The Solomon Hochoy Highway extension to Point Fortin project is 34 per cent complete and with several sections already open, traffic experts say the effects are already being felt. Despite the project having its roots with the Inter-American Development Bank (IDB), at a subsequent meeting with the bank in 2010 it indicated its unwillingness to fund the project.
Several financial experts explained it had become a norm for Government to seek international funding with low-interest loans for mega development projects like these. Former Minister of Planning, Mary King, who was at that 2010 meeting, said the IDB cited improper tendering processes, not enough local involvement and a steep tender prices for their refusal.
The project carried an engineer’s price tag of $3.5 billion, but the Brazilian firm Construtora OAS won the tender for the project with the lowest bid of $5.3 billion, with an additional $2 billion spent on the acquisition of land and relocations—taking the total cost to $7.3 billion. Contracts like this, on international tender, follow the Fidic model, which covers everything from the discovery of fossils to delays, variations and termination.
Commercial advocate Terrence Bharath commented on the possible penalties involved if the project is to be temporarily halted, re-routed or terminated altogether. He explains: “Fidic is an international standard of terms and conditions of contracts used to govern projects across the world.”
He says these universal terms and conditions become important in cases where foreign firms operate on local soil. OAS, he says, having completed many such projects internationally, would be cognisant of the many bumps to be encountered along the road. “Under Fidic, it typically provides that nine out of ten times, if a problem occurs beyond their control: your problem, not mine,” Bharath said.
As a result, the foreign company may be entitled to demand compensation for ordered material, mobilisation and demobilisation. Fidic provides for temporary work stoppages or delays due to natural disasters, wars, and even protests. “The Highway Re-route Movement (HRM) chaining themselves to equipment and stopping work from happening is nothing that is glaringly out of the ordinary," the attorney said.
And while the employer (in this case the State) usually bears the brunt of the cost, OAS must serve a notice to Nidco within 28 days to ask for an extension or compensation. One such incident occurred in 2012. A court affidavit filed by OAS reads: “When OAS attempted to carry out works, they impeded and threatened our workmen and other personnel. This has contributed to delays as OAS was unable to carry on works on the site during this period.”
Compensation might certainly be an entitlement, explained Bharath. GML could not confirm whether OAS pursued that issue. “The size and value of the contract demands some sort of mutual understanding between parties,” Bharath added, saying OAS may not necessarily make demands for every inconsistency. But the company did not take things lightly when an incident occurred later that year.
OAS wrote: “Members of the Highway Re-route Movement and persons unknown damaged pieces of our equipment including GPS surveying equipment valued over £50,000 and hurled abuses at our workmen and other personnel.” OAS did, in this instance, request monetary compensation.
“What the clauses would provide there—one would look to see if OAS was negligent in leaving equipment unprotected, and if they were not, and this was a malicious act, then that cost would be passed on to the State,” Bharath explained. The HRM is calling for a re-route of the Debe to Mon Desir section of the highway, but because the project was a design-and-build package, this would likely involve a price variation.
Bharath says: “There is flexibility always in these contracts for variation, but again the project manager, National Insurance Development Company (Nidco), and the State will ultimately pay. The question is, is the variation so great that it will cause a deviation from what was originally intended?”
But the situation could be more complex, as OAS would have entered into contracts with local sub-contractors. Variations can involve amended terms or termination altogether. “All these companies would have subcontracts with the main contractor (OAS) who then becomes liable to claims under those subcontracts. That (claims) would eventually be passed on to Nidco and the State,” Bharath said.
As Bharath puts it, these contracts are governed by one golden rule: “When these contractors come into your country, they always make it clear in the contracts that whatever happens on your soil and it’s not my fault, I’m always compensated in a certain way.”
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According to Fidic it's always the employers prerogative to terminate the contractor, but not without paying these costs:
•Return performance security
•Pay for the amount of work done.
•Cost of plant and material ordered for work
•Cost incurred by expectation of completed works
•Cost of removal of temporary works
•Cost of repatriation of staff and labour
The amount of any loss of profit or other loss or damage sustained as a result of this termination