Finance Minister On Airport Re-Development

November 21, 2014

[Updated with audio] Speaking in the House of Assembly today [Nov 21], Minister of Finance Bob Richards provided an overview of the agreement with the Canadian Commercial Corporation [CCC] to pave the way for the airport redevelopment.

Minister Richards said, “The redevelopment of the Bermuda airport represents one of the most important capital projects ever undertaken on our island shores. It will play a crucial role in the renaissance of the Bermuda economy while also being one of the most costly. Its success will be paramount to all in Bermuda.

“The construction phase will initially produce hundreds of much-needed jobs for Bermudians and deliver multiple layers of public benefit including, we believe, the basis for a new prosperity.

“The new terminal will show the arriving passenger that he/she has entered a country that is indeed First Tier, First Class and First World. The new terminal will create a buzz in tourism circles and substantially enhance the airport terminal experience for the travelling public.

“For Bermudians, it will not only bring jobs, but it will engender a sense of pride, reaffirming our sense of self-esteem for our island’s unique qualities as a tiny but first world nation,” added the Minister.

21-minute video of the original announcement earlier this month

Minister Richards continued, “A key and novel component of this project, and the reason I announced this signing instead of one of my colleagues, is the financing component.

“The fact is this project would have probably gone ahead long ago if funding were available for it. But with Government running large annual deficits and debt soaring, a new airport terminal had been impossible; – Until now.

“Having carefully considered all its options, Government has decided to avail itself of a novel procurement model offered by way of an arrangement with the Canadian Commercial Corporation. CCC is wholly owned by the Government of Canada.

“CCC will select a Canadian Developer from its already preselected stable of Canadian firms. This company will enter into a contract and Concession Agreement with the Bermuda Airport Authority to develop and manage the project. Title to the airport and adjacent property will remain in Government hands. This will be the core of our unique P3 arrangement.

“This company will maximize local employment in subcontracting opportunities in the selection of contracting firms to actually carry out the work on the ground. The vast majority of these subcontracting companies will be local Bermudian firms employing local labour.

Minister Richards continued, “We will be engaging an independent construction firm to review the project model in all its aspects to formally verify that Bermuda is getting value for money from this arrangement.

“There are few options to create jobs by way of infrastructure projects, for a government that already has high debt, and is adding to it annually by running deficits.

Update: Audio of Minister Richards being questioned by the Opposition about the deal:

“The traditional way of financing such projects would surely increase government debt. In collaboration with CCC, our unique P3 model will enable Bermuda to create significant jobs for Bermudians without putting the government further into debt.

“I can confirm that we have received the appropriate Entrustment Letter from Her Majesty’s Government in the UK to move forward with the project, despite the fact that a recent legal opinion established that a separate Entrustment was not necessary.

“I can also confirm that we have already consulted with the Accountant General, who is responsible for Financial Instructions, and have received the required approval to move forward with the engagement of CCC.”

The Minister previously said it is expected to cost in the “range of $200 million”, and the plan is to break ground in about a year, and the project should take about three years.

The PLP has previously questioned the agreement, asking whether there was an international bidding process in place to select the candidate, and “what guarantees have been given about the extent of Bermudian involvement since Canada Commercial Corporation’s aim is to benefit Canadian interests, not Bermudian interests.”

The Minister’s full statement follows below:

Mr. Speaker, I rise today [Nov 21] to advise Honourable Members of the signing of an historic Memorandum of Agreement with the Canadian Commercial Corporation [CCC] to pave the way for the re-development of the Bermuda airport, including various sources of financing.

This re-development will involve the construction of a new purpose built terminal building.

The MOU will allow for continued dialogue, and ultimately, an exclusive negotiation in relation to the redevelopment of the LF Wade International Airport. The signed MOU will be tabled in this Honourable House today [Nov 21].

The redevelopment of the Bermuda airport represents one of the most important capital projects ever undertaken on our island shores. It will play a crucial role in the renaissance of the Bermuda economy while also being one of the most costly. Its success will be paramount to all in Bermuda.

The construction phase will initially produce hundreds of much-needed jobs for Bermudians and deliver multiple layers of public benefit including, we believe, the basis for a new prosperity.

