Property Matters – State land acquisition

Recent concerns over the State’s land acquisition process, especially in relation to the Curepe Interchange project, have virtually coincided with the appointment on 12th January 2018 of the first Board for the Office of Procurement Regulation (OPR).

The $222M contract for this project was awarded in August 2017 to China Railway Construction Corporation (CRCC) by National infrastructure Development Co. (NIDCO). NIDCO is one of the implementing agencies for the Ministry of Works and Transport, which is headed by Senator Rohan Sinanan. Twenty-Two parcels of private land have to be acquired to build this interchange between the Churchill-Roosevelt Highway and the Southern Main Road. That includes a part of the disused Kay-Donna Drive-Inn Cinema, which is at the south-western corner of that intersection.

Minister Sinanan has confirmed his part-ownership of the Kay-Donna property, which, together with the long-standing problems within the State’s land acquisition process, have given ground to the sceptics. In my view Minister Sinanan’s position is a direct conflict of interest, if ever I saw one. That said, it is not an irremediable conflict, indeed it must be remedied, since we ought not to either halt this project or delude ourselves to think that recusal is some kind of cure for this Executive Proximity.

This situation is a learning opportunity to re-establish some proper standards of transparency and accountability in the land acquisition process and for the OPR to issue strong regulations to assure best practices for the future. This article will outline the key issues in State land acquisitions and propose a best practice approach which could ease some of the legitimate concerns arising in relation to the conflicted situation of Minister Sinanan. Continue reading “Property Matters – State land acquisition” →

Property Matters – Horses for Courses

horses for courses After the imbroglio with NIDCO’s award last month of a $400M contract to KALLCO for a 5Km stretch of highway, we have once again been treated to a series of related high-profile announcements.

On Monday, 16 October 2017, Minister of Legal Affairs, Stuart Young MP, announced the counter-suit by State-owned Estate Management & Business Development Co (EMBD) against five contractors; former Minister of Housing and Urban Development, Dr Roodal Moonilal MP; and its former CEO, Gary Parmassar. The five contractors were:

TN Ramnauth;
Mootilal Ramhit and Sons;
Namalco Construction Services Ltd;
Fides Ltd; and
Kallco.

According to Young, there was over 18 months of investigative work to ground those counter-claims which allege collusion and bid-rigging, resulting in over $200M defrauded from the State. The most decisive allegation seems to have been that then-Minister Moonilal was making the decisions on those contract awards. I have not yet been able to read the EMBD’s court filing.
Continue reading “Property Matters – Horses for Courses” →

Board Games Redux – the NIDCO matter

These recommendations are from the 2010 Uff Report into the Construction Sector.

“…39. The reviewing of tenders and the making of decisions upon the award of contracts should be undertaken in as transparent a manner as possible, including demonstrating clear compliance with procurement rules, so as to allay suspicion of improper actions or potential corrupt influences…”
(The emphasis is mine)

“…54. There should be no doubt (as there presently is) as to the power of Ministers to give instructions to Government agency companies on any matter within the Minister’s remit, including compliance with rules, regulations and procedures. If this cannot be achieved by voluntary means, consideration should be given to creating the agency as a statutory corporation incorporating such powers…”

It is unacceptable that Cabinet is still making decisions on the award of large-scale contracts. What is more, this procedure continues to be the norm, so this week I am deferring any budget commentary to deal with this issue.

I am referring to the recent imbroglio emerging from the award of a $400M contract to KALLCO for a 5-Km (about 3 miles) stretch of the Toco to Manzanilla highway. Minister of Works & Transport, Rohan Sinanan, is related to KALLCO and he declared that he had recused himself from both the discussion and the decision made by Cabinet.

My concern is not Sinanan’s relationships, or indeed, whether or not he recused himself from both the discussion and decision stages of the Cabinet process. I have no good reason to doubt the Minister’s statement, my only point on that issue is that the continuing tradition of Cabinet secrecy has made it impossible to verify Sinanan’s assertions.
Continue reading “Board Games Redux – the NIDCO matter” →

Re-Route Reboot

The continued dispute over the Debe-Mon Desir Link of the Point Fortin Highway and the growing public debate over this issue require further attention to certain critical aspects.

The Armstrong Report was published in March 2013 after a process agreed between parties to the dispute over this highway link. It is a significant achievement in the journey to a more considered and consultative approach to national development. Given the shifting grounds of the dispute and the nature of the various statements, it is necessary to clarify some of the key issues.

The three main issues to be clarified are –

The Armstrong Report

The State’s position in relation to The Armstrong Report is a critical element of the dispute, so it is important to detail how this has morphed, like so much else in this matter. The Ministry of Works & Infrastructure Press Statement of 3 December 2012 ‘welcomed the inputs…from the JCC, FITUN, T&T Transparency Institute and Working Women‘ and went on to note that ‘the discussions had been very fruitful‘. That statement settled a basic framework for a Review of the elements of the link which were in dispute, with the preliminary Report to be provided within 60 days ‘to NIDCO for its consideration and publication thereafter’. Some people have tried to restrict the meaning of NIDCO’s ‘consideration’ of The Armstrong Report to a merely editorial vetting which implied no commitment to any post-publication consideration. The only conceivable reason for a party to this kind of process to have the right to review the preliminary Report would be to address factual errors in a situation in which the completed Report is of some significance.

