<Bz12.5>AN ONGOING legal dispute between Government and the construction company hired to build a public school is costing businesses hundreds of thousands of dollars,
Sub-contractors initially hired by Pro-Active Management Systems — the company that won the Government contract to build the new Berkeley Institute senior school in 2001 — allege they are still waiting to be paid for work they carried out on the scandal-ridden construction site nine months after it was completed.
The mammoth project was plagued by controversy after it was put out to tender by Government in November 2000.
Although identified as a high-risk bidder, Pro-Active Management Services eventually won the contract and promised to complete the school by September 2003 at a cost of around $70 million.
But in August 2004, after repeated delays and a spiralling budget, the company was sacked from the job and the Ministry of Works & Engineering took control of the project. The school was eventually completed last September at a cost of around $125 million — three years late and more than $50 million over budget.
A legal battle between Government and Pro-Active Management Services, which claims its contract was wrongfully terminated, is understood to be ongoing.
Proceedings — held behind closed doors at the request of Government — are understood to have wrapped up last autumn and a ruling was expected by the end of last year.
However, it is still not known if a ruling on the dispute has been made and as a result, sub-contractors have still not been paid.
And one sub-contractor argues that, because the Ministry of Works & Engineering took over the management of the site, Government should pay off any outstanding bills.
Building supplies company Conspec Ltd. pointed out that a performance bond was in place to guarantee payments to sub-contractors should Pro-Active be unable to pay its bills.
The performance bond — in effect a type of insurance policy for the project — covers Government for one-tenth of the value of the original $68 million contract. But it was the subject of controversy after it was revealed that the surety for the bond was Union Asset Holdings Ltd., an insurance company owned by the Bermuda Industrial Union and founded for the purpose of supplying the bond.
Pro-Active was reimbursed $700,000 by the Ministry of Works & Engineering to cover the cost of the bond, but when Auditor General Larry Dennis asked to see a receipt to prove that that was how the money was spent, the Ministry was unable to supply one.
In a recent letter to Works & Engineering Permanent Secretary Derrick Binns, Conspec owner Dennis Cherry wrote: “We are writing to you again with regards to long overdue payments that are outstanding from the new Berkeley Senior School.
“Conspec, as you are well aware, has been co-operative the whole way through this contract and we are being treated very badly here.
“The nominated contractor, Pro-Active Management, never paid us on time and in full. The payments were very often not even accompanied with a payment advice slip.
“Conspec, in spite of not being paid continued to supply products to this project ‘for the good of the project’. Any other contractor would have, and we believe did, withdraw their services until paid in full. We did not. We were assured that we would be looked after in the end and agreed to complete the supply for this project.
“When it was made very public that Pro-Active Management was in great financial troubles, this is when the Bermuda Industrial Union took over the running of the project, implanting their own managers within Pro-Active’s. We were not happy about this as our purchase orders were with Pro-Active, not the union.
“We had been in contact with Derrick Burgess and other members of their organisation with regards to payments. We were assured we would be paid.
“As you can see, we have $34,688.42 owed directly from non-payments from Pro Active. These claims were made before their termination and the amount is mounting due to interest charges.
In subsequent letters to the Ministry, Mr. Cherry said: “The owner (The Bermuda Government / The Ministry of Education / The Ministry of Works & Engineering) entered into this contract with Pro-Active management and then later with the Bermuda Industrial Union and has the protection of the AIA contract.
“This, along with the performance bond that was put in place, assured companies like COnspec Ltd. that payment will be made if Pro-Active/The Bermuda Industrial Union defaulted with non-payments.
“We would have perhaps not agreed to this if we thought that this was not the case. Can you please send us the details of this agreement and a copy of the performance bond by return?”
In reply, Government lawyer Paul Smith e-mailed Mr. Cherry saying: “It is unfortunate that Pro-Active has not paid Conspec the monies due to it. But the Government did not and will not guarantee the performance by Pro-Active of its obligations.”
Yesterday, Mr. Cherry said he had been repeatedly stonewalled by Government in his attempts to get paid.
“I have come to the point where the pressure I’m experiencing is huge. I’ve been told that if I speak out I’ll be blackballed but to be honest I don’t want to work for Government any more — they either scream at you or ignore you,” he said.
“The union got involved and in the end it really became a union job. When Pro-Active started getting into financial difficulties Derrick Burgess personally asked me if I would carry on with the job, even though I wasn’t getting paid. I agreed to do so for the good of the school and for the good of Bermuda but now I’m just being ignored.”
Mr. Cherry’s claims were backed up by other contractors who claim to be owed money — but cannot collect while the arbitration hearing drags on.
Gary Hines of Bermuda Air Conditioning said: “We did take out a writ against Pro-Active for $202,000 that they owe us and we were successful in that writ but it hasn’t been honoured.
“We’re hoping that we will get paid if there’s a settlement between Government and Pro-Active but if there isn’t I assume we’ll get nothing. The thing is we have no idea which way it’s going to go.
“I have no idea what the arbitration schedule is. In arbitration they don’t talk about anything — it’s a secret court.
Another company, SKB Coatings, is now taking legal action against Pro-Active, claiming the firm still owes them $60,000. Yesterday, SKB boss Ricky Sousa said he had still not heard any news about the outcome of the arbitration hearing.
Neither Dr. Binns nor Works & Engineering Minister Dennis Lister returned telephone calls and e-mail requests for interviews from the Mid-Ocean News by press time last night.
Businesses count the cost of Berkeley dispute
