Nipdec did not have effective management

22.16. For the Toco Police Station reasons for time and cost over-runs were said to be: access problems due to the collapse of a bridge, omission of essential foundation works, shortage of cement aggregate and concrete, inclement weather, delay in the arrival of implied components, delay in the provision of electrical connection by TTEC, client variations, significant price increase of materials and inadequately short project period. For the Tunapuna Police Station, the reasons for the time and cost over-runs were said to be: inexperienced design personnel, modifications to structural engineering designs, lack of timely response by the design consultants, client variations and significant price increases of materials.

22.17. Nipdec was responsible for constructing five Community Centres, at Beetharn Gardens, Pelican Extension, Morvant, Maracas Bay, Thick Village and Preysal. Nipdec contended that the projects were all subject to substantial time and cost over-runs as a result of intervention by the client (Ministry of Community Development, Culture and Gender Affairs) at approximately 60 percent completion when instructions were given to increase the seating area in the halls by a factor of five. This resulted in re-design taking about ten months, claims for works stoppage by contractors and the need to prepare a new contract document and to have the project re-priced. With respect to two of the projects the original single storey design was replaced with a two storey structure. Further delays are said to have resulted from external works not being designed and provisional sums in the contract proving to be inadequate. The increased seating capacity required a significant increase in the provision of car parking and waste water treatment capacity. In addition there was a last minute request from the client to incorporate air conditioning in two of the centres, thereby increasing the electrical load and requiring changes to wiring and transformers and fmiher associated work. There are said to have been general delays due to a slow response from WASA and TTEC.

22.18. For the Mayaro Sports Facility, Nipdec contended that time and cost over-runs resulted from logistical errors, programme deficiencies and defective work. For the St James’s Youth Centre time and cost over-runs are attributed to the additional cost of nominated sub-contract work and variation by both consultant and client resulting in a 65 percent increase in the cost of the works.

Initial conclusions

22.19. Nipdec has identified the causes of time and cost over-runs on the “other projects” as the following: inexperienced design personnel and inadequate designs, lack of timely response by design consultants, modifications to structural engineering designs, contractor’s lack of resources, client variations, poor communication and relationship with nominated sub-contractors and significant price increase of materials. These are essentially failures by contractors and consultants; but for these projects we have been presented with only the views of Nipdec.

22.20. By contrast, the reported events at Scarborough Hospital (in para 22.2 to 22.9 above) and Belmont Police Station (in section 10 above), have been reviewed taking into account the views of other relevant parties. While we have no reason to doubt that the matters identified by Nipdec were grounds of delay and cost over-run on these “other projects”, they provide no assistance on whether there were contributory failures by Nipdec itself.

22.21. In the case of Belmont, Nipdec did not appear to play any role in resolving the emerging problems on the project. The fact that Nipdec was appointed project manager may even have created an expectation that they would perform this role. In the case of Scarborough Hospital, while the matter is still under review in the arbitration and court proceedings, it appears that Nipdec’s role was similarly low-key, in this case expressly devoid of executive authority. Thus, for whatever reason, Nipdec did not provide effective management of the project. Thus, we do not accept that the failure of the original project can be deployed as an argument against use of the design-tender method in general. However, we do accept that the accumulated problems of design and construction on the Scarborough project indicate that design-build was the right solution for completion of the project, which has been let on this basis, still with Nipdec employed as manager.

23. Udecott Projects

23.1. This section reviews time and cost over-runs and defects in relation to eight projects undertaken by Udecott from 2002 onwards, including some which are ongoing.

Prime Minister’s residence

23.2. According to the statement of Ms Rampaul, the original designer was a local architect, Nigel Thomas and Associates, who also provided an initial estimate on incomplete drawings of $40 million. As further drawings became available the costs substantially increased. As stated in the Government’s answer given in Parliament by the minister at the time, the Hon Chin Lee on February 14, 2007, the sum of $43.2 million had been spent on the project for demolition works, site clearance, grubbing, site preparation and construction work. Udecott is said to have carried out a value engineering exercise from which it was determined that the cost of the project, following the existing design-tender method would exceed $200 million and would additionally result in substantial delays. The Commissioners have not been able to verify any of the quoted figmes.

