An Assessment of Turn-Key Contracts for the Realisation of Capital Works Projects

Tony Gibb BSc DCT (Leeds) CEng, FICE, FIStructurE, FASCE, FRSA. FR

Preambles

The traditional approach to capital works building projects in Anglo-Saxon countries, including the Commonwealth Caribbean, is for the owner to have separate contracts for architects, structural & civil engineering consultants, electrical & mechanical engineering consultants, quantity surveyors (except in North America) and construction contractors. Occasionally the design team (architects, structural & civil engineering consultants, electrical & mechanical engineering consultants, quantity surveyors) are consolidated into one contract. Added to the team may be a project manager, although this coordinating role is traditionally allocated to the architect in buildings for human occupancy. The main construction contractor would usually have several sub-contractors, although such services are sometimes contracted separately and directly by the owner.

In recent decades there has been a gradual increase in the use of various forms of package contracts. These various forms include: Build-Operate-Lease- Transfer (BOLT) contracts, Design-Build-Operate-Transfer (DBOT) contracts, Engineering- Procurement-Construction (EPC) contracts, Design-Build (DB) contracts and Private Finance Initiative (PFI) contracts. The term “turn-key contract” encompasses all of the above variations, and several more – including Build Operate Transfer (BOT), Build Operate Own Transfer (BOOT) and Rehabilitate Operate Transfer (ROT).

The process by which a construction project is comprehensively designed and constructed for an owner would include: project scope definition; organisation of designers, constructors and various consultants; sequencing of design and construction operations; execution of design and construction and close-out and start-up. The procurement of designers, constructors and various specialist consultants would include: the assessment of qualifications and price proposals and the selection of project participants. The form of agreement in a construction project would include obligations and responsibilities, the allocation of project risk and the payment procedures.

Reasons for Using Turn-key Contracts

There are a number of reasons why an owner would select a turn-key contract for a particular project. Many of these reasons are well-founded. Some of the reasons may be due to misconceptions. The reasons include: a faster overall schedule (principally by using a “fast track” approach allowing construction to commence at an earlier stage in the design process); having a single point of responsibility for design and construction (without an implicit warrantee by the owner to the constructor for the adequacy of the design); involving the constructor at an early stage in the development of the design of complex projects; fostering creativity and innovation; inability of the owner’s in-house technical resources to monitor the work of designers and constructors; and “off balance sheet” accounting (allowing the project cost not to be shown in the owner’s balance sheet).

Potential Advantages

Some of the advantages of turnkey contracts are already described above. Other advantages are: the project cost could be fixed before detailed design is well advanced; there is a reduction in claims for extras; the owner should be relatively sheltered from liability arising from design errors or omissions; turn-key contracts reduce the possibility of adversarial relationships between the designer and builder; turn-key contracts make it easier to fix the overall project schedule early on; dealing with one entity would reduce the administrative burden; appropriate and effective sharing of risk; long-term maintenance can be incorporated in turn-key contracts; PFI provides government with a vehicle for reversing the legacy of under-investment in public-service infrastructure; PFI helps the public sector by providing a better understanding of the total costs of providing the required facility and service.

Questions to be Answered when Deciding whether to Utilise a Turn-key Contract

If the owner is considering utilising a turn-key contract for a particular project, it is highly desirable that the following questions be discussed and answered before making a final decision: project timing (Can there be significant time savings by carrying out design and construction concurrently and can potential time savings actually be realised?); complexity; value (The owner needs to review whether relinquishing total control of the design would be compensated for by some other value added as a result of the turn-key arrangement.); scope (The owner’s team should prepare a formal project scope.); in the PFI model can the owner define its needs as service outputs that can be adequately contracted for in a way that ensures effective, equitable and accountable delivery of public services in the long term and can the pre-conditions of equity and accountability in public service delivery be met? It must also be recognised that the advantages to be gained from utilising various forms of turnkey contracts usually require complementary actions on the part of the owner.

Disadvantages

Users and owners occupy a different world from contractors (providers). Providers think that what they do is right, and users tend to accept it because they are led to believe in the expertise of the providers. Users who discover problems when using facilities tend to suffer in silence rather than openly blame the providers. Providers tend to blame owners for not correctly using and maintaining the facilities. Providers often win the silent battle with the owners.

Turn-key contracts can require the provision of many items and services, including the provision of land, obtaining planning permissions, designs, long-term finance, construction, equipment, commissioning services, long-term maintenance, and long-term management of the facility for up to (say) 25 years. At a minimum, the turn-key contractor must supply design and construction services. The availability of suitable and willing contractors to bid on a project is inversely proportional to the number of distinct services they are required to provide. Therefore, one of the important disadvantages of turnkey contracts is the narrowing of the field of candidates.

High bid costs and long procurement times represent concerns for both the public and private sectors. These costs are eventually passed on to clients. Thus they impair value for money for the public sector and limit contractors’ capacity to bid for projects. Bid costs are higher and procurement time scales are longer than for conventional procurement.

There are projects where the final design must be completed before an accurate estimate of cost can sensibly be made. If the bidders are encouraged to submit tenders which allow for a high degree of uncertainty, the owner would end up probably paying too much for the facility. This is so because the design-builder would have to include a large contingency sum to cover those uncertainties.

The owner may want significant input in the design. Successful turn-key projects necessitate the design-builder to “own” the details of design. There is an assumption of trust between the owner and the contractor. If the owner attempts (or needs) to influence the details of design after the award of the contract, there could be negative cost implications and a breakdown in relationships.

Projects that are too small to attract competent turn-key contractors should utilise the traditional procurement processes. The design-builder is taking on more risk than usual. The project must be large enough for a commensurate reward. Where specialised equipment is of a class with rapid development and improvement, there may be the need for greater flexibility in the contract terms. This is not what is envisaged in turn-key contracts. Many aspects of high technology equipment procurement do not fit well with the central requirements of PFI, the fast pace of change in that industry make it difficult for the public sector to define effectively the outputs it requires in a long term contract.

Strategies for Mitigating the Disadvantages

With the gradually increasing use of turn-key contracts for hospitals and other large capital projects in the Caribbean and elsewhere, it is appropriate to provide some guidance towards improving the success of such projects.

Strong procurement skills are required by owners for delivering quality investment on time and in a way that secures value for money for the public sector. PFI requires relevant expertise – long-term options appraisal, significant use of specialist advisers and probably complex contract negotiations reflecting the owner’s approach to risk sharing. User participation in the design of projects is an important ingredient for success. This becomes more difficult in turn-key projects where the owner hands over the responsibility for design to an entity which is not focussed solely, or even principally, on design. To counteract this disadvantage it is necessary to prepare more detailed performance specifications (but not prescriptions) than would be required in a conventional project. There are different kinds of users – occupants, visitors, owners and tenants. Their views must all be accommodated and this is the role of the owner and advisers.

A “performance criterion” may be defined as “a rule by which the effectiveness of operation or function is judged and its value measured”. The project scope must be described by definitive, project-based performance criteria rather than by comprehensive construction plans and specifications. All parties must embrace performance criteria as the definitive project scope due to the risk of costly scope creep as the project proceeds to completion. These performance criteria serve to articulate the scope, quality, cost, schedule and other requirements for a given project and become the foundation for the turn-key contract.

The owner has four main objectives when establishing the performance scope of work in a turn-key contract: Develop a clear project description in functional terms; define operational and quality requirements in performance terms; define all the project’s requirements without relying on the post-award process and outline the performance/acceptance tests required that will demonstrate the requisite level of quality for each item of work.

“Quality” may be defined as “the totality of features and characteristics of a product or service that bears on its ability to satisfy given needs”. The design-builder is in a position where the details of design and therefore the resulting level of quality are constrained by the budget and the schedule. It is very important to both the owner and the contractor that the requirements for quality be clearly communicated in the bid documents so that the resulting proposals will be responsive to the owner’s needs.

