THE future of Pro-Active Management Ltd. as general contractor for the project to build a new Berkeley Institute appeared to be hanging in the balance last night.

Works & Engineering Minister Alex Scott said yesterday he had been locked in hours of talks over the future of the troubled $70-million project with parties including sub-contractors owed hundreds of thousands of dollars for their work at the new school.

Asked about the truth of rumours that Pro-Active Management was to file for bankruptcy, Mr. Scott replied: "The issue of Pro-Active's ability to continue on the site has been discussed today. It's been a fruitful day."

Although sub-contractors have refused to speak out publicly, sources have told the Mid-Ocean News that at least two of them are each owed in excess of $200,000.

One contractor has been planning to take legal action to retrieve the six-figure sum he is owed.

And some sub-contractors have insisted on being paid directly by the Government instead of Pro-Active and have threatened to withold supplies to the site if payments are further delayed.

Matters came to a head last week when workers on the project spoke out after their pay cheques from Pro-Active bounced, having arrived late for the third successive week.

Mr. Scott said yesterday that the Government was taking steps to ensure that creditors on all levels got the money they were owed from the Government project.

"The incident on the site where men could not cash their cheques concerned the Government greatly, because a day's work is entitled to a day's pay," said Mr. Scott.

"And equally, we are concerned about sub-contractors who have submitted billing for services rendered and have not been paid.

"There are sub-contractors who are owed monies and I have spent today (yesterday) in meetings addressing credit issues that some contractors have with the site.

"I don't want to go into specifics, but I can report that initiatives are being taken to address this very concerning situation. I would think that those who are owed money will have that situation addressed."

Asked whether sub-contractors had been paid directly by the Government, he replied: "That is possible."

Shadow Works & Engineering Minister Erwin Adderley said the Government had let down the sub-contractors.

"The Government has to be held totally responsible for this situation," said Mr. Adderley.

"Most of these sub-contractors got into this because Government said Pro-Active was a good company. And contractors had no reason to believe they would not get paid on time because this was a major Government project.

"It would appear that the Government has let these sub-contractors down."

Mr. Scott said last week that management help would be brought in to aid Pro-Active and speed up progress on the Pembroke site.

But the Minister did not confirm widespread rumours that the company to help would be Somers Construction.

"We certainly are pursuing extra management expertise, but I can't be any more specific than that," said Mr. Scott. "I don't want to pre-empt any step that is being taken."

When asked whether the company was being brought in to help with Berkeley, a Somers Construction spokesman said yesterday: "I really can't comment on that. All questions regarding Berkeley should be addressed to the Minister."

The slow progress of the site was highlighted in an audit report on the project by Auditor General Larry Dennis. Mr. Dennis concluded that the target completion date of September, 2003, would not be achieved and that Pro-Active's own total completion target of January, 2004 was "optimistic".

And he raised doubts over the validity of a performance bond which provides insurance for the project, as the company providing it, Bermuda Asset Holdings Ltd., had not even been incorporated at the time the bond was drawn up.

Mr. Dennis has also questioned the payment of $700,000 of Government money to Pro-Active as reimbursement for the cost of the bond.

The Ministry of Works & Engineering failed to provide the Auditor with a receipt to show that Pro-Active had paid out for the bond. The matter is now the subject of a police investigation.

Mr. Adderley said: "I understand that Pro-Active is being paid on a week-to-week basis, so I find it difficult to understand how they could get in arrears of more than $200,000 to two different sub-contractors.

"If the Government is having to pay sub-contractors directly, then I would say the contractors may be in violation of the contract and so the bond should be called.

"I think the Minister (Alex Scott) is reluctant to do that, because of the doubts over the validity of the bond."

Pro-Active Management Ltd. owner Arthur Ebbin did not answer messages left by this newspaper yesterday.

Education Minister Paula Cox said this week that no students would move into the new school until the entire complex was complete.

That statement appeared to signal the end of Mr. Scott's hope, expressed to this newspaper two-and-a-half months ago, that sufficient blocks would be finished by September to allow at least some students to start at the new school.

Mr. Dennis' report, released last November, said technical staff at the Ministry of Works & Engineering had considered Pro-Active a "high risk" option at the time the contract was awarded two years ago. And so they recommended that BermudaTech, whose bid came in at $5 million less than Pro-Active, be given the project.

Technical staff said there were three advantages of choosing Pro-Active, but seven disadvantages, including its lack of experience and lack of track record.

But the audit also stated how a report written by technical staff had also recognised that allowing Pro-Active, which is a Bermudian company, to bid would be politically desirable.

Pro-Active was allowed to bid and was then awarded the project by the Cabinet.