Prime Minister Philip Pierre Updates the Nation on Hewanorra International Airport Redevelopment Project

Review of Hewanorra International Airport Redevelopment Project: In August 2021, the Cabinet of Ministers of Saint Lucia appointed a Committee to review the HIA.

Redevelopment Project and to offer recommendations related to the Project’s scope and financing arrangements to identify fiscal space for reallocation to other priority projects of the Government. …. the Committee submitted an Interim Report containing initial findings, critical issues which have been observed during the review, and urgent recommendations. The Committee found that the Saint Lucia Air & Seaports Authority (SLASPA) entered into a construction contract with the Taiwan-based firm Overseas Engineering & Construction Co. Ltd (OECC) for the execution of the Redevelopment of the Terminal Building of HIA. The selection of OECC was solely determined by the political directorate, devoid of competitive bidding. By letter dated February 20th, 2019, to the General Manager of SLASPA with such instructions. SLASPA also engaged the Florida-based Architectural firm CBRE/HEERY previously named Heery – S&G [comprised of Heery International Company, a Georgian Corporation, and Sequeira & Gavarrette (S&G) Inc, a Florida Corporation wholly owned by Heery International Company]. Heery – S&G formed part of the Consortium with Asphalt & Mining (A&M) when SLAPSA attempted to pursue the airport redevelopment utilizing a Design Finance Build model in 2010. The A&M Consortium was paid US$2,125,256,000 or approx. EC$5.738 million for the intellectual property rights to the airport designs. These same designs were used and modified by the current architects, CBRE/HEERY who were again engaged at a contract price of approx. US$15.9 million or EC$42.9 million. It is important to note that an addendum to this contract with an amended Scope of Services and cost was signed by the Chairman of SLASPA on July 23, 2021 (one working day before the last General Elections). Executive Consulting & Management Services Inc (ECMS) was retained by Contract Agreement dated July 19, 2018, to November 30, 2020, to provide the project coordination services at a contract price of US$770,650 or EC$2.08 million ECMS was further retained by Contract Agreement dated December 1, 2020, to May 30, 2023, at an additional contract price of US$733,500.00 or EC$1.98 million. The firm of Amicus Legal which was retained as SLASPA’s External Counsel was paid an additional EC$1.689 million for vetting of the loan agreements relating to the project. The original site for the new terminal was north of the existing terminal. However, the existing project site is further northwest and appears to be premised on the integration of the Desert Star Holdings (DSH) racetrack and new seaport development. The new terminal will therefore be accessible from the La Ressource Road thereby requiring new road construction which is outside the scope of the OECC. The project is expected to be executed in 5 packages: (i) Foundation package (ii) Shell + Mechanical, Electrical, Plumbing, and Fire Protection (MEPF) package (iii) Interior Package (iv) Landside Package (v) Airside Package The effective project start date was September 11, 2020, with a planned duration of thirty (30) months. Construction commenced on November 23, 2020. Considering an initial budgeted project cost of US$175 million or EC$472.5 million, the then administration secured loan financing from the Exim Bank of Taiwan of US$100 million in 2018 and from a consortium of commercial banks of $US75 million in 2020. Additionally, the World Bank’s CATCOP loan financing of US$45 million or EC$121.5 million was contracted in May 2020 for airfield projects……the total cost to the Government of the entire HIA Capital Improvement Program (CIP) remains unclear. Based on the information and documentation presented, the Committee found some critical contractual and administrative issues such as: (i) the absence of a peer review and structured project dossier for the Project; (ii) the Project was not comprehensively appraised at its commencement; (iii) the contract price for the Project (US$130.7 million) is not fixed and was based on preliminary rather than detailed designs; and (iv) sole source procurement was adopted rather than competitive procurement of architectural and engineering (A&E) as well as contractor services. The prevailing administrative and contractual issues expose SLAPSA and the GOSL to significant risks, particularly project cost escalation. The expenditure to date is approximately US$31.8 million or EC$85.86 million. In fact, OECC claimed that the likely cost overruns up to the shell phase of the project will be approximately US$42 million or EC$113.4 million. Under Rough Order of Magnitude (ROM) scenarios, a continuation of the Project under its current track can cause the Project cost to range between US$220 million (5.0 percent of GDP) to US$245 million (5.6 percent of GDP). A worsening of project execution from its current track can cause the Project to end up costing approximately US$400 million (9.1 percent of GDP), a little more than double the initial ROM costing of US$175 million (4.0 percent of GDP). The realization of any one of these scenarios can potentially push up the country’s debt to GDP ratio. The project is behind schedule with 10 percent completion when it should be about 40 percent complete. The rate of progress analysis indicates that the project is delayed by nine (9) months as of September 2021.

………. poorly written contracts, namely those for CBRE/HEERY, ECMS, and the OECC, blur critical roles and responsibilities especially those for project management. It can be concluded that the interests of the taxpayers have not been adequately protected. The Government of Saint Lucia who has guaranteed the project. SLASPA has also provided the contractor with a guarantee to cover cost overruns with no limits for the construction of the project. This is dangerous and if it is allowed to continue, could potentially result in a financial predicament for SLASPA, as the project cost can increase by more than 100%. The five options proposed for review are: 1 Do nothing. Complete the terminal using the current design and determine the overall cost. 2 Scale down existing design to obtain a single structure by removing components including the elevated roadway and third floor with VIP lounges. 3 Use the design from 2010 with the construction of the terminal in the car park, north of the existing terminal, and demolition of the existing terminal. 4 Keep the existing terminal and incorporate it into the expansion. Create a connector and use the existing terminal for arrivals and the new scaled-down (along vertical plane) terminal for departures. leaving room for future expansion if required. piling would have already been in place. 5 Determine what could be salvaged from the ongoing foundation works and relocate the new terminal further towards the east. The government awaits the final report of the committee ……..