Cheddi Jagan International Airport Corporation racks up heavy losses; questions about where the income goes: Part 4 – Airport extension and the Golden Fleece

My hope last week was to move seamlessly this week into the big ticket items on the CJIA contract – particularly the runway and the new terminal building. But during the week there has been something of a development, or rather a distraction. Embarrassed at the revelation that the contract provides for some rather overpriced everyday items such as toilet bowls, urinals, sinks and showers and bulbs ‒ separate from the paraphernalia that go with them – the Ministry of Public Works and Communications whose Permanent Secretary signed the contract with China Harbour Engineering Company Limited, went on the offensive to defend the prices set out in 33 pages of the Bill of Quantities which forms part of the contract but which is described as “provisional.” In language that by GINA standards was uncharacteristically moderate, the ministry claimed for the first time that this was a lump sum contract and that persons were being mischievous in isolating for comment any single line item. Perhaps no one bothered to tell the Permanent Secretary that it is unusual for lump sum contracts to have such extensive Bills of Quantities. I think a better explanation is that once President Jagdeo had been told by the Chinese Money Man that US$138 million was available, his government was instructed to work with the Chinese to come up with a contract for an identical sum. To make that possible, they had to find $424,000 toilet sets, $124,000 sinks and $165,000 washbasins.

Two things the Ministry of Public Works does not seem to know, or to care about. Lump sum contracts by their nature require the contractor to submit a total and global price instead of an itemised list of products and services with individual prices. Such contracts are also better suited to simple and small projects where the scope of the work is well defined and drawings are completed up front. That is certainly not the case with the CJIA expansion, and even a cursory review identifies items described as “to be determined.” When China Harbour Engineering Company has done with us, we will be truly finished.

They know that the manner in which the CJIA project is being undertaken does not fit the framework of a lump sum contract. But our Chinese friends know too how to exploit persons of limited experience and even less expertise and under pressure to sign a multi-billion dollar contract two weeks before elections. This combination of factors helps to explain why the Chinese can estimate their cost of mobilisation of equipment and material at US$1,120,000 but yet be paid by Mr Benn’s Ministry the sum of US$20,700,000 ($4,300 million). The FIDIC model contract describes such an advance as an interest-free loan for mobilisation and design. But it certainly becomes more than that when the advance is 18 times the mobilisation expenses. With corruption tainting every element of government operations, this surely invites suspicion.

business pageHaving read and re-read the contract several times, I find that while this contract defies categorisation it facilitates corruption on a massive scale. Indeed the fact that the Feasibility Study was done more than six months after the signing of the contract is hardly the most ethical or logical approach for such high value contracts. What is worse is that it was done by the same ministry that so incompetently negotiated and signed the contract. But let us get back to where we had hoped to be, starting with what the contract describes as Preliminaries.

Mr Hu
The first item to strike one’s senses is that for the performance security. Note the lopsidedness to the Preliminaries in the contract with a total cost of US$8,284,382.53. Oh, such precision! While Guyana pays $4,300 million as an advance payment, CHEC the contractor is only required to provide a performance security for proper performance in the amount and currencies stated. Yet, in clear violation of the condition set out in the Yellow Book, which we are told forms part of the contract, that the bond be provided by the contractor “at his cost,” CHEC the contractor is charging Guyanese taxpayers one hundred and fifty million dollars to provide assurance that they (CHEC) would complete the work. It is Amaila all over again. When it comes to our deals with the Chinese, the question arises whether Guyana is a country of idiots or is it just the ministry. But CHEC is not finished with us yet. It has built into the contract the sum of one hundred million dollars to cover the cost of the advance payment bond which Guyana has to pay within days of signing the agreement. It is Guyana which is committed to making the advance payment but the clever Chinese demand from Guyanese a hundred million dollars as a guarantee of the payment, which is no more than a book entry from EXIM Bank of China to CHEC of China.

Following the FIDIC’s Yellow Book, CHEC is required to deliver the performance security to the Works and Communications Ministry and to send a copy to the engineer. The poor Chinese are at a loss because no engineer has been identified in the contract. That is perhaps only slightly worse than the provision in the contract which describes the contractor’s representative as “Mr Liu Jialin,” with no designation or address. With more than a few thousand “Mr Jailin” among the seven hundred million male Chinese in China alone, and with their deadpan humour, CHEC the contractor could just as well have identified Mr “Hu” Jailin as its representative. And incidentally, this Mr Jailin is not the person signing the
contract for CHEC the contractor.

