Category: Public Procurement Reform

G2G Policy

The current Government to Government (G2G) arrangements are a direct threat to our country’s fundamental interests.

The key element of the G2G arrangement is that a larger, more advanced, country will assist a smaller, less-advanced country by building or operating complex facilities which are beyond the reach of the smaller state.

One of the features the G2G arrangements have in common with the other large-scale projects is the high degree of secrecy with which the proposals are developed.  That secrecy raises doubts as to whether proper Needs Assessments are undertaken and as to the degree to which the views of citizens and stakeholders are sought, far less considered.  The fundamental issue as to the necessity for these projects is thus routinely sidelined, which is inimical to the public interest.

The main criticisms of the G2G arrangements are –

  • Sidelining of the elementary Tendering Process – the procurement process is effectively outsourced, since the more powerful country has the right to select the contractor;
  • Limited, if any, role for Local Participation in terms of labour, professionals, suppliers, or contractors;
  • Weak or nonexistent contract controls, due to the disparity in power between the parties;
  • Serious drain on Foreign Exchange;
  • Lack of the promised Transfer of Technology.

These arrangements have been heavily criticised in our country for almost 35 years, starting with Winston Riley’s October 1979 paper which identified many of the emerging problems.  As a result of that rising tide of criticism, an official enquiry was established by then PM, George Chambers.  In March 1982, the Ballah Report was published and the G2G programme was brought to a halt as a result of its dire findings.

Despite the learning, successive political administrations seem unable to resist the appeal of these G2G arrangements, so we have today’s situation as shown in the table.

Physical Development Projects via G2G – April 2014

Readers who access this article online can view the background info via the hyperlinks

COUNTRY PROJECT/S DATE AMOUNT COMMENTS
CHINA NAPA – North & South 2008
  • TT$818M as’final cost’
  • TT$207M for ‘remedial works’
 NAPA (POS) completed in 2009, NAPA (San Fernando) completed in 2012– stated final cost of both projects was $130M USD ($818M TTD). A further $207M was borrowed from EXIM Bank of China in 2011 for ‘remedial works‘ on NAPA (POS). Design & Build contractor was Shanghai Construction Group.
AUSTRIA San Fernando Teaching Hospital 2011 TT$739M Opened in January 2014
CANADA Penal Hospital 2012 Undisclosed Involvement with Canada’s nominated designer SNC-Lavalin was discontinued after serious concerns over that firm’s international banning for corrupt business practices.
CHINA
  1. Couva Children’s Hospital,
  2. three national sports facilities in Couva,
  3. three multi-sports facilities in other parts of the country.
 2012 TT$1.8 Billion Loan Agreement signed in March 2013 with EXIM Bank of China, with Shanghai Construction Group selected as the contractor for all the projects.These projects include the swimming & cycling complex at Balmain and the sporting complex at Tacarigua Savannah in Orange Grove.
CHINA Lake Asphalt 2013 Undisclosed MoU, with a Confidentiality Agreement, signed on 30 May 2013 between Lake Asphalt T&T Ltd and a Chinese contractor. One of the official objectives of the February 2014 State visit to China, according to the Office of the PM, was “…Removal of asphalt from the Pitch Lake in greater capacities…”.
CHINA La Brea Port and seven industrial parks. 2014 US$750M (TT$4.83 Billion) Agreement signed in February 2014 to have these facilities built by China Harbour and China Construction.

The total cost of these projects is just under $8.4 Billion TTD.
That is the background, against which we must consider these further elements –

  • china-caricomRegional Strategy – As a leading nation within CARICOM, it is important for Trinidad & Tobago to give serious consideration to the role of the various bilateral G2G arrangements China is pursuing in our region and the implications of those arrangements on our aspirations for healthy regionalism.  I have been reading the February 2013 Research Note by UWI’s Dr. Annita Montoute – ‘Caribbean-China Economic Relations: what are the Implications?‘  The scope of Dr. Montoute’s research and her findings are sobering – at pg 115  “…CARICOM Trade with China is on the increase; however it is overwhelmingly in China’s favour…”.  The regional issue is a serious one to which we must address our energies.
  • Trinidad & Tobago’s Strategy – Now consider these statements by then Finance Minister, Winston Dookeran, at the September 2011 ceremony to sign the $207M TTD loan for NAPA (POS) ‘remedial works’ –

    “…Dookeran said it was now imperative that TT deepens its ties with China…’In the first instance China has now emerged as a very significant player, especially in light of the recent tremors and uncertainties in the world economy,’ he said. ‘China…is now an economy that we will have to rely upon. It is in that context that it is very appropriate and timely for Trinidad and Tobago to start to intensify its relationship with China.’..”

    Winston Dookeran is now Trinidad & Tobago’s Minister of Foreign Affairs.

  • The Uff Report – The 42nd and 43rd recommendations of the 2010 Uff Report deal directly with this  issue –
    1. The Government’s policy on the use of foreign contractors and consultants for public construction projects should be transparent and open to review.
    2. Local contractors and consultants who compete with foreign companies should be provided with the same or equivalent benefits as enjoyed by those foreign companies and should be protected from unfair competition through matters such as soft loans…

    Uff was calling for the establishment of a national policy on this series of issues and the JCC has been requesting a consultation between government and stakeholders, so that a proper strategy can be developed in open collaboration. That would include labour, professionals, the State, the contracting sector and all the associated elements such as suppliers of building materials, financiers, skills training and so on.  The JCC wrote to the PM on this in April 2012, but to date there has been no response to our calls for those consultations in the national interest.

