The contractor responsible for demolishing the Deutsche Bank building next to ground zero where a fire killed two city firefighters Saturday will receive a $6 million incentive payment if the demolition is completed by December 31.

The seven-alarm fire was possibly exacerbated by a lack of water supply and by polyurethane sheets covering asbestos and other materials inside the building. The fire marshal is investigating the cause of the blaze, which was still burning in isolated pockets yesterday afternoon.

Environmental concerns about the substances that rained down on the building when the World Trade Center towers collapsed in 2001 have meant that contractors from Bovis Lend Lease are demolishing the building floor by floor, piece by piece. The Lower Manhattan Development Corp. contract under which they are operating, which was originally for $82 million, set a $6 million bonus for finishing by year’s end. It wasn’t immediately clear whether there was any similar financial incentive in the contract for finishing the job without any deaths or injuries.

Officials would not say whether the project had been on track to meet the end-of-year deadline. In the past seven months, contractors have taken apart about 14 floors and had less than five months to take down the remaining 26 floors.

The Web site of Lend Lease, the publicly traded Australian company that owns Bovis Lend Lease, states, “We are committed to being Incident & Injury Free wherever we have a presence. This philosophy reaches every part of our operations and extends to clients, suppliers, subcontractors and other stakeholders.”

A spokeswoman for Bovis Lend Lease, Mary Costello, yesterday referred press inquiries to the Lower Manhattan Development Corp.
Officials including Governor Spitzer said yesterday that the fire is likely to affect the delayed demolition project, although they were uncertain how long it will be put on hold.

“Clearly there’s no work going on right now, so that in itself is a delay,” a spokesman for the Lower Manhattan Development Corp., which currently owns the site, Errol Cockfield, said.

“We’re obviously disappointed because we’d been bringing the building down at a steady clip,” he said.

The city’s Department of Environmental Protection said yesterday that the air in the area following the fire was clear of asbestos, and said further testing would show whether there were elevated levels of mercury and other toxic substances.

Under a contract renegotiated this year, the contractor, Bovis Lend Lease, which is working with subcontractors, including John Galt Co., is to be paid $6 million if it finishes dismantling the building by the end of the year, according to a state official. If it doesn’t meet the deadline, the contractor would not be automatically paid the $6 million. Instead, it would have to argue in court that the state should pay it the money, which is related to the timeliness of its work on the project. It is unclear how the fire could affect that potential litigation.

A spokesman for JP Morgan Chase, which announced this summer that it would open a new headquarters on the site in 2012, Thomas Kelly, said the fire didn’t diminish the company’s desire to build there: “We want to build a building on that site.”

He added that “it’s too early” for the bank to tell whether the delay could affect the demolition and the heavily government-subsidized $2 billion real estate deal.

Further delays could also slow the construction of a $500 million vehicle security center, underneath 130 Liberty Street, which would screen all deliveries to the 8 million square feet of office feet planned in four commercial towers at ground zero.

The fire is the latest in a series of delays in the demolition of the Widow, as the black-shrouded building overlooking ground zero is sometimes called.

Insurance companies have battled over costs, contractors have walked off the job, and this summer, a steel pipe from the building stabbed the roof of a nearby firehouse, hurting no one but slowing progress on the project during the investigation.

In the nearly six years since the September 11, 2001 attacks, the bank building has been called an eyesore and a curse that haunts Lower Manhattan. It has been a tomb for hundreds of fragments of human remains from the World Trade Center.

The two veteran firefighters who died this weekend, Robert Beddia, 53, and Joseph Graffagnino, 33, were from the Battalion 2 firehouse in SoHo, which lost 11 firefighters on September 11.

Beddia and Graffagnino ran out of oxygen as they were dragging hoses to the upper levels of the building because the building’s source of water, known as a standpipe, wasn’t working. The fire started on the 17th floor, which was not yet cleared of asbestos, and spread to multiple floors, fire officials said.

Standing among bouquets of flowers strewn on the sidewalk, Captain Patrick McNally of Ladder 5 spoke briefly yesterday at an emotional news conference in front of the Battalion 2 house.

“Unfortunately for this firehouse, they’ve been through it before,” he said. “They just stick together.”

Mr. McNally said Graffagnino had been the “heart and soul” of the firehouse, while Beddia, “being the senior man, he had trained or broke in almost everybody in.”

Beddia had 23 years with the department, and Graffagnino had worked for eight.

“Neither one, not a finer person you could meet,” Mr. McNally said.

A maze of dismantled materials and debris made fighting the fire more difficult, and more than 50 firefighters were injured in the fire, officials said.

Contractors and owners of buildings undergoing construction or demolition are required to communicate regularly with the fire department about floor plans and other building components that could affect fire fighting. A fire official yesterday said he wasn’t aware if the building’s contractor or owner had contacted area firehouses or if firefighters had visited the building recently.

Many floors in the building were draped in polyurethane sheeting, which is meant to keep toxins from spreading into the air, but which also traps in heat.

In addition, the standpipe for the building was “dry” according to building plans, meaning the pipe does not have water immediately available for dousing fires.

The City Buildings Department declared the former bank building structurally sound even as engineers were conducting more inspections yesterday. Buildings nearby were open, and authorities said they would also continue to monitor the air for toxins.

For residents in the area, the blaze that sent black smoke spewing into the air over ground zero brought back both old memories and old worries from September 11.

A notice from the Department of Health and Mental Hygiene warned that the fire “could trigger painful memories,” and that residents might react by feeling symptoms such as confusion, anger, or headaches. Already, anger appeared to be setting in among a group of a dozen residents and city officials who gathered in a third floor apartment overlooking ground zero. They called for transparency as the demolition moves forward and suggested the state appoint a tsar to oversee the Deutsche Bank demolition.

“We’re told the air is safe to breathe, but no one believes it,” the president of Independence Plaza Tenants Association in TriBeCa, Diane Lapson, said, citing the controversy over EPA assurances that the air over ground zero was safe in the months following September 11. “The problem is that since 9-11, we have so many tenants whose health has been really compromised.”

The chairwoman of Community Board 1, Julie Menin, said that while neighborhood residents were ready for the “Widow” to finally come down, they were more concerned about the safety and integrity of the demolition process.

“It’s not a question about how long, it’s a question about doing it right,” she said.