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Throwing out the baby

Published Thursday 30th May, 2004

ROYSTONIA: Investigation or Distraction?

Over the last fortnight there have been a series of claims and counter-claims in the controversial Roystonia housing scheme.  How can we try to make some sense of the confusing new picture?  Do we want to know what really happened?

This is an opportunity to clarify and improve national housing policies; it would be a pity to miss it.  What was the rationale behind the Roystonia contract?  Is that rationale effective for delivery of low-income housing?  How heavily does it consume taxpayers’ dollars?  Are there better methods available to us?

Of course, there have been accusations that the Housing Minister’s calls for investigations into this matter have been nothing less than a series of distractions.  We can all remember episodes in which our politicians have tried to distract us from one embarrassment or another. It would be easy to assume that this is the case here.  The critical importance of housing to the national well-being, the size of the identified housing needs and the scarcity of the critical resources all mean that this is far too important a matter for these easy assumptions.  How can we evaluate these accusations?

To properly decide on that question, there are some questions we would need to have answered –

  • Tendering – I have read both NHA and Hanover statements on this matter with conflicting claims of no tendering and competitive tendering respectively.  Which is true? 

    It is possible to use resources to produce quality houses without competitive tendering.  Building contracts can be settled by negotiated tender with contractors, but these would need to be monitored by reference to prevailing costs and quality norms to ensure value for money and standards of quality.

    Of course, our norm is for public works to be tendered – the reason behind the establishment of the Central Tenders’ Board – but that has been changing over the last few years.  If there are good reasons for the changing of that system, we need to learn these publicly and have the appropriate cost and quality measures agreed by the respective bodies – NHA, UDECOTT, NIPDEC, JCC, Hardware dealers etc.  Does the present housing program use the competitive tendering system or have we diverged from these?  Again, for the sake of clarity, there is nothing wrong with trying something new once the necessary safeguards are in place.
     

  • Risk allocation – One of the more serious criticisms of the Roystonia scheme is that the contract seems to have allowed rises in construction costs to be passed onto the NHA.  Do the present wave of contracts restrict that risk to the building contractors?

    The entire rationale behind using the private sector for public provision is their greater efficiency at a number of things, including the critical area of risk.  If agreements between the public and private sectors do not allocate risk to the latter, the rôle and utility of these is questionable, to say the least.  Once again, we can support changes to this, but only if the risks retained by the public are matched by corresponding benefits.
     

  • Cost of building - We recently heard the Minister of Housing voice his serious concerns over the rising prices of building materials and the adverse impact this was likely to have on the thrust to build affordable housing.  Appropriate procurement methods and the associated allocation of risk are critical for the attainment of the government’s ambitious targets.  There ought to be significant savings in any volume building program.  We need to learn to what extent the Roystonia homes were more or less expensive than the prevailing norms for houses of that size and standard.  How does the output from the present housing program measure up?  Has our performance improved?  Are we getting value for money?  If not, why not?  What can we do to improve that performance?
     

  • Monthly payments – We read reports of NHA statements that monthly payments exceeding $4M were being made to the Roystonia contractors.  These are large sums of money and moreso when we consider that it is almost the whole of the capital expenditure on housing.  This table compares the actual capital expenditure on housing (obtained from the Ministry of Finance publication Estimates of Expenditure) with the recent Roystonia figures as reportedly stated by the NHA.

The comparison is striking since in several of the years the stated expenditure seems to exceed the reported totals.  There are several possible explanations and these are set out here, in no particular order - the $4M figure of monthly expenditure is incorrect or correct figures have been mistakenly published by the newspapers: the Estimates are incorrect: the entire project is, for some reason, not meant to be shown in the Estimates.  The questions are fertile and others occur; how could one scheme, even if it were not part of the officially reported expenditure, consume so many resources?  One could also ask how what is obviously the NHA’s biggest scheme is only now receiving attention.

The directors of Hanover Construction have made their protests of innocence and we need to guard against creating an atmosphere which discourages private sector participation in national development.  We are already very close to that point.  We need to clear the air and be constructive if we are to develop.

We have to learn from our experience if we want to do better.  It is an essential part of growing up.  Do we want to do better?

Next week, we begin to discuss the future of our cities, beginning with our troubled capital.

Afra Raymond - Property Matters

Over the last fortnight there have been a series of claims and counter-claims in the controversial Roystonia housing scheme. How can we try to make some sense of the confusing new picture? Do we want to know what really happened?

This is an opportunity to clarify and improve national housing policies; it would be a pity to miss it. What was the rationale behind the Roystonia contract? Is that rationale effective for delivery of low-income housing? How heavily does it consume taxpayers’ dollars? Are there better methods available to us?