Minister: ‘Best Result From This Sorry Situation’
Minister of Public Works Lt/Col David Burch provided a lengthy statement in the House of Assembly today [Oct 6] on the relocation of the mail facility from the airport, saying he thinks it is important to provide all the “details and time lines concerning how a Government Department housed in a Government building could be charged rent [and possibly penalties] by a 100% foreign owned company.”
In explaining the entire situation, Minister Burch said, “This may sound like a scenario for ‘How Not to Run a Government’ - but this is far more serious. In fact, there is nothing to laugh about in this entire situation.”
“The deadline for the Airport Mail Processing Centre to be out of its space at the airport was September 30th; and here I am on October 6th explaining how Bermuda was placed in this situation,” Minister Burch said.
“We are 6 days past the time we were supposed to be out of the building that we thought was ours. Aecon has the contractual right to start charging rent and they have so far taken a tough stance on this issue; noting that the Airport Mail Processing Centre building is required as an integral part of their project plans.
“Aecon has the contractual right to start charging rent right now – that is what their contract states,” the Minister said.
“Although, they have not provided an indication of their market rental expectations. We have done our own calculations, based on recent market evidence at Southside, [$15 per square foot for warehouse space and $25 per square foot for office space] so a monthly charge of $17,700, plus service charge, would be a reasonable estimate from our viewpoint.
“I believe that it is important to ensure that my colleagues, and the public at large, understand just how we got into this situation and why it was important to give you all of the details and time lines concerning how a Government Department housed in a government building could be charged rent [and possibly penalties] by a 100% foreign owned company.”
The Minister said this matter was first bought to his attention in August, and “since that time we have worked diligently to secure the best result from this sorry situation.”
He added that the lease for New Venture House was signed yesterday, the fit out works are progressing, and he expects the “move to occur before the end of this month.
Minister Burch said he will keep this House “advised of the outcome of this sorry tale and the ultimate costs to the Bermudian taxpayer.”
The Minister’s full statement follows below:
Mr. Speaker, I feel compelled to present a Ministerial Statement today in order to bring further clarity to the statement made in this House two weeks ago by my colleague, the Honourable Lovitta Foggo, the Minister for the Cabinet Office with responsibility for Government Reform.
Mr. Speaker, I apologise in advance for the length of this statement, but it is essential that I provide the background to this situation.
It was in March 2016 that the Bermuda Post Office contacted the Department of Public Lands and Buildings with an enquiry regarding the future of their Mail Processing Centre.
Investigation at that time revealed that the Department of Airport Operations [DAO] was seeking to put the Airport Mail Processing Centre on a twelve [12] month tenancy agreement for their occupation of what was, at the time, a government-owned building under the purview of the Department of Public Lands and Buildings [DPLB].
It appears that it was at this point that [DPLB] were advised by DAO that the Airport Mail Processing Centre may have to relocate as part of the airport redevelopment project.
Mr. Speaker, this may sound like a scenario for “How Not to Run a Government” – but this is far more serious. In fact, there is nothing to laugh about in this entire situation!
It was at this point that [DPLB] – on behalf of the Bermuda Post Office – reached out to the Department of Airport Operations “to establish what were the long-term plans for the Airport Mail Processing Building as part of the airport redevelopment?”
Initially, information was scarce, but it became apparent – as the airport redevelopment plan progressed – that the former Government had included the existing Airport Mail Processing Centre building within the lease for the airport property!!!
Mr. Speaker, to say that the Airport Contract negotiated by the former Government is “a gift that keeps on giving” would be an understatement!
It was at this point that DAO asked the DPLB whether they had government space within which to relocate the Airport Mail Processing Centre.
Mr. Speaker, the answer to that question was “no”.
In June / July 2016, apart from not having any spare warehouse space for the Airport Mail Processing Centre, the DPLB noted that relocating the Airport Mail Processing Centre should be the responsibility of the DAO & / or Aecon as part of their project, as ultimately, the Minister of Transport has a statutory obligation, under the existing Civil Airports Act 1949, para 4[5] to secure the mail-handling function at the airport.
