In dispute over stalled modular tower, Skanska warns: "No one knows if the building is going to leak"

Update: also see coverage of Skanska terminating contract to build B2 and purchase order for modules, as well as the Opportunity Brief Forest City presented to further the partnership.

The planned tallest tower in the world built via modular construction—stalled at ten (of 32) stories next to the Barclays Center—may be not just delayed but also defective.

The tower, known as B2 and slated to include 363 units, half of them affordable, could leak “at the thousands of joints between module façade elements,” according to the construction company mired in a bitter legal dispute over the project.

B2's facade seems insecure; it's not clear if this signals
 the potential misalignment identified by Skanska

"It is impossible to predict that the building when completed will perform as designed; and in particular, it is impossible to predict that the curtain wall joints will be and, over time, will remain effective barriers to the passage of air and water,” warned Skanska USA Building in a 146-page letter August 8 to estranged partner Forest City Ratner.

“[I]n simple terms, no one knows if the building is going to leak,” Co-Chief Operating Officer Richard Kennedy wrote (p. 117), terminating Skanska's agreement with a Forest City affiliate, Atlantic Yards B2 Owner, to build the tower and fabricate the 930 modules to be trucked to the site and assembled in Lego-like fashion.

Both sides blame each other for delays and attendant excess costs, and have filed dueling lawsuits, with Skanska seeking at least $50 million in damages.

Skanksa’s letter, which surfaced in a recent legal filing, offers new details regarding the tower’s purported failures and suggests that—as experts have long warned—the creation of a new construction system poses big challenges.

Beyond that, according to Skanska, the system Forest City developed to build modules at the Brooklyn Navy Yard was flawed from the start.

"There is risk in this Project substantially in excess of a conventional high-rise commercial building, and that risk arises directly from a defective design," wrote Kennedy, who also blamed Forest City for unwisely cutting corners in preparing the project.

(Note: Unlike with much of the coverage of the B2 legal dispute, this article was not driven by a press release from Forest City or Skanska. I found the document on my own.)

Forest City blames Skanska

Forest City, which in available legal filings has not yet directly responded to Skanska's warnings about leaks, has blamed the Skanska for numerous implementation errors and said the builder “belatedly—and falsely—claimed the modular design is defective.”

Having claimed to have “cracked the code” with a “revolutionary methodology” for modular construction, Forest City backs the system it developed to lower costs, speed construction, and potentially transform the building industry.

“We believe the system is compelling, and works," Forest City CEO MaryAnne Gilmartin said at a conference September 16, adding that the stall was not a "referendum" on modular, which would be validated by a finished building.

In an affidavit, Gilmartin blamed Skanska Modular for delays “in fitting out the Factory and its ineptitude in procuring essential building materials,” and for falsely blaming B2 Owner for the delays.

Clearly contradicting Skanska’s stance, Forest City in legal papers said that Skanska "confirmed in writing that there were no flaws in the design or constructability of the modular units” that would have caused a material increase in the cost of unit fabrication.

If Skanska's warning about leaks is valid, that suggests that the tower may require new testing before it can be deemed habitable and potentially repairs or even unbuilding.

Tangled ownership, effort to reopen factory

Atlantic Yards B2 owner is a partnership between Forest City and the majority owner, the Arizona State Retirement System. B2 was being built under a contract with Skanska USA. In turn, Skanska has subcontracted module production to a new company, FCS Modular, co-owned by Forest City and Skanska, but managed by the latter.

Skanska USA agreed to construct the Project for a fixed price of $116,875,078, and hired FCS Modular for a fixed-price of $31,450,087, with Skanska taking responsibility for all cost overruns.

Skanska says the the intellectual property (IP) contributed by Forest City was fundamentally flawed, thus obviating that responsibility.

Meanwhile, Greenland Forest City Partners, the new joint venture building the 15 additional towers in the project launched as Atlantic Yards, has renamed it Pacific Park Brooklyn. The 70% owner of the joint venture, which excludes B2 and the Barclays Center, is the Chinese government-owned Greenland Group.

On August 27, FCS Modular furloughed some 157 workers at the modular factory in an action Forest City said violated a contract requiring board assent. Forest City then asked to reopen the factory, under its control, with Gilmartin assailing “Skanska's indifference to the well-being of these workers and the project.”

