Category: Public sector

Introduction
Well, Mr Brassington has done it again. Like he did to me over the Berbice River Bridge Company, he wanted me to hold back a column while he committed NIS money to the Berbice Bridge. On this occasion he needed a weekend to respond to my questions on his Marriott. Well it turned out that ten days were not enough to provide answers to what I thought were straightforward questions. Maybe he was too busy.

I am sorry if I piqued readers’ interest or led them to believe that the public will receive first hand, honest-to-goodness truth to questions we are all dying to have answered. I apologise to you all for leaving you without any answers to a string of questions which I have put to Mr Brassington. It was his undertaking that made me not divulge the questions last week.

But if there does come a time when Guyanese officials are made accountable for their abuse of office, when they can no longer make promises which they have no intention of honouring and when they will have to deal with public money in a lawful and transparent manner, Winston Brassington will surely be listed among the pantheon. For him, the indictment will be long and damning: complicity and execution of NICIL’s illegalities; the Amaila Road contract to ‘Fip’ Motilall; the privatisation of the Sanata Complex and the illegal concessions to Queens Atlantic Investment Inc; his hinterland road-building exercises with GGMC billions; his shenanigans with fund-raising for the Berbice River Bridge Company Inc; and now the Atlantic Hotel Inc of which he remains the sole director, Chairman and CEO.

Expertise or conviction?
I had understood from someone in the engineering fraternity that there were concerns including a criminal conviction of one of the persons reportedly involved in the supervision of the construction of the hotel. So I asked for the name, expertise and experience of the firm or individuals looking after AHI’s interest in the construction of the building; if it was an individual, the person’s qualifications and experience in projects of this magnitude; whether the position was advertised and who was responsible for the selection; who the person reports to and whether that person was provided with all the documentation, specifications and drawings for the foundation, plumbing, electrical, concrete pours, curing period for different aspects of the concrete work, steel size and resistance capacity, etc; and I asked about the number of non-compliance reports submitted to date by AHI’s representative.

On the contractual deals with Marriott International I sought from Mr Brassington information on the precise role of Marriott International in the design and construction stages of the contract; the basis and the amounts payable and paid to Marriott for the two phases; whether withholding taxes were deducted from those payments and remitted to the Guyana Revenue Authority; and whether the contract for the management of the hotel has been signed and sealed. I also subsequently asked for copies of the contracts with the Marriott.

The mysterious private sector partner
The project has always been promoted as a public-private sector partnership with the Grenada- based Zublin identified as the/a partner. Of course, the term private-public sector partnership can mean whatever one wants it to mean. To clarify the point and satisfy concerns expressed by cynics that Zublin was never seriously involved and was merely a red herring, I asked Mr Brassington whether the discussions/negotiations with Zublin had been concluded and for him to confirm the percentage of the shareholding Zublin would take and the price for each share issued.

After all the hotel would be worth much more than the actual amounts paid to the contractor. If we divert for a moment and look at the financial statements of Atlantic Hotel Inc as at December 31, 2011 we see the flawed accounts signed by Mr Brassington and given a clean audit opinion by the Audit Office. Only the Guyana dollar equivalent of the payment to the contractor has been recorded in the accounts. It is a matter of public knowledge that NICIL has spent not inconsiderable sums in infrastructural works; it must also have paid Marriott several millions for services provided while it is reported that a huge sum has already been paid to the engineers looking after the country’s interest. None of these costs are reflected in the books of AHI and must have been paid by NICIL, which engages in so many disparate activities that it can be confident that the Audit Office would be unable or uninterested in identifying those costs which are properly chargeable to the hotel company.

And surely those concessions which Mr Brassington has negotiated from Go-Invest have a huge value which must be factored in any price. The selling price of the shares in the hotel should therefore exceed the actual cost giving rise to a huge profit. Of course, Director Brassington will argue, quite incorrectly, that the profit belongs to the company and can only be distributed by way of dividends.

To return to the identity of the buyer which Dr Luncheon has indicated has already been agreed, I asked Mr Brassington about the alternative arrangements that AHI/NICIL have put in place in case Zublin is no longer interested. Some people think that the name Atlantic is more than a coincidence since there is another beneficiary of state largesse with Atlantic in its name. Or is it a ‘brother’, peeved that he was forced out of the business the first time around?

SCG
The public will recall that Mr Brassington had said that the contractor SCG International (Trinidad and Tobago) Limited (SCG) had insisted on the exclusion of Guyanese from its labour force, apparently because we are not up to their standard. But my failure to see such a clause and my prior experience with Mr Brassington compelled me to ask him a direct question: where in the contract does it state that the labour force is Chinese only? To put it politely, he did not tell the truth.