At the post-Cabinet Press Briefing on Thursday 14 February 2013, the then ‘line Minister’ for NIDCO, Emmanuel George, said that the Report gave the State the ‘green light’, thanked the members of the Highway Review Committee and was reported to have agreed to ‘…as far as possible, accommodate their suggestions and recommendations…‘.

The only reasonable meaning to put to the State’s actions and agreements at the time was that there was a commitment to consider the recommendations of the Report. Of course we are now hearing from officials that there was no commitment to adopt or consider any of the recommendations in The Armstrong Report.

As a reality check, just ask yourself what would have been the position if The Armstrong Report had fully vindicated the State’s actions.

You see?

The Highway Contract

The high cost of halting construction is the main argument being used by the State to criticise The Armstrong Report and in its litigation with the Highway Re-Route Movement (HRM). On 25 February 2013, NIDCO wrote to JCC with its comments on the preliminary Report and the first page of that letter noted its concern that no consideration had been given to the fact that a $5.2Billion construction contract was in existence for this project. (Comment #2 on p. 30) That complaint is fundamentally misplaced, to say the least, since technical and scientific reviews do not normally take financial or commercial elements into account as material considerations.

At the level of general principles, two examples can clarify the position. In the widely-used two-envelope tendering situations, the tenderers submit separate technical and financial proposals, which are examined independently, with points awarded for each. The eventual selection is made after considering both those scores.

The most recent Commission of Enquiry was announced by the Prime Minister on 18 September 2014 into the HDC apartment blocks which had to be demolished in 2012 at Las Alturas in Morvant. (pp. 68-70) When HDC recognised that the stability of these newly-constructed hillside apartment blocks was in jeopardy, they obtained technical advice from professional engineers. It is doubtful whether those reports considered the financial and commercial fact that the building had already been erected or the losses that would accrue if they were to be demolished. Very doubtful. Indeed, one would rightly be suspicious of technical advice which was coloured by commercial considerations.

SIDEBAR: NIDCO’s reply to JCC

The JCC wrote to NIDCO on 10 October 2014 to request a detailed statement as to how the ten recommendations of The Armstrong Report had been treated and we met with NIDCO’s team on 17 October to discuss that request. NIDCO agreed to provide the details to JCC by Friday 24 October, but that reply is still awaited at the time of this writing.

Now, to deal directly with NIDCO’s criticism of The Armstrong Report, we need to note two facts –

Terms of Reference – If, despite the general principle, NIDCO had wished to have the construction contract for the highway considered alongside the other factors to be examined during the 60-day Review, it could have made that request. The fact is that NIDCO never made that request, so the construction contract was not included in the terms of engagement for this review exercise.
The Highway Review – If, having not requested that the construction contract be included in the review, NIDCO subsequently wanted it considered, there was an option to submit it. NIDCO never submitted the contract to the JCC or the Highway Review Committee.

Proceeding from the general principle to the particulars of this case, it is therefore clear why the Highway Review Committee did not consider the contract as part of the review process.

Note also that NIDCO has not submitted the contract to the Court during this extended litigation with the HRM.

Submitting the contract to either the Highway Review Committee or the Court would have exposed the underlying financial and commercial arrangements, as well as the repeated claims of adverse cost implications, to critical scrutiny.

Tender Truths

Lastly, there is now a series of new statements emerging from the HRM and its supporters which did not form part of the original concerns of that group. The most striking of these is that the highway contract was not tendered. That allegation can be found in the HRM’s International Media Release of 24th September 2014 on their Facebook page and on the AVAAZ campaign webpage, as well as in other media statements by various persons supporting the HRM. That assertion is most alarming for two reasons.

Firstly, that is an entirely false assertion since the highway contract was tendered in 2010. Consider this extract from the top of page 19 of The Armstrong Report –

…On May 07, 2010, the closing date for this procurement, three proposals were submitted by 1.00 p.m. (from the 29 Request for Proposals issued)
The three entities submitting tenders were, in alphabetical order:

China Railway Construction Corporation Limited;

Construtora OAS Ltda (OAS); and

GLF Construction Corporation…

On May 13, 2010 The NIDCO Evaluation Committee submitted its Final Report and recommended OAS as the Preferred Respondent, and so informed OAS by letter dated May 25, 2010…”

Secondly, those baseless assertions by the HRM show a lack of familiarity with the contents of The Armstrong Report. The HRM has relied heavily upon The Armstrong Report in its recent campaigning, so one can only wonder at the implications of these repeated claims.
Given the public positions taken by the protagonists, it seems unlikely that mediation can be a real option.

The Armstrong Report is a serious advance in terms of our nation’s development, being to my knowledge the first Civil Society review of a State-sponsored project in the Caribbean region. That Report would not have existed without Dr. Wayne Kublalsingh’s sacrifice, but the full benefits of the Report can only be realised by a proper and open consideration of its recommendations. Only then can we gain from the increased public attention to the complex issues of national development and really start to learn the lessons.

National development is a real and inescapable challenge which will continue to evolve, whoever is in government. That challenge can only be properly addressed by a fact-based approach adopted by all parties.