Mr. Speaker, one might ask, “Why do we need a new airport?” The airport is Bermuda’s principal gateway, the place where travelers to our island get their first impression. What do we want that impression to be? We want that first impression to be consistent with the brand that Bermuda presents to the world and that brand can be summed up as, “First Tier, First Class, First World.”

That is the brand we want to convey, whether the traveler is arriving for business or leisure. Certainly the current terminal building, with sections dating back to the 1940′s, does not convey that branded message.

The new terminal will show the arriving passenger that he/she has entered a country that is indeed First Tier, First Class and First World. The new terminal will create a buzz in tourism circles and substantially enhance the airport terminal experience for the travelling public.

For Bermudians, it will not only bring jobs, but it will engender a sense of pride, reaffirming our sense of self-esteem for our island’s unique qualities as a tiny but first world nation.

For visitors, it will reinforce the island’s status as a successful and sophisticated up-market tourism destination as well as a leading international business centre.

Mr. Speaker, a key and novel component of this project, and the reason I announced this signing instead of one of my colleagues, is the financing component. The fact is this project would have probably gone ahead long ago if funding were available for it. But with Government running large annual deficits and debt soaring, a new airport terminal had been impossible; – Until now.

Having carefully considered all its options, Government has decided to avail itself of a novel procurement model offered by way of an arrangement with the Canadian Commercial Corporation. CCC is wholly owned by the Government of Canada.

The proposed transaction will take the form of a type of public private partnership, [P3], a model that will allow Bermuda to build, use and eventually take possession of the most modern of facilities for civil aviation, without any burden on the Bermuda treasury.

Some of the benefits to using the CCC approach to redevelop the Airport are as follows:

  • This model cuts the procurement time dramatically, enabling shovels to be in the ground and jobs created much sooner than traditional methods.
  • This model significantly reduces the cost of procurement.
  • The new terminal will be customized to Bermuda’s needs.
  • CCC will guarantee that the project will be delivered on time and on budget.
  • There will be a Canadian infrastructure developer. CCC will conduct its own due diligence to be satisfied that the Canadian developer has the technical, financial and managerial capability to deliver on the contract.
  • The transactional approach will not require any initial expenditure for the airport by Bermuda, and with no new debt for Bermuda;

The model demands total transparency, adhering to international best practices; in fact, as I have already mentioned, we will ensure that there will be no recourse to the balance sheet of the Bermuda government, direct or contingent.

Our intention is that the financing will rely mostly on the future revenue streams from the new airport itself

Mr. Speaker, we will also benefit from the uncompromising standards, world class experience and expertise of CCC. Established in 1946, CCC, a federal crown corporation, was mandated to facilitate international trade on behalf of Canadian industry, particularly within government markets.

CCC will select a Canadian Developer from its already preselected stable of Canadian firms. This company will enter into a contract and Concession Agreement with the Bermuda Airport Authority to develop and manage the project. Title to the airport and adjacent property will remain in Government hands. This will be the core of our unique P3 arrangement.

This company will maximize local employment in subcontracting opportunities in the selection of contracting firms to actually carry out the work on the ground. The vast majority of these subcontracting companies will be local Bermudian firms employing local labour.

Mr. Speaker, we will be engaging an independent construction firm to review the project model in all its aspects to formally verify that Bermuda is getting value for money from this arrangement.

This structure, which is tried and tested in other countries, has a number of reduction advantages:

  • reducing the risk and expense of procurement,
  • reducing the risk of budget overruns,
  • reducing the risk of late delivery,
  • reducing the risk to the Bermuda Government treasury and balance sheet,
  • reducing unemployment in our island and validating value for money issues.

It is a winning formula on all fronts.

Mr. Speaker, we are now at the start of a long and complex process with many milestones along the way. The next important milestone will be a Go-No-Go decision, and assuming it’s a Go, the final construction contract and a facility management service Agreement [and related financing arrangements], which will govern all aspects of the project, will be developed and concluded.

At that time the final costs and design features will have been ironed out.

There are few options to create jobs by way of infrastructure projects, for a government that already has high debt, and is adding to it annually by running deficits. The traditional way of financing such projects would surely increase government debt. In collaboration with CCC, our unique P3 model will enable Bermuda to create significant jobs for Bermudians without putting the government further into debt.

