Govt Has Received Entrustment Letter From UK

July 22, 2015

[Updated with video + PLP response] The Government has received an entrustment letter from the British Government for the airport redevelopment project which “removes any potential legal barrier to Bermuda’s engaging with the Canadian Commercial Corporation,” Finance Minister Bob Richards announced today [July 22].

The Minister said, “I am pleased to announce that the Bermuda Government has received and formally accepted an entrustment letter from HM Government with respect to the airport terminal redevelopment project.

“This document will remove any potential legal barrier to Bermuda’s engaging with the Canadian Commercial Corporation [CCC], with respect to the construction of a new airport terminal for Bermuda.

“This entrustment letter has been a long time coming, but it now includes language that both the UK and Bermuda are content with. It removes any ambiguity as to the authority of the Bermuda Government to engage CCC, which will act as the prime contractor in this project.

“The Government did have legal advice stating that the transaction we sought with CCC fell outside of the requirements for an entrustment from the UK. However, any ambiguity in this matter would have posed a significant problem for the project’s financiers.

“Acting in good faith, the Bermuda Government sought clarity by establishing dialogue with the UK. And now, that ambiguity has been removed.

“We are now continuing talks with CCC and with Aecon, Canada’s largest public construction and infrastructure development company, towards making ‘the go, no-go’ decision.

“If agreed, we will move from Phase One to Phase Two which would entail the finalising of detailed contracts, financing and design. That will probably take the better part of a year.

“Advancing to the next stage will alter the arrangements of liability for Bermuda, meaning we will be committed to the project and would have to pay financial penalties, should we subsequently abandon the deal. The Bermuda public will be apprised when arrangements are agreed to move on to Phase 2.

“Governance matters highlighted in the report by Deloitte will be acted upon in due course.

“I would like to thank the Ministry of Finance team and the Department of Airport Operations who have both worked diligently on preparing a number of documents in relation to this airport terminal redevelopment effort. Their work is not done yet.

“I would also like to publicly acknowledge the work of His Excellency the Governor and the Deputy Governor for their assistance in moving this process forward.”

Update 5.27pm: Shadow Minister of Finance David Burt said, “The UK issuing a Letter of Entrustment does not mean that the airport redevelopment project has received the, ‘Green Light’.

“The OBA’s continued drive to award an unsolicited and untendered project to a Canadian company which will far exceed $1 billion is a slap in the fact to good governance.

“Though the Minister of Finance glossed over the highly critical Deloitte report on the OBA’s approach to the airport redevelopment by saying ‘Governance matters highlighted in the report by Deloitte will be acted upon in due course,’ it remains our view that the OBA’s approach to this redevelopment process has been flawed from the outset.

“That view has been confirmed by the independent Deloitte report which highlighted numerous fundamental gaps in the process which means that, the important measure of value for money, cannot be guaranteed.

“The Progressive Labour Party has contacted Government House and will reserve further comment until we have read the revised Letter of Entrustment.”

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  1. Jeremy Deacon says:

    So all those really incriminating emails did not manage to persuade her Maj’s Government …..
    Still rather see the money spent on something for tourists to do like a lovely Hamilton waterfront (oops, can I mention that) mind you …..

    • antondeck says:

      The money has to be spent at the airport as the costs of maintaining the crumbling infrastructure there are excessive. Unfortunate, but true.

      • Jeremy Deacon says:

        not ppp tho and not $200m surely?

        • serengeti says:

          Based on that thinking I suppose we could have kept the hospital the way it was, patched together, cramped, and falling down.

          If you’re uncomfortable with the idea of PPP, how comfortable are you with all the other government projects over the past 10 years, where all of it is mortgaged to overseas banks? None of it is owned by us. None of it has been paid for. The way we’re going, none of it will be paid for, for decades.

        • hmmm says:

          Jeremy if a hotel at Par-la-ville requires a bridging loan of 18million to secure a Permanent Loan of $225m and an Equity investment of $100m, then $200million is very reasonable.

        • Kangoocar says:

          If it isn’t PPP then we can’t build it thanks to the plp leaving us with NO money and heavily in dept to the foreighners they hate so much??? And yes $200 million is a good price being first off, we don’t have to come up with the money and secondly it is a lot better that the $400 million +++ the grandiose plp wanted to build!!! Congrats Min Richards and the OBA for what will surely get a lot of bermudians back to work and a huge injection into the BDA economy!!! Now that is how the pros do it!!!

        • Toleratate says:

          Since you are all throwing around numbers; can someone clarify the constant use of the figure $1 billion that David Burt continues to throw out there?
          This topic was quite for a while and I cannot remember if this figure was facts or pulled out a hat.

          • Kangoocar says:

            @ tolerate, if it came from Burt/plp you can be rest assured it was pulled out of the plp hat??? That figure was and still is absolute nonsense, and was surely spouted out after an Alaska hall meeting that the plp special tea was served????

