington. The remaining projects were divided among 14 different architecture firms.
The question is whether state contracts should be given to a variety of firms, said Rep. Kathy Stein, D-Lexington, who chairs the House Judiciary Committee and sits on the Courthouse Facilities Standards Committee.
Changing the 2000 law that lays out the AOC courthouse building process would be up to the legislature.
"It needs to be a competitive process," Stein said. "Kentucky is a small commonwealth, but we need to ensure that the taxpayers get the benefit of every dollar spent on courthouse projects."
Editor's comment: you can follow more on this story here.
By Linda B. Blackford
Most cost-effective way to build is debated
The concentration of contracts given to Codell Construction highlights a debate over the use of construction managers versus general contractors in building projects. Each side says that it provides more value for the dollar.
In construction management, the manager gets a flat fee, then it takes the bids from different contractors to build. Construction managers are seen as a protective layer to prevent cost overruns or work by unqualified contractors.
With general contracting, an architect oversees a host of different contractors without a construction manager as the middleman.
Some new justice centers have been built with general contractors; Garlan VanHook, who oversees courthouse building for the Administrative Office of the Courts, said the costs have been roughly the same as those built with construction managers. However, some say that construction management adds another layer of costs.
Rep. Harry Moberly, D-Richmond, would like to know whether construction management is really the most cost-effective way to build capital projects.
"The whole issue of whether to use a construction manager or whether to use the traditional general contractor needs to be revisited, as do many things having to do with facilities, with the new chief justice," he said, referring to recently appointed Chief Justice John D. Minton Jr.
Since 1998, the state has designated more than $880 million to build 65 courthouses. Of that, more than half of the contracts — without competitive bidding — have gone to two Kentucky firms whose political connections have included a former transportation secretary, state senators and the son of former State Supreme Court Chief Justice Joseph E. Lambert.
Codell Construction of Winchester has served as the construction manager on 38 of 65 projects — nearly 60 percent of all the jobs — while Ross Sinclaire & Associates has done the bond work on more than 68 percent of the projects in the past decade, according to the Administrative Office of the Courts, which oversees the program.
In addition to the 38 new buildings Codell has handled, the company's Web site lists an additional six courthouse renovations or additions, including those in Madison, McLean, Clark and Webster counties and two in Pike County.
Codell sits at a powerful intersection of money, politics and business.
James Codell IV, president of the company, is the son of James Codell III, who was transportation secretary from 1996 to 2003 under Gov. Paul Patton. Since 2000, Codell relatives and employees have given almost $61,000 to county judge-executives and other local officials involved in deciding the contracts for courthouse work, according to state reports on political contributions. That includes about $3,500 to the campaigns of Lambert's wife, Debra Lambert, for family court judge and circuit court judge.
The company also employs state Sen. Johnny Ray Turner, D-Drift, to lobby on its behalf. Turner, who pleaded guilty last year in a vote-fraud case, serves on the powerful Senate Appropriations and Revenue Committee, which approves the state budget as well as local projects.
State legislators can work as lobbyists, but they are not allowed to vote on measures in which they hold a personal interest.
In all, Codell Construction employees have given $193,500 to Kentucky politicians since 2000.
Many large businesses give generously to politicians on both sides of the aisle. In Codell's case, it has been a good investment: Codell officials said they have earned $11 million in courthouse business since 1993, some of it for projects still under construction. (Thirty-seven of the total 65 projects approved since 1998 are under construction or in the design phase.) Codell has received contracts for other projects it has not yet been paid for.
Both Codell and the AOC declined to say how much the company will earn under contracts going forward. But if Codell receives a typical average payment for such jobs, it could earn more than $18 million total on courthouses planned or built since 1998.
The AOC, which is not subject to the state's Open Records Law, said it did not track the exact amounts paid to Ross Sinclaire or Codell.
Under AOC rules, prices for all major contracts are set in advance. Construction management is one of the major contracts that does not require firms to bid for the work.
Instead, each local courthouse committee — a group made up mostly of judicial officials — issues a request for qualifications, allowing companies to present their background and experience. Because Codell has built the most courthouses, it is usually considered to have the best qualifications.
The same is true for Ross Sinclaire, which gets the lion's share of courthouse bond business. While that company's political giving is dwarfed by Codell's, it employs two legislators: state Sen. R.J. Palmer, D-Winchester, a vice president for financial advising and client development; and state Rep. Bob Damron, D-Nicholasville, who wrote the 2000 legislation that codified the AOC's building process.
In addition, for a few months this year, it employed the son of former Chief Justice Lambert, who pushed for new justice centers in every county and sees the program as his greatest legacy.
State Rep. Brent Yonts, D-Greenville, a member of the Budget Review Subcommittee on Justice and Judiciary, says the rules might need to be changed.
"I don't know why these groups are getting most of the business, but it may be something we need to look at," Yonts said. "Philosophically and ethically, the business ought to be open and ought to be bid in any way possible to get the maximum value."
Friends in high places
The Codell Construction Co. started out in heavy construction in 1908, but in past years has moved into construction management, mostly of municipal projects such as schools, jails and justice centers.
