PW investigation: State recovery office awarded troubled construction company $80 million in homebuilding contracts while thousands of Hurricane Matthew survivors remained displaced

PW investigation: State recovery office awarded troubled construction company $80 million in homebuilding contracts while thousands of Hurricane Matthew survivors remained displaced

Rescue Construction Solutions is the general contractor to rebuild or renovate these homes as part of the state’s Hurricane Matthew disaster relief program. The houses remain unfinished. The state is paying for the homeowners to live elsewhere while construction is completed. (Photos: Lisa Sorg)

Rescue Construction Solutions blew past construction deadlines and amassed hundreds of homeowner complaints; some people died before they could move back into their houses.

This is the first story in a series on the state’s hurricane disaster relief programs.

Editor’s Note, May 16: The NC Office of Recovery and Resiliency is disputing that Rescue Construction Solutions received preferential treatment in the bidding and scoring processes. We are publishing their rebuttals and our responses in full, unedited. NCORR sent these rebuttals via email, which are public under state open records law. On May 17, we plan to post a snotes taken at NCORR meetings with general contractors that show how Rescue was treated more favorably than others.

Sam Cockrell removed from the front of his house in Lucama a plank of plywood that had been spray-painted in orange with the word: “Keep.”

He dismantled a second board. It read “Out.”

“I want to keep the front door,” Cockrell said, unlocking it, “as a memory.”

He opened the door into darkness. An invisible mist of mildew escaped as if the house had been holding its breath and then exhaled.

Since Hurricane Matthew devastated eastern North Carolina in October 2016, the state has received $236 million in federal disaster relief money to rebuild or renovate single-family homes that sustained major or severe damage, such as Cockrell’s. At least 1,780 houses belonged to low- and moderate-income households.

Yet five years after the state received its funding, only 717 houses have been finished and another 169 are in progress. Meanwhile, Cockrell and thousands of North Carolinians have been stranded in motels or with relatives, in dilapidated houses or in travel trailers for months, even years. Some people died before they could move back into their houses, state records show.

A Policy Watch investigation has found that over the past four years, the NC Office of Recovery and Resiliency (NCORR), which runs the state’s housing disaster relief program, has changed its own rules that rewarded one company – Rescue Construction Solutions of Raleigh – with contracts worth $80 million.

Hundreds of pages of state records show that even while Rescue blew past construction deadlines and amassed hundreds of homeowner complaints, NCORR gave the company more money, more responsibility — to the detriment of displaced Hurricane Matthew survivors.

Sam Cockrell measured height of the flood waters — about 7 inches — on the side of his house. (Photo: Lisa Sorg)

NCORR’s RebuildNC program is funded by taxpayer dollars through the U.S. Department of Housing and Urban Development. Ivan Duncan, NCORR’s chief program delivery officer, is responsible for overseeing all construction within RebuildNC.

Hundreds of pages of documents and interviews with more than 20 people show how Rescue received preferential treatment:

  • The company was awarded additional contracts, even as it got further behind schedule. Of the 529 homes Rescue won in the bidding process, only 134 are listed as complete, according to state records from April.
  • This year, NCORR retroactively altered 85 of Rescue’s original bids to allocate an additional $3.1 million to the company. Until 2021, NCORR’s own policy forbade retroactively changing bids despite rising construction costs.
  • Also in 2021, before NCORR awarded Rescue a $52 million contract to install modular homes, it changed performance requirements in a way that ended up favoring the company. Had NCORR not amended those requirements, Rescue would have been ineligible to bid, according to the office’s own policy.
  • Rescue also failed to disclose key information in its pre-qualification application that could have excluded it from the HUD program.

Rescue won a bid to be the contractor for Sam Cockrell’s new house, at an estimated cost of $188,000. The home has been in limbo for nearly a year. Cockrell has been living in a Comfort Suites in Wilson County since last June, returning home each day to feed his dogs. (Until the state moved him to the motel, he lived in his damaged house.)

