Big construction project in Chuuk in limbo

Legal wrangle holds up road work

After huge cost overruns, major delays and problems with faulty designs, the largest construction project ever undertaken in the Federated States of Micronesia is now at a standstill with multiple lawsuits looming. Majuro and Guam-based Pacific International Inc (PII) completed about 90 percent of a road and sewer project in Weno, the capital of Chuuk state in the FSM before it was terminated last November by the FSM’s Project Management Unit.

The contract was originally budgeted for US$25 million but costs escalated significantly during construction that started in 2009 because designs provided to PII contained many errors causing repeated changes, delays and millions of dollars in additional costs. After terminating PII and ordering it to demobilise at the end of last year, the FSM called in the multi-million dollar bond PII had posted for the construction project.

United States-funded infrastructure projects in the FSM require a 100 per cent bond be posted by contractors. However, an independent engineering firm, hired by the Saipan insurance company holding the bond, determined that the FSM Government — not PII — mismanaged the construction project. The detailed evaluation of the construction project by engineering firm J.M. Robertson, Inc concluded: “The owner (FSM Government) was found to be in default of the contract for nonpayment of amounts contractually and legally due the contractor (PII) and for other reasons. That included issuing bid documents…that were so highly defective as to be unusable.”

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