Port Authority criticised

The Auditor General’s special report on the Royal Watler Cruise Terminal project is critical of the Port Authority management, its Board of Directors, its former Chairman McKeeva Bush and of the structure of the Port Authority itself.

The report is also critical of the Royal Watler Cruise Terminal Project manager Burns Conolly Group Limited.

With regard to the project manager, the Auditor General found it surprising an outside project manager was recruited in the first place.

‘One would surmise the reason for contracting a third party is that the Port Authority lacked the capacity in-house to carry out a capital project of this size and complexity,’ the report stated. ‘However, we learned that the Port Authority already had a project manager working on the repair of the cargo pier.’

The report stated there was a breakdown of the normal channels of authority inherent in an agent-principal relationship.

‘There was a breakdown in communications leading to the Port Authority management being unaware of changes made to the design until a request for payment was submitted in some instances,’ the report stated. ‘In our opinion, numerous changes to the upland works are also indicative of poor project planning and management, as a design-build contract is supposed to minimise such changes.’

The upland works deal with the construction of buildings awarded to Hurlston Ltd.

As of the date of the report, the Auditor General noted there had been more than $519,000 of payment certificates for variations of works.

‘Many of the variations arise when the owner approves changes made to the original design or specification to which they originally signed off,’ the report stated. ‘According to the Port Authority management, they did not make these requests and they are of the opinion the Project Manager initiated those changes.’

The report stated that the Port Authority maintains that 15 of 28 variations were not approved by them, while the Project Manager maintains that 21 of 28 variations were initiated by the Port Authority management and/or the Port Authority Board.

‘In our opinion, there was a clear lack of communication between the Port Authority management and the Project Manager on key decisions and approvals,’ the report stated. ‘We have not attempted to resolve this difference of opinion between the two parties (as to who authorised the variations) but we note that a disagreement on such an important matter is proof of our contention that there was, and continues to be, a lack of clear communication between the Port Authority and the Project Manager.

‘Part of the reason for these disagreements is that the Port Authority management took a hands-off approach in regards to monitoring the actions of the Project Manager’.

In the Auditor General’s opinion, the Port Authority management should have pro-actively communicated with the Project Manager to ensure all variations of works were necessary and authorised the changes to the design before the variations were physically made.

‘It appears the Port Authority management still do not know what these changes are or how they were authorised,’ the report states.

In addition, the report states that Port Authority management failed to attend many project progress meetings.

‘The control over the project became reactive, in that only when variations showed up on payment certificates did the Port Authority management get involved in the process.’

The report is also critical of the Port Authority Board’s lack of control over the selection of contractors, particularly after the project’s Tenders Assessment Committee’s decision was overridden by the Project Manager.

‘It is true that the Board eventually did ratify the Project Manager’s decision to select another contractor, but in effect, the Board had little choice as the Project Manager had already, in his capacity as agent, communicated to the bidders that more information was needed. Thus the review of bids extended beyond the conclusion reached by the TAC.’

The former Chairman of the Port Authority, who – although he is not mentioned by name in the report – was Leader of the Opposition McKeeva Bush, is criticised for a letter he sent to Misener Marine Corporation Inc. on 29 April 2003 regarding possible cruise berthing facilities.

‘This letter was not on Port Authority letterhead, but was instead on letterhead of the Ministry of Tourism, Environment, Development and Commerce,’ the report states. ‘Moreover, the Chairman signed the letter simultaneously quoting the titles of Leader of Government Business, Chairman of the Port Authority and Minister of Tourism.’

The Auditor General said the action was ‘contrary to the idea of establishing Statutory Authorities as separate legal entities’.

‘The basis of establishing Statutory Authorities is to grant them autonomy from government in their decision-making processes.’

The report also notes that Mr. Bush either engaged or attempted to engage employees, consultants and contractors with the Port Authority without first referring to the Port Authority Board or management.

The 29 April letter to Misener was cited as an example.

‘In this letter, the Chairman was attempting to give Misener, albeit with caveats, the exclusive right to design, build and finance a cruise ship berthing facility,’ the report stated. ‘This is an example of unilateral decision making without consultation with other Board members.’

In a one-page response to the Auditor General’s findings appended to the report, Port Director Paul Hurlston indicates that Mr. Bush’s involvement ‘may well be the core issue that caused the failures in the system’.

Mr. Hurlston also pointed to the role of the Project Manager for some of the difficulties with the project.

‘The Project Manager is employed to act on behalf of management and as such is instructed by and answerable to management,’ Mr. Hurlston said.

‘One of the difficulties that the Royal Water Cruise Terminal project experienced was that the Project Manager due to other factors, was instructed and answerable to certain members of the Board of Directors, and in that way, the management of the Port Authority was to a large extend circumvented for the decision-making process.’

Mr. Hurlston said management attempted to correct the difficulty, but was unsuccessful because ‘this project appeared to be considered more a Board of Directors project rather than that of the Port Authority of Cayman Islands.

When contacted for comment, Mr. Bush pointed out that he has not been involved in the project for a whole year.

He also said the Board of Directors was aware about his letter to the Misener Marine prior to him sending it.

‘The caveat was that the final agreement would have to go to the Board,’ he said. ‘It was just an approval in principle.’

In a written statement of response, Mr. Bush said the Port Authority conducted its affairs lawfully.

‘Bids were received and handed over by the Board to its highly qualified project manager Burns Conolly,’ Mr. Bush stated. ‘Mr. Conolly analysed the bids from various contractors and made recommendations to the Board (and) based on his analysis, the Board properly and unanimously accepted the recommendations of its project manager and contracts were duly awarded.’

Cabinet Minister Charles Clifford said the Auditor General’s report ‘essentially confirms what I said in answer to Parliamentary Questions a few weeks ago and highlights the problem of having a minister chair a Public Authority.’

Mr. Clifford acknowledged however, that this Auditor General’s report did not delve into the issue of Port Authority land near Safe Haven, something that created heated debate between him and Mr. Bush when the Parliamentary Questions were answered.

Mr. Clifford also defended the Port Authority management.

‘Knowing what I know, I have absolute confidence in the management of the Port Authority and in the abilities of the Port Director and Deputy Director.’

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