Opinion: Famous On Airport Development Plans
[Opinion column written by Chris Famous]
On Nov 10th, 2014, Minister Bob Richards announced that a MOU was signed with the Canadian Commercial Corporation [CCC] for the re-development of the LF Wade International Airport.
Who is CCC?
CCC is a federal Crown corporation established by the Canadian government for the sole purpose of facilitating international trade for Canadian companies. In other words, CCC is working in the best interest of Canada. Recently, CCC was embroiled in a controversy over its selection of SNC-Lavalin as one of its sub-contractors, a company which has been blacklisted for 10 years from World Bank contracts for “a conspiracy to pay bribes”. This brings into question CCC’s ability to adequately assess the suitability of sub-contractors.
Backdoor Privatization
Despite OBA promising to put the Public Bodies Reform Act on hold, this deal is privatization as it will grant operational control of our airport to a foreign company for 30 years. In fact, the 43 persons currently employed with Department of Airport Operations were told that their jobs cannot be guaranteed once this deal is finalized.
Accountability and Transparency
While this project will be one of Bermuda’s largest capital projects, the OBA have opted to not to put it out to tender. Ironically, CCC made a similar proposal for the Cayman Owen Robert International Airport in 2013 but was ultimately vetoed by Cayman’s UK Governor because it failed to follow a competitive tendering process. Sound familiar? According to Caribjournal.com, Cayman Islands has subsequently opted for a smaller redevelopment project for on $67 million using an airport authority similar to the one proposed by the PLP.
Strange Bedfellows
During the recent standoff between the OBA and the UK government over the issue of the Letter of Entrustment [LoE], OBA took legal advice from Bennett Jones. Coincidently, Bennett Jones was the firm that had represented CCC in respect of its recent SNC-Lavalin scandal
The Connections
While the public has been told that this agreement won’t be finalized until March 31st 2015, CCC has already selected a sub-contractor – Aecon, a Canadian company. Recently it was revealed that sitting on the board of Aecon is Michael Butt who is the Chairman/CEO of Somers Construction, a local firm.
The Numbers
In November, Minister Bob Richard told the taxpayers that the estimated cost for the project was $200m. Fast forward three months to the reading of the 2015/16 Budget and MP Bob Richards announced that the cost had ballooned to $255m!! Ironically the ‘Minister of Austerity’ gave zero explanation as to why or how this increase would impact the estimated 30-year timeline. An increase of over 25% with no explanation? Go figure.
Currently the Airport annually generates $25.2m in revenues and $20.6m in expenses with a surplus $4.6m. While Minister Richards said that the development would be financed through “future revenue streams from the new airport itself”, the current surplus will not be enough to fund this project.
With the 2015/16 budget, the OBA increased the airport departure tax per passenger from $35 to $50. This extra $5.5 million in revenue will not be used to pay down our debt or support our schools. It will most likely be handed over to the Canadians. During a town hall meeting on March 31, 2015 it was revealed by Minister Bob Richards that the lease time had now been extended from 30 years to 35 years. So two questions are
- A: Exactly where will all this additional revenue stream come from?
- B: Why has the lease been extended to 35 years, if according to Minister Bob Richards CCC will recover most of their costs after the first 15 years?
Return on Investment
How much does CCC look to profit off of our airport? Well, according Minister Bob Richards: “This foreign entity is borrowing the money to build that airport and whatever money goes to that project, most of it for the first half of the 30 years, most of that money is going to pay off the debt.” House of Assembly – March 4th 2015 It appears that CCC will have at least 15 years to bank the profits generated from our airport.
Key concerns:-
- potential loss of jobs
- failure to tender
- loss of direct government revenue for 35 years
- loss of control over a key strategic asset
At this point two questions are in most Bermudians minds
- A: Is the OBA working this Airport deal in the best interest of the Bermudian People?
- B: Is the OBA working this Airport deal in the best interests of the Canadians?
