NPIIP Report to Parliament - Prime Minister Hubert Ingraham

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March 05, 2012

Statement on New Providence Infastructure Improvement Project Prime Minister the Rt. Hon. Hubert Ingraham House of Assembly Monday, March 5, 2012

Mr. Speaker:

As promised and in fulfilment of our duty to be transparent and accountable, I wish to make a statement on the New Providence Infrastructure Improvement Project (NPIIP).

Eighteen years ago in 1994 my Government engaged MM Dillon Consultants, a Canadian firm, to prepare a transportation development plan for New Providence. This plan formed the basis of the IDB-funded NPIIP (“the Project’).

The project was conceived in response to an imperative to transform our aged and outdated public infrastructure i.e. water mains and laterals, electric and communication conduits, poor drainage and congested road network in New Providence, an island whose population has more than doubled in the last four decades

Mott MacDonald Consultants (MM), a UK firm were appointed in 1999 for the preparation of 30% road design, bid documents, engineering and contract supervision for the project to be tendered on a design-build basis.

The objective of the program was to reduce transport costs and traffic congestion for road users by providing a more rational and efficient transport system for New Providence Island. The objective will be met by improving and expanding the existing road network, through improved traffic flows, increased public transportation, reduced vehicular nuisances, modernizing and strengthening the institutional framework responsible for the provision of transportation services, improving road safety and alleviating the negative environmental impacts associated with the existing traffic congestion levels.

Four companies were prequalified and invited to submit bids for the project which were opened on 9 June, 2000 with the following results:

(1) Lagan Holdings (UK) $58.1 million

(2) BA Black Top (Canada) $49.9 million

(3) Associated Asphalt(UK) $50.9 million

(4) Interbetton (Netherlands) $59.1 million

During the bid evaluation it was determined that the bids submitted by Lagan and BA Blacktop did not comply with all the requirements in the Bidding Document. It was, therefore not possible to assess the adequacy of their proposals. Associated Asphalt (AA) and Interbetton on the other hand, while not fully compliant with all the requirements of the Bidding Document, provided enough information to enable an assessment of the adequacy of their proposals. The Government, therefore, agreed to negotiate with Associated Asphalt, the lower of the two responsive bids and in April 2001 awarded AA a $52.2 million lump sum contract to undertake the project. The contract contained no price escalation clause. At that time the price of oil averaged between US$20 and US$21 per barrel (today the price of oil is in excess of $100 per barrel and rising).

As required by the contract AA provided 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 the IDB in the amount of $46.2 million and with Government providing counterpart funding of $19.8 million. The components of the project included:

• Roadway Development and Traffic Management ($50 million): The construction and rehabilitation of 14.38 miles of roads and 9.38 miles of new roads for a total length of some 24 miles to Florida Department of Transportation standards, with a design life of 20 years.

• Engineering Studies and Project Supervision ($5.5 million)

• Institutional Development and Strengthening ($1.5 million): Strengthen and Modernize the Government’s capacity to develop and implement the comprehensive surface transport policy established in the Transport Development Plan for New Providence (Dillon Consultant Engineer’s Report), which would lead to closer collaboration between Department of Public Works and Road Traffic Department.

• environmental mitigation

• the creation of Big Pond Park and

• a Public Recreational area at Saunders Beach

The contracted works commenced on 2 April 2001 with a completion date of 10 February 2003, just over nine years ago.

Mr. Speaker,

The project has been plagued with many challenges, the first of which was the receivership of AA’s parent company occurring fifteen months after the start of the project, resulting in works coming to a halt. Prior to the work stoppage AA had substantially completed the Charles Saunders Highway, the Milo Butler Highway and the Gladstone Road Realignment, valued at $11.4 million.

Excluding the advance payment of $7.6 million the contractor was paid $8.3 million and was entitled to receive payment in respect of $2 million in unpaid certified invoices.

In the normal course of events the next lowest acceptable bidder would be engaged to complete the project. In that case the bidder was Interbetton whose bid was some $8 million higher than AA. The bond holder held the view, however, that BA Blacktop the lowest bidder, whose bid was rejected, should be engaged to complete the project. The Government and IDB did not agree to engage BA Blacktop.

In November 2002 the Government terminated AA’s contract and subsequently called on the bond holder to pay the sums due under the Performance Bond and Advance Payment Bond. The bond holder refused to pay the bonds. The Government then determined to initiate a Supreme Court action for payment of the two bonds. By letter of 26 April 2005 the Office of the Attorney General advised, however, that the Performance Guarantee “could not be sued upon as none of the conditions necessary to give rise to a valid demand were satisfied nor would it now be possible to satisfy them, the date of 9 February 2004 having elapsed”. The Government’s neglect to make a demand on the Performance Guarantee in a timely manner resulted in the unenforceability of the Performance Bond.