Between Rescue’s backlog and his ongoing dispute with NCORR –  he asked that his new 1,000-square foot home be built 30 feet south, on higher ground, instead of elevating it – not so much as a shovel of dirt has been upturned.

“They keep doing the same thing over and over, and not getting anything done,” Cockrell said. “I was hoping to get in this year, but I wouldn’t bet no doggone money on it.”

Sam Cockrell took photos of Hurricane Matthew flooding on his property in Lucama. He lived in his damaged house for more than four years before the state moved him to a motel. He’s been at a Comfort Inn since last June. (Photo: Lisa Sorg)

Despite repeated failures, contractor benefited from altered rules, lax oversight

Barbara Pinion and her husband, who live in Bladen County, survived two catastrophic hurricanes, in 2016 and 2018. “It was horrific,” Pinion said. “First Matthew, and then Florence flooded us out again. We’ve been in hell.”

Rescue won a bid last September to tear down the Pinions’ home and build a new one. The couple signed the paperwork in December. Only last week was NCORR finally moving the Pinions, both in their mid-70s, out of their home. “Four years we have been living in a damaged house,” Pinion said. “There’s mold, mildew. We were doing the best we could.”

The Pinions are now looking for a rental with the $275 monthly stipend from the state. Their new home isn’t scheduled for completion until November.

HUD disaster relief funding targets low- to moderate-income households, like the Pinions, whose insurance doesn’t cover the repairs or who are too poor to hire contractors to rebuild or renovate their homes.

Initially, the state fumbled the disbursement of HUD money related to Hurricane Matthew. Neither the Commerce Department nor the Division of Emergency Management (DEM) – which ran the program for the first two years – had experience navigating federal relief bureaucracy. North Carolina soon ran afoul of HUD over improper contracting and slow spending of federal funds, according to a 2019 Program Evaluation Division report submitted to the legislature.

The legislature created NCORR in late 2018. Gov. Roy Cooper, with the support of then-DEM Director Mike Sprayberry, appointed Laura Hogshead as NCORR’s chief operating officer to get the state on track. Hogshead, also the director of NCORR, had worked as the chief operating officer at HUD.

She earns $139,996 a year, according to a state salary database.

Hogshead quickly hired Ivan Duncan. He had worked at the New York Governor’s Office of Storm Recovery overseeing buyouts and acquisitions related to Hurricane Sandy; he then switched to a position within program delivery – similar to the job he now holds at NCORR. He earns $134,611 annually.

“We recruited him to come and bring all of his [disaster relief] knowledge to North Carolina,” Hogshead told Policy Watch, “because the whole reason that the legislature had to set us – NCORR – up is that the state didn’t know how to spend this money.”

When Duncan arrived, Rescue and 11 other contractors had already been pre-qualified for the program by the Commerce Department and DEM the previous summer.

However, Rescue’s pre-qualification application, which Policy Watch reviewed, was incomplete. The application required potential contractors to list all civil litigation in which they were a defendant within the past three years. Company president Sheila Brewington signed the document June 22, 2018, but omitted the fact that at the time the company was embroiled in a civil lawsuit in Wake County Superior Court related to a residential roofing job. The litigation was later settled in mediation.

The application also asks whether the company had been involved in “any judgments, claims, arbitration, mediation or lawsuits within the last five years, whether resolved or still pending resolution.” Brewington responded “no.”

Brewington did not respond to written questions from Policy Watch. Michelle Rash, vice president of RLF Communications, which has expertise in crisis communications, responded on behalf of Rescue, but did not answer questions, either. Instead, Rash issued a statement: “Rescue Construction Solutions is proud of the work we have done to help many families impacted by Hurricane Matthew return to their homes. We have strived to comply with all government rules and regulations and believe all of our contracts were awarded consistent with bidding requirements and applicable law.”

The state reserved the right to conduct background checks on applicants, according to pre-qualification documents. It’s unclear whether that happened, and if so, what it revealed. NCORR referred questions to the agencies in charge at the time; Policy Watch has requested documents related to the background checks.