Mr. Speaker, I apologise if this Statement is sounding more and more like a comedic screenplay; but these are the facts revealed as we follow the series of actions that have led us to this point.
Mr. Speaker – here is where we are in this “comedy of errors” – D AO were unable to provide any suitable alternative accommodation at the airport and the redevelopment agreement had been completed on the basis that the Airport Mail Processing Centre building would be vacated by 30th September 2017.
At this point – with a deadline for action and contractual penalties [market-rent for the building if not out by 30 September 2017 and a $600,000 penalty; plus continued market rent if not out by 31 December 2017] in place if these deadlines were not met –Project Co. determined that the Department of Public Lands and Buildings and the Bermuda Post Office would solve the relocation issue.
Thus, the Estates Section, the Architects Section and the Bermuda Post Office began to consider modifying an existing plan to renovate the General Post Office’s Customer Service Hall and Basement to make it suitable for long-term occupation by the Airport Mail Processing Centre and the Customs facility.
This work included:
- renovation of the ground floor customer service hall
- upgrading the post office counters so that parcel service counters
- could be transferred from the basement level
- upgrade to the philatelic counter
- new office accommodation for staff
- meeting rooms
- a new mail processing floor
- new customs area and
- upgraded staff welfare facilities on basement level.
Mr. Speaker, it became obvious to the Estate Officer [as it must have to you, just listening] that there were many moving parts to this project and that the scale of the task would benefit from the appointment of a Project Manager.
The Chief Surveyor and Permanent Secretary of Public Works agreed with this approach. Accordingly, at the next project meeting, this was discussed between the estates officer, architects section and Bermuda Post Office, and they agreed that a Project Manager would be most effective if he were appointed as part of a construction contract.
As such, the appointment of a Project Manager was deferred until such time as the architects had the initial design completed and planning permission in place.
Mr. Speaker, in the meantime, during May 2017, the appointment of a new Contract Manager at the Bermuda Airport Authority gave the client and estates officer an opportunity to review the progress made to date and reinforced the project deadlines and penalties for remaining in the existing Airport Mail Processing Centre building.
It became apparent that at this stage, a “Plan B” was needed, as the renovation of the General Post Office Building would not be deliverable on time. In fact, the budget to fund the project had not yet been requested from Cabinet!
Shortly after that meeting, the Estimated Budget Cost for the preferred option [redevelopment of the basement level of the General Post Office] was confirmed by Government’s in-house Quantity Surveyor as being in the region of $1.8 Million to $2.3 Million.
Mr. Speaker, this quote was provisional, as the full cost of the required air conditioning upgrade work could not be accurately estimated due to nonexistent Mechanical & Engineering plans for the General Post Office Building!
By this time, with no capital funds budgeted for this project and no supplemental budget, it was decided to look for alternative solutions. The Estates Officer conducted a market search for any suitable vacant space. By the first week in July 2017 four options had been inspected with the Bermuda Post Office Facility and Operations Managers.
Let’s look at some of the scenarios examined:
Option 1 – relocate to the General Post Office Building
Pros – Improved Customer Experience
Separate mail processing area, kitchen and bathrooms for HM Customs staff
No long-term rent liability
Cons – High cost capital project [Estimate between $1.8 - $2.3 Million]
No capital money budgeted for this unscheduled real estate project
Realistic delivery of project approx 12 – 18 months
Length of project means deadlines imposed by Airport Contract would not be met
Therefore, total cost would be $2.4 – $3 Million [inclusive of $600,000 penalty, plus market rent for the period of time that the Airport Mail Processing Centre building remains occupied
No parking for General Post Office Vans /Trucks that currently park in the secure compound at the airport.
The capital cost of this project does not include future maintenance liability
Option 2 – Relocate the Airport Mail Processing Centre to the New Venture Building, Mills Creek, Pembroke
Pro’s – The building is empty and can be made available at short notice
Moving into this building in a timely manner would allow us to meet the deadline to vacate
The property provides warehouse space, a mezzanine level and office accommodation
The warehouse and office spaces are fully air-conditioned
The space is large enough to accommodate the Airport Mail Processing Centre, the General Post Office functions and the Bermuda Post Office administrative functions
The location, outside of Hamilton, means there is parking and the rents are considerably cheaper.
