Yesterday, the Sunday Express examined the relationship between the Trinidad and Tobago Government and the United Kingdom firm British Aerospace Engineering (BAE) Systems over a contract for and subsequent cancellation of three offshore patrol vessels (OPVs). It was knitted together from the witness statements and documents submitted to the International Court of Arbitration during the period May 8-18, 2012 for which a non-disclosure clause was agreed.
The story revealed that the PNM administration, who had initiated the programme, had been concerned about BAE's inability to meet deadlines, their lack of transparency and their failure to meet contractual obligations. The People's Partnership Government served notice to BAE on September 16, 2010 and the contract was officially cancelled on October 20, 2010.
A billion dollars lost for a seemingly billion-dollar gain.
That's how the arithmetic for the cancellation of the offshore patrol vessels (OPV) project works out.
The Government of Trinidad and Tobago (under the former administration) had taken a $2.192 billion loan from BNP Paribas and Lloyds for the financing of three Offshore Patrol Vessels (OPVs) in 2007.
The total sum of the OPV boats was £155 million.
Following the cancellation of the contract, Attorney General Anand Ramlogan had negotiated an out-of-court settlement of $1.382 billion with BAE. According to figures provided by Ramlogan in Parliament last Friday, the Government's balance on the loan was $1.041 billion.
Once the settlement is applied to the loan, the surplus is $341 million said Ramlogan. That sum, he had said, can be used at Finance Minister Larry Howai's discretion.
At a press conference at his Cabildo Chambers office last Wednesday, Ramlogan had said it was difficult to estimate the amount of money T&T had lost on the OPV project.
But a calculation by the Express of loan ($2.192) minus settlement ($1.382) points to about $800 million.
An official close to the project under the PNM government, who spoke on condition of anonymity, observed that that cost is exclusive of the cost borne by the State for the infrastructure work undertaken by the Coast Guard to accommodate the 90 metre boats at Staubles Bay, Chaguaramas.
Ramlogan had also revealed in Parliament that "other costs associated with the implementation of the OPV project, which include for infrastructural and logistical support, which were paid by the Government Treasury" amount to approximately $164 million dollars.
The $800 million already spent on the OPV project added to infrastructure costs of $164 million amounts to $964 million.
When the legal fees of the AG's team, which he estimates to be under £2 million that'll take the total loss of the OPV project to over one billion dollars.
The official pointed out that T&T had lost money and still did not have boats to secure its borders. The official noted that Government now had to purchase new boats and questioned how it will finance this project which could amount to over a billion dollars as no worthy patrol boat could be had for under $400 million.
The Government had taken a collective Cabinet decision to terminate the contract on September 16, 2010. Following this BAE had initiated arbitration hearings in London seeking over $611.032 million and managed to sell the three OPVs— which were named Port-of-Spain, Scarborough and San Fernando- to the Brazilian Navy for £133 million.
There's been the argument that the $1.382 billion settlement was simply a refund equivalent to the £133 million sale by BAE to Brazil. And far from earning money from this arbitration, this country had actually lost- not in settlement but in dollars spent.
The People's Partnership decision to cancel the £155 million contract with BAE came despite recommendations that the Government accept the OPVs from BAE.
Those recommendations came from the UK's Ministry of Defence (MOD), Commodore Garnet Best, Captain Mark Williams and former minister of national security John Sandy. Their recommendations were based on the amount of money already spent on the project which had spanned three years and had no tangible result save for the infrastructure work completed to accommodate the vessels and the training of 120 staff for the project.
In his witness statement, Williams said the MOD's had recommended that was "to keep the moving" forward subject to clear agreements and commitments on the part of BAE
"With respect to recommending acceptance for vessels being built for the Royal Navy, it was usual for the MOD to take decisions that would keep their programme moving forward as their vessels are not normally required to enter service until a considerable time after the vessel has been completed. This, however, was not the case with respect to the OPVs, which is why the MOD's recommendation was caveated with the question of whether of not the vessel had sufficient interim operational capability with the degraded weapon system and whether training of crew could take place on board concurrently with any agreed rectification plan," he said in his witness statement.
As a project leader, Williams said he was concerned about the impact in the morale of staff and crew.
"However, wearing my senior naval officer's hat I was extremely concerned that we were being asked to consider accepting a vessel the defensive capabilities of which fell far short of what had been expected and was contractually required. The OPV was £50 million pound asset as a result itself a target. The degraded Combat System did not enable it to adequately defend itself," said Williams.
Despite his recommendations Williams had remained concerned about accepting the vessel given that rectification by BAE was estimated at 12 months and that the Government of T&T would not receive a vessel for which they had contracted or would meet the requirements needed to secure this country's maritime boundary sufficiently.
"Given the outstanding defects and the uncertain path and time scale to resolution, the OPV was being offered with a degraded Combat System. The MOD noted: Based on demonstrations, the weapon can still be used to fire munitions out to a range of 6km by manually inputting the 'target range' from information extracted form the Scanter radar. However, with the added time delays associated with inputting the range data and without the benefits of the predictor, it is questionable how operationally effective the weapon will be against realistic targets." In other words, it in present condition the 30 mm gun could not effectively engage moving targets and the 6km capability was a maximum range not maximum effective range," he stated.
Following the notice of cancellation in September, he observed that BAE had sought to speed up the delivery before the October 20 deadline. However, by October 16, BAE had not followed the correct protocol in accordance with the contract.
In explaining his decision to terminate the contract, Ramlogan had argued in his witness statement that "BAE was asking us to forego our existing contractual rights in favour of whatever we might be able to negotiate with BAE'S post acceptance and once the OPVs were in service in the waters of Trinidad and Tobago."
In Parliament, Ramlogan said the Government had saved a $32 million dollar recurrent expenditure for maintenance of the boats as well as a $24 million recurrent expenditure for the crew.
To be continued in tomorrow's Express