By Dan Skilken
President, CBD Board of Directors
At the May 29th congregational meeting, we announced that unfortunately Bryson Burns Construction, our contractor had declared bankruptcy, and went out of business. We have filed a complaint with the Contractor’s State License Board, alleging that Bryson Burns diverted approximately $1,100,000 of our funds that we paid them, by failing to pay our subcontractors for three months from February to April 2016. This came as a complete surprise to all of us. We believed Bryson Burns when they told us they were paying our subcontractors, as there had been no indication in the previous 12 months of work, that they weren’t. We had twelve months of trouble free business with Bryson Burns; they went from a thriving construction firm with a stellar reputation to bust in about two years. Since the congregational meeting , we have made a lot of progress, but I assume many of you still have lingering questions about the status of the Next 50 Project.
In May, we worked very quickly to mitigate our damages. We hired job supervisors familiar with our project, and established a direct working relationship with all the subcontractors. The City of Saratoga has permitted us to complete the job as an owner-builder. These actions will allow us to complete the job with minimal delay. If we had to hire a new general contractor to complete Phase I we would have lost at least three months of time, and it could have cost us hundreds of thousands of dollars more to complete the job.
What is the new schedule to complete construction? Will it be finished by the High Holy Days? We should have the Mercaz, Beit Midrash and Beit Tefilah, office and school wing completed by the end of July. We are just wrapping up the finishes, the air conditioning, and fire systems. The gating item right now is our front doors. Although the absence of a front door does create a very open and welcoming environment, it is hard to secure the building without them. The main sanctuary remodel is well underway. The framing is complete, the new windows and stucco are finished, and we have started to work on the electrical, gas plumbing, and heating/air conditioning registers. This second phase will be finished in plenty of time to set up for Rosh Hashanah.
How do we know we are getting quality work and what kind of construction guarantee will we have when we no longer general contractor? The job supervisors and general contractor that we have hired check the work very carefully. In addition we have regular inspections from the city of Saratoga to protect us. Our architect is also on site every week to check the work. The subcontractors warrant their work for longer than Bryson Burn’s original one-year guarantee. We must call a specific subcontractor if we have a problem with work in their area, rather than calling a general contractor. If the problem falls between two subs, we will have to work to resolve the issue with the parties involved. The quality of the work throughout this entire job has been very good. Because we were under a cost plus contract, the general contractor did not cut corners on the construction to try to improve profit on the job. We are confident that we will move into a reliable and well-built facility.
How are we paying for the additional expense of the diversion of our funds, as well as the cost to complete the building? We are so fortunate to have the support of our entire Kehilla behind this project. We have received committed donations of over $7,700,000 toward the construction, and have about $150,000 of the building endowment completed. Even after Bryson Burns went out of business, congregants stepped up to pledge even more to the project. In addition congregants have loaned us $1,600,000 dollars to cover the short-term cash flow we need as pledges are paid over time. We will need to see how our legal recourse against Bryson Burns turns out and raise enough additional donations to cover the misdirected funds.
Was Bryson Burns vetted before we hired them? Did we have a performance bond? Can our insurance cover this? Bryson Burns had an excellent reputation when we hired them. They only had the minimum bond required by the state licensing board. In hindsight, if we had purchased a performance bond on this job, it would have potentially saved us some money, but not necessarily aggravation. The bond would have been very expensive, and once we needed to collect, we would likely have lost control over finishing the construction to the contractor(s) hired by the bonding company. Our contract held back 10% of all construction costs as retention to assure the contract was completed. We no longer owe Bryson Burns their 5% profit on the job which helps lower the total cost of the job. Unfortunately, insurance does not cover fraud.
How did we not see this coming? Bryson Burn’s staff didn’t warn us because of potential legal risk with their company and expectations were set by management that they only had a very short-term problem. None of the subs would tell us about the payment problems because every time they threatened to walk off the job from lack of payment Bryson Burns threw them some cash to keep them on the job. We had 13 months of good performance on our contract. We relied on lien releases we were receiving from Bryson Burns without demanding the releases directly from the subs. In hindsight, it would have been prudent to demand proof of lien releases from the subs, rather than just relying on the lien releases from Bryson Burns.
What legal action are we taking? Ian Kass and David Hoffman are chairing the ad hoc legal committee. Beth David has retained the firm of Greenfield, Draa & Harrington, a well-known construction and bankruptcy law firm, in San Jose. GDH is representing Beth David in bankruptcy court, and also advising on our other legal options.
What are we doing to make sure we have better financial oversight? We have hired a contract full-time construction bookkeeper working in the synagogue office to manage all the bills and collect all the lien releases from both the subcontractors and their suppliers. We have copies of all the original contracts and change orders, and copies of all past payments and lien releases. We also have legal paperwork with all the subs that certifies that they are giving us accurate information, and if they are paid by the bankruptcy court, they will pay us back any money we are due.
We will have all the construction finished by the High Holy Days, and will move out of the trailers in early August and have the school ready in the new building before September. We thank you for your patience. We regret that this happened and the Next 50 Project Committee is working night and day to raise donations and get this project finished. We hope you find the results both functional and beautiful.
