Last week, we reported that a heat wave is hitting the North and South Poles with temperature reaching 70 degrees and 50 degrees above normal, respectively. The situation has since worsened as scientists on Friday reported that the ice shelf on the eastern part of Antarctica, the 463-square-mile Glenzer Conger about the size of New York City, has now collapsed due mainly to human activity that continues to release greenhouse gases into the atmosphere.
The eastern part of Antarctica has always been considered stable, compared with the western part where the Thwaites Glacier about the size of Florida is in danger of collapse, making this latest development worrisome for scientists. The former contains more than five times the ice that is found in the latter. If all of the ice in the east part were to melt it would release so much water that sea levels would rise by more than 160 feet. While this may take centuries to happen at the current rate of warming, scientists are unclear as to the extent of sea level rise in the coming decades because of the melting of polar ice caps. (See https://ca.yahoo.com/news/antarctic-ice-shelf-the-size-of-new-york-city-collapses-201709973.html).
Recently, there have been sharp increases in the prices of coal, oil and gas because of the Russian invasion of Ukraine. Countries that are dependent on Russia for their supplies are scrambling to find alternative sources to satisfy their energy needs. However, according to the United Nations Secretary-General, the rush to use fossil fuels is “madness” and threatens global climate targets. He warned that these short-term measures might “close the window” on the Paris Accord on Climate Change. Accordingly, he called on countries, including China, to fully phase out coal by 2040. (See https://ca.yahoo.com/news/climate-change-madness-turn-fossil-093336392.html).
Follow-up on last week’s article on the Amaila Falls Hydropower Project
In response to last week’s article, one of our readers enquired about the level of confidence that should be placed on the Norwegian Agency for Development Co-operation (NORAD) report as regards possible adverse effects on the lives of the communities in the area in which the Amaila Falls Hydropower Project is to be constructed. According to the report, (i) no resettlement of communities is required as there is limited human activity in the area directly affected by the project; and (ii) the real environmental risk relates to the impact on Indigenous communities as a result of the construction of 85 km of new access road and the rehabilitation of 122 km of existing roads that provide easy access to indiscriminate and illegal mining and exploitation of the forest.
In 2014, Norway had deposited US$80 million with the Inter-American Development Bank (IDB) as Guyana’s equity share in the Project in recognition of the latter’s efforts to protect its rainforest from exploitation and degradation and to move away from the use of fossil fuels towards emission-free power generation. However, Sithe Global, the developer of the Project, withdrew because of a lack of political consensus in relation to the Project. As a result, representatives of the governments of Guyana and Norway met in December 2015 and agreed to conduct a fresh assessment of the Project. The NORAD report is the product of this assessment. We have no reason to believe that the report should not be relied upon.
The reader also made an important observation about the impact of recent unseasonal heavy rains that have resulted in severe floods in many parts of the country, especially in the hinterland areas where many were left stranded. He also asserted that ‘mining and deforestation in and around rivers and hydropower plants are said to have eroded river banks making them weak and narrow, unable to hold their structure during intense flooding, which experts agree will be a regular occurrence due to the effects of climate change’. We thank the reader for contributing to the discussion on the need to preserve and protect our environment and hope that the Authorities will take note.
In today’s article, we discuss the Cheddi Jagan International Airport Expansion Project which, after more than eleven years since the contract award, is yet to be completed.
Estimated costs and financing arrangements
The total cost of the Project was initially pegged at US$150 million to be financed by a loan of US$138 million from the China Exim Bank, with US$12 million in counterpart funding from the Government of Guyana. However, there were significant delays and cost overruns due mainly to the absence of feasibility studies prior to the signing of the contract with China Harbour Engineering Corporation (CHEC); lack of clarity in relation to scope of works; and ineffective supervision of the Project. As a result, the final cost is likely to be in the vicinity of US$200 million.
Contract award and commencement of works
The contract was awarded in November 2011 in the sum of US$138 million to CHEC, a mere ten days before the November 2011 national and regional elections. The nation was unaware of this development and only learnt of it from an article carried by the Jamaican Observer newspaper, raising concerns about the apparent secrecy in the award. That apart, no major contract ought to be entered into in the run-up to elections, which has a binding effect to the State, especially during the period of dissolution of Parliament. We had raised this matter when the APNU+AFC did the same during the 20-month period between the no confidence vote and the assumption to office of the current Administration.
There was also no evidence of competitive bidding before the contractor was selected. It would appear it was one of the conditionalities before the loan could have been granted that the works must be undertaken by a Chinese contractor. However, the Procurement Act is clear that all contracts for procurement of goods, services and works must be awarded based on competitive bidding procedures and the lowest evaluated bids awarded accordingly. However, Section 4 states that ‘[t]he provisions of this Act shall apply to any procurement unless they conflict with any provisions made applicable by virtue of an international agreement’. It is doubtful whether a loan agreement between the Government of Guyana and China Exim Bank can be regarded as an international agreement since, by definition, an international agreement is an agreement between two or more countries. Where two countries are involved, it is called a bilateral agreement, otherwise it is a multilateral agreement. Since the agreement is with the China Exim Bank as distinct from the Government of China, it cannot be regarded as a bilateral agreement. When this matter was raised, government officials had argued that the Exim Bank is owned by the Chinese government and therefore it is a bilateral agreement. They also contended, quite inappropriately, that the situation is analogous to the Government entering into a loan agreement with the IDB where the requirement is for the procurement of goods, services and works are to be made only from IDB member countries.