  • NAPA, again – The Minister of Culture, Dr. Lincoln Douglas, told the Senate on 8 April 2014 of the serious issues arising at NAPA (POS), with an estimated further $100M being required for more repairs.  It is not certain if the issues of disrepair are all due to inadequate maintenance, but it is unacceptable for such issues to have emerged for a structure less than 5 years old.
  • Shanghai Construction Group – Despite the bad record at NAPA, the selected contractor for the $1.8 Billion Couva Children’s Hospital and the other sporting facilities is the said Shanghai Construction Group.
  • Proposed Public Procurement Law – most alarmingly, Clause 7 of the proposed Public Procurement & Disposal of Public Property Bill 2014 specifically excludes Government to Government Arrangements and projects funded by International Financial Institutions from oversight.  That proposed exclusion is entirely unacceptable as it further jeopardises our national interest.

The PM has made a call for a National Conversation and this is one topic which needs addressing. Our country cannot continue exporting our jobs, capital and skilled people in favour of unexamined and undisclosed foreign policies.

AUDIO: The Showdown Show Interview, i95.5FM – 6 April 2014

Afra Raymond is interviewed on the ‘Showdown‘ show on i95.5FM about the public procurement legislation recently laid in parliament. 6 April 2014. Audio courtesy i95.5FM

  • Programme Date: Sunday, 6th April 2014
  • Programme Length: 0:38:25 + 0:48:59

Part 1:
Part 2:

FAILURE to ACCOUNT

[gigya src=”http://www.timetoast.com/flash/TimelineViewer.swf” flashvars=”passedTimelines=850809″ width=”100%” height=”400″ allowScriptAccess=”always” ]

The main issue now arising in relation to the Beetham Water Recycling Project (BWRP) is the complete failure of our country’s system of Public Financial Management.

The $1.043 Billion BWRP was omitted from Trinidad & Tobago’s 2014 national budget.  By any standard that is an unpardonable failure to account for that mammoth sum of Public Money.  Although the national budget-making exercise is collective in nature, the ultimate responsibility for that function is held by the Minister of Finance & the Economy.  That Minister is Larry Howai, who is a Certified Management Accountant and was a career Banker, up until his appointment in June 2012.

The JCC have been long-time campaigners for Public Procurement Reform, together with our Kindred Associations – T&T Chamber of Commerce; T&T Manufacturers’ Association; T&T Transparency Institute; American Chamber of Commerce; Federation of Independent Trades Unions & NGOs and the Local Content Chamber.  In the preamble to our 2012 draft Bill we identified Public Procurement Reform as heralding the “stated intention to strengthen the quality of governance by promoting these principles of good governance by systemic re-engineering of the public financial management system. This Bill is thus one of a raft of relevant Bills for the re-engineering of the public financial management system.”

Public Procurement Reform is therefore a fundamental part of the modernisation of our Public Financial Management system.  We need that system to map our pattern of income and expenditure in order to gather the basic information to allow us to plan how we are going to spend the future income.  Budgeting is a critical component of that system.

SIDEBAR: PNM’s Public Procurement Position

I was contacted last week by a senior PNM MP who shared with me certain of their ‘official stated positions’ on Public Procurement from 2009, in an attempt to rebut my assertion that there was no known PNM position on this critical issue.  In late 2006 PNM shelved the White Paper on Public Procurement and the accompanying draft Bill, which would have saved the country all of these ongoing losses of Public Money, so I remain unconvinced.  PNM left office after losing the May 2010 elections to the PP, so a 2009 position is not very persuasive.

The Private Sector/Civil Society group continues to extend its invitation to the Leader of the Opposition for dialogue on this critical issue of national development.

The government laid its long-awaited Public Procurement & Disposal of Public Property Bill in the Senate on Tuesday, 2 April, with a three-week period set for public comments before formal debate on that new law.  The fiasco of the BWRP being omitted from the 2014 budget is an inescapable example of both failure of Public Financial Management and questionable procurement process.

Our country must move out of this period of chronic waste and theft of Public Money.  It is important that we achieve that by a peaceful transition to adopt the advances used in other countries to control corruption in public transactions.

It is therefore necessary to closely examine this BWRP episode so that we can draw lessons for our collective progress.

