Gov’t ignores World Bank, awards $100m contract for hospital without tender 

The parliamentary opposition has criticised the decision of the government to invite a Taiwanese firm to bid for and then award a US$100 million contract to the firm to construct the Arnos Vale Acute Referral Hospital without returning to tender, as the World Bank had suggested.

However, the government defended its decision to award the contract to Overseas Engineering & Construction Co. (OECC) after borrowing US$125 million from Taiwan, saying returning to tender would have delayed the construction of the hospital by another year.

“The business of procuring services for government requires very careful, tested steps,” West Kingstown MP Daniel Cummings, who is the opposition spokesperson on health and public works matters, told Parliament on Thursday during the debate on the Arnos Vale Care Hospital (Construction Project) Loan Authorisation Bill, 2024.

The bill was passed into law with bipartisan support around 1:45 a.m. Friday despite the opposition’s objection to how the contract was awarded. 

“I want to know what is the rationale for awarding a contract of US$120 million without having any other offer to compare it with, and whether or not this government possesses the authority to do that,” Cummings told Parliament.

“It is not ULP money,” he said, referring to the ruling Unity Labour Party. “This is the people’s money. How can we be guaranteed that there isn’t a better option at lower cost to the people of this country, as important as the health services, as delayed as it is.”

World Bank only offered US$98m

Financing for the project had initially come from the World Bank but the government renegotiated to divert those monies to pay for the recovery from Hurricane Beryl.

The government then negotiated a loan from Taiwan to pay for the hospital.

Presenting the bill to lawmakers, Minister of Finance Camillo Gonsalves said the World Bank financing was US$$98 million. He said the US$125 million loan from Taiwan reflects the fact that the World Bank had said that the government would have had to top up anything above US$98 million.

“It reflects the fact that the estimates for the construction of the hospital have gone up…” he said, adding that the process has been a long one and the government was operating based on 2020 estimates of construction cost.

“And it also reflects the fact that we would like to do even more things to improve the wider healthcare sector, beyond the list of items that we had to curtail, to fit within the $98 million of the World Bank.”

Interest for the loan is set at the Secured Overnight Financing Rate (SOFR) plus 1% plus 0.2%. The loan is to be repaid in 60 semi-annual payments.

“You have 30 years to repay the loan,” the finance minister told lawmakers, adding that the first payment is due 126 months or 10.5 years after the first drawdown.

“So, you have essentially 40 years and six months from the moment you draw down your first dollar to when you complete payment on the loan. Those are very generous terms in terms of the length of the repayment,” Gonsalves said.

He said there is also a bilateral agreement between the governments of Taiwan and St. Vincent and the Grenadines “to ensure that with this variable interest rate, whenever the interest rate exceeds the parameters that are comparable to World Bank-OFID financing, we will receive assistance from the Taiwanese Government to ensure that the terms remain comparable”.

However, Cummings said he was not casting any aspersion on OECC but pointed out that he had been involved in executing multi-million-dollar US projects from the World Bank and other entities.

“I find it very intriguing that under the World Bank procurement guidelines, the tendering procedure started and the number of bidders was whittled down to two. No decision was taken on whether to go forward or to start anew. Lo and behold, we are told that a Taiwanese company has been approached and has been offered the job, and a sum has been agreed.”

The West Kingstown MP said lawmakers had not been made aware of any other entity being asked to make a bid “for the purpose of determining whether our money is being spent prudently and well.

“This kind of procurement troubles me in the extreme,” Cummings said, noting that the hospital is a “very sizable project”.

OECC’s estimate 15% than World Bank

He said that what was worse was that the finance minister had noted that the sum agreed between the government and OECC was 15% more than the World Bank’s.

“Again, my own experience tells me that when the World Bank comes up with an estimate you very seldom exceed it,” said Cummings, who is a former manager of the state-owned Central Water and Sewerage Authority (CWSA).

 The opposition MP said the government had decided “to abandon the steps required by the World Bank, which steps are intended to make sure that we as a people in St. Vincent in the Grenadines get maximum value from the loan we are borrowing.

“Yet, partially through our incompetence that we want to pin on the World Bank, our gross incompetence, that has a project stalling year, after year, after year, and this government has an awful track record with projects,” Cummings said.

He continued:

“It’s not just a World Bank project; all projects. They take 15 years from gestation to birth on average.”

Cummings acknowledged that World Bank procedures are “complicated”.

“We know that — not complicated by accident. There’s a deliberate rationale for setting out the procedures step by step. I say, to make sure that there’s value for money from the country receiving the loan.”

Cummings said the evidence was clear that with an effective understanding of the World Bank’s methodologies and their rationale, “what appears oftentimes as insurmountable hurdles can be climbed, can be overcome”.

He gave as an example the negotiations that the CWSA, under his leadership, had entered into with the World Bank, which allowed the Solid Waste Management Unit to be set up as part of CWSA, rather than a separate entity, duplicating the use of capital and human resources.

“So, I’m saying, the World Bank requirements seem at times stringent and bureaucratic,” Cummings said, adding that he was not saying “that there aren’t persons in these institutions who like to give countries trouble. But, by and large, by and large, these rules are geared to ensure that the country gets benefits.

“So fine, you bungle the whole procedure of all these years. You can’t get the project going, and you want to blame the World Bank. … This government met a very effective project management unit within the Ministry of Finance, and they scrapped it and put some people without an iota of the relevant experience.”

He said he remembered discussing with PM Gonsalves “the pitfalls of such an act because he told me that he got three for the price of one when he dismantled the unit without realising that the three could not even amount to [one],” Cummings said.

“Project management is a very serious area of requirement in any country,” he said.

PM accuses Cummings of not listening

Responding to Cummings during the debate, PM Gonsalves accused the opposition MP of not listening to the finance minister’s presentation of the bill.

He said that after a long period of procurement, two companies were selected as qualifying, and the World Bank asked his government to negotiate with the companies.

However, the World Bank later wrote, informing the government that one of those companies was embroiled in a huge litigation and might not survive the process.

With only one company remaining, the World Bank’s advice was to go back to tender, Gonsalves said, adding that this would have taken another year.

“In the meanwhile, the price is going up as it has been going up from the length of time this has been going on with the World Bank procedures,” the prime minister said.

He said that faced with that “conundrum”, he decided to approach Taiwan for a loan on competitive terms, which would go beyond the hospital to include strengthening of the health sector.

Taiwan agreed in principle and asked SVG to finalise the numbers but Hurricane Beryl struck SVG on July 1, while the government was calculating the loan.

“And then it appeared that out of this terrible thing for Beryl, there may well be a pot of money of $93 million there — 63 from the World Bank and 30 from OFID that we say, let’s see if we can get that $63 million and the World Bank responded to the Minister of Finance and the Director General finance and planning, saying, yes, yes, we can repurpose it, particularly in these circumstances,” the prime minister said.

Gonsalves said that his government having secured the loan from Taiwan, going back to tender was not practical.

“The suggestion by the Honourable Member for West Kingstown that we go to these two companies who had qualified from the World Bank. One of them, we had indicated a challenge, and I said that you couldn’t use those two companies because they are mainland Chinese companies and not eligible to bid for a loan given by a Taiwanese bank with support from the Taiwanese government.

“These are the facts before us. You can dance around them all you want. You can shriek as much as you want. But this is the reality which confronts at the moment this small island developing state called St. Vincent and the Grenadines post Beryl,” the prime minister said.