Mr. Speaker I can confirm that we have received the appropriate Entrustment Letter from Her Majesty’s Government in the UK to move forward with the project, despite the fact that a recent legal opinion established that a separate Entrustment was not necessary.

I can also confirm that we have already consulted with the Accountant General, who is responsible for Financial Instructions, and have received the required approval to move forward with the engagement of CCC.

However Mr. Speaker, it is important to note that no contracts have been issued for any works, and that prior to any contractors being brought on board, this Government will establish the procurement parameters with CCC based on best practices. We will no doubt share this information with the general public.

Mr. Speaker, based on the above mentioned benefits, the Ministry of Finance is confident that this unique alternative of contracting with the CCC is the appropriate model to be used for the redevelopment of the Airport. This approach will provide the Government with a timely, efficient and trustworthy alternative.

Thank you, Mr. Speaker

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Comments (45)

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  1. watchfuleyes says:

    Dictatorship Government! Hundreds of jobs at what cost? We have no money but we need an airport, really? Ever been to some Islands and seen their airport? But what they have to offer is more important and substantial, and inviting than surface appearances, or cosmetics, we are offering. Money doesn’t grow on trees, well apparently it did overnight.
    Voila a new airport!

    • hmmm says:

      We are NOT PAYING FOR IT.

      • Black Soil says:

        Thank you bro Bob Richards for moving Bermuda forward with a new airport. The PLP are crying tears of hate. That is all they have to offer.

        • charles says:

          Truth be told BS, the PLP funded the study of this new airport back in 2006/2008. The main problem everyone has with this is the way it was tendered, or rather wasn’t tendered. I don’t care how many ways it has been explained away, this process was wrong. How many Govt Technical Officers were involved in the review and selection. Who did the Govt invite to tender? Why is there a “bent’ toward Canadian Companies. There are US, European companies equally or more competent than CCC(SERCO again).

          So if there is any hate its because of that, for one!

    • Kunta says:

      I’ve been to Islands with worst and smaller airports but loads of fun and entertainment to enjoy unlike my Beautiful BORING Island that fines tourist $1000 for a joint.
      And yes we will pay for it one way or another , nothing is FREE.

  2. Here’s where “the rubber meets the road”. Thanks to C.C.C. and the One Bermuda Alliance we can now see light at the end of the tunnel…This along with the Americas Cup etc. are all win-win prospects for Bermuda and all Bermudians.

  3. Pointless says:

    Yes we need an airport that is safe and isn’t falling down, and yes we need jobs for so many, but do we need to do it at such a large capital expense?

    Does anyone know a single visitor who has been to the island and has then stated that there is no way that they would return because the airport is so old? When you look up a vacation overseas do you look up the airport to see what it looks like and then base your vacation decision on that? I certainly doubt it.

    If you want visitors to believe that the island is first class then how about getting your act together on the Dockyard projects? I visited there last week when we had a cruise ship in town and the Victualling Yard was in such a state. There is so much junk, trash and broken glass there, not to mention the obvious safety issues of the crumbling building. This is the first thing that our cruise ship visitors see!! We should be addressing this before embarking on this airport fantasy.

    Having a state of the art airport would be fantastic…but there are many more realistic issues that could be addressed that would actually be more likely to impact a visitors decision about whether to visit or not. The cruise ship passengers see a lot of Dockyard, the airport passengers do not care about the airport as long as it works.

  4. Encyclopedia says:

    Why no RFP/Tender Mr Finance Minister?
    Who recommended CCC and how did you decide to go with CCC?

  5. sage says:

    A country that is indeed first class, first tier and “first world” should be able to build their own airport.

    • LiarLiar says:

      Then blame the PLP for making us a second tier country with tehir overspending and leaving us with a $2bn debt and a $330mn deficit which hinders us from paying for any type of capital project at this time.

      I know, I know. The PLP did no wrong and the situation we are in is none of their doing. Silly me.

  6. Ride says:

    Please, oh please, have enclosed sky-walks for boarding and disembarking the planes. Windowed ones would be nice.

