There has been much discussion on the planned improvement to the Hewanorra Airport, and unfortunately the public has been forced to sift through the misinformation and rumours to collect a morsel of truth on this project. We all know that in the political crossfire between political parties statement of facts do not equate to the presentation of absolute truths.
Undoubtedly, it is a clear example of how important timely information should be provided to the public. SLASPA as the executing agency has been attempting within the last two months to provide some clarity on the project. The most recent attempt was a full page advertisement in a local newspaper.
Governments throughout the region must understand that there is a changing electorate. The Caribbean citizen is now exposed to the politics of the world, with the expectations of the same levels of transparency and accountability they observe in the USA and Britain.
The Full page advertisement by SLASPA has answered some of the questions and there is a hope that there will be a continuance of going beyond the veil. The first bit of information the public received was that a company called Asphalt and Mining was awarded a contract for close to $ 0.5 billion dollars for the development of Hewannora Airport.
This public pronouncement sent shock waves in the society, as no one had known much about this company. I have been involved in construction activities for over 27 years, I have tendered on projects in almost every English speaking country in the Caribbean and I have never interfaced with Asphalt and Mining. So even for me there was a level of apprehension. Such concern was even heightened when I travelled on the Allan Bousquet Highway and saw a vivid display of poor construction management. How can a company that is struggling to complete a simple road rehabilitation project of 2 miles, be able to complete such a large project?
The SLASPA advertisement has clearly stated that there has been no decision on the award of a contract. There however was no clarification on the firms that tendered on the project. I would suggest that SLASPA follows through and publish the following:
- names of the original short list of contractors
- Terms of reference that was inserted in the Request for proposals ( RFP)
- The time period for submission of the RFP
- The basis on which the short list was developed
SLASPA has made a case that their estimates show that passenger growth is expected to increase by 5% by the end of 2010 and exceed 600,000 passengers by 2015. They have made a case that the inadequate check –in counters, inadequate seating, and low comfort levels for arriving and departing passengers demand that there be an improvement to the airport. There is no dispute that these are valid reasons and that something has to be done immediately.
SLASPA went on to state that a Master Plan was commissioned to review the airport, and the report concluded that due to the growth expansion limitation of the of the current terminal a new terminal would be necessary. The Master Plan also included a new control tower and the increase in apron parking from 5 to 8 spaces, with all connected with air bridges.
The first question that comes to mind is whether there was consideration of incorporating the present terminal with the new design, instead of demolition of the existing terminal building. When Barbados did their terminal improvement, it is my recollection that the design involved the incorporation of the existing structure. I would strongly suggest that this be considered as a value engineering approach by SLASPA.
I am in full agreement with the approach of SLASPA in identifying the need for expansion of the airport and commissioning a study to see what is needed to satisfy future passenger loads. SLASPA proceeded to engage a procurement process. SLASPA opted for a selective procurement process instead of open bidding for the project.
SLASPA indicated that ‘based on their knowledge and experience in the sector’ seven (7) companies were short listed. These companies were given an undisclosed period for submission of their bids. It is rumoured that the time frame was ten (10) days.!! Three (3) firms submitted bids within the timeframe. The criterion for the selection of the short listed contractors was ‘requisite competence and track record on similar projects’.
The Port Council as a responsible body has confirmed to the people of St. Lucia that selection of contractors short listed for Hewannora was based on a due diligence of their ‘requisite competence and track record on similar projects’. SLASPA has stated that the Port Council stands by the integrity of the procurement process, and there is no ‘fly by night’ contractor within the list. I reiterate –SLASPA has said that every short-listed contractor has engaged in works of a similar nature with a demonstrated track record.
The project is a Design /Finance /Construct model. Therefore each consortium would have a design team, a construction team and a financial concept. One can only assume that SLASPA would have short listed the construction team, who in turn would have gathered their consortium. It is impossible for SLASPA to create working partnerships of consortia.
So by July 2009, we have a list of three bidders who have put together teams and submitted proposals on the project. One assumes that the Consultancy for the Master Plan generated a Preliminary cost estimate of EC $ 427 million dollars. In discussions with the Government of St. Lucia it was agreed that there should be a reduction in the budget to EC $ 381 million. In essence the GOSL set a ceiling for the project of EC $ 381 million. The GOSL also set parameters that the project must be self financing and that any passenger facilitation or Airport Development Levy be kept to an absolute minimum.
On the issue of the ceiling of cost, it is a historical fact which is supported by a mountain of evidence, that airport projects always exceed budgets. The average cost over-run (here we go again) averages between 40-50%. So we say the final cost will be $ 500 million dollars. An expanded airport requires additional security, additional budgets for maintenance, increased cost for utilities and the list goes on. The passenger facilitation charge has to cover the repayment of the project cost and the increased running cost of the facility.
I have discounted the additional revenue that may come in due to additional shops and restaurants. I do not believe a 5% growth can translate into huge demand for new business. We can look at the growth in passengers from 2002 to 2009. Between that period there was an increase of 190 519 passengers, in the same period I do not believe that there was considerable growth in rental income at Hewanorra. There has not been a surge in demand for shops.
When you begin to look at the repayment of a $ 0.5 billion dollar loan, there are some startling facts. I have assumed that such a loan in US dollars would attract a 10% interest rate and a repayment over 15 years. This creates a total repayment of $ 967 million dollars, with a repayment of $ 64.47 million per year. Assuming the project is completed by 2015, SLASPA has projected 600,000 passengers, which means that each passenger will pay $ 107.45.
The downside to this is that the cost of a ticket will therefore increase thus making St. Lucia less attractive as a destination with the knock on effect of a slowing of your passenger growth.
I believe the expansion of the Airport is required and is a prudent move by the Government to pursue such improvement works.
I would strongly advise that every attempt is made to reduce the cost and to engage in creative ways to incorporate the existing structure.
I would advise that SLASPA remains committed to ensuring that the contractor chosen is one with the requisite competence and track record on similar projects.
I would advise that a sensitivity analysis be done to show the effect of the introduction of an Airport Development levy on passenger growth, and to determine the thresholds for the introduction of this levy.
I would advise that we look at a stage construction approach to spread the construction over phases.
Take your time and do that which is right.