De­layed pay­ments, work­ing in high-risk ar­eas and fail­ure to im­ple­ment the pro­cure­ment leg­is­la­tion have been plagu­ing con­trac­tors in T&T.

The three is­sues–the ma­jor one be­ing the bil­lions owed to them–have af­fect­ed con­trac­tors so bad­ly that some have lost their busi­ness­es, oth­ers are strug­gling to get by, some are tied up for years in court bat­tles which they even­tu­al­ly lose and are forced to pay costs, while oth­ers have died wait­ing to be paid for jobs com­plet­ed. In 2018, then pres­i­dent of the T&T Con­trac­tors As­so­ci­a­tion (TTCA) Ram­lo­gan Roop­nar­i­nesingh es­ti­mat­ed that $4 bil­lion was owed to the en­tire in­dus­try and not just to TTCA mem­bers.

The con­struc­tion sec­tor, which has his­tor­i­cal­ly been one of the main dri­vers of T&T’s econ­o­my, has had its share of chal­lenges over the years, and the de­cline of the econ­o­my over the last few years has on­ly ex­ac­er­bat­ed the prob­lems.

The sit­u­a­tion has been de­scribed as “daunt­ing”, and the Gov­ern­ment–the largest em­ploy­er of con­struc­tion ser­vices, through its state agen­cies, spe­cial pur­pose com­pa­nies and min­istries–has been ac­cused of “dere­lic­tion of its con­trac­tu­al oblig­a­tions” to the peo­ple in this sec­tor.

The is­sues plagu­ing the sec­tor were iden­ti­fied in a doc­u­ment pre­pared by the Con­struc­tion Man­age­ment In­sti­tute of T&T (COMITT) re­searchers An­ton Bal­four, R Pa­tel and Derek Out­ridge un­der the MSc Con­struc­tion Man­age­ment pro­gramme at the Uni­ver­si­ty of the West In­dies (UWI), De­part­ment of Civ­il and En­vi­ron­men­tal En­gi­neer­ing.

COMITT, recog­nis­ing the ur­gent need to ad­dress these is­sues, sub­mit­ted the doc­u­ment to the Gov­ern­ment just be­fore the na­tion­al bud­get when the pub­lic and pri­vate sec­tor were in­vit­ed to share ideas on re­boot­ing T&T’s econ­o­my.

Ac­cord­ing to COMITT, they con­duct­ed three re­search stud­ies be­tween 2015 to 2020 and held open “Think Tanks” to study the re­sults. The “Think Tanks” at­tract­ed key stake­hold­ers in­clud­ing rep­re­sen­ta­tives from state agen­cies, the Con­trac­tors As­so­ci­a­tion and con­sul­tants among oth­ers.

CHAS­ING PAY­MENTS

A “Think Tank” host­ed by COMITT in 2019 re­vealed that a ma­jor is­sue was un­time­ly pay­ment from the Gov­ern­ment of T&T re­sult­ing from the bu­reau­crat­ic pay­ment pro­ce­dures, in­ad­e­quate fund­ing, and ir­reg­u­lar re­lease of funds from the Min­istry of Fi­nance.

Large sums of mon­ey are owed to con­trac­tors and there has been no sig­nif­i­cant im­prove­ment to the de­layed pay­ment is­sue over the past decade. This has neg­a­tive­ly im­pact­ed con­trac­tors who face low cash flow, down­siz­ing, ad­verse ef­fects to the sup­ply chain, and in­sol­ven­cy amongst sev­er­al oth­er is­sues which have crip­pled some op­er­a­tions.

To com­pound the sit­u­a­tion, there is poor gov­er­nance and lack of leg­isla­tive sys­tems or Prompt Pay­ment Laws in T&T, which man­dates gov­ern­ment agen­cies in oth­er coun­tries to pay the prime con­trac­tor on a project no lat­er than 14 days af­ter re­ceiv­ing an in­voice for a progress pay­ment. And, be­cause there is no polic­ing of de­layed pay­ments, the con­trac­tors and the in­dus­try over­all suf­fer.

