It is official: the Urban Development Corporation of T&T (Udecott) owes contractors an estimated $300 million. And the Housing Development Corporation (HDC) owes contractors not one penny.
This confirmation is coming from the chairman of both state entities: Jearlean John. In an 8 am interview at the HDC's South Quay, Port-of-Spain, office last week Thursday, John put to rest ongoing issues of contractors complaining that Government owed them tens of millions. John revealed that this is not a clear-cut issue where projects have been completed, money is outstanding and should be paid right away.
In fact, there are key issues hindering that smooth process from taking place, including a reevaluation of shoddy work on housing developments; discrepancies in claims, piecing together information to substantiate contractors' claims and some main contractors abandoning projects mid-stream. John said she always had an open door policy to sort out issues with the Contractors Association (TTCA). Threading very cautiously, she explained that every mechanism is being put in place to ensure the process is transparent and fair.
Udecott is back
To ensure transparency and accountability, Udecott has engaged the services of American firm Hill International, which provides expert project management and construction claims services to re-evaluate and audit all Udecott's documentation regarding money owed to contractors. She explained that one of the major problems with Udecott was its lack of proper documentation. In order to verify contractors' claims, John said they are working of putting together documents that may be in different places because the project manager, chief engineers and other personnel are no longer working at Udecott. "In the absence of these key individuals, we have to find other ways of collecting the information. Therefore, we have hired an international company of repute, Hill International, to re-evaluate and piece the documents together.
"We have also engaged quantity surveyors to go in and measure the work and put a price to the work, and this takes time because we are doing it all over again. "It's important that we have to verify the information the contractors have because the ministry has an oversight, any time the auditor general could step in." She explained that Udecott has to send a monthly report to the Ministry of Finance's monitoring division. "I am not casual about these relationships. Anybody could challenge our agreement or decision. While the contractor may have documents, we cannot solely depend on that one source. We must have an internal track of governance."
A sticker for discipline, proper management and order, the Udecott boss said she would ensure all processes and decisions taken could stand up to scrutiny. John said Udecott is at the stage where it's putting together all its documentation to ensure what the contractors are claiming is justified and properly accounted for. "After this stage is completed, the Udecott board would review and deliberate on it because at the end of the day, we have to have ensure due diligence, proper governance and transparency. I am always concerned about the paperwork because it's the paperwork that would speak on my behalf after I am gone.
"The Udecott process is going through the system, so I think within the next first or second quarter, we should all have substantially paid up all of the outstanding payment, which would amount to just over $300 million." A confident John boasted, "Udecott is back." I am proud of Udecott. The country will feel the impact of Udecott by the end of March. Contacted last Saturday for a comment, Mervyn Chin, president of the TTCA, said that since John's last statement in which she threatened to expose contractors' claims and cheques already issued, he's sent correspondence to John detailing further claims. He said he prefers to wait for John's response before commenting further.
Udecott projects
John said the review process of Udecott projects has started and that most outstanding projects would be resuscitated. "One of its major projects is the south Chancery Lane project, which is about 85 per cent completed. It's now have been repurposed for the extension of the San Fernando General Hospital and it is being renamed as the University of the West Indies Teaching Hospital South Campus." John said Udecott is in the process of ensuring it meets and exceeds accreditation criteria of a teaching hospital. "The onus is on Udecott to provide that structure and secure and insulate people from losing their names, hence the reason I am very rigid.
"We are going to hand off at least six of the wards in May and the rest by year's end. Three hundred beds would be distributed for pediatrics, adult care, and the university teaching administration and clinics for outpatients by the end of 2012. John said Udecott would be putting out tenders for the services of companies to outfit the various projects. The Port-of-Spain-based Government Campus Plaza, a two million square feet of real estate, is to be outfitted. She said Udecott has only furnished about 80,000 square feet of the plaza so far. John said the Ministry of Education Tower on St Vincent Street is completed. Tenders are being evaluated for its outfitting. The Real Spring housing project in Valsayn should be on stream by the end of February.
Resumption of construction work on the Tarouba Stadium, San Fernando, should begin in March. Udecott is in the meantime working on sorting out some legal issues associated with the controversial stadium, which has so far cost the State $1.1 billion. John said she thinks the public's fears have been allayed more and more by seeing Udecott going out and transparently inviting companies to tender. "Prior to that, the public felt the work was just given out here and there."