State Enterprises and Public Procurement

procurement cycle State Enterprises were created to enhance the pace and quality of Public Procurement, yet they are now the scene of the most bedeviling paradoxes in the entire system of public administration.

Some of the key procurement issues which arise in this arena flow directly from the split character of the governance model.

The basic rationale for the existence of State Enterprises is they can be more effective because they are not bound by the strict rules which control the conventional civil service. The absence of those rules is supposed to allow more latitude in terms of hiring, borrowing and contracting. State Enterprises can hire professional staff at market rates, enter complex commercial arrangements and borrow on commercial terms, all of which should amount to significant improvements in public services.

The typical State Enterprise is owned by the State, with the shareholding held by the Corporation Sole, an exceptional legal creature which exists within the Ministry of Finance. Apart from its owner, the State Enterprise will sometimes have a ‘line Ministry’, which would be its sole or main client. For example, the Ministry of Housing & the Environment is the sole client of the Housing Development Corporation (HDC) and the Ministry of Education is the sole client of the Education Facilities Company Limited (EFCL).

State Enterprises can operate within the existing Companies Act or be established by a separate Act of Parliament, as is the case with the HDC. That legal framework ought to ensure that a satisfactory standard of corporate governance and accountability is maintained.

The fact is that many of the Directors and Officers of State Enterprises are political appointees, which puts the entire rationale onto a doubtful footing. Because the salaries and perks are so attractive, not to mention the commercial opportunities, the State Enterprises are prize targets for political appointments and favours.

Some of the main issues which arise when one is considering this sector are –

the number of State Enterprises – there needs to be a reduction in the number of State Enterprises.
If the politicians can instruct the State Enterprise, via the Permanent Secretary, on specifics, what is the purpose of the Board?
Given the preceding point, do the Board members of State Enterprises have the same duties under the Companies Act as in the case of other registered companies?
In terms of our proposed Public Procurement legislation, what is the boundary between the fiduciary responsibility of the Directors and the contracting powers of an ‘authorised officer’ – i.e. someone identified as having the power to enter certain contracts?

Proceeding along the Procurement Cycle and using the International Waterfront Centre (IWC) as an example –

Needs Identification – This is the first stage of the Procurement Cycle and it ought to be an objective assessment of needs. In this case, the IWC was part of a huge, disastrous boom in building new offices in POS – this is all detailed at ‘Capital Concerns – New Office Buildings’ – here. Before the boom started in 2005, there was 6.5M sq. ft. of offices in Greater POS, at the start of the boom some 3.2M sq. ft., or an additional 50% of the capital’s office supply was approved for construction. Please remember that Nicholas Tower, which took 5 years to fill, is only 100,000 sq. ft. Just under 2.8M sq. ft of new offices was actually built in POS in the last 5 years, with 2.3M sq. ft. of that space (82% of it) actually built by the State. Every State project identified at the outset was executed, but in stark contrast, virtually half the private sector projects stopped before construction began. The obvious consequence of that over-building by the State has been a collapse in the office rental levels in the capital, which is detailed in the next point.
Reconcile Needs with Funds – This is the stage at which a developer ought to consider critical questions such as the cost of funds, the cost of the project and the returns from it. That is sometimes called a feasibility test and this is where the IWC dissolves into utter confusion. When then PM Manning addressed the Senate on 13May 2008, he emphasized that every UDeCOTT project was approved by Cabinet and had been vetted by a Finance Committee on Financial Implications. That is the most important address if we are to see the depth of the problem with these State Enterprises – see here. The break-even point on such projects is the rent at which the project can repay its costs of construction – at minimum, those costs would have to include for land, design, construction and finance. On that ‘bare-bones’ basis, which makes no allowance for maintenance or periods when spaces are vacant, the break-even rent for the IWC is in the $30 per sq. ft. range. This is the largest single office building ever built in our capital and the best rents ever achieved for space of comparable quality is about half the break-even figure. There is no way that the IWC project could ever have satisfied any proper feasibility test. Every new office project started in our capital only increased the supply of offices, which reduced the market rent, which, in turn, increased the gap with the break-even rent. Under oath at the Uff Enquiry, Calder Hart tried to rationalize the confusion when he confirmed that only one of UDeCOTT’s projects had been subject to a feasibility test and that one was the IWC. He was even so bold-faced as to estimate a break-even rent in the $20 range, but, when pressed, had to admit that he had left the cost of the land out of the calculations! That is the extent of the deformed thinking which typified the best schemes of the leading State Enterprise. Only one of the State’s many office development projects tested for feasibility and in that case, the cost of the land is omitted, yet that same land is included as a part of UDeCOTT’s Assets at $224M in that very financial year. Political imperatives were allowed to pervert a process which exists to protect the public interest from this kind of empire-building. But it is in the next part that the full confusion comes to bear.
The rest of the procurement cycle – This is the stage at which tenders were invited for design-build and the winning bidder selected, the project built and the complex opened. According to UDeCOTT’s statements, the IWC project is its flagship and an outstanding success, having been built on time and within budget. Even if one accepts those assertions as being true, the IWC project is an example of the tragic consequences of a limited application of proper procurement processes.

As a result we have a completed project which is said to have been built on time and under budget, yet makes no economic sense and has a break-even point at some uncertain point in the future, if ever.