It is necessary to understand the functional requirements of the project and its components thoroughly. To do this the persons preparing the technical criteria for the bid documents should answer the following questions:  Which requirements are minimum or threshold requirements? What is each threshold? Are there maximum requirements? What design constraints will apply?

The public sector should aim at achieving the optimum combination of whole-life cost and quality (fitness for purpose) to meet the user requirements. It should seek to ensure that the evaluation of which procurement option to adopt is undertaken with no inherent preference for one over another; value is not taken to be the least cost and a full evaluation of costs and benefits on a whole-life basis is undertaken, including an assessment of risk.

Oversight/Checking Consultant

The role of the oversight/checking consultant is essential in turn-key contracts. This is to be emphasised in geographic locations (such as the Caribbean) where there are multiple hazards to be accommodated, with the corresponding need for significant care and attention to detail in all aspects of design, construction and maintenance of the built environment. As in other aspects of the design and construction processes, an independent review of the bid documents is recommended. That review should check that the bid documents are fully responsive to the project’s programme; all major features of work are included; all owner’s requirements are included in a consistent format and order; and descriptors are used to facilitate interpretation.

Principles and Choices – Part 1

Kenn A. Coates B of Arch., MRIAC, OAA,CAPHC.CaGBC

“We shape buildings, therefore they shape us.” – Winston Churchill

Let us just take a minute to contemplate and preface our thinking about the built environment. Given my profession as an Architect and having regard for the milieu of today’s architectural realm, I frequently question our purpose for what we do at any scale of endeavour and what we undertake professionally… and I look back over time to find relevance and perspective on which we have based our principles and choices. As I write, I hope that my thoughts will spark some chord of interest and action among all who care … as much and hopefully more than I do, yet I remain open to suggestion as to where we may go from here and how we can make our world a better place.

It has been my observation and experience that the art and science of architecture and related applied disciplines to which some of us belong have been whittled down by narrow gauged thinking. Conversely thinking within a larger context embraces notions of development, buildings, land-use, infrastructure and ultimately our cities. As things stand now, however, I believe that often our resultant human conditions have been and are selfishly motivated by our own misguided ‘politicised agenda’ to succeed and create some form of value to support ourselves instead of the big picture.

The aesthetic standards for any of the above must be premised to broaden any design and consideration must also be given for accommodating the greater whole and the widening of relative immediate, short term- and long term impacts. These impacts are affected by:

i. The choices and judgment we bring or attach to our application of any intelligent answers or proposed solutions that are microscopically suspect to fail; for we disregard any recognition or resultant effect that a ‘crystallized pedagogy’ informs what it is we have and what exists. We are instructed through education and our work methodology process to be objective in design; to provide solutions for various “artifacts, buildings, infrastructure, structures and landscapes”. However, what we are actually doing is answering to a limited equation and applied formulaic thinking.

ii. An applied rational thinking for our human mind, born out of historical and political manifestations as well as a so-called new world order for systemized development from turn of the century imperialism. My point here is not to ultimately criticize and bemoan society but to put the responsibility and accountability back on our own shoulders; and to understand that any prescribed prevailing design standards are only just that. Additionally, these standards are created to be guides for land-use, buildings, structures and landscapes that are more or less mindful and ecologically competent and that is all… ultimately misguided and faulty prescribed judgments that are inherent in our profession’s education system and applied society standards for proposed solutions we have had to expect to produce in templates ad nauseam.

I now wish to build on that premise and foundation herein to connect all of us as professionals in our respective roles. I believe that we must remain open and un-truncated by the limitations of what we do. I also believe that the education of current and future undergraduates and those in the field at various points in their careers must acknowledge that the larger issues of human ecology and any relevance to sustainability and ‘green thinking’ be universally viewed in a contrarian view . That is, the art and science of what we do as professionals in our respective fields must not be limited or isolated to just our expertise, without full consideration and embracing of a greater holistic consciousness, principled and even emotionally and intelligently centered.

My thoughts may very well be considered lofty by some; however, I have always believed that change is not for the timid. To bring about a paradigm shift in the way we think and work, I would like us to advocate a promising and open field of vision-rationale premised upon education, politics, and also within religious perspective and not truncated such that any design endeavour that we undertake must be viewed as part of subfields of the art and science of health and well-being in the process of coming up with so-called proposed project solutions.

Essentially we have done two things; and perhaps you may argue otherwise and show by example but they are just that isolated in a one off scenario. However, taking the aforementioned into context, it can be seen that our so called ecological troubles and state of economic thinking have shown our inability to manage our common property resources at all levels. It also shows that we have forgotten important influences such as the human condition and gender imbalances.

At the same time, we have created through industrialization of all things attributed to some form of physical value only; albeit technological, educational, resultant exponential uncontrolled growth in companies, neighbourhoods and cities that are ultimate flaws in economic thinking models we have deemed relevant.

Today, even though we are all ready to jump on the popular bandwagons of “sustainability” and “green technology,” we have become ambivalent and lack even any enchantment to acknowledge and attest that we have lost our body and human memory of nature, any sensory created loss and connection to emotional attachment and intelligent thinking of an affinity for something of a greater meaning and fulfillment in what we do as professionals. We have let function control our way of thinking and dictate within our own very disciplined community into a scientific based thinking.

Our current economic and social reality have now brought forward our ‘green- sustainable model’ as an embraced resultant paradigm shift and direction that even still embraces behavioural misdirected economic survival and applied biases in trendy ‘green washed thinking’ which is uni-dimensional still, muddied and misrepresented by media and business product advertising.

If we are really serious about being professionals who are in tune with our environment and clients’ needs, let us sit back and take some accountability and social responsibility individually and together in cross disciplinary thinking and solicit common purpose and goals through what we do from the smallest task to the largest project. Let us make our voices be heard and create common purpose and direction towards a real paradigm conscious shift by which we can live and work.

Kenn has been practicing architecture in Canada and abroad for the past 30 years. The second part of this article will be published in Issue 5 of CCD. You can email Kenn via [email protected]

Overcoming Challenges in the Construction Sector

Victor Hart

Introduction

Construction projects, by nature, pose challenges at all stages of the project cycle, from design to construction. Unlike a factory-produced product that is exact, repetitive and quality assured because it is made in a controlled environment, each construction project is different due to the client’s brief, design choices, specifications, site and weather conditions and changes in the availability and quality of market resources. These variables result in a sector that is full of surprises and periodically experiences turbulence.

I understood this challenge from Day One and it always puzzled me that public and private sector clients did not. They expected then, and still do today, projects with a precision of design and construction, free from variations and defects, and they remain hung up on the notion of a ‘fixed’ price and completion within time and budget. The need to educate clients and the public was the first challenge I noticed when I joined the construction sector in the 1960s and it remains one of the challenges today.

Challenges of the1960s

I perceived the main challenge facing the sector in the 1960s to be the lack of understanding by clients and the general public about construction matters. Practitioners in the sector, dominated by foreigners, did not recognize the need for public education or, if they did, did not show any interest in responding to that need.

In 1966, when the Quantity Surveyors Society of Trinidad and Tobago (formed sometime before by expatriate QSs) was revived, I was able to get it to begin a public awareness drive with a weekly programme on Radio Trinidad entitled ‘Focus on Building’. In addition, we published regular articles in the newspapers under the byline ‘From your Quantity Surveyor’. That initiative continued for a couple of years and helped to educate the public on some sector matters and was the start of putting Quantity Surveying on the map in Trinidad and Tobago (T&T).

I dare-say that that idea might be worth re-considering today given the amount of misinformation being put into the public domain by detractors of the sector. Now, the sector is much better organized and has more resources available to it, therefore, it will be possible not only to use the print media and radio, as was done in the 1960s, but also to use TV to host programmes paid for by ads from member firms, hardware dealers, manufacturers and other players. The challenges of the1960s led the formation of the Trinidad and Tobago Contractors Association (TTCA) in 1968 by a few local visionaries.

