Shanghai left hospital project over 'poor project management, increased costs, delayed payments'

THE Shanghai Construction Group (SCG) had vowed to quit its contract to build the new Central Block at Port of Spain General Hospital owing to grouses such as an unexpected extra US$9 million in freight costs plus the financial fallout of bureaucratic delays blamed on a project official, said a November 5 letter from SCG head Michael Zhang to Udecott CEO Tamica Charles-Phillips.

The delays had doubled the construction period from 22 to 44 months. A delay in steel imports has idled 40 workers for four months.

Border closures led SCG to fire Chinese subcontractors and hire local firms at a "higher cost and extra time."

SCG said a contract was awarded to a lower bidder than themselves, but unfairly at a newly reduced scope of work.

The letter said since January 2021, SCG had warned higher freight costs would "seriously impact the project."

By September 2021, SCG had applied for reimbursement. The Udecott board had purportedly agreed to pay, but Udecott later left this decision up to the project official but whom the letter alleged had a record of "unreasonableness, unfairness and late assessments" which had caused the "extremely difficult situation and delays in the project."

Some U$$500,000 was spent on 98 containers, even as 600 containers were pending shipment, Zhang said. "The additional cost of US$9 million really is beyond what we can bear."

Zhang also hoped for compensation for new staff hired abroad for whom SCG had to pay staff salaries, visas, travel, lodge and board for seven months, but lamented a 21-month delay (to date) in the project official assessing this claim.

"This unacceptable delay made us worry about the process of project management."

He complained rather than the requisite 21 days for the official to advise on a change in the development design, he had taken 165 days. "This additional 144 days – almost five months – adversely affected the progress of the other design work of the project."

Next, instead of taking 21 days to approve a change in the architectural design, the official took 119 days.

Zhang then blamed the official for a 59-day delay in a payment to SCG. He said rather than an arbiter of disputes, the official "added to the creation of disputes."

Zhang said Udecott tendered a project to build a doctor's lounge after the SCG's $16 million bid contrasted to the official's $8 million estimate.

"It was awarded to another contractor at a price of $12 million, with reduced scope of work, which excludes design works, medical air quality air-conditioning and additional roof protection, compared with SCG's proposals.

"Therefore our submission was not treated fairly."

The SCG head complained the project official had used a "more dangerous" and "totally inappropriate" radiographic testing of steel structure works, despite SCG's method approved by an independent testing agency.

Zhang alleged the official had told Udecott the SCG had benefited from an advance payment guarantee to be used to buy steel for the project.

"This is quite extraordinary."

He said payment was made based on what milestone the project had reached.

Zhang said the project official's role seemed compromised.

"We fail to see fairness and reasonableness pervading decisions and such action militates against the successful completion of this very important national project.

"It is very difficult for SCG to further implement the project."

While the contract period of the project was 26 months, Zhang said SCG managers and staff have been on site for 29 months, with a further 22 more months anticipated to finish construction.

Saying the project now faces "real risks and challenges", the letter advised, "Quick assessments and decisions are necessary, but we have not seen any improvement and adjustments so far."

It said SCG was invoking a clause of the contract to suspend work owing to the employer's failure to satisfy payment requirements.

The contract would end on November 14, the letter said. They asked to be given back their performance security, payment for work done and payment for and loss of profit or any other resulting loss or damage.

Saying it was "really painful" to end the contract, SCG said, "However we are willing for further negotiation and work with Udecott to find a final solution for this very important national project."