Archive for category Politics and Public Affairs

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

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

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

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Part 2:



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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.

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VIDEO: Morning Edition 24 March 2014

Afra Raymond sits with host, Fazeer Mohammed on the Morning Edition television show to discuss the JCC’s position on the recent Beetham Water Recycling Project. Video courtesy TV6

  • Programme Air Date: Monday 24th March 2014
  • Programme Length: 0:22:23

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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‘.

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Guarding the Guards

Our country continues its perpetual grappling with the question of conduct in public office, but at this time we are faced with particular threats and opportunities in respect of the Public Interest.

Before getting to the present particulars, some critical facts and concepts must be stated. Trinidad & Tobago is a leading nation in the Caribbean region, so progress made here will be to the wider benefit of the region. That said, the particular shape of our economy is such that the State is easily the dominant player in the country’s commercial affairs. Given that reality, the question of illegal or improper conduct by the State and its Agencies, goes far beyond principled assertions. The State must be exemplary in its conduct, not just because that is a principled position, but because its regular misconduct and illegality will continue to distort the behaviour of non-State players.comics-elephantthere-big

The size and wealth of the State makes its control and oversight a continuing and seemingly-insurmountable task. Like the old proverb – ”…Where does an Elephant sit? Wherever it wants to…” It is essential that the State be subject to ongoing and timely oversight, so as to preserve the society’s stability and progressive development.

The State’s power emanates from its unique legal powers and the fact that it has more money than any other element of the society.

These two streams of power work together in a special relationship to which we must be most alert. We rely on the State to seek our collective interests, so we have a special duty to be most vigilant as to its operations.

That is the background against which the current threats and challenges must be viewed.

The main element driving the episodes of State misconduct and illegality is the ability to transact in Public Money, which is money due to or payable by the State, to include any money for which the State will be ultimately liable in the event of a default. Public Officials transact in Public Money, on our behalf. Those Officials are defined in the Schedule to the Integrity in Public Life Act (IPLA) – that list includes politicians, Permanent Secretaries and Board members of State Enterprises, Statutory Bodies performing a public function and bodies in which the State has a controlling interest.

Public Money must be managed to a higher standard of accountability and transparency than Private Money, because it is raised by coercion (taxation) and mostly spent in a manner which does not allow for real competition. Residents and companies are therefore obliged to pay taxes and consume public services with no real choice, hence our entitlement to that higher standard of accountability from the State in the delivery of public services.

Our country’s Integrity Framework is outlined in the sidebar.

SIDEBAR: The Integrity Framework

Our Republic’s Public Bodies and their officials act on our collective behalf, so it is fundamental that those operations are under the oversight of a series of legal requirements to ensure their proper functioning. I have called that series of arrangements and legal requirements, The Integrity Framework.

Our country’s Integrity Framework comprises these basic elements -

  • The Integrity Commission (IC), which is responsible for monitoring the integrity of Public Officials;
  • The Freedom of Information Act (FoIA), which gives the right to obtain unpublished information;
  • The Auditor General, the Independent body monitoring the financial reporting of Public Bodies;
  • The Investments Division of the Ministry of Finance, monitoring the operations of State Enterprises;
  • The two Parliamentary Accounts Enterprises Committees, providing Parliamentary oversight of Public Bodies
  • The Judiciary – The courts exercise a supervisory jurisdiction over the rest of the society to ensure that illegal acts do not prevail.

Obviously, those bodies which are part of the Integrity Framework are performing important public functions, so it is ironic that those bodies are not always accountable in the same way that the others are. For instance, the members of the Integrity Commission do not have to declare their assets, income & liabilities as do other Public Officials. Also, as a result of a 2007 High Court ruling the Judiciary do not have to provide declarations to the Integrity Commission.

