Correia Construction paid out $10,000 a week to rent a crane for the publicly-funded Dockyard project a crane the subcontractor said he originally offered at $8,000 a month.

The original rental fee of $8,000 a month is detailed in a draft copy of the contract drawn up between main contractor Correia and US subcontractor Norwalk Marine International (NMI), shown to The Royal Gazette by NMI boss Louis (Skip) Gardella.

How the rate for NMI's 75-ton Linkbelt crawler crane came to more than quadruple to $10,000 a week by the time the original contract was signed is disputed by the two parties.

"We said the crane rent was $8,000 a month but he (Mr. Correia) came back and said, 'No, we want you to charge us $10,000 a week'," Mr. Gardella said.

The subcontractor added that the high rates more closely matched Correia's own rates for its equipment. The plan was to split the profits on the equipment rental, he added.

However, Correia Construction boss Dennis Correia said the subcontractor was used to working in the US, where the cost of fuel, maintenance and labour was lower than on the Island. "Crane rates are $10,000 a week in Bermuda," he said.

Rates are indeed much cheaper than this in the US. An 80-ton Link-Belt crawler crane with 230ft boom was available for $15,500 per month on the rental list of Texas-based Four Seasons Equipment Inc., published online last week. Correia was paying more than two-and-a-half times more for NMI's smaller model with a boom that was shorter by 100ft.

Mr. Correia said the rented crawler crane used about $3,500 a week worth of fuel, $2,500 a week in operator costs and around $2,500 for maintenance. Such costs were factored into the $10,000 a week paid to NMI for the crane, Mr. Correia added.

Mr. Gardella, however, insisted that the $10,000 a week was for the crane rental only.

Mr. Correia's equipment and labour price list from the time (July 2007) is also attached to the NMI/Correia contract. On it, a larger, 100-ton crane, one of which was used on the Dockyard project, is listed at $250 per hour. This equates to $12,500 a week, based on the 50-hour work week detailed in the contract.

A Bermuda-based construction management expert told this newspaper that a tower crane not the same as the crawler crane used in the Dockyard project being used in one of the ongoing major office building projects in Hamilton was being rented at around $10,000 a month, or less than $2,500 a week.

According to NMI's invoices, Correia paid $10,000 a week for the Link-Belt from early June 2007 to the end of July, 2008.

Another rate to rise between the drawing up of the draft contract between NMI and Correia and the signed version was the rental for an ICE Model 28B vibratory hammer, used for driving piles, offered on the original NMI price list for $8,900 a month. Correia agreed to pay $16,000 a month.

Two of these vibratory hammers were rented from NMI at $16,000 a month each at various times during the project. Mr. Correia said the extra $7,000 on top of the $8,900 was to cover fuel costs of up to $1,000 a day, insurance and maintenance costs.

Another aspect of the deal was that Correia purchased both the Link-Belt crane and one of the vibratory hammers at the end of October 2007 two months after work had started.

Yet Correia continued to pay out rent to NMI for both pieces of equipment over the following nine months. After the items were purchased, the rental income on NMI's books was no longer described as "rental" but, initially as "management fee" and, from December 2007, as "equipment fee", Mr. Gardella said.

When Correia was finished with the two items, it sold them back to NMI for $1 each. Mr. Correia said his company purchased the equipment to cut its duty bill for the crane and the hammer. The purchase price of the two items more than $500,000 was intended to pay part of NMI's share of the profit.

Government charges a 50.25 percent rate on the renting of such equipment. The rate is 33.5 percent for purchase of a crane or a vibratory hammer, according the schedule of Bermuda Customs Tariffs 2009.

According to a Customs Declaration form dated July 23, 2007, seen by this newspaper, the Link-Belt crane was hired by Correia from NMI on an 18-month rental for $780,000, which generated a tax bill of $391,950 more than the value of the crane itself.

Mr. Correia told The Royal Gazette delays at the start of the project meant the crane was being rented for longer than expected. To cut his duty bill, he said it made financial sense to buy both the crane and the hammer.

"As a business decision it was better for me to buy the thing, because I don't have to pay the lease on it and duty," Mr. Correia said.

Mr. Gardella said: "When he realised the rate in duty, he purchased the crane and got a rebate for paying too much duty, and changed my rental into a 'management fee'. At the end of July 2008, he then gave me back the crane for $1."

By the time the two pieces of equipment were returned to Connecticut in August 2008, NMI had received more than $800,000 in rental payments for them $600,000 for the crane and $200,000 for the vibratory hammer according to NMI's financial records.

E-mail correspondence details how the $514,990 paid for the two items was intended to be a payment towards the 45 percent share of the profits to which NMI was entitled. In an e-mail to Mr. Gardella, dated March 10, 2008, Mr. Correia wrote: "This the deal. 1. Keep your $514,000 for the crane and vibro as advanced profit share on labour profit only.

"2. $514K equates to 45 percent of $1,142,222.22 therefore

"3. Correia will pay itself $628,222.22 which equates to 55 percent of $1,142,222.22 4. We will use $1,142,222.22 as a line in the sand labour only profit share at this time."

Asked why he continued to pay Mr. Gardella "equipment" and "management" fees for the crane and vibratory hammer after buying them, Mr. Correia told this newspaper: "It was just to appease him."

The Ministry of Tourism and Transport, which was responsible for the oversight of spending on the project, declined to comment on whether it found the arrangement between the two parties acceptable.