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Legislative Assembly 24 April 2014 Part 3

Reports and Portfolio Reports and Debates

Compiled and Transcribed by J. Brock (FINN)

Report from the Public Accounts Committee on the Morrison (Falklands) Ltd Partnership Agreement and the following Motion to make the Report:

Motion No 9/2014

That This House notes the Report of the Public Accounts Committee in respect of Morrison (Falklands) Limited Partnership Agreement.

Introduction by the Hon Mr Michael Poole:

Mr Speaker, Honourable members, alongside my Honourable Colleague Ian Hansen I sit on the Public Accounts Committee at the moment and have been asked to introduce this report, which has come to us from the Chair of the PAC. The report covers the partnership between the Falkland Islands Government and Morrison (Falklands) Limited as has been said.

The issue with the Morrison (Falklands) Limited was first referred to the PAC in around 2011 so it was some time ago. So it has taken almost 3 years to reach this House. There are a number of reasons for the length of time it has taken. The key of those are that it is quite a complex issue, its taken some time to compile all the relevant documents and data and to analyse it. There has been some a unavoidable changes within the membership within the Public Accounts Committee itself which has inevitably led to some delay. There was also a significant delay in receiving significant documentation from relevant parties involved in the agreement. This lately contributed to about a 12-month delay to the process, which is disappointing. There was also a need to obtain independent expert comment on it from overseas and it took some time.

But the report in front of the House today consists of a covering letter of four pages with two separate consultancy reports attached to it. Both of these consultancy reports are from Mazars Ltd, the auditing firm that currently audit the Falkland Islands Government Annual Accounts. They were contracted in mid-2012 and again in mid-2013 to provide independent expertise on the partnership arrangement. The Reports provide very good background and are an interesting read because they give good context to these kinds of arrangements as well. But the covering letter itself presents the main body of the feedback from the PAC.

The Public Accounts Committee approached this issue from the point of view as to whether the Falkland Islands tax payer is receiving value for money from the partnership arrangement as it stands at the moment. They did this by firstly benchmarking against common practice within the UK  how the UK Government does things. It is a partnership arrangement of this type that is suitable and also then looked at specific projects that have been worked on under the partnership arrangement. The Fisheries building is one example of those.

I shall attempt to summarise the key findings of this research as briefly as possible. Firstly it is worth noting that whilst it is not the remit of the PAC to comment on policy decisions the research did show there are no clear reasons why a single bit of procurement approach cannot be used by FIG so this system can work - it has worked elsewhere in the world which is quite reassuring.

However, they did find that significant strengthening in the existing partnership arrangement needs to take place to further protect tax payers money and to insure value for money generally. To this end the partnership agreement should be re-negotiated to make clear the articulate respective risk sharing between the two parties involved. And it should also have much clearer contractual and pricing methodology included within it as well. This re-negotiated contract has to come from the starting point of common objectives and goals. We need to talk to Morrisons about what we are trying to achieve here with this partnership arrangement and it needs to be legally binding as well. And it requires a clear definition of each partys respective roles and responsibilities.

The new document has to be based on past experience over recent years, looking at where things have worked well, where things have worked not so well and re-structuring it from experience we have had with Morrison (Falklands) Limited.

And we should also take the chance to benchmark against what would be seen as appropriate elsewhere in the world, too. Once you then have this much stronger partnership agreement in place there is further work that cascades from that particularly in terms of more formalised contractual documents for individual construction projects.

A key part of this will be a much more detailed and agreed schedule of allowable costs for building works that are going on and these need to be regularly reviewed and appropriately benchmarked to ensure that they are accurate and fair.

Finally, once these documents are in place, the Public Accounts Committee also recommends a stronger oversight role from a person independent of the Public Works Department within the Falkland Islands Government to look at specific individual contractual documents.

I am conscious that we as a Government have only recently received this report so we are unable to respond in any real depth at this juncture. However, we will produce an official response which will come via Executive Council and the Government will then have 6 months considering the magnitude of this issue. I am sure it will be within a shorter time-frame than that, or I would hope at least.

The responsibility for the current situation, also improving it where necessary sits with us all. These things have gone via Executive Council; we set policy and we have a duty to protect public funds and therefore I am sure that all Members will be taking this issue most seriously.

As a clarification I should note that there is a statement within the covering letter from the Public Accounts Committee which is incorrect. I have to say this was my personal responsibility  it was wording I included. Within the covering letter there is reference to 8.5% average overspend against the budget. However that figure was actually the average variance. Having looked again at the analysis that Mazars had done over recent years the average over-spend has been only 1%. So I apologise to the PAC and to Members for that mistake on my part.

Whilst the report is detailed it covers a wide range of issues. I would suggest that instead of getting bogged down in detail here I think we need to take on-board the range of comments included and really work towards a solution. I am not going to talk about whats gone on in the past but work with Morrisons about improving the situation today.

