Baybutt president says companys problems started last year
By Jacqueline Palochko
The Keene Sentinel | March 25,2013
KEENE, N.H. — The downfall of the Baybutt Construction Corp. — the now-closed lead contractor on several uncompleted Vermont projects including Brattleboro’s state office building and Rockingham’s public library — began last year and quickly snowballed, according to its owner.
Company President Frederick L. Baybutt told a bankruptcy court last week it took one project to set his family’s nearly 50-year-old company on a path of debt.
Recently, a number of the company’s subcontractors came forward saying they have not been paid for projects they worked on. Some have filed lawsuits.
Within months, Baybutt Construction lost four multimillion-dollar projects. And the company is broke, Baybutt said at a hearing on his personal bankruptcy filing last Thursday in a federal court in Manchester, N.H.
Its only assets are a handful of construction equipment, including forklifts, trucks and trailers, he said.
Baybutt told the court how his company continued to work while not being paid, how an insurance bond for a Vermont project was waived before the project started, and how he did everything he could to keep the family-run business afloat.
Several of his Vermont clients, however, tell different stories.
First sign of trouble
In 2010, Baybutt Construction was awarded the $13 million construction project for the new Brattleboro Food Co-op store and two floors of apartments on top for the Windham & Windsor Housing Trust.
And that’s when the problems started, Baybutt told the court.
Baybutt said food co-op officials refused to pay his company, which he attributes to financial difficulties the co-op was facing because the new store’s sales did not meet projections.
“This was a developer who backed out on us,” he said. “We were wronged. That project started the snowball.”
In response, co-op officials refute Baybutt’s claims, noting they secured all loans and grants through a public fundraising campaign before the building’s groundbreaking so they could pay bills as they were submitted.
“All completed requisitions were turned around in quick order, and the co-op has consistently fulfilled all of its obligations,” co-op spokeswoman Sabine Rhyne told the Brattleboro Reformer. “The final resolution of the project is now in the hands of the bond company.”
Co-op officials added that any trouble they had paying Baybutt was because the company wasn’t submitting all of its paperwork for subcontractors on time, said project manager Tom Appel, who has worked with Baybutt Construction on other projects over the years and was hired by the co-op.
“We were always waiting on Baybutt,” Appel said.
In January 2012, complaints about subcontractors not being paid first started surfacing, co-op General Manager Alex Gyori previously said. In all, between 25 and 30 subcontractors were making claims.
Originally, the co-op was supposed to open in November 2011, Gyori said, but construction was delayed by about seven months. After another delay, the store opened in June. But earlier this year, the co-op laid off 11 employees, and Gyori said the layoffs were due to additional expenses and lower-than-anticipated sales after the project was delayed.
Baybutt said, despite troubles receiving payments, the company continued with other projects to “soldier on.”
But the problems rippled.
After the food co-op, the company had contracts for a $2.6 million renovation project for the Vermont state office building in Brattleboro, a $2.9 million renovation project at the Rockingham Free Public Library in Bellows Falls, a $1.2 million project for a new Antrim, N.H., police station and an approximately $4 million project at the Nantucket Memorial Airport in Massachusetts.
All four were terminated in December and January, and three of the contracts ended because subcontractors weren’t paid. Antrim officials decided to end the contract before construction started because of the financial difficulties the company was facing.
When Rockingham officials terminated their contract with Baybutt, it was also on grounds that Baybutt did not secure a performance and payment bond on the project, even though the town paid $21,000 for the bond, they said.
The bond ensures subcontractors will be paid the money they’re due for their work.
But Baybutt said that before the project started, officials decided a bond could be waived to save money.
At the bankruptcy hearing, Baybutt said he is not sure why the company was given $21,000 for the bond since it was waived. Pressed by attorney Howard Myers, representing Bradford, Vt.-based ARC Mechanical — a contractor owed more than $190,000 for the library project — Baybutt said “there was some confusion.”
But Janice Mitchell-Love, the chairwoman of the library’s board of trustees, said that although she remembers talks about the company not getting a bond, the trustees wanted one, and they believed a bond was purchased.
When Myers asked Baybutt where the $21,000 went, Baybutt said he’d have to check records.
ARC Mechanical was not paid for work done in September, October and November 2012. Myers asked Baybutt if it was his decision, the project manager’s or the company’s accountants who decided to not pay subcontractors.
“It was a team effort,” Baybutt said.
Baybutt said the construction industry has been turned “upside down” since 2008.
The demand for construction services has been down and projects are extremely competitive, he said in court.
And Steven Horton, the project manager for Keene’s new fire station — another recent Baybutt effort — said construction companies only make a small profit after they pay for on-site work, such as rubbish removal, temporary power and project supervisors. Subcontractors are usually paid about 85 percent of the project, said Horton, who has decades of experience in the construction industry.
For companies trying to stay afloat in a tough economy, they usually get jobs by reputation or bidding lower than others, Horton said.
