Construction Disputes
State Steps in to Pay Subs on Embattled Hawaii Air Cargo Facility
Work has been halted since late 2015
The Hawaii Dept. of Transportation is taking the unusual step of paying millions of dollars to subcontractors left holding the bag after the main contractor was removed from the construction of a new cargo terminal at Honolulu International Airport. Transportation department officials plan to spend $10 million to pay as many as 47 subcontractors after the department removed Pittsburgh-based contractor dck from the terminal construction job in late 2015.
The two sides have been locked in a fierce legal battle since late 2015 over who is to blame for the halt in the air cargo terminal construction.
“Settling these claims now spares all parties years of litigation and lets HDOT use existing project monies to pay subs for the work that was done,” said Doug Chin, Hawaii Attorney General, in a statement.
HDOT’s decision to directly settle up with subcontractors on the project was unusual enough that state legislation was required to authorize it. A bill passed by the state legislature permits Hawaii transportation officials to dip into money budgeted for the terminal project to pay the subs, with the money coming, in turn, from fees and other revenue generated by the airport.
dck has been a major construction manager and contractor in Hawaii for many years. In emails, the company says the owner of the project is responsble for the delays and that dck is owed money for its work on the project.
In the case of a contract default under the terms of a surety bond, the surety on a project would typically step in to pay for the completion of the project and settle up with subcontractors. The entity that provided the $78-million completion bond on the project, Terrace Pacific, is a captive surety company owned by dck, according to a report in the Honolulu Star Advertiser, a newspaper.
Hawaii transportation officials contend they have paid dck through Sept. 30, 2015, but that the contractor had kept more than $3 million that should have gone to local suppliers and subs, according to a statement by HDOT. The department contends it is pursuing litigation “to the fullest possible extent” to recover the money from dck. In addition, transportation officials are working with the State Procurement Office “on barring dck from working on future state projects.”
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| The air cargo terminal project, shown in a rendering, is part of a larger modernization program for Hawaii's airports. Image: Hawaiiairportsmodernization.com |
dck, through a spokesperson, says that it was “wrongfully terminated.” After being awarded the contract, dck pacific, LLC worked with the state through a two-year delay and through “numerous other issues, no fault of dck, that extended the performance of this contact for over five years,” the company said.
Dck pacific has overseen billions of dollars in construction projects in Hawaii over the years. The company contends it is “astonishing” that it was pulled from the project with what it contends was just a few months left before completion. The company says it is still owed for “certain work” done before September, 2015 and “any work” performed after that.
“Monthly project payment requisitions through October were approved by the owner and its consultants certifying that nearly 93% of the work was properly completed with no deficiencies,” the company spokesperson wrote.
The terminal project, for Hawaiian Airlines, is part of a broad, multi-project modernization program taking place at airports across the state. It includes new concourses, a car rental facility, widening of taxilines and a new parking lot.
Ironically, the design-build project's structural engineer, BASE, noted on its website that that it had completed its work early "so that the construction manager was able to order materials early and get a jump start on construction."
