Members of Parliament’s Public Accounts Committee on Wednesday quizzed airport officials and project managers on why the expansion of the Owen Roberts International Airport terminal cost $23 million more than originally budgeted.
The PAC heard that the project, estimated in a 2014 outline business case to cost $51.9 million, ultimately was completed for around $74 million, and nearly a year behind schedule. The work on the airport building had been expected to be finished by the end of March 2018, but was officially opened by Prince Charles in March the following year.
The August 2018 audit report pointed to a number of issues that led to additional costs and the later-than-expected completion, including many ‘variations’ to the scope of the project, changes requested by the Cayman Islands Airports Authority after contracts were awarded, and the lack of a final business plan.
Among the changes requested by the CIAA after the contracts were signed were installing land-side canopies to provide shelter to passengers; bringing forward the implementation of the new generators to supply full emergency power at the terminal building; upgrading hurricane-grade windows to 15 pounds standard; upgrading offices on the second floor; and replacing old sections of the roof.
Using the airport windows as an example of the cost impact of changing elements mid-project, the audit report pointed out that upgrading them to hurricane grade at that stage cost the project an additional $800,000.
Funding for the project was paid for by government and by passenger facilities charges – a $13 fee per passenger. The outline business plan for the project was approved by Cabinet in August 2014 and also signed off by the Foreign and Commonwealth Office, but a final business plan was never produced, the PAC heard.
Change in consultant
The lead consultant on the expansion work was US-based consortium RS&H. The audit report noted that after a different lead consultant originally had been chosen, it became apparent that the company did not have the experience or capability to lead the project, so RS&H, which had expertise in airport construction, was hired instead.
“The change in lead consultant delayed the signing of the contract by three months (to January 2015) while RS&H obtained the necessary registrations and licenses to trade in the Cayman Islands,” the report stated.
However, Auditor General Sue Winspear, in her report, pointed out that RS&H did not perform well, leading to parts of the project “having to be re-phased, overall delays in the timescale, and cost increases”. Sub-consultants working with RS&H reported that the company was “slow to communicate with them, which has resulted in critical information not being updated or presented to the Senior Project Manager and Project Steering Group”, auditors stated.
Among the shortfalls in performance highlighted in the audit report was an issue with electrical drawing, which auditors stated had to be submitted 14 times before the government’s Building Control Unit inspectors approved them. “Approval for the electrical drawings was 36 weeks later than planned, which resulted in the start of construction being delayed by eight weeks,” the report stated.
Thomas Guyton, chairman of the Cayman Islands Airports Authority, also told the PAC Wednesday of some of the problems that had been encountered with the lead consultants, including the fact that what were supposed to be final drawings presented at the start of the construction project were incomplete. “We later found out that they were no more than 75% complete,” he said.
He also told the PAC members that a total of 412 variations had been made to the project due to omissions or errors in RS&H drawings, at a cost of $12.37 million.
He said 72 tenant variations led to $531,000 in costs, while an additional $1.15 million was spent on dealing with 79 variations relating to “unforeseen situations”. Also, the CIAA board approved another 236 changes, at a cost of $5.6 million, which Guyton said was paid for by supplemental cash that had been ring-fenced for those variations.
In relation to the cost over-runs, Guyton pointed out that the outline business plan had included a 25% risk allowance for expected risks for the duration of the project, based on the terminal being a 30-year-old building, so “if you adjust the $51.9 million for construction costs and apply the 25% risk allowance factor, you come to $71.08 million; we come in at just around 3% over that figure”.
Project manager Roy Williams, who was hired in July 2016, told the Public Accounts Committee that a meeting was scheduled to be held next month on the overall final cost of the project. The committee had heard earlier that legal advice had been taken in relation to the work done by RS&H.
Not enough meetings
It was suggested at Wednesday’s PAC meeting, and in the audit report, that a lack of meetings by the Project Steering Group, which had oversight of the work, meant that issues that could have been addressed earlier, were not.
The report noted that although the steering group had met monthly since August 2016, meetings were infrequent between July 2014 and August 2016, “at times when key procurement processes were ongoing and contracts were being signed”. No meetings were held between July and November 2014; seven meetings were held between March 2015 and February 2016; and no meetings were held between March and August 2016.
Asked about the infrequency of the meetings, Guyton admitted that while there may not have been regular meetings, “at no time was the steering committee left in the dark”.
This was echoed by CIAA Chief Executive Officer Albert Anderson who told the lawmakers that some members of the steering committee were also members of his management team and worked on a weekly basis with the contractors and consultants.
“They were very, very close to the project. Some discussions were had by email,” he said, but added, “I accept that the meetings should have been held to record when they were updated.”
Asked why, when its performance was considered so poor, RS&H had not been fired and replaced, the witnesses before the PAC all stated that there would have been no benefit to removing the lead consultant in the middle of the project. Guyton said bringing in a new lead consultant at that point would have made the project even more expensive and led to additional delays.
The project involved the expansion of the existing airport terminal and the construction of a new terminal, all while the airport continued to operate. The construction work coincided with record numbers of tourists arriving on island, meaning that the airport needed to be open every day, adding to the difficulty of the project. The original airport had been designed to handle up to 500,000 passengers a year, but since 2000, double that number was coming through its doors annually.
The PAC hearing into the Owen Roberts International Airport expansion project will continue on Thursday morning, 28 Jan., when Richard Noel and Steve Gaffing of contractor McAlpine Ltd. and Ministry of Tourism Chief Officer Stran Bodden will appear before the committee members.
Later on Thursday, the PAC will consider the ‘Improving Financial Accountability and Transparency: Budgeting (December 2020)’ report by the Office of the Auditor General. On Friday, the PAC will hold a hearing into the audit report on ‘Financial Reporting on the Cayman Islands Government: General Report, 31 December 2019 (December 2020)’.