The (*estimated) timeline is instructive –

  • February 2013* (reported in local media)– WASA obtains a $246M USD IDB loan for wastewater works, including this BWRP.  That loan is reported to be the largest granted by the IDB in the Western Hemisphere.  Exactly when and why that loan was rejected remains unclear. WASA is also collaborating with PUB-CPG Consultants of Singapore to provide technical support and services for the development of the Beetham Wastewater Treatment Plant Reuse Project. (p. 8)
  • June 2013* – NGC appointed CPG Consultants, to prepare the Request for Proposals (RFP).  [Hansard pp. 152] Given that the RFP was advertised on 2 September 2013, it seems reasonable to suggest that this appointment was in mid-2013.
  • 9 September 2013 – the budget statement is delivered by Minister of Finance & the Economy, Sen Larry Howai, with no mention of the Billion-Dollar BWRP, the RFP for which was published a mere seven days prior.  The 2014 budget contains statements relating to the adequacy of water supplies and the highlighting of five new waste-water treatment plants, as detailed in last week’s column.  Those statements are contrary to the rationale, given elsewhere of course, for BWRP.
  • 21 November 2013 – the Minister of the Environment & Water Resources, makes a formal statement detailing the expansion of Desalcott’s daily output from 32 million to 40 million gallons. [Additional link]
  • 10 March 2014 – BWRP contract was awarded to SIS Ltd and its subcontractors in the sum of $1.043 Billion. [Hansard pp. 150-161]
  • 14 March 2014 – WASA announces that Desalcott’s expansion programme is delayed and will take effect in April, instead of January as originally anticipated.

That timeline is worrying enough, but consider the other aspects.

It is worth repeating that the underlying commercial elements of the project remain undisclosed.  According to section 1.1 of the RFP issued by NGC –

“…NGC will be responsible for supplying Feedwater to the WRP at no cost to the Contractor. The Contractor will be responsible for the processing of the Feedwater into Product Water at the WRP and supplying the Product Water to NGC.

NGC will enter into a Water Sale Agreement (WSA) with WASA concerning the sale of the Product Water. WASA in turn will sell the Product Water to industrial companies at Point Lisas…”

So, NGC will be supplying wastewater at no cost to BWRP, which seems to usurp WASA’s role.  WASA will then buy the recycled water (Product Water) from NGC, before selling that to industrial users at Point Lisas.

This raises questions as to the terms of those agreements and just who are the beneficiaries of this arrangement.  The answers will go to the very heart of this matter since the stated rationale for this entire exercise is the supposed inability of WASA to finance these works.  Will the new arrangements improve WASA’s financial position?  Are those critical figures also being deliberately suppressed?

All of which leads right back to the issue of the omission of BWRP from the 2014 national budget.  How and why did that happen?  No play on words here, but the Minister of Finance & the Economy needs to offer the public a clear accounting for this unacceptable position.

Are we witnessing a situation in which the entire Cabinet was aware of this huge BWRP and a deliberate, collective decision taken to omit that from our national budget?  Or are we seeing that a small group of high-level Public Officials were able to activate and implement a huge project out of the ‘line-of-sight’ of the Finance Minister.  Which is it?

One of the lessons from enquiries into the global financial collapse is the pernicious practice of ‘Regulatory Arbitrage‘, in which the players in the financial market were able to choose to which regulatory regime they would subject various products.  That practice allowed bad, ‘smartman’ practices to grow until the historic crisis exploded.  Those arose in some of the most advanced jusrisdictions due to the several financial market regulators in operation.  The same ‘smartman’ behaviour was evidently at the root of the CL Financial collapse here.  One of the important lessons from that global crisis, which our country seems to be adopting, is that the financial system is better regulated by a single entity.

The same solid lesson should also be fundamental in our efforts to develop an effective Public Procurement system for our country.  To my mind, this matter is also a notable example of ‘Procurement Arbitrage‘, in which major players in the State sector can choose to take less transparent paths to implement pet projects.  For whatever reason, this reminds me of TIDCO paving roads some years ago.  A little bit again and we might hear that NGC is undertaking road projects.

Clause 7 of the government’s Public Procurement & Disposal of Public Property Bill specifically excludes Government to Government Agreements and projects funded by International Financing Agencies from oversight by the new system.  That is an unacceptable exclusion since it would immediately place the greater part of State procurement outside of transparent and accountable oversight.  That exclusion will, in turn, spawn a fresh round of the detrimental ‘Procurement Arbitrage‘ identified in this BWRP issue.  The JCC is strongly objecting to that attempt at taking the path to obscurity.

The fact is, that as matters stand, we do not know what other ‘off-budget‘ projects are in play.  How can the public properly establish the extent of the State’s commitments?   This deplorable episode does little credit to the progressive notion of ‘Good Governance’ in our nation.

The Minister of Finance & the Economy must give a proper accounting for this glaring omission from the 2014 national budget and a clear set of details for the BWRP, to include the underlying commercial elements which are driving the entire arrangement.

CRYSTAL CLEAR

NGC advertisement for Beetham Water Recycling Project – Ten Million Gallons | March 2014
NGC a\Advertisement for Beetham Water Recycling Project – Point Lisas Supply | March 2014
NGC Advertisement for Beetham Water Recycling Project – Benefits | March 2014
NGC Advertisement for Beetham Water Recycling Project – Benefit to Citizens | March 2014
NGC Advertisement for Beetham Water Recycling Project – Decisive Leadership | March 2014
NGC Advertisement for Beetham Water Recycling Project – Water Route | March 2014
NGC Advertisement for Beetham Water Recycling Project – Energy Sector | March 2014
NGC Advertisement for Beetham Water Recycling Project – Tender Process | March 2014
NGC Advertisement for Beetham Water Recycling Project – Transparency | March 2014
NGC Advertisement for Beetham Water Recycling Project – Centre Spread | March 2014

The title for this column is borrowed from the ongoing, expensive advertising campaign being mounted by WASA & NGC to promote the attributes of the Beetham Water Recycling Project. (Click thumbnails at right to magnify)

The Project is in two stages – to Design and Build a water recycling plant at Beetham and to Operate & Maintain that plant for a period of five years.  The recycled water is to be piped to Point Lisas for the cooling requirements of industrial customers, which we are told will ‘free-up’ about 10 million gallons per day of drinking water.  This Design & Build contract for $1.043 Billion was awarded to SIS Ltd and its sub-contractors on 10 March 2014.

