Facing the Facts

Two important laws were partially-proclaimed by the President at the end of July –

  1. The Public Procurement and Disposal of Public Property Act, which is intended to control transactions in Public Money, and the
  2. Planning & Facilitation of Development Act, which is intended to provide for effective control of physical development.

Both those laws would be critical in controlling the worst excesses in terms of waste and theft of Public Money as well as the scourge of unplanned development. There is still substantial work to be done to properly implement those new laws, neither of which will actually come into effect before elections on 7 September, so our stern attention will therefore be essential.

The campaigning and committee-work to achieve those new laws has been demanding, so it Is important to re-state our fundamental concern as to the sheer hostility of high-level public officials to the truth. This is a fundamental point since the new laws create modern, transparent and participative processes. If the key public officials maintain their hostility to the truth, we would be entering a period of serious struggles to implement these new laws.

These examples speak to the official hostility to the truth with which we are beset.
Continue reading “Facing the Facts”

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FAILURE to ACCOUNT

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

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‘.