A Special Report of the Auditor General Dan Duguay released to the Cabinet last week concerning the debris removal contract awarded to MC Restoration vindicates the decision for the most part.
In the Auditor General’s opinion, however, the contract should have been awarded to one of the other five bidders.
He also said the process could have been enhanced if more efforts were made to obtain bids from local contractors.
Regardless, the Auditor General found the Cabinet Secretary acted quickly and reasonably in awarding the contract.
‘The process for selection was reasonable given the severe time pressures in place during the awarding of the contract,’ he said.
The report also found no evidence that Cabinet Minister Frank McField violated any laws or used his position to obtain a debris-removal trucking contract or get better conditions than any other Cayman contractor.
The Auditor General’s report shows MC Restoration submitted the second lowest bid for the debris removal contract at US$10.7 million.
The bids ranged from US$8.76 million to US$19 million.
The lowest bidder, a company called DRC, was disqualified by the Government during due diligence checks because of an undisclosed relationship between it and the firm of James Lee Witt, which acted as the Government agent in the management of the debris removal contract.
In that role, James Lee Witt certified the quantities of debris collected, its classification, and whether it was disposed of in accordance with the terms of the contract.
The Government felt it could not award the contract to DRC given the conflict of interest whereby it was monitored by James Lee Witt, with which it had close ties.
The Auditor General, however, felt the relationship between DRC and James Lee Witt could have been dealt with in light of the nearly $2 million cost advantage.
‘In my opinion, the relationship would have had to have been modified so that the government would have been assured that counts and quality assessment would have been fair and accurate,’ the Auditor General wrote. ‘In the worst case analysis, the government could have hired a third party to watch the Lee Witt overseers if it was concerned with accuracy.
‘This would have added to the final cost of the DRC contract, but would have, in my opinion, still resulted in significant cost savings.’
For the Government, however, the decision swung on the nondisclosure, something which it said could have led to a ‘major embarrassment for the Government and potential claims of lack of diligence’ had it not been discovered.
‘While it may be correct that concerns could have been resolved on the conflicts of interest, it must be recognized that the underlying reason for disqualifying the proposal from DRC was the failure to disclose the relationship between James Lee Witt Associates and DRC,’ the Government wrote in response.
The Auditor General also noted that the request for bids was sent only to foreign companies, bringing into question whether local contractors had a chance to bid on the contract.
The Cabinet Secretary indicated that local companies were aware of the contract through the local media but none had contact him.
‘With the benefit of hindsight, I think that it would have been appropriate for the Cabinet Secretary to have made more of an effort to obtain bids from local members of the contracting community,’ he wrote.
‘I do agree that there should have been an awareness by the community that a contract for clean up was to be awarded.’
In its response, the Government said the fact local companies did not express greater interest in the debris removal and processing contract might have been a result of ‘the lack of familiarity with the entire complex process which would have to be undertaken.’
‘Local heavy equipment operators have tremendous expertise and experience in various aspects of debris removal, however, none had the collective resources to handle all aspects of this complex undertaking following Hurricane Ivan,’ the Government stated.
Another aspect of the contract the Auditor General investigated was whether the Government accepted a higher bid from MC Restoration than an earlier unsolicited bid from MC Florida, which had the same principals.
The Auditor General found the bids not directly comparable for a number of reasons.
When he made the necessary revisions to make the two bids comparable, he found the final contract given to MC Restoration almost $2 million less than the earlier bid.
Whether the Government received good value for money was another question the Auditor General dealt with.
He found that it was difficult to compare MC Restoration’s contract price with other jurisdictions because of the circumstances particular to the Cayman situation.
‘For example, hurricanes in Florida did not result in a large number of derelict vehicles ruined by saltwater,’ wrote the Auditor General. ‘Nor did contracts there address issues like sand screening or Freon removal from appliances.’
With the common aspects of debris removal, such as the hauling and processing of debris, the Auditor General found the Cayman Islands Government actually paid less than a jurisdiction in Florida.
‘In the case of the City of Port St. Lucie, a rate of US$22.50 to US$25 was paid for the hauling and processing of debris,’ he wrote. ‘This would be directly comparable to the (MC Restoration) contract price of $20.50, which is the sum of $12 haulage charge and the $8.50 processing charge.
No special interest
As announced earlier this year, the Auditor General confirmed in his report that, to the best of his knowledge, there was no ownership or beneficial ownership interest in MC Restoration by any Caymanians.
The Auditor General did find that MC Restoration violated the terms of its Local Companies Control Licence by bringing in more equipment than allowed.
‘However, except for a few isolated and minor instances, the surplus equipment was not used and therefore did not adversely impact local contractors,’ the Auditor General said.
In the Auditor General’s opinion, MC Restoration fulfilled its requirements under its LCCL by employing local labour and equipment as much as possible.
‘As of the date of my review, MC Restoration had over 200 Caymanians on staff and approximately 15 foreign workers to provide management,’ he wrote.
The Auditor General also found that MC Restoration spent more than 80 per cent of expenditures on local workers and services.
The propriety of Minister Frank McField’s obtaining a trucking contract with MC Restoration as a private citizen was another topic discussed by the Auditor General.
‘My review… indicated that Dr. McField had obtained the same set price for the use of the trucks as those offered to other Caymanian contractors,’ he said.
‘In addition, it would be fair to say that Dr. McField did not receive any special consideration as MC Restoration had need for all dump trucks that were offered to it under contract.’
The Auditor General said he took advice from the Attorney General as to the legality of Dr. McField entering into a contract with MC Restoration.
‘After review of the relevant legislation and codes of conduct, I have concluded that Dr. McField violated no law or regulation in entering into a contract with MC Restoration.’
Mr. Duguay praised Mr. McField’s transparency in the matter.
‘I would like to take this opportunity to congratulate Dr. McField in openly acknowledging through the media that he had entered into a contract with MC Restoration,’ he wrote.
‘Although he was not technically required to do so, I believe that such openness is crucial in ensuring that the residents of the Cayman Islands get the openness and accountability that they are entitled to.’