Sixty-nine toilets, only three showers
Guyana has to pay $270 million for CHEC’s supervision of works, $122 million for CHEC’s site accommodation; $70 million for temporary roads, $60 million for traffic control during construction, $238 million for insurances, $150 million for the performance bond which the contractor is required “to provide at his cost,” and $100 million to cover the cost of advance payment guarantee! Guyana is paying too $20 million for “as built drawings,” $41 million for signs and markings and $1,500 million for layout structure and systems! Clearly someone or several persons are making tons of money from this contract. At these prices it is easy to understand why we need 69 toilets. Surprisingly, however, only three showers.

While we digest those numbers let us think briefly about the concept of the project. One of the features touted by the government is the provision of eight loading bridges, for which the contract contains no specifications and no costing in a Bill of Quantities that otherwise finds it necessary to itemise several items priced at less than US$10. The benefit of the loading bridges could easily have been met by a few buses provided by the airport’s ground handling services at a monthly cost. Even major international airports do this.

Now why 8? At the moment only three passenger airlines serve the CJIA compared with 15 serving Barbados and eight Trinidad. Barbados is also served by eleven charter operators, Trinidad six and Guyana nil. The logic and justification for eight loading bridges seems designed to maximize the returns to CHEC the contractor rather than passengers. Statistics show that approximately 800 passengers use the airport daily, which means that the average traffic of each loading bridge is 4.17 persons per hour in a 24-hour day, assuming that every aircraft uses a loading bridge which is not necessarily the case, since at least at a number of airports the smaller aircraft do not.

Fantasy planning
The intellectual architects of the project have sought to justify the expenditure on the basis that Guyana will attract those large airlines which usually fly with an average of 200 passengers per plane. What if four planes with 800 passengers are departing around the same time and the departure area can accommodate only 400 persons? Will the other 400 be asked to wait in the car park? Another justification offered is that aircraft from Europe will not have to stop in Barbados or Trinidad but can fly direct to Guyana. No one at the Bureau of Statistics, the Tourism Authority or THAG could provide any data on tourist traffic between Guyana and Europe. If we assume an estimated total monthly Guyana-Europe traffic of 1,000 per month, we will barely be able to fill one aircraft per week. Benn’s ministry gives as its justification that persons coming from Europe to Guyana do so via North America.

It would be useful for someone to explain why the contract provides for the removal of the existing terminal rather than retaining the building to be used for perhaps cargo and domestic air purposes. Even if following criticisms the plan changes, the question is why was this not thought of before rather than wait for this to become a variation under the expansion project with time and cost implications? This shows clearly that Mr Jagdeo and company were only interested in signing a contract.

Cost and comparisons
Let us turn to page 46 of 75 of the Bill of Quantities which is headed Bill #4: Runaway (sic) & Taxiway. As we look at the numbers it is clear that the costs are so inflated and exaggerated that Runaway is indeed an apt description. Bill #4 gives the total cost of the construction for the runway (1,066.8 meters), the shoulder, the taxiway and the fire lane at US$56.4M. Other items, drainage, water supply and power supply, takes this Bill item sum to US$58.2M.

Let us now use a comparison. The Amaila Road is projected to cost US$30 million for 100 km of new road, and 85 km of rehabilitated road, culverts, bridges and river crossings. A one-kilometre extension of the runway with related pavement works, but exclusive of the parallel taxiway and the cost of sand, are listed as costing US$58,211,240. Of course an airport runway will obviously be built to demandingly high engineering standards but the terrain of the Amaila Road should make the runway costs no more than three to five times the Amaila Road costs. Even excluding the rehabilitation road the runway cost compared with the Amaila Road is quite astronomical.

Or let us take the new modern St Vincent Airport scheduled for opening in November. The runway of 2,743 metres (9,000 feet) has three interconnecting areas for Commercial, General Aviation and Cargo Aprons. The Commercial Apron has one position for aircraft such as B 747-400 and B 767-200, one position for small to medium aircraft such as B 737-800, and six positions for DHC-8 or similar aircraft. St Vincent will have spent EC$652 million (US$240.6 million), including EC$112.2 million (US$41.4 million) on land purchases and EC$44 million (US$16.2 million) on capital equipment which the Government of St Vincent now owns.

By deduction then a brand new international airport is costing the people of St Vincent EC$495.8 or US$183.0 million. By comparison, an extension of Guyana’s runway by 1,066 metres and the construction of a new terminal when grossed up for the works to be done by Guyana, the taxes foregone and other concessions will cost Guyana as much as US$250 million.

Clearly the small islanders are much smarter than we are.

To be concluded next week

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