Some of the caus­es of de­layed pay­ments are as fol­lows:

• Mul­ti-head­ed client fund­ing arrange­ments

• Un­time­ly re­ceipt of funds from the client min­istries

• Lack of ad­her­ence to the pay­ment terms by the client min­istries

• In cas­es where the client min­istries are re­quired to re­quest funds from the Min­istry of Fi­nance, this process is ex­treme­ly time-con­sum­ing

• Bu­reau­crat­ic pay­ment ap­proval process at the client min­istries and MOF

• Lack of client fund­ing due to re-pri­ori­tis­ing of bud­gets and projects re­views

• Client trans­fer of funds process (client and MOF), un­der­tak­en in in­stances where there is in­suf­fi­cient fund­ing for a project in an al­lo­ca­tion or the al­lo­ca­tion was used for oth­er pri­or­i­ties

• Lack of aware­ness on the part of the pub­lic ser­vants at min­istries on the im­por­tance of time­ly pay­ment pro­cess­ing

The im­ple­men­ta­tion of Prompt Pay­ment leg­is­la­tion or Statu­to­ry Ad­ju­di­ca­tion is rec­om­mend­ed to en­sure the sus­tain­abil­i­ty of small, medi­um and large con­trac­tors.

DERE­LIC­TION OF CON­TRAC­TU­AL OBLIG­A­TION

COMITT re­ferred to a 2020 study and pro­vid­ed sta­tis­tics to show the con­trac­tors’ woes. (In this in­ves­ti­ga­tion 75 ques­tion­naires were sent out to con­trac­tors and 65 re­spond­ed; 11 large, 27 medi­um, 27 small.):

• 88 per cent spent more than two hours per day wast­ed chas­ing up late pay­ments

• 88 per cent ex­pe­ri­enced a re­duc­tion in busi­ness prof­its

• 90 per cent were caused to pay sup­pli­ers late

• 93 per cent ex­pe­ri­enced dif­fi­cul­ty in get­ting ma­te­ri­als and ser­vices

• 82 per cent had to in­crease con­struc­tion costs

• 88 per cent had to bor­row ad­di­tion­al funds to com­plete projects

• 60 per cent were un­able to pay staff or to pay staff late

• 71 per cent had to sus­pend works due to de­layed pay­ments

• 60 per cent lead to the aban­don­ment of works

The re­searchers point­ed out that while there has been a “dere­lic­tion of con­trac­tu­al oblig­a­tions” by the Gov­ern­ment, con­trac­tors are afraid of be­ing black­list­ed. How­ev­er, they not­ed, since the 2016 court de­ci­sion in the At­tor­ney Gen­er­al v By­noe Rowe Wilt­shireth where the court up­held the four-year Statute Bar, con­trac­tors seem to have changed how they seek to re­solve the is­sue of de­layed pay­ments.

In a re­search done in 2015 by Charles-Ra­goo (Ques­tion­naires were sent out to 91 con­trac­tors and 71 re­spond­ed; 29 large, 21 medi­um, 21 small), 50 per cent of con­trac­tors did not want statu­to­ry ad­ju­di­ca­tion. This changed in the Bis­soon 2019 study (Ques­tion­naires were sent out to 100 con­trac­tors and 80 re­spond­ed; 66 medi­um, 14 small) where 86 per cent of con­trac­tors pre­ferred this method.

In re­spect of Prompt Pay­ment Leg­is­la­tion, in 2015 on­ly 51 per cent of con­trac­tors favoured this as a so­lu­tion. In 2019, how­ev­er, 86 per cent of the con­trac­tors favoured this method.

Con­trac­tors of­fered so­lu­tions to the de­layed pay­ment prob­lem. The sta­tis­tics from re­search by Bis­soon (2019) high­light­ed the fol­low­ing mea­sures used by con­trac­tors to curb the ef­fects of de­layed pay­ments:

*59% stat­ed they will in­crease their ten­der bids

*50% say they will de­cline to bid

*61% in­di­cat­ed they will re­duce their rate of work

*65% stat­ed that it will in­crease their debt fi­nanc­ing

*67% were in agree­ment to work sus­pen­sion

*81% stat­ed they would ex­tend their time for com­plet­ing the works

*82% pre­ferred up­front ad­vanced pay­ments for works

*82% were in agree­ment to con­tract­ing on manda­to­ry pay­ment terms

*70% pre­ferred lit­i­ga­tion (Bis­soon 2016)

COMITT said it was of crit­i­cal im­por­tance whether the Gov­ern­ment has the funds for the project. The re­searchers said the bud­get per­for­mance was crit­i­cal and should be analysed based on rev­enue vs ex­pen­di­ture. They al­so said the Min­istry of Fi­nance re­lease of funds should be based on project pri­or­i­ty lev­els and done on a time­ly ba­sis.

The re­search rec­om­mend­ed that a 20-year pri­or­i­ty plan sim­i­lar to the Cana­di­an mod­el be im­ple­ment­ed. This as­sures the con­ti­nu­ity of projects and pay­ments

The Uff and Thorn­hill re­port

The Uff and Thorn­hill (2010) re­port on the con­struc­tion sec­tor in T&T made the fol­low­ing rec­om­men­da­tions to curb de­layed pay­ment prac­tices:

*Stan­dard­i­s­a­tion of con­tracts to gov­ern lo­cal projects adopt­ing the stan­dard UK and in­ter­na­tion­al forms used for ad­ju­di­ca­tion.