    Ride

  7. Starting point says:

    If the news about the Americas Cup is confirmed in the coming weeks, it will be important to factor this into this process as to have one of the worlds largest sporting events and the most historic sporting event in Bermudas history in 2017 and for thousands to be arriving by air to a constructions site will not send a positive message.

    The CCC should be made to sign MOUs indicating that the project will be completed on time prior to this sporting event.

    It can not be understated the value of these two projects (and the hotel work), we may be heading into a mini construction boom in this island and our labour force, unions etc. need to be prepared so that we can use this as a catalyst to drive the country forward.

    Hopefully the Union is involved from at least the standpoint of required job skills for these works so we can offer workshops, certifications, training prior to the jobs being needed. Please do not drag your feet and then say Bermudians are not qualified to work on the respective projects because we failed to prepare them.

  8. I have a bridge to sell you. says:

    You really think the majority of the jobs will be given to Bermudians by the Canadian Construction company. We have Bermudian Construction companies here that don’t want to hire Bermudians, so what chance they have competing International. The Canadians own it and lord knows we need a new airport. The Canadians will be in control and will hire who they desire.

    Rule#1 whoever has the cash makes the rules.

    • Lois Frederick says:

      Bob Richards stated that in the first meeting with CCC the requirement to use Bermudian workers in the construction of the airport was essential. One of the main points of doing this is to get Bermudians back to work. CCC acknowledge the need for Bermudians to be used for the construction of the airport. Chose not the believe it, but the OBA are working very hard to get Bermudian back to work.

    • A Better Bermuda says:

      Why don’t Bermudian construction companies not want to hire Bermudians?

      • Family Man says:

        Ask Zane and Dennis.

        • Kunta says:

          Its called GREED and its all over de world, cheap labor is de in thing, why pay de going rate, pension, GOOD insurance, Benefits to natives when you can pay minimum wages,no pension and MEAGER benefits to workers who are desperate for money and their countries currency is worth S…,!!!!!!!!!!!!!!!
          That’s what they call Good Business Sense.

    • Creamy says:

      What happened when BCM Mcalpine built the new hospital?

  9. Wow says:

    As an OBA voter, I’m in shock.

    1) The first we hear about this is when there is a signed agreement already..

    2) Bob Richards writes an article answering his own questions. In those questions he leaves out the most important “Do we need a new airport?”

    Then he goes on to say that having a proper tendering process for the “most important capital project ever” would be too expensive. Are you kidding me? It’s irresponsible not to have a proper process for something that he claims is so important. Not only that, but I’d imagine illegal and/or unconstitutional.

    3) He justifies it as a job creator. This is lunacy. Why should the government be in the business of creating jobs. Even if this was the mandate of the government, is giving away our airport and $3mil of net revenue per year in perpetuity a good investment for a temporary increase in jobs?

    The answer is that jobs are an afterthought of this project. Bob Richards is touting it because he knows he can go after the opposition for not wanting to create jobs if they oppose. Same games as always. My disappointment and frustration at this is beyond measure. He is playing politics to get the built.

    4) The weakness of the opposition is just a big a detriment to Bermuda as the myopic megalomania of the government. I did not vote for the PLP, but dammit I want them to stand up against this farce. Don’t talk to me about how bad the contractor is, that isn’t the point. Talk to me about how a new airport will provide real dollar benefit to the island (will it)? Talk to me about why the RFP process was summarily bypassed. Talk to me about how the people only found out about this after a deal was signed. Talk to me about what the real reason is for this project, because it sure as hell isn’t jobs.

    If there was an election tomorrow, I would not vote OBA. I may never vote OBA again. I wont vote PLP either, but I definitely will not ever cast a vote in favour of Bob Richards.

    • Kunta says:

      Hey FOOL if you don’t vote and O.B.A/ubp wins its still a vote for.
      SMFH

      • strike fund says:

        You do realize that quite a few ex UBPers are in the PLP as well.

