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Brick by brick, American business loses edge
Question of the Day
Since its founding in 1912, Summitville Tiles has been a proud family company with a legacy of service to the government.
F.H. "Pete" Johnson, the company's founder and a World War I veteran, stood proudly by the company's motto, "American Made, American Owned" - and true to his word, Summitville tiles cover the roof of the White House and the floors of Washington, D.C., Metro stations.
Today, Mr. Johnson's grandson, David Johnson, wonders whether that legacy has any value. Last year, his company had high expectations of landing a subcontract to provide brick for a school to be built at a U.S. Army base. Despite competitive prices and federal laws intended to support American manufacturers - not to mention common sense, Mr. Johnson thinks, given the nation's poor economy - his company lost out to a German competitor.
The loss will be felt beyond Summitville Tiles' bottom line and could have dire effects on the already depressed region in southeastern Ohio that is clinging to economic life.
Equally troubling, when Summitville challenged the selection process, Mr. Johnson encountered a wall of silence, bureaucratic confusion and disturbing signs of contract-fixing within the U.S. Army that rewards a foreign company over a domestic one.
The $250,000 subcontract for an elementary-middle school project at Fort Bragg in Fayetteville, N.C., has since caught the attention of lawmakers from Ohio, who are concerned that the Army has no say over hundreds of millions of dollars in military subcontracts. The Defense Department's office of inspector general already has opened an administrative investigation into the selection process.
Two Democratic congressmen from Ohio, Rep. Charlie Wilson, whose district includes Summitville, and Rep. John Boccieri, along with Reps. Jim Jordan and Bob Latta, Ohio Republicans, wrote to Secretary of the Army John McHugh in late November and asked for an explanation of "the Army's decision to overlook a domestic manufacturer and the failure to support the American economy."
A month later, an Army official responded that the Army "does not have privity of contract with subcontractors or a subcontractor contract award." The official added that the German company was exempt from the Buy American Act, which protects U.S. manufacturers from foreign competitors because of a World Trade Organization pact to stimulate foreign trade.
After a closed-door Capitol Hill meeting in January with high-ranking Army officials, Mr. Wilson appeared unassuaged. "I still strongly believe that the Army should be better about ensuring that American companies are given a fair shake," the congressman said in a statement. "This experience with Summitville Tiles has reinforced my strong belief that American companies should be supported at all levels of federal contracting.
"I look forward to working with my colleagues to ensure that we have better oversight of such contracts in the future," he pledged.
That may come too late for Summitville Tiles. Mr. Johnson was forced to lay off 22 more workers in an ever-shrinking manufacturing belt. In recent years, his work force has shrunk from 750 to 150 - all while his global competitors skirt the Buy American Act in the wake of a crippling recession.
"This is another example of why American manufacturing is dying on the vine," Mr. Johnson said.
A bright spot
With military base realignment and consolidation throughout the country, new construction is a potential bright spot for some builders and manufacturers. In the Fort Bragg region alone, officials expect to spend $274 million over the next several years just to build schools, according to the Army's comprehensive growth plan.
However, Ohio lost almost a half-million jobs between 2000 and 2009 - a recession driven primarily by manufacturing losses, said George Zeller, a Cleveland-based economic research analyst.
In an election year, with congressional seats at stake and a steady erosion of manufacturing jobs, Mr. Johnson is wondering whether lawmakers will press the Army for oversight of the subcontracting process.
"These jobs are not coming back," he said. "We don't just send out a memo, either. We go into the factory and explain what is happening, like a family at the kitchen table. It's painful to look into people's eyes."
Although the school at Fort Bragg was not going to make or break Summitville, Mr. Johnson said it would have helped stop the bleeding.
"When folks are down, I'd think the military in particular would want to help American companies," he said.
In July, the U.S. Army Corps of Engineers awarded the $39 million Fort Bragg school construction contract to Balfour Beatty Construction, a subsidiary of a British engineering firm of the same name. The firm has more than $16 billion in annual revenue.
Balfour Beatty has excelled in winning military contracts.
From 2000 to 2008, the Defense Department awarded the company more than $185 million in contracts, according to federal government records. In October, the firm announced an award of military construction projects totaling $449 million.
Once a general contractor was hired for the Fort Bragg project, Mr. Johnson said, the Army "preselected" his German competitor to provide brick for the school.
Had 'no role'
Army officials contend they had "no role in the selection of contractors or materials," said Fort Bragg Garrison public affairs officer Thomas D. McCollum. "That belongs to the Army Corps of Engineers."
Not so, countered Louis J. Moore, chief of the regional contracting center for the Army Corps of Engineers in Savannah, Ga. He said the general contractor chooses subcontractors and materials.
