Prime Minister's Address to JCC for the construction industry

Prime Minister, Dr. the Honourable Keith Rowley

REMARKS BY THE PRIME MINISTER OF TRINIDAD AND TOBAGO DR THE HONOURABLE KEITH ROWLEY

 

JOINT CONSULTATIVE COUNCIL FOR THE CONSTRUCTION INDUSTRY BREAKFAST WITH THE PRIME MINISTER

TUESDAY 16TH JANUARY,2018

 

 

 

 

 

Salutations

 

  • Dr. James Armstrong, Ph.D., President of the Joint Consultative Council for the Construction Industry;
  • Members of the JCC Executive;
  • Others Representatives of the Construction fraternity;
  • Cabinet colleagues;
  • Members of the media;
  • Distinguished Ladies and Gentlemen; a very good morning to you all.

 

 

Introduction

I believe it is fair to say, that since the last time I addressed this gathering, our collective circumstances have improved significantly. And since I am sure there are a number of pressing matters you wish to address with me as I stand before you, I intend to make full use of my present opportunity to raise some key Government initiatives as they relate to our local construction industry and various concerns you would have raised and which I wish to raise.

Over the past year, the Government has achieved some level of success in stabilizing the economy and we are now increasing our focus on the areas of Growth, Development and Employment generation.

This morning’s meeting, therefore, is most timely as the involvement and support of the JCC is  critical to our success in creating the infrastructure required as part of our national economic diversification policy. As I’ve said before, this administration is willing to partner with, and assist the JCC in its efforts to embrace best practices continuously improve output in the industry.

 

Re-establishment of a Ministerial Committee for the Construction Sector

 

One of the major developments I wish to share with you today is the re-establishment of a Ministerial Committee for the Construction Industry which is to be chaired by myself, as Prime Minister.

Comprising the committee will be the relevant Ministries and of course, the JCC, representative of all the professional bodies that fall within its purview. This grouping should be in place before the end of the month and the JCC is being asked today to nominate two or three persons to join others, in this approach to identifying and addressing our challenges and opportunities.

This committee will facilitate continuous communication between all the various parties to whom the success of the construction sector is critical; it will allow for the sharing of information and provide the Government with valuable input and feedback for its plans and strategies.

Further, this forum will provide the JCC with the opportunity to ventilate the issues and challenges that it considers most in need of the Government’s intervention in an effort that would allow for the smooth and effective functioning of the construction industry. This intervention would include, but not be limited to, the use and encouragement of professional standards and also the settlement of outstanding monies owed to  the sector.

 

Legislation

 

With respect to legislation, there is a regularisation process underway to address amendments to existing Acts and the introduction of new Bills, where required. The aim here is to recognise and strengthen some of the key professions to the industry, specifically Engineers, Architects, Surveyors and Planners.

The Government will assist in championing the institutionalisation of various pieces of construction legislation. This would include; Building Standards – Wind Codes, Seismic Codes, Drainage Codes and Storm-water Management Codes etc. This shopping list on its own could become a bureaucratic nightmare of delays but married into new legislation and Local Government Reform it could be made to work in expediting approvals and creating an enforcement platform that will be to the benefit of the national community.

To this end we are currently working towards engaging the Planning and Facilitation of Development Act 2014. This Act has been partially proclaimed and the Ministry of Planning is considering the way forward as it relates to the intersection with Local Government Reform and the Property tax laws.

 

Material Shortages

 

The Cabinet has also been working to resolve issues regarding the shortage of certain building materials. To this end, the Government is seeking to regularize the quarrying industry, so as to ensure compliance with the Environmental Management Authority’s regulations as it relates to obtaining the required mining licenses and payments of royalties.

These regularising practices will undoubtedly assist in eliminating the risks and inconveniences presented to the public as a result of the unauthorized use of state lands to operate unlawful quarrying activity.

Moreover, it will also prohibit illegal material from being sold into the construction sector.  Once  this  structure  is  implemented,  the  materials  legally  provided  to  the construction sector are expected to be of the appropriate quality and in adequate volumes.