    • Kangoocar says:

      @”wow @clear as mud ” nice try but you are not fooling anyone except those stupid enough to vote for your plp, you two are plp bloggers and you should be blaming your own party as to why we have to go this route!!! But with that said sit back and watch how the proffessionals get it done!!! You plper’s are pathetic, you would rather gain control over the government even if meant your supporters staying unemployed and starving to death!! Plp over everything else is your motto and you should be ashamed of yourselves???. Alaska hall working overtime I see!!!
      I will put it in real simple terms for you and your supporters, for what would amount to $3million a year, we will get a $200 million airport, ( heck ) if you guys had not brought in Beyoncé we could have almost paid the first year right there??? Just add the trip to China and that should just about do it!!!
      You guys need to stop this nonsense and let the OBA put people back to work, even if it goes against your agenda!!!,

      • clearasmud says:

        You are clearly a fool and you have no idea who people vote for, You seem to think that because you support the government then they can do no wrong and that is the most stupid thing in the world. You choose to ignore important questions and attack the writers. FYI everyone has the right to question their government Everyone.

        • Kangoocar says:

          Seriously?? You say everyone has a right to question their government, everyone???? Your plp government quite clearly said, ” WE DONT CARE WHAT YOU THINK?? ” do you now want to apologize for your plp governments statements???

      • MIsterMan311 says:

        I wish people would stop assuming that because a person’s comment is anti-OBA they are PLP die-hards. It’s sloppy and stunted thinking.

    • strike fund says:

      Just quickly in reference to item 3.

      A $3m return on a $200m investment is only 1.5%.

      Much of that $200m will be paid as salaries and subject to payroll tax as well as being recycled around the island in goods and servicers.

  10. clearasmud says:

    I am not yet convinced that going with CCC is the best option as the minister still has not provided any proof to support that it is. It is a joke for him to say that “I can also confirm that we have already consulted with the Accountant General, who is responsible for Financial Instructions, and have received the required approval to move forward with the engagement of CCC.” Firstly, the Accountant General answers to the Minister of Finance so clearly this statement is intentionally misleading.

    Nassau has recently built a new airport and they used a different Canadian company named Stantec who have built several airports so at a minimum we could have got a quote from at least that company.
    Except in exceptional circumstances financial instructions require 3 quotes and the AG does not have authority to wave that requirement for such a large and expensive project.

    Finally the minister talks about eliminating costly consultants as part of the reason he has choosen this method of funding and then announces that he will hire independent consultants to verify that we are getting value for money isn’t that a contradiction?

  11. Sky Pilot says:

    a part time airport built by a dubious Canadian company

    these government types fall for it all the time!

    • Politricks says:

      What dubious Canadaian company?

      CCC is a Govt owned intermediary that is involved in over 70 countries in which they are assisting in infrastructure development.

      They haven’t even named the ultimate developer and you are already trying to denigrate their reputation based on lies.

      It would have been nice to spend our own $$$, but unfortunately the green team sqaudered it all away on so called ‘cost overruns.’ I am just amazed that the posters on this thread stayed ominously quiet on the Port Royal auditor general report issued last week. Do not one of you guys care about the misappopriation of our taxpayer dollars for which we got nothing in return in terms of tangible benefits?

      I say shut down all capital project opportunities which bring abotu Bermudian jobs just to appease you naysers and perpetual complainers. What part of we don’t have the money don’t you lot understand?

  12. fred says:

    Really? I can’t recall any airport that I went through that created a buzz in circles of travel or tourism and I have travelled many across the US.. this is pure horse manure!

    • Triangle Drifter says:

      Well Fred, I guess you have never been through DIA & the Jeppesen (SP) Terminal. Makes ATL look like a regional terminal. It had its naysayers too.

  13. Alvin Williams says:

    The OBA government must point to some major development before going before the people of Bermuda in an election. I saw the PLP plan for a new airport; but that has been dismiss as being too grandiose? This government is bound and determine not to give any form of credit to the former PLP government even though in effect it is building on the foundation set by the former government. The fact that this government is gambling that the causeway will continue to survive future hurricanes is really tempting fate and reminds me of the reaction of the postal authorities when they were informing postal workers of the plan to create a central mail sorting centre at the East end. The question was asked what if the centre was put out of commission like it had been in the aftermath of Fabian? They were not to happy at that question and that development no doubt help to put the Post Office as a whole further in a financial hole. And of course it has come true the central mail sorting centre has been knock out in the course of these recent storms without any talk about how we will get back the initial investment. Now we are about to give control of a new airport to a foreign entity for decades. which country gives up control of it’s one and only national airport to outsides interests; even if it is considered that this is the only price we have to pay to built a new airport? It is almost as if as a country we dream about the days the Americans built the airport and maintain it and we did not have to pay. But this time we will not have control or access to any future profits-whittle my poor country.

