Little difference between chinese, local contractors

Initial Conclusions

18.5. It needs to be borne in mind that the material in this section is provided exclusively by the Government Agency responsible for commissioning the projects. There was no oral presentation and time and resources did not permit further investigation. On some projects, presentations received from contractors and consultants have painted a somewhat different picture from that put forward by the Agency. However, the Commissioners have no such grounds to question material put forward by EFCL.

18.6. Assuming that the EFCL predictions of cost overruns in respect of projects still under construction are fulfilled, the level of post-contract cost increase can be seen to be relatively modest. This is not unique in the public sector, but nevertheless to be welcomed. While the cost overruns in all cases are relatively modest, it is to be noted that some of the secondary schools are said to have been let to Chinese Contractors because the tenders submitted by local Contractors were substantially in excess of the in-house estimate.

18.7. Delays, conversely, in relative terms, are a much more serious problem than cost overruns, amounting to an average of 25 percent of the contract period. The causes of time overruns are divided between employer (Consultant) delays and contractor delays, although it is to be borne in mind that the definitive causes have yet to be determined or agreed. One notable feature of these contracts is that, while all the primary schools, with the exception of Icacos, have been undertaken by local contractors, the secondary schools number 1,2,3,4, 5, 8, 9 and 10 (8 out of 13) are being undertaken by Chinese Contractors. While the causes of delay in respect of these contracts appear primarily to be the result of late mobilisation rather than subsequent construction problems, it has to be concluded overall that there is little if any difference in the performance of Chinese Contractors compared to local contractors.

Estate Management & Business Development Co

19.1. Estate Management and Business Development & Co submitted information on time and cost overruns for residential development over the past five years. Thus, of 19 contracts said to be completed, two were in fact still in progress as a result of termination and replacement of the contractor. Of those substantially completed by the original contractor three (out of 17) were completed within the contract period. In respect of the remaining 14, the intended contract durations ranged from 4.5 months to 15 months, while delays ranged from one month to eight months with an average of 3.5 months or approximately one third of the original contract period. The information provided by EMBD was only as to the principal reason or reasons for delay which in every case, with one exception, was stated as “inclement weather .”

The sole exception was stated to be material availability which applied in one other case as well. No information was provided as to whether the inclement weather in question was merely seasonally inclement or exceptionally inclement. But the regularity of this ground of delay strongly suggests the former.

19.2. EMBD also provided information of 31 agricultural development projects. Whilst strictly outside our Terms of Reference, this provided more information on grounds of delay which followed a similar pattern to residential developments. Again, in the great majority of the 31 developments listed, inclement weather was the major delaying factor accompanied by resource problems (material equipment and labour) as well as variations and site access problems.

19.3. In terms of cost overruns, EMBD simply state that there were “no cost overruns”.

The figures quoted, surprisingly, reveal that in no case has the contractor been paid more than about 90 percent of the contract value. This includes two contracts (Woodland and Hermitage) in which a new contractor is said to have been appointed. The same pattern is reported in respect of agricultural developments where the maximum sum recorded as having been paid equates to about 95 percent of the contract value.

Initial Conclusions

19.4. As in the case of the Educational Facilities Company, the material in this section is provided exclusively by EMBD. There was no oral presentation and time and resources did not permit further investigation. Nevertheless, a similar pattern emerged to that presented by EFCL, of limited (if any) cost over-run accompanied by relatively substantial delays, which are a regular feature of most construction projects encountered. However, the performance of EMBD on residential development appears to be in marked contrast to substantial cost over-runs experienced in housing projects undertaken by the Housing Development Corporation.

Housing projects: Trinidad

20.1. In addition to Cleaver Heights, which is considered in some detail under separate terms of reference in a later section of this report, four housing projects have been considered, two in Trinidad (Beverley Hills and Real Spring, Valsayn) and two in Tobago (Blenheim and Roxborough), the latter being dealt with in section 21 below.

These projects have all been managed either by the Housing Development Corporation (HDC) or its predecessor National Housing Authority (NHA) or by Udecott. Details of the operation of NHA and HDC are set out elsewhere in this Report. The Trinidad projects in particular gave rise to a number of issues beyond those of time and cost over-runs.

Beverley Hills

20.2. This was originally a Udecott project for the construction of 120 multi-family units in ten blocks. The contract was awarded to HKL in about June 2003 at the contract price of $35,011,875. The project was handed over to HDC in October 2006 when already subject to very substantial delay and cost overrun. HKL was still on site at the date of transfer. HDC, however, stated that it was unable to confirm the monies paid to HKL or the state of certification of works prior to the transfer. HDC was advised in December 2006 by QES & Associates (QES) that the cost of completion as at September 2006 was the surprisingly large sum of $39,751,921 suggesting that the project had made little progress.

20.3. HDC engaged an independent Project Manager, CE Management Services Ltd (CEMAS), who assessed the works which were still being carried out by HKL and recommended payment in the total sum of $6,913,008 including a settlement figure of $2,300,000, for all works completed as at June 30 2008, which sum was duly paid by HDC. HKL then withdrew from the site by agreement and HDC took steps to engage a new contractor in December 2008. Keith Baldwin & Company (Baldwin) was engaged as independent Quantity Surveyors to estimate the cost of completion of the work, which was then assessed as 42 percent complete with two of the blocks then being occupied.

