BY MAUREEN N. MARATITA
A Guam businessman is claiming that subcontractors that perform work on military bases may not get remunerated if payment depends on the contractor’s guarantee that they have been paid.
John W. Scragg, president of JWS Refrigeration, said he has not been paid for subcontracting work at Andersen Air Force Base although the prime contractor in question has.
“The concern we have is with Naval Facilities and their ability to manage their contracts,” he said.
In almost five decades of doing business in Guam, JWS has done a substantial amount of business “with prime contractors that have been reputable and that are good corporate citizens in general,” he said.
“Most subcontractors feel comfortable doing business with the military indirectly through these prime contractors, because there’s some form of security that you’re going to get paid,” Scragg said. “We discovered this is not necessarily the case.”
Scragg said prime contractors sign a statement when the job is substantially completed, saying they have paid all subcontractors and suppliers who worked on a project.
Scragg claimed P&S Construction Inc. owes JWS more than $250,000 for work at Andersen Air Force Base. The contract in question was a $3.16 million task order awarded to P&S to upgrade chillers and condensing units at the CE Motor Pool at Andersen. JWS was subcontracted for $1.48 million worth of construction and equipment supply.
“What we ran into was that Naval Facilities approved and paid a contractor on the fact that he had completed the job satisfactorily and needed to get paid the entire amount for the completion [and the contractor also said] they paid all their suppliers and contractors.”
JWS submitted 12 invoices to P&S between April 2015 and May 2016 before it was dismissed by P&S, according to a Sept. 13, 2018 letter JWS wrote to Naval Facilities Engineering Command Marianas, which JWS supplied to the Journal. According to the letter, JWS claims P&S delayed payment on six invoices, and failed to pay JWS on two invoices.
Catherine Cruz Norton, NavFac Marianas public affairs officer, told the Journal, “As NavFac is not a party to the contract between P&S and JWS, we cannot speak definitively on the outstanding claims and disputes between them. In general, NavFac requires our prime contractors to certify that they have paid subcontractors prior to payment of submitted invoices. Additionally, NavFac requires that payment bonds be secured before the commencement of work to protect subcontractors and suppliers in the event they are not paid by the prime.”
“We are currently in arbitration with P&S,” Scragg said.
Scragg said the last two jobs JWS did for P&S were completed on time. “We didn’t know they got paid until after the fact. It’s the last two jobs that are in arbitration, but they tied the two together,” he said.
Scragg said his aim is to make subcontractors aware of the situation. “Don’t assume that the government is going to look after your interests.”
According to a June 5 release from the office of the U.S. Attorney for the District of Massachusetts, Hector Sanchez, former president and co-owner of P&S pleaded guilty to a bribe totaling about $1 million to a Navy contracting official in Singapore in connection with federal construction projects there. The bribery took place in 2016. Sentencing is due in September.
“When we became aware of this, two things became very apparent,” Scragg said. “One, they took the president and co-owner of P&S Construction on bribery charges. They didn’t take P&S to task as a company. My question is, ‘Why where there no sanctions against P&S when the principal of this company was involved in pay-offs?’ We have not been made aware of any sanctions against P&S.”
Scragg said a number of well-known Guam-based companies do treat subcontractors as they should, but that the current system allows for that not to happen. “If there’s no fundamental watchdog, the whole system falls apart,” he said.
JWS reached out to NavFac Marianas about the non-payment twice, Scragg said. “We made Naval Facilities aware.”
P&S has an office on Guam, but all managerial staff were currently off-island, the Journal was told.
Cruz Norton confirmed that P&S does have continuing work.
“P&S is currently performing work on the Petroleum, Oils and Lubricants Fuel Systems Hardened Structures project on Andersen Air Force Base. This project is approximately 78% complete,” she said.
According to Journal files, P&S was previously awarded a multiple-award contract at Andersen on March 5, 2015 to construct the Red Horse Airfield Operations Facility. It received a $7.05 million task order at the time and a subsequent task order for $7.16 million later that month. mbj