Some collateral damage needs to be noted, to quote one of the former PM’s notable phrases. Contrary to his statement to the Senate which is cited here, UDeCOTT did not publish its accounts since 2006, which is a breach of both the Companies Act and the Ministry of Finance guidelines. A total breach of the elementary norms of good corporate governance, which is the protection the private sector structure was supposed to give us taxpayers as a safeguard. Because of the political element in the operation, we can see clearly that UDeCOTT was carrying-out the instructions of the Cabinet and those Directors have not been punished or censured in any way, apart from their public dismissal. The consequence of those breaches being condoned at the largest State Enterprises – UDeCOTT and HDC – how does one get the smaller and less-visible State Enterprises to conform to good governance?

If the priest could play, who is we?

This is why we need a complete review of our procurement controls.

An Overview on the CIVIL SOCIETY submission to the Joint Select Committee on PUBLIC PROCUREMENT

This special publication is dedicated to the important issue of Public Procurement. It is written by the a private sector group, headed by the Joint Consultative Council for the Construction Industry (JCC). The JCC consists of:

Association of Professional Engineers of Trinidad & Tobago (APETT)
Trinidad & Tobago Institute of Architects (TTIA)
Board of Architecture of Trinidad & Tobago (BOATT) – observer status
Trinidad & Tobago Society of Planners (TTSP)
Trinidad & Tobago Contractors’ Association (TTCA)
Institute of Surveyors of Trinidad & Tobago (ISTT) comprising Land Surveyors, Quantity Surveyors and Valuation Surveyors.

The private sector group consisted of –

Joint Consultative Council for the Construction Industry
Trinidad & Tobago Chamber of Industry & Commerce
Trinidad & Tobago Manufacturers’ Association
Trinidad & Tobago Transparency Institute.

The members of that Private Sector group were part of the Working Party on the Public Procurement White Paper, which was published in August 2005 and laid in Parliament the following month.

The Peoples’ Partnership’s manifesto, at page 18, commits to –

Procurement

Prioritise the passing of procurement legislation and appropriate rules and regulations

Establish equitable arrangements for an efficient procurement system ensuring transparency and accountability by all government departments and state enterprises…

In keeping with those campaign promises, the Minister of Finance tabled two legislative proposals in Parliament on 25 June 2010. Those were a Bill to amend the Central Tenders’ Board Act (originally prepared in 1997, when Ramesh Lawrence Maharaj was Attorney General) and the Public Procurement Bill (originally prepared in 2006, after publication of the White paper). A Joint Select Committee (JSC) was established on 1 October 2010 to examine those proposals, invite submissions and make recommendations.

The stated target of the PP government is to have the new Public Procurement legislation in place by the first anniversary of their electoral victory – i.e. by 25 May 2011.

Our Private Sector/Civil Society group reconvened last year and made a joint submission to the JSC in December 2010 – it is available here from the JCC‘s website. Our Private Sector group has had several meetings with the JSC – which was chaired by Education Minister, Dr. Tim Gopeesingh – but the results of those are not featured in this publication.

This special publication is intended to inform readers of the necessity for new Public Procurement legislation in our country and to set out the objectives of our proposals.

The guiding Principles

These are –

Transparency
Accountability
Value for Money

The broad picture

One of the most serious findings of both the Bernard Enquiry (Piarco Airport Project) and the Uff Report (UDeCOTT and HDC) was the extent to which the largest State projects were being executed outside of any normal system of accountability. The very purpose of setting up these companies and procurement methods was to bypass the Central Tenders Board. The natural consequence of that way of proceeding being that if the CTB could be sidelined as a deliberate act of public policy, then other important elements of the regulatory framework are violated as a matter of course. In the case of both UDeCOTT and NHA/HDC, accounts were not filed for years – since 2006 for the former and 2002 for the latter – in flagrant violation of the rules and laws.

These were the largest State projects – often described as being the flagship or centre-piece of this or that government’s policy – yet they were breaking the main rules and getting away with it. The ‘getting away with it’ is the cloudy part of the picture, because we never hear of any penalty being sought against those State Enterprise Directors who broke the governance rules.

But that is the very centre of the puzzle and we need to understand it before we can try to unlock it. So, we are told, time and again, that the only way to really get important and urgent projects done in the correct fashion is to go outside the rules. The stated reasons are that the old rules are too cumbersome, slow etc… and yet, we end up, time and again, in the same mess.

Some of the features of these fiascos are –

Huge cost over-runs on virtually every project.
Unfinished projects which virtually no one can make sense of – to date there is no proper rationale for the huge and loss-leading International Waterfront Project, apart from Calder Hart’s bogus explanation to the Uff Enquiry.
A gross burden on our Treasury going forward – The continuing delay in completing the accounts for these State Enterprises shows how difficult it is to work out exactly what the State owes and to whom.

What all that tells us is that the existing rule-book seems to be blocking progress and the attempts to bypass it have done little better, if not far worse.

The dismal picture on public procurement is not limited to construction projects and can be found in all the other areas.

A new approach is needed and that is what is at the foundation of these legislative proposals.

What is Public Money?

Central to the new proposals is that any new Public Procurement system must be in full effect whenever Public Money is spent.

