Road project $40M over budget
The current incarnation of the New Providence Road Improvement Project will eventually cost the government $154 million, estimated officials from Argentinian contractor Jose Cartellone Construcciones Civiles (JCCC), who testified before the Public Accounts Committee (PAC) of the House of Assembly, during an ongoing probe.
The final price represents cost overruns of more than $40 million above the $113 million the government borrowed in 2008 for ongoing works.
In fact, Ministry of Public Works officials estimated that the borrowed money will be completely expended by April 2012.
JCCC officials told the PAC that the company does not expect to complete the project before September 2012, despite the government’s initial promise that it would be completed by the first quarter of next year.
According to information obtained exclusively by The Nassau Guardian, the project was $23 million over budget as of June, due to new components to the project, unanticipated costs, delays in design and the rising price of raw materials.
Testimony given to the PAC said the Ministry of Finance could have prevented much of the cost overruns had it decided to hedge its bets on the possible rising prices of raw materials for the project, as was advised by some in government.
JCCC estimates that the cost of raw materials is now 25 percent higher than prices benchmarked in the original contract, which has never been tabled in the House of Assembly.
As of June, nearly $10 million in cost overruns was due to the fluctuation in the price of raw materials, mainly because of the Arab Spring this year, which drove the price of light sweet crude higher due to decreased production in key oil producing nations like Libya.
However, the spike could have been avoided, according to testimony given to the committee, if the Ministry of Finance had implemented a hedging strategy; such as investing in long-term oil futures – the profits from those investments would have offset the increased price in oil.
The Guardian understands that a high-ranking Ministry of Public Works official testified before the PAC that the Ministry of Finance said it was too expensive to hedge on raw materials, though the official admitted to not being involved in those negotiations.
The government has committed to paying for the cost overruns, which likely means that it will have to borrow more money from the IDB or another international lending institution to cover the $40 million shortfall.
A ROCKY HISTORY
The government often talks about the “$120 million” road improvement project, but such statements are somewhat misleading.
The contract for the New Providence Road Improvement went to tender for over $119 million in 2007.
But by August 2008, the Government of The Bahamas signed a memorandum of understanding with JCCC for $113 million for work that is now ongoing, with an additional $6.7 million provisional sum for work on the Carmichael Road and Cowpen Road corridors.
The work on Cowpen and Carmichael Roads has never been authorized to begin.
The Guardian understands this is because of land acquisition issues.
The contract was signed with JCCC on September 22, 2008.
Since then, unanticipated factors, such as sinkholes along the Bethel Avenue corridor and the need for extra, legally obtained fill, have led to variations and new items being added to the contract.
The government has been excoriated over its handling of the project, the largest of its kind in the nation’s history.
Last year, the Coconut Grove Business League, a group of business owners who claimed their enterprises were adversely impacted by work on Baillou Hill Road, successfully sued the government in the Supreme Court.
However, the Court of Appeal overturned that decision this year.
But the scathing criticism has continued from residents and business owners in multiple areas of New Providence, who have experienced lengthy road closures, detours and traffic delays as several major roads have been closed simultaneously for months.
The public outcry recently prompted the government to seek outside help to complete the remainder of the project.
Prime Minister Hubert Ingraham recently confirmed that several engineers who worked on the Baha Mar road project will be hired to assist with the project.
The new West Bay Street, which opened recently, took nine months to complete.
While the NPRIP is significantly larger than the Baha Mar road project, some observers have suggested the Baha Mar road project was better planned.
On November 17, the prime minister told reporters that several corridors would be opened in the coming weeks to alleviate anticipated traffic congestion during the holidays.
“The public can look forward to a relatively hassle free Christmas season. Baillou Hill Road will be paved [from] Soldier Road in the south, up to Government House. Market Street will come from Robinson Road to Ross Corner and continue along,” said Ingraham, who claimed 11 corridors currently being worked on would be open before Christmas.
The work includes installation of a 24-inch water main from Fox Hill Road and Prince Charles Drive in the east to the junction at Baillou Hill and Robinson Road, which is expected to improve water quality.