Pittsburgh Housing Authority turns to consultant, pays millions for outside expertise

The man who came to Pittsburgh City Council last month and secured $12 million to build homes in hardscrabble Larimer introduced himself as "Nathaniel Boe, Housing Authority of the City of Pittsburgh."

Mr. Boe, though, is not an authority employee, but one of eight vice presidents of Tampa-based CVR Associates Inc. Last year that firm billed the authority $1.25 million for its services.

Of that, Mr. Boe's charges totaled $404,000 -- more than double the $168,000 salary of authority executive director Caster Binion.

Mr. Boe and his firm are the behind-the-scenes masterminds of a public housing rebuilding boom that has touched Garfield, Brookline, the Hill District and other neighborhoods. They also epitomize the reliance, by an agency tasked with sheltering the poor, on richly paid consultants.

Coming Monday

Maintenance problems in the housing authority's communities.

Mr. Binion called Mr. Boe's bill "maybe the average when you bring consultants in," adding that CVR has "the know-how to work with developers and get projects done."

CVR's own invoices, though, suggest that its work has been a subject of recent interest from the U.S. Department of Housing and Urban Development's Office of the Inspector General. And the firm's 2009 hiring of an authority employee -- who now bills several times what she was paid as an employee -- raises the question of whether outsourcing much of the city's public housing modernization and development work has proved economical.

Several people who have dealt with the authority for years were surprised to learn about CVR's role and Mr. Boe's bill.

"That's a big number for a public agency to be paying someone," city Controller Michael Lamb said. "What's the expertise that he's bringing to the table that would cause you to pay that kind of a premium? And the truth is, I don't know that," because the authority has resisted his efforts to audit its contracts.

"I think it needs to be explained," said Valerie Lauw, the elected president of the tenant council at Northview Heights, the authority's largest community at about 500 families. They await renovation of a dilapidated playground and replacement of outmoded kitchens -- the kind of work that would be coordinated by CVR. (The Post-Gazette will explore the authority's struggle to maintain its aging buildings in an article on Monday.)

"If he's getting that kind of money," Ms. Lauw said, "we should see results."

Paying their way?

Mr. Boe argued that the authority is seeing results, thanks in part to his background.

A native of Liberia in West Africa, he got his law degree from University of Iowa and cut his teeth as an attorney with the city of Chicago and then its housing authority. In 1998, he joined CVR, three years after it was founded by fellow Chicago Housing Authority alum Ana Vargas.

Though CVR was young, it got the job of fixing the troubled Puerto Rico Housing Authority. After Mr. Boe finished reforming the island agency's procurement policies, Pittsburgh called.

In 2000, the Housing Authority of the City of Pittsburgh was struggling to spend capital funds properly. Costs on its construction contracts typically inflated by more than 20 percent due to change orders -- contractors' requests for more money to cover unforeseen problems. It faced criticisms from its HUD overseers. A consultant recommended that it consider outsourcing its development and modernization efforts.

The authority invited proposals from firms nationwide, interviewed two firms in early 2001, and settled on CVR.

The plan was "for CVR to come in and help the housing authority to achieve its goals" by retraining its in-house staff, said Mr. Binion, who joined the authority in 2006 as its operations director and got the top job nearly a year ago.

CVR impressed the authority enough that it opted not to rebuild its in-house staff. "The board decided that CVR would run the Modernization Department and the Development Department," Mr. Binion said.

Mr. Boe bought an inexpensive Lower Hill condominium in 2003 and said he spends most of his time in Pittsburgh, returning to Chicago for a few days each month.

In 2011, the authority paid CVR $1.17 million, including $395,000 for roughly 2,550 hours of Mr. Boe's time, at $155 an hour. Last year, according to CVR's invoices, Mr. Boe billed the authority for about 2,400 hours of work -- 48 hours a week, assuming two weeks of vacation. His hourly rate was increased mid-year to $187.

"If I had a chief development officer [on staff], that would probably run me maybe about $150,000 plus benefits," Mr. Binion said.

CVR's bills, he said, amount to just 1.7 percent of the authority's capital spending. Its total budget for operations and capital work this year is $155 million.

Mr. Boe said Pittsburgh is his only client, though Ms. Vargas and others at CVR sometimes ask for his advice on other authorities' challenges, and he does a small amount of outside legal work.

"If he finds time for other clients, he's Superman," Mr. Binion said.

Mr. Boe oversees three other CVR employees and two subcontractors and also manages six authority staff members paid separately by the agency. All of them work in Downtown office space rented by the authority.

"I had no idea [Mr. Boe] didn't work for the housing authority," said Miles Byrne, development director for Boston-based Beacon/Corcoran Jennison, which, since 1996, has converted the authority's troubled Allequippa Terrace in the Hill District into mixed-income Oak Hill. Mr. Byrne added that Mr. Boe seemed to be an independent voice in authority decision-making, arguing for quality mixed-income housing in the Hill District even when past leaders were inclined to pull the plug on parts of the Oak Hill plan.

