7.13. Jack Bynoe of TTIA expressed opposition to the design-build system. When the Government embarked on major construction programmes they tended to reject the local construction industry in favour of foreign contractors and consultants. The local industry had a good track record in constructing projects such as schools. The Government had unrealistic expectations of local architects. He gave examples of an irrational approach to the design- build bid process by which four primary schools in different locations were put out for firm price bids by the Education Facilities Company Ltd (EFCL), with no available soils information. Ten bids had been requested involving architects, engineers, quantity surveyors and contractors, where nine of the bids were to be rejected.
7.14. Professor Suite offered the view that the study of comparative procurement system led to the conclusion that each system had advantages and each had disadvantages. Historically, none of the systems had more disputes than others; and in Trinidad and Tobago there had been disputes in the private sector where the public sector was not involved. Where the State was involved in contracting, there was a conspicuous absence of expertise such that the State was unable to control the incidence of disputes. The most appropriate procurement system depended on the capacity of the client on a particular project.
7.15. Mr Joseph stated that the Contractors’ Association Members were currently divided on the issue of design and build. He did not believe design and build would add to the value of development of the industry, but should take its place with other procedures and systems. There was a need to be cautious because of the possibility of corruption. There were unscrupulous practices in the contracting sector: the industry has problems with architecture, engineering and with the contracting departments which needed to be examined holistically. There were a large number of contractors listed in Trinidad and Tobago with no track record and there was a need for competence to be established.
The problem with inadequately specified work was that (as Arun Buch stated) the tenderer with the least experience will tender lowest, and the tenderer with more experience will be rejected.
7.16. Mr Cochran of ISTT noted that the design and build system has been developed in the US and UK over many years. There was a very wide range of different types of design-build. The fact that there was single point responsibility for the client would not prevent disputes within the contractor’s organisation, as in the case of Wembley Stadium. The essential requirement was to have a good definition of the employer’s requirements and this required skills which were not present in Trinidad and Tobago at the moment and which required a great deal of training of those commissioning construction on behalf of the Government before proper requirements could be accurately written.
There also needed to be proper rules governing the selection process, which were not presently in place. There was a wide range of opinions within the surveyors’ organisation. There would be far more work for quantity surveyors using design-build. But there was opposition to design-build and much development was required. A client advisor was needed and many other changes were required to make design-build the sensible and efficient way forward.
7.17. There were exchanges between Mr Buch and Minister Imbert regarding the comparative cost of office accommodation in projects using design-build against design tender. Mr Buch’s analysis led to a cost of under $1,500 per sq ft for the Government Campus Project, which was below the cost of the Waterfront Project. Minister Imbert conversely quoted a cost of $1,451 per sq ft for the Waterfront Project against present costs of $1,546 for the Government Campus Plaza, which was still subject to substantial increase.
7.18. Minister Imbert gave an example of a local design-build project that had not worked well. The project was at Coconut Grove, Mayaro where the developer was Bynoe Rowe Wiltshire Partnership. The project scope was the construction of 84 single family housing units. The original completion date was February 2004. Only 50 percent of the project had been handed over by 2007 and the remainder was only recently completed. This was a local consortium undertaking design-build which was plagued by disputes, non-conformance with construction drawings and incomplete designs. Mr Bynoe responded by pointing out that neither the contractor nor the developer had been paid by Udecott. The project was handed over to HDC who had taken no action for the past two years. Coconut Grove was a sole selective project so that the designer was guaranteed payment for his design work.
7.19. The Inquiry heard from Mr Rubadiri Victor of the Artists Coalition of Trinidad and Tobago who addressed the Academy for the Performing Arts and other cultural projects with costs of around $4 billion over the past four to five years. The concern of the Artists Coalition is that NAPA could not function as a Performing Arts Centre at present because the stage was not appropriately constructed to facilitate dance or theatre production. The concern was that public money was being used for a purpose which was not going to be achieved. Minister Imbert responded by agreeing that the facility should be tailored to accommodate the aspirations and requirements of the end user and this would need to be addressed. The Performing Arts Academy was not a performing arts centre but a training institution. It was not designed as a concert hall. The University of Trinidad and Tobago (UTT) has responsibility for administration of the facility as a training institution.
