MWBEs earn a significant place in St. Jude’s big construction projects – Memphis Business Journal
From the Memphis Business Journal
By Jason Bolton
Memphis Business Journal
Jonathan Logan makes a point of sitting in the front row at meetings of the Mid-South Minority Business Council Continuum.
A few years ago, the Mid-South Minority Business Council (MMBC) Continuum held a meeting for minority and women-owned business enterprises (MWBE) to be considered fora construction project on the campus of St. Jude Children’s Research Hospital.
Logan, president and CEO of Castle Black Construction, stood up and said his name and company, as did others in attendance. And, as fortune would have it, a few months prior to the meeting he’d made the modern equivalent of a cold call. He had sent off an email to John Curran – St. Jude’s director of design and construction -asking to be considered for the project as a general contractor.
Curran was at the fated MMBC meeting and recalled the email from Logan.
“We talked awhile, and John asked a lot of questions about who we were and what we do,” Logan said.
A few months passed, and then Logan received a cold call of his own – from Belz Construction Services LLC, with whom Castle Black hadn’t worked before.
Curran had recommended that Belz Construction reach out to Logan for a small piece of a construction project at St. Jude.
“We saw that as a chance for us to go in and show what we could do,” Logan said. “The space was only a 15-foot by 20-foot room. We went in, knocked it out, and did a fabulous job.
“And, ever since then, we’ve been working for St. Jude,” Logan continued.
Castle Black is one of 29 MWBE subcontractors, vendors, or suppliers that St. Jude’s general contractor, Flintco LLC, has awarded contracts to for work on the under-construction, $412 million Advanced Research Center (ARC). The research facility is rising by the day next to Danny Thomas Boulevard and is slated to open in 2021.
A quarter of the contracts awarded – $66.5 million of $268 million committed by Flintco to date – have gone to MWBE firms for jobs on the research facility.
That dollar amount represents one of the largest – if not the largest – MWBE construction spends by any privately funded construction project in the Memphis metro.
As of January 2020, minority-owned business enterprises (19 firms) have received $53 million in contracts, and women-owned business enterprises (10 firms) have received $13.5 million.
“I don’t know that there have been bigger numbers out there as far as the dollar amount [awarded to MWBEs on the ARC] and number of [MMBC] members that have participated on it,” Curran said.
And, St. Jude spending 25% of the contracts awarded with MWBEs isn’t tied to incentives.
For a sense of scale, Crosstown Concourse’s total MWBE spend was $43.7 million, and initial estimates for the Renasant Convention Center project show that nearly $50 million could go to MWBEs.
The ARC is one piece of St. Jude’s 10-year building plan that represents a total $1 billion capital infusion into the infrastructure of its campus. More building projects are on the horizon.
Curran said that one such project – still in the design phase – is a new outpatient facility that would include a clinical component and a doctor’s office component. That facility could be a boon for MWBE firms, because of its size: “at least the scale and dollar amount” as the Advanced Research Center.
The campus is also almost out of parking. Two parking garages are on deck, as well as a new office building planned to be built next to the ARC.
All of that construction adds up to fortune-altering contracts for firms, including MWBEs.
Curran expects St. Jude to make a similar commitment to hiring MWBEs for the many required trades and firms needed to complete those forthcoming projects.
“We have made a more than 20% [MWBE participation goal] on every [large scale] job we’ve done that I’ve been part of,” Curran said.
That commitment stretches back to 2004 if not earlier, via major St. Jude projects such as the Chili’s Care Center and the Kay Research and Care Center.
Creating a connection
The initial work on an MWBE inclusion strategy for the ARC revolved primarily around meetings with the MMBC Continuum. St. Jude and Flintco are both corporate members of the business advocacy group.
Once Flintco was officially awarded the ARC contract in April 2017, the general contractor and St. Jude held meetings with the MMBC Continuum. The organization’s staff then – over several months in the spring of 2018 – vetted its membership to find a core group of businesses that met all requirements to work on the project.
Of the MMBC’s 650 members, about 19% are in construction or related trades. In 2018, the organization reported nearly $300 million in contract awards across its membership, creating or retaining about 1,200 jobs.
Jozelle Luster Booker, president and CEO of MMBC Continuum, lauded the initiative St. Jude showed toward a diverse and inclusive workforce on the Advanced Research Center.
“There is no goal to satisfy a PILOT [payment-in-lieu-of-taxes] or any type of incentive commitment [other than] St. Jude’s desire that we maximize minority and women participation on this project,” Booker said.
And, that is a commitment shared by Flintco, as well.
“We wanted to maximize that [MWBE spend on the Advanced Research Center] to reach as many people and to generate as much revenue and dollars in the minority community as possible, so we gave it a lot of thought up front,” said Danny Moeschle, Flintco’s project director in Memphis.
Of the approximately 500 workers on the construction site in January 2020, about 100 work for MWBEs. In addition to the MMBC Continuum, Flintco connects with other organizations for MWBE work, such as the Memphis Area Minority Contractors Association.
Moeschle noted that some scopes of work might be beyond the capacity of an MWBE, either in experience, manpower, or both.