How we approach this over the weeks and months is yet to be decided. Obviously we all have a number of competing priorities and this is a big piece of work. We cant, in short, expect overnight results. Its going to take some time to work through and we need to do it properly and take the appropriate amount of time to do that.

Finally, just one of the advantages of this report coming at this stage is that we are currently compiling a National Infrastructure Plan as people will probably be aware, which is looking over a 20 year time frame. So I think it is right that we can look at the work of Morrison (Falklands) Limited in the context of this quite ambitious capital plan we are going to have over the next 20 years. So it is timely that we have received this report at this time.

Thank you for your patience. Mr Speaker I support the Motion.

Seconded by the Hon Mr Ian Hansen:

Thank you Mr Speaker, Honourable Members I would like to second this Motion I have very little to add to the Honourable Michael Pooles statement. He did an excellent job of summarising this report.

I would just like to reiterate that this is an important report and in particular the parts that concentrate on the specific weaknesses of the present partnership agreement.

I think anything else I would say would be repetitive Mr Speaker so I will say I second this Motion and look forward to the Falkland Islands Governments response.

RE: Mr Speaker, Honourable Members, I, too, welcome this report from the Public Accounts Committee. And I, too, look forward to the response from Government within the 6-months that they are allowed to respond to these papers.

I do have one question for my Honourable Colleague Michael Poole and that is regarding the overspend and I recognise that the figures in the thing were incorrect and he was quite right to point that out. However, one of my fears is  and I commented on it several times before in this House  is, are those overspends the initial costs of the projects or are the overspends after all the apparent continuous agreed additional funding for those particular projects?

Thank you Mr Speaker.

KB: The Honourable Michael Poole would you like to answer now or wait until your summing up at the end?

MP: I am happy to wait until the review at the end Mr Speaker.

MS: Mr Speaker, Honourable members, I will speak briefly. As a member of the Public Accounts Committee when this matter first came to that body I took part in some of the early investigations into this issue and therefore have a bit of an insight into how it was conducted and how we approached it.

One of the important things to say about this is that we are in a very different period of time now to when the partnership was first entered into. There is a danger in these things sometimes of people being overly critical and therefore other people who are responsible for delivering are becoming overly defensive. And thats not in our best interest. But the point really is that when we entered into this partnership many, many, many years ago it wasnt actually that easy to find somebody who would enter into an agreement. So the nature of the agreement that we entered into was probably appropriate at the time.

We are in a very different period of time now; we are in a much stronger negotiating position. And it is clear from the things that Mazars have set out for us in the advice they have given that we should have a much more robust approach to the initial investigations to the projects and the initial costings of those projects, I think that touches on the point that my Honourable Colleague is making. And the notable overspends that we have had in the partnership agreement going back have been on projects where they have been Undefined and there has been an unquantified risk and by in large, the over-expenditure could always be explained. It doesnt mean its right but it could be explained.

My plea really is that we approach this thing with an open mind and very positive thinking so we are not in a blame culture. We are not saying to anybody you shouldnt have done that, or that was wrong or thats the wrong way of doing things. I have always been a strong supporter of the partnering agreement because I know and understand that it is generally speaking a very much cheaper way of getting value for money for public expenditure in these types of arrangements than often you do in competitive tendering. So it is positive, forward looking and looking to improve the arrangement that we have is, I think, the right way to go.

JC: Mr Speaker, Honourable Members, I would like to reinforce what the Honourable Mike Summers has said. For all its imperfections the partnering agreement replaced a very unsatisfactory situation and got us through some difficulties.

GS: Mr Speaker, Honourable members, I obviously welcome this report as the department I represent is probably the main user. As for the Morrisons Agreement I certainly very much look forward to working through this and coming back to this House with a reply in 6 months maximum but hopefully a much shorter time period. So I very much look forward to this.

Summary by the Hon Mr Michael Poole:

Thank you Mr Speaker. I will just begin by addressing the Honourable Roger Edwards question regarding the 1% figure which has been corrected from the 8.5% in the covering letter as it stands at the moment.

That comparison was made against the final letter of instruction, which was quite late in the procurement process. So thats the point which you type down what is hopefully your final budget. So it is after any changes and specification that may have been made by our Government or the contracting party. So I hope that makes sense.

I think if you were to compare against initial estimates naturally there would be a larger variance but thats to be expected. Initial estimates are just that and the final price is often very different once you get into the detail of specific projects.

I, too, concur with the Honourable Mike Summers and the Honourable Jan Cheeks comments on this. We need to look forward. There is a shared responsibility here between Government and Morrison (Falklands) Limited. And I think there is a lot of detail in the report from the PAC. A number of these things should be quite straight forward.

Hopefully it will be a matter of just sitting down and working through them and devising the necessary contractual and legal arrangements.

