200 Page Airport Development Appraisal Report

June 12, 2015

The 200-page appraisal of the airport redevelopment contract is now available, with the report seeking to “evaluate the business case, value for money and affordability of the existing proposal.”

Last month Finance Minister Bob Richards said, “In order to improve the value of this unique proposal, and recognizing the anxiety in the public domain with regard to the proposal, the Ministry of Finance, in conjunction with Her Majesty’s Government in London, represented by the Foreign and Commonwealth Office [FCO], engaged the services of Deloitte, following a competitive tendering process, to conduct an independent appraisal of the method of procurement for the redevelopment of Bermuda’s airport using the CCC.

“The purpose of this engagement was to evaluate the business case, value for money and affordability of the existing proposal and to provide a high-level cost effectiveness opinion for the proposal being put forward.

“The engagement was commissioned in March 2015 and also assessed whether the existing analysis and documentation on the proposed Bermuda Airport Development was sufficient to support an investment decision based upon HM Treasury’s Green Book guidance for the evaluation of public sector spending proposals.”

In the report’s executive summary, Deloitte said, “The Government of Bermuda has developed plans to deliver a new terminal building for the Bermuda airport. The Government has received a proposal from the Canadian Commercial Corporation [CCC], a Crown Corporation of the Government of Canada, to act as the Prime Contractor to deliver the planned new terminal building.

“CCC would structure back-to-back or similar contracts with private Canadian contractors who will deliver both construction and ongoing facilities management of the Bermuda Airport under a 35-year Design Build Finance Operate [DBFO] or similar concession structure.

“The Government of Bermuda and Her Majesty’s Government in London [represented by the Foreign and Commonwealth Office] wish to ensure that the proposal will represent Value for Money for Bermuda, and will be affordable to the Government of Bermuda, before proceeding with the proposal.”

The concept has been strongly criticised by the Opposition who said, “Bermuda deserves better than privatisation through the back door without a tender process. The fact that the OBA Cabinet is willing to forgo over $1 billion of future revenues without a fair, open, and transparent tender process is a slap in the face to good governance.”

A PLP delegation traveled to the UK to meet with the Foreign & Commonwealth Office regarding the airport redevelopment, saying it is their view “that a competitive tender process is the only way to ensure that Bermuda gets the best deal for the privatisation of the airport, which in it’s current form, will give the Canadian company AECON the rights to over $1 billion of revenue.”

The 200-page Airport Appraisal report follows below [PDF here]:

airplane click here copy (1)

Read More About

Category: All, News, Politics

Comments (22)

Trackback URL | Comments RSS Feed

  1. Raymond Ray says:

    Pleeeeeese, get over it and allow the O.B.A. to get on with this project! It’s at no expense to anyone, whether they be of the O.B.A. / P.L.P.. No individual will be footing the bill.
    C.C.C. will be managing the operations of this new airport for 35 yrs. while maintaining its upkeep. Once handed over to Bermuda Government it will still be like new; and not dilapidated as we see the present L.F.Wade International Airport :-(

    • Vote for Me says:

      @ Raymond Ray
      Comments such as yours are perpetuating misinformation about the proposed airport redevelopment.

      The Bermuda Government (taxpayers) will be immediately responsible for funding the airport redevelopment. The funding will occur because the present net positive cash flow (‘profit’) from the airport that flows to the consolidated fund to cover general expenses will cease. Government will therefore have to find alternative revenues to cover the shortfall.

      We should all be clear that there will need to be net annual revenues of $10m to $15m to fund the new airport. The funds will come from funds that would otherwise be available to fund government requirements.

      If the proposed windfarm comes to fruition, then those funds would flow to CCC instead of the government.

      To summarise, there is no free lunch!! Taxpayers will foot the cost of the proposed $250m airport redevelopment.

      • Raymond Ray says:

        @ “Vote for Me” (or whomever you maybe)I suggest you re-read the proposal. C.C.C. will be providing jobs that Bermudians, (if you haven’t noticed) are in desperate need of. Plus additional jobs will be created. There are several businesses that’ll be established to assist the “public”, whether it be restaurants, bars or gifts stores they are all means of employment for Bermudians…All this will be overseen/ maintained by C.C.C. so when we,(Bermuda) receive the airport back it will,(according to the agreements) be up-kept for them 30 odd years and we’ll have a like new, L.F.Wade International Airport. Now be real, what’s wrong with that picture?

        • Vote for Me says:

          @ Raymond Ray
          Reread your comments. How do you think these multiple businesses will be sustained if we continue to have declining tourims numbers?

          On the whole, the comments are not relevant to the economics of how the airport will be funded. There will be an immediate impact to Bermuda taxpayers since the government will have to otherwise fund the existing surplus that is generated by the airport.

          If we can get beyond the wilful misinformation, we may find that there is more support for the proposed redevelopment than we realise.

      • Triangle Drifter says:

        The spinning & the misinformation continues.

        In your world, the day to day operation of a terminal & airport is free is it?

