The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar last night urged its Chinese financier to use its “strong ties” with the project’s main contractor to get the $3.5 billion development back on track, arguing that it has “a vested interest” in ensuring its success.

In what effectively amounted to an intervention plea to the Export-Import Bank of China, the Cable Beach developer described the institution as “more than a lender in this situation”.

“It has strong ties to the general contractor, China State,” a Baha Mar spokesman said in a statement. “We expect the bank can be very helpful in moving the construction of Baha Mar to completion in as timely a manner as possible.

“The bank has a vested interest in Baha Mar being successful and understands the economic importance of this major project to the people of the Bahamas. Baha Mar, the bank and China State are all critical to the completion of this magnificent project.”

Baha Mar’s statement came amid suggestions that it has yet to resolve its dispute with the project’s main contractor, China Construction America, while Tribune Business also gained further insight into the problems bedevilling its construction.

One well-placed source familiar with developments at Baha Mar said a resolution with China Construction America remained “a work in progress”, describing the two parties’ stand-off as “a desperate situation” that needs to be brought to a rapid conclusion.

“It’s still a work in progress,” the source said, “bit he’s [Sarkis Izmirlian, Baha Mar’s chairman and chief executive] working flat out to make some progress.

“It’s a desperate situation that needs to be addressed. The whole country is holding its breath for Sarkis and the Chinese to work out their differences.

“The longer the situation goes on, the more untenable it becomes. It’s not good. It just cannot be maintained. Something needs to come to a head. It needs to move.”

Baha Mar and China Construction have been locked in an increasingly bitter dispute for weeks, with the latter alleging it has not received due payment for its February 2015 work - something that prompted it to slow the construction work pace down in the run-up to the planned March 27 opening.

Baha Mar, for its part, is disputing this and demanding that China Construction set a date for when the project will be completed and it can open its hotels.

With the impasse and ‘Mexican stand-off’ still not ended, it is not surprising that Baha Mar is reaching out to the Export-Import Bank of China.

Apart from being Baha Mar’s main construction financier via a $2.4 billion loan, the bank also shares common ownership with China Construction - the Beijing government.

Baha Mar is no doubt hoping these links, and the Export-Import Bank of China’s vested interest in bringing the project to completion, can bring influence to bear on its recalcitrant construction and equity partner.

However, it can often be difficult to determine just who calls the shots amid the complex decision-making web in the Chinese government. And the Baha Mar project is relatively small amid the trillions in surplus capital assets that the Chinese possess.

One Baha Mar source said the $2.4 billion extended by the Export-Import Bank of China represented “a rounding error” for Beijing. Yet they pointed out a failure at Baha Mar was not an option for the Chinese, given their extensive investments in the Bahamas and wider region, and the reputation of their capital and construction companies.

“They’ve invested a lot of money in this country, and do not want it deemed to be a failure,” the source said.

Meanwhile, well-placed construction industry sources attributed the project’s building woes to a lack of planning and organisation by both Baha Mar and China Construction.

And, crucially, they said the Chinese contractor had hired American construction managers to oversee its work who were not qualified to assess whether this was up to quality or in compliance with the Bahamas Building Code.

“China Construction has these construction managers who are not really construction managers,” one source, speaking on condition of anonymity, told Tribune Business.

“They are really supervisors and foremen. This has created a big problem. A supervisor and foreman’s job is to get the work done. A construction manager’s job is to ensure the work is done in conformance with the regulations.”

The source said China Construction’s construction managers had effectively been hired at a level that was too high for them.

As a result, they had been reporting to Baha Mar, and insisting, that everything was fine and that all the electrical and fire systems had been installed when, in fact, they had yet to be tested as a full system and passed as being in compliance with the relevant Bahamian regulations.

Tribune Business sources said it was unfair to blame the third party Bahamian engineers, Terracon and Integrated Building Systems (IBS), and Graphite Engineering/Melanie Roach, for these construction woes as they were only normally called out to inspect work once China Construction said it was completed.

And they said the same applied to Reiss Engineering, which has been contracted by the Ministry of Works as its ‘eyes and ears’ to recommend whether different aspects of Baha Mar are in compliance/non-compliance with code, and if occupancy certificates should be issued or not.

This newspaper was informed that China Construction could not even produce “punch lists” of work done and corrections made.

Yet it had frequently complained that the Bahamian engineers and inspectors were “holding up” the project, which had previously resulted in Baha Mar “jumping” on the latter until the recent dispute with its contractor.

“No one would tell the Emperor he had no clothes,” was how one source put it.

Tribune Business was told that the construction woes had given Mr Izmirlian “a weapon to use” against China Construction, but one source added: “There’s planning and organisation failings on both sides’ parts. Baha Mar was stepping in and trying to be construction manager, and never held China Construction accountable.”

Tribune Business was also told that Baha Mar had tried to “supplement” China Construction with its own executives. “They’ve put these individuals in to try and keep an eye on China Construction,” one source said.

They include Brent Creary as the architect of record; Jim Kwasnowski as executive vice-president of construction and development; and Tommy Jones as operations manager.

“The two sides have to resolve their financial dispute,” one source said. “But this has allowed Baha Mar to breathe, plan and organise. Yet I don’t get the sense that China Construction understands planning and organisation aspects, and understands building to code.”