Challenges of the 1970s

The challenges of the 1970s began with a construction boom that took everyone by surprise and the sector was under-prepared. In 1970, the Government embarked on a World Bank financed Secondary Schools Education Project. The World Bank insisted on international tendering and consultants and contractors scrambled to meet the challenge of entering overnight into joint venture arrangements to satisfy that requirement. Then came the Black Power Uprising and the mutiny in the Regiment at Tetron Bay. One of Prime Minister Eric Williams’ responses to create jobs was to launch a massive construction programme of houses, Factory Shells and more schools. Local contractors benefited from those medium-sized projects that did not require joint ventures and the sector flourished.

To meet the extra demand, there was an influx of foreign contractors, some of whom posed new challenges by offering clients project financing and turnkey contracts. The local contractors found themselves playing catch up to cope with this new challenge especially with commercial banks then being more willing to finance foreign contractors than locals. Consultants and contractors had to hire staff in large numbers from the region and the U.K. and, by the end of the 1970s, T&T had a booming construction sector, second to none in the Caribbean. The challenges gave rise to the formation in 1978 of the Joint Consultative Council for the Construction Industry (JCC).

A major challenge of the boom years was that, with the economy overheated, most projects were experiencing time and cost overruns. The management skills of our architects, engineers and contractors were found wanting and this gave rise to the advent of the independent Project Manager.

Challenges of the 1980s

The challenge of the 1980s was to adjust to the collapse or ‘bust’ that followed the boom of the 1970s. Dr. Williams died in 1981 and the new Prime Minister George Chambers faced a collapsing economy with the price of oil plummeting to US$9 per barrel. Company collapse followed the economy’s collapse and many of us found ourselves overstaffed with substantially reduced income. Times were tough and rough. The NAR government came into power in 1986, with the economy in deep recession and was forced to turn to the IMF for financial bailout. In this period, the construction sector faced serious survival challenges.

Challenges of the 1990s

The 1990s began with the Jamaat’s attempted coup that led to an earlier than expected return of a PNM government in 1991. Another ‘boom’ started around 1994 followed by the first UNC government in 1995. The boom continued well into the current decade and the challenge for the construction sector was once again to expand to meet the unplanned demands. However, the decade ended with the JCC and the TTCA, convinced that the government had created an uneven playing field to favour its party financiers, one of whom was a contractor and a member of TTCA, began campaigning for a Commission of Enquiry in the Piarco Airport Development Project. The Construction Sector and government were on a collision course and the fight got nasty.

Challenges of the 2000s

The 2000s began with the challenge of public sector procurement reform. The JCC and the TTCA adopted the position that getting a Commission of Enquiry to investigate the Piarco Project was not enough. Additionally, there was need for public sector procurement reform to prevent a recurrence of the suspected corruption. This campaign contributed in part to the fall of the UNC government in 2001 and the return of the PNM. The new Prime Minister Manning had promised the JCC, while in Opposition that he would set up an enquiry and pursue procurement reform and he kept his word.

TTCA had hoped that, under the new government, its calls for a better organized and regulated construction sector would be realized. For years TTCA had asked for registration of contractors, licensing of craftsmen, apprenticeship schemes, updated Building Codes and for the publication of the National Physical Development Plan but these calls had fallen on deaf ears. The new government also failed to deliver on these important demands.

TTCA had hoped that the country would return to the era of Development Plans, so allowing the sector to know what government, the largest investor in the sector, was planning for the next 5 to10 years and so be able to engage in manpower planning, re-tooling and plant acquisitions to meet the challenges ahead. But alas, that was not to be.

The economic boom continued until 2007/8 and the Construction Sector coped well initially. However, when the price of oil increased from US$35 to US$146 per barrel, money was no longer a problem and mega projects became the order of the day. As a result, the sector became overheated and all resources became scarce and expensive. Construction projects began running over budget and time. Government’s reaction was to set up more Special Purpose State Enterprises, such as the long established UDeCOTT, to meet the challenge and to import companies from France, Malaysia, China and Korea at the expense of locals. While so doing, government abandoned its public commitment to procurement reform because it said that the checks and balances proposed by the White Paper on public sector procurement reform would slow down project delivery. The JCC and TTCA rejected that argument and continued to press for the adoption of the White Paper reforms. Government saw that move as a threat and retaliated by taking steps that had the effect of emasculating the local construction sector thus posing an unprecedented challenge. ‘Design and Build’ became the government’s mantra because they knew that there was limited experience and know-how locally, thus justifying going foreign instead of local. The Prime Minister assured the country that these efforts were designed to reform and bring the sector into the 21^st Century, however, this reform was undertaken taken without any meaningful consultation with the sector stakeholders.

At the same time, the JCC and TTCA were calling for a Commission of Enquiry into the procurement practices of State Enterprises, and UDeCOTT in particular, that appeared to be falling far short of best practice.

They felt that there was more than a suspicion of corruption and mismanagement in the award and execution of construction contracts. After strong resistance by government, the enquiry was set up under Professor John Uff with JCC and TTCA playing a leading role in presenting evidence and cross-examining some of the leading players in the sector. Those actions did not endear JCC and TTCA to the government and its antagonism and hostility towards the sector grew even more. The current challenge facing the sector is a life and death struggle with government holding most of the cards. Fortunately, the now concluded Uff Enquiry, if its report is ever published, might yet vindicate the JCC and TTCA’s stance and cause government to reconsider its position on procurement reform and other related issues.

If the government does not change course in this confrontation, the sector will witness more importation of foreign contractors and designers. The sector will hear more derogatory statements by the Prime Minister and other Ministers about the poor quality of work by T&T designers and contractors, statements that are sending the wrong message to local investors and to Caricom where many T&T firms have offered services in recent years. If government succeeds in reducing work opportunities at home and in CARICOM for contractors and consultants, the future for the sector will be very bleak indeed.

The Next Challenge

If one of the current challenges facing the sector is ending the discrimination against local participation, the next challenge will be that of maintaining the facilities designed and constructed by the imported contractors.

Government appears oblivious to the fact that an essential part of the ‘value for money’ equation is the transfer of technology when taxpayers’ money is spent on public works. Government has not insisted on a contractual requirement for imported contractors to transfer technology to locals at the design, construction and craftsmen levels. There has been no attempt to insist on the use of materials and goods that are readily available on the local market or from traditional sources.

This means that the maintenance of the foreign built facilities will have to be done by the very imported contractors at great expense to the country for which succeeding generations will have to pay. One only has to look at the costly maintenance headache the country inherited at the Mt. Hope Medical Complex that was designed and built by the French with technology, materials and goods from France without any capacity building among locals. History is likely to repeat itself when the current imported contractors return to their homelands leaving behind a major maintenance challenge for the sector.

Conclusion

If the main challenge faced by the sector in the 1960s was the need for public education about the industry and its practitioners, in order to realize the bright future that then lay before us, the main challenge the sector faces today is what to do to ensure its survival.

We faced the sector’s challenges in the 1960s and 1970s with enthusiasm and great hope. In the same way that locals had taken over the political leadership of T&T, we locals were taking over the leadership of the professions and the contracting and manufacturing businesses and we saw the future as exciting. Unfortunately, the challenges in the sector today are being faced by most of you with a sense of hopelessness and despair. Very few of you, if any, will bet money on a favourable outcome. Not one of you can say with honesty that it is a joy to work in the construction sector today. What a sorry state this once proud sector has reached in T&T.