- Chris Famous can be contacted via email at Carib_pro@yahoo.com or Twitter at @ryderz777
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I agree with Betty on this one – I think this was an awful move by the government and serious questions should be asked of Bob Richards
Thanks @BT checker…..it is a BAD MOVE by OBA government indeed. The high level of false creditably by this government is making them fall on their swords.
The Famous one has written a Brilliant article based on FACTS.
THE lack of TransparencyTransparencyTransparency by OBA is killing them slowly with their own song……..lol
No Betty – its not.
Its an issue which should be addressed maturely, not words such as “lol” and “killing them slowly”.
Grow up for goodness sake
Touchy are you? Listen if the government does not want to be honest and Transparency it’s shows up big time……it’s often good to see the humor that is displayed by the OBA. ……funny ……yeah….because the OBA pushed pre-election 100% TransparencyTransparencyTransparency. ….now they are running big time from it….I have not seen one sign of REAL TRANSPARENCY AND COLLABORATION. ….ALL THOSE THINGS THEY PROMISED PREELECTION. ….THUS I CAN ONLY..lol
A: Is the OBA working this Airport deal in the best interest of the Bermudian People?
YES !
B: Is the OBA working this Airport deal in the best interests of the Canadians?
NO !
but why not put out to tender??
In the least it would stop political opponents criticizing it. The OBA’s entire platform was based on not doing the same thing the PLP did when it was in power…. and on the biggest project they have done exactly that.
The response that no-one would tender for such a big contract for costs reasons etc is a nonsense. So show you put it out and didn’t get anywhere.
Sorry but this is wrong – no matter who you support.
Don’t you see.. whoever builds it has to raise the money to pay for it.
Who in Bermuda is going to come up with the hundreds of Millions ?
They also have to be able then to manage it profitably for 30 years to pay back their outlay with a marginin of proft.
Please identify ALL those in Bermuda with the experience in managing an airport and who have the fiancial capacity to achieve build it.
I think you totally misunderstand what I am saying. Why do you think tendering would only apply to Bermudian companies?
This is an international project for an international tender. If you are right and no company anywhere would have put in a bid than fine – the government can show it tried but had no choice. This is not what happened.
The reality is they could have done a 6 month tender window in early 2013. They didn’t and have chosen to proceed without any competitive tendering on one of the largest construction projects in Bermuda history.
I am amazed all those who were so outraged when the PLP did this now think when the OBA do it is in our best interest. Lets get real – the PLP were a disaster, but the OBA is making some of the same mistakes. They should be brought to task for it. This is just stupid and I am amazed the Premier backed the idea
@hmmm: “Please identify ALL those in Bermuda with the experience in managing an airport and who have the financial capacity to achieve build it.” I totally agree with the O.B.A. selecting C.C.C. to finance the construction of the new airport leaving them to assure us it will be at no charge to the Bermuda Government, who by the way don’t have millions to spend but do need to put people back to work and C.C.C. has agreed to hire out of 600 employees 400 Bermudians.
Now, that may not please everyone but them who are in need of employment will be extremely happy knowing they’ll have jobs when the shovels dig into the ground.
Granted it will be 30 odd years before the airport is signed over to the Bermuda Government but during them years C.C.C. will(who’ve agreed to it)take care of the maintenance of the airport at no expense to us / Bermuda Government not matter who that may be.
As for the Causeway, we just don’t have the dollars at this time to finance the project. It will come in the future and the refurbishment or replacement will take place.
Straight garbage. Mr. Biased himself.
…..quote….In fact, the 43 persons currently employed with Department of Airport Operations were told that their jobs cannot be guaranteed once this deal is finalized….end of quote.
Its a pity they didn’t do this with the 80% (yes – eighty percent) over staffed post office.
No job should be guaranteed – ever.