The Commissioner of State Lands has entered into a Lease Agreement with the EMBD to ensure that new, acceptable terms and conditions, inclusive of payments, are determined by volume extracted, rather than the annual flat fee, as calculated previously for the state lands which are being quarried under this company’s control.

Secondly, the mandatory requirement for licenses granted by the Ministry of Energy and Energy Industries to conduct quarrying operations for sandpits will be more forcefully implemented.

This administration is also of the view that Trinidad  and Tobago has an adequate deposit of aggregate to meet the needs of the local construction industry. Government has refused to accept bids from contractors who propose to execute public works with imported aggregate and in this time of foreign exchange shortage, we certainly should not be importing crushed rock with the little foreign dollars that we have, especially when importers of medical supplies and spare parts for machinery are having difficulty.

 

This new policy should see the accelerated development of the Studley Park Quarry in Tobago. The operations of this particular quarry are expected to yield production in excess of the current technical specifications and quantity requirements for ongoing projects, such as the construction of highways and airports. The THA has recently taken steps to upgrade the performance and output from this quarry by taking it out of the Public Service and placing it under a Board of Directors which will be mandated to conduct the operations as a major national facility exporting aggregate to Trinidad whilst satisfying Tobago’s need.

As I have mentioned on several occasions, the expansion and modernisation of our country’s physical infrastructure is central to the Government’s plans for stimulating economic activity and increasing social development across the nation, particularly in those regions which have been identified as growth poles.

 

In fiscal 2018, the Government will continue its pattern of investment in infrastructural development with an allocation of 1.91 billion dollars to the Public Sector Investment Programme, under the Vision 2030 thematic area of “Improving Productivity through Quality Infrastructure and Transportation”.

Among the transportation related infrastructure projects that have been prioritised for implementation over the 2015-2020 period are:

  1. The  completion  of  the  Solomon  Hochoy  Highway  Extension  to  Point  Fortin Project;
  2. The construction of the Churchill Roosevelt Highway Extension to Manzanilla (CRHEM);
  3. The completion of the Maracas Beach Facility Upgrade Project;
  4. The construction of the Valencia to Toco Roadway;
  5. The construction of a Ferry Port in Toco; and
  6. The widening of the roadway from Western Main Road to Chaguaramas.

 

Now, each of these  projects will benefit both the local communities  as well as  the country at large.

 

1.      The Solomon Hochoy Highway Extension to Point Fortin Project

 

  • Thisproject will improve overall productivity by reducing trafficcongestionand significantly  reducing delays. These benefits are already being realised with commuters reporting a reduction in travel time between Golconda and Debe from the previous 30-45 minutes to less than 10 minutes. The reduction in time spent in traffic will significantly impact commercial activity, in particular the movement of goods and services, within the region and between San Fernando and other parts of the country.
  • Local economic activity will also be boosted. Throughout the duration of this initiative skilled, semi-skilled and unskilled labourers from the surrounding areas will be employed be it directly or indirectly through the contractors.
  • A positive consequence is also the continued development of a knowledgeable and competent workforce. This project which is now entirely in the hands of local contractors, is one of the most complex physical infrastructure projects ever implemented in this country. The participation of local contractors and consultants in designing and construction activities on the project is an investment in human development, ensuring that future projects of similar magnitude and engineering complexity can be undertaken by local experts in their many professional fields.

 

 

The Churchill Roosevelt Highway Extension to Manzanilla,

 

TheNorth-EasternPeninsula.

 

  1. Directemployment.The CRHEM project is anticipated to directly employ about the same number of persons (of varying skills) as the SHHEPF project in the south. Indirectly, opportunities will redound to other persons – equipment rental contractors, suppliers, security, caterers, etc. to do business with the contractors and other project personnel.
  2. Of particular importance is the creation of access to previously inaccessible routes.  Utility companies will now have clear routes through which they can bring their services and infrastructure to households and businesses in previously inaccessible areas. The result will be improved connectivity to electricity, water, cable, etc. thereby improving the quality of life within the impacted communities. Further, easier access will invariably result in reduced costs for these services along with increased economic activity and a commensurate improvement of property values over a wide area of the country.

