Internal chaos at construction company causes project to go 2x over schedule/budget

[Julian Martinez]

Anyone have advice or experience with the following?

Here's what's happening-
I've ended up in a situation where the owner of the construction company I hired to build our ADU had to fire the project manager on our job because the PM did some shady stuff. And due to their internal strife, my project is now almost 2x over schedule and over budget.

We took out a HELOC to finance the build and only draw once a milestone is met. The milestones came fast and furious in the beginning- we started in May, had 80% of the work done by July, looked like we were going to be completed by August or September, which meant 80-90% of the HELOC had been drawn down by Sept. ONLY then did the internal strife start- and all work stopped once the strife started while the owner accused the PM of malfeasance, PM went rogue and made decisions to install things that didn't pass inspection, all the while, the meter is running on that HELOC balance. And now here we are, it appears we're close to the finish line, but the new PM has no idea where the last PM left off and is not making much progress on what remains, so while he tries to catch up, this is obviously costing us a sizable amount- not just the holding cost (000’s of $ per month) but also the lost rent.

Has anyone had to negotiate with (and/or threaten to complain or sue) your construction company for going WAY over schedule/budget on a project due to internal mismanagement within the company? Or withheld final payment to offset your expenses?

I've held back the last 10% of the project in case I need to hire a new company to finish the work. I’ve racked up a bunch of unexpected expenses while I wait for the construction company to figure out their issues- it feels unfair to bear the burden of those added expenses alone when this is not my doing. I plan to discuss with owner of the company some form of agreement about how we're going to make this right but if he's not willing to negotiate, I may have to resort to filing a complaint with CSLB and/or ultimately, threatening to litigate (which I likely wouldn't do since it's a lose-lose). 

Any advice or insights would be so appreciated.