The maintenance liability is shifted from Government to the LandlordCon’s – This is the most expensive rental option at $25,000/month plus service charge due to the large footprint and high quality fit out.
In times of heavy rain, the area tends to become flooded
Access docks are raised for containers/large trucks. A solution would have to be reached to overcome this issue
There is limited staff parking
Option 3 – Relocate to Davison’s Warehouse, 16 Ferry Reach, St. George’s
Pro’s – This is the cheapest rental option at $12,000/month
The property is located close to the existing AMPC location
There is a large shared yard and plenty of roller shutter access doors into the accommodation
There is some office accommodation [basic drywall construction] which could be easily reconfigured
There are additional units in the building which could be acquired if necessary
The loading bays are accessible
The maintenance liability is shifted from Government to the Landlord
Con’s – The fit out work would likely delay occupation of the property, possibly beyond the deadline of the airport contract
The space is partially air-conditioned and any fixture, such as additional air-conditioning systems would be the liability of the tenant
The toilets in this unit would not meet current Occupational Safety and Health Regulations for the number of staff
Option 4 – Relocate to Somer’s Warehouse, Cemetery Road, Pembroke
Pro’s – The rental is $15,000/month
The property is close to the City of Hamilton
There is a secure yard for a limited number of vehicles
There are a couple of pre-existing rooms which could help to provide Customs with a separate mail processing area
The maintenance liability would belong to the Landlord
Con’s – There is limited space for staff parking
Access to the warehouse is via a raised loading dock
There is no air-conditioning on the first floor
There are no bathrooms on the first floor; and the bathrooms on the lower floor would not meet the Occupational Safety and Health Regulations for the number of staff needed to operate from this area.
Mr. Speaker, by this time it has become clear that we are “between a rock and a hard place”. The deadline for the Airport Mail Processing Centre to be out of its space at the airport was September 30th; and here I am on October 6th explaining how Bermuda was placed in this situation!
Mr. Speaker, any proposed option has to meet both the operational, and security needs, of both the Bermuda Post Office and Her Majesty’s Customs
The newly created Bermuda Airport Authority is the only government stakeholder with direct access to the Developer – Aecon, the Airport Operator Skyport who must be kept informed of progress being made to relocate the Airport Mail Processing Centre.
Mr. Speaker, at this point, I want everyone who hears my voice to understand the situation in which we find ourselves.
We are 6 days past the time we were supposed to be out of the building that we thought was ours. Aecon has the contractual right to start charging rent and they have so far taken a tough stance on this issue; noting that the Airport Mail Processing Centre building is required as an integral part of their project plans.
Let’s be clear!
Aecon has the contractual right to start charging rent right now – that is what their contract states.
Although, they have not provided an indication of their market rental expectations. We have done our own calculations, based on recent market evidence at Southside, [$15 per square foot for warehouse space and $25 per square foot for office space] so a monthly charge of $17,700, plus service charge, would be a reasonable estimate from our viewpoint.
Obviously, the Minister of Finance would prefer to avoid any penalties as a result of the Airport Mail Processing Centre remaining in their current location on 31st December 2017.
Mr. Speaker, I take my Ministerial duties seriously and I believe that it is important to ensure that my colleagues, and the public at large, understand just how we got into this situation and why it was important to give you all of the details and time lines concerning how a Government Department housed in a government building could be charged rent [and possibly penalties] by a 100% foreign owned company.
In spite of the Budget Debate in March of this year, there was no mention of needing to fund and relocate the Airport Mail Processing Centre. I understand that the public will wonder how the repeated phrase that “the airport redevelopment will not be a burden on the tax payer” has been transformed into Government paying for essential unbudgeted items from the public purse.
Mr. Speaker, this matter was first bought to my attention at a joint meeting with key stakeholders on 11 August 2017- since that time we have worked diligently to secure the best result from this sorry situation. I can report that the lease for New Venture House was signed yesterday and the fit out works are progressing.
