Battle over letter of intent

As mentioned in my report on yesterday’s meeting of the CMPA Board of Trustees, there is a battle being waged over the letter of intent for a performance bond for Maritime Park Development Partners in regards to the construction of the Community Maritime Park.

Here is the original email from CMPA attorney Ed Fleming:

From: Edward P. Fleming
Sent: Monday, March 29, 2010 6:45 PM
To: Edward Spears; Eddie Todd
Cc: Rusty Wells; Al Coby; Skocdopole, Finley; Mike Morette
Subject: FW: Scanned image from McDonald – Fleming – Moorhead

Gentlemen — I have reviewed, at the request of Ed Spears, the
“bonding letter” from the Chubb Group of Insurance Companies to determine
whether it was legally sufficient to meet the assurances of bonding capacity
requirement under the CMPA-MPDP contract. It is my conclusion, for the
reasons stated herein, that it does not.

Nowhere in this letter does it say that the MPDP has been approved
for a bond in the amount of $32 million. The letter speaks in terms of
providing a performance and payment bond “for the construction of this
project,” but expressly makes that statement contingent upon “our approval of
the contractors selected for construction,” as well as other contingencies.

It also speaks in terms of “approval of the existence and content of
all arrangements for this construction project whether by joint venture,
subcontract or service agreement.”

The typical “condition” of a letter certifying that a particular
contractor has the capacity to bond a particular project bonding capacity is
the approval by the Contractor and Surety of the contract.
I have attached a typical letter (redacting the name of the contractor for
privacy purposes) for your comparison.

I talked with the person who signed the letter, Karen K. Pedigo, to
see if she could revise the letter to state that MPDP had the capacity to
bond this project subject to approval of the contract by MPDP and the Surety.
She said the letter could not be modified. She would not discuss any details
as to what “arrangement” would be approved, whether the request was for a
“joint venture” between MPDP and a general contractor who had bonding
capacity, or any other details, citing to privacy concerns.

I have discussed this matter with the Owner’s representatives (Finley
Skocdopole of Hatch-Mott McDonald, and Mike Morette of the Morette company,
and they have authorized me to represent that they concur with my opinion
that the letter from Chubb does not constitute proof of bonding capacity, and
thus does not meet the requirements of the CMPA-MPDP contract. The deadline
for providing such proof of bonding capacity has come and gone.

The MPDP may very well have the ability to post a $38 million payment
and performance bond; but such ability is not established by the letter

Here is the Chubb letter and an accompanying power of attorney and the copy of letter of intent that was acceptable for a Pensacola Junior College: CMPA Atty.

Maritime Park Development Partners disagrees with Fleming and believes the Chubb letter is fine. Read MPDP Atty.

Typically it’s the owner who decides what is adequate. It appears that MPDP is backing the CMPA Board of Trustees into a corner where it must capitulate on the demands of the MPDP, over the advice of its legal counsel and consultants, or lose the New Market Tax Credit money. Continuous bickering, delays and flitting from one issue to next without ever reaching resolution on anything forces the CMPA Board to accept whatever MPDP wants–if it wants the additional $11 million.

Leaving the performance bond and the general contractor agreement open without clear direction from the CMPA Board gives MPDP the “license to delay.” The next board meeting for the CMPA is April 9, which is too late to bring in another general contractor and still meet the NMTC deadline of May 15.

The CMPA Board needs to demand the letter of intent that their Fleming advised they should have and set Friday, April 2 as the deadline for the general contractor agreement. The pressure should be on MPDP to comply, not vice versa.