Probing JDIP - SCANDALOUS!

The Jamaica Development Infrastructure Programme (JDIP) was trumpeted by the Jamaica Labour Party (JLP) administration as the most significant infrastructure programme ever undertaken by the GOJ. The project, as originally announced, involved expenditure of US$400 million over a four-year period.

The project concept was initially supported by the Opposition, as there was no question of the need for significant additional investments in the country's infrastructure. Furthermore, a commendable feature of the project was that loan repayment was directly linked to the additional taxation levied on gasolene in 2009.

It was this link between the increased taxes and improved infrastructure that influenced the Opposition's decision to initially support the programme and not to seek to gain political mileage by protesting the huge tax increase on gasolene. This was a break with past behaviour when any such increases had been used by both political parties as the pretext for protests and demonstrations.

Unfortunately, few could have anticipated that the administration would use the cover of the initial goodwill, accorded to the programme, to embark on a set of projects about which troubling, unanswered questions have been raised at every stage. Furthermore, the refusal to answer the most basic of questions posed in Parliament was aggravated by the dismissive arrogance of former minister, Mike Henry, who spoke about the project as one would a personal fiefdom.

I faced continuous frustration as several questions posed in Parliament were left unanswered for months and, in one instance, never answered. My appeals (both private and public) to then leader of government business, Minister Andrew Holness, and Speaker Delroy Chuck bore no fruit. To be blunt, both seemed intimidated by Mr Henry.

incompetence or unpreparedness

Furthermore, when answers were eventually tabled, they were inadequate and, invariably, Mr Henry claimed he was not prepared for follow-up questions. It became increasingly clear to the Opposition that, rather than this reflecting incompetence or unpreparedness, there was a carefully orchestrated plan aimed at avoiding accountability for expenditure undertaken on the project.

It is useful to start at the beginning by considering the source of funding for the project and the way in which the main contractor was selected. The US$400m project is being funded as follows:

Of the US$400m required for the full project, the China EX-IM Bank is providing US$340m (85 per cent) and the GOJ, US$60m (15 per cent). The loan from China carries an interest rate of three per cent per annum. So far, so good! Now problems begin to emerge.

The former minister stated categorically that the China EX-IM Bank had required, as a condition for granting the loan, that the sole-source methodology be employed in selecting the main contractor. This claim has been flatly refuted by the auditor general in the special audit of the project. In truth, the contractor could have been selected through the tender process.

Question 1: Why did the minister find it necessary to mislead the country on this matter? Is it that he was misinformed?

In a recent appearance before the Public Administration and Appropriations Committee, Permanent Secretary Dr Alwin Hales admitted that the ministry was always aware that the sole-source methodology was not a requirement of the Chinese authorities. However, he argued that the limited period available to access the loan forced the ministry to proceed along that path. This response contradicts the earlier statements by Minister Henry that the sole-source methodology was prescribed by the China EXIM Bank.

Question 2: Why was Minister Henry's erroneous assertion allowed to remain uncorrected?

We next turn to the selection of subcontractors. Again, former Minister Henry, in the early days, stated categorically that China Harbour would only be utilising the services of grade-one contractors, but the tender process would not be used in selecting those to be awarded projects under JDIP. The Opposition questioned this approach from the outset.

The twin situations, whereby the main contractor was chosen by the sole-source methodology and subcontracts are negotiated directly with select firms, implied that the country has no assurance of value for money at either stage. The recent revelation that China Harbour's profit margin had been arbitrarily increased to 25 per cent, is more proof of the validity of this concern. Any pretence of an arm's-length relationship between the GOJ/Mr Henry and the main contractor has been undermined by the fact that a close business associate of the former minister is employed by China Harbour as an 'adviser'.

lack of transparency

The auditor general's report has once again provided us with information which contradicts an earlier statement of the minister. It was shown that, contrary to the initial claim that only grade-one contractors would be employed by the project, several of subcontractors were ranked at grades two and three.

In addition to the lack of transparency resulting from the approach used to select contractor and subcontractors, several examples have arisen where there is evidence of significant price increases on projects designed and costed prior to JDIP, but now being implemented under the programme. Three bridges - Cassia Park and Queensborough in St Andrew and Rio Grande in Portland - are interesting examples.

In answering questions which I posed in Parliament, then Minister Henry revealed that the Cassia Park Bridge was costed by NWA engineers at $52m in 2005, but is being constructed under JDIP for $184m. The Queensborough Bridge was costed at $45.5m in 2005 and is being constructed at a cost of $154 million. In seeking to explain the significant cost increases in both instances, Mr Henry spoke to the price movements in materials. Mr Henry's answer to my direct question, of whether the contractors provided the construction materials, was in the affirmative.