Readers will recall that I reported in an earlier column that an official search I had carried out at the Companies Registry came up with the astounding fact that SCG was not legally permitted to carry on business in Guyana. So I asked Mr Brassington whether he or his legal secretary had checked to see whether SCG is incorporated or registered in Guyana before entering into a multi-billion dollar contract with them. It was almost laughable that following the column frantic but improper efforts were made to register the company with the Registrar.

At large is whether the company has registered with and is complying with the income tax and NIS laws of Guyana. The laws of Guyana treat such omissions as extremely serious and one can be sure that the GRA could step in with heavy boots when it finds out. That is surely how SCG should have been treated.

One of the requirements for registration with both these bodies is that the company be registered or incorporated in Guyana. Since it has not been registered, it is a fair assumption that the previous suggestion that the company is excluded, or has excluded itself from the tax and NIS laws of Guyana is more than justified.

Readers will recall that SCG, in bringing down their tender price from US$65 million to US$51 million, had indicated that it would exclude a number of works and the critical certification of which the government boasts. I have asked for the estimated cost of the several other elements of the project which SCG excluded, whether funding for those works and the balance of the contract price had been sourced.

Conclusion
Mr Brassington has chosen to ignore direct questions from a taxpayer and citizen of this country. He is shielded by equally opaque politicians who could not be bothered about answering questions from anyone. Democracy and accountability have been turned on their heads, or dumped into the Atlantic next to the hotel.

There is nothing more that civil society can do. All the questions have been asked while any answers have been provided by the media itself. It is the new democracy, the new dispensation. There is no room for questions.

To summarise, the government has embarked on the conception, construction and financing of a $10 billion hotel built with taxpayers money but from which taxpayers labour was explicitly excluded in a collusion between the Government of Guyana and the Chinese construction company. The hotel will be sold to God knows who at a price which has not been determined. The hotel comes with concessions extending in some cases to twenty years – itself historic.

Meanwhile we claim that we cannot afford to increase the subvention to the University of Guyana, equip our regional hospitals and health centres, pay better pensions or solve the problems at the NIS.

It is a new model of development.

Introduction
Earlier this week I sent to Mr Winston Brassington, the head of Atlantic Hotel Inc, (AHI) the company financing the construction of the hotel complex a number of questions dealing mainly with the construction phase. I was hoping that I could address the issues in today’s Business Page. However, Mr Brassington in a telephone call initiated by me explained that events at the Guyana Power and Light Inc prevented him from addressing my questions but promised that I would have a response by tomorrow (Monday). Out of respect for that commitment, I will await his response.

Meanwhile Guyanese learnt from no less a person that a member of the Board of the controversial NICIL, AHI’s wholly-owned parent, that AHI has found all but US$8 million to complete the construction of the complex. At the end of 2011, NICIL had advanced to SCG International (Trinidad and Tobago) Ltd the sum of $2,036.7 billion, or the equivalent of US$10 million, as a 20% advance payment on the US$50.9 million contract. Since that date NICIL received some US$25 million from the sale of the government’s share in GT&T (with a balance of US$5 million) to come. This suggests that NICIL/AHI have secured financing for at least US$35 million to US$40 million, leaving a gap on the construction cost of some $11 million. Since the total cost of the project was budgeted at US$41 million against the US$50.9 million price contracted with SCG, one is left to speculate whether the US$8 million shortfall figure given by Dr Luncheon is to cover the entire contract cost or the difference between what NICIL/AHI have secured from the US$40 million privatisation proceeds.

The unclear Luncheon
business pageNot surprisingly and not for the first time, Dr Luncheon’s statement is less clear than the country deserves and adds nothing to another document which I have seen. The document, an Agreement between the Guyana and AHI, dated April 14, 2011 and signed by Winston Brassington on behalf of AHI and Mr Dhanraj Dhanpaul, CEO (ag) of Guyana Office for Investment (go-Invest) on behalf of the Guyana Government, states as follows:

That AHI was formed with the objective of building and operating a minimum of 150-room hotel (revised in 2010 to 197 rooms) and an entertainment complex (including a casino, nightclub and restaurant);

The Developer, through its owners (current and prospective), has represented to the government that the Undertaking is currently in the tender stage for construction, with a projected timeline for the anticipated commencement of construction being Q2, 2011 with a construction timeframe of 2 years, following the conclusion of a contract with a Contractor, to deliver the substantial portion of the undertaking;

The Developer will own the Hotel and Entertainment Complex which shall be operated by third parties; the Hotel will be operated by the Marriott; the casino, nightclub and restaurant will be operated by other third party operators to be identified. All income earned and expenditures made will be in the name of the Developer, with the Operators being paid an operator’s fee for services provided.

The owners of the Developer have further represented to Government that the Undertaking will contribute to the development of the Guyanese economy, more particularly the hospitality sector and have therefore applied to Government for concessions.

