July 12, 2010

By Bill Jaynes
The Kaselehlie Press

Palikir, Pohnpei, FSM-Representatives of VCS Construction and Pacific Landscaping, Engineering, and Construction (PLEC) both say that they won't be able to bid on the contracts to build the next three school buildings. Bids on those projects are due by August 10 of this year. Contract award notification is planned for August 25.

According to a press release by the FSM Public Information Officer a pre-bid conference was held previous to bidding on the three Pohnpei school projects which have a project range of from $1 to $5 million. Eight local construction companies, two local insurance companies, representatives from Pohnpei State Government, and the Principals from the Nett, Saladak, and Sapwalap schools attended the conference.

The FSMPIO press release said that the PMU Contracting Officer Marcelino Actouka told those in attendance at the pre-bid conference that DOI reinstated the bonding requirement as a result of certain FSM construction projects not having been successfully completed. Other PMU officials said that none of those kinds of problems that seemed to motivate the ruling had occurred in Pohnpei.

PLEC and VCS were awarded the current Pohnpei school projects after they successfully bid on the contracts at the Project Management Unit of the FSM Government which administers infrastructure projects funded with money from US Compact infrastructure funds.

For the Pohnpei school projects, the US Office of the Interior through the Office of Insular Affairs waived bonding requirements. To insure that the contracts reach final completion, the FSM Government withholds 20% of any payment due to the contractors until the projects are completed.

Both contractors said that the projects are on schedule and that the projects are approximately 90% complete.

Apparently the contractors who attended the conference had not been aware before the conference that the bonding requirement had been reinstated. Some said they probably wouldn't have bothered to attend if they had known.

According to the FSMPIO press release, Larry Adams of ABCOR Engineering and Construction gave an example of one of his company's past attempts to obtain bonding that seemed typical for the contractors in the room. He said that for a $3,000,000 project one insurance company had asked him to deposit $1,000,000 in an escrow account for the issuance of a performance bond. He said that was more than he could afford and he believed that no local contractors could afford that much either.

We contacted another Pohnpei contractor who would only speak anonymously for fear of jeopardizing any future earnings potential. He said that it seemed to him as if the United States really just wants one of their big contractors to come in and build everything in the FSM and be done with it. "But what about the rest of the Compact," he asked? "I thought the idea was to help us build up our economy."

"What really happens is that outside contractors come in with maybe one or two representatives. They use the local contractors but they make all the money," the concerned contractor said.

Actouka, who must adhere to the requirements of DOI, told the gathered contractors that by imposing such a stringent requirement DOI is hoping local construction companies, in order to obtain bonding, will come to terms with the need to prepare adequate audited financial statements as well as a proven history of project completion.

According to the press release Actouka also said that if none of the local contractors could obtain bonding, that fact might assist PMU in future negotiations with the DOI that could potentially lead to waiver requests on a case-by-case basis. He seemed to be making an educated guess about that.

"Do we like bonding? Yes, we do," said Dana Smith, legal counsel for the PMU. He said that bonding makes the PMU's job easier because the bond insures that the infrastructure construction jobs will get done. "It just seems strange (for DOI) to change the rules in the middle of getting projects done."

DOI rules require performance bonds for all contracts above $100,000. Smith wonders how PMU will be able to attract bondable contractors, which currently is equivalent to foreign contractors, to bid on small maintenance type contracts in the $100,000 to $300,000 range. "I don't think they're going to do it," he said. "Nobody's going to bid."

Jose San Nicolas, of VCS Construction said that he is trying to get all of the local contractors together to write a joint letter to the President of the FSM and to the Governor of Pohnpei.

While those two Government leaders might be able to negotiate on a higher level than contractors could, the ultimate decision on the matter lies with the DOI and they have already stated their requirements.