The on-again, off-again redevelopment of Hewanorra International Airport (HIA) in Vieux Fort, Saint Lucia, is once again consuming the time and attention of policymakers, the business community and the people of Saint Lucia.
There is much justified discussion and speculation, given that this is the largest infrastructure project to be undertaken in Saint Lucia (apart from the DSH/citizenship by investment horse racing facility), amid calls for total transparency, accountability and prudence.
In an address to the Parliament on March 21, 2018, Stephenson King, minister for infrastructure, ports, energy and labour, said, “The current administration intends to bring the airport project back to the gates of execution before the end of this year.”
There has been major concern with regard to financing and successfully positioning HIA operations to compete and remain viable.
There is also much local suspicion that the political directorate is caught up in personal interests that override those of the public at large in the light of recent awards of multiple no-bid contracts to political and personal cronies, allegations of bribery, and material omissions in public statements by the government.
There was an assertion of “probable cause” in a corruption probe undertaken by the previous administration in relation to an earlier iteration of the HIA redevelopment project set out in a letter to the US Department of Justice requesting mutual legal assistance in relation to US businessman Antonio Assenza and promises by the current Saint Lucia prime minister, Allen Chastanet, to “investigate the investigation”.
Assenza and his local company Asphalt & Mining (St Lucia) Company Limited (A&M) were targets of the airport project corruption investigation, while one of the ministers implicated, Guy Joseph, welcomed the corruption probe.
Chastanet said in his recent budget address: “Redevelopment of HIA will take place in a phased manner using concessional loan financing. We are currently finalizing the loan agreement with the Republic of China (Taiwan) for the US$100 million required. The US$15 million a year in airport tax will be used as security against repayment of the loan.”
Leader of the opposition, Philip J. Pierre, replied to the policy statement, saying: “The government has rejected the public private partnership agreement that would have been supervised and monitored by the IFC, an arm of the World Bank.
“All plans for the construction of a modern state of the art Hewanorra International Airport had been finalized by the last Labour government with work about to commence without the government incurring any related debt. The airport would have been leased for a period of 30 years, at the end of which commercial control would revert back to the government of St Lucia. This arrangement had three major benefits: oversight of the project would have been done by a competent agent of the World Bank — the IFC; there would be no additional debt incurred by the government of St Lucia and we would have had a long awaited state of the art international airport.
“Having rejected and cancelled this agreement in September 2017, the government was offered by the investment arm of the Canadian government to enter into a memorandum of understanding to provide all the expertise in designing, financing, constructing and delivering the airport and the north south highway. The project would have been guaranteed by the Canadian government with no need for debt financing by the government of Saint Lucia.”
With the knowledge there was an approved transaction structure for the HIA public private partnership (PPP) already in place since January 2015, Pierre continued:
1. “Why is the government persistent in trying to avoid dealing with reputable international agencies that encourage good governance especially as it relates to procurement rules?
2. “We appear to be revisiting the age of A&M, which is still a subject of investigation by the US Attorney.
3. “When the UWP last governed in 2011, A&M had failed the due diligence test and its proposal to undertake work at HIA was rejected by the Deutsche Bank.
4. “What are the contractual relationships between this government and this company or its look-a-like for the redevelopment of HIA?
5. “The prime minister needs to clarify the procurement methods and whether an open tender process will be used given the size of this HIA redevelopment project.”
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Long Island’s $5m water deal went to the only bidder that “substantially” met the Water & Sewerage Corporation’s terms, its chairman saying yesterday: “I don’t believe in hanky panky.”
Adrian Gibson told Tribune Business there were sound reasons why the two-phase infrastructure contract was awarded to BHM Company (Bahamas Hot Mix), rather than a Long Island construction firm that submitted the lowest bid.
Rejecting claims by former PLP chairman, Bradley Roberts, that the Corporation would receive poor “value for money” from an award allegedly influenced by “cronyism”, Mr Gibson said price was not the only factor that determined the outcome.