However, this response is contradicted by the auditor general's report, which states that the materials needed for these bridges had been provided by the NWA, supplied through a contract with Mabey & Johnson, the British bridge-making firm. (Incidentally, Mabey & Johnson pleaded guilty in England to the charge of bribing officials in various countries. Former CEO of the NWA and outgoing MP for St Andrew East Rural, Joseph Hibbert, was named by the firm as one of the foreign officials they had bribed).
Question 3: Did Minister Henry mislead Parliament on this matter because he was misinformed by his technical advisers? If so, we need to know who misinformed him.

While the minister asserts that there was no prior costing of the Rio Grande Bridge, information which has been made available to me indicates that this bridge was costed by the NWA at US$15m, but is now being constructed under JDIP for US$29m.

Perhaps the first worrying sign about JDIP was the decision to route the project through the Road Maintenance Fund (RMF). No credible rationale has been provided for this decision. Because of this strange decision, Mr Holness, in his then capacity of leader of government business, argued, during the meeting of the Standing Finance Committee in April, that questions on JDIP were not relevant. The basis of his position was that the full project was not listed in the Estimates of Expenditure; consequently, the only questions allowed would be those related to the GOJ's contribution to its 15 per cent obligation for the project.

walkout

On the insistence of the Opposition, the deliberations of the committee were suspended to allow Minister Shaw to attend and explain the rationale for excluding the full project from the Estimates of Expenditure. On resumption of the hearings, Mr Holness' intransigent position was further reinforced by then prime minister, Bruce Golding, and finance minister Audley Shaw, leading to a walkout from the committee by the Opposition.

Immediately after the walkout, my colleague, Robert Pickersgill, and I jointly wrote to the auditor general and the contractor general requesting that their offices audit the project. The shocking AG audit is a direct response to our request.

The routing of the project through the RMF can only be described as a farce, as that institution is on record as stating that it does not have the financial capability to repay the loan for which it is listed as the official borrower. Interestingly, the executive director of the RMF, in testifying before the PAAC, stated that the institution had nothing to do with the negotiations for the loan and was only instructed, after the fact, to sign the loan agreement. Based on the RMF's plea that it was unable to service the loan, it is fully guaranteed by the Ministry of Finance. In short, there was, and is, no good reason why this project should not be routed fully through the Estimates of Expenditure and subjected to full parliamentary scrutiny.

Question 4: Is Prime Minister Holness still adamant that JDIP should be excluded from the Estimates of Expenditure and not be subject to review by the Standing Finance Committee?

Selection of Projects

From the beginning, there have been questions about the way in which projects were selected for inclusion under JDIP. Based on an analysis of the projects selected for the first two years, it has been established that, in terms of value, 75 per cent of the projects have been allocated to constituencies represented by JLP members. It is impossible for this skewed allocation to be justified using any set of objective criteria.

The bias evident in project selection in some parishes can only be described as vulgar and unconscionable. Consider, for example, Manchester. Over the two fiscal years 2010/11 and 2011/12, it is projected that there will be an expenditure of $1.75b in the parish under JDIP. Of that amount, $1.70b will be spent in the constituency represented by Finance Minister Audley Shaw! Over the same period, the other three constituencies in Manchester will benefit from projects valued at $50m. How can Minister Shaw and Mr Henry justify one constituency receiving 97 per cent of the value of projects and three others receiving three per cent? It is of more than passing interest that the AG's audit has raised troubling questions about the big-ticket project being implemented in Mr Shaw's constituency - the Christiana bypass.

The final point on accountability and value for money relates to the amount which has been allocated, under the guise of 'institutional strengthening', to the refurbishing and furnishing of the offices of the NWA. It is impossible for any justification to be advanced for this cavalier violation of all existing rules governing use of GOJ funds. Information which has been made available to me indicates that a full probe of the refurbishing contract, again awarded through the sole-source methodology, will reveal clear evidence of corruption.

In reviewing the way in which this project has been implemented, there are several lessons to be learnt, both in terms of limiting the damage done and in precluding a recurrence of the blatant misuse of public funds. The prime minister has agreed, belatedIy, to the Opposition's demand for a forensic audit of all projects which have been implemented to date.

But that is not enough. Simultaneously, the police should be called in to pursue all leads indicating possible fraudulent use of public funds. Third, all new contracts issued under JDIP should be via the tender process. Fourth, the project should be formally routed through the formal Budget process and placed in the Estimates of Expenditure.

This project, which was started with so much promise, is now seen by most objective observers as a scandalous misuse of public funds. Never again should any administration be allowed to violate the rules governing accountability and transparency in the expenditure of public funds, as has occurred with JDIP. While the Opposition has an obvious role to play, perhaps more important is the need for the media and civil society to be ever vigilant.

Omar Davies, PhD, is opposition spokesman on transport and works. Email feedback to columns@gleanerjm.com.