• CCA accused of ‘hiding construction defects’

• Fell up to 1,446 rooms behind on handover

• But architect woes gave CCA ‘ammunition’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A senior executive with Baha Mar’s main contractor urged employees to better conceal “fake” construction work amid assertions that it failed to “properly perform” its duties to the project and its original developer.

Steven Collins, a senior managing director in Ankura Consulting Group’s construction disputes and advisory practice, in an August 1, 2022, report cited numerous documents and e-mail communications as evidence that China Construction America (CCA) “violated basic generally-accepted industry practices that one would expect for a construction manager”.

The report, commissioned by Baha Mar’s first developer, Sarkis Izmirlian, to buttress his $2.25bn fraud and breach of contract claim against the Chinese state-owned contractor, cited an e-mail sent by a senior CCA executive demanding that workers do better on concealing construction deficiencies on the then-$3.4bn project.

“I have seen examples of CCA intentionally concealing its construction deficiencies from Baha Mar,” Mr Collins wrote. “On October 8, 2014, a rough translation of an e-mail inadvertently sent to Baha Mar showed CCA’s David Zou chiding CCA employees: ‘How could you fake the material in broad daylight?... If you really want to do it, you have to be careful’.”

That e-mail, incorrectly sent to Patrick Murray, project manager with MACE Group, Mr Izmirlian’s representatives, provides fresh insight into the brewing dispute with CCA that increasingly plagued efforts to complete Baha Mar’s construction and ultimately led to the missed March 27, 2015, opening deadline that sent the project on the road to its Chapter 11 bankruptcy filing.

“CCA failed to turn over guest rooms within each hotel tower and areas within the podium to Baha Mar in a timely manner. Spaces turned over by CCA were also incomplete and/or not constructed in accordance with the contract documents or including the required finish standards for a high-end luxury hotel and casino,” Mr Collins alleged.

Referring to the e-mail from Mr Zou, he added: “Internal CCA e-mail correspondence that appears to have been inadvertently sent to Baha Mar indicates that CCA management staff were aware of quality issues and, rather than address them, instructed its workers to do a better job of concealing them from Baha Mar. Testimony from Patrick Murray provides additional context to this e-mail as follows.”

The report then quoted Mr Murray, who asserted: “There was no pretense that what was being installed was in any way a mistake. That was being acknowledged by one of CCA’s senior fit-out guys that what non-conforming work could be progressed without sancture [sic], without any concern as long as they didn’t get caught. As long as it wasn’t obvious and wouldn’t be detected.”

Detailing the difference between the planned and actual number of hotel rooms to be turned over by CCA to Mr Izmirlian’s team, as per the construction schedule as the race to complete Baha Mar intensified in late 2014, Mr Collins wrote: “CCA was approximately 487, 1,446 and 789 rooms behind the planned quantities of rooms to be turned over to Baha Mar through the months of November 2014, December 2014 and January 2015, respectively.

“CCA’s failure to turn over rooms to Baha Mar in a timely manner was one of the primary factors for reductions to the amount of scope to be included in TCO One (the first temporary occupancy certificate that had to be obtained from the Ministry of Works) from what was originally required in the November 2014 agreement.

“Many of the rooms that were turned over by CCA between December 2014 and March 2015 were incomplete and/or had unresolved quality issues, which exceeded the minor corrections that are typically captured in a punch-list. In other words, these rooms were not progressed enough to be considered substantially complete as defined by the contract documents or general accepted industry practices, preventing Baha Mar from performing its follow-on inspections as intended and impacting installation of furniture, fixtures and equipment.”

However, CCA is countering by attributing the project’s delayed completion to “mismanagement” by Mr Izmirlian and his team coupled with factors beyond its control. The Chinese state-owned contractor, in its own New York Supreme Court filings and counter-claim, is alleging: “One of the biggest challenges throughout the life of the project involved the late issuance of design drawings by Baha Mar and its architects and consultants.

“For CCA Bahamas to begin construction on any particular building or area of the project, design drawings for that particular building or area had to be first issued by Baha Mar. But the issuance of drawings by Baha Mar was often incomplete and late, and in 2012 Baha Mar fired the project’s architect concluding it was failing to perform its ‘financial and operational obligations’.”

CCA produced a June 20, 2012, letter from Tom Dunlap, then-Baha Mar’s executive vice-president of construction and development, requesting permission from the project’s financier, the China Export-Import Bank, to replace RMJM Inc with AECOM Technology Corporation as the project’s architect. He wrote that RMJM’s “apparent financial and operational struggles” at its New York office presented an “unnecessary risk” for Baha Mar’s progress.

While CCA and the developer subsequently entered into an April 2013 Memorandum of Understanding (MoU), which committed Baha Mar to issue design drawings by particular dates, AECOM was apparently not much better. “Only months later, in July 2013, Baha Mar wrote that its new project architect was ‘not meeting’ the deliverables in the MoU and ‘all dates have been missed’,” the contractor alleged.

It produced a draft letter alleging that all the dates for delivering key architectural drawings had been missed, and which said: “Following the above evidence provided relative to AECOM’s performance on delivering the envelope scope of works, it has become apparent that it has taken AECOM four drawing revisions and 17 months from appointment to produce drawings that are fit for purpose.

“The consequences of the above actions have provided CCA with the required ammunition to make a substantial delay claim relative to the envelope works design deliverables, which has yet to be expressed. We also record that the impact of AECOM failing to deliver adequate drawings in accordance with the agreed dates has caused CCA and their contractor’s additional work having to interpret information contained on numerous conflicting documents.”

CCA added: “Throughout the project CCA Bahamas regularly informed Baha Mar that these design problems were causing delays to construction and threatened the December 31, 2014, substantial completion date in the master construction contract.”