Jeremy Brown, Gorstew Limited’s technical consultant on the Sandals Whitehouse Hotel project, says that the US$43-million overrun on the property cannot be properly explained without a “proper” forensic audit.

“I don’t think you will have a proper explanation for the US$43-million overrun until a proper forensic audit is conducted. That’s my opinion,” Brown, director of Implementation Limited, which advises Gorstew on technical aspects of the operations, told the Public Accounts Committee (PAC) of Parliament on Tuesday.

Brown was responding to questions from former PAC chairman and Opposition spokesman on finance and planning, Audley Shaw, about his comments on overpriced purchases for the project.

Shaw pointed out that Implementation detected that overpriced purchases for the project were as high as 40 per cent above market rates. He also noted that the forensic team appointed by former Prime Minister P J Patterson had determined that of some 21 construction rates identified, the rates paid by Sandals Whitehouse were higher in at least 13 instances than the market rates.

Shaw had made the point that some of the overstated rates were major elements of the contract and, therefore, must have contributed greatly to the huge cost overrun. He noted that Implementation had confirmed that there was excessive pricing on the concrete of approximately US$1.8 million, marl of over US$500,000 and reinforced steel of over $390,000.

Shaw then asked Brown whether that total estimated overspending of approximately US$2.7 million on the three items led him to the position that there is still a need for a “proper conventional forensic audit to be carried out at the site”.

Brown responded that until there is a “proper forensic audit” the overpricing could not be explained.

“Do you believe that on the basis of the sample of these three items, that a proper, detailed, conventional forensic audit would, in fact, reveal to the committee the kind of detailed explanation that is required in terms of the overrun of US$43 million?” Shaw followed up.

But Brown admitted that the numbers used to project the excessive cost pricing at US$2.7 million were actually derived from the forensic audit report from the prime minister’s team.

“It is the forensic auditors who disclosed this overpricing, all I did was to put a total on it,” said Brown. “But yes, this is indicative of excessive pricing throughout the project, and I believe it will demonstrate a trend.”

Shaw then asked Brown if he would be prepared to “make a link between what appeared to be an apparent excessive overpricing and an apparent willful attempt, on the part of the UDC (Urban Development Corporation), and the project managers to withhold information from you, as a partner in the project?”

Brown replied: “In December 2001, just after construction had commenced and we first saw the bills of quantities, I did identify these numbers as having been overpriced. I identified it in writing to Gorstew and I know that Gorstew made that information available to the UDC.”

Shaw said that more answers were needed on the issue of the overpricing and he would need to ask questions of representatives of both Ashtrom Construction, the builders, and Jentech Consultants, the engineering firm headed by former UDC boss Dr Vin Lawrence.

The forensic team, although pinpointing the time overruns and project management deficits as the main reasons for the venture going over budget, stated that it was unable to capture all costs related to the project in its sweep.

Calvin Roach, a quantity surveyor on the audit team, told a meeting of the PAC that there were areas in which it had not received information on costs that they had requested. He said that the team could not demand the information, it could only make a request.

Contractor-General Greg Christie has also raised the issue of a need for a financial forensic audit that would seek to capture all related costs, noting that he, in his own quest for information, had been ignored by several agencies.

balfordh@jamaicaobserver.com

Despite Whitehouse experience, ‘Butch’ won’t rule out future joint venture with Gov’t

Chairman of Gorstew Limited, Gordon ‘Butch’ Stewart, says that despite his experiences as a joint venture partner in the controversial Sandals Whitehouse Hotel project, he would not be averse to future joint venture partnerships with the State.

Stewart told the Public Accounts Committee (PAC) of Parliament on Tuesday, in response to queries from committee chairman Mike Henry, that there was a need for government and the private sector to work together for the development of the country.

Henry, in reference to a statement made previously by former Urban Development Corporation (UDC) chairman Dr Vin Lawrence, about what steps should be taken to protect the public’s interest in joint ventures between government and the private sector, asked for Stewart’s opinion.

“We can all agree that this project has had its fair share of problems, but I would not allow that to stop me from doing future joint ventures with government entities,” said Stewart. “It has taught me some strong lessons for any future projects.”

Sandals Whitehouse is jointly owned by the state-run UDC, which acted as project manager; the National Investment Bank of Jamaica (NIBJ) and Gorstew Limited, Stewart’s holding company. The hotel, which sits on Jamaica’s south coast, is managed by Sandals Resorts International.

Nevalco Limited, owned by Alston Stewart, who is not related to Butch Stewart, was hired by the UDC to be site manager.

Ackendown Newtown Development Company (ANDCO) is the entity formed by the trio to run and build the hotel.

‘Butch’ Stewart has accused the UDC and Nevalco of not bringing in the project on time and delivering it with inferior features that forced Sandals to refund tons of money to early guests. Sandals has also said that the unfinished hotel ha hurt its good name. The matter is now before the courts.

Last Tuesday in Parliament, Stewart said that among the lessons he had learnt were that, if construction is to be done, the project manager must be competent and completely independent of all the shareholders.

He noted that a forensic team set up by the Government to probe a US$43-million cost overrun on the project also seemed to agree with that point.

“This would facilitate independent management and advice to the board,” said Stewart. “The board will then be able to hold its independent project manager fully accountable. No way could that project manager go off and make decisions that impact on the cost without getting prior approval from the owners.”

Another lesson he said was that all money must be lined up, not just from shareholders, but from the bank.

“Sandals has never been able to go into a project without making arrangements for the funding,” said the Sandals Resorts owner. “With a competent and independent project manager and all your money in place, you really don’t need Dr Lawrence’s prescriptions that he made to this committee on November 7th. However, I agree with him that consultancy contracts with public bodies should carry insurance against non-performance. And I agree with the contractor-general that public companies should be subject to the National Contracts Commission.”

Balford Henry