The sector is in this position today because it allowed itself to become too dependent on the State as its largest client and it became too trusting of the political directorate. Our political leaders, even as they paid lip service to becoming the economic and political leaders of Caricom and moving T&T to first world status by 2020, missed a golden opportunity to consolidate the gains made in T&T and in CARICOM by our construction professionals and contractors in the period 1970 to 2000. Instead, for reasons not fully articulated, our leaders have purposely taken steps to emasculate the sector and future generations will inherit its carcass. I pray that you may have the courage, the strength and the wisdom to find solutions to the existing challenges (and the new ones yet to be unleashed) and so reverse this downward slide that is now being experienced in the once proud construction sector of T&T.

The above article is an abridged version of Mr. Hart’s address to the Trinidad and Tobago Contractors Association at their “Contractor of the Year Gala Banquet and Awards 2009”

What every Project Manager knows that you do not know: Time and Cost Overrun or Effective Planning and Scheduling?

By Ivan Hinkson FCIOB, FRICS, PMP, CCC

A Caribbean Construction Project Management Group – CCPMG White Paper –

Time and cost overrun is a major construction project management challenge, which has competency questions for the credibility and accountability of project managers and project sponsors in the current global environment.

The challenge is that can planning and scheduling be used to leverage project management and effectively monitor, evaluate and control the concerns and issues of time and cost overrun?

Available construction project management case studies, lessons learned, close-out reports and generally recognized best practices support the view that effective planning and scheduling have and can efficiently address the concerns and issues of time and cost overrun. But what really is time and cost overrun in the context of construction project management?

Definitions of cost overrun range from project cost in excess of estimated cost, to an excess of actual cost over budget. A considerable amount of confusion exists in defining cost overrun as cost escalation, cost increase and/ or as budget overrun. However it must be recognized that cost increase and budget overrun may not necessarily result in cost overrun, particularly if cost escalation and contingency plans are included as inputs of the budget.

In the determination of a construction project budget, it may be useful to recognize that there are fundamental differences between an estimate and a budget. Furthermore, the estimate, like the budget, has a cost value as well as a time (duration) relationship in the costing process. Overestimation or underestimation of the time value relative to the project estimate and/or budget can lead to another area of confusion in rationalizing the concept of time and cost overrun.

Time and cost overrun have further interpretation complications when project budget is sanctioned and project scope is not clearly defined at the project initiation stage. Furthermore at the project execution stage available research document the results that time and cost overrun trends are usually evident at 15% to 20% of project actual duration and not necessarily near to, or at the project due date.

The first step or foundation of highly effective planning and scheduling of construction projects is Knowledge Management, which ensures that the intellectual capacities of an organization are structured, shared, maintained and utilized within an appropriate knowledge base.

A highlight of the use of a construction knowledge base and six other steps for addressing time and cost overrun concerns and issues are progressively elaborated on in the Project Management Institute Southern Caribbean 5^th International Conference Presentation “7 Steps to Highly Effective Planning and Scheduling of Construction Projects”, (http:// www.pmiscc.org/Pdf/Conference% 20Presentations/Ivan%20 Hinkson%20-%20Steps%20 to%20Highly%20Effective%20 Planning%20and%20Scheduling% 20of%20Construction%20 Projects.pdf).

Ivan Hinkson is a Certified Project Manager and Certified Cost Consultant with twenty four years’ post graduate experience and acknowledged competency, as a Project Manager, Contracts Manager, Project Control Manager and Lead on Design/ Built, Construction Management, Contract Management and Engineering, Procurement and Construction (EPC) projects in Trinidad and Tobago.

Transportation: Tunnelling as an Option

CCD Files

As more vehicles continue to be imported by Caribbean member states and the road network becomes more complex, governments will be forced to take a more strategic look at their transportation network. Recent studies conducted throughout Europe and other parts of Asia suggest that underground road construction will be inevitable as cities become more crowded. According to one report, it is anticipated that 10% of the trunk road network in the in the UK will be tunneled by 2050. The report also highlights the cost of tunnel maintenance: about 8-10 times that of an equivalent surface road. Additionally, it was further reported that restricting tunnels to cars and lighter vehicles can improve operation and reduce construction cost by around 40%. This trend is also evident in Sweden, the Göta Tunnel and “The Big Dig” in Boston. Many of us may think that maintenance cost may be high; however if we were to view this from a total quality management perspective, we would soon realize that some processes are meant to be a journey and not a destination. Since we in the Caribbean are always looking for a “quick fix”, we are not prepared to look at the benefits of higher customer satisfaction, better quality products and increased productivity in the longer term.

In his 2010-2011 Budget presentation, Minister of Finance (Trinidad and Tobago) Winston Dookeran noted:

“The fourth growth pole involves developing the North-Coast… We will do a business plan for a new ‘Connective Development Project’. This project would create an underground tunnel from Maracas Valley to Maracas Bay, to enable quicker access to the North Coast.”

Minister of Works and Transport (Trinidad and Tobago), Jack Warner proposes to turn the sod for this project in late February 2011. Unfazed by those who believe that the project is too grandiose at this time, Minister Warner stated that “This project will bring more to our country than imagined, in terms of opening up the whole North Coast road, in maintaining the area’s flora and fauna, but, most importantly, we have to look at what it will do for tourism.” When compared to trends in tunnelling, it appears that Minister Warner and his colleagues undoubtedly have a vision which can hopefully allow for the efficient management and improvements needed in the many areas which have restricted/ limited transportation access to other parts of the island.                                                                                  

Even as we in the Caribbean ponder about the real benefits of a three mile tunnel (notwithstanding our limited resources) it may be interesting to look at other countries have constructed or undertaken in this regard, if only for the purpose of playing “what if”. The Gotthard Base Tunnel is a railway tunnel beneath the Alps in Switzerland. With a length of 57 km (35.4 mi) and a total of 151.84 km (94.3 mi) of tunnels, shafts and passages, it is the world’s longest rail tunnel, surpassing Japan’s undersea Seikan Tunnel. When the tunnel opens for traffic in 2017, it will cut the travel time between Zurich and Milan from 3.5 hours to 2.5 hours.

Perhaps we may never need a 57 km long tunnel in the Caribbean. However, the Gotthard Base Tunnel can teach us two things. Firstly, why was a decision made for its construction? The short and simple answer is that traffic has increased more than tenfold since 1980 and the existing road and rail tunnels are at their limits. Are we not in a similar situation here in Trinidad? Secondly, how was the decision made? By way of a 1992 referendum, whereby 64 percent of Swiss voters accepted the AlpTransit project. Construction of the tunnel then began in 1996.

To apply this to our local context, there are so many who believe that projects like these are not necessary at this time, whilst many believe that we need to make hard decisions now. Can the people decide that all projects in excess of a certain value must be approved via a referendum? The politicians may argue that referendums may slow things down; however empirical scientists (for example Bruno S. Frey among many), show that this and other instruments of citizens’ participation, direct democracy, contribute to stability and happiness. Minister Warner, the ball is in your court, what do you say?

The Independence and Impartiality of an Arbitrator

Ian Rollit  Bsc., FRICS, FCIOB, MCIArb

Arbitrator, Ajudicator, Mediator & Chartered Project Management Surveyor

Introduction

An arbitration agreement is a contractual clause evidencing agreement or a separate agreement to refer future disputes to arbitration. Arbitration clauses in contracts are phrased in a variety of ways so that the tribunal may have jurisdiction over: “all claims”; “all disputes”; “all differences”. The contractual nature of arbitration requires the consent of both parties to have the dispute settled by arbitration. The arbitration tribunal’s jurisdiction is based solely on the agreement between the parties to submit their existing or future disputes to arbitration. The arbitration agreement is the foundation stone of the arbitration. Its award will have the same finality and binding effect as a judgment. The composition of the tribunal must meet the same standards and characteristics of any fair trial.

The duty of disclosure is the antidote to allegations of impartiality and independence. The Arbitrator must disclose any interest and various laws and arbitration rules provide for this. The timing of disclosure should be before accepting the appointment or as soon as the Arbitrator becomes aware of a possible disqualifying event during the arbitration proceedings.

