Published Thursday 29th May, 2008

Cross-subsidy is a common feature of complex, comprehensive, urban developments in that unprofitable, but necessary public facilities are balanced out by profitable commercial parts of the development.

A recent, well-known example of this type of development is the offices above the National Library complex. We are not sure if these uses are effectively balanced-out in that case, but this is just an example of the possibilities. It is the essence of this type of development and Udecott’s mission statement speaks to this concern “the urban centre of the 21st century is one …in which interests in culture, history education, entertainment and government are well-balanced with commerce.”

The justification behind the existence of the Urban Development Corporation of T&T (Udecott) as an implementer of the State’s physical development programme is as solid as it is commonplace. The traditional bureaucratic structures of the public service do not serve the demands of rapid development.

There can be little doubt that Udecott has made great strides in our physical development in a remarkably compressed period. Whatever the current uproar, there are valuable lessons to be learned from the methods used by this company to advance State projects.

We need to outline our areas of concern with Udecott’s operations and equally, to distinguish those from the areas now being ventilated. There have been increasing allegations against Udecott; these have included unfair tendering, undue use of foreign contractors and professionals and the power of its leader, the Canadian-born Calder Hart.

Those allegations have come from a variety of civic organisations—including the Joint Consultative Council (JCC), the T&T Institute of Architects (TTIA), the local chapter of Transparency International and the T&T Manufacturers’ Association (TTMA)—culminating in a joint press conference to call for a Commission of Enquiry into Udecott. The Opposition leader, Basdeo Panday, also joined those calls.

Udecott has its defenders who point out that it is consistently profitable and audited annually by a leading firm of accountants. Some go even further to say that in the real sense, Udecott is an exemplary State-owned company due to its visible effectiveness.

Udecott also held a combative press conference to reply to its critics. After dramatic allegations by the UNC-A’s Chief Whip, Ramesh Lawrence Maharaj, of irregularities in the award of contracts, Prime Minister Patrick Manning announced a Commission of Enquiry into what amounts to the entire construction industry with a focus on public procurement. The ball seems to have been kicked into the long grass.

Udecott’s Web site speaks of the company as being a project facilitator for the State and lists its many projects. I am reliably informed that Udecott has moved beyond project facilitation with a new role as a project promoter. That is an important difference since it would seem to place additional responsibilities upon that organisation. If that is the case, the Commission of Enquiry needs to have more specific terms of reference than proposed by the PM.

The issue with the wave of projects now engulfing us is, for me, far more than the important ones of who is the architect, contractor, engineer etc. It is necessary, but not at all sufficient, that we enquire into those areas. We need to consider carefully the genesis of these projects. Did they originate within Udecott or the respective ministries and government agencies?

We spent a considerable amount of space in the 2007 series of Property Matters setting out the case that none of the office buildings being built by Udecott in our capital are feasible. Not one.

In every case the “break-even” rent—which is the figure the building has to be rented for to repay the cost of the project—is way in excess of the market rent. That remains uncontested to date. The silence on this point, from an organisation with an extensive PR budget, is as eloquent as it is damning. Silence from UNC-A and CoP too, for those who might feel that this writer is being party-political. All this from an organisation whose mission statement, in respect of its role as “developer of choice,” informs us, in respect of its aims, that “this will be achieved in accordance with aesthetically pleasing, environmentally sound and commercially viable principles.”

Udecott’s aspirations are clearly not being achieved, if we use “commercially viable principles” as a yardstick.

If Udecott were merely implementing State instructions—“to work as directed by the Government”—that would be one thing. It is my view that even so, it would have been incumbent on the professional staff and directors of such a special-purpose company to draw to the client’s attention all the implications of its unsound proposals. Did Udecott advise the State that its many office projects are all unviable and do not, by any measure, represent value for money?

No organisation claiming, as Udecott does in its core values, “We are professional at all times and expect the highest work ethics from ourselves” could possibly do otherwise. It is the true professional’s cause to advise the client on how best to achieve its objectives, but always pointing out the implications of those objectives.

But what if Udecott were actually more than a project facilitator? What if these projects were, in fact, conceived and promoted to the State by Udecott? If that were the case, we would be considering a higher level of responsibility. We would be contemplating a trusted adviser making detrimental proposals. That would be a professional nadir.

Those seem to me to be far more serious, precedent concerns in respect of the Udecott. We do need to examine other things, but we must keep our collective eyes on the ball. Where did all these projects come from?

There has never been prior public consultation on the rebuilding of our capital’s commercial centre. That lack of democratic process dilutes the claims to transparency now being so soberly advanced by those who should know better. It takes more than an audit to assure that a company is sound and progressing well. Audits are necessary, but not sufficient. In the case of property development companies, one has to examine many aspects other than just the accounts before a view can be formed as to the company’s operations or prospects. We understand that Udecott’s 2007 annual report is due shortly and once that is published we will be examining those.

Some questions to consider for next week:

l        What did the PM and the Cabinet know of these projects’ viability and when? Did Udecott ever advise its clients of the implications of their proposals?

l        Given its responsibilities, is Udecott appropriately governed? To go even beyond the doubts already published about the advisability of the executive chairman arrangement, I read in another newspaper that “On June 22, 2007, Ricardo O’Brien revealed to the PAEC that Udecott did not have an internal auditor and that its audit committee consisted solely of Udecott chairman, Calder Hart.” It seems, to refer to the subtitle of this column, to be a case of “A considerable concentration of power,” to quote the Cadbury Report.

l        If there is no profitable commercial element to our many, expensive State-sponsored developments, what cross-subsidy is there? If there is no cross-subsidy, what are we doing with our windfall? Is this the 1970s all over again?

Afra Raymond is a director of Raymond & Pierre Limited. Feedback can be directed to afra@raymondandpierre.com.