Despite the attributes presented by this project, there are grounds for serious concern as to the process adopted and the actions of the various public officials involved.

The Leader of the Opposition, Dr. Keith Rowley, first raised this matter in the budget debate of September 2013, following that with a formal complaint, on 10 March 2014, to President Carmona.  In addition, Dr. Rowley’s Private Motion was to be debated in Parliament on Friday 28 March calling for the Prime Minister to stop the project and investigate the matter.

Having considered the available facts, the JCC issued a Press Release on 20 March 2014 calling for the project to be immediately halted. The JCC is also calling for an independent public investigation into this entire matter.

The JCC’s preliminary concerns are –

  1. The Budget?

    The project is not mentioned at all in the 2014 national budget.  It is not in the Budget Statement or any of the supplementary documents which record the figures for State Enterprises (such as NGC), Statutory Corporations (such as WASA) or the overall national accounts.That omission itself is grave enough to warrant a complete halt to this dubious operation, but that is not the worse of it.  Not at all.When one carefully considers the 2014 budget, two even more serious issues become apparent.

    1. The first is the timeline.  The NGC published the Request for Proposals (RFP) for this huge project on Monday 2 September 2013.  The 2014 budget statement was delivered by Minister of Finance & the Economy, Larry Howai, on 9 September 2013.
    2. The second is that the 2014 budget actually has a section dedicated to ‘Water Resources’ at pgs 31-32.  That section of the budget states that “In fact, Trinidad is making significant progress towards achieving water for all” and “Tobago is well within achieving water for all”.   Details of upcoming projects were also provided – “We are expanding and improving wastewater treatment, collection and disposal systems in Malabar, San Fernando, Maloney, Cunupia and Scarborough, Tobago.”

    So, the Minister of Finance & the Economy assured the nation that we are well on the way to ‘Water for All‘, only one week after NGC published that RFP.  That sequence of events raise fundamental questions as to just what reliance we can place on our national budgeting process.  Reports which are silent on large-scale proposals are unreliable.  For our national budget to slide into that category of unreliable document is unacceptable.

    What is more, Minister Howai’s statement as to the nation’s water supply and WASA’s intended projects really give us cause for a pause.  If the Minister’s statements are reliable, why do we need this project?  If those statements cannot be relied upon, we are really at a sobering moment.

    The State Enterprises Investment Programme (SEIP) is an integral document in the national budget, which shows all capital infrastructure projects financed by State Enterprises and Statutory Authorities.  NGC’s projects are detailed at pgs 8-12 of the 2014 SEIP, but there is no mention of this Billion-dollar Water Recycling Project.

    The silence in the budget as to the Beetham Water Recycling Project is unacceptable.  It raises the direct question as to the reasons for the actions of these public officials.  It is unacceptable that a project of this size and consequence could be conceived and implemented as a ‘phantom project‘.  This is a mammoth ‘off-budget‘ expenditure to be funded by Public Money, via the NGC.

  2. The implementing Agency

    Apart from the ‘off-budget‘ issue, there is also the burning question as to the choice of the delivery agency.  WASA was reported to have obtained a $246M USD loan from the Inter-American Development Bank (IDB) in February 2013 for local wastewater management, to include this project.  No reason was advanced for the decision to resile from that course of action in favour of the current procedure.

    WASA is the Statutory Agency responsible for our country’s water supplies and sewerage, while NGC is the State-owned company established to manage the distribution and sale of our country’s natural gas. The JCC is questioning the reason for the participation of the NGC in this water treatment project. The Chairman of WASA, Indar Maharaj (who is also the CEO of NGC), stated that WASA did not have the money for the project as a way to explain how NGC came to procure these water treatment facilities.

    Sen. Larry Howai, Minister of Finance
    Sen. Larry Howai, Minister of Finance

    The role of the Minister of Finance & the Economy is crucial in this matter, as that Minister has the authority to secure funding from either the IDB loan or other State resources, such as NGC, to have the project implemented by WASA.

    The choice of NGC as the implementing agency for this Beetham Water Recycling Project is one which has serious implications in terms of oversight.  The implementation of this project by WASA would have required the involvement and supervision of the Central Tenders Board.  What is more, since the project would have been proceeding via a Statutory Authority, the tendering and appraisal procedure would have been open to challenge by means of a judicial review.

    As things stand, after the Appeal Court decision in NHIC v UDECOTT (#95 of 2005), NGC, as the State-owned Enterprise implementing this project, is shielded from judicial review in its commercial contracting operations, unless evidence of fraud or illegality can be produced.

  3. What are the Commercial fundamentals?

    Was a Needs Assessment carried out for this huge project? The 2014 budget detailed WASA’s significant pipeline renewal programme, which is expected to result in a significant reduction in the wastage of potable water. Desalcott is undergoing a 25% expansion in its output of potable water, from 32M gallons daily to 40M gallons, due for completion in April 2014.  So, just what is really the plan?