Thats all I have for now. Thank you Mr Speaker.

KB: Honourable members, the Motion before the House is: That This House notes the Report of the Public Accounts Committee in respect of Morrison (Falklands) Limited Partnership Agreement.

There was no objection and the Motion was carried.

KB: As the Public Accounts Committee has pointed out the Public Accounts Committee have made a recommendation that this report will be submitted to the Governor in Council and it a requirement that they make a response to this House within 6 months.


The Portfolio Report of the Hon Mrs Jan Cheek:

Mr Speaker, Honourable Members, my report is somewhat briefer than my last one because it covers a shorter period. Major projects are part of my portfolio and declaring my interest as a trustee I am pleased to report the Museum development is making good progress and we are hoping to open in the spring to allow people in the Islands a preview before the tourists arrive.

The other major issue ongoing is we await the business case for a port development in Port William. And that business case is due in May.

Moving to another area, Minerals, as most people are now aware there has been some slippage in the original time-table indicated by Premier Oil. So things are fairly quiet here on the Minerals front with the exception of the activity relating to the Noble Energy temporary port.

The Director of Mineral Resources recently returned from overseas. He and representatives of British Geological Survey were involved in a well-attended AAPG event (Association of American Petroleum Geologists) I am sure the Honourable Phyllis Rendell will correct me if I am wrong.

PR: Yes.

JC: And there was some interest being shown by a number of people there. The Director also had meetings with a number of the companies that hold exploration licences in our waters.

Moving on to FIDC, the Development Board met last week and received updates on many of the Corporations activities. In addition the Board agreed that the revised policy and procedures manual should be put to Executive Council for approval. And some loan applications were considered in the closed part of the meeting. Several other activities in that group are worthy of note, including the Business Climate Survey. The 5th edition of the FIDC Business Climate Survey was distributed to businesses on the 2nd of April. For the first time it is offered as an electronic survey for those who want to fill it in that way. The response rate so far has been good but it is still a little short of the targeted 40% return like there had been before. The deadline has been extended to this Friday so if you are still thinking about it please fill it in. And I have to admit I must fill in mine.

The feedback received in the returned surveys provides an important element of the information used by FIDC. It could lead to the Development of schemes, initiatives and projects that help businesses like yours out there.

The Waterfront Development Working Group has met on three occasions so far and had specific discussions on the development of the waterfront walk and the historic dockyard. The Group intends to promote opportunities on the waterfront in the very near future and the Honourable Michael Poole is involved in that group.

The 3rd phase of the Credit Union Project is underway. Three community leaders have volunteered to help with the project and they represent the Chamber of Commerce, Rural Business Association and MLAs, FIG and the Honourable Michael Poole. The next stage of this project is to develop a detailed business plan for a Falkland Islands Credit Union in partnership with the World Council of Credit Unions.

Regarding the Youth Enterprise Scheme, work has begun on drafting the enterprise publication and recruiting mentors.

Finally the FIDC website has been updated to include information on all current operations including sections on oil and gas development and an enterprise section.

Thank you.

There was no debate.

The Portfolio Report of Dr the Honourable Barry Elsby:

Mr Speaker, Honourable Members, I, too, have a relatively short summary today. It is not very long but it is what you concentrate on.

To touch on the matter of safeguarding issues  people will know we set up a safeguarding board in the wake of the sexual abuse cases and we worked closely with the Lucy Faithful organisation to help address this matter and to advise on how to take things forward so we can prevent such a thing happening again.

We have an absolute wish to start an ongoing publicity campaign not just for a few months but for years to better inform children to better inform parents about the dangers that modern life present. And at the moment parents and students will know that theres a questionnaire out asking for their views on certain questions about what they would do in certain circumstances and personal experiences.

We are doing that to try and find out what peoples views are here and when we do introduce the campaign to educate people of the dangers we will be able to look back in a years time to see if we have improved and if people are more aware of the dangers.

I know a few people have been upset by the questionnaire because it touches on a very raw subject such as on the Safety of Children. Its very difficult but it is a fine line you tread between not trying to upset people about an emotional issue and trying to find facts about a better inform us about how to protect our children in the future.

So I do hope people will complete these questionnaires and return them because it is important for the future.

The aim is to start the publicity campaign towards the end of May and it will be an ongoing campaign indefinitely because many children spend hours on social media sites and seeing virtually anything they want on the internet these days. We have to address that because it is always going to be there so we need to arm young people with the information to protect themselves and we also have to arm parents with information as to how they can help in the situation.

As people know I am a childrens champion here. That sounds very grand but its really a non-statutory role to try to raise the issues of children in all aspects of Government. Its a new job and whilst I am away at the Commonwealth Parliamentary Conference in Wales in a few weeks time and will also be spending some time with the Childrens Commission in Wales. That is a statutory body that has been set up in the wake of a sexual abuse crisis in Wales in 2001 and they have a lot of information and I hope to learn a lot about how they used and how they developed their services over the last decade.

