There have been questions raised in the public domain about the P3 financing model the Bermuda Government has entered into with the Canadian Commercial Corporation (CCC). To understand why Government has chosen this model one must take into consideration the context in which the decision was made. Some of these points are as follows:

* Is the need to create jobs urgent or not?

* Is it prudent for the Government to pay multiple millions of dollars to consultants required in the traditional RFP process, as it did with the new hospital building where about $10 million was spent on consultants.

* Does the Government want to use the resources of local contractors and labour?

* Does the Government have the funds available to construct the new terminal?

* Does the Government have the capacity to go further into debt for this project and remain in good favour with its creditors, upon whom it relies?

* Can Bermuda afford to run the risk of overruns and delays so common in projects of the past?

* Does the Government want to ensure it gets value for money?

I will address these seven points in order.

Is the need to create jobs urgent or not? Clearly Bermuda needs to create these jobs, urgently. The traditional Request For Proposal (RFP) procurement process is very time consuming, taking multiple years. The CCC model cuts this procurement time by about one year thereby allowing shovels to be in the ground and jobs to created sooner rather than later. We estimate the commencement of the project in about 12 months time.

Bids for specialised structures like a hospital facility or an airport terminal are highly technical, requiring expertise that Government does not have within the civil service. The traditional RFP procurement process would require the use of expensive consultants to set parameters and evaluate bids etc. More than $10 million was spent on the new hospital wing. The Government is trying to minimise such expenses and is utilising an alternate method to validate value for money metrics. CCC has years of experience in developments of this nature and will select a developer with the commensurate technical expertise and experience.

The Government has made it clear from the beginning of talks with CCC that local contractors and labour must be used as subcontractors to the maximum extent possible. Obviously no one in Bermuda has experience in building an air terminal from scratch, so expertise from abroad will be required but the vast majority of work on the ground will be performed using local resources.

Clearly, the Bermuda Government does not have the financial resources at its disposal to construct the new terminal. Neither can it withstand the substantial increase in debt and debt service that would result from traditional financing methods. We already have about $2bn in debt and expect to run a deficit this year of $267m. The financing of the new terminal under this model will not have a substantial impact on government debt or debt service. Neither will Government be guaranteeing the debt or substantial debt service payments like it is with the new hospital wing. Revenues accruing to the airport will support financial obligations without recourse to the Government balance sheet.

It is clear that Government capital projects have a bad record of cost control and delivery timeliness. The new Berkeley Institute building, Heritage Wharf and Port Royal are clear examples of this. Traditional procurement models provide little or no protection against such risks. The CCC P3 model protects us against such risks which, as we now know, can be substantial.

The objective of the traditional RFP procurement process is to ensure that Government receives good value for money for the final product. To ensure value for money in this case, Government will retain the services of an independent international construction firm to perform a value for money assessment of the whole airport project. The same objective of the traditional RFP procurement process will be achieved with this alternative approach.

Established in 1946, CCC, a federal crown corporation, was mandated to facilitate international trade on behalf of Canadian industry, particularly within government markets.

CCC does not carry out the job itself but will select a Canadian Developer from its already preselected stable of Canadian engineering firms. This company will enter into a contract and Concession Agreement with the Bermuda Airport Authority to develop and manage the project. Title to the airport and adjacent property will remain in Government hands. The airport will be no more privatised that KEMH is. The discredited developer referred to in yesterday’s Royal Gazette is not connected with the Bermuda project.

The need for a new air terminal has long been recognised by Government. Upon taking office the OBA found that there were advanced plans and drawings already procured by the former government, to the tune of about $800,000. The reason it was never built is the ability to finance the project. We have now found a way to finance it while not exposing the Government to further financial and operational risks.

We are fulfilling our mandate by creating new jobs without jeopardising the Government’s solvency. In the context of the present financial condition of the Government of Bermuda it is a winning formula on all fronts.