A definition of both impartiality and independence is critical in understanding the importance of same as it pertains to the Arbitrator.

Impartiality

An Arbitrator is impartial when he neither favours nor is predisposed as to the question in dispute towards one party. Such predisposition exists when the Arbitrator has already expressed a concrete opinion on the legal questions(s) or acted as a counsel for a party in the matter (1).

The impartiality of Arbitrators is essential for the arbitration process. There was no specific statement to this effect prior to the 1996 English Arbitration Act. The 1950 Act did contain various provisions to secure impartiality.

The 1996 English Arbitration Act goes further and confers upon the Arbitrators to “act fairly and impartially as between the parties.”

Section 33 of the English Arbitration Act gives specific instances of what is meant by fair treatment:

Each party should be given a “reasonable” opportunity of putting his case and dealing with that of his opponent, and Suitable procedures should be adopted by the tribunal that avoid unnecessary delay and expense, so as to provide a “fair” means for resolving the particular dispute.

Section 33 effectively requires the tribunal to act in accordance with natural justice and broadly reflects the Model Law Article 18 – Equal treatment of parties which states that “the parties shall be treated with equality and each party shall be given an opportunity of presenting his case”.

Impartiality impacts in three ways:

1. It is necessary to avoid the situation in which an Arbitrator who may not be impartial, by virtue of a personal interest in the outcome or by virtue of relationship with one of the parties is permitted to take up his appointment;

2. The situation may arise after the Arbitrator has taken up his appointment that an Arbitrator puts himself, or is otherwise put, in a position where his personal interest conflicts with his duty to act impartially and

3. The Arbitrator may, in his actual conduct of the proceedings, fail to act in an impartial manner.

The list of issues gives rise to a breach by the Arbitrator of his general duty under section 33(1) (a) of the Arbitration Act 1996 to act fairly and impartially: the Arbitrator in such a case is liable to be removed and if the award has been made it is open to challenge on the ground of serious irregularity. Impartiality requires that an Arbitrator is unbiased and does not favour one party and is not predisposed as to the dispute.

UNCITRAL Model Law

Procedure is contained in Article 12 – Grounds for Challenge and Article 13 – Challenge Procedure. The main issues are as follows:

1. Where an Arbitrator is approached in connection with his possible appointments he must disclose any circumstances likely to rise to justifiable doubts as to his impartiality. Once appointed he is under a continuing duty to this effect under Article 12(1).

2. A party who wishes to exercise his right to challenge an Arbitrator must within 15 days of becoming aware of the appointment or of the circumstances on which a challenge might be founded, send a written statement to the Arbitrators setting out his complaint .The challenged Arbitrator may then withdraw, and he must do so if the other party agrees with the challenge. If the Arbitrator continues, the validity of the challenge is to be considered by the Arbitrators themselves Article 13 (1).

3. If the challenge is not successful, the objecting party may apply to the curial courts within 30 days; pending such an appeal, the Arbitrators are free to continue with the arbitration Article 13 (2).

The procedure is subject to an overriding waiver provision, which prevents a party from exercising his right to challenge an Arbitrator if he participated in the appointment, unless the basis for his challenge did not become apparent until a later date Article 12(2).

The legal standard for impartiality of persons with judicial or quasi-judicial functions has been given detailed consideration by the courts in relation to judges .The leading authority is the ruling in the Court of Appeal Locabail (UK) Ltd v Bayfield Properties Ltd. The Locabail decision made it clear that that identical principle apply both to judicial appointments and to Arbitrators. In AT & T v Saudi Cable Corporation, it was confirmed that there was no basis for lowering the standard of impartiality to Arbitrators than to judges.

Independence

Independence requires that there should be no actual or past dependent relationship between the parties and the Arbitrators. Model law permits intervention where the Arbitrators are not impartial or independent. The Model Law provides for full disclosure.

The absence of an independent Arbitrator might well be contrary to the guarantee of independence in Article 6 of the European Convention of Human Rights since the Act goes to great lengths to secure impartiality.

The distinction between independence and impartiality was emphasized by the Court of Appeal in AT &T Corporation v Saudi Cable Co.

Nationality

Article 11 of the UNCITRAL Model Law states “No person shall be precluded by reasons of his nationality from acting as an Arbitrator.” It is commonplace and stated in most arbitration rules that a sole Arbitrator or a chairman should be of a different nationality than either party. ICSID Convention dictates that the majority of the Arbitrators must be of a different nationality than the parties.

Duty of Disclosure

Arbitrators are generally under a duty to disclose to all parties all facts which may be relevant. This ensures compliance with requirements of independence and impartiality. Each Arbitrator is under an obligation to ensure a valid and fair resolution of a given dispute.

IBA Rules of Ethics for International Arbitrators provides that a prospective Arbitrator discloses past and present business relationship, social relationships, previous relationship with any fellow Arbitrator prior knowledge of the dispute and commitments which may affect his availability to perform his duties as Arbitrator. The ICC Statement of Independence requires Arbitrators to declare their willingness to act as an Arbitrator.

Conclusion

In R v. Gough it was held by Lord Goff of the House of Lords that ‘the test should be the same in all cases of apparent bias, whether concerned with justices or members of other inferior tribunals or with jurors or with Arbitrators and that test was ‘… whether here was a real danger of bias on the part of the relevant member of the tribunal in the sense that he might be unfairly regard (or have unfairly regarded) with favour or disfavour, the case of a party to the issue under consideration by him.’

An Arbitrator may be removed by the Court where circumstances give rise to justifiable doubts as to impartiality. (Article 12 of the Model law).

Earlier Law of the Courts had always stated that “justice should not only be done, but should manifestly and undoubtedly be seen to be done.” Courts have taken the view to intervene when;

1. The Arbitrator has some connection with one or other of the parties to the arbitration proceedings.

2. The Arbitrator has some interest in the outcome of the proceedings;

3. The Arbitrator’s conduct prior to or during the proceedings demonstrates that his mind is made up.

In Taylor v. Lawrence the Court of Appeal concluded (at paragraph 60) that the appropriate test for potential bias was the test in Re Medicaments (No.2) as modified by Lord Hope of Craighead in Porter v. Magill:

“The court must first ascertain all the circumstances which have a bearing on the suggestion that the judge was biased. It must then ask whether those circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility that the tribunal was biased.”

There is a close relationship between the concept of independence and that of impartiality. In Findlay v United Kingdom 244, paragraph 73, the European Court said:

The Court recalls that in order to establish whether a tribunal can be considered as ‘independent’, regard must be had inter alia to the manner of appointment of its members and their term of office, the existence of guarantees against outside pressures and the question whether the body presents an appearance of independence.

As to the question of ‘impartiality’, there are two aspects to this requirement. First, the tribunal must be subjectively free from personal prejudice or bias. Secondly, it must also be impartial from an objective viewpoint, that is, it must offer sufficient guarantees to exclude any legitimate doubt in this respect. The concepts of independence and objective impartiality are closely linked…”

In both cases the concept requires not only that the tribunal must be truly independent and free from actual bias, proof of which is likely to be very difficult, but also that it must not appear in the objective sense to lack these essential qualities.

The nationality of the sole Arbitrator or Chairman of a tribunal is not good grounds for setting aside the award if the Arbitrator has disclosed at all times all facts which are relevant. Additionally if the party fully participated in the arbitration he will be estopped from claiming that nationality of the Arbitrator was a factor in his decision making.

Ian has 30 years’ experience as a Surveyor and Project Manager on a wide range of projects in Building and Civil Engineering. His experience in the commercial and contractual aspects of construction management has been acquired by working directly for a developer, as a consultant for large international companies and contracting organizations on major tourism projects. Ian has worked extensively throughout England, the Caribbean and South America. He has been involved in all aspects of projects, including costs estimates, contractor and sub-contractor selection, design management, preparation of contract documents, contract administration and the formulation and settlement of claims, drafting of pleadings and litigation support in litigation, advocacy in arbitration proceedings and is experienced in negotiation, conciliation, mediation, adjudication, arbitration and litigation. He is also a member of CCD’s Editorial Board. He can be contacted via email: [email protected].