        What goes into the consolodated fund from air related revenues comes right back out to operate it. Surpluses at the moment are very small, in no small reason because of the huge maintenance expenses for the dilapidated existing terminal.

        • Vote for Me says:

          @ Triangle Drifter,
          The current surplus from airport revenues net of expenses is approximately $5m. Note that both landing fees and departure taxes are airport based revenues, no matter how they are allocated in the Consolidted Fund. Note also that both streams wil be allocated to CCC under the proposed arrangement. If there was no surplus, how do you think CCC or anyone else would contemplate financing a new airport.

          Bermuda has to really get real and understand the economics of the proposal. Irrespective of whether anyone agrees if the airport should be built, there are immediate financial consequences to buildign the aiport.

          Lets be more fundamental. If CCC uses $250m to build the new airport (their own money or borrowed), how do you think they are going to get their money back?

          The annual revenues have to exceed the annual costs by at least the $8.3m per year, without interest for CCC to get back the $250m. We then have to add interest and profit!!

          My point is to at least be factual in discussing the finances of the proposed redevelpment.

      • Onion says:

        Yet without the massive contingent liability.

        This is clearly the best way to finance a new airport given Bermuda’s history of farcical large projects.

      • Bermyman says:

        Can the Government afford to pay for a $250m airport in the next 20 years without incurring significant financial consequences to the taxpayer?

      • hmmm says:

        Me thinks you forgot the expenses in your numbers.

    • Raymond Ray says:

      By the way, I believe “Jake Paget” has summed it up in this sentences: “From the start of the Government’s mandate, the Opposition, without a moment of serious reflection on why it was no-longer the government, it has been embarked on a relentless campaign of disinformation and distortion to drag down and undermine almost everything the O.B.A. Government is doing.”

    • Tough Love says:

      How will it be like new if it isn’t given back until 35 years later?!? Anything new would be outdated by then.

  2. johnny says:

    The building of the airport was not put out for tendering by govt., but a competitive tendering process was used to hire Deloitte to appraise the method of procurement for the redevelopment of our airport.

    Why do we do things backwards?

    Surely a competitive tendering process should have been used to hire the airport developer, then we would not have had to waste money to hire Deloitte.

  3. A Question says:

    Dear Minister et al,

    When the Airport is transferred to Aecon or CCC as operator for 25 – 30 years, one assumes they will have full autonomy over the all the various types of fees (including arrival &/or departure taxes), that users of the airport incur.

    Our important International Business Sector hosts many Clients, Conferences and Staff here annually, so what safeguards exist, if any, to ensure that the costs to IB of doing business in Bermuda are not increased exponentially as a result of the new operator setting fees at whatever level they are comfortable with in order to be profitable and recoup their billion dollar investment in improving our infrastructure.

    This came to mind as recently I read an article where Jamaica’s arrival taxes were the second highest out of all the Caribbean Tourist destinations and supposedly there is correlation between this high level of arrival & departure tax and the decline in visitor arrivals from the UK due to package tour operators not being comfortable with these high taxes.

    I am very concerned that our important IB costs (and business) could be held at ransom if the private hangars as well suffer from CCC’s autonomy when new fees are decided to use the Airport.

    Not concerned with Residents as we are not really the main objective, the main objective is improving the airport so that more Tourists visit which is very important.

    With best regards
    A Question

    • Toodle-oo says:

      ** the main objective is improving the airport so that more Tourists visit which is very important. **

      Wow ! Who would have thought after all these years of dwindling tourist numbers and many , many millions spent trying to get them back that all we had to do was build a new airport .

      • Onion says:

        I serve high-end tourists, they regularly complain about the airport.

        • Toodle-oo says:

          And did they say that because of the airport they don’t want to come back to Bermuda ?

          Look , a large part of my professional career was actually spent working at the airport and the only complaints ever heard were not about the building itself . If anything they were about crazy scheduling that put 4-5 flights on the ground at the same time and their not so lovely experiences with HM Customs .

        • Triangle Drifter says:

          I also used to serve the high-end visitor till the Platinum Period came along & drove them away. Grumbles about the terminal were not uncommon. Complaints about treatment by Customs & imigration were frequent.

          We charge top dollar. Visitors expect top dollar treatment from the moment they step out of the plane. They deserve no less.

    • Terry says:

      Oh Whoopdy Doo ‘A Question’.
      They have billions.
      And your point is what.

  4. Resa says:

    Hopefully there will be more job opportunities.

  5. San George says:

    E.T. Richards International Airport – get ready people. You cannot stop a train on Westminster tracks. This form of government creates kings and tyrants.

    Quo Fata Ferunt

    • Terry says:

      Not if you have a conductor that knows his/her job.

      Shalom and reflect.

  6. Airport Worker says:

    Come to the airport in middle of winter on a Tuesday or Wednesday when we have 2 or 3 flights operating in the middle of the day with less than 100 people in total and tell me what retail outlets will be willing to invest in opening a business down there.

    CCC will have no choice but to find other revenue streams and the airlines being the most likely target will love to use these rate hikes as an excuse to fly south where they can get load factors of 70 – 85 pct.