‘Public Money’ is defined at page 5 of our proposals as money which is either due to, or ultimately payable by, the State.

Our proposals are intended to form part of a financial management reform package to include for a National Audit Office and a Financial Management and Accountability Bill.

The intended move is towards a greater transparency and duty of care in terms of how taxpayers’ money is spent. Our citizens, particularly the unborn ones who will have to pay for some of the wasteful schemes which are littering the landscape, deserve no less.

The new equation confronting us is –

Expenditure of Public Money
minus Accountability
minus Transparency
equals CORRUPTION

We must fix that.

So, what is at stake here?

Our society is beset by large-scale corruption, which sustains wrong-headed decision-making. The wider social consequences of that toxic culture are now hatching, with a vengeance, in the naked violence and wily crimes which pre-occupy our head-space.

The killing-fields of East POS, the decimation of African urban youths, the URP and CEPEP gangs and the battle for turf are all part of this picture.

As long as our society continues to applaud and reward dishonest, corrupt behaviour, we will continue sliding downhill.

The structure of our economy is that most of the country’s foreign exchange is earned by the State in the form of oil & gas earnings. The rest of the society relies on the State and its organs to recycle those earnings for the benefit of those of us not directly engaged in the energy sector.

For that reason, the State casts a very long shadow in our country, far more so than in other places. Virtually every substantial business relies on the State and its organs for a significant part of its earnings. A healthy connection with the State is essential for good profits.

But that is where the particular problem is, since the conduct of the State and its organs is often found to be lacking in the basic ingredients of fairplay, accountability and transparency.

If the State is the biggest source of funds in the place and the State is not playing straight at all, a serious question arises – How can we hope to uplift our society?

The State has an over-riding duty to behave in an exemplary fashion in its policy and operations.

Due to its tremendous footprint, the State has to behave in that exemplary fashion if we are to move out of this mess. A positive shift in State conduct will have a salutary effect on the commercial culture and wider society, one that is long overdue.

So, who spends Public Money?

We have a vast, expensive and confusing array of organs, all of which are authorized to spend our money. For a country of about 1.4M people, we have 26 Ministries. Just consider that the UK, with a population of about 65 million, has 19 Ministries and the USA, with a population of about 300 million, has 16 Ministries. For a Caribbean example, Jamaica has twice our population and 16 Ministries.

Quite apart from the number of Ministries, there are two further layers of agencies which also have the power to spend – our country has 73 Government Bodies and 58 State Enterprises.

Given the vast range of operations undertaken by these agencies, any new system would have to be flexible in order to cover all those types of transactions.

The main features of the new system

Three new independent organs will be created –

The Procurement Regulator (PR), with the duty to create overall Guidelines and a common handbook to guide the public procurement process. The Regulator is appointed by the President in his own discretion and reports only to the Parliament. Agencies can create their own procurement handbooks, once these conform to the overall Guidelines, as approved by the Procurement Regulator.
The Public Procurement Commission (PPC) will be the investigative arm of the new apparatus to which complaints will be directed.
The National Procurement Advisory Council (NPAC) will be purely advisory and comprises 14 members from a broad range of named private sector/civil society organisations – the JCC, Manufacturers’ Association, Chamber of Commerce, Transparency Institute – as well as the Ministry of Finance and the Tobago House of Assembly.

All expenses are to be drawn on the Consolidated Fund, with the Procurement Regulator and Advisory Council required to report annually to Parliament.

A vital part of our proposals is that Cabinet, Government Ministers or politicians are prohibited from instructing or directing these new agencies in any way.

They are intended to be entirely independent of political influence, which conforms to the proposals in the White Paper.

That freedom from political influence was also specified in both the 1997 and 2006 draft legislation.

A Complaints Procedure

The proposed system will create clear rights to make complaints or report wrongdoing. Those rights are an important aspect of any modern procurement system and we propose three types of complaints/investigations –

Potential tenderers/suppliers can complain, in the first instance directly to the Agency with which the tendering opportunity resides, then, if that is not dealt with satisfactorily, they can complain to the Public Procurement Commission. Ultimately, the right to seek the protection of the High Court is preserved, once the established complaints procedure has been followed.
The Whistleblower – We are proposing that whistleblowers be given legislative protection and practical means to bring their complaints direct to the Public Procurement Commission.
The Public Procurement Commission can also, on its own initiative, start an investigation into an area of concern.

There are strict time-limits for acknowledgement and resolution of complaints.

Our proposal is for the Public Procurement Commission to have powers to punish both frivolous complainants as well as parties found to be in breach of the new system. Those can range from fines to embargoes, during which offending parties can be banned from tendering opportunities. Offending public officers can be subject to both fines and/or imprisonment.

The concern over the cost of the new apparatus

One of the most frequently expressed criticisms is that as critics of the rationale and operations of significant State Enterprises, we seem to be proposing a new series of state-funded agencies. Some people have pointed out that these offices are unlikely to be cheap, particularly the PPC, which is to be constituted as a standing Commission of Enquiry under those existing legal provisions.

Yes, there will be new agencies and yes, they will cost money.

Given the recent revelations as to the cost of the Uff Enquiry – already estimated to exceed $50M – there are genuine concerns that we could soon have three new state-funded agencies which could absorb maybe $100M a year.