2.     The Valencia to Toco Roadway Upgrade and Ferry Port in Toco

 

  • The current sub-standard transportation infrastructure in this area conspires to isolate Toco and its surrounding communities from the rest of the country. Improving access to Toco and the eastern seaboard and linking Trinidad to Tobago

 

through this area will aid in bringing the vision of myriad economic activities and rural development to fruition, particularly for the people from Mayaro/Rio Claro through Sangre Grande/Valencia to Toco-Matelot. The improved road access to Toco and the Toco Ferry Port projects therefore have huge economic and symbiotic relationships particularly for agriculture, fishing and tourism.

 

  • The socio-economic benefits of the establishment of a ferry port are varied and significant and will enable sustained development of the region on a scale not unlike the development that took place in Point Lisas in the 1970s. Permit me to highlight some of the potential benefits.
  1. To begin, this project will aid in the Government’s thrust towards economic diversification. The planned marina at the ferry port along with hotel facilities will encourage development of the tourism sector in north east Trinidad.
  2. Also quite important is the fact that the project will provide a more efficient inter- island ferry service between Trinidad and Tobago. The new ferry which we are currently in the process of purchasing would be able to do the Toco to Tobago route in under an hour when it is eventually put to service there.
  3. The Coast Guard Facility planned for this port will also provide increased security of the coastline as there are now no nearby Coast Guard facilities to monitor the well-traversed and exposed north eastern coastline.

 

3.     The Bridges Reconstruction Programme.

 

The aim of this programme is to modernise the country’s stock of bridges in order to improve vehicular and pedestrian safety and convenience as well as less wear and tear non vehicular traffic. We will maintain this program which currently targets 11 bridges at a cost of $140 million.

 

4.     Rounding  up  our  major  projects  is  the  Critical  Coastal  Protection  Programme.

 

As a Small Island Developing State (SID), Trinidad and Tobago’s coastline is particularly vulnerable to the effects of climate change. One such impact is the erosion of coastlines due to rising sea levels and increased wave actions. Since the local communities depend on the coastlines for varying services, including protection from natural disasters, flooding, tourism and local subsistence fishing, the destruction of coastlines has multiple social, economic and environmental implications.

This Programme aims to mitigate the severity of existing coastal erosion, using sustainable, soft engineering techniques to stabilise the coastlines in key areas. We have budgeted to spend $84.2 million on nine (9) such projects this year.

Communities along Trinidad’s coastline and in low-lying areas will benefit directly through:

  1. A reduction in the incidences and impacts of flooding (which traditionally results in loss of properties, agricultural crops and animals, loss of life, disruption in commercial activities, cutting off of communities and dislocation of families);
  2. Increased opportunity for tourism and by extension, improvement in the local economy;
  3. Improved prospects for fishing activity for artisanal fisher folks and those who depend on them for their livelihood.

 

5.  HDC

The housing sector is another integral element of this national infrastructure policy. I myself have reiterated the Government’s policy on housing. Everyone deserves a safe place that they can  call their  home and families must work towards this objective, making their own contributions along the way. Currently there are tens of thousands of citizens who look to the public sector housing program for relief and for the realisation of their dreams.

Unfortunately, the Government is in no position to single-handedly meet such high expectations. And so, our plan is to resort to more public/ private partnership based projects to satisfy the national demands. The market is there, the data shows us that unequivocally. What we need is to work in concert with the private sector to finally break the back of this long standing issue.

This Government is adamant about removing obstacles that would have prevented this collaboration in the past. Going forward, a Cabinet task force which I now chair, as Prime Minister, will oversee the fast tracking of government statutory approvals so that the provision of affordable housing through private developers may be quickly realised.

