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Companies struggle to get paid for building first new D.C. homeless family shelter

An exterior view of the Kennedy, a new homeless shelter in Northwest Washington where officials celebrated a ribbon-cutting ceremony on Sept. 26, 2018. The companies that worked to build the shelter are now locked in a payment dispute. (Fenit Nirappil/The Washington Post)

July 24 at 4:45 PM

D.C. Mayor Muriel E. Bowser (D) last fall proudly celebrated the opening of the first new homeless family shelter, part of a network of planned smaller facilities to replace the troubled D.C. General megashelter.

But almost a year later, a host of local companies that built the shelter in Northwest Washington known as the Kennedy have been struggling to get paid.

Businesses that furnished the 45-unit shelter, handled landscaping and built its heating and air conditioning system say the general contractor on the project has refused to fully compensate them.

The dispute escalated to a point in February when the D.C. government threatened to ban the developer, 5th Street Partners, and Moseley Construction, which oversaw the subcontractors, from receiving new city contracts.

At least 16 companies involved in the project started receiving checks late last week, after The Washington Post inquired about the situation, city officials said.

“We were not going to sit by idly and allow these people to not be paid,” said Keith Anderson, director of the D.C. Department of General Services, the agency overseeing the construction of new homeless shelters.

One of the family rooms available at a new homeless shelter in Ward 4, shown during a tour in September 2018. The company that furnished the shelter said it has struggled to get paid for its work for more than a year. (Fenit Nirappil/The Washington Post)

But his agency refused to detail whether the payments were partial or full and how many claims are still outstanding, saying those details are a matter between the construction company and its subcontractors.

Some of the businesses reached by The Post said their disputes have not been resolved and that the damage to their livelihoods cannot be undone.

Hugee Corporation, which installed the shelter’s heating and cooling systems, was able to secure $170,000 from the project’s bonding company, an entity that can resolve payment disputes, but is still fighting for another $80,000.

Perry Hugee, the company’s president, said any profit from working on the shelter would be wiped out by the costs of borrowing money and paying interest to suppliers while waiting for payment.

“How many minority contractors can stay alive after being owed all that money?” Hugee said. “I would have been better off telling them, ‘No thank you,’ and writing a check for $30,000 and giving it to the homeless shelter.”

On government construction projects, the city generally enters into a contract with a private business that submits the best proposal.

The city sets targets for contractors to subcontract a portion of the work such as electricity or roofing to local companies, with preferences for those owned by women or people of color. The city is not directly responsible for paying subcontractors.

The District awarded the contract to manage the $14 million Ward 4 homeless shelter project without competitive bidding to 5th Street Partners, which in turn hired Moseley Construction to oversee construction and enlist other subcontractors.

Bruce Finland, the managing partner of 5th Street Partners, said he could not answer questions about delays in payment.

“We don’t have a direct relationship with the subcontractors, it’s not directly on us,” Finland said in a brief phone interview.

Johnny D. Moseley, the chief executive of Moseley Construction, said the delays occurred because the city had not fully paid 5th Street Partners.

“There is a contractual requirement that the owner pays me before the owner pays the subcontractor,” Moseley said. “As the funds were released, we paid them out.”

City officials disputed that explanation, arguing that they already paid the developer for most of the contract and subcontractors were still owed money. The city made a final $1.6 million payment on July 8.

The subcontractors said the delay involving the Ward 4 homeless shelter was unusually long.

“Sixty days is fine. Ninety days you are starting to push it. Two hundred days and radio silence, it’s just complete disrespect,” said Chase Coard, whose company, Ecospaces, installed an environmentally sustainable green roof on the shelter.

Coard said his pleas for payment to government officials went unheeded, so he turned to the bonding company to secure most of the money owed to him and has given up on the remaining $10,000.

“No contractor does this for a hobby. This is how we feed our kids and this is how we pay our mortgages,” Coard said. “Not getting the money back, that’s just unacceptable, especially for a project funded by taxpayer dollars.”

Moseley said he did not ignore requests from subcontractors for payment.

Washington Group Solutions, a Virginia business that partnered with a D.C. company to furnish the shelter, said it hired extra staff and worked nights and weekends to get the work done in time for the mayor’s ribbon-cutting ceremony — collapsing a month’s worth of labor into 10 days at an additional cost of $50,000.

Company executives said Tuesday they had yet to receive any payment toward an outstanding bill of $254,000 and that after months of negotiations and an intervention by city officials, they are being offered only $195,000.

“We have worked with the government for years,” said Tom Murphy, a principal at Washington Group Solutions. “It’s the first time we’ve ever been burned like this.”

Council member Robert C. White Jr. (D-At Large), who oversees government contracting as chairman of the Committee on Facilities and Procurement, and his staff have also been questioning city officials about the homeless shelter payment dispute.

In an interview, White said the situation illustrates the importance of the city stepping in on behalf of subcontractors even if they do not have a legal obligation.

“Delayed payment or lack of payment can literally shut down a business,” White said. “Most of the subcontractors are local businesses, and we have an obligation to go to bat for them.”

The Kennedy was the first of seven new homeless shelters that are to replace the megashelter at D.C. General, a dilapidated facility that was demolished last year. Two new homeless shelters in Southeast Washington came under scrutiny for construction delays, but city officials say they have not been the subject of similar payment disputes.

A new shelter in Ward 5 is scheduled to open next month, and a new facility in Ward 6 is projected to start housing families in October. The remaining two shelters in Wards 1 and 3 are expected to open next year.