Rosemarie Sant
GML Enterprise Desk
The State owes in excess of $2 billion to local contractors.
Reeling under the pressure, some contractors have been forced to close shop, employees are being sent home and, fearing foreclosure by banks, there is now a threat from some of legal action to get monies owed to them.
The grim picture emerging from the construction industry was painted by president of the T&T Contractors’ Association Mikey Joseph, who told the GML Enterprise Desk that among the debtors are Nipdec, Nidco, the Educational Facilities Company and the HDC.
Joseph noted that when the People’s Partnership came into office they met a $1 billion debt, “but they ignored it. In some cases the funding was misappropriated and used for new projects.” He said the previous administration “in trying to win power extended themselves beyond capacity to pay and gave out a lot of contracts. Today, contractors are screaming again as the debt has now climbed to over $2 billion.”
While he could not say how many contractors are owed, Joseph said the bulk of the debt—in excess of $800 million—was owed by the Educational Facilities Company Ltd.
Debt owed to contractors:
Nipdec—$600m
Pure Programme
—hundreds of millions
Nidco-hundreds of millions
HDC—$600m
EFCL—$800m
No payments to date
Joseph said as far as he was aware, no payment has been made to any contractor to date. He said two or three months ago, a payment of $200,000 was made “to a small number of contractors,” but that is just a drop in the bucket and the huge amounts owed are not being paid.
As a result, he said, some contractors have had to “close shop, others have scaled down their operations, some are now operating two to three days a week, it is a difficult period.”
Asked about the outstanding debt to contractors, Finance Minister Colm Imbert told the GML Enterprise Desk that because the contractors are “engaged by government departments and agencies the question cannot be answered immediately or easily.”
He said, “Each individual ministry or agency has to complete its audit of work done under the previous government before the amount can be quantified.”
However, Imbert told us that in “some cases departments and agencies are making partial payments pending the completion of audits.”
Forced to scale down
operations, send home staff
Contractors admitted that because they are not being paid they are feeling the pinch.
A large contractor who procured contracts for roads and bridges through Nidco and Nipdec told the GML Enterprise Desk that he is owed in excess of $50 million by the state entities. Speaking to us on condition of anonymity, the contractor described the current situation as “very, very bad. It real bad, we don’t know if we going forward or backwards.”
He said the last payment he got was in September 2015. The contractor said he has had to scale down his operations and has sent home 80 per cent of his staff. He said he has been trying to get information about outstanding monies owed to him but to no avail.
The contractor said he was forced to change banks because “the bank I was with just did not want to understand the situation. They wanted their money. I moved to local banks which are more understanding.”
He warned that if a payment is not made within the next six months, he would have no option but to initiate legal action against the State.
Another contractor told us that he has downsized his operation by 30 per cent. He said they were waiting to be paid just like everybody, but to no avail.
Like his counterpart in the industry, he did not want to be identified for fear of victimisation but he said he had written letters to the different agencies which employed him and has been told that “when things settle down the debt will be settled.”
He declined to tell us how much money was owed to him but said “we have to understand we in a declining economic situation and everybody has to be understanding.”
Roger Ganesh of Kallco told the GML Enterprise Desk that “this is the worst situation I have ever experienced in my lifetime in terms of the debt owed to contractors by the State; things terrible.”
Kallco recently removed its equipment from the Maracas Bay improvement project because it was not receiving payments from the State for work done.
Trickle-down effect
There has been a trickle-down effect with contractors not being paid. We are told that suppliers have also not been paid as a result. Many contractors owe suppliers hundreds of thousands of dollars. While some suppliers have been “understanding,” they aren’t sure how long their credit lines will hold. Some contractors said they even owe their employees money, while others are unable to meet VAT commitments.
Added to this, some banks are not willing to facilitate people with government contracts. Asked about this, Joseph said, “Five years ago a government contract was considered money in the bank, and the banks would have financed your operation based on that, but because the payments from the Government are so unreliable you find that the banks are not willing to accept government commitment as any form of paper to lend money or to continue to have you run a high overdraft.”
