Recklessness at Whitehouse
THE Public Accounts Committee (PAC) of Parliament yesterday inched closer to understanding how the controversial Sandals Whitehouse Hotel project incurred a massive US$43 million in cost overruns.
In its most telling session since it began its probe of the issue almost six weeks ago, the PAC heard that the state-run Urban Development Corporation (UDC), the project manager and one-third partner, lost control over the expenditure, as the hotel project haemorrhaged.
Soaking up much of the pressure, UDC president and chief executive officer, Marjorie Campbell admitted that things had gone awry and that the safety latch on cost overruns was not utilised by Nevalco, the UDC’s site manager on the ground.
“Did the people on the ground who are committing to the expenditure receive your prior approval for increased expenditure?” PAC Chairman Audley Shaw pressed Campbell.
“No, Mr Chairman,” responded Campbell, who is facing the heat as current head of the UDC, from which former chairman Dr Vin Lawrence resigned earlier this year.
Lawrence threw in the towel after the UDC was accused by Contractor-General Greg Christie of deliberately withholding key information he needed to determine how the cost overruns came to be.
Pressed further as to the reasons for “the breakdown in the approvals process”, Campbell suggested it could have been caused by the fast-tracking of the project and the way in which it was implemented.
“If you are constructing the hotel using a fast-track methodology, where you are building as you design, it would be difficult to await the approval of the board for each claim,” Campbell argued.
Shaw rejected the explanation, insisting that “even if the UDC was only a one-third partner and the private owners were a two-third partner, there would still be an obligation to follow the procurement guidelines because whenever there is the commission and expenditure of government funds the government procurement guidelines must be followed”.
The Sandals Whitehouse project is owned one-third by the UDC, one-third by the state-run National Investment Bank of Jamaica (NIBJ) and one-third by Gorstew, Gordon ‘Butch’ Stewart’s holding company, through a joint venture called Ackendown Newtown Development Company (ANDCO). Nevalco represented UDC on the ground and Sandals is manager of the hotel.
It was originally Butch Stewart’s dream of a development that would bring prosperity to Jamaica’s lush and rustic south coast, by opening up the area to investment and job creation.
But the dream turned sour when the project began to bleed red ink and Sandals complained about costly delays and inferior finishing that hurt its top flight international brand, forcing it to refund huge sums to its early guests. Sandals is suing to recover its losses.
Shaw suggested to the UDC’s Campbell that if the government’s procurement guidelines had been observed in the Sandals project, it would not be the subject of discussion, as there were provisions for overruns based on increased costs.
“There is an approval process, there are checks and balances and there are controls in place…and what we have discovered today is that the controls were limited (or) non-existent and that is the crux of the problem…” the PAC chairman declared.
When Campbell disagreed with his suggestions, Shaw insisted: “It seemed to me the only checks and balances you had at your disposal was the approvals process and this broke down…and costs being overrun all over the place and then the bill comes to you and you just clear the bill without your prior approval.”
PAC member Mike Henry upped the tempo by citing the records of a June 6, 2002 site minutes which quoted site manager, Nevalco’s Alston Stewart, as saying if he had the authority he would terminate all contracts.
“Overall the project is going nowhere and if (I) had the project management’s authority most of the consultants on this project would be terminated,” Henry quoted an angry Stewart as saying.
“…It goes back to control again because if that statement was written in a monthly report, what action did the UDC take when such a damning statement was made by the UDC representative on the ground…? Mrs Campbell, if you can’t answer that question we should ask Mr Lawrence to come and answer them,” Shaw added.
The Committee noted that while costs were mentioned in several of the reports they did not reflect any discussion about the overruns, although the project manager had a responsibility to report cost overruns to ANDCO but had apparently not done so.
Shaw queried why there had been no active board for ANDCO since February of this year, and no board meetings two years prior to this.
“I think this committee has to record to the Government its concerns that despite all of the problems that have developed with Sandals Whitehouse there is no active board for ANDCO since February of this year and for the two years prior to that while all of these overruns were developing the board has not been meeting either,” Shaw pointed out.
“We already know the ANDCO Board was not meeting for two years. We want to know if there was an approvals process for these overruns… The monthly reports did not necessarily have that in there so what was the process by which your approval was sought to continue the project when it was clear it needed more money?” Shaw queried.
Later in the session, the PAC chairman instructed the UDC to undertake a thorough investigation into allegations by Sandals Whitehouse Hotel’s chief engineer, Patrick Borely, that an estimated 30,000 gallons of sewage, some unfiltered, had been deposited into the wetlands in the vicinity of the Westmoreland-based hotel.
The committee sought to verify the status of a leaking sewage tank which had been causing concern for the operators of the hotel. The UDC president assured that preliminary repairs had been effected and the leaking had been somewhat reduced. Further work is to be done by an American consultant who will be arriving in the island by monthend. Campbell conceded that the leaks were caused by a combination of design and construction flaws, but insisted that repairs to the structure had been completed and that the plant was operating and functioning effectively.
Shaw suggested that the UDC report back to the PAC on its investigations, during which time it should consult with the Ministry of Health and the National Environment and Planning Agency, in the event a clean-up was necessary.