HDC issues
Meanwhile, John said the problems at HDC were different. "We had an overwhelming of contracts." She explained, in some instances, there were no executing contracts, the contractors' initial prices would have changed from $50 million to $150 million, but the $100 million (difference) did not get the board's approval. "Same thing for the scope of the project. It may have changed from a two- to three-story building, but the changes were never approved by the board." In spite of such blatant discrepancies, she said HDC would have still been paying contractors. "The proper processes were not followed as people were working outside of their authority and limit. Once there is no board approval, no monies should be paid." Since assuming the chairmanship of HDC in November 2009, John has wasted no time in correcting these issues. She said in her first six months at HDC, she took all the contracts that had variations to the board for approval so contractors could be paid. When the new board came in, the process continued.
Putting order to the system, she said, each contract is properly filed with all its documentation and balances. Outside of the file is a note attached stating the board's approval. "We have done that in a 100 per cent of the contracts, so we don't have outstanding money for contractors. HDC would have paid over $1.2 billion. John had threatened to publish all names with cheque numbers together with the date of payment and cheque numbers so banks and sub-contractors would know they were paid, if they insist on blacklisting HDC as being delinquent. "HDC's name should not be on the list of those agencies that did not pay."
Retention fees
HDC is now working on the retention fee for contactors, John said. It's the policy of the HDC is to retain ten per cent of the overall cost in the event of defects. She said that within the contract is a letter of intent of how this should be paid-six months after substantial completion, a five per cent is released and the balance is paid in another six months. "This has turned into two years because contractors failed to submit critical documents, such as statutory approvals for work done, including plumbing, electrical work, etc, and drawings. Not to mention, we have been plagued by a lot of housing defects due to poor workmanship."
John said she refuses to take State funds to pay for the approvals and drawings. A deadline was given to the contractors to produce the approvals, failing which the retention fee would be applied. Regarding the defective homes, John said the TTCA challenged her to carry those contractors to court. "We are willing to do that, but they are not going with the retention fees in their pockets. " One of the main issues HDC had with contractors was their inability to keep proper records. "There is no paper trail confirming work done or instructions given by HDC. Contractors went on verbal agreements, but are now producing claims for work done that cannot be substantiated." "I can't pay if I can't confirm and there are no documents."
Getting it right
John, who is hell bent on maintaining her credibility and that of HDC, has implemented new structures to ensure procedures are followed and all contracts and decisions are above board.
The project management department, which oversaw every function regarding contracts, has been replaced by a construction management and operation department that identifies the job.
A projects management and oversight unit oversees the quality of projects and ensures all specifications and guidelines are adhered to. A contract management team is now in charge of procurement. All contracts now filter through nine attorneys.
A no-nonsense John said, "All lines are now clearly demarcated. This is called governance. Once your system is clear, things run smoothly and everyone is doing it without breaking the rules." She said HDC has implemented a predictive system, which indicates to HDC that payment is due within 28 to 56 days. "Due to this, we now pay contractors on time and promptly on the 30th of every month. "We have employees looking at the contractors' schedule and monitoring these plans and payments, but sometimes contractors jump before and ask for payment." John said contractors may request early payment for different reasons: they run out of money, some may take projects knowing they can't handle it, they don't have relationships with the bank, etc.
John said she has the remedy to treat with these situations. She said by the seventh of the succeeding month when contractors' invoice are due, HDC would issue three warnings, which, if not adhered to, would result in the termination of their services. She stated that every year a pre-qualification and evaluation would be done on a contractor's work by HDC's attorneys, and if it is not of the highest standard, three warnings would be issued. Failure to then comply would lead to termination. Jokingly, John said, "We would tell them wine to the side. HDC would not be dealing with any indiscipline."
Other problems relating to claims
• Extraneous settling of issues including failure by contractors to pay their services: namely architect, sub-contractors, security, bank interest.
• Other extraneous cost include extension of time, escalation of costs, where some of the cost is nebulous and predicated on assumptions.
• The contractors may present claims which are not in scope with the job. They may use another method to come up with the figure, which is not a dispute, but part of the process to determine the correct figures.
• Claims like project management fees, which have nothing to do with services received.
• Contractors folding up and abandoning projects. One foreign contractor left the Chancery Lane project without paying several local sub-contractors, who are now turning to the State for money. John said Udecott can't make those payments because it's unlawful and it would be opening up a can of worms.
• Contractors have poor relationship with banks.
• Poor record-keeping.
• Agreeing to jobs that they can't manage: sub-contractors may tender for jobs above their competence.