The challenge here is to move beyond the obvious and factual observations so that we can consider the decisive factors. Our proposals have the promotion of Value for Money as one of its founding principles and that is good for the public. So, how can we measure the value for money of these proposals, at this stage?

The scale of public procurement spending

In the case of expenditures direct out of the Ministries, the 2011 Budget has an anticipated capital expenditure for the Ministries of $7.050Bn, as per para 8 at page 4 of the Public Sector Investment Program (PSIP).

Also in that Budget there is an anticipated capital expenditure for the State Enterprises of $6.725Bn, as per the Foreword at page 4 of the Supplementary Public Sector Investment Program (Supplementary PSIP). The combined figure of $13.775Bn is only for projects, so it excludes the salaries, rents and normal running expenses. Please note that other elements in public expenditure, beyond just capital projects, will be covered by these proposals. The guiding principle being that those activities involve the expenditure of Public Money.

There are very limited exemptions from the proposed provisions and those can be viewed at the JCC website.

I am also sure that there are other ways in which Public Money is being expended which are not shown in the national Budget, so the amounts are surely larger than that estimate.

The potential for savings

The scale of the public transactions, involving Public Money, which will come under the control of this new system is huge, at least $14Bn in size. Even if the new system only saves 5% of that sum every year, we can easily justify an annual running expense in the $100M range, as mentioned earlier. 5% of $14Bn is $700M.

In the next 30 days, we expect our Legislators to make the crucial decisions on this series of proposals and we all need to be vigilant to preserve the key points.

Those key points would include –

Heads of Independent organs to be appointed by the President
Separation of the Regulator from the Investigator
Regulations laid in Parliament for negative resolution, with no Ministerial or Cabinet approval required.
Independent Organs funded from the Consolidated Fund, with no requirement to seek a Ministerial approval or Budget vote.
Accountability is ensured by the requirement to report annually to Parliament.
Private Sector/Civil Society oversight via the National Procurement Advisory Council.
Proper provisions for complaints and Whistle-Blowers.

The ultimate question, given what we know now, is – Can we afford not to take this step?

At this unique and challenging moment in what has been a long, twisted journey, the prospects of more corruption and waste are grim.

For these proposals to succeed, the legislators will have to vote in favour of a new law which reduces their power and discretion. To some, that might be an impossible contradiction and an unreasonable thing to expect, but there will be considerable political credit to the account of those who make this change happen. Our citizens deserve no less.

Creating a Context – the role of planning

investment-decision For me, the key point at which we lost our way in the UDeCOTT/HDC/NIDCO bobol, was the crossroads of the Investment Decision.

That Investment Decision is an indispensable part of any rational process of development, for families, businesses and countries alike. The national level is my concern and there must be broader considerations in making those decisions.

It is clear from the depth of the failure, that the last administration lost its way completely, insofar as elementary concepts such as opportunity cost, payback periods, cost-benefit analysis and so on. We have only now begun to scratch the surface in terms of understanding the extent of the losses and corruption – readers, please be reminded that as yet, we have no accounts for UDeCOTT or HDC for several years. In normal business thinking, the failure to publish accounts without even an attempt at an explanation is tantamount to an admission of the most serious problems. Only State-owned organisations can get away with that kind of irregular conduct, which is maybe why they do it.

My concern in this article, is that apart from the Investment Decision in the case of specific projects, the State has an obligation to consider the wider picture in terms of fine-tuning, timing and phasing those projects. Our last land-use plan in our country was approved by the Parliament in 1984 and we have had several fruitless attempts to revise that plan.

The focus here is on the need for a proper practice of integrated planning, in particular long-term land-use and town-planning. By integrated planning I am speaking to an approach which takes account of varying principalities, such as land-use, financial constraints and national targets. In addition, the approach allows a balance to be struck between the competing demands within various time-horizons, such as immediate demands, medium term demands (say, 10 to 20 years) and longer-term considerations.

Lack of an updated national Land-use plan
As I wrote in the Business Guardian of 9^th October 2008 –

Dr. Emily Gaynor Dick-Forde, former Minister of Planning, 2007-2010

“The Minister of Planning, Housing and the Environment spoke at a breakfast meeting of the Couva/Point Lisas Chamber of Commerce on September 10, and some of her reported comments deserve our close attention.

The minister told her audience that the National Physical Development Plan was passed in 1984 and had been continually updated, but that “that plan has somehow never reached to Parliament.” Somehow. The mind boggles.

One report said, “Dick-Forde said the external and internal committees on national development were working towards the completion of the National Development Plan, which will be taken to Parliament in the next two years.”

When this tidal wave of development is at an ebb, we will then have a plan tabled in Parliament for discussion. To what end?” see http://www.newsday.co.tt/politics/0,85974.html

Given the last Minister’s stated timetable, we ought now to be having a draft plan published for consideration. Where is this, Minister King? When do the consultations start?

Transportation planning

Austin 'Jack' Warner, MP, Minister of Works & Transport

This is a vital, related area and Minister of Works & Transport, Jack Warner, told us that the PNM government paid $21M for an incomplete Comprehensive National Transportation Study (CNTS) – see http://guardian.co.tt/news/general/2010/10/09/warner-pnm-paid-21m-non-study – and I agree. That fact only makes the situation more doubtful, since we seem to be making major transportation system decisions in the absence of a strategic plan.

