Remarks By Prime Minister Holness – Sitting of the House of Representatives on May 11, 2021
Madam speaker, I’m taking this matter on behalf of the Minister of Finance.
Madam Speaker, I want to thank the members opposite, who have participated in this debate and have expressed important opinions, some of which are valid and I want to say from the outset that the government thought long and hard about going this route before we entered upon it, because we are quite seized of all the issues as it relates to the contracting with overseas firms, issues of securing value for money, the transparency of the use of public funds, all the issues that have been raised here quite ably by members of the opposition. So, it is not a matter that we take lightly. I would also want to say Madam Speaker, that this is not a route that should be used with any form of frequency, precisely for the reasons that have been raised but I wish to point out Madam Speaker, that it was the government at the time led by our friends opposite, who made a change to the procurement guidelines in 2015, Madam Speaker, and then they did it for good reason because it was quite clear that the old procurement rules could not facilitate the level of development that we wanted and the speed of development.
I recall a sotto voce conversation between myself and the then Minister of Finance, who is a former leader of the opposition, who is not here, I wish he were because you could verify it. We were discussing the issue of strategic investments; that we needed to have a special legislation to deal with strategic investments, to move them through quickly. It was at the same time, Madam Speaker, that by virtue of the IMF framework, we had revised many of our laws to clarify, and to give institutional definition around things like incentives and so forth and it was a sentiment shared across the floor that this needed to be done, that there will be at some point in Jamaica’s development, special projects that are large and complex and frontier projects that would require the government to enter into direct contracting. I believe that this project is one of them. I believe that the Montego Bay perimeter road as acknowledged by the opposition spokesman on transport and works, as acknowledged by the opposition spokesman on technology and by the Leader of the Opposition, that it is a national project and I think there is no debate on that.
I don’t think that the Leader of the Opposition is proposing that we divide on whether or not the Montego Bay perimeter road is a national project, which leads me to respond to the issue he raised about the form in which the Order is taken.
The Order is taken in two parts, the Order itself and a resolution and the Order gives the waiver, the exemption, whatever you want to call it, the exception from the procurement rules and it also outlines the conditions of the exceptions that are given.
The resolution on which we are debating, because Madam Speaker, it is the resolution that will affirm the order so to speak, and so the resolution is clear. The resolution says now therefore be it resolved by this honourable house as follows.
1. This resolution may be cited as the public procurement national development project, Montego Bay perimeter road, project order 2021 resolution.
2. The declaration of a development project known as the Montego Bay Perimeter road project to be a national development project to which the act are any provisions thereof shall apply is approved.
So, Madam Speaker, to satisfy the leader of the opposition, I could at this point, take my seat but before taking my seat, I could ask Madam Speaker, that we approve the perimeter road resolution. We could. Just for proper form and maybe I will do that Madam Speaker.
Prime Minister continues….
So, Madam Speaker, whilst I understand what the Leader of the Opposition is saying, I’m saying that this Order is not yet in effect until we have approved it here. So as to whether or not it is true, at the point I was debating, it is immaterial, it becomes true at the point of our approvals. So, Madam Speaker, if it is just for form, we could take them in order or we could take them together; they both become true at the same time when the house votes.
And I’m saying the two things, one is the order giving the exemptions and the other is the resolution saying that the project is a national project. So, I’m just saying, Madam Speaker, we could take it or we could proceed. Madam Speaker, I’m choosing to proceed.
Madam Speaker, so that’s an important point that I believe we have addressed. Now, Madam Speaker, the opposition spokesman on transport and works pointed out that it’s time that we get things done in a timely fashion and we must always act; that has always been my mantra, getting things done.
Madam Speaker, let me tell you that I keep using this term bureaucracy and people ask me, why do I like to use that term, it is such a negative term and I keep saying to people, you know, bureaucracy is not a negative term. Bureaucracy is important. When a country has a strong bureaucracy, it is the signal of institutional development.
It can get things done in order and in good time. You know, bureaucracy doesn’t mean inefficiency.
Madam Speaker, where we are in our development as a country, is that we are developing our public administration and Jamaica has done very well in expanding its public administration. We now have many institutions that deal with integrity and transparency and compliance. We have institutions that deals with procurement. We have institutions, Madam Speaker, that we’ve always had, that deals with oversight of our parliamentary operations. We have institutions in our public administration that deals with our fiscal affairs, the management of our fiscal accounts and so forth and we keep expanding them.
The challenge now Madam Speaker, is how to get them altogether very quickly. We have added recently a public sector investment element of our public administration, and it can become overwhelming, but as we progress through exercises like these in parliament and we debate what we need to do, our public sector agents develop a better understanding of how the public sector works and works together.
