The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Contractors and suppliers working on the $3.5 billion Baha Mar project were “lulled into accepting abnormal payment practices”, an international construction company head saying: “I’ve never seen anything like it.”

Mark Loizeaux, head of US-based Controlled Demolition Inc, which is suing China Construction American (Bahamas) for an alleged $754,704 outstanding balance on its contract, told Tribune Business that Bahamian and international contractors were frequently forced to finance Baha Mar’s construction from their own pockets.

This was because payment timelines and schedules were frequently missed, with contractors frequently encouraged to stay on - rather than quit as is the industry norm - based on assurances that funds would ultimately be forthcoming.

As a result, the Controlled Demolition Inc head accused CCA (Bahamas) of “contracting in bad faith”, as it continued to hire other contractors despite alleging itself that payment problems with Baha Mar were forcing it to ‘carry’ the project.

Mr Loizeaux told Tribune Business it was unclear whether the problems were caused by Baha Mar, CCA (Bahamas) or a combination of both, but said the issues encountered had given him “pause” over whether to continue a 36-year working relationship with construction in this nation.

And he warned that the problems with Baha Mar’s construction could have “a dampening effect” on foreign direct investment (FDI) coming into the Bahamas, and the willingness of international contractors to work here, unless the Government dealt with the situation.

“It appears to me that either Baha Mar or CCA or both lulled local contractors and vendors into expecting aberrant, not normal, payment practices,” Mr Loizeaux told Tribune Business.

“I’ve worked around the world, and I’ve never seen anything like it. It appears they lulled the vendors and contractors into expecting abnormal payment practices.”

Mr Loizeaux, who conceded he had to guarded in what he said, given that his company was now embroiled in litigation against CCA (Bahamas), disclosed that he first worked in this nation when employed by Cavalier Construction in 1979.

He was tasked then with demolishing the old Emerald Beach Hotel on Cable Beach to make way for the Wyndham, before returning to the Bahamas to work with George Mosko in tearing down the former Montagu Beach Hotel.

Mr Loizeaux was then called upon by Sol and the late Butch Kerzner, and Kerzner International, in 1998 to demolish the old Holiday Inn property at Pirate’s Cove - a work history that has given him plenty of experience in contracting methods and practices in the Bahamas, both as a contractor and sub-contractor.

The Controlled Demolition chief recalled staying at hotels while awaiting due payment on the Baha Mar project, amid assurances that the promised funds would materialise.

“Most of the time, when someone doesn’t sign or pay something, you quit,” Mr Loizeaux said of standard global construction industry practices.

Yet Bahamian and international contractors, and sub-contractors, kept on working based on assurances they would be compensated despite missed payment deadlines, effectively carrying the $3.5 billion project from their own finances until that time.

Mr Loizeaux added that it was “ironic” that CCA (Bahamas) kept working even though it complained it was not being paid itself by Baha Mar - an issue that was central to its evidence in the recent Chapter 11 bankruptcy case.

“I find it ironic that CCA was demanding that we and our subs [contractors] kept working when they had the same complaints that they were not being paid for work,” Mr Loizeaux told Tribune Business.

“My perspective is that if they were being treated in the same way, CCA was contracting in bad faith as well.”

CCA (Bahamas) previously alleged that Baha Mar never properly compensated it for more than 1,000 changes to the scope of works and nature of construction it was asked to perform.

Jun Li, a CCA (Bahamas) vice-president, alleged in a July 16 affidavit that Baha Mar had ““rejected out of hand” almost 50 certified requests for time extensions from the contractor.

The extension requests, Mr Li said, stemmed from changes to the construction design or scope of works that Baha Mar wanted CCA (Bahamas) to make.

Yet he claimed that Baha Mar “has never agreed to a single extension of time” or request for extra payment to accommodate the extra work.

“As a result of design-related issues, thousands of Constructive Change Directives (CCDs) were issued by Baha Mar directing CCA Bahamas to perform the work differently than already designed,” Mr Li had alleged.

“In violation of the terms of the contract, the CCDs did not contain an estimate of the cost and time associated with the change or any method for payment - meaning that CCA Bahamas or a Work Package Contractor would improperly be forced to fund the changed work until Baha Mar agreed to a Change Order.”

Mr Loizeaux, meanwhile, said his experiences at the Baha Mar project site would give him second thoughts about taking on further work in the Bahamas - not to mention the impact it would have on potential FDI investors.

“After my prior positive experiences working in the Bahamas, it’s a shame that practices such as this on the Baha Mar/CCA contract will have a dampening effect on investment by others,” he told Tribune Business.

“Why would I want to go back and work in the Bahamas when this happens? Is the Bahamian Government going to prevent this happening?

“It’s just very disappointing because my previous contractual relationships there in New Providence have been very professional,” Mr Loizeaux added. “This has not been.

“Don’t you think it would give me pause? It gives me pause about working there again, if you’re not dealt with by the rules, and if you’re not dealt with in good faith. When people work hard, they should be paid for their work.”

Mr Loizeaux emphasised that he had “nothing bad to say about the rest of the folks” he has dealt with in the Bahamas.

He added that a significant portion of the $754,704 he is suing CCA (Bahamas) for relates to the original ‘scope of works’, not the expanded package, for the demolition of the former Nassau Beach Hotel and ‘J’ and ‘K’ towers at the Wyndham.

CCA (Bahamas) now has 20 days to respond to his and Controlled Demolition Inc’s lawsuit, and Mr Loizeaux said: “I’m almost 70 and I haven’t got this far to be discouraged this way. Let’s hope cooler heads prevail and people do what is right.”

An e-mail sent to CCA (Bahamas) local PR agency, The Counsellors, seeking comment was not returned before press time.