The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

More than 1,000 design revisions have been made to the New Providence Road Improvement project since it was conceived a decade ago, the Inter-American Development Bank (IDB) also revealing that further unanticipated construction material costs will total almost $30 million worth of overruns.

A paper prepared for the Bank’s Board, which is this week set to discuss and approve $65 million in additional financing to complete the troubled project, in its quiet, technical way provides a fairly damning indictment of a venture that is set to ultimately cost the Bahamian taxpayer more than four times’ the $52 million contract awarded to the initial contractor.

Breaking down the $77 million needed to complete the New Providence Road Improvement project, $12 million of which is coming from the Government, the IDB report said some $29.6 million was required to compensate the main contractor for unanticipated increases in construction material prices.

Jose Cartellones Civiles’ (JCCC) contract allows for it to be compensated every time raw material costs exceed benchmarks set by the Florida Department of Transportation, and the IDB report shows that over a two-year period - from 2009-2011 - there were only two months out of 24 when the Argentinean firm did not receive extra compensation.

The highest increase above base, in percentage terms, was the 31.8 per cent addition paid to JCCC in June 2011. That fell, but only slightly, to 25.3 per cent in November 2011.

The $29.6 million sum amounts to 18.3 per cent of the New Providence Road Improvement project’s total budget, and the IDB report said of JCCC’s compensation: “The monthly payments have been adjusted upward almost every month.

“This is the result of variations in the construction cost indices published by the Florida Department of Transportation (FDOT), which is used as an external reference in the contract’s compensation formula due to the geographical proximity, the use of FDOT standards in construction specifications and the fact that the majority of construction materials utilised in the Bahamas are imported from Florida.....

“It is expected that price indices will stay above the base date indices during the remaining period of construction. Therefore a budget provision is also included to consider such variations.”

The IDB report, released late last week, also revealed that the Government and Bahamian taxpayers were exposed to construction material price fluctuations when the project’s contract was redesigned in 2006-2007.

The redesign “appropriately assigned some risks to the client”, and was carried out after the failed tenders of 2004 and 2006. The “heavy assignment of construction risk” to the bidders in those tenders ensured no contractors responded.

The bulk of the additional $77 million, some $41.9 million according to the IDB report, is being assigned to cover “unanticipated additional works”. The latter figure is equivalent to 25.9 per cent of the New Providence Road Improvement project’s budget.

These works, the report said, had resulted from differences between the project’s initial pricing and the final construction design. Some $14.4 million has been allocated to this.

And it added: “There are 1,057 small design revisions to date, which were necessary to accommodate and adapt to site conditions.

“When constructing in an urban setting such as New Providence, numerous changes in designs are unavoidable to properly finish and match works to existing conditions, especially taking into account the project delays and the extended time between initial designs and execution.

“Additional design revisions are predictable for the remaining civil works, and thus they are quantified and considered in this budget.”

Another $14 million from the upcoming $77 million financing will cover this, with $13.5 million made available for the “prolongation of JCCC’s services and the costs of changes in legislation during project execution”.

The $5.5 million balance of the $77 million financing, the IDB report said, would go to the project’s supervisors. Some $3 million will be paid to Mott MacDonald, the supervising consultants, and $2.5 million to the project execution unit at the Ministry of Works.

Based on the fact that the New Providence Road Improvement project previously had a $162 million budget allocated to it, and that this was “depleted” at end-February 2012, it would appear that the extra $77 million in financing will take total spending on it to $239 million.

Some $30.6 million of this will have come directly from the Bahamian government, with $208.4 million provided by the IDB.

The $239 million figure is more than triple, or 262 per cent, above the initial $66 million IDB loan for the project, and more than four times’ - 360 per cent - higher than the $52 million contract given to the original contractor, Associated Asphalt.

While New Providence may get some shiny new roads, the sums spent on the project represent a further massive debt burden for the Bahamas at a time when it least needs it.

The IDB report confirmed that since March 2012, the Government has been paying all JCCC’s bills itself, a sum totalling $13 million through until end-August. The $77 million additional financing will take over this month.

“The project is currently executing in a satisfactory manner in terms of physical progress within the context of the original scope of works. In particular, the road civil works are at 76 per cent completion,” the IDB report said.

“As of May 31, 2012, the contractor has substantially completed 15 kilometres of a total of 25.6 kilometres under the JCCC contract. These corridors are open to traffic with minor outstanding works remaining to be completed that do not affect their intended purpose.

“The contractor is presently working on the remaining corridors which are at various stages of progress. Approximately 7.3 kilometres of these corridors have been paved with the first layer of asphalt, and 3.3 kilometres yet remain unpaved. The completion of road works included the renovation of 19.1 kilometres of main water pipelines (4 inches-24 inches) underneath the intervened corridors.

“Most of the remaining works include installation of drainage, chambers, street lighting poles, future utility ducts, partial paving sidewalk construction, curbing, traffic signage and final tests for completion......

All road civil works are expected to be finished in the fourth quarter of 20129 while the restoration of the Big Pond Park will be completed by the fourth quarter of 2013.”