In some instances, he said: “The banks are calling in overdraft facilities from some of our members.”
Meanwhile, there are no new government contracts on the horizon, and contractors continue to suffer from lack of payment and no new jobs.
Around this time annually, contractors are invited to site visits at schools which the Educational Facilities Company may have deemed to be in need of repairs. When told this may present an opportunity for some work for contractors, Joseph laughed and said: “If there are contractors who are brave enough to want to work for EFCL I wish them luck.”
He said EFCL had effectively “bankrupted some small contractors who have worked on school programmes in the past and have not been paid.”
Joseph is not optimistic that a lot of contractors would be open to taking the risk “because there are many contractors who have the EFCL before the courts for payments owed to them.”
Education Minister Anthony Garcia gave the assurance that “although it’s a lot of money, given the current state of the economy the $800 million owed to contractors will be paid.”
He said an evaluation was currently being done of the invoices from the contractors “so we can verify that the work was done and that we got value for money.”
Once that process is done, he said, an application would be made to “the Minister of Finance for monies to pay the contractors.” He said it would be up to the Minister of Finance to determine the source of funds for the payment to be made.
Head of the Contractors’ Association Mikey Joseph is lamenting that the construction industry has been hurt in the past by ‘collusion’ which saw some “investors having 21 companies and when you go on a site visit six of the companies belong to the same group tendering for the job, and then you want to talk about collusion and clauses where you sign that you are not colluding.
“It is natural collusion because they have the same set of shareholders. We need laws that deal with how we compete and set up businesses.”
He said to address this problem there needs to be “contractor registration and licensing. In addition we definitely need to have the new procurement legislation fully proclaimed, operationalised and functioning because at the end of the day, the only people who are losing are the ordinary people, the middle class and the poor.”
Industry dormant
for eight months
Meanwhile, Joseph said the construction industry in T&T has been dormant for the last eight months.
And according to Joseph, there are no indicators that there would be a turnaround in this situation any time soon.
In its latest report the Central Bank also indicated that in the last quarter of 2015 the construction sector had declined by 8.3 per cent.
Joseph said apart from the planning and design of the road to Toco, which may take up to two years, he is not aware of any big projects that are being undertaken.
Asked whether local contractors have been asked to bid to complete the Pt Fortin Highway now that the contract with OAS has been halted, Joseph said: “I am aware some local contractors have tendered on packages for continuance, but I am not aware there has been any positive outcome, we are also not aware whether funds are being sourced to continue the project.”
He said locally there wasn’t much available to contractors, and he does not anticipate that this country would be able “to sustain the level of activity we are accustomed to seeing for the next two or four years. I don’t see that happening.”
Although there are plans to spend $90 million to complete the Brian Lara Stadium, Joseph said when that is split up in several packages “it will bring relief but it is not going to be long term.”
He said once the work to be done is well planned, “the work at the stadium should not go beyond the year because it is generally just a matter of doing some restoration to electrical and other things. There are no development packages coming out of that.”
Because of the situation in the local construction industry, contractors are now looking to other countries in the region for work. Just recently, NH International headed by TSTT chairman Emile Elias got a contract in Dominica and Adams Construction “won a fairly large contract in St Kitts,” he said.
In an effort to get clarity on what is happening, Joseph said the Contractors’ Association, which he heads, had been trying to meet with the Ministers of Finance, Housing, and Planning to get “an understanding of where we’re at, what direction is best to take, what the housing plan and housing development programme is really about, but we have been unable to get meetings.”
The industry, he said, is also still unclear on the government’s housing plan as outlined by the Prime Minister in his address to the nation last December.
He said the Government indicated it would invite proposals for finance, some for design/build, and others who wish to have their own land developed, but “I don’t think that is the best model, but we have no further information other than the request for proposal.”
Joseph is suggesting that the best arrangement would be to have “a conglomerate which has financing in train.”
He explained: “We need to find finance, a design-and-build team, develop a proper project, and then present it to the Government.”