No-bid model ‘most fiscally prudent’ for housing contracts
The Government has released an internal memo justifying the lack of a bidding process for contractors and the involvement of quangos for the first phase of its $418.5 million affordable housing project.
It also shared a document with The Royal Gazette that reveals a “formal procurement process” will be carried out for the second phase.
The Permanent Secretary to the Ministry of Housing and Municipalities told the Financial Secretary in the June 10 memo that following Office of Project Management and Procurement rules did not always “produce the lowest price” or “hyper-accelerated delivery timelines” and that negotiating directly with “preferred proponents” was the “most fiscally prudent” path.
The memo — titled “Supporting Narrative for the Procurement of Vendors for Phase I Housing Initiatives” — was sent after Zane DeSilva, the housing minister and Deputy Premier, announced to MPs in May that two foreign firms, Coastal Precast Systems and Preconco Ltd, were awarded no-bid contracts to build 194 residential units at several sites before 2028.
The minister said financing was “fully secured” through Bermuda Commercial Bank and Clarien Bank, backed by government guarantee.
The Opposition criticised the lack of a request for proposals for such a costly public project, but Mr DeSilva wrote in an op-ed last month that “speed is of the essence” for Bermudians needing safe, affordable homes.
The June 10 memo was disclosed to the Gazette under public access to information legislation, along with the terms of reference for the housing ministry’s ad hoc Affordable Housing Advisory Committee, minutes of that committee’s meetings, a log of the AHAC’s meetings with contractors about Phase 1, AHAC expenses and the contract of AHAC chairman Hugo “Miguel” Pereira as a special adviser to Mr DeSilva.
Housing permanent secretary Jeane Nikolai, in her June 10 memo, explained to Chidozie Ofoego, the Financial Secretary, that Mr DeSilva had given the AHAC a “strict mandate” to “deliver as many quality, resilient homes as possible within a 24-month period at a target budget baseline of $500 per square foot”.
Ms Nikolai wrote: “To determine the optimal execution vehicle, the ministry evaluated whether delivery should be managed internally through standard Civil Service frameworks or externalised via relevant quangos.
“It was determined that the bureaucratic constraints of direct government management could not support the requisite speed, agility and commercial rigour demanded by the 24-month timeline”, so execution was routed through the Bermuda Land Management Corporation and the Bermuda Housing Corporation.
Ms Nikolai added: “While the procurement processes used in this initiative maintain total transparency, fiscal responsibility and auditability, they operate under a distinct commercial cadence and structure tailored specifically to quangos, separate from the Office of Project Management and Procurement frameworks.
“By law, these quangos are not bound to rigid OPMP policies, which are structurally optimised for standard public projects and do not always guarantee the lowest price, best quality or hyper-accelerated delivery timelines.”
The permanent secretary added: “Entering direct negotiations with shortlisted, preferred proponents was determined to be the most fiscally prudent and viable pathway to satisfy the minister’s mandate.”
She wrote that “ultimate statutory and fiduciary responsibility for the final project execution rested solely with the board” of the BLMC, where Neville Tyrrell, a government MP, is the chairman.
Opposition MP Michael Fahy has accused Mr DeSilva of “hiding behind quangos,” recently claiming they “have limited parliamentary oversight”.
The Royal Gazette asked Andrew Dias, the BLMC chief executive, for the corporation’s board-approved financial/procurement procedures and queried whether they included competitive tendering or value-for-money thresholds for sizeable contracts, but they were not shared by publication time.
Mr Dias wrote in an e-mailed response that the BLMC was “statutorily required to have annual audits by the Office of the Auditor-General” and that quangos “from time to time” helped deliver specific government initiatives, as happened with the America’s Cup in 2017.
He wrote that the primary difference between that event and the new homes scheme was “that one was to host a global sporting event and the other is delivering affordable housing for Bermudians”.
Ms Nikolai wrote in her memo: “Following an exhaustive technical and financial presentation delivered by the chair of the AHAC [Mr Pereira], the BLMC formally exercised its authority, ratified the selection of the preferred proponents and approved the final project awards. The same process was used for the financing.”
The permanent secretary, writing a week and a half after the minister told MPs that the external financing was backed by government guarantee, warned that because of the volatile global construction landscape, time was “now the most critical risk factor”.
“Because Bermuda relies entirely on imported materials, we are acutely exposed to these external market shocks,” she wrote. “Every week of administrative delay directly compromises our financial hedges.”
She added, in bold: “The longer the project waits for final sign-off on the sovereign guarantees, the more we expose the public purse to sudden, compounding material cost increases that could fundamentally threaten our targeted $500/sf budget baseline.”
Mr DeSilva told MPs on June 26 that there would be no cost overruns on the $64 million CPS project at Tommy Fox Road in St David’s, and Albert Row and Victoria Place, Ireland Island South, Sandys, which form part of Phase 1.
An “evaluation matrix” used to compare external firms in line for lucrative no-bid government contracts was incomplete when the successful companies were chosen, The Royal Gazette can reveal.
Minutes of meetings held by an ad hoc advisory committee to Zane DeSilva, the Minister of Housing and Municipalities, revealed that Coastal Precast Systems, of Virginia, in the United States, and Preconco Ltd, of Barbados, were chosen in March to build Phase 1 of the Government’s $418.5 million affordable housing project.