To be as inclusive as possible, Flintco looked at creative ways to break out a piece of the different major trade work, whether it be the mechanical or electrical portion of the project, for instance.
A-1 Electrical Contractors Inc. is one of the MWBEs that benefited from Flintco’s creativity when bidding out the project to subcontractors.
Curran said that there are only a couple local firms capable of handling an electrical contract of more than $30 million.
On the Advanced Research Center, a long-established firm on the local construction scene, Dennis Electric, received that contract, but two pieces went to minority owned firms, including a more than $3 million job to A-1 Electrical.
“[That] allows you to look at a little bit bigger piece of work, and [next time] you might not have to break it down as much for me,” A-1 Electrical’s president Willie Frazier said. “So, it is a stepping stone and an opportunity to grow my business.”
Frazier founded A-1 in 2009, and the firm got its start rewiring houses during the recession, primarily in North Memphis. A-1 Electrical has about 30 employees now, according to Memphis Business Journal research.
On the St. Jude project, Frazier started with four electricians and now has 10 on site. The firm is also currently doing work on Methodist University Hospital’s buildings being renovated after its new Shorb Tower opened.
That type of incremental growth is how Curran sees construction MWBEs finding more success, which is critical for projects that are on the drawing board for St. Jude and – potentially more crucially – for a building boom in Shelby County.
Building up capacity
The dollar amount and number of MWBEs utilized on projects such as the Advanced Research Center is important. But, gaining experience on large contracted work and having the ability to build on that is equally important.
Castle Black will have about 10 tradesmen installing a ceiling grid and tiles in a key research area of the new facility. That work should begin in March or April 2021.
Logan’s general contracting firm isn’t just doing ceiling work on the project, though.
Castle Black has two of its team members embedded with Flintco’s 22-person construction management group overseeing the project.
Embedding workers is a newer concept, but Flintco has used a similar mentorship strategy of marrying staff from smaller firms with larger ones on other projects.
One of Castle Black’s employees is serving as a document controller, helping to manage the construction document process, and the other is an assistant superintendent who is on the construction site itself.
“We strategically [set it up] so we have one office guy and one field guy from Castle Black,” Moeschle said. “When they’re done, they have the experience from both sides to go back to their company and be able to handle larger and more complex work.”
That experience is invaluable for those staff members but also to Castle Black as a company. Being a member of the construction management team provides a window into how such a large project is managed from start to finish.
“Flintco knows that we are a general contractor as well, and they know that [the two embedded Castle Black staffers] are there to gain knowledge and skills that they can bring back to us,” Logan said.
That construction management knowledge could lead to an opportunity down the line for Castle Black to manage a large project on its own.
“Being able to have that St. Jude name on our resume – people see that and say, ‘These guys have that experience, and this is somebody we can trust [on our project],”‘ Logan said.
Castle Black had the opportunity to bid on projects for Methodist Le Bonheur Healthcare because of the work they have done and will be doing for St. Jude, Logan said.
Another company with a key role in the ARC project is a local minority-owned firm, Carroll’s Roofing & Construction. The company, owned and operated by Derrick Carroll, was awarded the roofing contract for the Advanced Research Center. That job is now about 75% done.
Carroll’s Roofing was founded in 1999 and has about 35 workers on staff, with a dozen or so of those on the St. Jude job. His firm also did the roof on the Main to Main Multi modal Connector Project spanning the Mississippi River at the Harahan Bridge.
Curran said that he “sees no reason” why Carroll’s Roofing couldn’t be the biggest local commercial roofing company in a few years, given that the firm “does the job” and sells and installs Gen Flex Roofing Systems – one of the premier roofing products in the industry.
But, large project experience is, again, critical to taking that next step in the often close-knit construction realm.
“Getting the commitment from the contract community to give [Carroll’s Roofing] a chance is a hard one: Let’s say we’re going to give you this roofing business. And you’ve never done it before at this scale, and it’s the biggest research building being built in the country,” Curran said. “And people say, ‘Why are we going to do this?’ And I say, ‘Why aren’t we going to do this? Let’s put a team in place and rules in place where he can succeed.”‘
According to the Greater Memphis Chamber, $19 billion in construction projects in Shelby County were completed, began construction, or were planned over the past six years. The sheer volume of new building projects could create a shortage of firms and skilled labor to complete that level of construction, from contractors to electricians and roofers.
“[The MWBE spend] is working and the capacity that we need to get to $19 billion of construction is hundreds of millions of dollars a year of capacity from the minority business community,” Curran said. “And the need is getting bigger quickly.”
Minority businesses have the capacity to grow the fastest to meet the needs of local construction due to lower utilization in the past, Curran said.
“Can MWBE firms assume leadership positions in their fields? We think they can,” Curran said.
“We’re doing $700 million in two years here [at St. Jude]; FedEx is doing what they’re doing [with their $1.5 billion expansion]; and others are too,” Curran said. “So, this minority business community, in a one- or two-year period, is going to be doing
$100 to $200 million worth of work.
“Ten years ago, people would have thought that’s not possible,” Curran said.