With regard to the Post Office, are you saying island-wide they should only be employing 35 persons instead of the 168 currently working there now? (this figure from someone who actually works there)
I took the figure directly from the SAGE report Gombey. It was well publicized when the report came out and frankly I would be surprized if you hadn’t heard about it particularly as you work there. So yes it should be 35 I guess.
Actually 35 would not be correct. It would be 168 divided by 180 multiplied by 100.
the lease has now gone from $200 million – $255 million and 30-35 years with zero explanation via detailed public statements
Perhaps they should give it to Pro Active eh Chris?
Or Landmark ?
“Perhaps they should give it to Pro Active eh Chris?”
I do not understand this statement. I thought the OBA promised a new era of transparency and accountability. However, statements like this are the same old line…’the other guy did it, and you didn’t complain, so why complain when I do it’.
So you admit the PLP were shady and incompetent, and you want better.
Because those initial figures you quote were just that, initial figures. Since then the numbers have been worked on and the numbers have changed. They might still change again and then finally be fixed when the contracts are signed.
I do remember as far back as the early announcements that it was going to be $250m, a number that goes back further as an estimate to build the airport when the contest was held for potential plans
Chris,
My question would be, why wouldn’t your fellow PLP friends ask the same questions you do? Maybe you need to step out of the shadows and run as a politician yourself. I don’t often agree with your opinion but I do usually respect your point of view and approach.
I have always used my own name.
Dont live or write in shadows.
As for running..
Hmm just maybe.
Thanks in any regard
I really do not understand this. Why didn’t the OBA put the project out to tender? If, after the tendering process, CCC was chosen then so be it.
By not putting this project out to tender and giving it to CCC, this situation stinks to me.
Also, why do OBA supports defend the decision to not have an open, transparent tendering process? This would be in the best interest of all Bermudians. By defending the OBA’s actions, their own supporters are choosing against their own best interests.
Isn’t that why we have PATI?
You have absolutely no clue do you?
That has been explained over and over, time constraints. Has we tendered, we would still be in the process of RFP reviews at this time, while right now they are getting closer to the final wind up of the defining out the final product. Minister Richards has repeated this. Over and over, this is about 2 things, getting a new world class airport, and getting Bermudians back to work, both as quickly as possible. I remember when they held the drawing contest for the new airport, $250m was the estimate as far back as then, so the $250m number now isn’t some new magically produced number
We have waited how many decades? Why not wait another six months and do it right?
Cause it would be about another year, not 6 months and we need jobs now. Plus that would be another year worth of money spent to patch the old one together, plus repairs for emergency issues, never mind the regular cost of running it. RFP or not, if there is an independent oversight to review that we get the monies worth, then we are still getting it right, because ultimately it comes down to ensuring the final product is worth the cost.
Then they should have done it early 2013 and we would be in the same position.
Why didn’t the OBA put the project out to tender?
They are hiding something from the public. It’s more to the story. People don’t disregard transparency for no reason.
You are absolutely right, they could have still had a bidding process and have chosen a CCC. I don’t know why they are racing when the construction won’t be completed in time for the America’s Cup anyway.
Something doesn’t seem right. I’m not even sure how they could have disregarded the bidding process for a $255 million dollar project anyway. I’d like to know how they accomplished that..
The UBP/OBA will do just about anything to change the name of that airport !
You got something wrong with it maybe being named after someone like Sir Henry Tucker, he is after all one of the architects that brought commercial aviation to Bermuda, so it would be much more fitting.
How about calling it Bermuda International Airport.. That sounds better to me.
That works too, but some credit should be given where credit is due.
I want to begin by saying that I’m not sold on the need for this airport project now and how it is being done, but Mr. Famous is cherry-picking.
Who is CCC? I dunno, but how many projects have they worked on, and what percentage have involved controversies like the one you mention?
Backdoor Privatization…blah. Control and management yes, ownership no. Further, no job should be guaranteed…period.