Construction expertise, especially on similar water infrastructure, and the bidder’s financial strength also weighed heavily in a process that had to comply with Caribbean Development Bank (CDB) requirements given that the multilateral institution is providing the financing.
While confirming Mr Roberts’ claim that Rowdy Boys, the Long Island-based construction firm, submitted the lowest bid of $2.66m, Mr Gibson said it would have been “too risky” to award it the contract.
This, he explained, was because Rowdy Boys’ bid was less than 50 per cent of the valuation placed on the project by the Corporation’s external engineering consultants, who estimated it would cost $5.762 million.
Information provided to Tribune Business showed that Rowdy Boys’ bid was only 68 per cent compliant with the tender’s requirements, containing eight so-called deficiencies, whereas BHM Company’s offer was 96 per cent compliant.
Mr Gibson also revealed that two of the 11 bids, those from Island Site Development (ISD) and Top Notch Builders, were immediately disqualified because of potential ‘conflicts of interest’.
He and the Corporation, in a statement, said the two contractors’ submissions were accompanied by “professional references for individuals” working for the external engineering firm overseeing the Long Island project.
This resulted in the engineering firm’s “termination without prejudice”, with the Corporation planning to meet the two contractors involved to “discuss the matter further”.
“The procurement and tendering process has to be transparent, 100 per cent transparent,” Mr Gibson told Tribune Business. “It’s keeping everything above board, and I’m the type of person that doesn’t believe in hanky panky.
“I don’t subscribe to any corrupt practices. If it existed before my appointment, I’m certainly weeding it out and putting in measures to ensure everyone that submits a bid gets a fair shake.”
He added that bidders on any Corporation, Government or private contract had to understand that they would both win and lose out on different tenders, and said the two contractors’ disqualifications highlighted the need for ‘code of conduct’ requirements for Water & Sewerage vendors.
“Just the potential for a conflict of interest, and this is in accordance with CDB rules, caused that result,” Mr Gibson said. “It’s simply the potential for that to happen triggered the engineering consultant’s removal and two bids to be disqualified.
“We have a vendor due diligence form, and a form that speaks to standards of conduct for vendors. Vendors must be compliant with the Corporation’s standards for how we conduct business. These are all elements, facets of the new business model we’re putting in place.
“The idea is to create an environment of fairness, transparency and competitiveness. We’re anti-corruption, anti-bribery.”
Mr Gibson hit back after Mr Roberts, a former Water & Sewerage chairman, implied in a statement issued on Sunday that the contract award was influenced by “cronyism” because Brent Symonette and his family are shareholders in BHM Company.
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The eight investor groups going after the Norman Manley International Airport will be issued with finals bid documents next week, marking a three-month delay that divestment agent Development Bank of Jamaica, DBJ, said was allowed for more due diligence and consultations.
DBJ was initially expected to issue the documents in February for tenders to be submitted by March. The bank now says the documents will be issued on May 16, and that the bids are due by June 27.
Last September, DBJ hosted a bidders conference at which five of the eight prequalified investors showed up, but it still expects eight groups to bid for the airport.
Initially, nine bidders were identified, but a consortium called Jamaica Infra Development Partners Limited did not appear on subsequent lists. DBJ acknowledged that one of the companies did not make the grade, without naming the entity.
“The Government of Jamaica received nine applications for prequalification, of which eight met the prequalification criteria and were approved to participate in the NMIA opportunity,” the development bank said.
The eight, which includes two of Jamaica’s top conglomerates, are:
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In our article of 23 April 2018, we discussed Guyana’s Budget Transparency Action Plan (BTAP) that the Government had developed in 2015. The Plan contains 14 action items, of which advancing of the accountability cycle is perhaps the most important item. Once this action is fully achieved, the Government will be able to fully discharge its stewardship and accountability within 12 months of the close of the fiscal year, compared with what currently prevails where it takes approximately four years for the cycle to be completed.
Another important item in the BTAP is procurement planning which was the subject of last week’s article. This requires budget agencies to prepare and publicise comprehensive procurement plans in support of their budgetary allocations. While acknowledging that some progress has been made on several items of the BTAP, advancing of the accountability cycle as well as having procurement plans in place need to be accelerated.
