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Drowning in red tape

Mark Newman, Ottumwa Courier, Iowa –

OTTUMWA — The owner of an Ottumwa business says the federal government’s failure to pay for work on a high-profile construction project may cost him everything.

Grooms and Co. Construction, in business since 1898, won the bid to become the general contractor on the Ottumwa Job Corps Center.

Grooms agreed to the terms of the contract and to obey the Department of Labor project manager on site. The DOL, of which Job Corps is one part, agreed to pay for the work.

General contractors do some of the work and hire other experts to do those parts of the project that require different skills. Those companies are called subcontractors and though they are working on a federal project, they are technically working for Grooms.

“DOL only has a contractual relationship with Grooms,” explained Scott Allen, a U.S. Department of Labor spokesman. “We do not have a contractual relationship with any of Grooms’ subcontractors.”

“We’re the middle man,” said Nick Grooms, one of the owners of the business.

During construction, the DOL would send a check to Grooms on a monthly basis. He would then pay the craftsmen he brought in. And in nearly every case, he believes those subcontractors did excellent work, he said.

One problem started when the Department of Labor representative on site began demanding that extra work be done.

That’s not unheard of on a project this size, Grooms said, and when it wasn’t very costly, the construction crews would just get it done. In return, contractors would be told work that was in the contract that wasn’t necessary for the project could be skipped.

But when there was expensive extra work added on, contractors and the DOL representative could submit a “change order.” At first, those items were getting paid.

But then, Grooms said, came changes that seemed only desired by the Department of Labor project managers. Some, they would demand be done free.

“Any resistance on [the] part of the construction team was met with threats” like payment being reduced or stopped, or that the project managers on site would change their minds about the work they’d said to skip or that they would go through and find “something” local crews had to start over on.

That’s about the time payment for additional work was either delayed by months or stopped completely.

Because for some work over and above the contract, Nick Grooms did put through about half a million dollars in “change orders.”

None of that money has been paid by the Labor Department, he said.

“The project has contributed to at least two contractors going out of business and has left several more in financial distress,” Grooms said.

In total, Grooms and his subcontractors from the Ottumwa Job Corps Center project say they are owed more than $1 million.

“Our subs are getting very angry. They need paid for work they’ve done 16 months ago. I want to pay the subcontractors, but if we don’t get paid [by DOL], I don’t have a $1 million!”

One of the officials credited with bringing Job Corps to southeast Iowa is Sen. Tom Harkin.

He and local officials had been working on getting this center since 2003 and earlier.

“In August 2009, he was on hand with U.S. Labor Secretary Hilda Solis for the groundbreaking of the center,” said Harkin’s communications director in Washington, Kate Cyrul Frischmann. “This Job Corps facility has been a priority for Senator Harkin, so our office will continue to be engaged in resolving this matter.”

Grooms could use all the help he can get. The DOL rarely returns emails, he said. At times over the past year, he’s been told by phone the money was on its way — if he’d agree to accept only half the payment. Even that reduced payment didn’t arrive.

Asked by the Courier when local businesses could expect to be paid, the Labor Department said it has sent most of the money.

“DOL’s records show that it has paid Grooms $24,685,705.23, or 98.2 percent of Grooms’ total contract value,” said Allen.

Nick Grooms says he needs the remainder — plus the “over and above work” money — to pay his subs.

Some local companies — Grooms declined to name them publicly — have been driven to the edge of bankruptcy, he said. Others have gone under. And, he says, his good reputation has been put in danger.

Some of the companies that did work on the project have filed lawsuits against Grooms and Co. or taken out claims against his bonding company, a type of insurer that guarantees the owner the job will be finished.

“Our bonding company wants this resolved,” Grooms said.

In the meantime, they won’t sell the business any large bonds, meaning Grooms has had to say “no” when management sees a large, potentially profitable project.

Now, 16 months after the job is finished, and several months after the one-year warranty ended, the Labor Department sent Grooms a growing deficiency list.

Harkin’s people say the senator will not ignore this situation.

“Our office has been in contact with both the Department of Labor and Grooms and Company Construction, speaking as recently as this afternoon with the Department of Labor. During that conversation, we learned that both the contractor and the agency are moving forward in trying to resolve the outstanding issues, which will include a site visit so that Grooms can show the Department the work that has been done.”

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