6    Hospitals

I also want to take this opportunity to emphasise the Government’s commitment to health sector improvement. As we sit here, two hospitals are under construction in Arima and Point Fortin, both set for completion in 2019, while a new hospital in Sangre Grande is in the initial planning stage.

 

All of these projects and issues, which I have just raised, will fall flat if you, our local construction sector, do not work together with us.

Gone also are the days of favoured monopolies, a lack of competitiveness and over-

charging the Government just because it’s a Government job.

 

Today, more than ever, we need to get value for money. I know we have much of the expertise and equipment required. I know we have local contractors who are eager to do good work and hold their colleagues accountable. And I assure you that the Government is prepared to honour contracts into which we enter once the other parties hold up their ends of the bargain. The Government also expects that in the bidding process contractors will take account of the equipment pool which is already in the country and stop trying to buy a new fleet of equipment which you will add to the cost of every state project, whether it is necessary or not. Nobody wants to rent or lease equipment for a project. Everybody wants to be totally equipment sufficient and fully integrated. All that does is end up overcharging the taxpayer and misusing our scarce foreign exchange.

Maximise the use of all that equipment which is lying all over the country and I presume, already paid for. If the project calls for 100 hours of equipment you don’t need to own the equipment to budget the reasonable cost for rental or lease. The fight down between contractors  must stop and be replaced by a new form of competition  and cooperation among yourselves and in the national interest.

Our mission here, as you can see, is not just to build roadways and buildings. We are setting out to build a nation - to build homes and communities so that our fellow citizens can build better lives.

I know you are all up to the task, as you have already proven, and on behalf of the Government, I look forward to doing even greater work with you all.

But at what price?

 

Costs Considerations/ Bids and Debt

 

It is common knowledge that the Government of Trinidad and Tobago makes widespread use of the services of local contractors to do  a variety of work for  the national programs. As a result at any point in time there are monies, sometimes significant sums, owed by the state to the various service providers. The unsatisfactory pace of payment is largely influenced by a number of contributory factors, not the least

 

of which, especially in these times, are  the cash flow challenges of the Ministry of Finance, which is responsible for funding the operations of all other Ministries. Additionally, the Public Service accountability and necessary cross checking, commonly called “the bureaucracy” have the effect of slowing down some payment approval processes.

There is also the vexing issue of claims and counterclaims which cannot just be arbitrarily settled and have cheques issued because some eloquent or tear- jerking contractor goes on television and makes blanket statements about Government delinquency. The claims have to be examined and may or may not be certified as valid.

This Government acknowledges that significant monies are owed to contractors and payments are continuously being made on these accounts, albeit late, sometimes, even as new work is awarded to some of the same contractors thereby incurring additional debt.

In 2015/ 2016, at the height of the Government revenue collapse, $589.9m was paid to contractors for outstanding amounts owed to them at the Ministry of Works alone. Other payments were also made elsewhere. The point I am making is that it is a continuous process of payments and awards and the Government undertakes to pay as much as we can without stopping the development programs which in themselves continue to provide ongoing opportunities for service providers, even as they are owed money.

In the recent past, some contractors have been encouraged to operate in an environment of “happy times” where some amazing awards and payments were commonplace and the taxpayer was taken advantage of, at every turn. Well, even if this Government wanted to continue with dispensing largesse from the Treasury, the money is not available for such, and we do not intend to have it continue, whether money is available or not. We undertake to provide open and fair opportunity governed by competition, value for money and accountability.

Just think for a moment of what could have been happening which resulted in one contractor  suing  a  small  state  entity  for  $1.3  billion  of  OUTSTANDING  (certified)

 

payments. This and similar matters are being and most likely will be adjudicated upon by a court of law.