23.3. In the light of the Waterfront project, which was then being executed by design-build, the Commissioners were told that Udecott decided (with the knowledge and approval of Govermnent) to use this project as a further test of design-build methodology. The decision was also said to be influenced by the nature of the project, being the intended official residence for the Prime Minister. The decision was therefore taken to change the project to design-build, with use of a government to government arrangement between the Government of Trinidad and Tobago and the government of China. The Cabinet resolved in August 2006 that Udecott be instructed to negotiate with the Shanghai Construction Group International (SCG) to undertake the project under a design-build contract. Udecott contended that the project falls within “special circumstances” which permit the use of sole selective tender process. Udecott had in fact only three months earlier signed the contract with SCG for the design and construction of the Performing Arts Academies.

23.4. Udecott advised that the Prime Minister’s residence and Diplomatic Centre was delivered within nine months, within budget and to the highest standards of quality and workmanship. Udecott contended that the initial design-tender proposal would have led to increased building costs and escalating design fees, and that there would have been claims for additional payment by the contractor for variations and additional work instructed by the architect.

23.5. The JCC, whose members include the original architect, take a different view of the project. Mr Rilely claimed that the adoption of a sole source tendering procedure by Udecott has had disastrous consequences. In cross-examination he said that it was a gross insult to suggest that a two-or three-storey building of that size could not be designed and constructed locally. The people of Trinidad and Tobago, whose money was being spent on the project, had been over-looked. Mr Riley also questioned whether the life cycle costs of the project had been considered. He said that his information was that there are repairs going on to the building already. Mr Mikey Joseph, president of the Contractors Association, claimed that there had been extensive repairs carried out, almost from inception, to the floors and to the electrical system, which was not yet fully functional. He also claimed that the marble used in the building was artificial. As in the case of the Performing Arts Academies, the choice of SGC was a matter for Government and is not a criticism of Udecott.

23.6. It may be recalled that in mid-2006 none of the major design-build projects undertaken by Udecott had reached completion. The contracts for the Chancery Lane Complex and for the Intemational Waterfront Project had each been placed in mid-2005 and the contract for the Performing Arts Academies had been placed only months earlier. The decision to switch to a design and build contract for the Prime Minister’s residence was, therefore, something of an act of faith. In terms of cost over-run and delay the decision clearly paid off handsomely. The disappointment of local contractors and consultants, including the local architect whose contract was terminated, is easy to understand; and such a relatively modest, yet iconic building, should have been well within the capacity of local construction forces. However, given the delay which, by 2006, was clearly apparent on the major Govenment Campus Project and the stalled Scarborough Hospital project, the decision to try an alternative approach to procurement is entirely understandable. In terms of defects, the complaints by members of the JCC may have substance but they have not been substantiated. Only the chairman has visited the building which, on a superficial inspection, appears to be completed to a very high standard.

Customs & Excise Building

23.7. The C&E Building was subject to an initial delay from about March 2003 to January 2004 as a result of the procedural wrangles over the initial round of tender evaluations and the eventual decision to abort the process and re-tender the Project. As noted in Section 13 above, the Project was eventually let to NH International (Caribbean) Limited (NHIC) on March 5,l 2004 under a JCT 80 Form of Contract in the VAT inclusive sum of $114,460,303 ($99,530,699 exclusive), with Turner Alpha (TAL) appointed as Project Managers. The contract start date was May 17, 2004 and the completion date March 16, 2006 i.e. a contract period of 22 months. There were substantial delays to the Works including a collapse of full-height scaffolding to the East elevation which occurred in July 2006 (during the contract over-run) and is understood to be the subject of on-going court proceedings involving both NHIC and TAL.

23.8. The delays resulted in an application by NHIC for extension of time and loss and expense which was ultimately compromised by a Settlement Agreement entered into, on the advice of TAL. The Settlement Agreement extended the time for completion and included granting a Partial Possession Certificate dated January 28, 2008 and the removal of certain elements of work from the scope of NHIC’s Contract. The work elements not included in the Partial Possession Certificate were: the roof, external cladding, external works, elevators and MEP Works. The approximate value of the works taken over was $63,113,426. By September 2008, the gross value of work certified as completed in accordance with the Contract was $101,461,073 (excluding VAT). TAL records the value of work still outstanding as amounting to $800,000 which valuation is disputed by NHIC. Udecott stated that NHIC has refused to carry out the remaining Works.

