Thursday, May 28, 2020
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Local contractors and New Providence roads

Last week, Baha Mar proclaimed, with much exuberance and optimism, the official initiation of its multi-billion dollar development in the Cable Beach area by completion of the new roadway surrounding the site for the planned luxury hotels.  That roadway, we are informed, was completed ahead of schedule and by all accounts, with minimum disruption to vehicular traffic in the area.  More importantly, the quality road construction work was performed by a Bahamian company.

Given the less than satisfactory work to date being performed simultaneously, under the government road improvement project throughout New Providence, one is forced to raise the question as to why all road projects in The Bahamas are not carried out by Bahamian companies?

To begin with, Bahamian road construction companies have demonstrated their ability to perform high quality work (the original Cable Beach dual carriageway, the original Sir Milo Butler Drive, Prince Charles Drive, Tonique Williams-Darling Highway, etc.) and therefore local competency in this area is not the issue.  Other things being equal, then one has to assume that it is the cost factor – that is, the foreign companies must have submitted lower bids during the international bidding process.

It is somewhat astonishing that despite the fact that those companies, if successful in the bid, would have to mobilize a foreign labor force, lease housing, equipment and other ancillary supplies and services and perform services in an alien environment where they are unfamiliar with layout of the land, that they would put forward lower bids.

Could it be that the local firms, because of their familiarity with the territory (the need to factor-in the cost of working at night and employing other unusual measures to avoid inconveniencing an impatient public or a group of disgruntled shop owners) submit bids that are realistic but invariably higher than the less informed foreign company?   We have already heard rumors that the lending institution, the Inter-American Development Bank (IDB), is contemplating advancing additional funds to The Bahamas road program loan to cover anticipated cost overruns.

Should that eventuality materialize, it would be instructive and useful to determine if the final cost of this or other similar projects were in the region of the bids submitted by the local firms.

To the extent that the IDB is a regional lending institution owned by more than 40 Latin American and Caribbean countries one can understand the rationale for permitting firms from member countries to bid on any IDB funded project.  It is equally important to appreciate, however, that large capital projects such as the road program would have a greater social and economic impact on the country if the work is performed by local companies provided that those companies were willing and able to carry out the projects.  In the interest of fairness and competition, any price differences between the local bid and perhaps a weighted-average of all other bids, could be reflected in the interest rate applied to the loan in such a way that the institution is no worse off than if it had selected the foreign firm.

Public infrastructure investments are more likely to produce greater returns if more local resources (labor, material and if possible capital) are utilized at all stages of the project.  After all, the primary purpose of a development institution is to encourage and assist the client state to meet its developmental goals by operating to its full potential; that could only be done by utilizing more and more local resources while at the same time reducing the reliance on foreign input especially in those areas where the local talent is present.

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