Just consider –

The Tunnel to Maracas
This was first announced in the 2011 Budget – see http://www.finance.gov.tt/content/Budget%20Statement%202011.pdf at page 24

…We all know how difficult it is to access Maracas Bay through the North Coast Road.

Currently, it takes approximately 45 minutes to get from Santa Cruz to Maracas Bay. Furthermore, landslips on the North Coast road are a major deterrent to persons wishing to access this scenic route for pleasure or business. As a result we will do a business plan for a new: ‘Connective Development Project’. This project would create an underground tunnel from Maracas Valley to Maracas Bay, to enable quicker access to the North Coast…

That strange project was then taken up by Warner at length – see http://guardian.co.tt/news/general/2010/09/26/warner-s-tunnel-take-next-year
The expansion of the Highway Network
We are now aware that the National Infrastructure Development Company (NIDCO) is proceeding with ambitious Highways packages from San Fernando to Point Fortin, with the San Fernando to Mayaro route under active discussion – see http://www.newsday.co.tt/politics/0,124988.html.
Coastal Water Taxis
It seems that the government has changed its mind, three times, on this part of our public transportation system. Firstly, we were disposing of two of the four new water-taxis as being superfluous. Secondly, there was an about-face, in which it was decided to keep the new water-taxis. Most recently, I have seen advertisements for the provision of brokerage services for the disposal of these vessels. Again, what is the basis?

Sewer Treatment plants and the threat of cholera
We recently had shocking stories about the leaking of significant amounts of untreated sewage into the Maraval reservoir – see http://guardian.co.tt/news/general/2010/11/19/wasa-boss-moka-residents-must-pay-repair-sewerage-plant. That is no surprise, given the widespread practice of property developers walking away with their profits in hand upon completing the sales of their properties, but with no proper plan for the maintenance of the sewer treatment plants.

Once again, this is an area which urgently needs to be addressed in terms of town planning, local health, WASA regulations and adequate financial mechanisms for ongoing maintenance of these facilities.

The Housing Development Corporation (HDC)
The HDC’s new target for 2011 is 6,500 new homes and that is still a huge number. Given our limited land resources and the absence of a national planning framework, how is this to proceed?

There remains the unanswered question as to what is the basis for these decisions?

The Limits of our financial resources

The Minister of Finance recently called for Ministries to not implement any new large projects, due to the financial limits constraining state expenditure – see http://www.newsday.co.tt/news/0,129148.html. That is a valid call, which shows that the time is ripe for us to plan our major strategies and projects so that they can conform to some sort of national context.

That context would have to include elements such as land-use, transportation implications, financial limits and the question of the capacity of the economy to meet the targets being set.

SIDEBAR: Fuel subsidies in national planning

The question of fuel subsidies is an important part of this integrated planning discussion, since, at approximately $2.8Bn, they are a large part of our national expenditure. More to the point, the effect they have on our behaviour is largely unremarked, which is paradoxical – the gas price being so low that we do not really consider it in our daily choices.

It is a classic example of the sort of ‘policy silos’ which the integrated planning approach seeks to overcome.

The Minister of Works & Transport speaks out strongly against the heavy subsidies necessary for the operation of the Coastal Water Taxis – no statement from Warner on the larger sums spent on the fuel subsidy. The Minister of Energy, in the run-up to the budget, says that these fuel subsidies may need to be reduced. The Minister of Finance, in his budget address, said –

“…The largest Subsidy is on petroleum products, particularly gasoline which usually represents one to two percent of GDP per annum. All of our citizens benefit from this subsidy. It is often difficult to determine whether resources are being used wisely to achieve the intended objectives of subsidies. We are currently reviewing whether alternate options are more efficient…”

We need to develop a holistic view of the various subsidies being paid in our economy and transportation subsidies, including fuel, are important considerations.

The goal of promoting the wider use of public transportation has to be adopted with some vigour and creativity. The fuel subsidies enjoyed by small vehicles – say, less than 12 passengers – should be gradually reduced with a shift of those subsidies to larger-capacity vehicles. They make more efficient use of our limited roadways and would reduce the adverse effects of traffic and pollution.

The three Ministries concerned should join with the Ministry of Planning in mapping out these strategies and policies.

The strategic goal should be to decrease the convenience of individual car-journeys and increase the convenience of the mass-transit approach.

It is no easy shift to go from today’s congested reality to the medium-term goal of a much-improved transportation system with travelers having several choices. That journey would involve a virtual culture-shock for most of us, but it is one we should start, sooner than later, for our common good.

That is one of the examples of how an integrated planning approach can offer fresh solutions to serious problems.

Seeing the Big Picture – Learning the Lessons of the SPE fiasco: Part 5

I have set out the key findings of the Uff Report, insofar as the elements of governance go. Those were combined with recently published news to offer a picture of the manner in which our leading Special Purpose Entities (SPEs) are being governed.

The picture is an unflattering one, which few could seriously seek to emulate. It brings to mind the question raised here some time ago – ‘What was it really all for?‘ I continue to believe that the State must behave in an exemplary fashion, but that is not all.

