PAC studies recommendations

he recent Public Accounts Committee’s review of the auditor general’s report on the Royal Watler Cruise Terminal will make several recommendations concerning good governance.

It is still possible the PAC will hear testimony from Hurlston Ltd., the construction company that built the upland works for the project. However, PAC Chairman Osbourne Bodden wants to get the PAC’s report out as soon as possible.

‘I think we’ve exhausted what we’re going to do,’ Mr. Bodden said at the end of testimony by three witnesses last week.

If the PAC is indeed through hearing witnesses on the matter – former Deputy Port Director and current Minister of Tourism Charles Clifford has declined to testify – Mr. Bodden believes the PAC’s report would be completed within one to two months.

One of the recommendations concerning the practice of having elected representatives sitting on statutory boards will echo one made earlier this year by Sir Richard Tucker, who headed up the Commission of Enquiry into actions of Mr. Clifford.

In the case of the Royal Watler project, Leader of the Opposition McKeeva Bush – who was then leader of government business and a cabinet minister – acted as chairman of the Port Authority board.

‘It’s a clear conflict of interest,’ Mr. Bodden said. ‘A minister should not be chairing the board.’

When asked about it during his testimony, even Mr. Bush agreed.

‘I was doing what was basically the custom for ministers at the time,’ Mr. Bush said, adding it was often felt prudent for sitting ministers to chair a board to get things done.

‘Sometimes we felt it was the best thing to do, however you know I brought a motion to the House on [discontinuing] that practice and I certainly wouldn’t put myself in that position again.

‘The Commission of Enquiry made some very pertinent recommendations on that matter and I hope they are taken on board.’

Mr. Bodden agreed Mr. Bush was not the first minister to sit as chairman of a statutory board.

All-risk insurance

During the PAC proceedings, the committee heard a variety of often conflicting testimony.

‘There are more questions than answers,’ Mr. Bodden was forced to conclude at one point.

McAlpine Ltd. General Manager Ian Pairadeau, the final witness last week, offered a new perspective on several aspects of the matter.

McAlpine bid to do the marine works of the project as part of a joint venture with Arch and Godfrey.

Tampa-based Misener Marine Corporation Inc. eventually did the marine work.

Auditor General Dan Duguay stated in his 2006 report on the Royal Watler project that Misener had ‘invalidated’ a condition of the standard design-build contract by not obtaining all-risk insurance.

In its written testimony given to the PAC, Misener argued it had not invalidated the provisions, but had negotiated it out of the contract ‘as a legitimate part of the contract negotiation and award process’. Misener stated that all-risk insurance is always a flow-through cost to the client in all cases and that it is exorbitantly expensive and comes with a very high deductible. Representatives for Misener testified that it is extremely rare in their experience to see all-risks insurance for such projects.

Mr. Pairadeau said the request for tender was clear that all-risk insurance should be provided for and he said the McAlpine bid included the cost of that insurance.

He agreed that the cost of the insurance was a ‘pass through’ to the client – meaning that McAlpine simply raised the cost of its bid by the cost of insurance.

Mr. Duguay raised the point, however, that if the Port Authority board had decided not to require all-risk insurance, it should have reduced the other bids received by the cost of the insurance before assessing the tenders.

During the PAC proceedings, Mr. Duguay asked Mr. Pairadeau if the Port Authority had taken a significant risk by not requiring Misener have all-risk insurance.

Mr. Pairadeau said there had been a significant risk to the Port Authority, especially if a major hurricane had destroyed the marine works close to completion.

‘Misener would have been ultimately responsible,’ he said, adding that it was a big and reputable company, not one likely to avoid it responsibilities.

Regardless, Mr. Duguay is of the opinion government should have all-risk insurance on its capital projects to safeguard public funds.

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