The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar’s main contractor breached its construction contract through “often tardy” scheduling and a workforce that was inadequate to meet timelines for completing the project’s 50,000 square foot convention centre.

The Disputes Resolution Board, to which both parties took their dispute, said China Construction America’s decision to increase the convention centre workforce by 50 per cent in the week immediately prior to its hearing was effectively an admission that there was inadequate manpower.

But the Board, which largely found in favour of Baha Mar, also said there was “extensive evidence” that China Construction America (CCA) was “disrupted” by the late delivery of designs and more than 1,000 changes to the scope and nature of construction.

The August 13, 2014, ruling, which was last week filed with the Delaware Bankruptcy Court, also said there was insufficient evidence to make any findings about the quality of China Construction America’s workmanship quality and labour force.

The findings, signed by Board chairman, John Hinchey, provide a key insight into the row between Baha Mar and its contractor, and suggest that both sides have a case to answer.

The ruling indicates that while there is plenty of blame to go around, each has to assume some responsibility for the problems that have bedevilled the $3.5 billion mega resort’s construction. How to apportion the blame is another matter.

This much is clear from the content of the Board’s 30-page decision, which deals with Baha Mar’s complaint that China Construction America had failed to deliver ‘100 per cent access’ to the convention centre by March 31, 2014 - as per the construction contract.

This, in turn, was preventing Baha Mar from showing the convention centre to group business bookers, who typically select resorts and meeting space 12-18 months prior to the convention event.

The Board’s ruling recorded Thomas Dunlap, Baha Mar’s president, as disclosing that the convention centre remained incomplete as at July 16, 2014.

“Under typical industry practice, convention centre space is normally booked 12-18 months in advance,” the Board ruling recorded. “To date, Baha Mar has been unable to book or confirm any first quarter or second quarter 2015 business for the convention centre, or to allow travel industry professionals and even planners to tour the convention centre because it remains unfinished.

“Further, Baha Mar has been prejudiced by lost time and substantial damages resulting from its inability to make future conference reservations due to the inability of China Construction America to provide reliable scheduling information with accurate completion projections for the convention centre.”

Baha Mar produced evidence of China Construction America’s schedules and representations promising that the convention centre would be complete by March last year.

When the date did slip, the contractor promised Baha Mar it would complete “key areas” by the due date. Mr Dunlap alleged it was only six weeks before the due delivery date that China Construction America confessed that “no portion of the convention centre would be timely delivered”.

Baha Mar’s project controls director, Terry Pickerill, and its owner’s representative, both testified that the contractor had failed to meet its own projected staffing levels.

“For example, China Construction America had fallen short by 2,115 workers by March 31, 2014 and, as of March 2014, the cumulative deficit of workers per month was 18,029,” the Board’s ruling stated.

Baha Mar “repeatedly requested” that China Construction America increase manpower at weekly construction progress meetings, given that it was also in non-compliance with the two parties’ May 17, 2013, Memorandum of Understanding (MOU) on this issue.

“Mr Pickerill noted that even though China Construction America had already fallen behind its progress milestones, [it] continued to decrease the projected number of workers required,” the Board’s ruling said.

“The cumulative deficit of workers per month was 5,605 as of March 2014.” And Baha Mar’s count of construction workers on-site was always below that of China Construction America’s; usually 50 per cent below.

“Mr Pickerill added that in late 2013, China Construction America occasionally had only a handful of workers per day deployed to the convention centre but, since March of 2014, has typically had approximately 120 workers on site at the convention centre,” the Board said.

“Moreover, during the week prior to the Disputes Resolution Board proceeding, from on or about July 12 until approximately July 17, China Construction America moved workers from other areas of the project into the convention centre, thereby increasing the convention centre manpower by nearly 50 per cent.”

Baha Mar estimated this increased the convention centre workforce to 200, with China Construction America’s own projections placing it at 237.

Tiger Wu, China Construction America’s executive vice-president, responded by stating that the contractor had already completed $1.1 billion worth of work on Baha Mar, and was moving at a rate of $40 million per month.

“China Construction America also presented extensive evidence that Baha Mar has failed to deliver the design information in accordance” with schedule,” the Board’s ruling said.

“China Construction America further contended that even when design documents have been ‘issued for construction’, such documents were frequently fraught with defects that required lengthy correction by Baha Mar and its designers. Moreover, Baha Mar’s designers have issued massive and multiple changes to the design.”

Mr Wu alleged that Baha Mar issued an entirely new set of structural drawings within 30 days’ of the project’s start, and “the incomplete design of the structural steel and numerous changes plagued the project and have never fully been resolved”.

China Construction America also complained that there had been more than 1,000 construction changes requested, resulting from new hotel brands, design incompletion and design errors”.

Mr Wu complained that none of these gave China Construction America any compensation or extension of time, while 175 requests for information out of 4,393 were outstanding.

These often caused construction workers “to remain idle” while waiting for answers from Baha Mar and its designers.

In its ruling, the Disputes Resolution Board rejected Baha Mar’s request that it issue an order allowing it to deploy 100 of its own workers to the convention centre to supplement China Construction America’s own labour, ensuring the total workforce never dropped below 220.

“Suffice it to say that the Board can find no provision in the contract that would authorise Baha Mar to take such drastic action,” it ruled, “notwithstanding that China Construction America may be in breach of its contract by having failed to provide adequate labour forces”.

It added that Baha Mar’s labour force supplement proposal was both “unauthorised”, and “impractical and unworkable”.

However, the Board did find for Baha Mar on the construction schedules and manpower issues.

“It is evident to the Disputes Resolution Board that the actual construction schedules issued by China Construction America were often tardy, and have not consistently and accurately reflected the state of construction for the convention centre,” the ruling said.

“China Construction America cannot have it both ways; for example, by reciting certain actual or potential sources of delay in the monthly reports, and not accurately reflecting the cause, source and extent of those delays.”

The Board found that this placed the contractor in breach of contract, as did its failure “to proceed expeditiously with adequate forces sufficiently to comply with the contract”.

“By having increased manpower on the convention centre in the days leading up to and including the hearing, China Construction America has thereby indicated that the convention centre portion of the project requires at least that level of forces for the days that the Dispute Resolutions Board was in session,” the Board found.

It ordered China Construction America to maintain that level of manpower and resources at its own expense, in a bid to ensure “maximum progress” on the convention centre without harming the overall project.

However, while there was “extensive evidence” that China Construction America had been “delayed and disrupted” by the design and construction change orders, the Board said the contractor had yet to make a formal claim for increased compensation and an extension of time.