$5-Million Overrun Predicted in Audit of Compton Center

An audit of the city’s $15-million convention center and parking garage complex, being constructed as part of the Alameda Plaza Hotel, has accused the general contractor of poor planning and conflicts of interest that could lead to a $5-million cost overrun.

The management study, performed in March by Wexco International Corp. and Hollier Engineering & Construction Inc., estimates that city officials have already paid the contractor--Tucon Development Corp.--about $1.3 million more than there is work to show for it.

“The fact that there are cost overruns,” the audit’s summary states, either “points to the possibility of an incomplete (cost) estimate at conception or there are inefficiencies in management. . . .”

Motivations Questioned

“Additionally,” says the summary, “there are numerous vested parties involved within the construction process which may mitigate their motivation towards cost-effectiveness.”

No independent party is looking over Tucon’s shoulder, according to the audit. And because Tucon is attempting to serve concurrently as designer, developer, general contractor and construction manager, its work is “sorely lacking in the normal checks and balances necessary to assure proper project execution.”

Helina Dreicer, Tucon’s vice president of construction, disputed the audit allegations this week. “We don’t foresee any such large overrun, or any overruns at all,” she said.

“Wexco has tried to make final conclusions, and I think it is very foolish to look at a job that is not complete. We know what we’re doing and we’re very confident in what we’re doing.”

Justifying Its Contract

Dreicer said Wexco was only trying to find fault that would justify its consulting contract with the city.

Wexco Vice President David J. Ough replied that his firm’s findings are based on “sound engineering approaches, and we feel the audit speaks for itself.”

The 10-story hotel and convention complex, financed jointly with nearly $30-million in city-sponsored industrial development bonds and certificates, is being built on the north side of the 91 Freeway near Alameda Street as the cornerstone of Compton’s latest redevelopment plan.

Work began last year and is expected to be complete by summer 1988, although officials hold out hope that it could open for the city’s centennial celebration next May.

The 26,400-square-foot convention center and 115,000-square-foot parking facility are to be owned and operated by the city, while the 300 hotel rooms rising above them will be owned and managed privately. The project co-developers are D&B; Development Co., led by Naftali Deutsch, and Lazben Financial Co., a partnership of Deutsch’s two sons. Tucon, of which Deutsch is president, acts as general contractor. And another project participant, JRDSE Corp., is led by Deutsch partner Jeffrey M. Boren.

Defendants in Suit

Deutsch was a principal in the construction of the Los Angeles Airport Hilton Hotel and the Anaheim Hilton Hotel. But earlier this year, he and Tucon were named as defendants in a $3-million suit by Security Pacific National Bank over construction defects allegedly found in the downtown Los Angeles Beaudry Center I, which Deutsch completed in 1983.

In February, the City Council hired Wexco as a consultant because city staffers lacked the experience in dealing with such a large and complex building project. City officials initially agreed to pay Wexco $638,000 for a variety of construction review services, according to records. But after the audit was performed, a contract dispute arose between the two parties: When city officials apparently asked the firm to perform additional oversight, Wexco raised its price. City leaders balked and the matter remains unresolved.

Neither City Manager James Goins nor Community Redevelopment Agency Director Myrna DeJean returned calls seeking comment.

According to the audit, Wexco engineers studied the Tucon construction site and, using “scientific approaches through Critical Path Method Scheduling,” estimated that while the city had paid Tucon 66% of its construction money, the parking structure stood only 53% complete.

“This created a concern,” says the audit summary, “whereby the expenditure of funds exceeded physical work by 13%, or $1,372,380.” If the trend continued, the audit says, it could cost the city an additional $5 million.

“That’s not true,” said Tucon executive Dreicer. “The city would never release any money if it wasn’t coming to us.”

Tucon’s project design work, the audit continues, is being performed “on a fast-track basis, that is, design is being accomplished at the same time as construction is in progress. This situation, while it is workable, requires close coordination and control to assure that the intent of the design team is clearly communicated to the construction forces in the field.”

But Tucon’s design process left Wexco auditors citing “serious areas of concern.” Among them:

- “There was no formal set of specifications, relative to any portion of the project, in evidence during the course of Wexco’s review,” the summary says.

- “There were no formal, systematized records or logs to track submittals, reviews and approvals of the design drawings. . . . Certain construction activities were taking place without benefit of approved, signed drawings,” says the summary.

- Indeed, the summary continues, “There is also evidence to suggest that ongoing changes are being made in the design offices and in the field without the drawings being updated to reflect the changed conditions.”

- Some of those changes, the audit further states, were communicated orally, “without benefit of a clarifying document. The margins and opportunities for error in a verbal transmission raise major concerns relative to whether the work actually installed was what was intended.”

Auditors also questioned Tucon’s ability to objectively inspect the quality of its own construction.

“The complicated contractual alignment in effect on the (hotel and convention center) project,” says the Wexco summary, “raises a number of potential problem areas” that might confront Tucon with a conflict of interest.

For example, it may be difficult for the firm to monitor the work of its subcontractors, “since those subcontractors are also associated companies.”

And “the inspection function is being handled by a direct employee of (Tucon), thereby creating situations where objectivity must be questioned.”