The Government on 15 July 2005 initiated Supreme Court action in respect of the Advance Payment Bond. In response to the Government’s action the bond holder asserted that they would not honour the bond as the Minister of Works and Utilities, Bradley Roberts, in a meeting on 2 October 2002, attended by a representative of BA Blacktop, a representative of Western Industrial Contractors, a representative of Wolsee Construction and a Mr. Kendal Demeritte (described in the court action as a “political assistant”), had stated “that the award of the project to AA was tainted by suggestions of political interference and corruption”. The bond holder also asserted that the Minister stated “that the actions of all parties involved (and the then officials of the employer) were currently under investigation and that there was an on-going inquiry into the award of the project to AA and the execution of the agreement”. The defence filed by the bond holder to the action brought by the Government also stated that Minister Roberts refused to disclose the details of that inquiry. Relying upon the words of Minister Bradley Roberts that the Government “knew that the circumstances surrounding the award of the contract to AA amounted to an illegality” and the “political interference and corruption amounted to the commission of offences under both the common law and the statutes of the Commonwealth of The Bahamas”. They further stated that they were not prepared to support a contract that was “illegal or which violated or resulted in the violation of any law or applicable regulation” and they had no obligation to honour the bond on the grounds that the agreement with AA was tainted by illegality, which rendered the guarantee illegal and/or unenforceable on the grounds of public policy.

Following upon the election of my Government in May, 2007 the bondholder in September, 2007 finally agreed to discontinue relying upon the allegation made by Minister Bradley Roberts and confirmed in a letter to the IDB that it was “withdrawing the allegations of political interference, corruption and illegal acts pleaded in its Defence and Counterclaim filed on 30 September, 2005”. The bond holder agreed to pay $5.25 million in settlement of both bonds.

Also following upon the receivership of AA’s parent company in 2002 a number of contractors expressed an interest and offered to complete the project including two of the bidders on the project prior to the award of the contract to AA:

i) Interbetton (originally prequalified and submitted a bid);

ii) BA Blacktop (also originally pre-qualified and had submitted the lowest bid, but was disqualified);

iii) American Bridge (new);

iv) Highpoint Rendle (new).

The inclusion of non-bidders as a replacement contractor for AA was not acceptable to the IDB and the proposals made by them were not satisfactory to the Government. Except for Interbetton and American Bridge, all the other contractors had similar or less financial resources than AA and lacked regional or other overseas experience outside their home countries.

Interbetton, the contractor who built the Paradise Island second bridge on time and within budget, had the required experience and resources and put forward an indicative price of $56 million to complete the project, which was $22 million over the balance remaining in the contract ($34 million). They also required the payment of $150,000 to defray the cost of their bid preparation. Interbetton’s proposal was rejected by the Government.

This rejection of Interbetton’s proposal is instructive in that MM, the Government’s Engineer of Record, several months later estimated the cost to complete the project at $57 million.

It is unfortunate that the Interbetton proposal was not favourably considered by the Government. Had the proposal been accepted, the $7.7 million spent on Harrold Road; the $3.3 million on Baillou Hill Road from the roundabout to Robinson Road; the $11 million on the Milo Butler Highway extension from Fire Trail Road to Carmichael; the $2.8 million committed for the extension of Gladstone Road from JFK Drive to West Bay Street and the millions of dollars being spent on the roads from Thompson Boulevard to Baillou Hill Road and the connector road between Bethel Avenue and Yellow Elder Way would not have been spent or would not now be needing to be spent.

Additionally 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 realized much sooner.

Also the price of oil in 2003 was $23 per barrel, as compared with the price of oil in recent times of over $100 per barrel and rising.

Mr. Speaker,

In 2003 three Bahamian contractors were pre-qualified to bid the Harrold Road Corridor and Bethel Avenue Roundabout project, (previously deleted from the programme) after receipt of the IDB's No Objection:

1) Bill Simmons Construction & Heavy Equipment

2) Bahamas Hot Mix

3) Bethell's Trucking and Heavy Equipment

Bill Simmons Construction’s bid was considered to be substantially non-responsive and rejected.

The bid by Bahamas Hot Mix of $6.5 million was considered to be fully responsive and in line with MM’s estimate of $6.2 million.

Bethell's Trucking’s bid of $5.3 million neglected to include the Bill of Quantities and was considered to be substantially non-responsive; nonetheless it was accepted by the Ministry of Works and Utilities.

Upon consideration of the Ministry of Works and Utilities Bid Evaluation Report, the Tenders Board expressed the view that as all tenders were received late they should have been rejected and the project re-tendered. If the Government were to proceed with the project as tendered they recommended that the contract should be awarded to Bahamas Hot Mix whose bid submission was responsive to the bid requirements and bid price was close to the Engineer’s estimate.

The recommendation was forwarded by the Ministry of Works and Utilities to Cabinet for its consideration. Prior to consideration of the recommendation by Cabinet, Bethell’s Trucking and Bahamas Hot Mix advised the Government that they had formed a JV and submitted a proposal to undertake the work jointly. A contract in the sum of $5.7 million was agreed and the contract awarded to the JV on 13 February, 2004.