    The JCC is noting its grave concern that no Business Case seems to have been made for the advisability of this large-scale project on grounds of a value proposition.  The long-term, underlying contractual arrangements which are driving this project remain obscured.  Do these proposed arrangements improve or further diminish WASA’s financial standing?  Do they benefit NGC and to what extent? What is the financial impact of these proposals on our country’s fortunes?

    Despite the strong protests from the PNM on this matter, the JCC notes that the Opposition’s position on Public Procurement reform is unknown. The continued efforts by our Private Sector/Civil Society group to engage the PNM in dialogue on this question have been fruitless.

The lawful circumvention of our country’s oversight provisions in this matter is glaring.  This situation amounts to a deliberate choice by public officials to take the path to obscurity, with diminished transparency in the execution of this huge project.

As I wrote in June 2008, criticising the previous administration’s mega-projects via UDECOTT – “Either the Cabinet or its advisers are responsible. We are either dealing with a lack of rectitude at the highest level of our republic or a sobering naïveté.”

Sad to say, that much is ‘Crystal Clear‘.

FOREIGN AFFAIRS

g2gGovernment to Government arrangements (G2G) are made between two states, so that the less developed one can benefit from the technology and methods of the more advanced one. Given the scale of projects now being undertaken via these arrangements; the current high-level State mission to China, with its key objective of deepening the strategic ties; the long-promised and impending Public Procurement & Disposal of Public Property law and our recent G2G experience, this a critical issue to delve into.

These G2G arrangements have been controversial since their introduction to Trinidad & Tobago in the 1970s, during the ‘petro-dollar boom‘. The Central Tenders Board Act was amended in 1979 to exclude both State Enterprises and G2G arrangements from what was seen as the heavy hand of bureaucracy. In that period, the most memorable projects done via G2G were the Mount Hope Medical Complex, the Twin Towers and the Hall of Justice. There were other projects, often shrouded in allegations of corruption and improper practice. After strong protests, the then PM George Chambers appointed the late Lennox Ballah to enquire into the entire series of G2G arrangements. The Ballah Report was published in March 1982 and it should be required reading for those who are committed to national development. Chambers accounted for the petro-dollar by reporting to a shocked nation that two out of every three dollars had been stolen or wasted. Most of the G2G arrangements were stopped after that publication.

Yet these damaging arrangements have now re-emerged and what is more, there does not appear to have been any fundamental improvement in our terms within the new agreements. Once again, despite the clarity of the Ballah Report and its publication, we do not appear to have the capacity to learn from our history. That is a fatal blind-spot in our society.

It is clear to me that G2G arrangements, as presently configured, are severely detrimental to our national interest. Supporters of G2G would say that those arrangements allow a more rapid pace of development at costs which can appear to be competitive.

The main criticisms of the existing arrangements are –

  • Sidelining of the elementary Tendering Process – the procurement process is effectively outsourced, since the more powerful country has the right to select the contractor;
  • Limited, if any, role for Local Participation in terms of labour, professionals or contractors;
  • Weak or nonexistent contract controls, due to the disparity in power between the parties;
  • Serious drain on Foreign Exchange;
  • Lack of the promised Transfer of Technology.
Shanghai Construction head, Michael Qing Zhang, centre, with former PM Patrick Manning, right, and Calder Hart of UDeCOTT touring NAPA under construction.
Shanghai Construction head, Michael Qing Zhang, centre, with former PM Patrick Manning, right, and Calder Hart of UDeCOTT touring NAPA under construction.

The previous administration entered a high-profile G2G arrangement with China to build the National Academy of Performing Arts (NAPA) in POS and San Fernando via a $100M USD loan. The fundamental injury this G2G did to the national interest was that it ceded effective control of the project to China, who exercised their rights by awarding these two huge Design & Build contracts to Shanghai Construction Group (SCG). The POS NAPA was a highly-controversial project, executed via UDECOTT, with Peter Minshall reportedly stating that the buildings looked like ‘copulating slugs‘. Many allegations were made against local designers, contractors and workers as the pressure mounted on the Manning administration.

We know that the design errors are legion at NAPA POS, arising mostly from the lack of consultation with user groups and the public. The costs of sidelining a proper consultation process are high, so this is a vital case-study of the heavy impact of those detrimental arrangements.

Strong protests were raised in the Parliament by the then opposition against the NAPA deal. Those people are now in government, the previous administration having suffered a heavy electoral defeat in what seemed to me to be a public rebuff at these kinds of arrangements.

But the real lesson for us here is the extent to which our national interest has been wounded in that the ability to renegotiate appears to have been compromised. Just consider that the incoming PP administration was obliged to ‘fall-into-step’ when expensive remedial works were required in 2011, which was the second year since NAPA (POS) was opened. In September 2011, the State took a further $210M loan from the Export-Import Bank of China to carry out remedial works at NAPA POS, those works to be done by the original contractor, Shanghai Construction Group. The normal procedure is for remedial works to be for the contractor’s account, but these G2G arrangements are not normal. Having been sidelined by the original project, our local designers, engineers, bankers, contractors and skilled trades-people were once again displaced by foreign interests.