Baybutt was the lowest bidder on a few significant projects.
For the Brattleboro Food Co-op project, the company bid $9,195,725, more than $1 million less than the next company, according to information provided by Appel. The next-lowest bidder was MacMillin Co. of Keene, which bid $10,247,000. Bread Loaf, based in Middlebury, Vt., was next, with $10,268,000.
In the bids for the Rockingham library project, Baybutt listed its costs lower than other companies, which included MacMillin and Colchester, Vt.-based Engelberth Construction.
For example, the company said its general conditions costs — which includes rubbish removal, superintendent fees and more — would be between $97,281 and $145,292, while other companies ranged from $139,480 to $255,000. And the company agreed to provide pre-construction services — including attendance at design review meetings and suggestions for cost savings — for no cost.
The fact that Baybutt had the lowest cost was enough to sway Rockingham officials, said Municipal Manager Timothy Cullenen.
Nantucket airport Commissioner Chairman Daniel W. Drake said the company was awarded the project because it was the lowest bidder, as was also the case with the Antrim police station.
Baybutt said that by December, only one subcontractor was owed for the Nantucket project and would be paid through the bonding company. Baybutt said he believes Nantucket officials terminated the contract without grounds, and he is contemplating legal action.
A family firm rises
In 1964, Richard Baybutt, with 11 years of construction experience, left what would become a rival construction company and founded his own.
Baybutt was vice president at MacMillin, where he’d worked for four years, before leaving to start Baybutt Construction Corp., according to archives at New Hampshire’s Historical Society of Cheshire County.
By the late 1970s and early 1980s, the company became one of the top construction firms in the area, said Keene Mayor Kendall W. Lane, and was eventually passed down to Richard’s youngest son, Frederick Baybutt, although other family members remained involved.
Among the firm’s projects were renovations at the Historical Society of Cheshire County, at the Bellows Falls police and fire stations and at Keene State College.
In 1999, the company started one of its biggest projects, a roughly $19 million renovation and expansion project at Keene High School. The project was completed in 2004, said Business Administrator John R. Harper, and shortly after the company won the contract for the $6 million renovation project at the high school’s technical and career education center, known as Cheshire Career Center. There were no complaints on either project, Harper said.
Though MacMillin was later tapped to build the district’s new $36.7 million middle school on Maple Avenue, other Keene municipal projects came Baybutt’s way.
In 2010, when Keene officials were choosing a construction company to build a new fire station, they had the companies do presentations to an appointed board, rather than bid, said Fire Chief Gary P. Lamoureux.
The board took into consideration how long a company had been in existence, how many municipal buildings it had done in the area and its financial stability. The new facility, which opened in the fall 2012, cost $5.9 million.
Baybutt Construction stood out from the other companies for a few reasons, one being that it had just finished building the Portsmouth, N.H., Fire Station earlier that year, Lamoureux said. Portsmouth Fire Chief Christopher LeClaire said there were no problems with that project.
So far, about 40 subcontractors have made claims they have not been paid for work on the Keene station, according to the insurance company, Merchants Bonding Company of Iowa. Nearly half of them have been paid, according to the insurance company.
Right now, Baybutt Construction is broke, Baybutt said at his bankruptcy hearing.
Foreclosure proceedings against the family-run Granite Gorge Ski Area and the Baybutt headquarters on Avon Street in Keene were called off shortly before the properties were to be auctioned, with the debt holder only saying that the matter had been resolved.
The company has no value, except for some construction equipment, and those have liens, or attachments, against them from TD Bank. TD Bank has filed a lawsuit against the company, saying the company owes more than $1 million and its bank account is overdrawn by more than $300,000. Baybutt said Thursday the account is overdrawn because checks were made to subcontractors for the Nantucket project.
“We did everything we could do to keep the business going,” Baybutt said.
He said he even cashed in his own retirement fund to help with the company’s finances.
Baybutt said he has not received a paycheck from the construction company since Dec. 24, and has been only receiving a salary of $3,500 a month from the Granite Gorge Ski Area, where he is a partner in the business.
Many in the community who have done work with Baybutt Construction were disappointed to see what’s happened.
“I was saddened to hear about their difficulties,” Harper said. “They and MacMillin were always our local companies.”
With MacMillin Construction merging with the Vermont-based D.E.W. Construction Corp. last year, it’s a real issue that the city has lost these two companies, said Lane, who has known the Baybutt family for years.
Both used area subcontractors when doing work, Lane said. Now, that boon to the local economy is gone.
“Baybutt Construction will fondly be remembered for their work,” Lane said. The company also donated to a number of charitable groups and nonprofit organizations over the years.
When asked by attorneys at last week’s hearing if the company is finished, Baybutt said it was “sidelined” — existing but not doing business right now. When the Avon Street headquarters closed in late December, only a handful of employees were left with the company.
Baybutt said it’s been difficult to go through the losses of a second-generation family company.
“This was my life business.”