In the fall of 2019, state documents show Rescue won its first substantial NCORR bid, worth $4.6 million to rebuild 27 houses. In 2020, Rescue won two additional bids worth $5.3 million to rebuild or renovate 64 houses, according to state documents. The same year, Rescue was fired by a general contractor, Premier Design Build, over an alleged botched roofing job at Fort Bragg, interviews and court records show. (Premier withheld $100,000 in payment; Rescue sued, and the contractor was forced to pay.)

North Carolina law requires that contracts be awarded to the “lowest responsive, responsible” bidder. But Rescue routinely lowballed its bids to win, one company which also won contracts with the state, told Policy Watch.

“We didn’t see how Rescue could do the jobs for that price,” the contractor said.

Laura Hogshead, COO of NCORR (Photo: NCORR)

In many cases, Rescue couldn’t. State records show Duncan, with Hogshead’s approval, retroactively increased the company’s bid prices on 85 projects. As a result of these adjustments Rescue received an additional $3.1 million.

Hogshead acknowledged in an interview with Policy Watch that the pricing changes were made “fairly recently,” and attributed them to spikes in materials costs because of supply chain issues during the pandemic. “What we’re finding now is that even on the projects we bid out per federal procurement rules and awarded, the general contractors are not able to do the work with the price that we agreed to.”

Hogshead said three other contractors also received retroactive increases in March to cover the escalating cost of materials. Policy Watch has requested those bid documents.

In a followup email, Hogshead told Policy Watch that a price increase is “not meant to, nor does it benefit only some general contractors. The program institutes price increases when research justifies it.” Those adjustments must be approved by HUD.

(Photo: LinkedIn)

Yet several contractors told Policy Watch that they had asked Duncan for price increases to account for materials costs, as recently as last year.

“He flat out told us no,” one contractor said. “We don’t expect to get rich, but we do expect to be paid fairly.”

“He told us we just had to figure it out,” another contractor said, adding his company had lost upward of $50,000 on the program. The company has completed all of its projects except for one.

Policy Watch obtained contractor notes that were taken contemporaneously at weekly meetings. (There are no recordings because Duncan required contractors to turn off their phones and place them in a bucket. Hogshead confirmed this occurred because, she said, Duncan was concerned proprietary information could be discussed. Hogshead said she spoke with Duncan and that the practice won’t reoccur when in-person meetings resume.)

Last June, Duncan reportedly said “any changes that NCORR is looking to change will always be moving forward and not retroactive.”

The notes also corroborate other contractors’ claims that Duncan denied them retroactive increases. One company stated it “could not do it for the price they bid and wanted to give back the project since it had been on hold for so long.”

Duncan and NCORR general counsel Jonathan Doerr reportedly said pricing adjustments “could not be retroactive and could cause a bid protest or a finding/concern from HUD,” the notes read.

Hoghead acknowledged that NCORR had turned down these requests “for a long time.”

“For the first probably, year of the pandemic, we said, we have a contract and we need to execute it,” she said. “And the projects were not moving forward, because they literally could not afford the gas, the lumber or the windows, the doors. We held the line as long as we felt like we could, and now we just have to get these projects done. So we did a retroactive increase, but it did not just impact Rescue.”

Duncan has a connection at Rescue via Mike Carrington, a former project manager for DRG, a contractor in New York. DRG won millions of dollars in bids related to Hurricane Sandy from the Governor’s Storm Recovery Office. Some of those bids were awarded while Duncan was employed by that office. 

Carrington now works for Rescue. 

Hogshead told Policy Watch that when Carrington “wanted to relocate to North Carolina, he started working for Rescue. NCORR did not ask Rescue Construction to hire him and his employment with Rescue has no bearing on their contracting.”

NCORR could have rebid the projects to allow other contractors to do the work, but it did not.