By Dan Skilken
President, CBD Board of Directors
At the May 29th congregational meeting, we announced that unfortunately Bryson Burns Construction, our contractor had declared bankruptcy, and went out of business. We have filed a complaint with the Contractor’s State License Board, alleging that Bryson Burns diverted approximately $1,100,000 of our funds that we paid them, by failing to pay our subcontractors for three months from February to April 2016. This came as a complete surprise to all of us. We believed Bryson Burns when they told us they were paying our subcontractors, as there had been no indication in the previous 12 months of work, that they weren’t. We had twelve months of trouble free business with Bryson Burns; they went from a thriving construction firm with a stellar reputation to bust in about two years. Since the congregational meeting , we have made a lot of progress, but I assume many of you still have lingering questions about the status of the Next 50 Project.
In May, we worked very quickly to mitigate our damages. We hired job supervisors familiar with our project, and established a direct working relationship with all the subcontractors. The City of Saratoga has permitted us to complete the job as an owner-builder. These actions will allow us to complete the job with minimal delay. If we had to hire a new general contractor to complete Phase I we would have lost at least three months of time, and it could have cost us hundreds of thousands of dollars more to complete the job.
What is the new schedule to complete construction? Will it be finished by the High Holy Days? We should have the Mercaz, Beit Midrash and Beit Tefilah, office and school wing completed by the end of July. We are just wrapping up the finishes, the air conditioning, and fire systems. The gating item right now is our front doors. Although the absence of a front door does create a very open and welcoming environment, it is hard to secure the building without them. The main sanctuary remodel is well underway. The framing is complete, the new windows and stucco are finished, and we have started to work on the electrical, gas plumbing, and heating/air conditioning registers. This second phase will be finished in plenty of time to set up for Rosh Hashanah.
How do we know we are getting quality work and what kind of construction guarantee will we have when we no longer general contractor? The job supervisors and general contractor that we have hired check the work very carefully. In addition we have regular inspections from the city of Saratoga to protect us. Our architect is also on site every week to check the work. The subcontractors warrant their work for longer than Bryson Burn’s original one-year guarantee. We must call a specific subcontractor if we have a problem with work in their area, rather than calling a general contractor. If the problem falls between two subs, we will have to work to resolve the issue with the parties involved. The quality of the work throughout this entire job has been very good. Because we were under a cost plus contract, the general contractor did not cut corners on the construction to try to improve profit on the job. We are confident that we will move into a reliable and well-built facility.
How are we paying for the additional expense of the diversion of our funds, as well as the cost to complete the building? We are so fortunate to have the support of our entire Kehilla behind this project. We have received committed donations of over $7,700,000 toward the construction, and have about $150,000 of the building endowment completed. Even after Bryson Burns went out of business, congregants stepped up to pledge even more to the project. In addition congregants have loaned us $1,600,000 dollars to cover the short-term cash flow we need as pledges are paid over time. We will need to see how our legal recourse against Bryson Burns turns out and raise enough additional donations to cover the misdirected funds.
Was Bryson Burns vetted before we hired them? Did we have a performance bond? Can our insurance cover this? Bryson Burns had an excellent reputation when we hired them. They only had the minimum bond required by the state licensing board. In hindsight, if we had purchased a performance bond on this job, it would have potentially saved us some money, but not necessarily aggravation. The bond would have been very expensive, and once we needed to collect, we would likely have lost control over finishing the construction to the contractor(s) hired by the bonding company. Our contract held back 10% of all construction costs as retention to assure the contract was completed. We no longer owe Bryson Burns their 5% profit on the job which helps lower the total cost of the job. Unfortunately, insurance does not cover fraud.
How did we not see this coming? Bryson Burn’s staff didn’t warn us because of potential legal risk with their company and expectations were set by management that they only had a very short-term problem. None of the subs would tell us about the payment problems because every time they threatened to walk off the job from lack of payment Bryson Burns threw them some cash to keep them on the job. We had 13 months of good performance on our contract. We relied on lien releases we were receiving from Bryson Burns without demanding the releases directly from the subs. In hindsight, it would have been prudent to demand proof of lien releases from the subs, rather than just relying on the lien releases from Bryson Burns.
What legal action are we taking? Ian Kass and David Hoffman are chairing the ad hoc legal committee. Beth David has retained the firm of Greenfield, Draa & Harrington, a well-known construction and bankruptcy law firm, in San Jose. GDH is representing Beth David in bankruptcy court, and also advising on our other legal options.
What are we doing to make sure we have better financial oversight? We have hired a contract full-time construction bookkeeper working in the synagogue office to manage all the bills and collect all the lien releases from both the subcontractors and their suppliers. We have copies of all the original contracts and change orders, and copies of all past payments and lien releases. We also have legal paperwork with all the subs that certifies that they are giving us accurate information, and if they are paid by the bankruptcy court, they will pay us back any money we are due.
We will have all the construction finished by the High Holy Days, and will move out of the trailers in early August and have the school ready in the new building before September. We thank you for your patience. We regret that this happened and the Next 50 Project Committee is working night and day to raise donations and get this project finished. We hope you find the results both functional and beautiful.