Any discussion and/or analysis of Guyana’s public financial management systems would, however, be incomplete without reference to another important policy document that is to be found at the Ministry of Finance’s website. We refer to the Public Financial Management (PFM) Action Plan that was developed in 2013 following key recommendations made during a Public Expenditure and Financial Accountability (PEFA) performance measurement assessment of the same year. The Plan covers six key departments/agencies, namely: Internal Audit of the Ministry of Finance; Office of the Budget; National Procurement and Tender Administration Board (NPTAB); Accountant General’s Department; Audit Office of Guyana; and Guyana Revenue Authority. In total, there are 116 action items, with deadlines ranging from June 2013 to December 2017. The Action Plan is therefore a five-year plan.
Since the 2013-2017 cycle has ended, it would be necessary for a new PFM Action Plan to be developed for the next five years, building on the achievements recorded in the last five years. The recently concluded 2018 International Monetary Fund Article IV Consultation indicated that the Government intends to have a new PEFA assessment – the third of its kind – conducted later in the year. This is a most welcome development.
Ministry of Finance’s Internal Audit
Internal audit is an integral part of the internal control system of an organisation that analyses the strengths and weaknesses of an organization’s internal control systems; evaluates governance arrangements in place; and assesses opportunities and threats to the organisation and risk management. By providing regular feedback in these areas, internal audit renders a valuable service to the organization in facilitating management review and action towards achievement of organizational goals.
Internal audit in Government is not only a matter good governance practice. It is a requirement of the law. Section 11 of the Fiscal Management and Accountability Act requires heads of budget agencies to maintain an effective internal audit capability within their agencies. In his report on the public accounts for the fiscal year ended 31 December 2003, the Auditor General commented that “the absence of internal audit departments in large ministries continued to militate against an effective system of internal control and have contributed significantly over the years to the deterioration in financial management at both the ministerial and central levels”. This comment was repeated verbatim in the Auditor General’s 2004 and 2005 reports, but subsequent reports shied away from any commentary on the functioning of internal audit systems in Government, or rather their absence.
A review of successive reports of the Auditor General reveals that many of the comments are in the nature of internal audit findings. This reinforces the need to have in place an organized system of internal audit throughout the operations of Government, thereby freeing up the Audit Office to undertake high level reviews, such as the conduct of performance audits. In fact, Section 24 of the Audit Act 2004 vests with the Auditor General the responsibility for conducting: (i) financial and compliance audits; and (ii) performance or value-for-money audits. In conducting the latter, the Auditor General is required to examine the extent to which a public entity is applying its resources and carrying out its activities economically, efficiently, and effectively and with due regard to ensuring effective internal management control. However, after more than 13 years since the passing of the Act, only four performance audits were conducted, one of which was a follow-up audit.
Prior to the development of the PFM Action, the Ministry of Finance had begun a process of establishing a centralized Internal Audit Unit to provide internal audit coverage at not only the Ministry of Finance but also at other Ministries, Departments and Regions. The Action Plan relating to the Ministry’s Internal Audit contains 16 action items, of which the following are the most relevant: recruitment of additional staff; training of staff in internal audit techniques at both the Ministry of Finance and at budget agencies; development and implementation of internal audit plans; and monitoring and follow-up on audit findings and recommendations.
This centralized approach to internal auditing in Government may not be appropriate to provide the desired level of coverage, especially for larger Ministries and Departments. In this regard, we refer to item 10 of the BTAP which requires the Ministries of Public Infrastructure, Education, Public Health, Communities, Agriculture, as well as Ministry of the Presidency to have in place organised systems of internal audit by December 2016. The Auditor General was to have reported on the effectiveness of the functioning of these internal audit units in his 2016 report to the National Assembly. However, it is not clear what progress has been made so far to have such a decentralized internal audit system in place. Regrettably also, the Auditor General’s report provided no guidance or commentary on such a fundamental governance and accountability matter.
