Airport Terminal Requete

I spoke in relation to report into the Airport terminal project on behalf of the Public Accounts Committee at the December 2014 States meeting.

Sir,

I will speak specifically in relation to the Public Accounts Committee’s involvement in this report.

Those members who were around during the last States will be aware that in  February 2012 the Previous Public Accounts Committee sought to rescind the requete of 2004 instructing it to report on a specific aspect of this project, namely the process which led to the award of the contract to ensure it was robust and well managed and in particular the financial checks carried on Hochtief.

However, I think the States then made the right decision not to support that proposal. It is probably true to say that project management has improved greatly in a number of areas since then. There are contract administration processes, a standard procurement policy, pre-qualification questionnaires and risk registers.

However, the current PAC does not think the picture is a rosy as made out by T&R and Policy Council in their comments attached to this report. It is therefore important for members and those involved in large scale projects are made aware of the issues that still exist.

Then, as now, work commenced before contracts were signed. PAC have been made aware of issues that have arisen on other projects since the airport terminal build where this has created problems and additional costs.

We are also aware that contingencies are still not used for the purpose for which they were intended, but as additional project funding. And whilst it is true that in the last 5 or more years projects have not gone over budget, it is also true to say that projects have had sizeable contingencies which, in several cases have been fully spent.

And, as I mentioned 2 weeks ago, post implementation reviews are still not disseminated so it is harder for lessons to be learnt across the States.

Specifically in relation to financial assurances, checks were done on Hochtief and parental company guarantees were put in place. However, then as now, the financial situation of sub-contractors was not looked at as there was no contractual relationship with them.

Now, recent capital projects have introduced the concept of a project bank, a bit like an escrow account, whereby monies paid in to a bank account at each stage of the project are only paid out on the joint signature of the main contractor and the States. This was trialled successfully on the Belle Greve Phase V wastewater project.

However, in large contracts where there may be several sub-sub contractors they will continue to be vulnerable. Such contractors need to ensure that , in accordance with commercial best practice, they have their own contractual protections in place.

Finally, we must comment on the legal proceedings that were undertaken and lasted 8 years at an unknown, but undoubtable substantial cost and without a satisfactory conclusion so far at the States of Guernsey was concerned.  The PAC would recommend that responsibilities in the legal decision making process are understood and consideration is given as to the costs and risks associated with each course of action to minimise the likelihood of similar costly and protracted proceedings occurring in the future.



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