"If they really did care about the workers, they would have engaged in dialogue with us and resolved the significant commercial and design issues facing the B2 Project," Skanska's Kennedy countered.

Hearing Tuesday; affidavits support Forest City

A hearing on a preliminary injunction in the lawsuit aimed to reopen the factory is scheduled for 9:30 am, Tuesday, Sept. 23 in state Supreme Court in Manhattan, before Justice Saliann Scarpulla. The location is IAS Part 39, Room 208, 60 Centre Street.

Numerous supporters of the Atlantic Yards project filed affidavits backing Forest City’s effort to reopen the factory, saying Skanska’s action threatened both affordable housing and jobs.

They include Gary LaBarbera, president of the Building and Construction Trades Council of Greater New York; Steven Spinola, president of the Real Estate Board of New York; the Rev. Herbert Daughtry of the Downtown Brooklyn Neighborhood Alliance; and Bertha Lewis, president of the Black Institute.

Skanska's opposition papers are due Monday afternoon.

Resolving blame, clouding re-opening of factory

If Skanska’s warning is valid, it clouds the potential reopening of modular factory, at which 60 percent of the building is supposed to be completed.

Forest City touted the plan as enabling greater more quality control, requiring fewer trucks and less waste, and saving money, thanks to increased construction speed and the use of cross-trained workers completing multiple tasks, at lower wages.

B2, which broke ground in December 2012, was originally said to take 20 months. The delivery date was extended to December 2014 and then the fourth quarter of 2015, well more than a 24-month schedule via conventional construction.

For now, there's no projected opening date, and Greenland has directed that the next few towers be built via conventional means, thus depriving Skanska of a previously presumed pipeline of additional work.

And though Empire State Development, the state agency overseeing/shepherding Atlantic Yards, presumably has an owner's rep keeping track of the project, no observation of problems and delays has publicly surfaced. The New York City Department of Buildings hasn't publicly weighed in. Nor has the Arizona State Retirement System commented.

Resolving the chicken-and-egg dispute—Skanska says Forest City’s design is flawed, while Forest City blames Skanska’s implementation—likely will rely on the Spearin Doctrine, which distinguishes between “performance” and “design” specifications.

While performance specifications give the contractor latitude to achieve the requested results, design specifications admit no such flexibility. Skanska says it was required to follow such design specs.

Forest City, however, says "nothing in the IP Transfer Agreement absolved FCS Modular’s responsibility to adapt, refine and supplement the IP to the extent necessary to timely fulfill its obligations.” Forest City also points out that B2 Owner, a limited liability company, is not a party to the IP Transfer Agreement, while Skanska is trying to assign blame to the larger but separate developer.

Questions over methods, “weather seal,” and flooring

Skanska says the system it was required to use was flawed from the outset. For example, Kennedy wrote that the steel frames used in the project “call for tighter-than-industry-standard tolerances in the fabrication shop and in the field erection,” so the exterior curtain wall panels will fit.

Such tolerance is crucial to achieve “an effective weather seal.” In a typical steel frame building, according to Skanska, adjustability would come from four sources, including the position of the steel framing, the adjustment of the facade, and the position of other structural facade supports.

Only the first source of adjustability is possible in this project at this time, with Skanska recommending that “FC's design team should develop additional sources of adjustability,” including the ability to adjust facade panels in the field.

Without such adjustability, “the building is expected to continue experiencing problems that will make it difficult or impossible to maintain the tolerance between façade panel gaskets that is required to support the warranty of these panels and their performance as a building envelope.”

It is “particularly troubling,” Kennedy wrote, that “the out of plumbness of assembled module columns”—the departure from perpendicularity—can “be cumulative.”

Large parts of the cost overruns, according to the letter, derive from the difficulty erection crews at the B2 site have had in “bringing the module columns as close to specified alignments as possible.”

The new production plan apparently provoked unintended consequences. The wood flooring supplier, Armstrong Flooring, told Roger Krulak—a Forest City employee placed at the factory—that factory installation would void the warranty, according to Skanska.

Forest City said it was a Skanska/FCS responsibility. Skanska called it a design error, referencing a Krulak email citing "a specification problem.” Forest City then said the email was taken out of context.