“The other thing that we’re having a problem with is that those contractors aren’t bidding. So we have put out a number of bid packages that we’ve had to cancel because no one will bid on them,” Hogshead said. “Because, again, gas, supplies, traveling to the sites, a lot of our general contractors have just refused to bid.”

Costs aren’t the only reasons companies aren’t bidding, several contractors told Policy Watch. They said NCORR’s management of the program has driven them out of the state. Some lost between $500,000 and $750,000.

“We will never step foot in North Carolina again under the current circumstances,” one contractor said.

Rescue Construction is also responsible for renovating these homes. (Photo: Lisa Sorg)

Rule changes help Rescue win $52 million contracts for modular home program

Sheri and Bill Zerby moved out of their modular home in Craven County on Dec. 7, 2020, anticipating Rescue would soon rehab and elevate it. Months of waiting have turned into nearly a year and a half – time spent living in a 250-square-foot travel trailer in the parking lot of Vanceboro Christian Church.

“It’s been awful,” Sheri Zerby told Policy Watch last month. She fired off a list of incidents: Staircase railings were not installed to code. Air vents fell out. The couple once checked on their house and found the doors unlocked.

“We have called Raleigh [NCORR] and got nowhere. We can’t get up with anybody and the house just sits for weeks.”

The Zerbys’ home was scheduled to be finished on April 29. Policy Watch visited the property on April 28. It still lacked siding and wasn’t close to being complete.

The Zerby family is not responsible for the long delay. Hogshead said the home wasn’t finished because of an increased scope of work, including elevating the home another two feet, per a county requirement, as well as a county inspection delay.

While Rescue was lagging behind its fellow contractors on completing houses, NCORR awarded the company another contract, worth $52 million, for a modular home program.

Since winning the contract last August, Rescue has finished just three of the 226 modular homes, documents show. Nine more are in progress. At this rate, it will take another seven years to complete all of the modular homes.

Hogshead said supply chain issues have slowed Rescue’s construction pace for the modular program. It is true that because of the pandemic, factories haven’t met the demand for modulars. However, NCORR launched its modular program – in the middle of the pandemic – so people could return to their homes more quickly.

Rescue would’ve been temporarily ineligible to bid on future contracts, performance reviews show, had NCORR not changed the rules.

NCORR’s general contractor instruction manual dated May 6, 2021, shows that to be considered a “responsible” bidder a company must score at least an 80, based on several performance benchmarks. These include the pace of construction, number of incomplete and complete projects, inspections, and complaints.

  • On July 13, 2021, Rescue scored a 71.2. The company lost points for its number of open projects; at that time 92 homes were still under construction, and Rescue had received non-compliance notices on 27 of them, records show. The company also received deductions for overdue progress inspections, as well as the average number of days from a work order to a completed project.
  • On Aug. 12, NCORR issued a revised instruction manual, the eighth such version. The document noted that on June 3, the scorecard had been revised to lower the eligibility threshold to 75 points.
  • On Aug. 13, Rescue scored a 77.15.

Hogshead said scorecards are used to examine contractors’ ability to bid, but not for requests for proposals and not for modular homes.

A contractor’s construction history with NCORR is not considered for requests for proposals, she said, “but rather their ability to bring on subcontractors such as modular manufacturing facilities.” Three days later, bids for the modular home project closed.

Rescue soon won the entire 226-home package on Aug. 16, 2021.

The modular project in question required contractors to list any civil litigation within the past three years. Rescue’s lawsuit with the Raleigh homeowners was not settled until 2019, after it entered mediation. It is unclear if Rescue disclosed that litigation when it bid on the modular project; the state has yet to provide relevant records.

Hogshead said the previous threshold was even higher — 85 — but NCORR lowered it to enable more contractors to competitively bid.  “Scorecards are done in the best interest of the State,” Hogshead said.

Yet NCORR changed another aspect of the scorecard that would help Rescue in the future. The “capacity” section no longer evaluated a contractor for its number of projects, which could gauge whether the company is overcommitted.