"Every general contractor has their own way of doing it," Mr. Moore said.
Officials at the Department of Defense Education Activity Fund, which provides funding for school construction on military bases from its $1.8 billion annual budget, pointed to Fort Bragg: "The local installation has the final say on those matters," Kevin Kelly, chief of financial operations, said of the selection of building materials.
Complying with specifications issued by the Army Corps of Engineers, Balfour Beatty solicited bids last fall for a brick veneer wall system for the Fort Bragg school from a number of companies, said Balfour Senior Vice President Kent Long.
Mr. Long said many factors come into play in choosing a vendor: price of materials, availability, conformity with Army standards. A key factor at Fort Bragg, he said, was that one of Summitville's competitors, Feldhaus Klinker, a German company, supplied brick for two other projects under way at the base.
"We certainly could've used other brick," he said. "But [Feldhaus] has already been used, so the benefit is, you don't have to go through the approval process again."
Such decisions can be cost-effective, but it remains unclear whether that was the case at Fort Bragg.
"If we arbitrarily gave out price information, it could stir up a hornet's nest," Mr. Long said in declining to disclose competing bids.
In November, he said, his team met at Fort Bragg with officials from the Army, the Army Corps of Engineers and the Defense Department, and the group decided to go with Feldhaus. Afterward, according to multiple sources, Balfour's architect, Cathy Roche, of the Orlando, Fla., firm Schenkel Shultz, told a Summitville sales representative that Feldhaus was "preselected."
The problem, Mr. Johnson said, is that Summitville had not yet quoted its price.
Ms. Roche referred questions to her firm, which referred questions to Balfour Beatty.
The Washington Times reviewed numerous documents and written communications and interviewed multiple parties involved in the selection process. The documents show that in early December, after Feldhaus was selected as the brick veneer supplier, Balfour Beatty project manager Dave Goltz issued a purchase order and told a Summitville sales representative that Summitville's price was $3 per square foot higher than Feldhaus' for 100,000 square feet of brick.
However, a quotation from Summitville's distributor, Harwood Brick, a Florida company, shows that Summitville priced its brick at $4.58 per square foot. That would put the German bid at $1.58 per square foot, Mr. Johnson said.
"With costs of shipping across the Atlantic Ocean and transportation to the site, that simply is not possible," he said.
Harwood never quoted Summitville's price to Balfour Beatty either, he added. More troubling, Mr. Johnson said, is that Summitville suspects that the domestic distributor of Feldhaus brick had something to do with freezing out Summitville.
"We believe that Fort Bragg has been misled by those representing the German [company]," he wrote to Ohio's congressional delegation in November.
Feldhaus is distributed exclusively in the United States by United Wall Systems of Greenville, S.C. Brian Drummond, president of United Wall, did not return calls.
Although Mr. Long maintained that Balfour Beatty relied on brick wall construction firms to solicit brick prices, Mr. Johnson contended that those firms also never conveyed his actual price to Balfour Beatty.
"We included a brick estimate in our overall price," said Roger Webb, chief operating officer for Florida brick installer Tilt-Con, noting that his company estimated the cost of brick at $5 to $8 per square foot.
"Maybe Balfour Beatty got [Summitville's] price from the distributor," said Brent Long, of Charlotte, N.C.-based Choate Construction, which won the subcontract to install the German brick.
Brent Long of Choate and Kent Long of Balfour Beatty are twin brothers.
In early December, Summitville Tiles filed a formal complaint with the Defense Department's office of inspector general claiming a "no-bid" contract award. Gary M. Comerford, a spokesman for the inspector general's office, confirmed recently that an administrative investigation is under way. The office's policy is to decline to comment on such matters until resolved, he said.
On Jan. 12, Mr. Johnson received a letter from Mr. Moore of the Army Corps of Engineers, explaining that "Balfour decided to procure the brick directly from Feldhaus in order to improve its ability to meet the construction schedule."
Mr. Long of Choate Construction, however, said the brick does not need to be delivered "until spring at the earliest, because of delays due to wetlands issues." Mr. Johnson replied that Summitville could have delivered the brick by now with no problem. "We have a whole new product line - it's 'shovel-ready,' " he said.
Sen. Sherrod Brown, Ohio Democrat, declined to comment, although his office said it was looking into the subcontractor issue and that the senator had concerns with World Trade Organization procurement rules.
A spokesman for Sen. George V. Voinovich, Ohio Republican, said his boss does not get involved with individual procurement matters. Although the office regretted that Summitville was not selected, he said, "if any [federal regulations] were violated, we hope [the Defense Department] will address the issue through proper channels."
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