The scope of works included: construction of a dual carriageway from Milo Butler Highway to Baillou Hill Road, construction of a service road, rehabilitation of the roundabout at Harrold and Baillou Hill Roads, construction of a new roundabout at Yellow Elder Way and Harrold Road, construction of sidewalks, installation of an extensive drainage system, installation of street lighting and landscaping.

The project was completed and turned over to the Government on 30 August 2005 at a cost of $7.7 million, a cost overrun of $2 million, and some 34% over the contract’s fixed sum.

In early 2003, five international contractors indicated an interest in bidding on the road project, excluding Harrold Road and Bethel Avenue Roundabout:

i) Canadian Commercial Corporation ( BA Blacktop - UK)

ii) Vecellio & Grogan (Ranger Construction - USA)

iii) Jose Cartellone Construcciones Civiles (JCCC - Argentina)

iv) Sigma Construction Engineering (USA)

v) Lagan (dropped out indicating that they could not meet the criteria - UK)

The first three contractors submitted pre-qualification proposals by the bid closing period and of those only JCCC was pre-qualified to bid.

The project was put to bid in June, 2004 and in November, 2004 JCCC advised the Ministry of Works and Utilities that they would not be submitting a bid.

Following upon no bid submission from any contractor the Government decided to split the project into seven separate slices, two of which were open to international contractors. The Government determined that going forward:

• bids would be invited on the more conventional build-only basis, as this format was expected to result in a more competitive bidding process from a wider range of contractors;

• re-tendering by slices (smaller and more manageable bid packages) would be attractive to Bahamian contractors.

The bid documents for the International Slices were issued in January 2006. Twelve contractors collected bid documents, but only seven of them participated in the pre-bid meeting and site visit that was held in February, 2006:

(i) Dickerson Construction (Florida)

(ii) Ranger Construction (Florida)

(iii) Dipcon Engineering (Trinidad & Tobago)

(iv) Bethell’s Trucking & Heavy Equipment (Bahamas)

(v) Caribbean Civil Group (Bahamas)

(vi) Bill Simmons Heavy Equipment (Bahamas)

(vii) Bahamas Hot Mix (Bahamas)

Notwithstanding the extension of the bid period up to five months, no contractor submitted a bid.

In March, 2005 the JV contractor for the Harrold Road and Bethel Avenue Roundabout Corridor project was invited to submit a Price Proposal for the construction of new roundabout at Robinson and Baillou Roads, improvement to the roundabout at Baillou Hill and Harrold Roads and construction of 0.25 miles of dual carriageway between these roundabouts, landscaping, sidewalks, drainage and street lighting.

The contract was awarded to the JV in October, 2005 for the sum of $3.3 million.

The JV was to complete the project in 7 months. However, the project was not completed until February, 2007, some 14 months after the commencement date. The joint venture contractor has submitted a claim for an additional $3.8 million over and above the contract sum. This claim has been rejected.

The bids were issued in 2006 for the extension of Milo Butler Highway from Fire Trial Road to Carmichael Road, construction of a roundabout at Fire Trail and Milo Butler Highway, signalized intersection at Carmichael Road and completion of the Milo Butler Highway, construction of sidewalks, installation of an extensive drainage system, installation of street lighting and landscaping.

In March 2007 the lowest bidder, Knowles Construction and Development was awarded a contract in the sum of $8.85 million to undertake the project. The project was completed and commissioned in December, 2008 at a final contract sum of $10.95 million inclusive of a price escalation cost of $1.7 million.

Mr. Speaker

JCCC

Following on the failure to attract any international bidders in respect of the two international slices open to international and local contractors on two previous occasions, the Government with IDB’s approval used the IDB’s Limited International Bidding method in respect of the international slices to solicit bids to complete the project.

On 4 April, 2007 four international companies were invited to bid on the project:

1. Ashtrom International (Israel)

2. Malphrus Construction Company (US)

3. Ranger Construction Industries (US)

4. Surrey Paving & Aggregate (Jamaica)

JCCC (Argentina) was added to the contractors list on 10 May 2007.

The Bids were opened on 21 August, 2007 with the following results:

1. JCCC US$ 86.96 million

2. Malphrus Construction US$ 88.3 million

3. Ranger Construction Industries US$107.6 million

4. Surrey Paving & Aggregate US$ 71.3 million

The Bid Documents submitted by the first three bidders were substantially responsive. The bid by Surrey Paving & Aggregate was considered unresponsive and rejected. JCCC’s bid was reduced to $83.3 million resulting from cost savings options and modifications in relation to revisions to the scope of Works to Baillou Hill Road south to Carmichael, Baillou Hill Road to Duke Street, and Market Street.

Further negotiation with JCCC included the addition of new corridors Bamboo Boulevard to East Street, Bethel Avenue between TWD Highway and Thompson Boulevard, Prince Charles Drive between Beatrice Avenue and Fox Hill Road, and Abundant Life Road/Windsor Place at a cost of $20.2 million; an increase in the scope of works for Water Mains at a cost of $9.7 million and a Provisional Sum of $6.7 million for the Milo Butler Highway extension from Carmichael to Cowpen Road.

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News date : 03/05/2012

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