Questions have been raised about how the foreign firms were selected, without the issuing of an RFP and without oversight from the Office for Project Management and Procurement.
The minutes of a March 27 meeting of the affordable housing advisory committee record “concern about research background and documentation completeness”.
They continue: “Need to finalise evaluation matrix to justify selection of vendors.
“Team to review and identify gaps and share missing items.”
The vendor evaluation matrix, in the form of a spreadsheet, was shared with Michael Fahy, the shadow housing minister, in response to parliamentary questions he asked about the process of choosing contractors.
Mr Fahy said the document led to “more questions” than answers about the Government’s due diligence before it awarded lucrative contracts to foreign firms.
However, a senior civil servant claimed the data was the “mathematical evidence of a rigorous, objective filtering process in action”.
Mr Fahy, a One Bermuda Alliance MP, said the matrix showed the scoring system for companies assessed for work on Phase 1 of the Government’s affordable housing scheme was “heavily weighted” in favour of those who had worked in Bermuda before.
He said that would “naturally lead to a predetermined result”.
The matrix shows the scores given by the affordable housing advisory committee to nine firms, with CPS and Preconco coming out top.
The contenders could earn a total of 61 points across four categories: relevant experience and local knowledge (25 points), cost and value for money (20), project timeline and delivery capacity (10), and reputation, reliability and governance (6).
CPS scored 21 and Preconco 22 for relevant experience and local knowledge, while the others all got fewer than 20 points in the category.
Mr Fahy said: “This calls into question the supposed rigorous nature of the process undertaken to choose the housing providers.
“This is very important given that $115 million has already apparently been allocated for housing plans [for Phase 1] where there has been no RFP, with at least $300 million to follow.”
He accused Mr DeSilva of “actually bragging at not getting RFPs, when there is an intent to spend close to half a billion dollars of taxpayers’ money [in total over ten years] by quangos that have limited parliamentary oversight”.
A June 10 internal memorandum from the housing permanent secretary to the Financial Secretary, disclosed under public access to information, referred to the evaluation.
Jeane Nikolai wrote that CPS and Preconco had a “good local track record of delivering similar projects in other locations in Bermuda, which means that there will be no extra time spent in learning the local environment or navigating the local labour landscape”.
She added: “Preconco and Coastal completely outpaced the competitors in the modular field [Stack scored 3 out of 25, Z-Modular scored a 9 out of 25].”
Ms Nikolai also explained that many metrics for firms other than CPS and Preconco were marked “unknown” on the matrix because those companies failed at an initial “sequential ‘gating’ process”.
The permanent secretary wrote: “Under standard best practices in procurement, if a vendor fails to meet an absolute baseline requirement, the evaluation for that vendor is immediately terminated.
“Consequently, several metrics for non-selected vendors are marked as ‘unknown’.
“This does not represent an omission or a lack of diligence by the AHAC; rather, it indicates that these vendors were completely disqualified at an earlier stage of the matrix, rendering further investigation unnecessary and redundant.”
She added: “Coastal Precast Systems and Preconco successfully passed every single sequential gate …
“Only after clearing these non-negotiable structural and safety requirements did the committee invest the technical resources to completely calculate their erected shell costs, evaluate their fit-out requirements and audit their local subcontractor networks.
“The presence of ‘unknowns’ on the scoring matrix is the mathematical evidence of a rigorous, objective filtering process in action.”
The housing ministry declined to comment for this article on the basis that the Pati disclosure had “answered these questions”.
The Pati disclosure contains AHAC meeting minutes from March 9 to July 3 this year.
The minutes for March 9 note a formal decision was taken to proceed with precast units and that CPS and Preconco were the “primary vendors under consideration”.
“A justification document for the Financial Secretary is needed, detailing project costs, payment schedules and a construction schedule from both vendors to approve the funding request,” the minutes state.
At a meeting on May 21: “The team agreed that for the next phase of building [300 homes], a more conventional bid process would be conducted.”
At a July 3 meeting: “A debate occurred on whether to issue a new RFP for Phase 2 or directly engage existing mobilised contractors [Preconco and Coastal]. The consensus was that a formal procurement process should be carried out.”
• To view records from the housing ministry Pati disclosure and the vendor evaluation matrix, see Related Media
Housing minister Zane DeSilva announced in May that Phase 1 of the Government’s ten-year $418.5 million affordable homes plan would result in the building of 229 residential units before 2028, at a cost of almost $115 million.
Groundbreaking took place at Albert Row, Dockyard, last week, where 24 two-bedroom units, within two three-storey buildings, will be built by Coastal Precast Systems, of Virginia in the US.
CPS’s $64 million no-bid contract is also for 24 three-bedroom units and 12 two-bedroom units at Victoria Place in Dockyard, and 12 two-bedroom units and 12 three-bedroom units on Tommy Fox Road in St David’s.
Phase 1 will also deliver 110 one-bedroom units in Southampton, adjacent to Dr Cann Park, built by Barbados-based company Preconco Ltd.
Mr DeSilva said in May that 35 single-occupancy units would be retrofitted in Channel House in St David’s for seniors.
However, last month it was announced the former office block would become a transitional healthcare facility with 60 beds for seniors to alleviate hospital bed blocking.
Christopher Famous, the Bermuda Housing Corporation chairman and a government MP, confirmed that the facility superseded the previous plan for Channel House.
• Additional reporting by Sam Strangeways and Alva Solomon
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