Bermuda airport: Swiss Challenge a "no-go"

Bermuda airport: Martin Zablocki, Chairman of Canadian Commercial Corporation and Aecon Group Executive Chairman John Beck confer with Bermuda's Finance Minister Bob Richards

Martin Zablocki, Chairman of Canadian Commercial Corporation and Aecon Group Executive Chairman John Beck confer with Bermuda’s Finance Minister Bob Richards

Aecon Concessions, the company sole sourced to redevelop Bermuda’s only airport, has dismissed the idea of opening up the deal to a Swiss Challenge as a non-starter.

Canadian Commercial Corporation, which would oversee and guarantee the $250 million project, refuses to be drawn into the local dispute over the process.

Bermuda’s Opposition Progressive Labour Party is pulling out all the stops to prevent what it sees as an abuse of process that will cost the taxpayer dearly and could worsen the country’s balance sheet.

Government has dismissed Opposition concerns, saying it has chosen a novel procurement approach which will mitigate risks inherent in the traditional RFP competitive bidding process.

On Monday, just two days after Government rejected its parliamentary motion to subject the project to an RFP process, a high powered PLP delegation jetted off to Whitehall to appeal to the UK to intervene.

The party is proposing that the project be subjected to a Swiss challenge at the very least, or begin the process anew with a Request for Proposal.

A Swiss Challenge would invite other parties to match or exceed the proposal put forward by CCC/Aecon.

At a press conference on Wednesday, Aecon executive John Beck said that a Swiss Challenge could not be implemented given the structure of the deal.

The problem with a swiss challenge in this particular case is that the solution we believe we bring to the Bermuda airport redevelopment is there needs to be a Canadian government there to attract the right financing solution and to give guarantees to the government that there would be no surprises or overruns.

If you go to a swiss challenge and you open it up to multiple bidders, the other bidders would not be able to bring the government guarantee of execution. So it would be imbalanced.”

A CCC spokesperson sent this response when asked if it would support the PLP’s proposal for a Swiss Challenge.

With respect to the questions around Opposition Progressive Labour Party seeking to have the UK intervene, a Swiss Challenge and Bermudian taxpayers, CCC is not in a position to comment on these matters. However, CCC strongly believes that its established due diligence processes, access to proven suppliers and competitive financing options, and guarantee of contract performance delivers high value and low risk to Bermuda.

CCC and Aecon executives made considerable mention of their work together building an award winning airport in Quito, Ecuador. The Canadians said that the model which saw them finance and build the facility in exchange for a concession agreement, would be replicated for the Bermuda project. But no mention was made of the fact that that project was the subject of considerable controversy and litigation when the Aecon-led joint venture that held the concession for the airport increased airport fees by more than 100 percent.

The Quito project was also subject to a Swiss Challenge. According to BNamericas, a Latin America focussed business news service, the process attracted some interest from “a number of” European consortiums but counteroffers to CCC’s initial proposal did not materialise due to aviation industry conditions at the time.

Shadow Finance Minister David Burt and Opposition Leader Marc Bean at a press conference to criticise Government's Bermuda airport redevelopment plans

We object: Shadow Finance Minister David Burt and Opposition Leader Marc Bean at a press conference to criticise Government’s airport redevelopment plans

The airport redevelopment project has been controversial since Finance Minister Bob Richards announced the signing of a Memorandum of Understanding with CCC in November last year. Criticism was renewed this month when a cache of emails between CCC and Aecon execs was released following an Access to Information request by civil society group The People’s Campaign. Critics say the emails prove that Mr Richards misled parliament about the beginnings of the negotiations and that Aecon was the chosen contractor from the start.

Interrelationships

The criticism has also highlighted relationships between the key players and Aecon, raising concerns about backroom dealing.

Aecon Concessions is owned by The Aecon Group Inc, a publicly traded Canadian company whose board of directors includes Bermuda resident Michael Butt who also happens to be the Chairman and CEO of local construction company Somers Construction.

While Aecon is expected to be the prime contractor for the airport redevelopment, the understanding is that local subcontractors will be sourced under traditional competitive processes.

We asked Aecon Concessions president Steven Nackan whether it expected to work with Somers Construction once the airport project gets underway. He said that Somers would not have an advantage over any other local company.

As an independent member of the board of directors of the publicly traded entity Aecon Group Inc., Mr. Michael Butt has and will continue to recuse himself in any discussions regarding the LF Wade International Airport Redevelopment Project,.

Under no circumstances have commitments been made by Aecon to Somers Constructions with respect to the Bermuda Airport project. Similar to our approach on past projects, Somers, along with other local potential contractors and suppliers would be able to submit their qualifications to be pre-qualified to provide goods and services to the project through a level and rigorous evaluation and prequalification process. Once pre-qualified, companies can be invited to submit tenders for those portions of the work for which they qualify.

CCC ignored our query seeking to know what role it would play in ensuring that Aecon engages in a competitive procurement process for local sub contractors.

Somers Construction employees have also been involved in on-island meetings with Aecon as it conducted its due diligence, and the Aecon-Somers link is not the only relationship that could raise eyebrows.

Government’s legal advisor on the Aecon/CCC deal, Bennett Jones, a Canada based law firm which set up shop on the island about a year ago and has played a key role in developing the Bermuda airport deal, has also worked with CCC in the past.

CIBC, which introduced the Aecon/CCC option to the Government and set up meetings with the Minister of Finance, wholly owns CIBC Asset Management Inc which is a major institutional shareholder of Aecon Group.

According to investment research firm MorningStar, CIBC Asset Management Inc, is the fourth largest institutional shareholder of Aecon owning just over three percent of the group, a shareholding which was increased by almost 70 percent in recent weeks.

CIBC Canadian Small Cap, another fund managed by the bank, owns an additional .78 percent of the group.

CIBC was described in the email cache by Steven Nackan as Aecon’s “back channel” which provided informal advice to the company about its approach to Bermuda Government.

*May 24, 2015: Updated for clarity and additional information. (CIBC Asset Management, Inc, not CIBC, is a major institutional shareholder of Aecon).

This article belongs to Politica ! The original article can be found here: Bermuda airport: Swiss Challenge a “no-go”