Dive Brief:
- BML Properties, the original owner of the Baha Mar Resort in The Bahamas, filed suit against China Construction America (CCA) in the New York Supreme Court alleging that the contractor engaged in fraud, deception and breaches of contract in order to submit hundreds of millions in bogus billings during its time working on the resort project, according to the suit. BML claims CCA's actions cost them more than $2.25 billion, Building Design + Construction reports.
- In its lawsuit, BML states that CCA used Baha Mar as a beachhead for unqualified staff to pursue additional work in the Americas and Caribbean and, at the same time, intentionally dragged its feet, understaffed the project and sabotaged progress on the resort, including moving labor and equipment to a competing project nearby, in an effort to extort money to which it was not entitled. BML alleges that because of CCA's actions, the project lost out on two lucrative travel seasons.
- CCA, a U.S.-based subsidiary of state-owned Chinese State Construction Engineering Corporation, has claimed in the past that the additional costs and missed openings were due to BML design changes that led to the issuance of more than 1,300 change orders, according to Tribune 242. As to the lawsuit's allegations of construction defects, Leonard Sands, president of the Bahamian Contractors Association, told Tribune 242 that the Bahamian government would have never issued the project a certificate of occupancy nor would the current owner have purchased the development without the resolution of significant deficiencies.
Dive Insight:
Unfortunately, claims of overbillings and other bad acts by contractors are not uncommon, though they're certainly not the norm.
In December 2015, Tishman Construction agreed to pay more than $20 million in restitution and fines to settle charges of mail and wire fraud conspiracy related to overbilling. Prosecutors alleged that Tishman billed $5 million more than it should have from 1999 to 2009 on projects like the World Trade Center Towers and the Jacob K. Javits Convention Center expansion by invoicing at higher rates than were agreed upon and billing for hours not worked.
Plaza Construction also agreed to pay a settlement of $9.2 million in restitution and fines in 2016 amid allegations that it intentionally defrauded some clients on projects like the Brooklyn Navy Yard and the Bronx Terminal Market by overbilling them. CCA purchased Plaza Construction in 2014.