7.20. The Commissioners accept that design-build has much to commend it in Trinidad and Tobago. However, as pointed out by several parties, there is no single system of procurement which should be preferred in all circumstances. It is to be noted that design-build has been developed over many years in the USA, UK and elsewhere, where other systems have co- existed and continue to be used successfully. Furthermore, in any country, including Trinidad and Tobago, any new system needs time to become bedded into the local industry, requiring that professionals should learn new skills, contractors should discover the economics of working with the new system, and both should learn to work together and to accept new levels of risk.
7.21. One matter which is clear to the Commissioners is that design-build is not to be seen as a convenient means of escaping the well-documented problems of design-tender.
Those problems, in the view of the Commissioners, stem from a range of management issues generally indicative of poor performance by many parties. It should not be supposed that design-build projects can be successfully carried out with similar levels of poor performance. Indeed, the Commissioners are of the view that the undoubted success of some high-profile design-build projects has been dependent on high levels of performance from all parties involved.
7.22. It was generally recognised that there are a number of ways in which design-build can be applied, ranging from full open design competition to a negotiated tender on a design for which the contractor takes over responsibility. There was little discussion on which particular form of design-build was most suitable for adoption in Trinidad and Tobago and this should carry the subject of future debate. This should be aided by analysis of projects clearly completed so far in Trinidad and Tobago, and of responsibilities including that of developing the design up to completion. On the basis of the present debate, the Commissioners were of the view that a full open design competition is unlikely to be justifiable.
The preferred system is likely to involve tendering on the basis of a preferred design which is completed up to a minimum level, and which is then to be priced competitively. The Commissioners endorse the proposal of Mr Riley, which had general support, that there should be provided to tenderers in all cases a detailed statement of Owner Requirements and a detailed Performance Specification. There was also general support for the need for employers to retain the services of a design consultant who could either produce or oversee the production of the appropriate tender documents and advise on the acceptability of contractors’ proposals.
8. Issue (vii) Price gouging and profiteering in the public construction sector.
8.1. The Inquiry received no written submission on this issue, although a number of references were made during round-table sessions on other issues. Minister Imbert referred to over-pricing by local contractors bidding for Early Childhood Care and Education Centres; but that was put forward as a reason for turning to a foreign contractor and, whether or not the local bids were inflated, no money passed as a result.
p8.2. Price gouging is understood to refer to a situation in which a contractor or supplier who has contracted to buy goods or materials at a low price then takes advantage of a rise in the market price to make an un-earned profit. This is likely to apply in the case of commodities such as steel, cement or aggregate, but it can apply equally to any other goods or materials. There is a perception that such “price gouging” is unfair, unethical and should not be allowed to occur.
8.3. It may be that this perception is fuelled by what happens in the reverse situation when the price rise is borne by the contractor and (in accordance with standard practice) there is no fluctuations clause to mitigate the effect of the price rise. In this situation, as we have seen a number of times, the contractor generally receives some measure of compensation where the employer accepts responsibility for part of the delay which has given rise to the price inflation.
8.4. In all such situations it is the employer, including the State Agencies, which controls the terms of the contracts being placed. It is the contract terms which offer the opportunity to make provision for the consequences of price inflation in respect of goods and materials as well as rises in other items, such as wages and taxes. A “fluctuations” clause allows the contractor to recover defined inflationary price increases and therefore requires that he should not include for any such increases in his price. While this is unusual, there is no reason why a fluctuations clause should not also provide for price reductions occurring after the fixing of the contract price. However, as has been seen, the present policy of the State Agencies is against the inclusion of any such provisions.
8.5. The conclusion, in the absence of debate in the Inquiry, is that price gouging, if assumed to be a bad thing, should be controlled by appropriate contract clauses to regulate what the contractor is entitled to recover and what is to be regarded as his risk.
