Sarkis Izmirlian is claiming Baha Mar’s main contractor would have cost him $169 million in “grossly over-valued bids” had he not intervened in its procurement process.
Baha Mar’s original developer, in his $2.25 billion damages claim against China Construction America (CCA) and its affiliates, alleged that the Chinese state-owned contractor “misused” and failed to properly control the $4.2 billion development’s tendering system. Mr Izmirlian, and his family’s BML Properties vehicle, are instead claiming that CCA used the project’s Tender Event Schedule (TES) to “improperly” advance its interests by submitting bids on Baha Mar work ‘packages’ that were “far higher” than the project’s budget and market rates.
“In light of CCA’s failures, Baha Mar was forced to seek its own savings in procurement,” Mr Izmirlian alleged. “Baha Mar had to intervene on certain packages as CCA’s initial recommendations or bids were grossly over-valued or proved to be uncompetitive.
“If Baha Mar had not acted to protect its interests and those of BML Properties, CCA would have placed orders for works approximately $169 million over the amount it should have paid.”
CCA, as Baha Mar’s main contractor, was responsible for breaking the multi-billion dollar project down into work ‘packages’ that would then be awarded to sub-contractors.
This meant CCA was responsible for determining the scope of each ‘work package’, pricing it, putting it out to tender, and then hiring the best bidder. Mr Izmirlian, though, alleged that the Chinese state-owned contractor sought to retain most of the work for itself so as to maximise profits.
“CCA exhibited at all relevant times a lack of willingness to provide non-self perform procurement strategies or bid processes for the project,” Mr Izmirlian and BML Properties alleged.
“Baha Mar was forced to insist that CCA prepare, and continue to provide, a traditional procurement process in line with any self-perform/commercial offer to ensure market value was proven.
“For example, in the case of the Building Envelope, Baha Mar had to perform a bid process of the windows and sliding doors work package to safeguard the project schedule, which resulted in a saving of approximately $2 million against the similar scope within CCA’s self-perform offer.”
Mr Izmirlian alleged that CCA only reduced its bids when confronted by Baha Mar on its price, or threatened that the developer might perform the work itself.
“Evidencing the failures of the bidding system, and as a result of CCA’s plan or inadvertence, CCA continuously submitted bids that were far higher than the budgets and the market,” the original Baha Mar developer alleged.