What is worse, the original projected cost for NAPA (both POS & San Fernando) was said to be $100M USD and it was later disclosed that NAPA POS cost $500M TTD, before the remedial works of $210M. You see?

One would think that with the high cost of remedial works at NAPA POS having been revealed in September 2011, the present administration would have been cautious in embracing these G2G arrangements. But no, it did not

Prime Minister turning sod for Couva Hospital
Prime Minister Kamla Persad- Bissessar turning sod for Couva Hospital

On Friday 2nd March 2012, the PM turned the sod for the Couva Children’s Hospital, to be built under a new series of G2G arrangements with China. The PM’s address contained a clear message as to the restoration of these arrangements to acceptability –

“…This is the first in a series of projects involving Government to Government collaboration which will yield tangible results that will benefit Trinidad and Tobago in a number of ways…”

That was the first direct, high-level statement by the Peoples Partnership administration on this critical development issue. The contractor selected by China was the said Shanghai Construction Group. But there was more.

In March 2013, Newsday reported that “…Government and the EXIM Bank of China yesterday signed a $1.8 billion loan agreement for the construction of the children’s hospital and three national sports facilities in Couva, and three multi-sports facilities in other parts of the country…”. Furthermore, according to that report “…The contractor for the projects is the Shanghai Construction Group of Companies, which Zhu said ‘is one of the best construction companies in China. We believe that under Shanghai, the two projects will be completed on time with the quantity and quality of work required of them guaranteed,’ he said…”. Clearly, SCG seems to be a highly-favoured firm of contractors.

There are serious issues of the Public Interest being negotiated and compromised in these large-scale and highly-secretive G2G arrangements. The JCC has repeatedly called for a complete re-examination of these arrangements so that the critical issues of national development can be properly advanced. The 42nd and 43rd recommendations of the Uff Report speak directly to these burning issues.

The new Public Procurement and Disposal of Public Property law must include for proper scrutiny of these large-scale G2G arrangements. The government of the day has the right to enter into arrangements with its diplomatic partners, there is no doubt as to that. These G2G arrangements must be conducted in accordance with proper norms of transparency, accountability and consultation, so that value for money can be achieved. Our country has a poor record in this area. We must do better.

The Elephant in the Room

The huge potential supply of State-built, unfinished office buildings in our capital is the ‘Elephant in the Room‘. There are potent elements at play here in terms of the viability of the long-term and large-scale investments which have been made in Port-of-Spain by private and public capital.

At this point, taking account of offices over 25,000 sf in size, there are over 1,500,000 sf of incomplete offices in our capital. This article will examine the likely outcomes for our capital and those investors as the various projects are completed.

Incomplete Port of Spain offices at February 2014 (Over 25,000sf)
Incomplete Port of Spain offices at February 2014 (Over 25,000sf)

The State has 1,329,000 sf of incomplete offices in POS and the private sector has 224,800 sf. The State has virtually seven times more incomplete offices than the private sector and that is the ‘Elephant in the Room’. This chart portrays the reality – the details are set out in the table below.

The legacy of the POS offices built during the previous administration is a matter which deserves serious consideration. The sheer volume of offices built by the State during the previous administration is sobering – 2.3M sf. Given that Nicholas Tower – that elliptical, blue tower on Independence Square – contains 100,000 sf, it means that the State built the equivalent of ‘23 Nicholas Towers‘ in our capital in that period of rapid development.

We also know that there was no attempt at public consultation or feasibility studies by the State or its agent, UDECOTT. At the Uff Enquiry, the Executive Chairman of UDECOTT, Calder Hart, admitted that a feasibility study had been done for only one of those projects. That project is the International Waterfront Centre (IWC), which comprises the two office towers of 890,000 sf, the Hyatt Hotel, New Breakfast Shed and car-parking/outdoor facilities. Hart also admitted, under oath, that the value of the land had been omitted from the viability study for the IWC, so it was a bogus exercise. The break-even rent is the amount which must be earned by a project to repay the cost of land, construction, professional fees and finance. The IWC, repeatedly boasted-of as UDECOTT’s flagship project, is not a viable project, since its break-even rent exceeds the highest rents now earned by A-class offices in POS.

The Parliament has now relocated there during the Red House repairs and renovations. A number of other Ministries and Public Bodies have also started to occupy those offices.

The Office of the Prime Minister is now in the new 75,000 sf building on St. Clair Avenue, opposite to QRC grounds.

The rationale advanced by the Manning administration for that surge in office construction in our capital is that it would free the State from the payment of large monthly rents to private landlords. Although I made several requests, I was never able to get the actual figures for the rents paid by the State in POS. My own familiarity with that market allowed me to estimate the average rent at that time (2007-2009) at about $8-9 per sf. The break-even rents of those new buildings exceeded $25 per sf, so the costs of those office projects would never be recovered. I have read reports that the estimated cost of the Government Campus Plaza, which is the largest element in the POS offices, was recently stated by UDECOTT’s Chairman, Jearlean John, to be of the order of $3.2 Billion.

We can reasonably estimate that the rate of rents paid by the State for office buildings has now increased since 2007, in terms of dollars paid per sf.