    • Double Standards says:

      The Bahamas did with a Canadian developer since you asked.

      Actually most of down south has such infrastructure developments financed via the P3 model being used.

      Now you should really ask as to why we don’t have the dollars to do it on our own. But you won’t like or agree with the answer.

      Next.

    • Ringmaster says:

      Thanks to the PLP Bermuda has been sold to foreign interests already. $2bn in debt is not held by the 40 Thieves but by faceless bankers around the world. They call the shots. They now effectively own and control Bermuda. Until the debt is paid they will say how high to jump.

    • jt says:

      The plp is bound and determined to accept no responsibility fir our current plight.
      Chew on that Alvin.

  14. I have to smile after reading letters written by (without any doubt) Progressive Labour Party supporters and possibly, “representatives”. But all the “i” and “t” have been dotted and crossed. In other words, the contract has been signed…

    • Triangle Drifter says:

      Is that as in “It is a done deal. Get over it”.

      Now where have I heard those phrases before? What organisation? What person?

    • Kangoocar says:

      @raymond, you are absolutely correct my friend!! Alaska hall is working overtime tonight?? If they think they are fooling anyone they are sadly mistaken!! Sad bunch of sick individuals I say!!! They would rather bermuda fail than the OBA to succeed, more proof that the plp is only concerned with reap gaining power at all costs and they really don’t care who starves to death because of it, which mostly would be their own supporters!!! The thing I find most amusing is this, the OBA are putting this deal together with no financial guarantees from us, unlike the BIG hidden secret of the incompetent plp who were so proud of their hospital deal, what they have kept secret is the fact that we ARE ALL on the hook if something goes wrong!!! plp, just stay out of the way and watch the professionals, who know if you open you xenophobic minds and eyes, you might actually learn something????

  15. Watcher55 says:

    This project is NOT a transparent job, and to give away the departure tax???? Is the maths right ….1 billion over 30 yeArs….really bob is this your finest work

    • Trulytruly says:

      Departure tax will not be part of the deal. Bob Richards said that in the house today.

    • Triangle Drifter says:

      It is sort of like going to a loan shark, inna. The thing is, a new terminal is needed. It will provide Bermudian construction jobs. Yes, it will bring in foreign workers too, who will rent in the east end, buy food in the east end, go to the bars in the east end, buy transport, eat in restaurants. All of those places employ people.

      It would have been nice to get a more favourable deal but we got no monee. It was blown away on parties, travel around the world & huge cost overuns on poorly run projects. Financing what we owe costs something like $400,000 per DAY.

      Sad situation. If only those who put us in it could be held accountable for it.

  16. For Real says:

    A $200+ million airport serving less than 10 flights a day?

    Do the math on the payback or the costs to Joe Public to use the airport…..

    As we learned under the PLP, nothing is free.

    The airlines are sure not going to accept the higher costs of operating into Bermuda and will quickly just stop flying here all together.

    • Triangle Drifter says:

      My guess is that you were not around when tourism was really hopping & IB was still in its infancy.

      Pan Am flew a 747 here everyday, Eastern flew L1011s everyday, Delta flew DC10s everyday, BA flew 747s. All of them wide body aircraft. Then there were airlines like Qantas & Northeast serving Bermuda as well. The terminal was woefully too small to handle the traffic then, & that was way before the post 9/11 security steps before you were on your way.

      Today it is the same, now much older terminal needing major repairs. There comes a time when things are cheaper in the long run to replace rather than doing piecemeal repairs.

  17. Watching from Abroad says:

    Has anyone even Googled “Canadian Commercial Corporation scandals”. The list is a mile long and growing. Bermuda is just another fry and the sharks are coming.

    “A fool and his money will soon be parted”

    This seems like the way Bermuda is going as it sells off all its assets. Shameful, Shameful … Politricks !!

    Do your own research … don’t trust the politicians.

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