The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Cabinet-approved Public-Private Partnership (PPP) policy document is set for imminent release as the Government moves "to ensure we get taxpayers value for money".

KP Turnquest, pictured, deputy prime minister, told Tribune Business that the Government wanted to move away from the previous administration's ad-hoc approach to PPPs by developing a standard set of objectives and criteria to regulate such projects.

He explained that such an approach would improve the evaluation of private sector bids on major public contracts and infrastructure projects, while helping to better align their goals with those of the Government's desire to protect the Bahamian people's interest.

Mr Turnquest said PPP projects, if crafted correctly, could help "accelerate the pace of development and infrastructure" build-out throughout The Bahamas, especially since the Government's fiscal problems mean it will be impossible for the cash-strapped Public Treasury to finance all these needs.

He declined, though, to place a dollar value on The Bahamas' current infrastructure needs, which the KPMG accounting firm pegged at around $2.1bn almost a decade ago for physical assets such as schools, hospitals, ports, roads and airports.

"We have a number of PPPs with different terms and methodologies, and we want to see if we can come up with a standard approach," Mr Turnquest told Tribune Business of the rationale for the policy's development.

"We're trying to ensure we get value for money for the Bahamian people. If we have a standard policy that addresses the way we will engage in partnerships we have better control over the process."

Marlon Johnson, the Ministry of Finance's acting financial secretary, said the PPP policy had been approved by Cabinet and is set for imminent public release - possibly as early as this week.

Speaking from Geneva, where he was part of the Government's World Trade Organisation (WTO) accession delegation, Mr Johnson said: "We have a Cabinet-approved PPP policy that we will publish. We haven't put it out yet.

"Cabinet has approved a PPP policy and we do intend to go public with it in very short order. We have circulated it internally to heads of departments and heads of agencies." He declined to comment further.

However, the PPP policy has already come under fire. Mick Holding, the Grand Bahama Chamber of Commerce's president, in a statement issued last week called for the document to be amended because it was "overly bureaucratic" and "cumbersome".

He also expressed concern that the policy called for all PPPs to have a $10m "minimum" investment value or "floor", while arguing that opening up projects to bids from international companies and investors was "detrimental" to the needs of small and medium-sized (SMEs) Bahamian enterprises.

"I support the principle of Public-Private Partnerships," Mr Holding said. "I think it's a very effective way for government to get capital projects underway in an efficient and cost-effective manner. I also think that's it's a sensible idea for government to have a policy so there's consistent approach to PPPs, giving accountability and transparency."

The statement said the PPP policy was "quietly released" by the Ministry of Finance earlier this month, although Mr Turnquest and Mr Johnson both said this has yet to happen. Mr Holding, though, appears to have obtained an advanced copy as the statement quotes several passages said to be in the policy.

The sectors targeted for PPPs include electricity generation and distribution, especially renewable energy sources in the Family Islands. Ports, airports, roads, bridges, urban renewal, information and communications technology (ICT) and government buildings/facilities.

"The use of PPPs will be focused on those sectors and services that are currently under-performing, or where the Bahamas could benefit most from introducing private sector and international experience and expertise," the policy says, according to the statement. "This would include sectors where there is a need for expansion, innovation and/or the adoption of new technology."

Mr Holding then detailed his worries, saying: "It appears to me to be overly bureaucratic, just looking at the process and not having gone through it. There are many checks and balances in place, which may be necessary, but it does make it a time-consuming, cumbersome, bureaucratic process in my opinion."

He also called for Bahamian groups to take the lead on all PPP bids, with foreign entities only allowed to participate as their junior partners.

"I think that is detrimental to the development of small and medium-sized Bahamian businesses," the GB Chamber chief added of foreign entities being allowed to bid.

"If a Bahamian company needs to use a foreign company for technical expertise, that should be allowed, but the Bahamian company should always take the lead. I would have thought it would be quite acceptable to have an international junior partner. I don't think it should be open to international companies to tender."

Mr Holding is also a director of the Bahamas Striping Group of Companies, the company created from a $5,000 self-starter grant under the last Ingraham administration. Bahamas Striping has previously made no secret of its desire to engage in further PPPs with the Government for roads, parking lots and airports.

Mr Turnquest, responding to Mr Harding's concerns, said the PPP policy provided sufficient flexibility for the Government to consider "worthwhile" proposals below the $10m valuation "floor". He also argued that the "checks and balances" were critical to protecting Bahamian taxpayer interests.

"If I recall the policy, discretion can be used for worthwhile projects below that threshold, and not necessarily in the Government's priorities and spending envelope. There's nothing to preclude that," Mr Turnquest told Tribune Business.

"Again, the objective from the Ministry's standpoint is to protect the return on investment for the Bahamian people. To the extent there may be some checks and balances in the process, that's the reality."