Innovative Solutions Required to Combat Worries Over Economic Recovery

Kavena Ransoobhag  MSc. Economics

Introduction

Global economic recovery is mounting an unbalanced recovery with growth being slow in advanced economies and much stronger in emerging market economies. The International Monetary Fund (IMF) forecasts that the global economy will expand by 4.8 percent in 2010 amongst feelings of over zealousness in the number by some. Is Trinidad & Tobago to be included in the list of emerging market economies that are expected to experience rebounded economic growth in 2010? The following section focuses on a brief economic review of the local economy.

The Domestic Economy

Economic indicators show that the economy has remained at depressed levels in 2009 as the Central Bank of Trinidad & Tobago (CBTT) has indicated that the Gross Domestic Product (GDP) has declined 3.2 percent for the year. Despite this overall decline in economic activity in 2009, GDP rose 2.3 percent in the first quarter of 2010. However, this does not arrest the negative economic growth. The non energy sector which comprises the construction, manufacturing, distribution and agriculture sectors remained flat, in the first quarter of 2010, after four (4) periods of negative growth; whilst the energy sector grew by 5.5 percent. Interestingly, the data shows that the construction sector activity rebounded from the previous quarter, growing by 5.1 percent. Inflation has once again become a source of concern for the monetary authorities as it has risen to an all time high of 16.2 percent in the twelve months to August 2010. Headline inflation continues to be driven upwards by rising foods prices as domestic food production have fallen on account of persistent rain falls and the accompanying floods. At the end of quarter four 2009, the unemployment rate stood at 5.1 percent, with the employment within the construction sector declining by 6.1 percent from the previous quarter. Of the sectors surveyed (Petroleum, Manufacturing, Agriculture, Construction and Services) the construction sector lost the most amount of jobs for the quarter.

According to CBTT data, exports in quarter one of 2010 fell an alarming 31 percent from the previous year, indicating a deeper problem of loss of foreign exchange revenues for central government; imports grew 7 percent for the same period. As at May 2010, the Real Effective Exchange Rate (REER) showed a loss in the country’s level of competitiveness in terms of its foreign trade. Domestic demand conditions remained sluggish as private sector credit, in July 2010, declined by 6.2 percent. This decline in private sector credit was led by an 11.2 percent decline in business credit with consumer credit staging a negligible 0.4 percent recovery for the period. One can reasonably assume that business and consumers remain cautious. Real estate mortgage lending data in July showed that this sub sector has remained relatively robust, climbing 6.7 percent on a year on year basis. Short term interests continue to tumble as a result of buoyant liquidity conditions. The three month Treasury bill rate recorded a historic low of 0.34 percent in September 2010 on account of heightened demand for short term government securities. Economic indicators has shown little or no sign of economic recovery within the non energy sector and it is with this in mind one focuses on the provisions made for the Construction sector in the 2010/2011 Budget.

The 2010/2011 Budget on the Construction Sector

The 2010/2011 Budget laid before parliament on September 8th 2010, has disappointingly little to add to the development of the Construction sector; a sector whose growth was propelled by the previous administration’s drive to develop the nation’s infrastructure. Whilst one applauds the attempt by the administration to pay the debts owed to the contractors, to the sum of approximately TT$4 billion, one wonders what are the measures to help promote this fragile sector? The Budget, however, is not devoid totally of proposed construction projects as it proposes to commence construction of the Sangre Grande Enhanced Health Facility and the Chaguanas District Health Facility within the current fiscal year 2010/2011. Of these two short term projects, one has to ask how many of the contractors would benefit immediately from these projects. In the medium term, the administration is proposing the construction of the Sangre Grande Magistrates Court and the Arima Judicial Complex. Also, in an attempt to meet the demands of tourist accommodation, the proposal for the construction of a 251 room Radisson Hotel and a luxury hotel in Tobago are under review. These latter projects, however, are still on the drawing table and may not come to fruition depending on the outcome of the review. One wonders if these projects will be sufficient for a sector that has become heavily dependent on public sector investment for its growth.

One holds the view that the recent increase in the minimum wage will, in the short term, increase the number of unemployed persons within the sector as the construction projects remain at a minimum.

Creative Solutions for a way Forward

The phrase ‘creative solutions’ seems to be the new way for trying to bring the economy out of its stagnation given the limited financial resources available to the government. Therefore, one thought that maybe ‘creative solutions’ can be found to assist the construction sector in its fight to survive. Commercial banks, in recent times, have attempted to increase their private sector credit business by reducing lending rates on mortgages and car loans. One suggests that the negotiating body for the construction sector persuade commercial banks to provide a list of contractors for bank customers who borrow funds for home improvement or construction. Commercial banks can also benefit from this venture. For instance, a contractor and a commercial bank can enter into an arrangement where the bank offers customers of the contractor a 50 basis point discount on the loan rate. The contractor can then recommend the bank to his/her customers, thereby increasing the private lending business of the bank. In this scenario, the bank, the contractors and the customers benefit.

Contractors can also team up with architects as they can both benefit from each other with referrals. The same concept of providing discounts to customers of contractors by architects and other construction consultants and vice versa can apply here. Further, contractors can create value added for their customers by surveying a list of hardware stores and other building material companies for prices, so as to provide with a list of where they can find their materials at the lowest cost. In addition, the Caribbean Single Market Economy (CSME) provides contractors with a great opportunity to market and provide their skills to our Caribbean counterparts. Lastly, the importance of skilled labour within the construction sector cannot be overlooked. Improving on labour skills can always benefit the employee and the contractor. In this time of slowed construction activity, contractors can persuade their employees to participate in training programs being provided for free of charge by the Adult Education arm of the Ministry of Education as well as the National Training Agency (NTA).

Conclusion

Economic activity continued to remain sluggish in 2010 against the backdrop of declining exports, rising inflation, declining interest rates and a lack of domestic demand as indicated a declining private sector credit expansion. The construction sector has been affected the most as a result of slow payments of government debts and declining demand for large scale construction products. Further adding to its problems, the construction sector now faces an increase in its wage bill with the minimum wage being increased. In an attempt to endure the downturn, one suggests a list of ‘creative solutions’ as the way forward. One hopes that these suggestions are of value to the contractors in their continued struggle to survive.

Kavena Ramsoobhag is a Research Analyst. Email Kavena via: [email protected].

China Revisited

Jefferson Sooknarine  MSc. (Stanford-Sloan Fellow)

In addition to visiting several Asian countries, I have made three visits to China over the past fifteen years, the last being in 1999. Since my retirement, my wife Nyla and I have been trotting the globe; With China being a recent destination. When compared to 1999, what I saw in China in 2009, as far as active construction is concerned, was a real shock to me. What I witnessed in Guangzhou, Beijing, Xian, Shanghai, Yiwu and Haining, can well be described as amazing, miraculous and breathtaking. It is impossible to truly appreciate without seeing it. Words almost cannot describe this level of development. I will try, but in this case the old adage “seeing is believing” definitely holds true. What I can say, is if you want to witness first hand what “a multitude of megaconstruction projects” is like, you simply must visit China. Taken in the context of the current recession, the phenomenon of China is extremely noteworthy, especially to those in the field of construction. During my first visit in 1995, I immediately noticed quite a few tower cranes with active sky scrapers being erected. My guess was that that throughout the city there were at least 20 of these cranes.

During my most recent visit, I counted just about 50 of them littering the skies. Of all the cities I visited, Xian, the ancient capital of China, was the most astounding. There were no less than 300 active tower cranes. In Shanghai there were approximately 100 cranes; while in Guangzhou I saw more than 80 of them.

