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Contractors want Pa. to pay millions to finish prison in Skippack

'Default, debarment and litigation' threat

Contractors at the state's largest prison, under construction in Skippack Township, have agreed to call subcontractors back in to fix and test inadequate lighting, balky utilities, leaky roofs, overheating ovens, and more -- as long as Pennsylvania gives them millions to pay for the extra work.

But state officials say it's the builders who owe taxpayers millions for delays on the maximum-security State Correctional Institution Phoenix, which was supposed to open in fall 2015, replacing the aging Graterford prison next door.

State records show that Walsh Heery Joint Venture, a partnership between Chicago-based Walsh Group and Atlanta-based Heery International, had by last September completed $348 million worth of the $352 million in initial construction and change orders.

But there are still hundreds of jobs to finish and state inspections to pass before the prison can safely open, and there is no opening date now scheduled.

The state says Walsh Heery, hired under then-Gov. Tom Corbett in 2013 on the third attempt to bid the job, has been piling up "liquidated damages" at the rate of $35,000 a day -- more than $16 million so far -- since failing to complete Phoenix by the agreed November 2015 deadline, after previous extensions.

The prison project "is in serious trouble," General Services Secretary Curt Topper told Walsh Group chairman Matthew Walsh and Heery president Ted Sak in a Dec. 22 letter, which the state provided at the Inquirer's request.

Topper threatened the partners with "default, debarment, and litigation" unless  "dramatic changes occur immediately."

Facing this loss of state fees -- and, as Topper noted in another letter, a likely loss of federal and other government contracts if Pennsylvania suspended their companies -- Walsh and Sak came to Pennsylvania to meet with Topper and state Corrections Secretary John Wetzel on Jan. 16.

The meeting was "productive" but "not conclusive," Topper told the partners in an update two days later.

The contractors told Topper they can get the prison open by September. The state hasn't yet agreed to wait that long, Department of General Services  spokesman Troy Thompson told me: "We want it as quickly as possible."

At the January meeting, Topper pressed builders to test, fix, and set final inspections for smoke-evacuation, security, building-automation, electric, perimeter-lighting, roofing, kitchen, and loading-dock systems, and called for weekly reviews with senior Walsh Heery officials on site.

In return, the contractors asked the state to pay almost $24 million Pennsylvania had held back or declined to pay, citing delays.

In a follow-up note, Topper said he "may be amenable to some limited release of funds as a good-faith measure for project cash-flow purposes," such as paying subcontractors.

But Topper said Pennsylvania would still claim those millions were ultimately due back to the state from Walsh Heery. Any write-down that put more money in the general contractors' wallets would have to wait "until after the project has been successfully completed." He again threatened to suspend the contractors and block them from doing other government jobs if they didn't answer fast.

"Progress has been sluggish," Walsh Heery admitted in a 17-page reply Jan. 25. The contractors detailed steps they said had been taken in the last two weeks, including schedules for reviewing, inspecting and, as needed, repairing all systems.

But the contractors also doubled down on seeking more money, complaining that "withholding of amounts otherwise due" is having "a profound effect" on cash flow. State officials haven't agreed to forgive or to pay more.

After a Feb. 9 meeting, Walsh Heery promised a complete "punch list" of final work by March 14, and a schedule by March 27. Both dates were met by the contractors, said Thompson, though he added the department wouldn't make the documents public.

Walsh Heery hasn't returned calls to its Schwenksville field office. Lawyer Peter F. Marvin, who has defended Walsh Heery in lawsuits by subcontractors who say they are owed money, told me his clients won't comment.

Why did the Wolf administration have to threaten the builders? In 2012, the Corbett administration hired Hill International, now of Philadelphia, to represent state agencies in dealings with prison contractors. The state said it would pay Hill $9.8 million at that time; it has so far paid $20 million.

As the prison sat unfinished, Hill and Walsh Heery last year accused each other, in a series of acrid letters, of being unprepared and deceitful. Now, the Wolf administration is trying to break the impasse.

What did taxpayers get for their $20 million? Hill spokesman John Paolin said the company had no comment. Thompson, the state spokesman, said Hill "remains under contract" as construction manager for Phoenix.