|
Kurt Sansone
The negotiations concluded with Skanska on Saturday 6 November were hailed by Prime Minister Lawrence Gonzi as a success story but a deeper analysis of the numbers presented in Parliament last Monday show that government closed more than an eye to Skanska’s gross negligence and caved in to the Swedish consortium’s asking price for completing construction work.
The ‘new’ agreement, which MaltaToday discovered yesterday has not yet been signed, means the construction of Mater Dei will cost Lm139 million or Lm45 million more than what was projected in 2000 when the contract signed with Skanska included projections that put the hospital’s construction cost at Lm93 million.
It also means that government waived penalties that accrued over the last four years amounting to Lm5 million for delays in the opening of various sections of the hospital.
The Gap Analysis report compiled by Jackie Camilleri and presented in Parliament by Gonzi concludes that Skanska’s original base budget estimates were “far from robust” and “bear practically no resemblance to the Projected Final Cost (PFC) estimates compiled by the Contractor today.”
And despite clause 4.10 of the original contract where it was put in black on white that Skanska were satisfied with “the correctness and sufficiency of the Target Value (the base budget),” government chose to accept the consortium’s increased projection costs rather than insisting on the target values outlined and agreed upon in the contract of 2000.
The report clearly indicates Skanska had, since September 2003, concluded that the Projected Final Cost (PFC) for the construction of the hospital was Lm120.7 million. That figure was further revised to Lm122.4 million by July 2004. If one were to add management fees and other design costs, Skanska’s final asking price was around Lm139 million, the amount government eventually agreed to pay the consortium.
The savings Gonzi boasted about were nothing more than unaccounted for claims by subcontractors to the tune of Lm23 million, which Skanska brought up at the eleventh hour. It seems that Skanska entered the negotiations with a projected final cost of Lm161.4 million and agreed to settle for the Lm139 million they had projected before the start of negotiations.
Despite Gonzi’s tough talk it is Skanska who came out of the deal smiling. The Gap Analysis is replete with instances of gross negligence by Skanska when initially drawing up projections prior to the contract signed in 2000.
It is important to point out that in 1999 Skanska took almost one and a half years to complete a preconstruction brief for which they were paid Lm1.8 million and which was supposed to give government a clear picture as to what expenditure had to be incurred. The contract in 2000 was signed on the understanding that construction was going to cost government Lm93 million.
But for some strange reason today government decided to heed the conclusion of the gap analysis and absolve Skanska of its negligence and agree to a substantially higher construction cost.
Experts say that during the negotiations held towards the end of summer, government should have insisted Skanska stick to its original projections. They argue clause 4.10 was clear enough to be interpreted as an acceptance by Skanska of the target values it gave government in 2000 when the decision to award the contract to the Swedish consortium was grounded in the belief that costs would not spiral above the Lm93 million mark.
Negligence
The gap analysis lists various examples of how Skanska’s projections went haywire. A case in point is the variance in management staffing costs, an increase of more than 75 per cent over the original base budget and attributed to “an increase in the number of staff employed by the Contractor and the creation of new posts not accounted for in the original base budget.”
Another example concerns sub-contractual agreements entered into by Skanska that were “very often significantly higher than the Contractor’s original base budget estimate.”
A major cause for the higher expense is the practice adopted by Skanska to award work to sub-contractors on a re-measurement basis, which means that initial estimates were changed according to the costs incurred for the actual work done.
In various instances the gap analysis accuses Skanska of underestimating costs in drafting the base budget in 2000. “Increase as well as underestimation of several item quantities which very often caused practically complete revisions of original BOQs (bills of quantity) issued at tender stage,” the gap analysis states, referring to the various work packages pertaining to the contract.
When referring to the mechanical and electrical work packages, the gap analysis identifies a number of shortcomings including the “absence of a fully compiled and updated bill of quantity”, “changes made due to non-compliance with British standards” and “insufficient design detail.”
Other occurrences in the gap analysis report show how Skanska’s original target value did not cater for a variety of sundry costs including the final cleaning before government’s taking over. No money was allocated by Skanska for this operation, which was then calculated at Lm250,000 in the projected final cost.
No responsibility
The gap analysis report does not enter into the merits of whether such cost over-runs were approved by the Foundation for Medical Services, which is responsible for the project. It is unclear whether FMS certified the additional costs or even knew of Skanska’s dubious practices that upped the original construction cost by more than Lm40 million.
It also remains unclear whether the additional Lm23 million in claims by the sub-contractors, which Skanska came up with at the last minute were ever approved by FMS.
In his parliamentary statement Gonzi also steered clear from attributing political responsibility for the Mater Dei fiasco. Since 2000, the project has been the responsibility of Health Minister Louis Deguara. But after Gonzi took the issue into his hands this year, Deguara was politely sidelined in the discussions with Skanska. It was only during the two final meetings with Skanska’s topmost officials, and only after MaltaToday had reported Deguara’s sidelining, that the health minister re-entered the picture, but the main negotiating reference point remained Parliamentary Secretary Tonio Fenech.
Meanwhile, the hospital’s total cost for completion including medical equipment, the IT system and furniture is expected to top Lm212.5 million by 2007, a far cry from the figures quoted by the Nationalist Party media this week, which is trying to give the impression that Mater Dei will cost Lm139 million.
It seems Gonzi’s parliamentary statement has opened the lid onto more controversy rather than capping the issue once and for all. The saga is expected to come to a head when Parliament debates the motion of no confidence presented by the Opposition over the way the Mater Dei saga was handled since the signing of the contract in 2000.
kurt@newsworksltd.com
|