23.9. The revised Contract Price in accordance with the Settlement Agreement is $113,000,000 (excluding VAT) representing a net cost ovenun of approximately 13 percent. The revised Contract price includes the following:

(I) Variations and instructions for additional works, the major components being additional aluminium cladding and use of Hydrostatic Voltex. Total of variations:*6,973,301

(II) Settlement Agreement which NHIC was awarded an extension of time of 716 days up to 14 May 2008. TAL had assessed extensions of time up to the end of September 2006 (124 days)

which was then extended on the advice of TAL pursuant to the Settlement Agreement which effectively relieved NHIC of potential liability for delay up to May 2008. Within the Settlement

Agreement Udecott agreed to pay the following additional sums to NHIC:

(1) Settlement of claims for EOT/loss and expense:*$5,567,000

(2) Ex-gratia payment for increase in price of raw materials,

primarily steel:*$5,179,000

(3) Contractor’s claims for interest on late payment:*$250,000


23.10. At the heart of the Settlement Agreement is the inter-relationship between different

elements of the Government Campus Project, referred to as packages or PK 1 to 9, the C and E Building being PKI. On TAL’s advice, the Project was split up as follows:

PKl: Customs and Excise Building

PK2: Car Park

PK3: Board of Inland Revenue Tower

PK4: Mechanical Installation for all buildings

PK5: Electrical installation for all buildings

PK6: Ministry of Legal Affairs Tower

PK7: Curtain walling for the Towers

PK8: Elevators for all bnildings

PK9: Ministty of Social Development Building

23.11. This division required a number of contractors to range across the entire site working

in buildings being constructed by other contractors. The division of responsibility called for a high degree of co-operation between the Contractors and placed responsibility on TAL, as Project Managers, effectively to monitor and enforce the co-operation required for the Project to succeed. PK9, the Ministry of Social Development Building, included many of the areas of external works and paving surrounding the other buildings. Thus, the Contractor who was awarded PK9 effectively controlled large areas of the site with regard to access and was in a

position to impose serious impediment on other Contractors thus giving considerable

commercial advantage to the PK9 Contractor. The successful tenderer for PK9 was NHIC which, according to Udecott, was able to use its commercial advantage to achieve a favourable settlement agreement. The agreement the remove from the PK9 contract of the external works to PK3 and PK6, which then removed NHICs stranglehold over the GCP site.

23.12. Udecott thus explained the commercial settlement reached on PKI the following terms:

“[NHIC] held the potential to leave Udecott open to multi-package claims

as a consequence of the degree of inter-relationship and reliance between the

various packages consequent upon the TAL work package system employed on

the GCP. This left Udecott in a position whereby the potential was for a

massive influx of claims vastly out-sizing those of NHIC Further, if NHIC

was ultimately found to be culpable for such delay, it might have been that

NHIC would not have the financial ability to meet those claims. This may have

left Udecott holding financial liability for these further potential claims. In

this situation Udecott would have no alternative but to either terminate the

Contract with NHIC or to buy its way out of this situation, even if this was at a

premium very much to the advantage of NHIC.”

23.13. The Commissioners appreciate that there is and will continue to be differences between Udecott, TAL and NHIC as to how the situation described above could have come about. It is not the task of the Commissioners to draw conclusions or make any observations as to actual or potential responsibility. The Commissioners would observe, however, that the inter-relationship between the GCP Packages, particularly PK9 with PK3 and PK6 (that is the three major components of the

Campus, together with the CandE Building), once those packages were defined, was obvious. The consequences of such inter-relationship, coupled with the effect of the Contract Terms between Udecott and the respective Contractors, should have been entirely predictable and capable of relatively conventional contractual analysis. It is beyond the scope of the present Inquiry to examine what alternatives might have been available to avoid the situation which Udecott found itself in with NHIC. It is likely, however, that the cost of “buying off’ the rights ofNHIC under PK9 greatly exceeded whatever additional costs would have been generated by an alternative contractual strategy which would not have given the PK9 Contractor the commercial advantage it was given. In short, this was a serious failure of project management.

23.14. Udecott responded to this by pointing out that it is “primarily a development company” and not responsible ‘’for actively managing the projects at an operational level”. Consequently, it is said that the decision on how the GCP project should be split was taken by TAL and it would have been inappropriate for Udecott to second guess such advice. The problem is said to have arisen from the “outrageous behaviour of NHIC in imposing impediments to the progress of other contractors”.