20.4. The Beverley Hills project was exceptional in being located in an area of unusually high risk in which thefts, vandalism and a number of fatalities were recorded during the initial phase of construction. Work was disrupted to the extent that a joint police and army presence became necessary on site at all times and HDC found it necessary to include a premium risk allowance of 15 percent in any new contract. A contract for completion was awarded to AJKJ Construction Ltd in January 2009 in the sum of $63,870,758. The work is currently in progress and there are no present issues as to defects. The original contract period was 18 months from June 2003. At the date HDC took over the project, October 2006, the time taken was already more than double the original contract period. The current estimated completion date is May 2010. The huge delay, amounting to more than four times the original contract period, and the cost overrun of the order of three times the original price, are each attributable primarily to the high risk nature of the site making it difficult and at times impossible for the contractor to retain labour and to proceed with the works.

20.5. This project is clearly a-typical but does illustrate, in extreme form, one of the factors which can be found present in some parts of Trinidad.

Real Spring, Valsayn

20.6. This project concerns land at Valsayn comprising some nine hectares (22 acres) which was owned by the National Housing Authority. The Cabinet, during Dr. Rowley’s tenure as Minister of Housing, agreed to sell the land at a greatly reduced price to the National Union of Government and Federated Workers (the Union) to facilitate the construction of low-cost housing on behalf of the Union. The Commissioners have not seen the original documentation but it is accepted that the sale took place in February 2004 at a price of $2,530,000. Some months later the union took the decision to resell the land to Udecott at a price of approximately $7.5 million. Dr Rowley stated that he attempted to investigate the resale but was unable to obtain any further information. In particular, no information has been volunteered as to whether the windfall profit realised by the Union is still held in their account, and if so on what terms. The Commissioners were not provided with any rationale for the re-sale of the land. This requires further investigation.

20.7. On May 21, 2004 a valuation of the land was preprared by Mervyn C Thompson, Chartered Surveyors, in the sum of $14.9 million. Dr Rowley’s interpretation of events was that the land, having been made available to the union at a greatly reduced price, had then been bought back by the State, through Udecott, at an increased price. Minutes of a special Board Meeting of Udecott of April 8, 2004 recorded the decision to approve a proposal from HKL to construct 426 dwellings on the land at a cost of$129 million.

20.8. With regard to the construction works, the Commission was provided with a copy of the Contract entered into between Udecott and Hafeez Karamath Ltd dated June 5 2005, which was for the construction of 144 two bedroom apartments, 144 three bedroom apartments, 43 single family units and 77 townhouses (total 408 units) at a Contract Price of $134,632,200 (VAT exclusive). The form of contract was the FIDIC Conditions for EPC/Turnkey Projects (1999 Edition) with particular conditions, including amendments to Standard Clauses 1 to 20 and Additional Clauses 21 to 36. Of interest is the list of statutory approvals which included Town and Country Planning Outline Approval dated October 5, 2004, but no subsequent or final approval.

20.9. The contract completion date was March 31, 2007. By April 2007 the work was substantially in delay with a completion date of March 2008 being quoted. By March 2008 the multi-storey apartments, comprising the bulk of the work remained at 35 percent completed with no completion date quoted. By July 2008 the “approved revised completion date” was April 30, 2009 with multi-storey apartments still only 38 percent completed. The last Project Status Report dated December 2008 was reporting the same period of delay. By letter dated October 10, 2008 the contractor put forward the following reasons for delay.

* Manpower — shortage of skilled labour

* Very slow response from utilities (TTEC, WASA, Highways Division)

* Price escalation

* Material availability

No information was provided as to the final completion date of the units.

Initial Conclusions

20.10. Neither of the projects examined can be regarded as revealing issues of general application. Only the Real Spring, Valsayn project provided any insight into construction problems which, in that case, were substantial. A broader insight into problems on housing projects in Trinidad is provided by the Lockwood Greene Report, summarised in section 12 above. This should also be contrasted to the problems encountered on the Cleaver Heights project, which are considered in detail in sections 24 to 27 below.

Housing Projects Tobago

21.1. The Commissioners viewed two housing estates in Tobago on February 2 and 3, 2009 and subsequently received written and oral evidence on the projects.

Blenheim

21.2. This was an estate of social housing being undertaken for the Tobago House of Assembly (THA) by the NHA (subsequently HDC) who undertook the construction work, and Udecott who undertook infrastructure work. The project commenced in May 2006 when it was intended to build 114 houses. The site had very steep slopes and there were obvious difficulties of access and siting of houses. As a result the total number of units constructed was only 61, indicating a major failure of initial planning and investigation of the site. No proper explanation of this failure was offered. HDC said that planning was undertaken by THA and Udecott.

21.3. When the Commissioners inspected the site it was apparent that, despite the houses being substantially complete for over a year, much of the infrastructure work remained to be done and none of the houses was occupied. The outstanding work included waste water, water supply and electrical supply to infrastructure works, as well as final installation of fixtures and fittings which had not been completed to avoid vandalism.

21.4. For the construction work HDC engaged six contractors to build the 114 houses (approximately 20 houses to each contract), with a start date in May 2006 and a contract period of 30 weeks, to be completed by January 22, 2007. The total cost of the six contracts was originally $18,429,732. The cost up to March 2009 amounted to $18,306,876, but for only 61 houses, thus representing a huge escalation in cost to balance the reduction of the number of units. The additional costs are said to be as a result of:

(i) Improvements to the specification required by THA;

(ii) Failure of slopes requiring units to be relocated at additional cost and time;

(iii) Slope failures resulting in complete loss of units;

(iv) Additional foundation and substructure works required by steep terrain.