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Did ASG “do its homework” on Whitehorn contract?

Was the American Samoa Government at fault for accepting at face value Whitehorn Construction’s bond for the airport road improvement project without verification?

 

That question has surfaced in the community over the past weeks after the Lolo administration found the bond appears to be forged or fake. And Sen. Magalei Logovi’i asked an almost identical question on Wednesday during the Senate Public Works Committee hearing with the airport road the major issue of discussion.

 

Whitehorn’s $7.99 million contract for the project was terminated after the company was given 46 business days to come up with a new bond, because the original bond was found to be invalid. 

 

As previously reported by Samoa News, the issue of the bond came to light when an official with Chubb Group of Insurance Companies contacted Public Works Department and the Attorney General’s Office, informing them that the agent or broker though which Whitehorn posted their bonds — in the amount of more than $399,000 — does not work for Chubb, according to a government source who wishes to remain anonymous.

 

During the Senate committee hearing, Magalei asked the Governor’s Legal Counsel Steve Watson, as to “who’s at fault” with this bond issue problem.

 

“Did we issue the notice to proceed [with the project], not knowing that [bond] was default or something? Or [did] we have the trust in them that the bond was secured?” he asked. “Because if we found out that the bond was not secured, would that give us the right not to issue the notice to proceed, even though they won the contract?”

 

Watson explained that what the “government had in hand, purported to be a payment bond and a performance bond. Those documents were false, they were issued in 2012 — and that’s when work commenced” on the road project.

 

“I don’t know if fault should be placed anywhere. The job should not have proceeded without a proper bond in place, that is clear,” he said. “And the government didn’t adequately review the bonds and verify their authenticity before [issuing] the notice for the work to proceed.”

 

Watson pointed out, “The government was wrong in issuing the notice to proceed, under those circumstances…”

 

From the legal side, Magalei asked again, “What can we do to prevent this type of situation” from happening again? He also asked if the Fono should introduce legislation to “make sure that everything is intact before we issue a notice to proceed”  to prevent such problems from occurring in the future.

 

“I think the law is perfectly adequate as it stands. I think we just need to ‘exercise due diligence’ in reviewing the documentation before we issue a notice to proceed,” was the Governor’s Legal Counsel’s reply.

 

Magalei, who was the ASG Treasurer during the previous administration, said he does not want to see history repeat itself. He said he had raised concerns previously — with awarding the company with the lowest bid— because “we’ve never seen” any project done on island by Whitehorn.

 

He said that if the project had been awarded to McConnell Dowell, this project would be completed and done a long time ago.

 

McConnell Dowell, which has been handling many federally funded road projects over the years was the only other bidder for the airport road project. The company submitted an $11.03 million bid.

 

During the hearing, Magalei told Watson: “You said the law is intact— so who’s at fault? If there is a loophole in it, fix it, to prevent problems in the future.”

 

Watson replied, “Greater exercise of due diligence” is what is needed, adding that a bond is a “negotiable instrument... it’s almost like a $100 bill in some respects — they have counter proof protection, indicators”, and it’s “just a case of doing your homework — the homework was not adequately done prior to this contract.”

 

It was also during Wednesday’s hearing that witnesses told the committee that the contract with Whitehorn is now terminated with a notice sent to the company. Additionally, the government is awaiting approval from the federal grantor, the Federal Highway Administration, on two options to move forward.

 

One option is to rebid the project, which is something that ASG is concerned with due to the long procurement process involved; the second is to negotiate with McConnell Dowell to take over the project as “sole source”.

 

(See yesterday’s front-page story for more details.)