Wednesday, March 14, 2012

...the New Providence Road Improvement Project could have been completed "six or seven years ago" if it weren't for the incompetence of the former Perry Christie led Progressive Liberal Party (PLP) administration

Christie government was slow to act

tribune242 editorial

SPEAKING at the opening of Golden Gates constituency office, Prime Minister Ingraham said that the New Providence Road Improvement Project could have been completed "six or seven years ago" if it weren't for the incompetence of the former PLP administration.

For one thing, he said, the road works could have been continued in 2002 and completed for $56 million, instead of the now estimated $206 million.

"At that time," he said, "the price of oil, cement and plastic was lower, the price of oil was about $20 a barrel. Today, it's over $100 a barrel."

What happened to the road improvement project was unfortunate. If there had not been a change of government in 2002, the road project -- although it met with a major disaster midstream-- could possibly have been completed on time.

In 1994, the Ingraham government engaged a Canadian firm to prepare a transportation development plan for New Providence. This plan formed the basis of the IDB-funded New Providence Infrastructure Improvement Project.

Four companies were prequalified and submitted bids on June 9, 2000. Two of the bids did not comply with the requirements of the bidding document. The other two provided enough "information to enable an assessment of the adequacy of their proposals".

Government agreed to do business with Associated Asphalt, the lower of the two remaining bidders. It awarded Associated Asphalt (AA), a UK company, a $52.2 million lump sum contract to undertake the project. The contract contained no price escalation clause. At the time, the price of oil averaged US$20 and US$21 a barrel -- today it is more than $100 per barrel and rising.

AA was required to provide two bonds - an advance payment bond of $7.6 million and a performance bond of $7.8 million. The project was estimated to cost $66 million and was to be funded by a loan from IDB for $46.2 million with Government providing counterpart funding of $19.8 million. Work started on April 2, 2001 with a completion date of February 10, 2003.

Fifteen months into the contract, AA's parent company went into receivership. All work stopped. By then, the Charles Saunders Highway, the Milo Butler Highway and the Gladstone Road Realignment, valued at $11.4 million, had been completed. Excluding the advance payment of $7.6 million, the contractor was paid $8.3 million and was entitled to be paid for $2 million in unpaid certified invoices.

What would normally have happened was that the next lowest acceptable bidder-- a Netherlands company whose bid was about $8 million higher than AA-- should have stepped in to complete the job. However, the bondholder believed that the lowest bidder, a Canadian company, should be engaged instead. The Ingraham Government and IDB did not agree.

In the meantime, the PLP became the government. In November 2002 they cancelled AA's contract and demanded that the bondholder pay the sums owed under the performance bond and advance payment bond. The bond holder refused. The matter went to court. The Attorney General had to advise the PLP government that it could not sue on the performance guarantee bond because the final date on which a valid demand could have been made -- February 9, 2004 - had passed. The PLP government's failure to act in a timely manner had cost the country $7.8 million.

On July 15, 2005, the PLP government was again in the Supreme court demanding that the advance payment bond be paid. Again, the bondholder refused. This time, the bondsman claimed that then Works Minister Bradley Roberts in a meeting on October 2, 2002, attended by several company representatives and Kendal "Funkey" Demeritte, described in court documents as a "political assistant", had claimed that the FNM's award of the contract to AA was tainted. Mr Roberts suggested "political interference and corruption". The defence filed by the bondholder was that as Mr Roberts had said corruption in the transaction was under investigation -- although he had refused to disclose the details of the investigation--it had no intention of paying on an illegal contract. Again a loss to Bahamian tax payers.

However, when the Ingraham government was returned in 2007, the bondholder, agreed to discontinue relying on Mr Robert's unfounded allegations. It paid $5.25 million in settlement of both bonds.

In the meantime, time had been lost. Had the Netherlands firm been allowed to complete AA's contract, said Prime Minister Ingraham, the project would have been completed by mid-2005 "with substantial cost savings and the benefits to the economy and the benefits of the project would have been realised much sooner".

The country is now in the predicament it is in -- with escalating costs for roadworks -- because, as usual, the Christie government was slow to act.

March 13, 2012

tribune242 editorial