            • Build a Better Bermuda says:

              The $1b figure comes from a projected revenue that the Airport would produce for the next 30 – 35 years. The misleading point of this fact is that he associates this as being the value of the airport contract, but does not take out the estimated expenditures of around $700m it will cost for that 30 – 35 years. So the actual contract value is only around $300m

              • umok says:

                They will continue to increase taxes associated with the airport (like they are already doing) and that profit margin will increase.

                • Build a Better Bermuda says:

                  And inflation will continue to raise the expenses associated with it, were you trying to invalid my point with a half truth?

          • clearasmud says:

            I believe that If you read the Deloitte report it estimated that the cost over the 30 years in excess of 900mil which is a billion.
            It also said that the government had never done any value for money calculations on which it could assert that the present deal was thinnest!

            • Navin Sven Johnson says:

              The Hospital cost will be in excess of a billion as it is $30,000,000.00 a year for 30 years adjusted for inflation….the BHB will continue knocking on doors with their hands out forever…you can only sell so many $5,000 donations for bricks with their names on

      • Buzby says:

        Yeah, I’ve never seen any math on that.
        The truth is that big capital projects are political gold and both parties know it.
        We need a huge airport that is owned by somebody else like we need skin cancer. We’ll be having that though, whether you like it or not, because the elections mean that one party gets absolute control.
        If the OBA wasn’t shafting you with this the PLP would be and the OBA would be complaining about it like a bunch of Kiskadees instead of the other way around.

      • inna says:

        I agree. LFW airport is in shambles. The last time i was there, half of the departure lounge upstairs was roped off due to a leaky roof.

      • Car has a flat tire, Buy a new car?

        • Kangoocar says:

          Depends on how old the car is???

          • How old is JFK? Renovate do not rebuild

            • Build a Better Bermuda says:

              Different airport architecture, JFK was a purpose built airport with room and the ability to expand and renovate and upgrade. Bermuda’s was built by the U.S. Air Force as a civil air terminal for us that has passed its best before date by a while. In order to revive the airport, we would need to shut it all down, gut it floor to ceiling, probably have to rebuild sections, replace the vast majority of its electrical, almost the entirety of its plumbing, all of its HVAC… and ultimately we would have spent more than we would have for a new one, without the additional cost of setting up a temp airport as we can not go without an airport, and we would also end up with a airport where people will still be getting off into rain storms… and we probably would have only extended its lifespan by another 15 – 20 years.
              This vital entry port into our country should be welcoming visitors, leaving them with a sense of something iconic… not think, ‘perhaps I should stay to the right of this hallway in case that piece of concrete falls of the ceiling’ or ‘ what died and left that stain on the carpet’

            • Zevon says:

              Several jfk terminals have ben knocked down and rebuilt.
              Did you have a point, or was that it?

        • Build a Better Bermuda says:

          When the car has a flat tire, leaking radiator, broken transmission, half it’s floor panels rusted away, cracked engine block, etc… then yes, time for a new car. Especially if it the one you are using to pick up visitors in.

      • cottereaux says:

        not true. only a few million dollars a year are spent on airport maintenance. there is no need for a new airport.

    • Not surprised, lot at the lack of support for the Land Grab.

  2. sage says:

    Who gave the “legal advice”?

  3. stunned... says:

    damn those OBA

  4. Unbelievable says:

    Great news! Jobs!

    • Tough Love says:

      For who? Airport staff were told that they would have to apply for jobs and none are guaranteed. So this doesn’t really add to creating jobs, but could possibly mean less Bermudians employed.

      • Zevon says:

        Ha ha. Good one.

        • MAKE MY DAY says:

          The PLP NEVER had ANY idea how to finance capital projects… In fact they NEVER had ANY good ideas in the first place – that is why the Island is $2+ BILLION in debt + the spending of the Tax Payers $$$ over a 14 yr period!!!

          IT IS WHAT IT IS!! CASE CLOSED!!

      • Independence

      • theothersidebermuda says:

        No one’s jobs are guaranteed…ever…new owner or not. Not sure where this concept of entitlement of guaranteed employment comes from. Wake up, do your job, do it well, make the company money…that’s how you help guarantee your job. If I were the new owner of any business, I would definitely want to know that I have the right people. Maybe some should be promoted, maybe some replaced (with other Bermudians), maybe some roles need to be expanded…why is it unfair to an owner (new or existing) to reassess their business model? After all, who’s capital is taking the risk…certainly not the employees.

        • Build a Better Bermuda says:

          Civil Service notion, thus the reason so many in labour are against privatization. It removes the protectionist culture of a government job and requires employees to continually prove their value at the job.

  5. Sony says:

    yup f this country

    • Well then says:

      Something good happens and you can’t get your head out of your political sandbox. Talk about love for your country.

