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-legal experts at odds over “lump sum” contractOn November 11, 2011, days before General Elections, a major contract to extend the Cheddi Jagan International Airport (CJIA) was signed between Guyana and China Harbour Engineering Company (CHEC), a Beijing-based Chinese company.It was agreed that CHEC would build the facility under a “Plant and Design-Build” contract for US$138M.Guyana took a loan of US$130M from China and was expected to plug the balance which would put the project cost to US$150M.In terms of dollar value, the project would be the second most expensive after the US$200M Skeldon Factory Modernisation project.CHEC’s main job was to facilitate the runway extension and buildAn artist’s sketch of the proposed runway extension at CJIA.a new terminal building.In justifying the project, government pointed to space constraints and growing tourism as the reasons. Guyana’s geographic position at the northern tip of the South American continent made it ideal as a hub and a link to Asia and Africa, the government said.However, the details of the actual contract signed have raised questions whether Guyana had a good deal.Last week, Kaieteur News reported on a section of the signed contract that indicated that 69 toilet bowls were needed for the new terminal building to be built. Each would cost US$2,121.06 or $424,212 each. This worked out to US$146,353.14 or over $29M for the 69 bowls.The Ministry of Public Works, under whose purview the project falls, issued a statement on the report by this newspaper. According to the Ministry, the contract signed was a “lump sum” one for that section of the contract.“The articles fail to reflect that under such contracts the cost for each line item usually includes several other costs including materials, labour, overheads, transportation and profit,” the statement said.The Ministry went further, saying that the stated costs of the bowls included the costs of the sewer lines and cubicle doors.“For the particular sanitary items mentioned,Cheap NFL Jerseys China, there is no pricing stated for sewer lines, washroom cubicles and doors and the many fittings associated with the washroom; these are all catered for in the line item pricing such as “toilet set” – as is the case for all lump sum contracts.”But legal experts versed in the contracts and drafting of contracts has expressed disbelief at the explanation which seemed at odds over what normally prevails.“Lump sum”, they said, is very specific to certain contracts with the CJIA expansion definitely not falling under this category.Already, it was noted that the US$150M price tag could eventually pass the US$200M mark if one is to take into account the interest on the US$130M loan and the filling materials that Guyana will have to provide. The filling material referred to includes sand which will be used to extend the current main runway at CJIA by another 1,000 meters.The US$138M contract with CHEC also excludes all taxes, duties, royalties and fees of all kinds normally imposed by Guyana.With the entire contract vague in its very language, one lawyer has also questioned the methodology used by Government in ascertaining whether the costs were realistic.Already, the Government has advanced CHEC over US$20M ($4B) to start works.Actual construction has been stalled as the Opposition, during the National Budget considerations of the estimates in April, blocked $5.3B (US$26.5M) that was going to the project, citing concerns over the costs. Guyana could very well face paying CHEC for damages if the construction does not start soon.With regards to the actual contract and the Bills of Quantity which show what will be used in the construction, the particular section where the toilet bowl was described also spoke of pipes, gate valves, showers, urinals, drains, and a host of other items yet the contract remained vague on how the costs were arrived at.The layout of the terminal building is to cost US$42M, according to the contract.According to the online business dictionary, a “lump sum” contract is one under which a principal (in this case, the Government) agrees to pay a contractor (CHEC) a specified amount for completing work without requiring a cost breakdown.The Texas Department of Transportation (DOT) had this to say about “lump sum” arrangements:“Certain projects lend themselves more readily to the use of lump sum contracting. Florida and Alaska DOT’s Lump Sum Project Guidelines recommend that lump sum contracts are best applied to relatively simple projects with a well-defined scope, a low risk of unforeseen conditions, and not likely to change in scope or provide less than the required quantities.Some examples of projects that fit these criteria are bridge painting, fencing or guardrail installation, intersection improvements where utilities are known, landscaping, lighting, minor road widening, simple milling or resurfacing, signage, traffic signals and sidewalks.Kaieteur News, because of the nature of the actual project and its costs to the taxpayers, has placed a copy of the contract signed between the Government and CHEC on its website, www.kaieteurnewsonline.com.