In one case, in Xian, I stopped my car and counted 12 towers across and 5 towers deep, totalling 60 towers. Each tower had 30 storeys and each storey had 24 units. That made a whopping total of 43,200 living apartments. In the area within a 5 mile radius of Xian, I was told that there were over 30 million inhabitants. In Xian, I saw at least 40 recently constructed condominium complexes, many of them over 40 storeys with high with up to 30 of these towers in one development.

I noted that all the towers in each development had the same design and colours. What is more amazing is that the construction of each of these complexes was completed within two years. Yes….I said two years! When a Chinese national told me this, I nearly swallowed one of the nearby cranes! When I compared this achievement to our “tiny overpass” on the Uriah Butler/ Churchill Roosevelt intersection (Trinidad), I admitted that Chinese projects are bordering on nothing less than miraculous. In the Caribbean, when the Port of Spain skyline is littered with 6 relative small buildings (those constructed within the last 3 – 4 years) we regard these as “exemplary”. With such simple standards, our Caribbean eyes can never appreciate construction on a massive scale, unless we visit a place like China. I have been to more that 60 countries across the globe and countless major cities, and I have never seen construction activities on such a huge scale. Dubai is a far second on my long list.

With the pervasive buzz about global recession and economic meltdown, today China tops the list as the most shocking exception. Recently I saw a television documentary called “Chinamerica” whilst I was in Orlando. It explained that the China economy is so intertwined with the U.S.A that they both need each other more than any other. China produces and sells to the U.S.A. It collects countless billions which it invests liberally in infrastructure development. The huge balances are invested in various U.S.A institutions, especially U.S. Government instruments. The massive economic relief programs by the Bush and the Obama administrations came from China borrowings. So U.S.A consumes like an unbelievable eating machine and it borrows from China to satisfy its endless appetite. These transactions also have a significant impact on balance of trade as well as exchange rate factors, both of which are sore points in terms of China/America government relations. Americans argue that China should consume more U.S.A goods, but the more valid argument should be that the hungry giant should consume less than it does. In fact, overconsumption is what has led to the economic woes plaguing the world. It is interesting to note that the Chinese only eat until they are three quarters full; with the belief that a little under consumption will increase their longevity.

Infrastructure development in China is the other phenomenon just short of a miracle. You simply cannot imagine thousands of miles of 3 lane highways, constructed in recent years, with 30 or 40 feet of well manicured, shrubbery, greenery and flowers, in addition to all medians with at least ten feet of landscaping. Perhaps you have to compare what existed before to what exists now. I could not believe my eyes, when I saw over 150 miles of Beijing highways with the most prolific and colourful roses you could every possibly imagine, lining the middle and sides. Roses on 150 miles of highway? Only a disciplined nation could achieve a feat like that! The Chinese construction worker expects to work from 7.00 am to 7.00 pm, for six days of every week.

To appreciate the changes in China, one MUST also view this country in the context of the population of over 1.5 billion people, who just thirty years ago, were living primarily on potato and corn. They all wore the same clothes, the same color, every day! They owned no real estate or businesses. They saw no outside television and heard only the Government controlled radio station. They expected and knew nothing better. China was a failed State. Today, we see an infinite number of massive factories, real estate developments and business entities, growing at record rates. If the success of a country is to be measured by growth rate of the economy or the people, then the world needs to be more aware of the reality and the truth about the China of today. Based on what I have seen in China and America, then my prediction is that one day, China will indeed rule to world! America’s position as the most powerful country in the world, may well be in jeopardy, in the not too distant future. Discipline is also a world model in China. During my three week visit, I saw many policemen. Not one of them carried a gun. Crime is unbelievably low, punishment whenever it has to be meted out is harsh. Wherever corruption is detected, the criminals are dealt with in an exemplary fashion. Government officers, at every level, are punished very severely, if caught.

To all our readers…I hope that the selection from the hundreds of photos I took in these cities will give you a minute idea of what reality is, in terms of “China – The Eight Wonder of the World”. Closer to home…I hope that this brief report could help us in the Caribbean to redefine our concept of “Development”. It is only when we visit and witness what is happening in a place like China, that we can begin to experience “Development” in the true sense.

Jefferson Sooknarine is a graduate of The Stanford Business School. He was the Managing Director of Harricrete Ltd for the first ten years of the company’s operation. He is now happily retired and spends his time touring the globe with his wife Nyla. You may contact Jeff by email, with any “Comments, Questions, or Criticism” at [email protected].

Please indicate: “China – TT -CCD” in the subject line.

Helping Hand Initiative delivers to St. Lucia

CASTRIES, St. Lucia

As part of ongoing efforts to assist those persons who have been affected by Hurricane Tomas in neighbouring Caribbean Islands, the Helping Hand Initiative launched by Prime Minister Persad–Bissessar is working.

Two flights to the Hewanorra International Airport in Vieux Fort, St. Lucia left Trinidad and Tobago bearing key supplies. Items were donated from a variety of sources NGO’s, corporate citizens and even some government agencies, the breakdown is as follows:

- Blue Waters donated 13 skids weighing some 27,730 lbs of Water and this shipment was sent to the National Emergency Management Organization c/o The Prime Minister’s Office, Castries, St. Lucia.

- The Church of Jesus Christ and the Latter Day Saints purchased an additional 12 skids of water from The Blue Mountain Water Company, weighing 21,600 lbs and this was sent to the National Emergency Management Company, Castries, St. Lucia.

- The Caribbean Meteorological Organization got 25 cases of water donated from Blue Waters and these were also taken over to the Met office in Vieux Fort, St. Lucia.

- Amerijet purchased and sent another 4 cases of water for our own Agents in St. Lucia and this was also taken over.

This shipment of supplies was facilitated by Amerijet International and its local office, Amerijet Caribbean Express were able to transport some of the freight free of charge and the rest at a subsidized rate and ensured that it was delivered to St. Lucia.

The Helping Hand initiative continues to work and the Prime Minister returned from St. Vincent having toured that country with a team of specialists to survey the extent of the damage.

Feature interview: Winston Dookeran

Feature interview: Winston Dookeran

All things being equal, it could easily be that one of the most popular words in 2009 has been “recession”.
Indeed, President of the United States of America (US) Barack Obama said “recession”6 times in his February 24th address to Congress. Whilst the rest of the world battles with varying degrees of reactive and preventative measures in an effort to deal with this phenomenon, the Governor of the Central Bank of Trinidad and Tobago has only now admitted Trinidad and Tobago (T&T) being in a recession. His admission is based on the conventional definition of recession (three consecutive declines in GDP growth). Despite his optimism that various factors may mitigate the effects of the recession, Economist, Former Central Bank Governor and Political Leader of the Congress of the People, Winston Dookeran cautions that we will find ourselves surrounded by “rough waters” during the next year.
CCD’s Nalinee Khemraj met with Mr. Dookeran and got his views on Trinidad and Tobago’s current economic position and the likely effects on the construction industry.

1.What are the some of the major challenges facing the T&T economy at this time and how will these impact on our economic position?

In order for us to hypothesize about our future position, we must reflect on our history as well as our current position. T&T is in a recession. There is no need to deny this fact. 2009 saw the contraction of the global economy for the first time since World War II and we are aware that no country would have been immune to the effects of this decline. Bearing in mind that a one percent fall in the global growth rate is equivalent to 1,000,000 barrels of oil loss in global demand for energy coupled with the unstable price of oil during the course of this year, our government continues to promote projects and programmes that are weakening rather than strengthening our economy.

