Project 'myproject' is missing required Java project: 'somelib'

I am using the vsocde-java extension with a gradle java project.

Receiving error "Project 'java_server' is missing required Java project: 'chesslib'

• Operating System: Linux Mint 19.2
• JDK version: OpenJDK 1.8
  Version: 1.40.2

Commit: f359dd69833dd8800b54d458f6d37ab7c78df520
Date: 2019-11-25T14:54:40.719Z
Electron: 6.1.5
Chrome: 76.0.3809.146
Node.js: 12.4.0
V8: 7.6.303.31-electron.0
OS: Linux x64 4.15.0-72-generic

My gradle configuration builds and runs fine, but the plugin complains still.

My build.gradle is as follows....

apply plugin: 'java'

// Use maven repository
repositories {
    mavenCentral()
    google()
}

dependencies {
    implementation 'org.eclipse.jetty:jetty-servlet:9.4.19.v20190610'
    implementation 'org.eclipse.jetty:jetty-client:9.4.19.v20190610'
    implementation 'mysql:mysql-connector-java:8.0.16'
    implementation 'org.apache.commons:commons-dbcp2:2.7.0'
    implementation 'org.jdbi:jdbi3-core:3.10.1'
    implementation 'com.google.firebase:firebase-admin:6.11.0'
    compile 'com.google.apis:google-api-services-oauth2:v1-rev155-1.25.0'
    // implementation 'com.google.gms:google-services:4.3.3'

    compile project('chesslib')
    runtime files('../../chesslib/build/libs/chesslib-1.1.12.jar')
}

task runServer(type: JavaExec) {
   classpath = sourceSets.main.runtimeClasspath 
   main = 'ChessServer'
} 

task runClient(type: JavaExec) {
   classpath = sourceSets.main.runtimeClasspath 
   main = 'ChessClient'
   standardInput = System.in // without this, using Scanner on System.in won't work
}

task runCLITestApp(type: JavaExec) {
   classpath = sourceSets.main.runtimeClasspath 
   main = 'CLITestApp'
   standardInput = System.in
}

My settings.gradle is as follows...

include   ':chesslib'
project(':chesslib').projectDir = new File(settingsDir, '../../chesslib')

Start by reproducing the report with the provided build.gradle and settings.gradle, including the external chesslib project path. Then inspect how the extension imports Gradle project dependencies and handles compile project('chesslib'); the issue is done when the configured project is resolved without the missing-required-project error.