Sherwin-William HQ+R&D rises to $750 million

Downtown Cleveland skyline at night with Sherwin-Williams' new headquarters tower.

To the left of a holiday-themed Terminal Tower, the new Sherwin-Williams headquarters will rise to 39 stories, including rooftop mechanicals. At 616 feet, it will be the fourth-tallest tower in downtown Cleveland before the end of 2024. This rendering shows how the new skyscraper will look on some nights. On other nights it will have decorative lighting in its vertical crevasses and within its reverse-angled crown (Michael Collier/SHW). CLICK IMAGES TO ENLARGE THEM

Minority-, female-, locally-owned contractor compliance cited

Article updated Nov. 22, 2022 with Gilbane Building Co. responses.

Sherwin-Williams (SHW) has announced that construction costs for its new headquarters in downtown Cleveland plus its research and development facility in suburban Brecksville have increased from at least $600 million to $750 million. But the cause, according to the global coatings giant, isn’t entirely what’s affecting all other construction projects — inflation and interest rates. Instead, it cited compliance with state, county and municipal regulations in hiring minority- and female-owned subcontractors and suppliers, plus local small businesses. Those regulations were triggered because of public-sector resources SHW tapped for these projects.

For more than a year, SHW has been under pressure by minority groups, urging the Fortune 500 company to hire more firms owned by minorities, women and local residents to help build its new headquarters plus research and development facilities (HQ+R&D). The complainants argued that, since SHW is using upwards of $170 million in public-sector grants, loans and tax exemptions as part of its financing for these new facilities, it should comply with municipal regulations. SHW responded that it is doing that.

“As of October 2022, Sherwin-Williams updated its commitment to construction costs of $750 million to better reflect the updated design work related to the project,” SHW announced in its Nov. 16 Building Our Future e-mail newsletter. “Given increased construction and project costs, we are pleased to share that the supplier dollar commitment has increased from $180 million to $225 million. To date, Sherwin-Williams has contracted a total of $124 million of the diverse supplier spend and is fully committed to meeting or exceeding our revised level of $225 million.”

SHW also noted that the awarded contracts for minority-owned, female-owned and small business construction and non-construction subcontractors, suppliers and service providers increased to 59 firms. “Building Our Future” is the umbrella term SHW uses to describe all of its efforts in building its HQ+R&D facilities. More than 3,100 office and related jobs are expected to be retained in downtown Cleveland with another 140 added, plus 900 permanent jobs will be added in Brecksville. Thousands more jobs, albeit temporary, are being added to build the HQ+R&D structures.

Sherwin-Williams HQ R&D facilities supplier requirements

Sherwin-Williams’ Building Our Future (HQ+R&D) project spending on minority-, women- and locally owned business enterprises (The Sherwin-Williams Company).

“The actions and results from Sherwin-Williams deliberate approach to promoting economic equity on the Building Our Future project speaks volumes,” SHW continued in its recent newsletter. “Our thoughtful and consistent approach to providing opportunities for businesses owned by underrepresented groups to participate in this project has already and continues to deliver an extensive list of impressive accomplishments which we expect to grow.”

“The Sherwin-Williams Company has never stated that the increased cost was due to MBE/WBE/CSB compliance,” stated a Gilbane Building Co. spokesperson who declined to be named. “The cost estimate was increased to better reflect the updated design work related to the project. Given increased construction costs, Sherwin-Williams adjusted its supplier dollar commitment from $180 million to $225 million because those commitments are based on a percentage of construction costs.”

Construction on SHW’s 600,000-square-foot R&D facility began in October 2021 and is due to be completed by the end of 2024. It is located at Valor Acres, the redevelopment site of the former Veterans Administration Hospital which moved from Brecksville to Cleveland’s University Circle. Work on SHW’s new 616-foot-tall HQ tower and two-story pavilion, totaling 1.2 million square feet, began in November 2021 just west of downtown Cleveland’s Public Square but a formal groundbreaking ceremony wasn’t held until a month later. The HQ is also due to be completed by the end of 2024. A joint venture of Gilbane Building Co. and Welty Building Co. is the general contractor for both projects.

“We are proud that we have already awarded contracts totaling $124 million against a total commitment of $225 million to Minority Business Enterprises (MBE), Female Business Enterprises (FBE) and Cleveland Small Businesses (CSB),” SHW’s newsletter added. “We remain committed to helping uplift the entire Greater Cleveland community, including delivering on the supplier inclusion and diversity commitments asked of us by the state, county and city in our economic development packages.”

Cleveland’s requirements are perhaps the most demanding. Those bidding on City of Cleveland contracts or who desire to build projects in the city are required to comply with Chapter 187, the purpose of which is to ensure participation by CSBs, MBEs and FBEs. These businesses must be certified by the city’s Office of Equal Opportunity so that contractors may receive participation credits when hiring them as subcontractors.

Current construction status of new SHW HQ in downtown Cleveland.

As of Nov. 19, a brightly lit elevator/stairwell core for Sherwin-Williams’ new headquarters tower was rising up out of the ground near Public Square in downtown Cleveland. Soon, the construction crane will start lifting into place a labyrinth of steel girders around that core to a height of 616 feet (KJP).

However, construction industry sources say Welty and Gilbane did not adequately inform SHW about the hiring requirements and appear to be scapegoating the hiring regulations regarding MBE/FBE/CSB subcontractors. The sources note that SHW’s Building Our Future construction costs increased 25 percent. The Engineering News-Record, the bible of the construction industry, reports that its cost index for construction materials and labor in Greater Cleveland in 2022 increased 24 percent. Other sources have different numbers and these can change from week-to-week.

“Welty and Gilbane completely dropped the ball on MBE/FBE/CSB spend and had to jump through hoops to catch up,” said one source who asked to not be named publicly. “I’m sure this (cost citing) is posturing on their end.”

But Gilbane’s spokesperson defended its company’s performance in these compliance matters.

“Given this level of engagement with diverse firms, as well as the monthly newsletters and reports Sherwin-Williams has been providing regarding the engagement of diverse firms on the project, it is absurd and patently false to allege that Sherwin-Williams was not informed of the need to comply with these requirements,” the Gilbane company spokesperson responded.

NEOtrans reached out to Welty President/CEO Don Taylor, SHW’s Global Corporate Communications Vice President Julie Young and the City of Cleveland’s Director of Equal Opportunity Tyson Mitchell for comment. None responded prior to publication of this article. However Young was out of the office for an extended period, according to automated e-mail response.

Similarly, SHW was criticized last month by a design-review panel of the City Planning Commission for the design of landscaping/amenities for its new HQ. Specifically, some panel members said the gardens and surroundings for SHW’s new tower and pavilion on Public Square were excluding the public from lingering there. SHW opposed adding benches, horizontal wall surfaces or other features that were wide enough to encourage people from spending too much time on them in front of its headquarters. Panelists said that the ability for Clevelanders to enjoy public spaces was being harmed by SHW’s fear of attracting homeless people which is a fact of life in American cities. Despite their concerns, all but two panelists voted to approve the HQ designs.

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