MGM Mirage Sidestepping GC to Make Nice with Subcontractors

As a battle between the owner and general contractor of the $8.5 billion CityCenter development in Las Vegas continues to percolate, it appears subcontractors will be able to largely avoid the western-style standoff and, perhaps, some financial woes.
MGM Resorts International (MGM), whose board and shareholders on June 15 approved a change in its name from MGM Mirage effective immediately, told subcontractors on CityCenter that it will pay all legitimate claims of money owed to them for work on the Las Vegas Strip project, NACM has been told by sources with MGM and multiple subcontractor organizations present at the meeting.

The source at MGM, still facing a $492 million mechanic's lien filed by Perini Building, said the pace of payments depends almost solely on how quickly the subs turn around documentation and/or billing materials and discredited media reports that such payments could be held up until November. The source alleged they are taking this route with struggling subs because Perini badly mishandled its own paperwork for billing to the tune of 300,000 haphazardly organized documents strewn about in dozens of bankers boxes.

Randy Clark, of Nevada-based Young Electric Sign Co. (YESCO), which worked on the CityCenter project, said subcontractors he knows appear somewhat relieved by the development, and that he has never seen a company take this kind of approach when a hefty mechanic's lien is involved. Clark noted that it appears MGM officials "are going to try to be good local corporate citizens."
Perini, which previously met with Nevada Gov. Jim Gibbons (R) without MGM and called for the corporation to pay the subcontractors despite the lien, were not invited to the subcontractors meeting and again did not respond to requests for comment from NACM. MGM Mirage has alleged the general contractor failed to even present MGM with a final bill before filing the record mechanic's lien and botched the construction of CityCenter's Harmon Hotel so badly that it needed to be reduced by more than 20 floors from its original design.

For its part, Perini alleged MGM abruptly stopped paying for work already completed earlier this year, made thousands of change orders on the project's design well after an agreed-upon deadline and is trying to buy time because of its financial struggles of late. Perini said nearly $400 million of its mechanic's lien filing represented what was owed to subcontractors.
Greg Powelson, director of NACM's Mechanic's Lien & Bond Services, called the ongoing spat "a mess" and said MGM and Perini were likely still in the first stages of an 18- to 24-month process. Like disputes with other massive Las Vegas projects such as Fontainebleau and the Venetian, the situation doesn't appear to be one that will be fully settled quickly.

Brian Shappell, NACM staff writer

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