We, on the taxpayer side, are also faced with serious discrepancies with respect to claims being certified by professional bodies in anticipation of payments. Take for example;

 

 

 

ProjectX …housing lots……… RESIDENTIAL SITE

 

 

 

 

ORIGINAL AWARD

Contractor A

 

Award Date

March 2010

Awarded Amount

$143,238,073.94              Vat

Inclusive

Value of Works Certified

 

$53,215,833.16

Payments received to date

$39,625,169.51

Total outstanding

$13,590,664.37

interest claim on the unpaid balance $8,276,268.25.

 

 

 

EMBD terminated ……….in March 2014. This termination was in accordance with FIDIC sub- clause 15.2 – Termination by the Employer.

The termination was based on recommendations of the Consultant in accordance with FIDIC sub clause 15.2a and 15.2b

 

Further  an  independent  review  was  conducted  by  X…….QS  and  their  valuation  shows  an overpayment to the contractor.

 

 

Value of works completed as assessed

$38,201,749.65

Payments received to date

$39,625,169.51

Balance due

($1,423,419.86)

 

 

(SECOND AWARD) for same project

 

SECOND AWARD

Contractor B

 

Consultant

 

Award Date

February 2015

Awarded Amount

$231,422,824.53              Vat

Inclusive

Value of Works Certified

 

$201,054,654.76

Payments received to date

$131,337,772.69

Total outstanding  claimed

$72,103,094.39

 

 

Further, a review was conducted by an independent QS and their valuation shows a reduced amount due to the Contractor

 

Value of works completed as assessed by independent QS

$149,763,866.76

Payments received to date

$131,337,772.69

Balance due

$18,426,094.07

 

Something else that gets lost in all this particular instance is that the taxpayers of the country are being asked to pay over $0.5m for development of each 5000 sq. ft. building lot in this project! ($100/sq ft).

There is another kind of problem which is faced on the taxpayer end and that is value for money at the “in house estimate”/ tender/bidding stage. We are all taxpayers here in this room and elsewhere in the nation so we should all be concerned and have an interest in this manner of doing business.

The original cost of the Curepe Flyover and ancillary works project, in 2015, was budgeted to be

$513.59m. In 2017, those arrangements were stopped and proper, transparent competitive bidding was carried out. We received bids that ranged from $394.6m at the high end to $221.6m at the low end, a difference $173.0m, and this is almost $300m less than it was heading for in 2015.

The question that all of us must ask is, “Where was that $300m extra going? Towards inefficiency? To contractor’s luck or just plain old corrupt practice?” The taxpayers want and demand the benefit of competition so the contract was awarded to the low bidder because all the competing contractors were deemed to have the ability to do the job and the taxpayer desperately wants the benefit of that competition.

In the bidding process for Package 1b for the Highway Extension to Manzanilla the difference between high and low bid was $88m (43%).

For the Sea Lots Walkover the difference between high and low bid was 62%.

We need to get back to basics. There is no more largesse and political super handouts to be had. There are many good opportunities to be won through putting your best bids forward and winning the award of contracts large and small.

In the “time of great gifts” not even the Unemployment Relief Program was spared the excesses.

 

In 2012-2014 ………………….329m

 

By 2015………………………..515m 2017……………………………166m

2018……………………………150m

 

That explosion in 2015 was largely box drain contracts which made instant millionaires of the fortunate few. We must take this program back to providing employment relief for individuals and not so-called contractors who fight and kill over the allocations and others equally criminal who received fat cheques for work not done or poorly performed at best.

As you would have observed the President has finally appointed the Regulator and the Procurement Board. It is expected that the law will be proclaimed soon and the legal processes for awarding government contracts will kick in and be observed in the contracting activities.

While it is to be expected that these new arrangements should bring about a new way of doing business and such new approaches should see benefits such as better transparency, value for money and a reduction in corruption, it would be naïve to believe that this law will be the panacea which will solve all our contracting and related problems. In fact it comes with significant risks if there is not a societal abhorrence of the widespread corruption as a way of life and favours as an entitlement.

I thank you for the opportunity of spending the morning with you and look forward to working closely and productively with all of you in the years ahead as we grapple with the challenges facing Trinidad and Tobago at this time.

Weather

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