I am inclined to believe that we have adopted an Americanized approach even in the way we manage our economy. One of the major factors which led to the demise of the American economy was the fact that Americans were living unsustainable lifestyles. Their lifestyle was not consistent with what they were producing. Therefore there was always a shortfall and this laid the foundation for the entire system to crash. The economy of T&T is very similar in that our production levels are quite low. We have been enjoying a level of comfort beyond what we are actually producing and this has nothing to do with production but rather proceeds from our declining energy sector.

Today, although the price of oil seems to have stabilized albeit at a lower level than previous years, we must expect a decrease in revenue from the energy sector. This decrease is based on the fact that one never knows how the geo politics of the Middle East will play out. Moreover, given the Obama administration’s Energy Policy (to make the USA more energy self sufficient) we must be prepared for some degree of volatility in the world’s energy economy. We must also guard against down trends in prices. So to answer your question, the major challenges to our economy at this time are:

a. A loss of competitiveness due to globalization and declining productivity.
b. The decline in Caribbean economies; which could continue for some time, given the architecture of these economies.
c. The imbalances between finance and production considering also the contraction of our financial sector.
d. The prospect of inflationary trends and
e. Our continued reliance on the oil and gas sector, although we are well aware of what happens when we place all our eggs in one basket. We are already experiencing the effects of these challenges. We are in a recession which I believe will be worse than we expect. Maybe you can recall the recession of the late 1980’s? If not, the media has made the effects of the global recession visible for those who wish to acknowledge reality. The Governor of the Central Bank believes that the recession may only last until the end of the second quarter of 2010, when he expects investor confidence to pick up. What do we do until then? We cannot sit and hope for the best, we must take immediate action. We cannot address these challenges by any short cut method. We need to redesign our development strategy from excessive dependence on energy to a greater reliance on domestic and regional output in order to provide any growth impetus. The first step is to simply start producing more. Even if we implement reactive measures, we must recognize that recovery will be slow in coming. The economic cycle will take it course and recovery will take a life of its own. When one considers this in the context of our burgeoning national debt, reduced revenues from energy prices, depressed investor confidence and general low productivity, we must be realistic about what our position will be.

2. What are the challenges facing the construction industry?

Generally, it has been the norm that activity within the construction industry is pegged to the well being of the national economy. In the present scenario, the construction sector has contracted and this is largely due to the following factors:

a. A lack of domestic demand for construction services and
b. The curtailment of access to financing.

3. What opportunities are available to the construction sector at this time?

With the government’s continued spending on grandiose projects, some may be fooled into believing that “good times” are just around the corner for firms within the construction industry. However, given the government’s lack of performance and the many other issues plaguing the construction industry one must be cautious that these projects could be slow in implementation… if they get off the ground at all.

When one considers our current economic position and the prevailing conditions at a global level, the government’s priorities certainly seems misguided. From an infrastructure perspective, the government is bent on creating “symbols of development” instead of focusing on the “substance of development.” Although prospects may be dim, there are opportunities which firms within the industry can avail themselves to. The best opportunities lie in looking south to Guyana, Brazil and Suriname. These are perhaps the most efficient within the region and have enormous opportunities for joint venture type arrangements where the experience and expertise of our local contractors and consultants could easily be absorbed. Our local workforce has an abundance of qualified, experienced and hard working tradesmen and professionals. Given the level of activity within the industry during the last 10 years, our  workforce would have amassed a considerable amount of knowledge and experience. Therefore they can provide knowledge and even technology transfer to other countries. There is always opportunity in chaos but we must be wise enough to recognize it and brave enough to embrace it.

As we look for opportunities locally, we should note that the mechanism for the expansion of the construction industry in Guyana and Suriname was the creation of public sector infrastructure projects. Comparatively, the government’s allocation to infrastructure in T&T continues to be minimal and therein lies one of our major problems. It never ceases to amaze that the country has enough money to host international summits and other frivolous projects but very little to spend on a reliable road and drainage program me; especially since a well developed and properly functioning infrastructure plan is one way of maintaining a level of sustainability within the sector.

4. How do small contractors survive in times like these?

Over the years there has been a sharp increase in the number of small and medium sized firms within the industry. Currently, it must be difficult for them to survive. This is exacerbated by the fact that public policy seems displaced. However, in the absence of government support, in order to survive and be successful, firms need to adapt by:

- Increasing productivity by trying to become more involved in trying to become competitive in recessionary times.
- Using technology as means of becoming more productive, being more efficient and improving construction methods.
- Seeking more opportunities from within the private sector.
- Aligning themselves with international counterparts with a view to accessing outside technology (technology transfer).

5. What measures would you implement to develop the industry?

The construction industry does not operate within a vacuum. It is part of the entire economy. Thus, whilst some solutions may emerge directly from within the industry there are others which will necessitate the redefining of our national development plan. However, from an industry specific perspective, the following are some measures which can assist in the development of the industry:

a. A higher emphasis on safety: Both firms and the authorities must commit to a more stringent enforcement of the rules and regulations on the jobsite. This will ultimately affect cost, production and profit positively.
b. The establishment of pension plans as well as increased health benefits for construction workers:
These must be designed to adequately provide for workers despite the project oriented nature of work within the industry. These measures would increase motivation and provide a level of comfort and security to workers.
c. Tax incentives for both onshore and offshore investments:
One issue which has never been addressed within the context of the construction industry is that of taxation. A properly implemented taxation regime could be used to create a stimulus within the sector. Since the government has been not been proactive in developing this regime, the onus is on stakeholders within the industry to engage the government in a tax regime which promotes its growth.
A number of incentives are offered to firms within the energy industry, especially multinational corporations. Thus it seems only fair that local small and medium enterprises (even large firms) be given similar type incentives, especially since the construction industry is often used as the catalyst to stimulate the economy. Furthermore becoming an exporter of construction services can add to our external revenue base.
d. The establishment of an Institute of Transport Economics and Infrastructure: Many years ago when I was a lecturer at the University of the West Indies, I pioneered a Transport Economics course. I also recommended the development of a major transportation plan which should anticipate the demand for transport services and infrastructure within the next 20 years. Regrettably the course was not pursued and today, transportation remains one of our biggest challenges with the government’s solutions being more reactive than anything else. Maybe if the course was applied we would have a fully developed and integrated transportation system today. Of course, we would expect some challenges with implementation. Today, I think that the establishment of an Institute of Transport Economics and Infrastructure will be able to drive transport and other infrastructure related initiatives. Partnering with the private sector would also lend to the success of this venture.
e. On the job training for new technology being used within the  industry: T&T has been slow in adapting new technology within the building process. At all levels, we need to embrace technology and use it as a tool to make us more productive and efficient.
f. More forums for knowledge creation and development: CCD in itself is a giant step in making this possible.
g. Better priorities than what has emerged instead of tall buildings:
The government must lay the foundation for “the substance of development” rather than continuing to focus on “symbols of development”. As I have said in the past “development cannot be imported, rather it resides in the capability of the people to improve their lives. If we cannot have public policies that will aid in the development of our people, then there will be no development.”

The implementation and success of these measures requires action on the part of the government. It has been my observation that the various ministries are more often reactive as opposed to proactive and enabling. The viability of the construction industry will determine its stability. Note however, that viability and stability are also dependent on onshore development and growth in the south (Guyana, Suriname and Brazil). It is a huge challenge to turn around our economy and by extension the construction industry back to a path of growth but we have the power to make it happen.

6. What are your personal plans for the future?

I continue to build my professional practice outside of T&T.
This is not because I do not wish to serve our country but because all opportunities within T&T have been denied because of my political affiliation. From a political perspective, my plans are to continue to engage deeply in a political party – to be freed from a history of past acceptance and accommodation to corruption and racial bias to one that is more responsive to good governance for all of our people. There is much to be done if we wish to reclaim and rebuild our country. I believe that we are standing at a political crossroad, armed with the knowledge that the way forward must be different from past ideas and solutions. I thus find it most satisfying to be engaged in shaping the future through political engineering which has created a democratic option for the people of T&T.

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