The triple threat we face at this time is -

  1. The NHIC 2006 case – This is a disturbing Appeal Court ruling that UDECOTT, which is a State-owned company registered under the Companies Act 1995, in executing a large-scale project on State lands with State funds is not under the higher level of supervision which obtains in Public Law. UDECOTT was therefore able to proceed with that public project without the offended tenderer having the opportunity to obtain a Judicial Review of its actions in assessing those tenders. Of course, courts and boards have procedures to allow the recording of dissenting views in cases where unanimity is not achieved, but what is truly remarkable about this matter is that the dissenting judgment came from the then Chief Justice, Sat Sharma JA. This is an obvious loophole in that the ruling allows State Enterprises to function without the necessary high level of judicial supervision. That ruling attracted adverse comment from the late Karl Hudson-Phillips QC in 2008 and the 2010 Uff Report at its 55th recommendation “…There should be a review of the decision in NH International (Caribbean) v UDeCOTT and measures, if necessary legislative, put in place to ensure that bodies making decisions involving public money are open to challenge by Judicial Review…”. Despite the several promises, the Uff Report recommendations remain unimplemented, for whatever reason.
  2. TSTT’s exemption from the IPLAThe Appeal Court ruled in 2013 that TSTT was not a State Enterprise, with its Directors therefore exempted from the obligation to file declarations with the Integrity Commission. Quite apart from the damaging decision which appeared to exempt all Directors of State Enterprises, which I have covered extensively in this space, the Appeal Court made the ruling that indirect control of a State Enterprise amounted to an effective avenue for exemption. The fact that a State Enterprise is held via a holding company, such as National Enterprises Limited (NEL) was held to be good grounds for that exemption. This limb of that Appeal Court ruling jeopardises the public interest, since virtually all the profitable State Enterprises are held in NEL.
  3. TSTT exemption from the Freedom of Information Act – In 2010, the High Court ruled that TSTT was a ‘Public Authority’ and therefore subject to the FoIA. In 2013, the Appeal Court, in its final hearing on that matter – having agreed that the matter was compromised, since the parties were no longer proceeding – set aside the 2010 High Court ruling. The effect of that, it seems to me, is to further innoculate TSTT from public scrutiny.

All three of these positions effectively undermine the country’s Integrity Framework and all three are endorsed by our Appeal Court. The three, taken together, taste terrible.

The impending and long-awaited Public Procurement & Disposal of Public Property Bill, the continuing convulsions at the Integrity Commission and the deep hostility to the truth at the highest levels of our country’s rulers are the main elements which require our utmost vigilance at this time.

The Public needs to be on alert to the detrimental effect of these rulings. The Judiciary is now challenged to act in the Public Interest in these testing times.

The thing must not only be done, it must be seen to be done.

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FOREIGN AFFAIRS

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

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

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

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

The main criticisms of the existing arrangements are -

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

Shanghai Construction head, Michael Qing Zhang, centre, with former PM Patrick Manning, right, and Calder Hart of UDeCOTT touring NAPA under construction.

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

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

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

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

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

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

Prime Minister turning sod for Couva Hospital

Prime Minister Kamla Persad- Bissessar turning sod for Couva Hospital

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

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

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

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

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

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

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The Elephant in the Room

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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CL Financial bailout – Paying the Devil

paying the devilToday is the 30th of January 2014: five years since the State bailout of CL Financial was announced to a shocked nation and region. It is necessary to mark this moment in time with solid facts and stern meditation.

The Carnival season is upon us, so J’ouvert is near the front of my thoughts. J’ouvert is simple, yet tremendous, because of the experience of passing from night into daylight and of course those around you becoming clearer as the light overcomes the darkness. For me, the defining feature of Jouvert is the terrifying portrayals of ‘Devil mas‘ in its various forms – ugly and dirty, covered with mud, oil or paint; real noisy, beating pitch-oil tins and such; forceful, in demanding payment from you before you could pass. You have to pay the Devil to go away. Pay the Devil, so he could leave without dirtying you up.

The vast amount of detail which has emerged in the last five years, means that I can only focus on one key aspect of the CL Financial bailout scandal.

My main theme is that vast amounts of Public Money have been committed to repay the debts of CL Financial, while the chiefs who directed and controlled that conglomerate seem free to come and go as they please. Or, in the case of Duprey, who refused to testify at the Colman Commission, to go and refuse to come. Once again, Trinis in the running for some awards for innovation and so on, with Duprey being the world’s first ‘Penniless Philanthropist‘.

How much Public Money has been spent on this exercise? How much of that Public Money will the State recover? That is my focus.

When the Memorandum of Understanding was signed on 30th January 2009, it was on the basis that CL Financial assets would be sold to recover the Public Money being advanced, which was estimated to be about $5Bn.