Instead, contractors would only be penalized based on the projects that had not been started after a “Notice to Proceed,” or NTP, for short.

Once NCORR issues a Notice to Proceed, a contractor has 60 days to begin the job and 90 to 135, depending on project complexity – to finish it. A person with direct knowledge of the scoring system told Policy Watch that contractors can ask NCORR to delay the Notice to Proceed, essentially stopping the clock on a project. When the monthly scoring happens, it can appear that projects are on time, when they’re not.

Of the 226 modular projects awarded to Rescue, just 11 have an NTP.

Inexplicable delays

James Cade and his wife, Gloria, have been displaced from their home — under renovation by Rescue — for nearly a year. James said no workers have been to his house in three months. (Photo: Lisa Sorg)

On a recent spring day, James Cade visited his modest ranch home outside of Lumberton to cut the grass and to feed the feral cats that hang out on the patio. His wife, Gloria, would arrive that afternoon to plant flowers. 

The Cades have owned their home for 37 years, but for the past 11 months they have lived in a Fairfield Inn in Robeson County.  When Hurricane Matthew hit, a closet flooded, James Cade said, “but there wasn’t that much water.” However, inspectors came and found mold in the home, and told the Cades they would be eligible for the HUD rehabilitation program.

For two years, the Cades lived in their moldy house before they were approved for the program.

Rescue received a Notice to Proceed on March 23, 2021. With nearly all of their belongings in five PODS that had been set on the driveway, the Cades moved out on May 6 of that year, making way for work to begin.

But the company did not start until Oct. 22, state records show. Construction is scheduled to be completed on June 3. The house remains gutted, without walls or ceilings. The home must be rewired as well.

“They haven’t been back in three months,” Cade said. “I talked to a contractor friend of mine who said he could have done this in 45 days.”

There are several factors behind construction delays, both within and beyond Rescue’s – or any contractor’s – control. Sometimes liens or back taxes delay a project, or a homeowner can’t move out because of medical reasons. A wall might be demolished to reveal a termite infestation, prompting a change order. A new floor plan can enlarge the house, which might not fit on the lot.

In some cases, though, the delays are inexplicable.

After 13 months in an Extended Stay Hotel, Denisa Raye of Fayetteville is close – so close to moving into her home.

Fed by floodwaters from Hurricane Matthew, an underground spring beneath Raye’s house damaged its foundation. “My house split in the middle,” Raye said. “My bathroom wasn’t connected to my house.”

Nonetheless, FEMA determined her house didn’t lie within a flood zone. Raye’s homeowners’ insurance denied her claim. That’s when she turned to HUD and the state of North Carolina for help.

Meanwhile, Raye and her family remained in their dilapidated house for another three and half years. The baseboard heat no longer worked, so one winter’s night when the temperature dipped to 10 degrees, Raye said, “I was filling up pots of water and heating them on the stove to heat my house.”

They covered holes in the floor with plywood and dodged the sheetrock falling from the ceiling. “Our house was falling in around us,” she said.

Finally, Rescue received a Notice to Proceed on May 28, 2021. Her home was nearly finished by October.

“All I need is a ramp,” said Raye, who uses a walker to get around.

To build the ramp, Rescue has to install a single piece of sheet metal for the front porch, which the company has yet to obtain. “They knew I needed a ramp from the get-go. It’s frustrating. I’m not asking for a lot.”

Raye said she asked the state if she could hire someone to build the ramp, but was told no. The workmanship on the house comes with a 10-year warranty, which could be invalidated if the construction is done by someone outside the program.

Rescue or its subcontractors also dismantled gates at the entrance to Raye’s driveway and another behind her home, then threw them away. “They don’t want to put the gates back,” she said.

(It’s unclear who took down the gates, but the state requires general contractors to be responsible for the workmanship and conduct of its subcontractors.)

