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Airport entrustment letter unveiled

The terms of the British Government’s entrustment letter concerning the controversial airport deal have been unveiled by Government House.

The Bermuda Government must agree with 10 Downing Street on deficiencies identified by Deloitte, the letter states, while the government balance sheet should rack up no debt over the project.

Bob Richards, the Minister of Finance, had previously said that the entrustment letter removed ambiguity over the authority of the government to engage with the Canadian Commercial Corporation in constructing the new terminal.

Reacting to the release of the full entrustment letter yesterday, David Burt, the Shadow Minister of Finance, repeated his call for the Government to put the project out to tender.

The entrustment letter states: “The cost of the construction of the airport must be wholly borne by CCC and the selected developer and subcontractors. No debt should appear on the balance sheet of the Government of Bermuda that relates to the airport construction.

“The United Kingdom Government and the Government of Bermuda must agree on what measures are required to address the deficiencies that are identified by Deloitte in their assessment report[s].

“The Government of Bermuda must publish a written and evidence-based assurance that the required measures have been taken, before the Contract can be concluded.”

The entrustment letter also states that the Government of Bermuda “will keep the United Kingdom Government informed as to the progress of its negotiations with the CCC”.

Mr Burt pointed to two additions to the original entrustment letter dated November 10 last year:

• (6b) The United Kingdom Government and the Government of Bermuda must agree on what measures are required to address the deficiencies that are identified by Deloitte in their assessment report(s);

• (6c) The Government of Bermuda must publish a written and evidence-based assurance that the required measures have been taken, before the contract can be concluded.

“These additions make it clear that the OBA Government must address the numerous deficiencies that were identified by Deloitte in their independent report,” Mr Burt said.

“That report was very critical of the OBA Government’s approach to the airport redevelopment and highlighted ‘key’ and ‘integral’ steps missing from the economic case.

“The Deloitte report examined the commercial case and poured cold water on the OBA’s claim that their current approach can guarantee value for money.

“Deloitte went on to recommend that the Government independently assess some of the claims made by CCC, especially the claim that a sole-source procurement is the only viable option.

“Deloitte also examined the financial case and found that many items were developed by CCC and may not take into account the full costs to be borne by the Government of Bermuda.”

Mr Burt called it “critical that the largest capital project in Bermuda’s history is executed correctly” — particularly as the OBA planned to give Aecon control over the air terminal for “the next 35 years”.

The Opposition had called from the outset for the project to go to competitive tender, he said, to ensure the best deal possible.

“Further, we agree with the independent Deloitte report which states that the Government must use a ‘public sector comparator’ to ensure that the public-private partnership (PPP) that they have agreed to makes the most long-term economic sense for Bermuda. We look forward to reading the ‘written and evidenced-based assurance’ that is required by this latest Letter of Entrustment and it is our expectation that the alternate options required by the Deloitte report will be published in that document so the Bermudian people can determine whether or not the OBA’s sole-sourced PPP is the best option for Bermuda.”

However, Mr Richards said he was entirely satisfied with “improvements” made to the original letter tabled in the House, pointing out that the Deloitte report used UK requirements that do not apply in Bermuda’s case.

“We don’t have those rules in Bermuda,” the minister said. “That does not mean that these things were not considered by the Ministry of Finance or Cabinet. It just means they didn’t find anything in writing pertaining to those requirements when they came and spoke with us about it. We complied with financial instructions.”

Mr Richards added: “There are no deficiencies because we are operating by a different set of rules. There is no deficiency so far as thought processes or due consideration by the ministry or Cabinet.”

The minister said he expected a “go or no-go decision in the next couple of weeks”, with work on the new terminal to commence within the subsequent year. The new terminal will not be ready in time for the 2017 America’s Cup, he added.

“It was not intended for it to be,” he said. “The two are not connected.”

Mr Richards stressed the need for “a new airport in a different location”, less susceptible to hurricanes, and said the Government had urgently sought a way of replacing the dilapidated former terminal without adding to national debt. He said he had shown brief video clips of the terminal’s drastic flooding experienced during last October’s hurricanes at a number of presentations, and that these were enough to end the debate.

“It has passed its sell-by date,” Mr Richards said.

Mr Burt said the Progressive Labour Party would call a public meeting on the matter this August, adding that he hoped Mr Richards would allow independent debate in Parliament on the Deloitte report.

“For two months he has refused to debate this report and we believe that this project is far too important not to debate all aspects in Parliament.”

The entrustment letter, signed by Peter Hayes, Director of Overseas Territories, and dated July 17, 2015, also says: “I believe the continued deterioration of Bermuda’s fiscal situation to be a cause of significant concern and taking on board more debt is unlikely to provide a sustainable solution over the longer term.

“However, I have also considered the assurances I have received from the evaluation work undertaken by an independent accounting firm of internationally reputable standing [Deloitte], which assessed whether the project for the redevelopment of the airport represents value for money for Bermuda according to the requirements of the full business case under Her Majesty’s Treasury Green Book guidance for appraisal of public spending proposals.

“Subject to the requirements set out in paragraphs 6 and 7, the United Kingdom Government delegates authority to the Bermudian Government to enter into a contract with CCC to redevelop the airport.”