Winston Dookeran’s first budget speech on 8th September 2010 was a critical turning-point, as it appeared to me that he was attempting to stem the flow of Public Money out of the Treasury. Dookeran made a case which was based on the huge and unprecedented liabilities facing the State at pg 9 -

“…The total funding provided as at May 2010 by the Government and the Central Bank, excluding indemnities and guarantees to First Citizens Bank amounted to approximately $7.3 billion. As of June 2010, CLICO and British American combined total liabilities were approximately $23.8 billion but total assets were $16.6 billion…” .

Immediately, in protest at Dookeran’s attempt to limit the cost to our Treasury, there were several ‘Policyholders’ and Depositors’ groups‘ formed. The word ‘Depositors’ was soon omitted when it was realised that it would not suit their purposes.

With Dookeran isolated and the government under mounting pressure from these new protest groups, there were new laws drafted to stifle the protestors’ legal options. At this point, we had the historic address to Parliament by the PM on 1st October 2010 – historic because even with the required majority of votes to pass the intended new laws, the PM chose to explain and persuade the public. The bailout was extended to Hindu Credit Union and the Commission of Enquiry was announced to find the causes of the collapse of the CL Financial group and HCU.

Most notable was the PM’s outrage at the mystery of the bailout – at pgs 25-26

“…The $5 Billion has been spent—we are advised—to repay matured  EFPA policies in an ad hoc and unstructured manner where payment arrangements were entered into based on levels of funds invested. What criteria did you use to repay investors? Whom did you choose to pay? How were they chosen? These questions need to be answered. Because if it is today after the $7.3 Billion, all these EFPA people, the policy group and so on, they are out there, where is their money? Where is their money? Did you have a priority listing of who should be paid? Why did you go—and you are now crying crocodile tears about trade unions, credit unions, the poor man and the small man—why did you not pay them first? Why did you not pay them first? Where did that $7 Billion go? We need those answers, Mr. Speaker. We deserve those answers. The taxpayers need to know. Because when a parent  has to buy school books and bags to send his/her children to school but they have to pay tax out of the little money, they need to know where that money has gone…Where, how and why; we need to know…”

In September 2011 Parliament approved a new law authorising the State to borrow an additional $10.7 Billion to fund the bailout.

Winston Dookeran’s affidavit of 3rd April 2012 specifies that $24 Billion of Public Money is committed to the bailout, at paras 21 & 22…

Para 21         (a)      $5.0Bn already provided to CLICO;
                (b)      $7.0Bn paid to holders of the EFPA and
Para 22                  $12.0Bn estimated as further funding to be advanced.

Recent estimates have now risen to ‘$25b and counting‘ according to the Sunday Express report of 4th May 2013. Given the shock with which the estimated bailout cost of $5 Billion was received a mere five years ago, it is sobering that $25 Billion can now be bandied-about by Public Officials in this fashion.

Will our money ever be repaid? If so, how and when?

Now and again, official statements are made to assure the public that the matter is being resolved and the CL Financial Shareholders Agreement is extended for this reason or that. There is an appearance of diligence and purpose, but there are also other statements which we must consider.

Finance Minister Howai is recorded in Hansard of 30th January 2013, speaking about the CL Financial bailout – at pgs 16-17

“…Mr. President, we shall never recover all the funds that have been put into the group, but our focus is to try and maximize what we can and to reduce the borrowing that we need to do…”.

Even more concerning is that there has been secretive disposal of assets of the CL Financial group – to cite one example, Valpark Shopping Plaza was recently sold to Courts, without any public advertisement.

All the while, the State is mounting strong resistance to my lawsuit to force publication of the details of this bailout. The secrecy is inimical to the wider public interest, which is being sacrificed for the comfort and benefit of the ruthless few.

Every single established mechanism for oversight, transparency and accountability in public affairs has been sidelined in this sordid CL Financial scandal. Integrity in Public Life Act – nothing. Audited Accounts – not available. Freedom of Information Act – legally disputed. Briefing to Parliament – exempted.

Ask yourself – “Would you trust a public official with $1M to spend if there were no requirement for them to account properly?” If not, why should we trust any public official or institution with the authority to spend 24,000 million dollars with no oversight or accounting.

Hence my title – we really Paying the Devil.

cl-bailout-timeline

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Public procurement pressure

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

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

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

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

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

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The Uff Bluff

Jearlean John. Photo courtesy Trinidad Guardian

Jearlean John, Chairman UDeCOTT

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Hence my title – The Uff Bluff.

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