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FSM Government provides revised settlement offer to PII

Palikir, Pohnpei (FSM Information Services/PMU): November 27, 2013 - The National Government of the FSM transmitted a revised Settlement Offer to Weno road Contractor, Pacific International, Inc. (PII) on November 26, 2013, proposing to rescind the November 7, 2013 Notice of Termination and offering the Contractor additional time and money to settle disputed claims raised by PII. PII has until Friday, December 6, 2013, to accept the offer or to submit a counter offer to the FSM Program Management Unit (PMU).

The offer proposes to extend the Contractor's performance time for 281 days past the November 25, 2013, contract completion date and raises the total contract price by $1,761,076.07. This amount includes costs additional work as well as extended overhead. In addition, the Government proposes to release retention of $412,411.75, provided the Contractor uses the funds to increase manpower and to mobilize additional machinery and plant deemed necessary to accelerate production.

In consideration of the additional time and money to complete the contract work, PII must provide the Government with an amended schedule and a plan to improve its rate of progress. The Government's estimate is that it would take PII two years to complete the work unless PII mobilized additional equipment and manpower resources. PII has indicated that it would need more money than the remaining contract balance of $3,273,573 (as of the September progress payment) to complete the work and that it would charge the Government $7,770.21 daily overhead and profit rate after November 25, 2013 to remain on the job. Assuming it would take PII two more years to complete the job, that claim that would result in a $5,672,253 cost overrun just for the Contractor to remain on Weno, for a total estimated payment of $8,945,826.

The November 7, 2013, Notice of Termination for Default follows repeated attempts by the Government to request that PII take steps necessary to improve its progress. The Notice of Termination cited Section 1.44 of the Contract which provides: "If in the opinion of the Contracting Officer, the Contractor falls behind the approved schedule, the Contractor shall take steps necessary to improve its progress, including those that may be required by the Contracting Officer, without additional cost to the Government." In addition, the Section provides that the failure of the Contractor to comply with these requirements shall be grounds for a determination by the Contracting Officer that the Contractor is not prosecuting the work with sufficient diligence to ensure completion within the time specified in the Contract. The Contracting Officer has determined that PII did not take steps necessary to improve progress. Section 1.56 of the Contract provides that when the Contractor fails to prosecute the work and fails to complete the work on time, written notice may terminate the right to proceed with the work.