The recent closure by a Southern California manufacturer of modular buildings has left several districts there stranded with half-completed school projects.
TurnKey Inc., a privately held company in Temecula, Calif., that built modular classrooms and other school facilities, filed for voluntary dissolution, in which directors and most stockholders agree to shut a company down.
It was the second modular-classroom manufacturer in Southern California to shut down in the past half-year. In August, Moreno Valley-based Aurora Modular filed for bankruptcy, also leaving behind several unfinished projects.
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The shutdowns come as the modular industry, by and large, is enjoying a robust period.
Worldwide, the construction and sale of modular, or factory-built, commercial facilities is a $5-billion-a-year industry, said Tom Hardiman, the executive director of the Modular Building Institute, based in Charlottesville, Va. School facilities—mostly in California and Florida—account for about $1.5 billion of that market, he said.
“The advantage we provide is not cost savings … but time,” said Mr. Hardiman. A factory-built facility can be finished in nearly half the time of a school built on site, he said.
Meanwhile, one of the districts most affected by TurnKey’s closure is the 140,000-student San Diego Unified School District, which had contracted with TurnKey to build dozens of classrooms at four schools at a total cost of $34.5 million. One project is nearly complete, and the district was about to begin construction on two others. One was at the beginning of the design phase.
The company’s shutdown in January will translate into delays in the opening of the schools, or portions of the schools, said Bob Kiesling, the district’s chief facilities executive. He said he expected the district to recover all of the money lost by the TurnKey’s closure through the insurance that the state requires on such projects.
“If a construction entity goes out of business, you’re out of luck, and you need to have safeguards in place to complete those programs,” said Tom Kube, the executive director of the Council of Educational Facility Planners International, based in Scottsdale, Ariz.
“It’s bad enough we have to house our kids in modular classrooms,” he said, “but it’s even more dreadful when a company like this goes out of business and leaves districts stranded.”
Several telephone calls and e-mails to two TurnKey officers seeking comment for this story were not returned. A hearing on the company’s dissolution in the Riverside County Superior Court was postponed from last month to early this month.
A June 2004 press release from the company said that TurnKey was founded in 1998 and had grown since 1999 from just 12 employees to 330.
Quick Expansion
That quick expansion could have led to the company’s demise, said three California architects and facility planners familiar with TurnKey, who asked not to be identified.
“They had a reputation for more marketing than substance,” said one architect. “They overexpanded and sold to the moon.”
The company advertised a design process that prevented mold and cut down on maintenance costs. As part of that process, prebuilt construction components would be shipped to a school site and then attached to a concrete foundation. The company said the process cut down on building time and cost about 20 percent less than traditional construction.
But one former employee interviewed for this story, who asked not to be identified, alleged that TurnKey preyed on small districts that were not well versed in construction practices. The company, according to the former employee, had lawyers who wrote stringent contracts that did not allow for any change orders in construction. The company had also offered some districts temporary financing until they could receive state money for their construction projects.
But, according to the former employee, if a district asked for a change or could not secure all the financing within the specified period, TurnKey voided the contract and demanded that the district pay all the costs.
According to news reports, some former TurnKey employees had asked state and federal officials to investigate the company’s labor practices and handling of retirement accounts.
Mr. Kiesling of San Diego said that district officials there had researched the company, including visiting its factory, to determine that TurnKey could handle the district’s volume of the work.
“They gave an excellent product—the school building that they were mostly done with is very good quality, and was a very good price,” Mr. Kiesling said.
