If you’re interested in buying a new vehicle and you discover to your dismay that the Cadillac SUV you’ve set your heart on is too expensive, then perhaps the choice should be modified somewhat, even to the extent of choosing a Suzuki Jimney. Perhaps it is time for the BVI Ports Authority and Premier Ralph O’Neal to take this into consideration with respect to the proposed West End ferry terminal.
The current situation seems to be that prospective contractors are offering bids of close to $40 million for the package as submitted by the BVIPA and its consultant, CH2M Hill, in late December. This discrepancy was predicted in an earlier commentary published in the Beacon, and, indeed, the bids have been available since early January. Only now, with the elections at hand, is the discrepancy being made public.
Apparently, BVIPA officials have been trying since January to negotiate the cost down by all means short of reducing the scope of the project. Evidently they have been less than successful.
There are two basic types of contract that are practical in the Caribbean. One is the “lump sum, fixed price” contract. This contract is supposedly based on relatively complete plans and a detailed and complete scope of work. And, given this level of data, the bid proposal typically says, “In accordance with the plans and written detailed scope of work, the price for the package is … .”
The second type of contract is “cost plus.” The former often seems to turn into the latter if project cost control is poor or absent. And, all too often, this seems to be the case with government-sponsored projects.
In the fixed price contract (which is generally preferred by the government), the financial risk is all on the contractor. This is certainly true if there are no changes in scope or if the contractor does not have an operational “change order” system that he or she applies rigidly.
It has been said of Virgin Islands projects (both public and private) that fixed prices are valid only until the initial breaking of ground is complete. After that … .
Financial risks
Considering that the risk is generally on the contractor and further considering that the government’s current record of paying contractors does not appear to be strong, the contractors must take steps to protect themselves at the bid stage. Not to do so can quickly lead to bankruptcy.
As a consequence, it is naive to assume that a contractor is going to lower his or her bid unless there is a significant reduction in the scope of work. This is often a lesson that is expensive for a contractor to learn. But greed and the anxiety to get a job (and the prospect of profit) can distort thinking. And the results are rarely good!
The project is supposed to be funded by loans, presumably from local banks. The repayment of the loans is apparently projected to be from the rentals of the shops and restaurant space included in the current plans. But considering the current state of the local economy and the level of tourist arrivals, as well as the general condition of hotel occupancy and restaurant closures, any major expansion of restaurant space or shop space in Tortola’s west end would appear to be highly problematic from an economic standpoint.
So it would be no great surprise if the bank loans were hard to obtain — if not impossible. And, at the very least, if the project were not financially backed by the government, at least as a contingent liability, then there may be little interest at all on the part of the banks.
If the BVIPA is unsuccessful in reducing the price, and if the terms were similar to those proposed for the recent Caribbean Development Bank loan, then the annual payment due from the BVIPA will be in the order of $4.3 million per year. This amount, if it is to be drawn from the rental income of the shop and office space, would require perhaps an income for those businesses of $15 to $20 million per year. I frankly doubt that this is possible. Which can probably be taken to mean that the space will go vacant for the foreseeable future.
West End arrivals
The BVIPA continues to claim that 30,000 passengers per month are processed through West End. This figure is claimed to be the result of consultation with the BVI Tourist Board, customs and immigration. However, the figure is in no way backed up by hard data, and it is not backed up by the premier’s own statements in the House of Assembly. At the present time, the figure seems high by a factor of at least two if all passengers are counted, and perhaps as much as four if only tourists are counted.
The premier is quoted as saying that the ferry dock will not affect the mooring area for charter and private yachts. But this seems to be contrary to BVIPA Managing Director Vincent O’Neal’s response to the question of what would happen to even the registered moorings. When asked, the BVIPA director’s response was “see you in court.” This could very easily be taken as the equivalent of “who cares?”
In any case, it seems obvious from a visual examination of the harbour that all moorings to the north of the east/west centreline of Sopers Hole will disappear. This, if for no other reason than to provide for turning space for ferries. In support of this statement, one has only to look at Sopers Hole from above and realise that there are currently no mooring points north of the centreline in the area of the current terminal or the approaches to it.
The eastern mooring points might be safe, except that the plans allow for a new barge ramp to the east of the main terminal. Considering that the current barge facilities seem to work adequately, the rationale for a new facility seems unclear.
Scheduled completion
In addition, the new facility supposedly is scheduled to be in operation by 2012. But any rational analysis of the scope of the project and the fact that much, if not all, of the structure must be built on piles would indicate that a construction period of at least three years will be required. And the construction disruption of West End will most certainly be a problem for tourists and residents for that period.
If the government chooses to proceed with the current plans, without modification (and given past performance), the following will probably be the result.
• The ultimate cost will be in the order of $60 million.
• Sopers Hole will disappear as a private yacht mooring area.
• Property values above the new terminal (and quite possibly in the whole of West End) will be devastated simply because of the construction activity.
• The departure tax from West End will be raised sharply in order to gain funds to finance the project.
• Unless the departure tax from Road Town is also increased (thereby making the VI less attractive to tourists), the traffic through West End will decrease.
At this point in time, the government could, with minimal loss of face, settle for a smaller, “minimum adequate,” terminal. But this is a remote prospect at best.