Later this year, the first patients will begin moving into the new Walter Reed Army Medical Center, a mammoth, seven-story building that rises like the superstructure of a gleaming ship above the 69-year-old hospital it replaces at 16th Street and Alaska Avenue NW.
The hospital, which is as long as 1 1/2 football fields on each side and has room for 1,280 patient beds, was supposed to be completed more than two years ago and was to cost $100 million. But, like many government buildings jobs here, construction of the new hospital has involved lengthy delays, cost overruns and acrimonious disputes between the government and the contractor.
Blake Construction Co. of Washington, which was awarded the contract to build the hospital by the Army Corps of Engineers now claims the Corps owes it an additional $38 million for work not included in original plans.
The work was not included either because the corps changed the design of the hospital while it was being built or because the architect, as often happens, neglected to include essential elements of the building when drawing up the plans.
In theory, a contractor has no control over such additional work, known as change order requests. In practice, the question of whether the architect showed a particular item adequately in the plans is often a matter of judgement. Firms like Blake, which specialize in government work, make it a practice to hunt for areas that may be claimed as change orders, producing cost overruns.
Since change order requests are not put out for competitive bids, they can add substantially to a contractor's profits. In the case of the Walter Reed project, it is not clear how much of Blake's claim for change orders will be granted, since a number of requests are still to be negotiated.
However, it is clear that early in the Walter Reed project, Blake made itself $1.4 million by investing money the corps paid Blake for work already completed in the first two or three years of construction.
The government is supposed to pay contractors only for the value of work they have done each month, but the corps paid Blake $12 million more than it costs for the work it had done up to that point. Why the corps made these payments, which were 75 percent above Blake's costs up to that point, is not known.
Complaining of poor workmanship and other delays attributable to Blake, the corps has declared Blake's work on the project to date to be unsatisfactory. If the corps does not remove this "interim" rating by the time the building is completed, Blake will be barred from bidding on future corps jobs.
Government and industry experts say many of these elements typify the way firms like Blake do business with the government. If Blake stands out, these experts say, it is only because the company is more successful in dealing with the government that other construction contractors.
"Blake is a tough competitor in a tough game," said Walter A. Meisen, a former General Services Administration official who was in charge of another Blake project, the J. Edgar Hoover FBI Building. Because of change orders, the cost overrun on that building was $12 million on Blake's original $69 million contract.
"Blake tends to play the rules very precisely," Meisen said. "It tries not to do anything that is not called for. We (in government) ought to realize we wrote the rules and shouldn't get mad at Blake because it plays them very well.
For Morton, Stanley and Howard Bender, the brothers who own and run Blake Construction Co., playing rules precisely has paid off in bricks and mortar as well as in dollars.
Besides the imposing FBI building across from the Justice Department on Pennsylvania Avenue, Blake has built the James Forrestal Building on Independence Avenue near L'Enfant Plaza, the HEW South Portal Building on Independence Avenue near the Capitol, several National Institutes of Health buildings on NIH's Bethesda campus, and the red-brick U.S. Court of Claims and new Executive buildings on either side of Lafayette Square in front of the White House.
Blake's income from construction jobs last year totaled roughly $70 million, making it the Washington area's second-largest general contractor, after George Hyman Construction Co. Hyman, in Bethesda, does not specialize in government work as Blake does.
Blake was founded in 1945 by the Benders' father, Jack I. Bender, who began as a New Jersey painting contractor. When he died in 1966, his net worth was listed in the records of his estate as $4.4 million.
His sons began working for the family business in the early 1950s. Last year, the net worth of the two most visible brothers, Morton and Stanley Bender, stood at $24 million and $23 million, respectively, according to bank records and court testimony.
Part of that wealth comes from ownership of Blake, where Morton, 45, is president, and Stanley, 49, is treasurer, Howard Bender, who is executive vice president and generally has the same assets as his brothers, confines himself to supervising construction work.
The bulk of the brothers' wealth consists of business and real estate interests ranging from radio station W W DC-AM and FM to the Bender Building at 1120 Connecticut Ave. NW, where Blake has its offices.
Despite their impact on Washington through these interests and their contribution to the city's landscape, the Bender brothers, like many who have acquired great wealth, have never sought publicity, and they refused to be interviewed for these articles. Yet the story of how they make their money provides fascinating insight into the workings of a successful Washington business, the powerful figures who run it and the $6.8-billion-a-year federal construction program that is the source of most of the Benders' wealth.
To the uninitiated, making money in the construction business may appear to be a relatively simple matter of submitting winning bids and keeping costs low enough to insure a reasonable profit. In fact, construction is an extremely risky business that generates more than its share of bankruptcies.
When a contractor submits a bid, he guarantees he will complete the project described in the original plans at a stated price, regardness of subsequent cost increase due to the impact of inflation on labour and materials prices.
Other factors beyond a contractor's control-strikes, poor weather and material shortages-may delay the work and increase costs further. The contract terms require the builder to absorb these unforeseen increases.
Although the contractor assumes responsibility for constructing the building, nearly all the work is done by subcontractors hired by the general contractor. This incudes such areas of specialization as electrical wiring, plumbing and installation of heating and air conditioning systems. If a subcontractor does not perform his work properly, the general contractor will still be the primary object of attempts by the building's owner to recover damages.
As part of its agreement with the owner of the building, the contractor has the responsibility of supervising subcontractors' work to ensure it is done properly. For this reason and others, most private companies, when hiring a construction contractor, consider the firm's reputation as well as its bid price when choosing a firm. In government work, the lowest bidder generally must be awarded the contract.