*The Es­tab­lish­ment of a Spe­cial­ist court in T&T mod­elled af­ter the com­mer­cial courts in Lon­don to han­dle con­struc­tion cas­es.

*Es­tab­lish­ing a new Ar­bi­tra­tion Act and Prompt Pay­ment Leg­is­la­tion.

*Em­ploy­ing fair pay­ment prac­tices.

*Util­is­ing Gov­ern­ment bonds to fa­cil­i­tate le­git­i­mate pay­ment to con­trac­tors for com­plet­ed works.

HIGH-RISK WORK

Work­ing in high-risk ar­eas has al­so posed a chal­lenge in the con­struc­tion in­dus­try. They said as­sets of a con­struc­tion site (equip­ment, ma­te­ri­als and hu­man re­source) have al­ways been ex­posed to threats of loot­ing and ex­ter­nal dam­age and need to be pro­tect­ed.

The re­searchers point­ed out that with­in re­cent years, the ge­o­graph­ic lo­ca­tions ref­er­enced as high risk (in­flu­enced by rogue el­e­ments/il­lic­it ac­tiv­i­ties) have ex­pand­ed from Laven­tille, Mal­oney, La Hor­quet­ta, Beetham and En­ter­prise to name a few, to ar­eas such as parts of Ari­ma (O’Meara Road), Moru­ga Road (Pe­tite Café) and Diego Mar­tin 7 (San­ta Cruz Road), ex­pos­ing con­struc­tion projects in these lo­ca­tions to in­creased il­lic­it ac­tiv­i­ties.

The in­creased cost for this risk im­pacts the fea­si­bil­i­ty of a project, they said, and must be con­sid­ered since the risk can be cov­ered by the client (use of joint po­lice and army se­cu­ri­ty posts in the vicin­i­ty of project zones), shared be­tween client and con­trac­tor (pro­vi­sion­al line item in the Bill of Quan­ti­ties for site se­cu­ri­ty Off du­ty Po­lice or Pri­vate Se­cu­ri­ty, ie, co­op­er­a­tive ef­forts), or trans­ferred to the con­trac­tor (in­clu­sion of a lump sum line items in the Bill of Quan­ti­ties to ad­dress site se­cu­ri­ty).

They al­so sug­gest­ed in­volv­ing the com­mu­ni­ty to as­sist or keep an eye out as if left unchecked it be­comes an in­creased cost to the tax­pay­ers.

The re­searchers said these rec­om­men­da­tions can be ex­plored and rec­om­mend­ed the un­der­tak­ing of aca­d­e­m­ic re­search on the sub­ject mat­ter.

PRO­CURE­MENT LEG­IS­LA­TION

The pro­cure­ment leg­is­la­tion of T&T seeks to pro­vide an ef­fi­cient and eq­ui­table sys­tem for procur­ing and dis­pos­ing of state as­sets con­sis­tent with prop­er com­mer­cial prac­tices and pro­motes trans­paren­cy, ac­count­abil­i­ty and val­ue for mon­ey.

Ac­cord­ing to COM­MIT, with the vast lev­el of cor­rup­tion and un­fair han­dling of state as­sets at the ex­pense of the pub­lic purse, the ur­gency for the im­ple­men­ta­tion of the pro­cure­ment leg­is­la­tion is high. And they are plead­ing with the Gov­ern­ment to do so be­fore the end of this year.

The pro­cure­ment leg­is­la­tion in­cludes the ap­pli­ca­tion of the prin­ci­ples of val­ue for mon­ey, trans­paren­cy and ac­count­abil­i­ty re­flect­ed by pur­chas­ing best prac­tices in a lev­el play­ing field, pro­bity and trans­paren­cy of trans­ac­tions, risk man­age­ment; Pro­mo­tion of good gov­er­nance gen­er­al­ly through the op­er­a­tion of the prin­ci­ples of trans­paren­cy and ac­count­abil­i­ty in pro­cure­ment of ser­vices and as­sets dis­pos­al; Sup­port for lo­cal in­dus­try and busi­ness en­ter­pris­es in a man­ner that is con­sis­tent with in­ter­na­tion­al oblig­a­tions; in­dis­putable pub­lic and in­ter­nal con­fi­dence in pro­cure­ment prac­tices of T&T.

–re­port­ing by Raphael John-Lall