"There is no indication that FC has any intention of acting in good faith to resolve any of these Change Orders, Bulletins and issues," Kennedy, wrote, pointing to changes that led to increased costs but no payment. "They are simply acting in furtherance of the FC business ethic of denial, regardless of its contractual obligations and the legitimacy of the other party's rights."

Alleged additional flaws in match plates

Skanska also charges that match plates—3/8" thick plates which tie the modules together—were flawed. Though the drawings by Forest City consultant Arup called for a 1/4" tolerance between columns in the modules, the bolt holes in the original match plates allowed for only units to slide horizontally only 1/16”.

While Arup agreed on an enlarged match plate hole diameter, the holes were then reamed to 1 3/4", which, while adding flexibility to set individual units, also “created the potential” for misalignment, according to Skanska.

Skanska also blames Forest City for erroneously selecting Building 293 at the Brooklyn Navy Yard, saying it was not only not ready on time but also not effective for construction. (Forest City says Skanska was responsible for the factory.)

The lack of laydown space around the modules requires the operations team to move material multiple times, Skanska’s Kennedy wrote, suggesting that a truly "ideal factory" would be larger and allow for more concurrent work on modules.

Moreover, the space does not allow Group Technology Workcells (GTW) to work in a sequence that matches the position of modules at the construction site, which would make it easier to align facades.

Problems with workers, assembly process

While Forest City’s assembly methodology was used to produce modules for B2’s second and third floors, the time required—46 and 50 days, respectively, rather than the planned seven days each—spurred a change.

Skanska’s letter says “it was, and still is, completely unrealistic to expect the factory workers”—which it says were underpaid at a blended average of $36/hour—to “possess the skills necessary to perform all of the various tasks.”

Skanska said "there was a complete lack of reality to the ill- conceived seven (7) workday per floor duration. The fact that the workers were unskilled simply exacerbated the delay and damage."

After the slow production of modules for the second and third floor, FCS Moudlar abandoned the GTW methodology and had more skilled workers do “a narrow set of the more difficult tasks,” Kennedy wrote. That halved the delays for the next floor completed and further reduced delays for subsequent floors.

This learning curve trend will continue through the life of the B2 Project and would continue to B3 absent the improper repudiation of the LLC Agreement by FC," Kennedy wrote.

Skanska also says that more than 600 requests for information (RFIs) “were generated in the factory and field,” and unless such RFIs referred to existing drawings, the design was not complete, and therefore Forest City’s responsibility. Also, Forest City and its architect SHoP instituted design changes via several Bulletins.

Inadequate prototype alleged

Skanska even says that the prototype structure produced in the fall of 2012 was inadequate. Though “Arup and SHoP somehow declared the prototype and its erection sequence to be successful,” Kennedy wrote, the two 13th-floor units were bare steel, with no finishes, so they couldn’t be aligned appropriately.

Nor were two stories of stacked modules sufficient to simulate the cumulative effects of a potentially misaligned system.

In a report, SHoP observed that "Joints between the modules did not hold the 1" tolerance” but in some cases “approached nearly 2-1/4,” which Skanska says “should have raised a large red flag.”

“If FC [Forest City] had not been so profit- and schedule-driven at this stage of the Project, if it had been willing to step back and consider seriously the implications of its own prototyping information, the possibility existed for catching at the outset an important problem in its design,” Kennedy wrote.

Bitter disputes

According to Kennedy, the relationship quickly became adversarial: “As work began and problems were being encountered in the factory and on site, Skanska sought out the assistance of FC and its design team, with the expectation they would recognize that success in this Project depended upon joint efforts at every step. Consistently, however, Skanska's overtures were rebuffed.”

His letter even alleges that Krulak was a "spy" for Forest City “while pretending to work” for the modular joint venture.

By contrast, Forest City, in its lawsuit, charged Skanska with “gross incompetence,” thus causing the delays and cost overruns. “Skanska has stumbled through every step of the Project, and has repeatedly and routinely failed to meet any self-imposed or contractual deadlines, goals, or targets,” Forest City said.

“For example, Skanska employed three different project managers over the course of a fit-out process that was supposed to take approximately five months,” Forest City said.

Skanska Termination Letter, Atlantic Yards B2 project

Affidavits support FCRC in Atlantic Yards modular case

Atlantic Yards Modular Case, Hearing set by Judge