In the case of the Walter Reed project, Blake won the award by bidding $110.8 million. The only other bids were $111.2 million from George Hyman Construction Co. and a partner and $111.7 million from J.W. Bateson Co. and a partner.
To qualify to submit a bid, contractors must have a construction bond, which is like an insurance policy guaranteeing that the work will be completed as specified.
Because of the size of the Walter Reed project, Blake's bonding company wanted a firm with more assets than Blake to stand behind the job.
So Blake joined with U.S. Industries Inc. as coventurers or partners on the project. This satisfied the bonding company by placing more assets behind the project, and U.S. Industries, in return, received a 1 percent fee and a subcontract to install air conditioning, plumbing and heating.
Before ground was broken, Blake and the Army Corps of Engineers agreed on a schedule that would permit Blake to be paid each month for the value of each component of the project, from the excavation work and foundations to interior painting.
Each month, Blake and the Corps agreed on the percentage of each component that was completed during the month and based payments on that.
Many contractors routinely try to claim that the value of early work performed is worth more than the components completed later, hoping to be paid more money earlier, according to several contractors interviewed. Most are successful, but the payment ot Blake of 75 percent more than its costs, revealed by audits by U.S. Industries of the joint venture, is unusual.
In a telephone interview, Della K. McKnew, Baltimore district councel of the Corps of Engineers, expressed disbelief that any contractor could obtain advance payments so far above its costs.
"If there was evidence of a discrepancy of that magnitude," she said, "I would turn it over to the Inspector General (of the Corps) or our auditors to see if there was criminal midconduct, and then turn it over to the Justice Department, if necessary," she added. "This would mean the government was damaged by the ($1.4 million) loss of interest."
Trouble started on the project in 1973 when an independent testing laboratory determined that concrete foundation pillars were not of the required strength. Corps memos show it ordered Blake to demolish 20 columns and replace them with concrete of adequate strength, at Blake's expense.
In 1974, U.S. Industries hired William R. Coryell, a former Corps official, to act as a consultant on the project. He reported coordinating subcontractors' work and that construction had been delayed because of the need to replace the faulty concrete.
Coryell termed "appealing" Blake's delay in ordering steel for the top floors of the building until construction was well under way. And he said the Corps had replaced the official in charge of the project because of a feeling by the Corps that Blake was "running over the (the official) and he was not tough enough to deal with Blake."
In 1976, the "interim unsatisfactory performance rating" wins issued.
In supporting that rating, the Corps told Blake it had identified "numerous construction activities which are not being pursued in a timely manner or with sufficient effort to insure completion (on time) of the project."
"Your failure to implement an effective quality control system has been the subject of much concern," the Corps said. "Your attention to safety requirements has been poor at best," the agency added.
Standing behind these comments was a one-inch-thick packet of letters sent to Blake by the Corps over the course of the contract to point out alleged deficiencies in the work, alleged deficiencies in the work.
They show complaints ranging from failure to cover insulated pipes with metal as required in the contract to an accident rate substantially higher than that at other Corps projects.
Although the hospital was supposed to be finished by january 1976, the Corps of Engineers says it is not yet done. Some of the delays have been caused by strikes, poor weather and additional work requested by the Corps. Other delays, according to the Corps, have been Blake's fault.
The cost of the project has escalated because of the cost of 665 change orders Blake has claimed are necessary to complete the building.
A contractor may claim a change order is needed either because the owner of a building has made a change in design or because the architect has omitted an item from the drawings. Most of the change orders pending at the Walter Reed project are inthe latter category. For example, the drawings did not specify that a fan should be connected to electricity service, and Blake was allowed a change order to cover the cost of making the connection.
For change orders, the government pays the contractor his estimated costs plus a markup for overhead and profit. It the work is done by a subcontractor, the general contractor still receives a percentage of the amount paid.
In a deposition filed in U.S. District Court in Washington, Limbach Co., a plumbing and heating subcontractor, admitted it marked up its change order prices by as much as four times over its estimated costs when working on Georgetown University's new Law Center for Blake.
A Limbach official justified the markup on grounds the firm was not making enough money on the project.
While contractor theoretically has no control over how many change orders are made on a particular project, many contractors like Blake that specialize in government work have the reputation of bidding low to obtain a contract and making more money by looking for as many change orders as possible.
"Contractors bid low and make their money on change orders all the time," said Arthur F. Sampson, who headed GSA when Blake built the FBI building, you always have gray areas. They'll deluge you with change orders."
He added, "Some contractors will just go ahead and get the job done (without charging extra). I always put tough guys on Blake jobs because Blake is tough."
Austin T. Fragomen, who formel headed BCC Mechanical, a Blake affiliate that installs heating, plumbing and air conditioning, said Blake looks for possible change orders before submitting a bid and takes them into account when determining its price.
"The Blake people are schooled to know the specifications inside and out and backwards and forwards, and the minute a customer deviates, they put through the change order," he said.
Fragomen said Blake is only engaging in a smart business practise permitted by the government. "On private work, you can't do that because you won't be hired back."
"Blake knows the next job will be based on the lowest bid," said Meisen the former GSA official. "It's the way firms that specialize in government woek are," he said.
NEXT: The Benders' other interest CAPTION: Picture 1, Blake Co. claims it is owed $38 million more on what was to have been a $11 million Army hospital, By Gerald Martineau - The Washington Post; Picture 2, The Bender Brothers, from left, are Morton, Stanley and Howard in a 1971 photo.; Picture 3, The James Forrestal Building on Independence Avenue was a Blake company project, By Ken Feil-The Washington Post; Picture 4, The J. Edgar Hoover FBI Building suffered a $12 million construction overrun, By Margaret Thomas - The Washington Post