So, Madam Speaker, where we are now is not trying to circumvent the very institutions that we have debated here in parliament and established. What we’re trying to do is to make them work as we have defined them and the presentations by the leader of the opposition and others would want to suggest that in some way, the government is acting outside of the established institutions, outside of the law, that the government is acting in a way illegally.
Madam Speaker, I rush to the discerning ears and listeners to say that that is not the case. The very people who would want to create that narrative were the very people who created the law to allow for this and we Madam Speaker, on this side, carried it through with regulations in 2018, because it is well understood that this is an important part of our procurement process and it is not unusual. It is not unusual to Jamaica. It can be found in other countries, in other jurisdictions where there are these provisions. They have these provisions for national defence reasons and they have these provisions for national project and development reasons, and they have these provisions for strategic reasons so it’s not unusual.
Now, Madam Speaker, the leader of the opposition went to great lengths to make a profound point. The point that the leader of the opposition was making is that this kind of exception is different from others that could have been made because you’re making an exception on Jamaican taxpayers’ funds. And therefore, we should take greater precaution to protect Jamaican taxpayers’ funds and I agree with you leader of the opposition. We must make every effort to ensure that not one cent of Jamaican taxpayers’ resources is wasted: not one cent.
Madam Speaker, the leader of the opposition, then totally ignore that there was a process in place started by this administration with JDIP but continued and expanded by the administration led by members on that side called MIDP where multiple times what we are proposing to spend here was negotiated and there was no concern then that there was any concern about value for money. where was the concern about value for money when the then government, now in opposition?
Prime Minister continues….
So that we don’t get side-tracked from the issues because my intention is not to be contentious. My intention is to help the public to understand what it is we are doing and to remove any shroud of lack of transparency that is being created. I will then rephrase what I was saying.
In the same way that the opposition is now concerned about this exception that we are creating by approving this order, which will allow us to directly contract with China Harbour. That level of concern should have been expressed with equal energy and vociferousness. Madam Speaker, at that time under that arrangement, even though it was a loan, today, Jamaica taxpayers’ money is paying back for those loans. So, Madam Speaker, I just want the public to understand we on this side don’t sit here neglecting your best interest as would be the suggestion of the opposition.
Why is this in Jamaica best interest. Madam Speaker, first point is that the model of bilateral arrangements, which result in direct contracting is a model that Jamaica can say we have benefited from. We can point to several projects that have been done as a result of that. Now, that model of the bilateral arrangement with our strategic trade partner, China comes with certain conditions. There are conditions on the loans. There are conditions on the materials used. There are conditions on the concessions that we would have had to give. There are conditions on the labour that is used. And if you’re asking about transparency, hold on, hold on, hold on, hold on. If you’re asking about transparency, Madam Speaker, you are not allowed to share the contracting documents and the loan documents. So that arrangement Madam Speaker, in other words, the concern that the opposition has come here with, those should have been made when they were engaging in the bilateral. No, Madam Speaker, that is not transparent by any measure.
Now, Madam Speaker, we engaged with the government of China and with China Harbour on a bilateral basis in somewhere about 2016, 2017, thereabout to do the perimeter road. Now, bear in mind Madam Speaker, that there is no divide about doing the permit road as being expressed. This is being touted now 20 years that you should have done it. We came on board and we say, you know what, let’s move this thing ahead. Yes. Speak up.
Madam Speaker, upon reviewing upon reviewing our fiscal affairs we found Madam Speaker, that it was in the best interest of Jamaica not to pursue another loan from our strategic partners in China.
Now, Madam Speaker, I want it to be clear China has been very helpful to Jamaica and we are most grateful for the support and assistance that China has given to us.
In difficult times when nobody remembered Jamaica or would invest in Jamaica, but we always act with principle and in our interest and it was in our interest to change the relationship from a borrowing one, to one where we can finance projects or China can invest strongly in Jamaica and that is what we have now Madam Speaker, an investing relationship.
Now, Madam Speaker, a further point on this. There’s also in Jamaica’s interest to operate in good faith, very keen when we’re dealing with bilateral and international relations.
Now, China Harbour engaged with us and the government of China, the EXIM bank of China engaged with the government of Jamaica in good faith on the same mechanism as was done under MIDP and therefore China Harbour went ahead Madam Speaker, and made investments in doing the pre-feasibility, in doing their geo-technical and other such works. They would have mobilized Madam Speaker, for this project with the expectation, Madam Speaker, that they are going to get this project. We in the middle of it changed our position and decided that we would no longer go the route of borrowing, we would fund it out of our cash.
