Berbice River Bridge
Agreement with consortium unlikely
-IDB to conduct feasibility study
By Gitanjali Singh
Stabroek News
March 24, 2003
President Jagdeo says it is unlikely the government would reach agreement with the Berbice River Bridge Consortium (BRBC) to bridge the Berbice river, and has confirmed that the framework for the project was under review.
"It seems as though we may not reach agreement because of what that company wants... the level of government's participation [in the project]", Jagdeo told reporters at State House on Thursday. He was referring to the requirement of the BRBC for the government to provide US$1M to fund 80% of the development phase of the project.
The government would have been reimbursed for this sum if at the end of the development phase it had reached agreement with the consortium, which includes Group 5 and UWP Engineers of South Africa, to move ahead with construction.
The project, conceptualised as a build, operate and transfer (BOT) option, followed a developmental agreement approach, which allows the government an exit if necessary at the end of any of the phases, and provides a cushion against unforeseen risks as the project developed.
However, the BRBC insists in such a scenario, the government has to finance 80% of the developmental costs as the information derived from this phase would only be of interest to the government and not the consortium, if it should fail to reach agreement.
Financing most of the development phase was not the only area of concern for the government. In February 2000, when the BRBC first submitted a bid to bridge the Berbice River, the project price was given as US$37.8M.
However, when called upon in July 2002 to update its bid after Ballast Nedam International walked from the project, the consortium's bid price was adjusted to US$45.9M, an increase of 21 per cent. This, the firm said, was a result of increases in international construction costs and investing in Guyana. The cost variables were to be confirmed at the end of the second phase of the development agreement when the geo-technical and hydrographic studies were to be completed.
This increase in costs is worrying and the government expects that monies could be raised locally to finance the bridge as over $52B is currently invested in treasury bills earning low interest rates. Local financial houses are crying out for long-term investment outlets and could be willing to put their funds behind the bridge if the returns are adequate and the risk bearable.
The development agreement between the government and the BRBC was to have been fully implemented by November of 2002 but it was never signed. The BRBC has been waiting since mid-2002 to have the draft, subject to Cabinet's ratification, signed to start work on the project. That agreement was in three phases, the first of which covered clarification of financial issues, the second phase, the technical issues and the third phase, the legal issues. The two sides were working with a schedule to have financial closure (securing the financing for the construction) by November of this year and to have the bridge operational by July 2005.
However, final agreement on the draft development agreements have been dragging out and now coincides with the process of the Inter-American Development Bank (IDB) moving to conduct a full feasibility study on a bridge across the Berbice river.
This feasibility study, to cost US$600,000, will be awarded by the Central Tender Board shortly and its findings would provide much of the information the government would need to make an informed decision on the structure and operations of the bridge. These findings would be available in a few months.
This study would determine whether the IDB would release US$11M for the access roads for the project as well, all of which will go towards reducing the cost of the project and the burden to be placed on consumers using the service in the form of user fees.
The President, at an impromptu media briefing, confirmed that the framework for constructing the bridge was under review and instead of following the BOT option said the possibility of having a contractor to construct the bridge was being looked at. The contractor may very well turn out to be BRBC if such agreement is possible.
"Make no mistake about it. [The Berbice Bridge] is a top priority of the government and we will find the resources [to construct it] one way or the other, either through a private public partnership, a publicly funded project or a solely private-funded project," Jagdeo stated.
But many observers note that because of the threat to fiscal sustainability, the government is not in a position to finance the Berbice bridge construction itself, but with the high level of liquidity in the financial system monies could be raised through financial instruments to take the project to conclusion.
The government's final position is expected to be available once the IDB feasibility study is concluded and would reflect the current situation confronting traffic across the Berbice river. Traffic has slowed as a result of crime in Region 4 and this would mean that government support for the project might be necessary.