The completion of those State-owned office buildings is therefore a matter of the first importance, given the high carrying-costs. There is also the significant issue of the high opportunity cost of the State continuing to occupy rented offices alongside virtually-completed offices.
elephant tablet

Against this background, we are now seeing an active policy of decentralisation of POS offices by the present administration, with several Ministries and Public Bodies being relocated to south and central Trinidad. The decentralisation discussion is one which has been going on since the 1970s and it is an important issue to be pursued, in my opinion. That said, one has to wonder how is the decentralisation to be rationalised, given the existence of this over-supply of State-owned offices in our capital. That is a serious question which needs to be discussed if we are to achieve any proper resolution.

The completion of the State-owned offices is under the management of UDECOTT, the original developers, with recent disclosures from the Finance Minister of plans to sell the buildings and lease them back as a means of financing their completion. The terms of any such proposals would have to be carefully considered to avoid the mistakes and fraudulent behaviour of the past.

The completion and occupation of the State-owned office buildings in POS will pose an existential challenge to those private investors who have built offices for rent. The rental levels for offices in POS are likely to decline significantly, which will impact on the revenues of those investors.

Public procurement pressure

The complete overhaul of our country’s public procurement system is urgently required, given the daily reports of large-scale theft and waste of public money.

The last administration lost public confidence due largely to the high levels of corruption, as revealed in the Uff Enquiry into the Public Sector Construction Industry.

The JCC met in April 2010 with the leadership of the People’s Partnership at its request and with the media in attendance.

At that meeting, the People’s Partnership made three significant promises:

  1. Implementation of the recommendations of the Uff Report – This was the first item at the first post-Cabinet press briefing on July 1, 2010, with the Justice Ministry being tasked to implement those critical recommendations. That promise has been broken.
  2. Tabling of legislative proposals for public procurement within one month of an electoral victory. Then Finance Minister Winston Dookeran did lay two draft bills — a 1997 draft to repeal the Central Tenders Board Act and a 2006 draft Public Procurement Bill — so that promise was fulfilled.
  3. Creation of new laws for Public Procurement & the Disposal of Public Property within one year of an electoral victory.  Despite the statements at pg 18 of the People’s Partnership Manifesto, the appointment of a Joint Select Committee (JSC) and many public pronouncements, that has not happened. Continue reading “Public procurement pressure” →

The Uff Bluff

Jearlean John. Photo courtesy Trinidad Guardian
Jearlean John, Chairman UDeCOTT

On December 11, I wrote ‘Invader’s Bay Review‘ in this space, calling for an immediate public review of that improper large-scale development being proposed on reclaimed State lands in west POS.  I also took the opportunity to make the point that there had been no consultation on that proposed development and that UDECOTT’s repeated public statements that its operations are now compliant with the Uff Report recommendations are false.

UDECOTT’s response was to place full-page advertisements in the three daily newspapers, on Saturday 14 and Sunday 15 December, in an expensive attempt to refute my criticisms.  My letter to the editor, carried in this newspaper on the Sunday, put UDECOTT’s misleading advertisement in context and reaffirmed the continuing falsehood of their claimed compliance with the Uff Report.  The episode is recounted here.

There are several lessons one can draw from this exchange – the sheer hostility to the truth which is now becoming a disturbing ‘new normal‘ in our society; the invisible hand of the bureaucracy in devising large-scale developments, stated to be for the benefit of citizens, without citizen inputs; the inescapable reality that these obstructive forces operate across and within all our political administrations.

Sunity Maharaj wrote a fine overview of these burning issues in ‘Amandla!  Now listen to the people‘ in the 15 December Sunday Express.  In that article, Sunity detailed the development of a perverse consultation industry “Its specialty is in designing events that look like consultation, sound like consultation but do not actually involve consultation…”.

There is a serious challenge facing us here, since there is no will to implement the beneficial recommendations contained in the Uff Report, despite the repeated false promises.  The failure to implement those proposals is deeply detrimental to our society as it entrenches the colonial idea that development is not something which really concerns the people of this country.  Worse, the deceptive policy of politicians claiming to intend to do the right thing, while doing the underhanded thing, is imposing a neo-colonial reality.  The State has a duty to be exemplary in its conduct and for the State to fail to do so and to act deceptively in that failure, is to increase cynicism and instability in our society.

In addition to failing to implement the Uff Report recommendations, there was also another significant setback.   The Enquiry website – www.constructionenquiry.gov.tt – which held all of the proceedings and evidence, became inaccessible at the end of 2010, about 6 months after the Peoples Partnership electoral victory.

moore-volneyThe JCC has been pressing for the implementation of the Uff Report recommendations and the restoration of the Enquiry website.  Those efforts have ranged from the Attorney General, who directed us to the Minister of Justice, to the then Minister Volney who ignored our three letters on the matter – see http://www.jcc.org.tt/uff.htm.  When we pressed-on with Volney’s successor, Christlyn Moore, the exchanges were sobering.

The two previous Ministers of Justice – Volney and Moore – both claimed that the Uff Report recommendations were to be implemented by the impending Public Procurement legislation.  Quite apart from the inordinate delay in bringing these critical new laws into being, that claim is entirely false, since only one of the recommendations, the 56th, relates to new Public Procurement laws.  90 of the 91 recommendations could have been implemented by now with no need to get any new laws passed or any use of valuable Parliamentary time.  The JCC’s repeated offers to assist and advise in any working party for that purpose have also been ignored.  The implementation of those 90 recommendations would have greatly reduced the criminal theft and waste of Public Money with which we are now beset.  The failure to implement those recommendations is probably the largest single ingredient in the continuing decline in our ‘morality in public affairs‘.

