The reflections continue this week, by drawing heavily on the text of the Uff Report and the transcripts of the Uff Commission, to set some of the scandalous facts into context. This is for those who are still wondering ‘What was it all really for?’
Last week I wrote that the State must behave in an exemplary fashion. It is also important to know that the State has a responsibility beyond the moral plane. On an entirely practical level, it is clear that the State controls the majority of economic activity in our nation. As such, it is responsible for the majority of construction projects in the country. If we exclude the exceptional projects built for the energy sector, over 75% of the construction in the country is carried out by the State.
- National Infrastructure Development Co. (NIDCO)
- Housing Development Corporation (HDC)
- Urban Development Corporation of T & T (UDeCOTT)
- University of Trinidad & Tobago (UTT)
- Evolving TecKnologies and Enterprise Development Company Limited (e TecK)
- Education Facilities Co. Ltd (EFCL)
The conduct of the State is therefore fundamental to the conduct of a huge slice of the business activity in our country. If the behaviour in the majority of our commercial relationships is improper, that is good reason for the cynical attitudes and poor standards which flourish.
Yes, there is considerable ambiguity in the term ‘improper’ and I am therefore going to illustrate.
- The role of Boards of SPEs – As I said when warning against the appointment of Michael Annisette as an Independent Senator – see https://afraraymond.wordpress.com/2010/04/22/2008/01/12/an-unhealthy-choice/ – speaking of “…Directorships in significant State-owned enterprises…it is a widely-held view that such appointments, especially to those who are not experts in the relevant fields, are only offered to those in political favour. To put it plainly, one would hardly expect to see UNC or COP members, however expert, on State Boards under a PNM administration…” Despite the fact that there are many excellent and hardworking Directors of SPEs, that is the background to those appointments. Just to make sure, given the ‘silly season’ we have entered, I am equally convinced that when UNC was last in power they also allocated those SPE Directorships in a similar fashion.
- The role of the Executive Management – Suffice to say that there is little difference in the considerations when making those appointments.
- The role of consultants and contractors – It is impossible to say who these stakeholders support, apart from themselves.
One of the perennial questions is ‘How come State projects are almost always overbudget and late?’ That is a truly universal question and the problem, if only the main element is isolated for discussion, is that the parties are too close.
The typical contractual and managerial controls of budgets, accounting systems, independent professional advice and penalty clauses were all violated wantonly. Our Treasury has been plundered. See the sidebar for an extract from the Uff Report.
UDeCOTT and the HDC are the State’s two main agencies in the move to physical development, they are both under the Ministry of Planning, Housing and the Environment.
We are now clear that both have been failures when measured against the goals set for them. The sheer scale of the failure will be set out next week in this space, again with extracts from the published record.
We need to ask what has to happen differently? Can we make the change?
SIDEBAR: What is ‘Good Governance?’
Governance is one of the vexed aspects of this discussion on the purpose and performance of Special Purpose Entities (SPEs). Whether we are looking at the HDC or UDeCOTT, the concerns are similar.
At the national level, we can have a broad description of good governance which includes elements such as – equity, participation, accountability, transparency and conforming to the rule of law. Of course, when we focus on the SPEs, there is a narrower definition of good corporate governance being the rules which are followed by a Board of Directors to achieve fairness, accountability and transparency in the relations with the company’s stakeholders.
When one considers that the SPEs were introduced to overcome the delays of the old civil service rules, their corporate governance rules are key in achieving those elusive levels of performance.
- Extract from the Uff Report – Paras 62 and 63 at pages 33/34.
“Holding to account
62. We have observed, in the context of contractual issues as well as regulatory matters that there exists a culture of non-enforcement which appears to operate on a mutual basis. Contractors seem reluctant to issue proceedings for payments overdue or to enforce claims and employers in turn refrain from enforcing time obligations which are routinely not complied with. In regard to delay issues, the point was demonstrated by the fact that no witness or representative appearing at the enquiry was able to quote any case in which a contractor had actually been required to pay or had been debited with liquidated damages. In the wider field there was a tacit acceptance that regulatory approvals, particularly as to planning, were rarely given in a final form before the work was performed, this coupled with an expectation that such approval would be forthcoming retrospectively.
63. At the same time we had the impression that one contractor who made a habit of enforcing contractual rights, if necessary by formal proceedings, was regarded as being “confrontational”. Such an attitude does not sit well with the careful drawing up of commercial agreements; nor with competitive tending, which is carried out on the basis that contracts will be enforced. It is also inconsistent with the clear duty of directors of companies and public bodies to enforce the contracts they negotiate and enter into. If there is a desire to promote the timely and proper performance of public sector contracts, this will only be achieved by holding parties to account for any breaches of contracts freely entered into; as well as enforcement of legal duties in regard to regulatory matters. Enforcement must also be assured through efficient and timely processes of courts and other tribunals.”
The emphases are mine.