Opinion: MP Cole Simons On New Airport Plans

January 9, 2015

[Opinion column written by OBA MP Cole Simons]

The Opposition’s attempt to persuade Bermuda that the scheme to build a new airport is a stealthy way of selling the birthright of Bermudians to foreigners relies on three pieces of fiction.

The first fiction is that we are signing over to the Canadian Commercial Corporation about a billion dollars in revenue by giving the firm, in return for the investment it will make, a concession to run the airport for 30 years. That’s easy to deal with – the airport’s net return to the Government is less than $2 million a year. Even if you’re really, really bad at arithmetic, you can’t make that add up to a billion dollars.

The second fiction is that the airport is being privatised. Privatisation is the transfer of ownership of a property or a business from the public sector to the private. That’s not what’s happening here at all. This is a partnership between a public enterprise and a private enterprise, created with the aim of getting a mutually-beneficial result. Ownership of the land and buildings that comprise the airport remains with the Government of Bermuda.

The new hospital was built through a similar public/ private partnership agreement. The Opposition had a hand in creating that agreement, so it can’t be that they’re against such arrangements in general.

The third fiction is that it is wrong to deal with any capital project without inviting competitive tendering.

That certainly has been a popular method of doing business, but it may not be and is not, the most appropriate, or the most suitable method of procuring financing of this nature and scale. In fact, this decision is also supported by the fact that there are very few reputable international players in this space, and definitely none of these financing agencies are based in Bermuda, and none are Bermudian owned or controlled.

As my colleague Jeff Sousa said in an article published in Bernews a few days ago, competitive tendering is a method that is recognised worldwide to have drawbacks. It involves a number of procedures which take an unduly long time to complete. There is a risk that bidders will cut corners in order to be competitive.

And as everyone knows, if you have to make a change after the contract has been signed, you’re likely to have to pay through the nose for it. It can be an enormously expensive way of doing things – the Port Royal Golf Course upgrade was projected to cost $4.5 million and ended up costing $24.5 million. That’s an extreme example, but several other government projects in recent years have been plagued by very substantial cost overruns.

If you were spending your own money, you’d be free to buy whatever you wanted from whomever you liked. But if you were spending public money, you would have to fall in with Government procedures, which are designed to assure the taxpayer that there has been no “monkey business”. You might well end up with the cheapest product available, one that is unlikely to last as long or perform as well as others, and one that is likely to cost more over the long run. That is the price of transparency in Government procurement.

At least it has been traditionally in Bermuda. Other countries are increasingly looking for ways to make the system work better. In Europe, procurement policies are constantly being changed and updated to give the taxpayer not only openness and a guarantee of fairness, but also good value.

The European Union has just devised a new procurement policy [you can read a copy online at gov.uk], one that the British Government has welcomed and is adopting, saying that the new rules will, among other things:

  • “Reduce lengthy and burdensome procurement processes that add cost to business and barriers to market competition.
  • “Modernise the procurement procedures and provide more flexibility for purchasers to follow best commercial practice, so that the best possible procurement outcomes can be achieved.”

Those are the goals the Minister of Finance had in mind when he chose this method of financing the project. As he has said, it will minimize the project’s impact on Government’s balance sheet, it will eliminate the risk of cost overruns and delays, it addresses the urgency for creation of jobs by cutting procurement time and it cuts the cost of procurement by reducing the use of consultants.

Of one thing there can be no argument. The Bermuda government does not have the money available in its coffers to build a new airport. Yet the need for a new airport is getting urgent. If you doubt that, talk to someone who works there.

This public/ private partnership that the government has come up with is a creative way of cutting our coat to suit our cloth – not some fanciful scheme to steal Bermudians’ birthright and hand it over to a Canadian company.

- Cole Simons

Update 2.29pm: Bernews note: We accidentally closed comments on this, that should not have been the case, it was an internal error of ours. That has now been fixed and we apologize for that!

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Comments (8)

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  1. NCM says:

    Thanks for opening comments, Pat. You and your team do a great job!

  2. Local Music Lover says:

    Ok – let’s start at the beginning:

    1. The Billion dollars thing – - You are correct MP Simons – the math is wrong; however, you don’t confirm or deny that the Government is “giving away” at least 60 MILLION DOLLARS in revenue to a foreign company.

    2. Privatization of the Airport myth – - Let’s keep things simple. Based on your definition, “Ownership of the land and buildings that comprise the airport remains with the Government of Bermuda” – yes? So if the government in anyway defaults or cannot meet its obligations of payment, what happens? Additionally, based on your statement, if we own the land/the buildings, who then runs the airport and its operations? NOT THE GOVERNMENT.

    3. ” It is wrong to deal with any capital project without inviting competitive tendering” – - To get the best deal, I need to have all information presented in order to gauge what is the best deal available. That did not happen in this case (and I don’t take MP Bob Richards word for it, either). We, the people of Bermuda, deserve to know that this deal was the best one – - and we will never know that due to the way in which it was brokered.

    • aceboy says:

      To your point #1….they also *gave away* 58 million in expenses. Thus the NET 2 million mentioned in the article.

      Why are you (and the PLP) ignoring expenses?

      • Local Music Lover says:

        It is obvious to me that you don’t understand mathematics. . .

        “the airport’s net return to the Government is less than $2 million a year” – - so that means that AFTER EXPENSES, the government revenue from the airport NOW is “just less 2 million” – agreed?!!

        Therefore, if the airport is built under this private/public partnership, that revenue (2 million) will be the only source of funds to pay down the debt incurred – - which means 2 million x 30 years = $60 Million dollars.

        The Government has already stated that the revenue from the airport will be used to pay for the airport – - so how did I get that wrong?

        Your comment?

  3. sage says:

    Fiction one, we are getting an airport for free, fiction two, we are “first world, first class and first tier”.

  4. It's about time! says:

    Where, oh where are the PLP trolls on this one?????

  5. chipp says:

    Most of us will gone! what about the youth sad decision

  6. chipp says:

    Smoke shops make that $$$$$$$$$$$$$$
    so why a airport and who’s bright idea this surely not the peoples ????