In recent years, the CVR-led crew has handled the complete reconstruction of the 225-unit Garfield Commons and launched a redo of the Hill District's sprawling Addison Terrace. CVR is coordinating a raft of consultants who are trying to revamp public and private housing in Larimer.

Mr. Boe said the authority's average level of change orders on construction projects has been below 5 percent since CVR took over, versus 20 percent before. In a typical year when the authority is engaging in $50 million worth of capital investment, that translates into savings of around $3 million -- more than double CVR's bill.

"We have paid our own way," Mr. Boe said, "and we saved the housing authority millions of dollars."

Same person, triple cost

Mr. Binion's rationale for using consultants: "Sometimes bringing expertise in to assist you with these things will save time, money and energy, and bring innovation."

Terri Lee, though, is a CVR subcontractor who now costs the authority several times what she did four years ago, when she was an employee.

Ms. Lee was an authority property manager from 2007 to late 2009, earning around $45,000 a year, plus benefits worth more than one-third of that amount, according to Mr. Binion.

During 2009, CVR had a job opening for a project manager and advertised for applications. Mr. Boe said he decided "that Terri Lee would fit into the CVR model." Her employment with the authority ended in November 2009, and her involvement with CVR began within days.

Ms. Lee, who is African-American, became a CVR subcontractor, helping to satisfy an authority guideline that minority- and women-owned businesses should get a share of major contracts.

Last year, the authority paid CVR just more than $201,000 for Ms. Lee's work, according to CVR's bills. CVR billed the authority $87.50 an hour for her time through June and $112.75 an hour from July on.

As justification for the charges, Mr. Boe pointed to Ms. Lee's management of the reconstruction of Mazza Pavilion in Brookline, a 30-apartment senior citizen high-rise that was closed in 2008 due to mold contamination.

Mazza Pavilion cost the authority $7.2 million, including change orders that fell just shy of 10 percent of the final figure. That relatively high level of change orders came despite repeated fights with the job's construction contractor, Homestead-based Franjo Construction Corp.

In 2011, Franjo took the authority to arbitration, saying it needed more money to cover unforeseen problems with deteriorated wooden studs, damaged concrete floor slabs and a 17-day delay in structural steel work, among other problems.

Franjo wanted its pay to be increased by a total of $336,215, the authority said it was due $119,311, and arbitrators awarded the contractor a boost of $176,186.

In March, Franjo sued the authority, claiming that although Mazza Pavilion was finished in September 2011, the agency withheld $35,375 in payments. The authority put law firm Tucker Arensberg on the case and argued that Franjo didn't properly install the windows, but the arbitrator awarded the contractor $25,000.

The authority has appealed.

Frank Leonella, president of Franjo, said that because he had so much trouble getting paid, he won't put in bids on future authority projects.

"Terri Lee is a nice woman," Mr. Leonella said, but was "over her head. If I would debate her, she would push me to Nate Boe."

'Any little thing'

On Jan. 1, CVR billed the authority for three hours of work done in Chicago involving, among other things, "coordinating OIG audit related to Dev/Mod consulting contracts," according to the firm's bills. OIG is HUD's Office of the Inspector General, and dev/mod means development and modernization.

The next day CVR held a conference call with Mr. Binion and the authority's "executive team" and another "conference call with Terri on OIG audit involving her projects involved in litigation," according to its invoices. It decided to call in another consultant, attorney Michael Syme of the Downtown firm Cohen & Grigsby. (See accompanying story.)

Mr. Binion and Mr. Boe said they weren't sure what HUD's inspectors were looking for.

Mr. Binion said he thought the HUD inquiry was likely part of an audit of authorities nationally or regionally. Mr. Boe said it may have been part of a "desk audit" of authority paperwork, adding that he and his firm "haven't heard anything since that time" from HUD.

HUD's inspectors based in Philadelphia are scrutinizing public housing authorities' spending on legal services and lobbying, according to a Dec. 6, 2012, letter from a regional inspector to Mr. Binion which the authority provided to the Post-Gazette.

According to the letter, HUD asked the authority for data reflecting five years' worth of contracts, payments made pursuant to contracts, liability insurance premiums, legal settlements and employee severance payments. HUD also requested breakdowns of all payments to law firms, consultants and nonprofit organizations.

The inspectors also sought disclosures of lobbying activities and audit reports.

The HUD inspectors' website does not show any recent, completed audit related to Pittsburgh's authority. A spokeswoman for the inspectors said she could not comment on the existence of any investigation.

Mr. Boe said he was confident that any HUD review of CVR's work would come out fine. HUD scrutinized the authority's administration of $27 million in federal stimulus grants, he said, looking for "any little thing" and found no problems.

HUD, he added, is "very persistent. ... They don't want [the authority] to relapse to what it was prior."

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Rich Lord: rlord@post-gazette.com, 412-263-1542 or Twitter @richelord. First Published August 4, 2013 4:00 AM


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