  6. San George says:

    Bob Richard International!

    • stunned... says:

      another pet peeve: stop naming airports after people. let it be just ‘Bermuda International Airport’.

      • Bermuda International Airport has a certain ring…Now, let just on with developing it,putting people back to work a.s.a.p. The Shadow Minister of Finance David Burt is a another, “thorn in the side of progress!”
        There’s soooo much potential good things about to take off in the East end and Progressive Labour Party members seem to want to keep Bermuda and Bermudians at a damn stand still :-( Sad yes, but true.

        • clearasmud says:

          Mr. Burt is doing the job WE pay him to do. I have no problem with the PPP model of funding but how are we to know if we have the best deal when we have nothing to compare it with.

          • Build a Better Bermuda says:

            There is the crux, we have a history of supposed comparable best deal through tenders, and each time we have been shafted to the tune of millions over budget. Ultimately, what decides the best value isn’t the tendering process, it is the build to contract. Leaked emails, the review by the British government, the independent reviews already done and to be done and more have shown a great deal of effort has been expended to make sure this project will be value for the money. The onus will be on the contractor to be on time and budget, not taxpayers.
            One of the greatest misrepresentations is that we stand to lose $1b… this is a false perception in multiple ways. First, the value of th contract can only be quantified when you apply the contract’s expenses as well, when all is said and done, the CCC partnership probably stand to make around $300m as there is an estimate $700m in expenses to be removed from the $1b revenue figure. Next, if we were to build the airport ourselves for the estimated $250m, we would need to take out a loan, so using the same figures of revenue and expenditure, we still wouldn’t see that $300m in profit as those profits would be needed to pay the loan plu interest; and with the full weight of history to back me, there would be overruns, so in fact we would have to probably go past the airport revenue stream and dip into the government coffers.
            Another more minor misrepresentation is that now the airport will be privatized… in truth, the airport is already privatized. Private contractors clean it, operate its security, manage the environmental systems, work the baggage handling and airplane services… the only services that are still civil service are the admin and air traffic control and customs… and customs can’t be privatized.
            In the end, we have already had an airport that was operated and controlled by a foreign government for over 30 years, so this won’t be anything new, at least this time we are setting the standards for the final product. We won’t be losing control of our airspace, as it falls under government regulation. We won’t be losing any money. The only thing I would like to see is a rider in the contract that will allow us to buy out CCC/AECON early at a prenegotiated time lapsing valuation formula, should we eventually actually find ourselves in a financially secure position to do so.

  7. Onion says:

    Now Mr. L Scott, we can move on………whats next on your agenda ?

  8. Alvin Williams says:

    Don’t trust this government a Canadian development ; Canadian employment prospects for it’s building and Canadian control of Bermuda’s airport while they require us to continue to pay for it through increase travel taxes; government money for the airlines to fly here and over all lost of any profits for the next 40 years.

    • Build a Better Bermuda says:

      Guess what, we would still be paying for it out of the airport profits and the government coffers even if we built it ourselves.

  9. Terry says:

    What is the difference between the ………..
    PLP
    PPP.
    Shalom

  10. Jadon says:

    Whens the last time any of you have been away and said ” Oh no I’m never going back to that place there airport was the pits” – SAID NO ONE EVER!! LOL

    The airport needs a little work.. We do not need a new airport. I went to Panama not to long ago… The stalls where the officers check passports etc were made out of plywood. I barely remember what the airport looked like. No one comes to Bermuda to view our airport….

    • Build a Better Bermuda says:

      When it is the only way into a destination, there isn’t really any choice what you have to go through to get there, but that still isn’t an excuse for creating a bad first impression. If we are tying to market ourselves as a world class destination, then we need a world class first impression.

  11. Coffee says:

    Finally we have the authority to build a airport that could easily handle the six thousand visitors and locals that trespass our outdated facility on a daily basis . Maybe this investment by the OBA will increase our visitor numbers by at least 50% , cause the BTA is soon becoming a sideshow !

    • Build a Better Bermuda says:

      That the sideshow that has helped increase next year’s cruise visitations by over 10% or more than $10m visitor spending. The same sideshow that has been helping local entrepreneurs set up new visitor experiences and helped the NHW finance a very successful Carnival weekend. Or that they have been actively increasing our presence into the lucrative business conference destination market. All the while doing this with the lowest tourism budget in recent history.

      • Coffee says:

        Are you renting your place to Hanbury for $75,000.00 per annum , or is it your partner ?

  12. SMTH says:

    N wat money will will bermuda make , if they run it for 35 yrs . That’s the govt biggest income . SMTH

    • Build a Better Bermuda says:

      But since we need to replace it, we wouldn’t see that income for decades anyway. That income, plus some, would be needed to pay for the new airport in any case.