The Commissioners observe in the first place that UDeCOTT’s self-description as not being responsible for management at an operational level appears somewhat at odds with the Project Management role and indeed the high level of expertise which it also claims, inter alia in its Final Submissions. TIns adds weight to the view of the Commissioners that Udecott’s role needs to be re-defined. However, the Commissioners do not accept that such major decisions can be made “by” the professional Project Manager, whose tasks is to advise Udecott on major management decisions. Udecott possesses adequate expertise to make such important decisions itself. The third point is that it is not suggested that NHIC was acting outside its contractual entitlement. If it was doing so, it was the clear responsibility of Udecott to take appropriate steps to enforce the contractual rights of the employer. As it is, Udecott has simply allowed the additional cost and delay to be loaded onto the public purse.

Government Campus Plaza

23.15. The delay and cost overrun which occurred on the CandE Building is summarised above. As set out in Section 14, the CandE Building was the first of nine packages comprising the Government Campus Plaza (GCP) which included five major buildings, the Customs and Excise Building (PIG), the Board of Inland Revenue Tower (PK3), the Ministry of Legal Affairs Tower (PK6) and the Ministry of Social Development Building (PK9) and the multi-storey car park (PK2). The Project overall is described in Section 14.

23.16. As noted in Part II above, the tendering process for the CandE Building and subsequently the award of the MLA Tower to Sunway Construction Limited proved to be controversial. The award of the remaining sections of the GCP was not controversial as such, but has been the subject of much criticism by reason of the use of the design-tender procedure, with the suggested inference that the Project would have been executed more efficiently and more quickly had the design-build procedure been employed. This section therefore reviews the time and cost overruns which occurred, which are closely linked with events in relation to the C&E Building.

23.17. It is to be noted that Turner Alpha Limited (TAL) had been engaged as Project Managers for the GCP during 2003 and continued to be so engaged when they were also commissioned to act as Project Managers for the Brian Lara Stadium from 2004 onwards. Furthermore, when TAL was effectively removed from the BLA Project in 2008, they continued work on GCP and remained in place as the Project Manager throughout 2009. TAL was still in post when the Commissioners visited the GCP on March 25 2009.

23.18. With regard to cost overruns, the projected Final Accounts on the nine projects, PK1-

9, together with an additional PK l0 for the LED screen and PK13 for miscellaneous works, is set out in a spreadsheet attached as Annex 15. In summary, the total of the Contract Sums as awarded, including estimated figmes in respect of Pkl0 ($38,500,000) and PK13 ($10,000,000) together with other adjustments, gives a gross figure of $1,393,164,115, including allowances in the contracts for dayworks, Provisional Sums and Contingencies. The anticipated Project final cost is stated to be $1,527,337,873, amounting to a cost overrun of just under 11 percent. The anticipated cost includes claims accepted on PK1 as summarised above (including an ex gratia

payment in respect of steel escalation of over $5,000,000). The anticipated cost also includes the cost of variations in the total amounts, across all projects, of $62,715,308 actual and $24,038,325 further anticipated, total $86,753,633. Part of this cost is represented by dayworks, Provisional Sums and Contingencies already included in the contract sums. A somewhat larger figure ($99,319,712) is attributed to costs of extension of time. Overall, as assessed by Mr. Arun Buch, the cost of the Project has not escalated substantially and should be regarded, in temlS of cost at least, as a successful project.

23.19. With regard to delay, each component of the Project has been subject to very substantial delays such that the Completion Dates, which ranged from March 2006 in the case of PK1 to August 2007 in the case ofPK9, have all been exceeded by more than two years, with the Project typically talcing more than twice the contractual period. The principal reasons for delay were the following:

(i) Access problems involving PK1 and PK9, eventually resolved by the Settlement Agreement covering these packages. All other packages were delayed in consequence of the access problems.

(ii) As noted above, the total volume of Variations represented something over five percent of the total cost and could not therefore account for a 100 percent time overrun.Variations to the cladding system, however, were decided upon during the course of the Project and involved substantial delays in the procurement of materials. These delays were concurrent with access delays.


"Nipdec did not have effective management"

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