The backyard gate separates her home from a railroad track and a creek. Raye’s granddaughter loves animals, often chasing them through the back yard. “I’ve got to have those gates,” Raye said. “When she goes outside to play she has to have boundaries.

Raye said she has no idea when she’ll move back home. “If I had it to do all over again, I’d rather have taken out a mortgage,” she said. 

 

Failed oversight

NCORR is responsible for overseeing the Hurricane Matthew disaster relief program, but other entities are accountable as well. The Joint Legislative Commission on Governmental Operations established a subcommittee on Hurricane Matthew recovery, but it has not addressed homeowner issues. There are no meeting minutes for the commission on the legislature’s website.

The last time the Joint Legislative Emergency Management Oversight Committee discussed state flood recovery and mitigation was in March 2021.

Republican lawmakers, who hold the majority, disbanded the nonpartisan Program Evaluation Division, the legislative watchdog that had issued a 2019 report critical of delays and unnecessary spending related to the storm. (The Department of Commerce and the Division of Emergency Management were responsible for these missteps.)

Last month, State Auditor Beth Wood issued a report critical of the state’s oversight of Hurricane Florence funds. Wood’s office has not issued a similar report for Hurricane Matthew. However, last December she likened the response to the pandemic to that of recent hurricanes, where there is a rush to get money out the door, but questions arise soon thereafter as to how the money was spent.

“It’s been the history of North Carolina, we have a hurricane, we get the money out the door so people can get into a home, get a hotel, have food, whatever, whatever and that’s critical,” she told the Government Operations Commission. “But when we stand that up, we need to stand up beside it, some form of accountability, and watching over and setting metrics as quickly possible.”

Herman Jones is waiting for that accountability. The renovations on his home in Craven County remain unfinished for more than a year. He and his wife are living with their son.

Hogshead attributed the delays on Jones’s home to county officials, wait times for permits and inspections, as well as multiple renditions of foundation drawings.

“They’re giving me the runaround,” Jones told Policy Watch.

His wife uses a wheelchair, so the home needed an outside ramp because the home is also elevated. Jones said a crew built a ramp, only to tear it down because it turned out to be too steep. Inside, the backdoor sticks. The kitchen floors tilt. Wall paint has bled onto the ceiling.

Jones said he entered the home one day to find a man painting the walls, illuminated only by a headlamp. Otherwise, the room was dark.

Outside, air vents have been installed upside down in the foundation, and the siding appears to have been applied unevenly.

And then there’s the central air conditioning unit. Jones bought it two years ago; it sits in the backyard, out of the way of construction. “I told them not to touch it, that it was new,” Jones said. “I came to check on the house and the unit was on a trailer and they were getting ready to haul it away.”

Jones, 77, has lived in the house, which was built by his father, for 45 years. “A guy told me last year I’d have Christmas in this house,” Jones said. “I don’t know if I’ll live long enough to move back.”

This story has been corrected to show the date of the last  Joint Legislative Emergency Management meeting about hurricane recovery was March 2021. The original story said it was January 2017. The story has also been clarified to underscore that the modular program does not require a scorecard.


How we got the story

This investigation is based on public documents: bidding and financial spreadsheets, construction progress filings, contractor performance scorecards, complaint files, court records. We consulted reports and policy manuals issued by the NC Office of Recovery and Resiliency and the US Department of Housing and Urban Development, as well as legislative documents.

Policy Watch requested an interview with Ivan Duncan, chief program delivery officer at NCORR; the office made Laura Hogshead, chief operating officer of NCORR and Duncan’s boss, available instead.

We interviewed multiple contractors and people who work in the construction industry, including several former employees of Rescue Construction Solutions. Construction professionals and former Rescue employees asked not to be named in this story for fear they would be blacklisted from future state contracts.

Rescue Construction Solutions recently retained RLF Communications, a public relations firm with expertise in crisis communications, to respond to this story.

Policy Watch interviewed eight homeowners and visited dozens of homes, some complete, others in progress, and still others that have not been started.