The works did not commence until January 2013, some 13 months after the contract award, with an estimated completion date of August 2015. Additionally, the consultants were not hired until July 2014, resulting in the contractor working unsupervised for over 18 months.
Absence of feasibility studies
There was no evidence of any studies carried out to determine the feasibility and economic viability of a project of this magnitude which includes construction of a new terminal building; acquisition of eight boarding bridges; and installation of other state-of-the-art equipment, such as elevators, escalators, and x-ray scanners, along with flight information and security monitoring systems. In August 2015, the issue was raised with former Public Infrastructure Minister David Patterson who was unable to shed any light on the matter. He suggested that it was the responsibility of the previous Administration to ensure that such studies were undertaken before deciding whether or not to proceed with the Project as configured. (See https://mopw.gov.gy/posts/cjia-project-recommence-week-will-not-exceed-initial-us150-m-price-tag.)
In April 2019, Mr. Patterson repeated his concern that at the time of the contract signing, there were no feasibility studies including soil investigations and site surveys; and despite this, the contract sum and the general scope of works were agreed to. He stated that soon after the works commenced, the soil conditions in the proposed north east runway were found to be unsuitable, something that could have been discovered if studies were executed before the signing of the contract. Additionally, the decision to also extend the runway in the south west direction resulted in additional excavation and sand filling. (See https://guyanachronicle.com/2019/04/24/minister-patterson-clears-up-issues-surrounding-cjia-project/)
A year after the signing of the contract, a former senior Government official insisted that feasibility studies and evaluations were undertaken. (See https://www.guyanatimesinternational.com/guyana-china-sign-us130m-airport-expansion-deal/.) However, according to Attorney-at-law and Chartered Accountant Christopher Ram, such studies appeared to have been prepared to justify the expenditure rather than vice-versa. He reminded readers of the statement the said official had made that ‘there was only a narrow window to grab the Chinese money when the big man from Asia was passing through the region, only enough time for us to grab and no time for thinking. (See http://www.chrisram.net/?p=1250 dated 30 June 2013.)
The absence of feasibility studies prior to the signing of the contract would have contributed in no small measure to the seven-year delay in its execution, not to mention significant design changes and cost overruns.
Status of the Project as of July 2015
According to Mr. Patterson, at the time the APNU+AFC took over the reins of government, almost 35 per cent of the contract sum had already been paid to CHEC although only seven percent of the worked were completed. The contractor was also claiming an additional US$44 million. Accordingly, the Government decided to halt works for a week to allow for discussions with the contractor as regards the precise terms and conditions of the contract. The former Minister referred to CHEC’s contention that it had not been provided with enough information to enable it to prepare the tender, notwithstanding that the contract was signed some four years ago. He stated that no one was able to provide him with the specifics of the terms of reference for the preparation of the tender and that he was unable to obtain the relevant documents leading up to the signing of the contract.
Mr. Patterson further stated that the Government was presented with two main options on the way forward: abandoning the project and risking possible court action case; or allocating an additional US$35 million more to project to make up for poor preliminary planning and execution. The Government opted for the latter after certain adjustments were made to the scope of works, and a new deadline was set for 31 December 2018. (See https://guyanaaviation.com/2015/07/22/cheddi-jagan-international-airport-expansion-project-halted/.)
According to the Chief Executive Officer of the Airport, amounts totalling US$111.79 million were expended as of 31 December 2017, representing 75 percent of the original budget.
Status of the Project as of September 2020
It is not clear what percentage of the works were completed and how much was expended at the time of change in Administration in August 2020. However, during a visit to the Project in September 2020, the President identified 71 defects that needed to be rectified. These included: fixing of a cracked section of the runway skirt; sealing the floor tiles in the departure area; getting the four air bridges fully functional or replaced; replacing specified lighting fixtures; fixing doors and modifying others to specific fire codes; fixing the ceiling; fixing the toilets; separating the generator room; and repairing the system to allow for the sewage water to be separated.
The President made it clear that the Government would only accept completed works based on the original contract entered into in 2011. A new deadline for completion of the Project was set for 31 December 2021. However, according to the current Minister of Public Works, because of shipping delays as a result of the COVID-19 pandemic, this deadline is likely to be overrun; and the Project might not be completed until early 2022.
Latest developments
According to the Chief Executive Officer of the Airport, the works were only 54 per cent completed as of 11 January 2022, with more than US$160 million reportedly already spent. However, according to the Minister, the final cost is expected not exceed US$200 million, and a revised completion date for the Project is slated for 20 June 2022.
