Arbiter awards $3.5 million to ex-subcontractor
The Cayman Islands government will have to pay $3,483,751 in additional funds to a former subcontractor on its high schools construction project, following a final decision reached in binding arbitration between the Ministry of Education and the subcontractor.
The remaining $3.5 million due, as of the date of the 8 June award, is partly for works completed and other amounts owed to Caribbean Mechanical [High Schools] Ltd. on the Clifton Hunter High School on Frank Sound Road and partly for works completed and other amounts owed on the John Gray High School construction project in George Town.
The final decision was set out in an executive summary signed by Ben D. Nolan III of the Florida-based Berkeley Research Group.
Education Minister Rolston Anglin said government would abide by the final decision agreement: “This is a legally binding arbitration we both agreed to go into.” The Berkeley group determined that Caribbean Mechanical [High Schools] Ltd. was entitled to payments for three separate areas for the schools projects; actual costs plus a “reasonable profit”, reasonable profit and overhead costs on the “value of unexecuted work”, and other costs incurred from Caribbean Mechanical having its contract with the government terminated in October 2010.
“This calculation encompasses the actual costs incurred as of the date of termination, stored materials plus profit, overhead and profit on uncompleted works, and other direct costs,” the final decision read.
According to a statement released by the government in late October 2010, the Cayman Islands government and Caribbean Mechanical [High Schools] Ltd “mutually agreed” to terminate their interim relationship on the construction of the two public high schools.
The joint statement claimed this “interim relationship” was forged in the aftermath of the original project contractor, Tom Jones International, walking off the job sites in late December 2009.
The walk off by the Jones firm and the ensuing legal fight over payment for the projects led to significant delays for the new high schools’ scheduled opening dates. The Clifton Hunter school is set to open in September. An opening date for the new John Gray High School has not been fixed. After the Tom Jones departure, the Cayman Islands government assumed responsibility for Caribbean Mechanical’s contracts to ensure the continuation of certain work at the project sites, pending the appointment of a new construction management team.
Arbitrators calculated that Caribbean Mechanical was due 14.5 per cent profit, about $3.8 million in total for the “actual costs” of its work on both schools. A portion of those costs have already been paid, the Caymanian Compass has learned. A total of $5.5 million was due to Caribbean Mechanical at one point, but two separate payments of about $1 million each were made to the contractor last year, the newspaper has learned.
Additional amounts were awarded for overhead and unexecuted work on the two school projects. Total costs from termination of the contract were calculated to be $470,119 between October 2010 and May 2012, while legal fees and interest payments due came to more than $500,000 altogether.
The Berkeley group arbitrators also ruled that incorrectly executed work by Caribbean Mechanical had been done in the amount of $40,031 and had to be subtracted from the amount due the contractor by government.
The final decision reached on the claims between Caribbean Mechanical and the Ministry of Education do not address the legal dispute that remains between Tom Jones International and the Cayman Islands government.
That difficulty involved disputes over some 85 change orders in the project, which totalled more than $17 million, according to Tom Jones International. The Tom Jones contract was cancelled by government and the construction firm sued in late 2009.
Tom Jones International is seeking nearly $3 million from the government in its lawsuit for an amount the construction company said it was owed.