However, the effect of any such provisions will be dependent on the terms of the contract being properly applied and enforced. It is to be noted that, in some respects at least, there is a notable reluctance to enforce contract terms as they stand.
9. The White Paper
9.1. Government published a White Paper in 2005 containing extensive proposals for legislative reform of procurement practices in the Public Construction Sector. The White Paper is intimately bound up with the issues being considered in the Inquiry and deserves careful review. The issue was raised in the Inquiry by the JCC in the first statement of Winston Riley and responded to, inter alia, in the presentation filed by Udecott prior to the first hearing of the Inquiry.
9.2. The White Paper was the product of the Committee for Reform of the Public Sector Procurement Regime, set up by the Cabinet in 2002 as a result substantially of the initiative of the JCC.
The committee comprised senior civil servants from Trinidad and Tobago and representatives of the TT Manufacturers Association, the TT Chamber of Industry and Commerce, the TT Transparency Institute and the JCC. The Committee addressed many of the issues with which the Commission is now concerned. A Green Paper was published for public comment and subsequently a White Paper which was laid before Parliament in 2005. No action has been taken or is currently proposed towards implementing the proposals of the White Paper.
9.3 The White Paper reviews the history of and perceived shortcomings in the current procurement system.
It sets out proposals for a major re-organisation of the public procurement system to include both the prior design stage, the procurement of bids and the subsequent implementation stage. The proposals include a new framework applying objective standards and adopting current best practice, based on the principles of value for money, transparency and accountability.
The reforms are seen as necessary to achieve the quality of governance predicated by vision 2020. Significantly, the White Paper proposes the guarantee of a substantial market share to local business, to develop and promote domestic industry.
9.4. The White Paper proposes a new legal and institutional framework involving replacement of the Central Tenders Board Ordinance and its subsidiary legislation with a re-engineered procurement system. This is to be overseen by a regulator, accountable to Parliament and with a mandate of ensuring and efficient and relevant procurement system that conforms to the operating principles, objectives and guidelines established. The role of the regulator is said to be based on an existing model in Jamaica.
9.5. The JCC supports the aims of the White Paper and expresses concern at its continuing non-implementation. Udecott, conversely is opposed to the proposals and points out that it and other special purpose companies were not represented on the Procurement Reform Committee. Udecott asserts that the support and objectives of the local construction industry are essentially protectionist.
While Udecott supports the principles of value for money, transparency and accountability, these principles are already reflected in Udecott’s own tendering procedures.
The Udecott proposals of the White Paper are therefore seen as unnecessary. Udecott opposes a universal public procurement regime which, it says, would lack flexibility. Udecott therefore disagrees with the premise that a new framework should apply to all public procurement.
Udecott bases its opposition to the White Paper on what it sees as the shortcomings and limited capability of the local construction industry, which make it inappropriate that there should be any guaranteed market share.
Udecott also suggests that it is unlikely that any individual will be found with the necessary political and commercial independence to carry out the role of regulator envisaged by the White Paper.
9.6. Issues concerning the White Paper were dealt with in oral session by way of a round-table exchange. This took place on the second day of the second hearing, March 24, 2009 and was conducted between the following persons: Minister Colm Imbert, Ms Carla Herbert (former member of the Reform Committee), Winston Riley (JCC), Victor Hart (Transparency Institute) and Mr Calder Hart (Udecott).
9.7. Minister Imbert explained that, while the White Paper had been adopted as Government Policy in 2005, there had since been feedback from a number of industries, stakeholders and practitioners, and from the State Enterprise Sector which had not been represented on the committee. As a result the Government had now concluded that the regime proposed by the White Paper was simply unworkable.
The objectives remain laudable and the Government accepted the need to regularise the system of procurement, but the proposals of the White Paper were now seen as unrealistic.
The proposals would deprive the Government of control over the implementation of development projects. The Government now propose to strengthen the public sector procurement regime by standardising tender rules, tender criteria and tender evaluation procedures, if necessary by way of legislation. A party who complained of being treated unfairly should be able to seek redress through the courts, rather than through the proposed Independent Regulator.