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The opposition has announced plans to spearhead a campaign to collect enough signatures from registered voters to trigger a referendum on the proposed development of cruise berthing facilities in the George Town Harbour. Opposition Leader Ezzard Miller told CNS Tuesday that he believes the majority of Caymanians do not support this costly and risky project but a small vocal group has been driving the agenda, which is not in the best interests of the country. Miller said it was time to put the project on hold until the people can have their democratic say.
Miller has continued to raise more concerns in recent months as his efforts to find out the details of the proposed development, including anticipated costs and the issues surrounding the final design, have failed to shed any light on exactly what the country will be getting, how much it will cost and precisely what the various parties involved are actually bidding on.
The opposition leader has become increasingly alarmed about the lack of transparency and the growing evidence that the arguments and justification for the project are misleading and unfounded.
“Right now there is a vacuum of information, when at this point you would expect government would be able to tell us important details,” he said.
As well as questions about cost and environmental risks, not least the issues relating to Seven Mile Beach, Miller queried what exactly is the final design government has decided on.
“Is there a final design that all of the pre-qualified bidders are competing on or are they all suggesting their own?” the opposition leader asked. “The public does not know what it is getting,” he said, as he railed against the secrecy surrounding what would be the biggest ever capital expenditure project in Cayman’s history.
Miller also questioned the justifications government has given for the piers and claims about why Cayman needs them. He said that from the beginning, government has claimed that the smaller cruise ships were going to disappear from the Caribbean, which he said was plainly not true. He also debunked the claim that the new class of mega-cruise ships were unable to tender because the cruise industry has made it clear that this is not the case. He said the ships are tendering in several destinations, including their own private islands.
Claims that peers will facilitate tour operators to sell more trips are also false, he said, because offering berthing facilities to cruise lines will not alter the timetable for when the ships come and go, as this relates to the port calls and the on-board casino opening hours.
“There is no clear justification for this project. Government’s own statistics make it clear that every year the cruise industry is growing and there are no projected reductions on the horizon,” he said. “Government has been saying for some 20 years that the ships will not come unless we build piers, but they are still coming in ever greater numbers.”
The opposition leader said he and his team still have concerns about the many known risks to the marine environment and Seven Mile Beach, as well as the unknowns. “We don’t know where the piers are going to be. Will they be in or out of water, as we know there is a risk to the current and by extension the beach?” he added.
Miller also questioned the approach government has taken to the tendering process and asked where the truth lies. Nine bidders were said to be qualified but now maybe three or five are being invited to actually submit bids, and the opposition leader called on government to explain how all this has come about.
Following a recent FOI request submitted by CNS regarding the cruise project, a slither of information was released last week indicating that five bidders from the original nine who were pre-qualified had been invited to “submit outline solutions”.
This is at odds with other sources who told CNS that government is in talks with just three possible bidders. But whatever the current considerations, none of these bidders have been identified, and no details of the basis for the bids or what process is being followed have been revealed.
“We don’t even know the methodology being used for this tender and what we do know doesn’t make any sense,” Miller said, as he questioned how the procurement committee would be able to properly evaluate bids.
The opposition leader also asked about the finances and queried how much of an impact there would be on the cargo port if the project is to be financed entirely from cruise passenger fees.
“How much of the subsidy from cruise passenger that goes to the cargo operations will be impacted?” Miller asked, as he raised the real concern that diverting that subsidy could fuel a cost of living increase if the port operations and fees increase.
He further warned that the impact on the local infrastructure of 2.3 million passengers a year would be huge. On busy days there would be no tendering process to control the influx of passengers, he noted, compounding the overcrowding and adding to the challenges of managing the numbers.
Miller said that, instead of taking on the massive and unpopular risk of the berthing project, he wanted to see government invest in improvements to the current situation, buying bigger and more modern tenders, and improving the onshore experience at both the George Town terminals and at Spotts.
With so many unanswered questions, the opposition members are working on formulating a motion to force a debate in the Legislative Assembly and to get the questions that government has avoided answering into the public domain.
“We need a debate on floor of the Assembly to force government to unveil this information,” Miller said.
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