The release including Mr Holding's statement, though, also objected to how the PPP policy deals with so-called "unsolicited" proposals - project submissions and ideas that have not been requested by the Government, but are sent in anyway.

"Unsolicited proposals may allow The Bahamas to benefit from private sector innovation, and new ideas on ways to meet infrastructure needs. However, they also bring their own unique challenges, principally regarding transparency and VfM [Value for Money]," the policy is said to read.

"The Government will therefore consider unsolicited proposals that are demonstrated to be of public interest, but only under a framework that preserves competitive pressure, transparency, and fiscal discipline."

The release interpreted this as suggesting PPP contracts will not be awarded to parties that first proposed an idea, thereby "penalising innovation" and allowing others to benefit from their intellectual property.

Such concerns have already been expressed over the imminent Request for Proposal (RFP) for the Nassau cruise port's management, with some fearing the "unsolicited" offers by Global Ports Holding and Cultural Village (Bahamas) will be used to develop the bid document's contents.

The PPP policy, though, does refer to a winning bidder having to compensate the group who first thought of a project idea, with the sum agreed in advance between the Government and all sides involved.

PPPs are a now well-established global model for mobilising private financing and expertise to develop major, capital intensive infrastructure projects that are designed to benefit society. Mr Turnquest conceded that the Government, still trying to restore discipline to the public finances and facing an $8bn national debt, would be unable to meet all the Bahamas' economic and social needs in this area.

"As we try to minimise our loans and financial obligations, to the extent we can use private sector money we can be more efficient and hopefully get their faster," he told Tribune Business.

"When you look at the vast areas of the country, there are opportunities to accelerate the pace of development and infrastructure throughout The Bahamas. We see it as a benefit, and are looking for - and will welcome - creative projects.

"Ideally, the PPPs work when there is a revenue component where the project pays for itself. We're more inclined to do those, but we do realise there are some PPPs where there is no revenue generating component. We have to look at those carefully to ensure we're getting a return on the monies invested."

PPP arrangements are not without risk. The private sector's desire for profit is not necessarily always aligned with the public interest, for instance. They also came under the spotlight, and significant criticism, in the UK this year due to the collapse of Carillion, a multi-billion conglomerate that made its living through government contracts.

Mr Turnquest, though, said the "checks and balances" complained of by Mr Holding will act as a safeguard to prevent any Carillion-style debacle in The Bahamas.

"Once we have a standardised policy we will have something to objectively look at these proposals against," he said. "We can mark against the standards we have set for ourselves and benefits to the Bahamian people in the long run."

Both Arawak Port Development Company (APD) and the Nassau Airport Development Company (NAD) are examples of existing Bahamian PPPs. Besides Nassau cruise port, the Government is also exploring such arrangements for the redevelopment of key Family Island airports in a bid to bring them up to international standards - a project that could require up to $200m in investment.

Tribune Business previously reported that the Government hired the Caribbean Development Bank (CDB) to help develop a "properly structured" legal and risk management framework for PPPs, with meetings held with the private sector on the issue earlier this year.

This came after six PPP contracts entered into by the former government came under heavy fire from the Minnis administration, which inherited them upon being elected to office on May 10.

Carl Bethel QC, the Attorney General, told the Senate on June 22, 2017, that all were placed under review to determine if the Government was getting value for money and they were in the Bahamian people's best interests.

He identified the contracts as including proposals to "construct an administrative office building on 30 acres of prime agricultural Crown Land on Gladstone Road; reconstruct an administrative office for the administrator and police Station in Harbour Island, entered into with the same company that had agreed to build the Gladstone Road complex".

Mr Bethel said the Memorandums of Understanding (MoUs) for these two projects were combined, adding: "That MOU called for the 30 acres to be granted to the builder by a Crown Grant, so that it could then lease the same land back to the Government. The transfer of title was said to be so as to enable that builder to borrow necessary funds from a Bank to fund the construction."

The Attorney General did not identify the developer involved, but Tribune Business previously revealed Sebas Bastian's Brickell Management Group (BMG) as the private sector partner behind the Harbour Island project.

The other PPPs referred to by Mr Bethel included a new administration complex and police station in Eight Mile Rock; the new General Post Office at the Independence Drive Shopping Plaza; the proposed new Road Traffic Department building on Tonique Williams Highway and Knowles Drive; and contractual works for the Fox Hill Community Centre.

Scott Godet, principal of Scottdale Bedding and National Fence Company, and a major landlord to the Government, was the principal behind the Post Office PPP. Desmond Bannister, minister of works, subsequently revealed that now-Exuma MP, Chester Cooper, was leading the $24.5 million Road Traffic PPP, while New Providence-based Top Notch Builders raised $25 million to finance the Eight Mile Rock complex.

The Eight Mile Rock project was subsequently given the go-ahead to proceed, but the fate of the others has been unclear.