Opinion: MP Cole Simons On New Airport Plans

[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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