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Fired Sandy-Aid Contractor Collected $32.7 Million – and Demands $18.4M More

Contract dispute with firm accused by critics of botching housing-repair grants heads toward arbitration

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The Superstorm Sandy housing grant manager quietly terminated by New Jersey last December billed the state for $51 million -- 75 percent of the total contract amount -- in just the first seven months of its work, according to new documents released yesterday.

Contractor Hammerman and Gainer Inc., which the state had hired to manage programs to provide nearly $800 million in federal grants to people with homes damaged by Sandy, is seeking another $18.4 million in payments plus interest from the state and has filed for arbitration to get it, according to public documents obtained from the state Department of Treasury and released by Fair Share Housing Center of Cherry Hill. So far, the documents indicate that the state has paid HGI about $32.7 million of the $51.2 million it billed beginning last May.

And that's just for work done through Dec. 6, when the parties agreed to terminate the three-year, $67.7 million contract. Because the state allowed HGI to keep working through Jan. 20, the company wrote in its request for arbitration that it "reserves the right to amend its demand to include claims for amounts" incurred during those six weeks. At the time of the termination, the state had agreed to pay HGI $10.5 million toward its unpaid balance for work already done and toward the work that would be done during the transition period.

Fair Share has charged that HGI botched the processing of applications, as evidenced by the fact that three-quarters of those who appealed the denial of an application for federal aid wound up winning an appeal. State officials still have not provided specifics about why New Jersey severed its relationship with HGI.

"As (Department of Community Affairs) Commissioner (Richard) Constable noted during his testimony before the Senate Legislative Oversight Committee earlier this week, the State severed its relationship with HGI due to performance-related concerns," Lisa Ryan, a DCA spokeswoman, said last night in response to the release of the HGI documents.

"New Jersey's unwillingness to be clear on what HGI did wrong makes it impossible for the public to be sure the problems have been resolved," said Adam Gordon, a Fair Share attorney monitoring Sandy aid and housing issues. "If a contractor has been fired, people impacted by Sandy are entitled to know what the contractor did wrong and how the state is addressing the resulting harm. We still don't know if, or how, the State is correcting these problems, and how much more it will cost in money that could be used to actually help people still out of their homes."

Gov. Chris Christie did not say much more last night during the “Ask the Governor” show on WKXW-FM and did not seem too concerned about the possible arbitration of the issue.

"I think that we had fundamental disagreements about how this should be done and because of those fundamental disagreements, which couldn't be resolved, we are moving on to another contractor," he said. "These things happen all the time. There's always going to be a dispute over monies owed on work that has already been done. And how much of that needs to be paid or not be paid ... if it ends earlier than was planned.

"A neutral arbitrator will work with the two parties to come to a resolution and that will be that," he added.

In papers filed Feb. 7 with the American Arbitration Association, HGI contends the state "made repeated demands that HGI perform work that extended beyond the scope of the services delineated in the Contract, and required completion within an accelerated timeframe not contemplated by the terms of the Contract, all of which far exceeded the manpower and services upon which the initial budget was estimated."

In an answer filed Feb. 11, Assistant Attorney General Beth Leigh Mitchell called the request for arbitration "premature" and sought its withdrawal. She wrote that as of Feb. 7, HGI still had not submitted its final invoice to the state and the parties had agreed they would allow for at least 16 days to "amicably resolve any outstanding issues" before seeking arbitration.

It is unclear where the matter stands now, but Christie's comments indicate that arbitration is likely.

Gordon said the documents raise other troubling questions beyond those involving payment. For instance, he said there appear to have been no written amendments to the contract to account for the additional costs. Nor did HGI submit to the state as it promised -- and as the state had demanded -- weekly progress reports on its work. He called on the administration to provide the public with answers to all these questions.

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