BASSETERRE, St. Kitts – THE recently leaked memo, purportedly written by a member of the Board of Directors of the St. Kitts and Nevis Social Security and sent to the organisation’s Chairman, Halva Hendrickson, has created much debate in the Federation.
Following this exposure, SKNVibes was contacted by a senior manager of CONTEC who provided a “Statement of Facts” concerning the issue with that construction company and the Social Security Board with regards to the Beacon Heights Project.
The Beacon Heights Project is the St. Kitts and Nevis Security Board’s first residential venture and it involves the construction of over 191 homes.
In December 2008, CONTEC was awarded the contract for the construction of these homes, with a projected target of completing the first 10 by June 30, 2011.
However, to date, the construction company has not reached that deadline although, so far, it was allegedly paid some $49M by Social Security.
The following is CONTEC’s Statement of Facts in its entirety:
Statement of Facts- CONTEC
BEACON HEIGHTS
October 18, 2011
CONTEC was selected through a comprehensive pre-selection process from among four local developers. The company was subjected to financial scrutiny (audited financial statements submitted), core competence examination, among other areas.
The project was executed in four phases:-
a. Design Phase includes conceptualisation, engineering, architectural, surveying, and project establishment. - ECD1.8Mn
b. Infrastructure ECD25Mn
c. Enhanced storm drain network to include detention ponds, several large underground soak pits, underground drains, and link road to the by-pass – ECD5Mn
Execution time for the above - 3 years
d. Building Phase – 10 homes (marketing models). Construction Commenced March 11th 2011 - Disbursed to CONTEC to date ECD4.5Mn
e. Average completion time of ten houses is 6 to 10 months.
f. 5 houses at finished stage.
Life span of this project is ten to twelve years from conception, with provision for earlier completion based on sales.
The disbursement of every claim has been made by progress certificates for work done, issued by the project manager representing The Social Security Board. Over ninety certificates have been issued to date.
The project has been executed by the engagement of highly qualified local and regional consultants. To date four consultants/managers with competences in project management and engineering have been engaged in the development of this project.
Challenges
Delays in the arrival of the imported electrical and water systems – 6 months - during the Infrastructure Phase.
Arrival of water system excluded “T’s” delay 3 months
Rainfall
Water damage on main road last quarter of 2010.
Worse rainfall in the Federation in recent years.
Restoration of the project which was in excess of ECD4Mn was totally financed by CONTEC, and this severely impacted the company’s cash flows.
Key Responses to Memorandum
The full ECD49Mn was not paid directly to CONTEC, for example, direct payment to suppliers was ECD3.3Mn, and insurance costs were ECD700, 000.00.
Also significant were the wages and salaries paid of approximately ECD16Mn with contributions to The Social Security Board to date of some ECD3Mn.
CONTEC as a group has made significant contributions into the fund over the last seventeen years. In addition, CONTEC has offered some of the highest wages in the industry.
During the life of this contract, CONTEC has continued to serve other clients in the Federation to their satisfaction. The contract terms have not restricted the company from engaging in other business activity.
In fact, many of these activities have contributed to CONTEC’s ability to subsidise the cost overruns associated with the Beacon Heights project
Mobilisation
There is no ECD9Mn advance for material on this project.
Mobilisation for development and building phase of ECD9Mn represents 5% of the total housing contract value. This is secured by a surety bond of ECD10Mn.
The purpose of this advance was to provide ECD1.8Mn for material inventory for 10 houses with the balance divided into construction manufacturing equipment; site equipment, and the provision for a permanent worksite over the life of the project.
This 2-acre work site includes offices, roof fabricating unit, general work shop, site storage facility etc.
The construction cost of the houses on this project is 30% lower than existing market rates. For example, the 1,800 sq. ft. units complete with high quality kitchen, granite counter tops, built in garage, and extensively designed roofing, is less than ECD200/sq. ft. With fencing, landscaping, retaining walls, and driveways, involves another ECD25/sq. ft. This is well established among the local contractors.
No single unit can therefore yield margins that are sustainable in any environment, more so in this tight economic period.
During the life of this contract to date CONTEC has attempted to provide employment to citizens of the Federation, being sensitive to the hardships being experienced in these difficult economic times, and for this we have no apology.
We have been able to employ over a dozen local contractors, and at times have exceeded over 100 workers on site and remain optimistic that these numbers will improve.
This resulted in significant extra cost to the contractor, which we were simply unable to sustain over a protracted period.
In addition, over 80% of the material purchases were channelled through local suppliers.
As a business, we continue to seek viability and we have had a significant role to play on the Beacon Heights Project from inception to date.
As a local business, CONTEC has always maintained the highest ethical approach to business. In recent times however, CONTEC was forced to restructure its business model in order to secure its operations, as well as its financial integrity.
We have never been informed of any breaches of our contract term or any grievances that would lead to termination of same. There had been some anxiety in having the building models available for the visitors’ arrival in the carnival and pre-carnival seasons this year.
There have been no cost overruns, and price variations reflecting price increases since the inception of the project. All shortfalls have been borne by CONTEC.
The foregoing represents international best practice for a project of this nature and there has never been any special favours granted to the contractor. Proper and legal documentary evidence has been executed by both parties in this contract, facilitating full disclosure and adequate audit trails.
We therefore appeal to the public to exercise good judgement in forming conclusions to whatever is being circulated in the Federation. We hold the Social Security Board in the highest esteem, and have made significant contributions to same, which will redound to the overall growth of the economy in these difficult times.