The concerns over governance being raised in this series ‘Learning the Lessons’ are part of an attempt to query the true purpose and effect of the SPEs. The point I am making in this final installment is that there are pre-conditions which ought to eclipse even important points like missing years of audited accounts, unsigned contracts, ‘back-fitted’ financial documents, publication of massively-inflated achievements, bogus feasibility studies and the like. Just listing the important principles which have been violated, the whole situation seems incredible.

Important as it is to eradicate those unprofessional and dishonest practices, there has to be more to the development process. Yes, even if the main ingredients of good corporate governance were practiced at our SPEs, it would all be for naught, unless those companies are operating in accordance with a sound strategy for national development. Good corporate governance is necessary, but not sufficient, if we are to achieve the sound development which every right-minded citizen would desire.

nidco To illustrate this point as to the importance attached to strategy, I am going to shift focus from UDeCOTT and the HDC. I am going to consider the operations of NIDCO in terms of examining this issue.

In her maiden budget speech on 22^nd September 2008, the Minister of Finance set out the main elements of this government’s ambitious transportation plans. These were in four parts – the rapid rail project, the coastal water taxi, the building of more highways and a significant expansion of PTSC’s fleet. The Rapid Rail, Coastal Water Taxi and Highway building program are all being handled by NIDCO.

“…another slew of ambitious, extremely expensive and long-range plans being carried out supposedly for our benefit, but once again, we are witness to fundamental dishonesty on a huge scale.”

In ‘P3 and the Proposals’- published in this space on 23^rd October 2008, see http://www.raymondandpierre.com/articles/article58.htm – I wrote –

“The National Infrastructure Development Company’s (Nidco’s) high-profile advertisements for rapid rail are now giving one pause. Hear this: “As part of a holistic plan to ease traffic congestion and create a more modern, efficient, transportation network, the Ministry of Works & Transport…signed a design-build-operate-maintain contract on April 11, 2008, for the implementation of the Trinidad Rapid Rail Transit System.

Where is this holistic plan?

Were public comments ever invited on that plan?

Where can the public see that plan?”

It was plainly the intention of NIDCO, in this series of advertisements, to promote the belief that these four huge, expensive initiatives are all part of a comprehensive strategy.

I was very sceptical and continued to call for the ‘Holistic Plan’ to be published. All to no avail.

On 27^th November 2008, I submitted my application, under the provisions of the Freedom of Information Act (FoIA), for a copy of the said ‘Holistic Plan’. My application was sent to both the Ministry of Works and Transport (MoWT) and NIDCO, its implementing agency.

That FoIA application and NIDCO’s reply also dealt with the Rapid Rail contract, but that is for another time.

On 2^nd January 2009, I was ‘phoned by a civil servant from MoWT, who advised that they were ‘working on my application’; she confirmed by email later that day that “…we are still gathering the information and working on your request…”.

Just imagine that. 9 months after signing a major contract, reportedly ‘…as part of a holistic plan…’ and three months after publishing advertisements to that effect, I get an email from MoWT to say they are putting the plan together.

On March 6^th 2009, the Permanent Secretary of MoWT wrote me to apologise for the delay (these FoIA applications are supposed to be dealt with in a month) and direct me to pursue NIDCO for a reply.

On 4^th August 2009, NIDCO’s Vice-President Legal, Nirad Samnadda-Ramrekersingh, wrote in reply to my application for the ‘holistic plan’ –

“…please note that same does not exist either as a formal document or series of documents and that the term as used in the newspaper advertisement to which you have referred is simply a descriptive reference to the Rapid Rail Transit System, the Water Taxi Service, the Interchange Project and the existing PTSC and Maxi Taxi networks also described in the said advertisement. We are satisfied that this is the case…”

“…simply a descriptive reference…” Take that.

So there we have it, another slew of ambitious, extremely expensive and long-range plans being carried out supposedly for our benefit, but once again, we are witness to fundamental dishonesty on a huge scale. Just like UDeCOTT, with its bogus feasibility studies, we can see that NIDCO’s claims are also highly questionable. In the absence of real development strategy, we can only hope for a lucky accident. That is no proper road to national development. Particularly in the arena of physical development, where decisions have long-term physical, environmental and financial consequences.

As our servant with special responsibilities, the State is responsible for carrying out those developments in accordance with some sound strategy. We must raise questions which are fundamental if we are to do better. If we are to do better, we have to think and act differently. Big changes are essential if the State is to deliver the future we need.

SIDEBAR: National Infrastructure Development Company (NIDCO)

NIDCO is a State-owned company, established in 2005 and under the control of the Ministry of Works and Transport.

According to its website – www.nidco.co.tt – its vision is –

Vision
To be a key enabling vehicle for the development of infrastructure that enhances and sustains Trinidad and Tobago’s economic development and quality of life.

Its core values are –

Transparency.
Professionalism & Quality.
Integrity, Trust, & Honesty.
Meritocracy.
Teamwork.
Commitment.
Communication & Participation.

No reasonable person could object to those principles.

The Chairman of NIDCO is Professor Chandrabhan Sharma, of UWI’s Engineering Department; Professor Sharma is also a Director of Republic Bank Limited, TTEC and several other companies.

NIDCO’s President is Kaisha Ince, Attorney-at-Law.

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