Even worse is the steadfast refusal to reinstate the Uff Enquiry website.   There is no way to tell if the website was deliberately removed or if there was a mundane technical reason for its disappearance.  What we do know for sure is that there is solid official resistance to even offer a sensible explanation for the continuing refusal to reinstate.

It is critical for us to learn from our errors if we are to avoid a repetition and it is therefore important that we excavate those lessons so that they can be considered.  To fail to do that is to thwart the entire move to a ‘developed nation status’.  Our nation’s primary information needs to be properly documented and published so that anyone who wants to learn the lessons can do so.

The evidence in the Uff Enquiry offers a deep, unprecedented insight into the state of affairs in our country and the conduct of our substantial business dealings.  That information is first-class primary source material for research and teaching in critical fields such as Government, Finance, Engineering, Surveying, Planning, Economics, Sciences, Law and Management.  We cannot become a ‘learning society‘ if first-class primary information is suppressed.  It does not matter how many universities we build or how many pupils we certificate, the ignorance of our own primary information will frustrate the drive to a higher level of education.

On 26 March 2013, then Minister Moore replied to the JCC –

“…It is inappropriate to make available the evidence revealed in the Uff Enquiry at this time as they may ground future criminal enquiry…”

On 23 May, we invited the Minister to reconsider her position, pointing out that –

“…To quote from the final remarks of the Enquiry Chairman, Professor John Uff QC Ph.D. – “…Finally we would like to thank the Press for their continued and expert coverage of the Enquiry; and the public for their unflagging interest in the proceedings. There are few countries in the world where an Enquiry into the construction industry could fill a prime time television slot for over a year. For me it has been a unique experience and I am personally honoured to have had the opportunity, as I hope, to serve the interests of the construction industry and the people of Trinidad & Tobago…” There can therefore be no doubt that the entire proceedings of the Uff Enquiry were published widely…”

This is the Minister of Justice, claiming that our request to reinstate this invaluable website, would amount to ‘making the evidence available‘.  Evidence which had been widely televised, all day long and rebroadcast at night. I tell you.

The Minister promised to revert to us by the end of June 2013, but that reply never came.

So now UDECOTT’s stance is clearer, given the overarching policy of the State on these critical matters of public concern. I maintain that UDECOTT did not conform to the 17th Uff recommendation in its involvement in the Couva Children’s Hospital.  That recommendation is –

“User groups and other interest groups should be properly consulted on decisions regarding public building projects, to ensure that relevant views can be expressed at the appropriate time and taken into account before decisions are made.”  (emphasis mine)

Procurement_NoticBut the current concern goes beyond the ongoing Couva Children’s Hospital, since UDECOTT is playing a leading role in the Invader’s Bay development. In December 2013, UDECOTT published full-page Requests for Proposals in the newspapers for Designers for Infrastructure Development of Invader’s Bay.  UDECOTT is seeking to hire a designer for the infrastructure element of this large-scale development which means that the selected designers would have to conform to the client’s instructions in preparing their plans.  The client’s instructions would have to be based on some kind of concept, proposal or outline.  That raises the obvious questions of when were these concepts, proposals or outlines conceived and by whom?  Most importantly, who approved these?  We know for sure that there has been no consultation with the public, user groups or other interest groups.

So, we are witness to yet another episode of large-scale development being undertaken, in this case by UDECOTT, with none of the promised consultation.

Hence my title – The Uff Bluff.

Letter to the Editor – UDECOTT’s failure to consult response

udecott-complaintIn response to a full page UDECOTT advert (embedded below) in response to my article “Invader’s Bay Review” (excerpted above), also published in the Business Express.

From: Afra Raymond <afraraymond@gmail.com>
Date: Sat, Dec 14, 2013 at 9:30 AM
Subject: Letter to the Editor – UDECOTT’s failure to consult
To: Editors of daily newspapers. Email addresses withheld

The 17th recommendation of the Uff Report is –

“User groups and other interest groups should be properly consulted on decisions regarding public building projects, to ensure that relevant views can be expressed at the appropriate time and taken into account before decisions are made.”

The decisive part is ‘before decisions are made.‘

The Peoples Partnership has not implemented the Uff Report’s 90 recommendations as promised and there has never been an explanation of that failure or refusal to carry out those critical measures. The sod was turned for the Couva Children’s Hospital on 2nd March 2012, at which time the project type, location, size, budget and procurement arrangements were all announced for the first time. Plainly, no consultation took place before those decisions were made, which was the point made in my 11th December article ‘Invader’s Bay Review’.

UDECOTT has now issued full-page newspaper advertisements to attempt to label my irrefutable observation as ‘reckless and damaging’ and so on. Yet another waste of public money, given that UDECOTT provided no examples of consultation before the key decisions were made on this huge project.

That pattern of secret development is inimical to our country’s progress. We must be properly consulted before decisions are made. We strongly criticised the last administration for that pattern of development and we will continue to make the same point. We must become a learning society.

Afra Raymond
POS