In 1996, Patton appointed company scion James Codell III transportation secretary. State ethics laws forbid executive branch officials from owning companies that do business with the state, depending on the business and the office held. Codell resigned from the company, and a spokeswoman said at the time that the company did no state business.
John Hays, an attorney for Codell who responded to the Herald-Leader's written questions, said that at the time, Codell also placed his shares, worth about 33 percent of the company, in a blind trust.
Codell remained transportation secretary throughout Patton's two terms, but the company continued to work on schools and judicial centers.
Although the General Assembly provides the funding to pay off the county bond issues that pay for courthouses, Hays disputed that courthouse work is state business.
"In fact, courthouse projects are local projects that are let by local development boards selected for each project," he said in a written statement. "By giving good service for a fair price, they developed an excellent reputation for managing courthouse construction."
The state's Executive Branch Ethics Commission did not issue an official ruling on the company's continued work for the state because no complaint was ever made, officials in the ethics office said.
Complaints have been lodged in the past about Codell's dominance of judicial center contracts. In 2003, Paducah architect Nick Warren asked then-Attorney General Ben Chandler to investigate the number of contracts awarded to the company.
Chandler's office declined. At the time, Chandler told the Herald-Leader that Warren had not brought enough evidence forward. Warren said he thinks Chandler was influenced by the $7,000 in campaign contributions given by the Codells and their employees in his run for governor — a charge that Chandler, now a member of Congress, flatly denies.
Warren asked for the investigation because he was — and still is — convinced that counties that hired Codell Construction would get road projects funneled their way by Transportation Secretary James Codell III.
Warren cites as an example McCracken County. After hiring Codell to build an exposition center in Paducah in 2000, Warren says, the county got a new overpass to an industrial park.
"I was angry because our general contractors were being cut out of the work," Warren said recently, adding that Codell got a much higher number of contracts "than is normal in our business."
Hays said Codell "categorically denies" these allegations, saying they would have to be based on a "grand conspiracy ... that encompasses numerous individuals."
Politics versus qualifications
Steve Branscum, the head of Branscum Construction, also does construction management. Branscum is a close friend and political ally of former Gov. Ernie Fletcher, and his company has gotten the contracts on three new justice centers.
"We pursue some of the judicial centers, and Codell and others have as well," Branscum said. "I think the facts would show that they've got the most of them."
When asked whether politics was involved in those decisions, Branscum noted that the decisions are made by county leaders and AOC officials. "It's just the procurement process of those projects," he said.
Representatives from Alliance and Messer Construction, two statewide construction firms, did not return calls seeking comment.
AOC facilities director Garlan VanHook expressed amazement that the most experienced company wouldn't get the most contracts.
"They're competing for who is the most qualified and who makes the best impression," he said. "It's qualification-based. Sometimes it's about personal relationships, but they aren't the means to an end."
Former Chief Justice Lambert also defended the process, saying the "use of the project development board has worked well, bringing good, solid input."
Pendleton County Judge-Executive Henry Bertram said his project development board hired Codell because "they had the best credentials. If I've built one courthouse and somebody else has built 10, who will you accept?"
Need for bids?
The other powerful company that gets the vast majority of business is Ross Sinclaire, which advises counties on their bond issues to pay for the new justice centers. In addition, Ross Sinclaire also wins most of the contracts for other bond work in the state, including schools and other municipal projects.
Ross Sinclaire is a full-service securities brokerage and investment banking firm based in Cincinnati, but has 80 employees in 10 states, including Kentucky.
Most of its public bond business in the state is done in its Frankfort office, where it helps local governments get the best deal on bond sales to finance public projects, said Damron, who works for the company, mostly in South Carolina.
The financial adviser is paid through a complicated formula that can give it about 1 percent of the bond total. So the company could make as much as $6 million on judicial projects approved since 1998. AOC officials dispute that number, but would not provide an amount. Ross Sinclaire officials did not return calls for this story.
In February, the Louisville office of Ross Sinclaire hired Joseph P. Lambert Jr., the son of former Chief Justice Lambert, who created and oversaw the courthouse building program. Lambert Jr. no longer works at the firm and declined to comment on a potential conflict of interest for a Herald-Leader article in May.
Chief Justice Lambert resigned in June to join the Senior Judge Program.
Ross Sinclaire is headed by Murray Sinclaire in the firm's Cincinnati office. The firm's other founder, the late Terrell Ross, was a businessman from Fleming County.
The AOC program shows much more diversity in the awarding of contracts for architecture, which are awarded under the same "request for qualifications" process. Of the 65 courthouses built since 1998, two firms got the most judicial center jobs —19 were awarded to CMW and nine to Brandstetter Carroll, both of Lexington. The remaining projects were divided among 14 different architecture firms.
The question is whether state contracts should be given to a variety of firms, said Rep. Kathy Stein, D-Lexington, who chairs the House Judiciary Committee and sits on the Courthouse Facilities Standards Committee.
Changing the 2000 law that lays out the AOC courthouse building process would be up to the legislature.
"It needs to be a competitive process," Stein said. "Kentucky is a small commonwealth, but we need to ensure that the taxpayers get the benefit of every dollar spent on courthouse projects."
Editor's comment: you can follow more on this story here.
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