Thirdly, Madam Speaker, let’s look at this procurement process. Yes, we could say let’s put it to tender. Now, the tender process for this with a best effort would be a year or probably at little bit more than a year with the best effort. In fact, it probably would be more because other contractors coming in would ask for two things.
1. They would say for me to come into this process as a new contractor, China Harbour would have to be excluded because China Harbour would have an unfair competitive advantage. And if you were to exclude China Harbour, definitely the period would be more protracted because a new contractor coming in or new contractors coming into a procurement process would want to be able to verify the risk of the RFP of the proposal, the tender documents that are put out and to tender on a highway like this, Madam Speaker, it’s not building a road somewhere; it’s a long process.
Madam Speaker, we analysed all of that and we looked at what is in Jamaica’s interest by virtue of time because, you know, Madam Speaker, the longer we wait to do this, the more the price of the project is going to escalate so we looked at what was in Jamaica’s best interest.
Now, having said all of that, we come now to the real core of what the leader of the opposition and others who have spoken had said, the issue of value for money. The issue of value for money, as I said existed under the bilateral contracting process and it is an issue here.
Now, how did we get around this issue of value for money, meaning how did we guarantee or give as higher possibility of guarantee of securing value for money to the Jamaican public? Well, there are a couple of things.
1. Madame Speaker, this project will be designed behind according to what is called- let me make sure I have the right terminology, the American Association of State Highway and Transportation Officials; so that along Madam Speaker, with ISO standards and our quality management plan will ensure that the quality of the work is guaranteed.
So, whoever Madam Speaker, will be the project engineer or the project supervisor, that is the standard against which they will be judging all output relative to payment so there is an open-source standard that anyone can look at and say for argument sake, three inches of asphalt placed on the road; that is the standard required. I don’t know what that standard is, I’m just saying that for argument’s sake.
A certain PSI pound per square inch of concrete put down, that can always be tested so there are standards that are open and transparent, and it is to those standards that the works will be assessed.
2. Jamaica developed the NWA specifically, a system that they call their negotiating team. It’s their value for money negotiating mechanism and that negotiating mechanism pulled on experts in the field, public officials working in at the time the NWA, NROCC and other areas and that negotiating team would negotiate the price of every element of the contract with China Harbour. That is what was done under MIDP and that is how we were able to secure as best as possible outside of a competitive process value for money.
So, we have a process in place of which the Opposition well knows. The member from Northwest Manchester said, yes, the Prime Minister is going to stand up and tell you that this process is in place because obviously he has asked and he has been told that there is this process in place, even when we were doing the bilateral contracting arrangement from which we got JDIP and MIDP.
And Madam Speaker, let’s expand the minds of Jamaicans listening. Even in a competitive contract Madam Speaker, there is still some level of negotiation that we will have to do and let us also be clear, a competitively let contract does not always lead to the best result. Most time it will but not all the time because Madam Speaker, from where I sit in the Ministry of Economic Growth and Job Creation sometimes Madam speaker, we have selected uncompetitive bids, the lowest cost tenders and you know what Madam Speaker, after we select them, they end up can’t do the job for the price they promised. We ended up having to go and negotiate with them and we end up paying much higher than what they told us they could do it for.
So, Madam Speaker, I’m not in any way trying to diminish the value of competitive tenders, it is important to note, but we must expand the conversation because in trying to create a negative narrative, we as public leader’s Madame Speaker, we have a duty to bring knowledge to the people, can’t just be one-sided in our conversation.
So, this is a discretion provided in the law for the government to use and it is not a discretion that should be used arbitrarily or wantonly and the government is seized on it, which is why I am happy for this debate to explain to the public that the government isn’t doing anything nefarious or hiding anything or trying to, in some way. At some point you have to have some faith in your government that the government is going to act in your best interest.
Madam Speaker, you can’t run a government without the people believing in you. No matter what you think, our governments; on this side and that side, we have made many mistakes, but as we progress as a nation, we have to learn from those mistakes and at some point, in time, if we’re going to develop, governments have to lead with maturity and we are taking here a mature decision.
It’s a mature decision to come out of a borrowing relationship. It is a mature decision to step out of a bilateral contracting process and going to one where there will be greater transparency than if we had contracted bilaterally because all of these documents, Madam Speaker, as it relates to the contract will be public.
An important question was asked, will the Integrity Commission be invited to serve. You know, Madam Speaker, I recall sitting in this house, I was on that side at the time on the Opposition side and there was a big debate undertaken about whether or not the contractor general should be involved in pre-contractual negotiation. You remember that Leader of the Opposition? So, to come today and ask that question as to whether or not the Integrity Commission will be brought in before we enter a contract phase.
