The Cayman Islands Government needs to better manage its major capital projects, Auditor General Alastair Swarbrick recommended in his latest audit report.
The report on the government’s management of major capital projects examined how well government managed projects that accounted for approximately 25 per cent, or about $150 million, of its annual spending and looked at the three high schools projects and the construction of the Government Administration Building as case studies of how major projects are managed.
Among his findings, Mr. Swarbrick determined that Cabinet did not appear to have given formal approval of the high schools projects, a situation he found “unusual” in a project of that size.
“We’re talking about one of the biggest projects in Cayman,” said Mr. Swarbrick, adding that due to the magnitude and cost of the project, it would be expected that a formal Cabinet decision to approve the project would have been taken.
He added that while it was possible approval was given, his auditors could not find any written formal approval that had been given by Cabinet.
Leader of the Opposition Alden McLaughlin, who was minister of education when the high schools projects started, said that all the decisions regarding the schools projects were discussed extensively in Cabinet. “I don’t know if the auditor general looked at the minutes of the Cabinet meetings… but I found that part of his report a bit curious. He says later on in his report that it was clear that there were extensive discussions about the concept and development of the project… with a whole range of different people, including Cabinet.” The audit report found that the management of the schools projects fell under the Ministry of Education, which it said “did not have the management expertise or the experience in delivering building infrastructure projects”.
“The lack of an experienced project manager, together with the involvement of politicians in the conceptual design phase of the project resulted in the projects being poorly managed and controlled, leading up to the signing of the contract with the general contractor in 2008,” the report stated.
The examination of the schools project did not extend beyond the contractor, Tom Jones International, signing the contract, because the government is currently in a legal dispute with the contractor. Mr. Swarbrick said that once those legal issues were sorted out, his office would look again at the high schools project, taking the construction and close-out phases into account this time.
The Auditor General’s Office carried out its review between May and October last year.
Key elements missing
It determined that the government does not have a sound governance framework for developing major capital projects and that key elements were missing, including comprehensive business studies linked to government’s strategic objectives and strategies; clearly defined delineation of the roles of politicians and officials in procurement and project management activities; sound financial management practices; and basic quality standards for how capital projects, such as buildings, should be considered.
Mr. Swarbrick recommended that the government establish a centre of excellence that can supply resources to individual ministries to help manage large capital projects in the future.
“Government needs to ensure that effective and robust practices are in place across the public service to manage these significant capital projects to demonstrate due regard for value-for-money. We found it is left up to the individual ministries to determine how it is done,” said Mr. Swarbrick. “Therefore, we have recommended that there be a centre of excellence created to ensure these projects are managed more effectively in the future”.
One element that might assist the government develop a better framework for managing projects is the re-establishment of the Public Sector Investment Committee. That committee has not met since 2003, Mr. Swarbrick said.
However, Premier McKeeva Bush has told Cabinet that he intends to re-establish the committee to help government achieve fiscal targets.
As an example of the impact of a lack of a government-wide strategic framework to ensure capital projects align with the government’s strategic objectives and priorities, Mr. Swarbrick cited the cost of the proposed Beulah Smith High School project. The school, which was to be built in West Bay, cost the ministry $5.9 million before Cabinet decided the project could not be completed. “In the end, value for money was not achieved as significant monies were expended for what is now a vacant lot,” Mr. Swarbrick said in his report.
He pointed out that in addition to the $5.9 million spent on that stalled project, the government continues to pay interest on the funds borrowed to finance it.
The auditor general also questioned why the government had apparently not raised any red flags over the fact that the lowest tender bids for all three school projects were considerably higher than the pre-tender estimated costs for construction provided by a contract quantity surveyor in 2008. “Government did not do really do anything to identify or review why that was the case,” Mr. Swarbrick said.
The estimated cost of the Clifton Hunter High School was $44.8 million, while the lowest tender bid was $62.3 million; John Gray High School’s estimated cost was $54.8 million, the lowest tender bid was $63.2 million; and the Beulah Smith High School’s estimated cost was $40.9 million and the lowest bid was $53.4 million.
Despite an overall lack of framework for managing project, the government did use good practices when building the Government Administration Building, the auditor general found.
“While there are problems with the government’s management framework for major capital projects, we found good practices used in the building of the Government Administration Building,” said the auditor general. “The government may wish to consider these for standard practice for the management of all future major capital projects.”
However, when the auditors completed their report, the Government Administration Building had only 60 per cent occupancy, with some large ministries and authorities remaining in high-cost leased offices.
“If the original government agencies included in the GAB planning and design had moved into the GAB, the government could be saving about $2.1 million a year in leased space,” Mr. Swarbrick said.
He cited the example of the Maritime Authority, which was due to move its 79 members of staff into a 10,000 square feet space at the Government Administration Building, but instead signed a new five-year lease, at an annual cost of $511,695 a year, in November 2008. The Government Administration Building officially opened to tenants in March 2011.
Richard Sanfilippo, director of facilities management of the Government Administration Building, said Thursday that the building, as of this week, is 73 per cent occupied and three government bodies – the Maritime Authority, the Health Regulatory Authority and the General Registry – are due to move in this summer, bringing the building to 80 per cent occupancy.
He said the intention in the short term is to have between 10 and 15 per cent unoccupied space to allow for future growth.
The audit report made eight recommendations to government on how to better manage projects in the future.
The management response from the deputy governor’s office agreed that there be clear guidance on the roles and responsibilities of politicians and administrators in the delivery of major projects. “The currently legislative system only addresses, in a very limited way, evaluation of projects by the PSIC [Public Sector Investment Committee] and evaluation of tenders during the procurement process by the CTC [Central Tenders Committee]… The objective has to legislatively prescribe the roles and responsibilities for the entire project cycle and to compliment and support these with appropriate administrative guidance, systems and support,” the response read.