Guam Uproar Over School Construction Developer Changing To Governor Interest Entity

Critics: handover by high capacity successful bidder to unqualified, conflict of interest developer, unethical

HAGÅTÑA, Guam (Pacific Daily News,July 26, 2016) – When the contract for rebuilding Simon Sanchez High School was being put out for bid, the successful proposer’s track record of having developed four island public schools gave it weight.

In part because of its credential, the government of Guam decided to award the contract, with a price tag of about $77 million, to that established developer, Guam Education Financing Foundation Inc.

But there’s a problem with GovGuam’s selection of the developer for the Simon Sanchez High School rebuilding contract, a bid protester contends.

Now that GovGuam has chosen Guam Education Financing Foundation Inc., the local government is allowing the successful proposer to essentially hand over the contract to a new developer, called Guam Education Development Partners, which doesn’t have school construction experience, according to bid protester Core Tech International.

“Formed just under 12 months ago, GEDP does not have any school or other construction experience and would not have qualified as a bidder” for the contract, according to Core Tech.

“Forty percent of GEDP is owned by Calvo family companies, E.C. Development Group LLC and Pacific X-Treme Combat LLC,” according to Core Tech, in a statement Tuesday.

Core Tech, also an established developer and contractor, was ranked second in GovGuam’s evaluation of bids for the Simon Sanchez High School contract.

Local banker Philip Flores, one of the main representatives of Guam Education Financing Foundation, a nonprofit, said it will let Guam Education Development Partners undertake the Simon Sanchez High project. GEDP is a special purpose development entity, Flores said.

“This is the standard industry practice to achieve the most efficient and cost-effective financing for the project,” Flores said.

“In this manner, we are able to finance the project with tax-exempt funding, lowering the cost of borrowing and providing substantial savings to GovGuam.”

“A nonprofit entity and special purpose developmental entity structure is the same manner in which we developed/financed Okkodo High School, Liguan Elementary, Adacao Elementary and Astumbo Middle School as well as the Okkodo High School expansion,” Flores said.

Flores said of Core Tech’s latest statement, “it’s just a continuation of their tactic of throwing out as much mud as possible hoping that some of it sticks.”

Core Tech has filed a procurement appeal with the Guam Office of Public Accountability’s procurement appeals section. Core Tech also has a pending administrative protest with the contracting agency, the local Department of Public Works.

“We know nothing about GEDP. It was not the offeror and would not have qualified under the requirements of the (Request for Proposals),” according to Core Tech.

Guam Education Development Partners was registered with the Guam Department of Revenue and Taxation as a domestic company on Aug. 15, 2015, Rev and Tax records show.

GEDP has two owners: Atlanta, Georgia-based Copper Ridge Partners; and FOL Guam LLC, which is in turn owned by two business entities owned by Gov. Eddie Calvo’s extended family, according to Core Tech.

Over the past few months, FOL became part of a public controversy when it surfaced as the new owner of a failed fisheries business that could get paid, along with its legal team, $14 million, for a botched contract with the Port Authority of Guam.

The port agency and its ratepayers stand to pay that $14 million award by an out-of-court arbitration panel.

The Port Authority is challenging the arbitrators’ decision and a hearing is scheduled for September in the Superior Court.

Core Tech contends the request for proposals for the Simon Sanchez High rebuilding “does not allow the assignment of the contract to another party.”

“GEDP is not a contractor, and having been formed only 12 months ago, it does not have the resources and experience required to get a performance and payment bond,” according to Core Tech.

GovGuam and Guam Education Development Partners addressed that by including language in the negotiated contract, which states GovGuam “hereby approves developer’s subcontract with Guam Education Development Partners, who shall provide a bond” through the prime general construction contractor, Hensel Phelps.

Hensel Phelps, one of the largest general contractors in the United States, is allowed to provide the performance bond to the government, according to Guam Education Financing Foundation. A performance bond offers GovGuam a safety net if the developer fails to complete the Simon Sanchez High School project.

Core Tech calls the performance bond arrangement with Hensel Phelps, rather than Guam Education Financing Foundation or Guam Education Development Partners providing it, “improper and violates the (procurement specifications) and Guam procurement laws.”

During the submission of offers, Guam Education Financing Foundation came up with a $73 million offer, Core Tech $61 million and Pernix $82.4 million, according to Core Tech.

The contracting agency, Public Works, has stated, however, that the decision was based on best bid value, rather than lowest bid price.

Core Tech called the Simon Sanchez High contract “a bad deal for Guam, but a great deal for GEDP.”

The Office of Public Accountability is scheduled to hold a merits hearing on Core Tech’s appeal at 9 a.m. on Aug. 22.

Core Tech also obtained access to an internal Guam Department of Education memo, in which Guam DOE expressed concern that during the negotiations with Guam Education Financing Foundation, negotiators were “losing focus on the intent of the (procurement) by reducing square footage,” after the decision to award the contract had been made.

The procurement specified a square footage of 278,850, but after four revisions during negotiations, the project’s square footage was reduced to 244,816, Core Tech contends.

Part of the project includes an auditorium, which was initially set to require 700 seats.

It was “right-sized” to 500 seats during the negotiations, according to Guam Education Financing Foundation.

Guam Education Financing Foundation quotes the negotiating committee, who included Guam DOE Superintendent Jon Fernandez, as having said “the cost to construct the auditorium is an expensive item … it was decided that the original estimate for 700 seats would result in an underutilized facility.”

In a response filed with the Office of Public Accountability, Guam Education Financing Foundation states GovGuam’s evaluation of the three proposals “did not consider price, or cost, as a factor in determining the most qualified” proposal.

Guam Education Financing Foundation cites language in the procurement specifications that once a successful proposal is selected, “a scope of work and fee estimate will be negotiated to perform the required services for Simon Sanchez High School.”

Pacific Daily News
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