That side, when they were in government, went to court to prevent the Contractor General from being involved in the pre contracting phases. I mean it’s as if we have short memories, but Madam Speaker, yes, we have no objections to that. And the team that we’re putting forward will be a multi-sectoral fairly broad-based team that can sit opposite the China Harbour people and bring levity, understanding and reason to prices. So, I’m expecting Madam Speaker, that prices will be moderated and approximate competitive prices.
Now, Madam Speaker, we are embracing transparency as a means of ensuring value for money. I believe, I have gone through all the reasons we have ensured that we have put in place conditions that will be beneficial to the people of Jamaica. 90% of the employment on the contract must be Jamaican. The workers on the contract must be paid at the GIC rates, that is the industry standard rates. Important question was raised, I believe it was raised by all three speakers regarding outlining in the contract, how subcontracting will operate.
Madam Speaker, under MIDP there was an arrangement which specified how subcontracting will be done, the same process Madam Speaker, will be followed as it relates to how subcontracting will be done.
Remember now Madam Speaker, that wasn’t placed in any order that was placed in the contract so when we come to the contracting now, we wouldn’t put that in an order, we put that in the contract so when we come to the contracting process now, that exact same procedure will be followed meaning Madame Speaker, that it goes through a competitive process and they go through and select based upon a competitive process, the same process, which is now being used for the South Coast Road Improvement Project, which is competitive. The contractors go, they bid, they get selected so that is established and that is in the interest of Jamaicans.
Then Madam Speaker, the issue was raised why are we shutting out local contractors? Madam Speaker, as I’d say, from where I sit, I have seen vast improvements in the capabilities of our local contractors. They are taking on now multi-billion-dollar projects, several at the same time. There is no argument, no question. There are some contractors who simply don’t have the capacity and we see it in overruns. We see it in delay in works, but we are developing at core competence in contracting.
The question however, Madam Speaker, is for example, a contract like this would come with the requirement of multi-billion dollars in bonds, would we be able to find the contractors who would be able to mobilize the several billion dollars in performance bonds to do it?
Madam Speaker, and there are other issues regarding the mobilization of equipment, the mobilization of highly technical skills. The Leader of the Opposition says it’s a big project, but it’s not complicated. I think the Leader of the Opposition should acquaint himself with the project because it does require as it did with the completion of the North south link where significant geotechnical work had to be done. This will require significant geo-technical work to be done as well in addition to the construction of a major bridge, which is over- I don’t remember the length of the bridge, but it’s a pretty substantial length, so Madam Speaker, it is not a simple project. My expectations Madam Speaker is that there will be significant subcontracting happening here, so Jamaican contractors will benefit from this.
Prime Minister continues…
My final point about benefits to Jamaica. Under this model as opposed to the bilateral contracting, the government of Jamaica is not positioning itself to provide any special incentives or waivers. So, Madam Speaker, as was given under previous arrangements, we are not expecting to give any fiscal waivers or considerations under this so, I just want that to be clear so all taxes that apply will be applicable under this arrangement.
So, Madam Speaker, I’m going to just yield for a moment, the Attorney General just wanted to clarify a legal point, which if members agree, I will yield and have her just make the clarification.
Prime Minister continues…
There are three other projects Madam speaker, that we are considering. They are of national impact, but before we even venture, we want to see how this one works in terms of the contracting, the negotiating and Madam Speaker, these things shouldn’t be secret. As soon as they have been developed, what I will do is bring them to the Opposition before so that you can have the opportunity to research them, look at them because we will probably have to consider how we treat these as national.
And so, Madam Speaker, declaring the project, by the way, just to be clear, declaring projects as national projects does not necessarily mean that they would automatically be exempt. There might be other reasons why you would want to declare our project as a national project to indicate how serious the government is to mobilize all public resources around it. So, the process of declaring a project, a national project should not just be looked upon as trying to circumvent and it’s not all the time that we would be seeking to have the procurement rules obviated by virtue of the declaring a project a national project. I just wanted it to be clear on that.
So, Madam Speaker, may it please you, I therefore put the resolution for the affirmation of the house now therefore be it resolved by this honourable house as follows.
1. This resolution may be cited as the Public Procurement National Development Project Montego Bay perimeter road project Order 2021 resolution.
2. The declaration of a development project known as the Montego Bay Perimeter Road Project to be a national
development project to which the Act or any provisions thereof shall not apply is approved.
3. The public procurement national development project, Montego Bay Perimeter Road Project order 2021 is hereby affirmed.