Mr. Speaker, I expect the move to occur before the end of this month and I shall keep this Honourable House advised of the outcome of this sorry tale and the ultimate costs to the Bermudian taxpayer.
Thank you, Mr. Speaker.
Doesn’t govt own Southside which is full of big useful spaces they could use for free?
yes it is
If this airport deal was made by Dr.Brown …………………
Two Bermudas.
The Minister guesstimated everything, except the new lease, which was signed, YESTERDAY!
this sorry situation…please explain the BDLC, the cost overruns, the failure to call the union guarantee, audit failure, the white elephant that is Grand Atlantic.
Please don’t peddle pennies when the PLP cost us millions upon millions. why are you not squawking about Port Royal ?????????
Perhaps grand atlantic could be used for the mail room we own that!
I would like to buy all the units at
Grand Atlantic
What’s the only thing stopping you? The fact that you don’t have $60m?
Wo! Isn’t that what AC cost us? Hey I am sorry OBA was doing some very good stuff. I like boats again and puppies and breakfast.
Yeah but the AC got us thousands of visitors, millions of dollars injected into the economy, tourism records, full hotels, busy taxis drivers, hours of exposure on worldwide TV. All stuff you hate.
The Grand Atlantic just got us an ugly empty building. All stuff you love.
Please…it needs to be empty for work to progress. Call it rent or whatever you like but I’m guessing you wouldn’t be in much a of a hurry to relocate without this clause in place. It’s not Berkley/Emmissions/heritage wharf/port royal/court house etc. They plan to come in on time and on budget.
Don’t act so thick.
Can we get some facts , how many pieces of mail actually get sorted on a daily basis , this actually could be an opportunity to streamline the process as it is obvious to anyone receiving mail know we don’t get mail on a timely basis. The Government owns all of southside and there are many buildings not occupied surely the 30k the current government intends on spending must be going to Friend of the family , surely not the best option
Facts? hahaha! That is a good question.
Put it out to tender and run the few pieces of mail outta Perot Post Office in Tawn, till de tender goes through. Or do a RFP, do sumptin! Or ban all mail cept OHMS stuff. Make ppl use couriers. Or sort d mail outta d bus garage, using d bus drivers dat are paid to do nuffin, dats comfy n air conditioned…
he weeps and moans about a $17,000 issue, all part of a project designed to create Bermudian jobs and renew a major asset for the country.
yet the amount is a drop in the bucket compared to the money they have wasted and diverted
I appreciate that they did some research into a number of alternative options for the mail sort facility.
Regarding buildings at Southside, it’s possible that none of the existing available properties were suitable because of A/C needs, plumbing/ventilation needs, who knows. Certainly using a facility near the existing one was the first thought to my mind as well.
Has the OBA shadow responded to the statements?
Re:Southside
They have space big enough and the cost of the fitout could have been negotiated with a reasonable landlord with concessions given on rent for a reasonable time period. At the moment some of their larger warehouse space is vastly underutilized and what’s stored there can be relocated. It would take some work but it would be government investing in themselves pretty much. Win win
Kevin hits the nail on the head. Why throw money into a system that is near collapse? I stopped using the post office for my commercial shipments because they we more expensive, mush slower and poor customer service was the norm. The closing on Saturdays was the last straw.
Was consideration given to the closed sub-post office buildings? Surely one could have been pressed into service. What about the air freight terminal at the airport?
How on earth do you put a warehouse on the third floor of a building that was unsuitable for the Hospital’s use? If the elevator breaks the post office is out of business.
Well I keep seeing more and more of the GP blue cars back on the Rd please don’t tell my you all need a car again and if you have to pay them rent for a while then do it. Where ever you go you have to pay rent is it because it is a 100% owned company. Give me s break. All your followers did not like when Mr Richards said money does not grow on trees now you see it does not.
When will we know the details of the minibus contract?
Never, it’s too lucrative. The regular drivers get stood down every morning and drive taxi on ya dime. The minibus contract will only be a prob if the Union steps in. Till then, it’s all gravy, ya taxdollar gravy.
So any chance of my mail ever being delivered? They only have 120 people more than they need according to sage.