Government negotiates concessions and dooms Pegasus
Of course, the owners of the developer are the same Government with which Mr Brassington made the agreement. And note that the only hint that the AHI will sell the property is in B above – “current and prospective owners.” And under the Agreement the new facility is being granted for ten years exemption from corporation, property and withholding tax (including the payment of interest and dividends to debt providers and equity holders. Additionally the developer has received an undertaking that it will be granted a licence to operate a casino.

Additionally, the developer is guaranteed relief from duty and excise tax on capital repairs or replacements including machinery, equipment and buildings costing more than US$10,000. And on top of that, the developer is entitled to a “one-off” retrofitting of the project within ten years if so required for a period of ten years (sic) from the commencement of commercial operations.

There is absolutely no way any investor can compete with AHI’s project unless it receives similar concessions. It is either that the hotel will make super-profits or competitors will simply be run out of business. These concessions spell the death-knell of the Guyana Pegasus and possibly the Princess Hotel as well. The only other entity in Guyana that came close to such generous concessions is the Ramroop-owned Queens Atlantic Inc, lending credence to the rumours that the investor will be the same group.

The Agreement as signed has no conditions regarding ownership and it means that AHI can sell the hotel one day after completion with all the massive concessions which amount to a windfall to whoever the buyer turns out to be.

The Guyana Government has now taken on the role of venture-capitalist and procurer of concessions, licences and permits for an unknown entity(ies) which is not willing to invest any money upfront. It is hard to think of any similar arrangement across the Caribbean!

The wrong feasibility
Now that it is becoming almost certain that AHI is risking taxpayers’ money for the benefit of some private investor/s, one must wonder why the Government went to such lengths to convince the public that the project was feasible. If the project was undertaken for resale, the only feasibility was whether or not there would be takers of any offer of sale of the hotel on completion. And with such sweeteners the only thing one has to fear is diabetes, not a shortage of buyers. But that is another part of what seems to have been an elaborate but not too hidden plan to fool the Guyanese public while building a project for selected friends of the Government.

We wait to hear what Dr Luncheon and Mr Brassington will tell us next.

The construction
Now this is another story. Recall that when AHI conceived the project its budget was US$41 million based on its drawings and specifications. It went to tender on that basis. So when SCG sent in a tender for US$65 million, AHI said to SCG please go and do an alternate design meeting Marriott’s standards. SCG came back with a design but this time costing US$51 million but excluding several costs and most importantly that relating to Leadership in Energy and Environmental Design (LEED) certification. What SCG was effectively telling AHI is that if you wish to have LEED certification then you must pay for it. And Mr Brassington said yes. Now that we are cutting corners on statutory deductions, changing design specifications and eco-features we allow the contractor to dictate to us about quality certification.

Having been duped by SCG, the Chinese contractor, on the importation of labour – although Guyana had the final say in work permits – the next danger for us is who is looking after the interest of AHI in ensuring that we do not have a similar experience in the quality of the material used or in supervising the execution of the work by the contractor. Earlier this week I was being regaled with the post-modern technology and material being employed on the cut-price contract. Well maybe that explains why none of the local consulting engineering firms was retained by AHI to look after its interest.

Supervision
One experienced engineer expressed to me considerable doubts about the ability of AHI to put together a competent team to deal with the international contractor, SCG. According to the engineer, AHI has stepped well out of its league, even though the internet made it easy to research the experiences of other countries using Chinese contractors with Chinese labour.

He suggested that persons who negotiate building works contracts should have an understanding of building components, building codes and current construction practices. Of course, the contractor on a project of this size should have a Quality Manager whose primary responsibility is to meet Quality Assurance/Quality specifications. But contractors are mainly interested in maximising profits which comes from reducing costs, and so AHI must satisfy itself and specify the steps embedded in the process to ensure that quality assurance and quality control matches the agreed plans and specifications.

Price v quality
AHI would have needed to ensure, even before construction started, that it had in place a team to manage the construction supervision, including the ‘Engineer’ who will sign off on the final product and approve design changes. While only a limited amount of information has reached the public, the several volumes of contract documents – probably written in one of China’s languages − would comprise of specs and drawings. Within the specs are written quality responsibilities for the contractor, eg a spec for cast in place concrete would require the contactor to submit product data for the cement, concrete admixtures, mixing requirements of concrete plant if readymix concrete is used, a concrete mix design, certification that the plant is certified, type of aggregate used, tests used, certification of the readymix trucks, etc. Similarly there are specifications for formwork, reinforcement, survey, safety, code compliance, electrical, mechanical, windows, masonry, and so on.

It is true that we negotiated on price. The question now is whether AHI knows whether it has compromised on quality.

Next week: Conclusion