Whitehorn charges ASG failed to do its homework
Whitehorn Construction Inc (WCI) says the American Samoa Government failed to uphold its legal and regulatory responsibilities by failing to ensure the validity of the bonds, in their appeal filed with the Administrative Law Judge when the government moved to terminate its contract with WCI.
ASG moved to terminate the contract after the government found out the bonds issued were fake or bogus.
The issue of the bonds came to light when an official with Chubb Group of Insurance Companies contacted the local DPW and AG’s offices, informing them that the agent or broker though which WCI posted their bond did not work for Chubb.
WCI had been awarded the contract to fix the Airport Road.
In their appeal filed against the American Samoa Government, the ASG Office of Procurement and Chief Procurement Officer Tiaotalaga J.E Kruse, WCI notes that between November of 2012 and August 7, 2013— despite the fact the contract was terminated— WCI remained committed to providing excellent construction service to ASG, and up to the date of termination WCI diligently worked to complete the work, and at no time did WCI fail to prosecute the work. “The offending issue concerned a bonding issue that was out of WCI’s control and not the fault of WCI.”
According to the appeal, to WCI’s knowledge the bond documents were legitimate and valid and WCI reasonably believed that the broker was an authorized agent of the surety underwriter. WCI lawfully procured the bonds and paid the full value of the bonds pursuant to acceptable industry standards, and prior to finalizing the contract WCI forwarded the bonds to the office of Procurement for review and comment.
WCI believed the bonds were also submitted to the Attorney General’s office for final approval. After ASG purportedly vetted the bonds the contract was finalized.
“Had ASG vetted the bonds and determined the bonds be invalid, then ASG should not have issued the NTP (Notice to Proceed)" says WCI.
The appeal further says WCI since learned that it fell victim to an elaborate scheme of fraudulent bonds, and they have been working with the federal criminal authorities to identify and prosecute offending individuals. They have also worked with the insurance companies to bring civil actions in federal court against the perpetrators of the fraud scheme.
Although the bonds were later identified to be invalid, WCI procured the bond per contractual requirements outlined in the bid documents, and "the invalidity of the bond was not grounds to terminate the contract for default," says the appeal, which further states that termination for default occurs if the contractor refuses or fails to prosecute the work, however, WCI did not fail or refuse to do the work.
Also the breach of contract prescribed by Chief Procurement Officer notification is not the type of breach outlined in contract clause sections, said WCI, who also believed they had been "extremely pro-active in procuring long lead materials and continuing to press forward with the project in spite of the numerous delays with submittal approvals."
WCI say they stopped working on the project upon ASG’s request and discretion, due to the bonding issue.
WCI acted in good faith with the broker of record on the bonding instruments as well as in their dealing with ASG, and received no indication that the bond was anything other than a valid document. Accordingly WCI paid the full value for the bond—an amount in excess of $399,000 which equates to 5% of the total contract value and all of WCI’s responsibilities in procuring what was though to be a valid bond were met.
“While WCI met its obligations, ASG, as the contracting officer failed to uphold its legal and regulatory responsibilities of ensuring the bond's validity.”
According to the appeal, had ASG taken appropriate actions at the time the bond document was submitted to them, the determination regarding the validity of the bond document would have been addressed immediately. However, this determination did not happen and all parties were under the assumption that the bond was indeed valid.
“Because it’s clear that the ASG did not fulfill its duties and obligations as a contracting officer, WCI contends that ASG breached its legal obligations as early as September 2012 when the contract was finally executed by the ASG.”
Since ASG’s breach of its legal duty resulted in substantial loss of monies paid by all parties for an invalid bond, as well as additional monies expended for materials, equipment, overhead and labor, WCI contends that the original contract award is invalid and this invalidity is a direct result of contracting officers failure. WCI has sustained damages including significant financial damages, and damages of its reputation in the territory.
WCI requests that the termination for default be set aside and that ASG issued instead a termination for convenience. The bonding company perpetuated a fraud on WCI and the ASG, however had the ASG and its sworn representatives done their due diligence as is required by law Federal Acquisition Regulation guidelines and adhered to their duties pertaining to a validation of a bond instrument this entire unfortunate situation would have been averted more than a year ago.
WCI contends that the CPO’s final termination for default was in violation of applicable constitutional pr statutory provisions, excess of the statutory authority of the agency, made upon unlawful procedure, affected by other error of law, clearly erroneous in view of reliable probative and substantial evidence in the whole record or arbitrary, capricious or characterized by abuse of discretion or otherwise not warranted and WCI requests for a hearing into this matter. Samoa News will report on ASG’s response in later editions.
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