Accountability and Transparency…The tender process has not worked so well for all of the capital projects over the past decade. More accountability was needed in the execution process as the tender process secured bids that could not be adhered to and resulted in major cost overruns and no enforcement of contract terms or bond agreements. This process actually incentivizes CCC to come in on budget, as the revenue over the term is all they have to work with.
Strange Bedfellows…legal representation by a firm familiar with the CCC framework is well-advised. The standoff wasn’t against CCC, rather against UK.
Connections…Well, what can I say?
The Numbers…This is where you completely miss the point. Projected revenue based on existing plus new tax is about 10M per year, not adjusting for any future increases or decreases. With a 200M outlay upfront and 10M per year income over 30 years, CCC makes 100M but is in the hole for the first 20 years and only makes an IRR of about 2.84%. If the cost is now 255M, that profit drops to 45M and IRR drops to 1.08%. Adding 5 years to the lease takes the IRR back up to a respectable 1.87%. Big in dollar terms but not so over 30 to 35 years and we could not possibly get a loan anywhere near those rates. Additional revenue streams will change the economics, but I can’t fathom where they would come from. Those numbers actually make it a good deal financially for Bermuda.
Well stated and an excellent break down, I however do disagree with you on one point… your first point. We are in desperate need of a new airport. I have been in both the front and back of the shop at that airport, and can tell you that it is well overdue. Even now, we have water stained ceiling tiles, paint that no longer stays on the walls and cement popping off rebar in the public areas, so you can only imagine what the back areas of that building are like. The ongoing cost of just patch work, never mind emergency repair works whenever something critical goes, is only going to go up every year, that the only way to get the current building up to surviving a longer period of time would be to gut it to bare bones and install new systems. A long, time consuming effort, further complicated by it needing to still be in full service during the revitalization, that is cost prohibitive at this juncture. So, it is simply better in the long term to bite the bullet and build a new airport, then the old terminal can receive the works to revitalize it for other purposes, like an executive terminal for the private jet, an expanded cargo terminal…
why are sooooo many people worried about putting the job out to tenders..?? How many local construction firms can take on this project from all required aspects of development with out “outsider” help?…we really don’t have the time or money to be p#$$yfooting around with mistakes due to inexperience, inducing insane overruns in costs… D&J..?busy…BC&M..?busy…GLConstruction..?busy…who else..? oh yeah!!lets give “Do Less & See More Building Co.” a chance Because he’s Bermudian. Once CCC takes command no matter whether it fails or flourishes…it is not Bermudas responsibility…it’ll cost us nothing so we receive nothing… i’m just a lil concerned about when it is relinquished back to us…it will be 30 years old and time for another overhauling..?
oh yeah you can list the construction co’s that you talk about. thanks
Putting this project out to tender wouldn’t mean restricting it only to local contractors. IF CCC can do this project for $250m w/a 35year contract, what’s to say that there isn’t another firm – overseas or local – who could do the job for cheaper and on better terms? We won’t know if there is because our govt never bothered to check!
you mean like …we hire them through a deal that is sooooo lopsided it’s not even funny….who makes a deal like this?…I don’t like this deal…the airport is fine…we need a hydro electric sluiced bridge built by Holland. and staffed by Bermudians…..use the electricity produced to make solod hydrogen (inert),fuel cells ,save on fuel power ferries ,boats,cars,buses as in Holland!…..wake up you lot…….
So you want us to spend $50 million plus wages maintenance etc… to save $2 or $3 million if fuel a year?
You sound like those Solar power worshipers that invest 20K on panels and installation to save $400 per month on electricity, only to learn that they need to pay for maintenance, batteries and more every few years. All you are doing is taking from Peter to give to Paul.
And Peter didn’t have any money to begin with !
More ignorance.
As always
Thank you all for taking the time to read. Even if we disagree on items you have taken the time to read and or respond.
It means much
Love you all
Chris
airport is falling apart. dangerous. Mr Misinformation will do anything, including lie and misinformation to throw poo at the OBA cause he is upset that his Pee El Pee didnt win. how much they pay you Chris?