“…A nod is as good as a wink to a Blind Horse…”
—A cynical Cockney view of political tricks.
“…You drink your rum, well let me drink mine…”
—A cynical local saying on how improper behaviour is tacitly accepted.
In this case, the THA, making its long-standing case for increased autonomy, seems comfortable to defend the wretched MILSHIRV agreement almost in the same breath as its perennial complaints of severe financial hardship. Well I tell you.
The misbegotten MILSHIRV project is ground-zero in the workbook for how PPPs and BOLT arrangements can violate the Public Interest. Our responsible senior Public Officials agreed to change the terms of the lawsuit so that the legality of this BOLT contract was never tested by the Court, so the matter was converted by agreement to become an ‘interpretation‘ issue. Given the Court of Appeal ruling on 21st October 2019, the Public Interest has once again been grossly violated.
Typical views of failed projects consider delayed completions, cost over-runs or structural failure but despite the popularity, such views are entirely incorrect. The proper position is that the only failed project is one from which we learn no lessons. That is the real learning here.
This article takes a closer look at the Court of Appeal judgment in this matter and the real implications for the public interest.
So, what are the legal implications of that ruling? The THA was represented by a team headed by former Attorney General John Jeremie SC, while the Attorney General was represented by team headed by the eminent Alvin Fitzpatrick SC.
The Court of Appeal found that –
“…allow the appeal and hold in relation to the first question that upon a true construction of the THA Act, the THA is not empowered to enter into a BOLT agreement for the purpose of developing and financing construction outside of the statutory framework in the THA Act for the control of expenditure; and in relation to the second question that upon a true construction of the CTB (Central Tenders Board) Act, the THA is not empowered and/or it is unlawful for the THA to enter into a BOLT agreement for the purpose of developing and financing construction projects other than in accordance with the CTB Act…” (para 51)
All of which has two important, inescapable implications –
- MILSHIRV – This deal failed both tests, on a straight reading of the published notes, given that the THA did not even seek approval from the Finance Ministry or invite the Central Tenders Board to superintend the process. The MILSHIRV contract could therefore not withstand the intended legal challenge;
- Retroactive Approval – Given those serious breaches, it is clear that the MILSHIRV investors would have been exposed without any cover since no court would uphold an illegal agreement. I was still surprised to learn of the then Finance Minister’s role –
“…Howai stated that…in view of the possibility that the rights of innocent third parties, in particular Milshirv Properties Limited and FCB Limited, may be adversely affected by the Court proceedings as presently constituted and in the interest of good public administration he had decided to approve under section 51(b) of the THA Act and all enabling powers, the construction of the office complex as well as the lease and mortgage of the same to the THA and FCB pursuant to the BOLT arrangements entered between the THA and Milshirv; and to approve under the Act expenditure for the payment of lease rents to Milshirv under the proposed office lease between the THA and Milshirv…” (from THA Press Statement of 26 July 2013)
The emphases are mine as Howai’s use of the phrase ‘innocent third parties’ is egregious in the extreme, given that Rahael Group devised the project and sold it to THA. The Finance Minister used his discretionary powers to grant retroactive approval, while the then AG used his discretionary powers to shift the focus of the lawsuit.
The first, essential stage in the procurement cycle, public or private, is the Needs’ Assessment, which is intended to examine what is proposed, why and how those objectives might be best achieved. All of that examination is to be done before any legal or financial commitment is made, so that there is no rush to judgment or undue pressure on decision-makers.
Few public projects in our country are ever subjected to a needs’ assessment, since that would involve explicating all the aspects of the proposed projects and greatly reduce the scope for meaningless projects. That consistent application of Needs’ Assessments is one of the standards which will be required under the new Public Procurement and Disposal of Public Property system. That alone would be a big improvement on the existing deep dysfunction.
In the case of MILSHIRV, before contracting, consideration would have had to be made as to the need for a desperately cash-deprived public authority to
- buy land for $12M to lease to a new company for an unknown project to;
- enter a previously unidentified contract for $311M;
- to build an office three times larger than the current ones;
- for which the rent to be paid was twice as high as was then being paid and 50% higher than was the highest in Tobago;
- all to result in increasing the rental bill by five times.
MILSHIRV is a strong example of detrimental and deliberate circumvention of proper process to achieve political and financial objectives, but there are two further lessons for consideration.
- Firstly, Rahael Holdings made an unsolicited proposal for MILSHIRV. In procurement practice, an unsolicited proposal is a Red Flag, since it enables Phantom Projects while side-lining the normal tendering and competitive procedures and that is exactly what happened here.
- Secondly, the impact of MILSHIRV, given its size would likely be that the increased vacancies within offices previously occupied by THA would reduce rental levels in Tobago. Which means that the fixed rent provisions in that lease amount to a detrimental arrangement resembling take-or-pay.
The PNM-led THA and the Peoples Partnership’s AG found common cause to avoid examining the legality of MILSHIRV. The PP’s Minister of Finance obliged by granting retroactive approval and the THA will now appeal the Court of Appeal ruling at the Privy Council. So exactly who is representing the public interest?