In education itself as with all departments at the moment its budget time and the Education Department is looking very closely at the budget to try to keep it within bounds. The Education Department is unusual as it doesnt have much revenue so we cant boost revenue very much and most of the expenditure obviously focuses around staff and the facilities of the school.

The Department has the need to employ more teachers at the moment because of the rising class sizes so that by the end of this year and the start of the next academic year every class year in the Junior School will be split. And we are at a point where we need to look for accommodation. We have various options we are looking at for temporary accommodation, be they cabins on Stanley Hostel or looking at the Catholic Church hall to use for the spill-over but I think at the end of the day we have to accept the reality that we need a new Junior School but as my Honourable Colleague, Roger Edwards has said today, there are many other competing capital projects and I would encourage all people to attend a meeting on May the 1st as he suggests so we can discuss it with as many people as possible.

I think thats all I have to say at the moment Mr Speaker.

Thank you.

There was no debate.

The Portfolio Report of the Honourable Mr Ian Hansen:

Thank you Mr Speaker, Honourable Members My report today will be rather brief as well. I will speak first of all about one of my portfolio responsibilities I didnt touch upon during my last report; and thats FIGAS. As certainly the Honourable Roger Edwards and the Honourable Phyl Rendell know. We know a lot about FIGAS. We spend a lot of time with them and they are a vital component for the Camp, in particular for tourism in Camp for which they are absolutely vital. But they do have several significant issues that are beginning to affect the services. Not least of these is the age of the fleet. The aircraft range in age from 21 to 27 years so they are not young any more. At some point a fleet review will be coming to Executive Council at some point in the near future.

Of course consideration needs to be given to what we should do with the ageing fleet. Is it aircraft types, size, pay-load, service report, spare parts availability air crew training and engineering training to name just a few. So its a complex issue.

We also have an issue with getting qualified staff in relation to aircraft engineers. There is a world-wide demand for licenced aircraft engineers and the age and type of our aircraft means that there is an extremely small international pool of these people. So it is very difficult to get them.

If we had a different type of aircraft it would be easier with a larger pool but it is such a complex issue with changing the fleet there is a huge amount of things that come with that.

Of course the possible requirement for Stanley Airport to be certified for the return of commercial helicopter operations is another issue. There will be regulatory obligations and of course associated costs added to that if and when it happens.

Another issue is the Camp Aerodrome fire appliances. Again, they are ageing. The current complement of 33 of these fire appliances were first purchased by FIG in 1988. So they are 25 years old now. And of course replacement parts are becoming progressively more difficult to obtain. Again there is another associated cost involved but they will have to be replaced at some point.

Its not all doom and gloom. FIGAS is still operating and gives good service but these things will be on the horizon and will be happening.

I would just like to do a very quick radio service update with information I received yesterday so this is up to date, I guess. The FM Transmission is back on from Mount Kent and this is thanks to BFBS who lent us an amplifier and took the time to fit it last week. I would like to thank them very much for that.

The new FM service from Mr Sussex is now transmitting Falkland Islands Radio Service on 97.2. I did try this morning to try and find out how far reaching it was but I couldnt actually get a hold of anybody at Port Howard to see if the service is working there but I will try and do that later.

Unfortunately 530 Medium Wave is off air and KTV are installing new equipment on Mount William with a mast. It is estimated that 60% of the work on Mount William is completed. But of course this can be hampered by the weather. And the weather lately hasnt been too helpful to KTV.

I think that is where I will end my report for this week Mr Speaker.


PR: I would like to thank the Honourable Ian Hansen for the update on FIGAS. I just wonder if you could tell me and the people who have an interest in FIGAS when we are expecting to have a report on recommendations for new airframes or the continuation of the frames we have. What is the timescale please?

IH: I thank the Honourable Member for her question. The time table for the fleet review is at the end of this year. Also for the future improvement of Stanley Airport to involve what we need for helicopters  when that happens it will be coming in June. And the Camp fire appliances will be next month in May.

BE: Mr Speaker, Honourable Members, I share your concerns about FIGAS, particularly the lack of engineers. You are looking in a small pool, arent you?

We had a very successful career fair at FICS; and I notice you had an excellent stall there from FIGAS and there was some interest from students. I hope some of those are going to be engineers and want to get into engineering.

I just wonder if you are chasing any of those children who expressed an interest in engineering so they know they are valued. And you can round them up and get them trained.

IH: I thank the Honourable Barry Elsby for that question. Absolutely we are working very hard on getting local people into these positions and certainly it is very high on the priority list to get young people interested in certain positions.

The Portfolio Report of the Honourable Mr Mike Summers:

Mr Speaker, Honourable Members, thank you. I will concentrate this time on some capital projects that have important operational aspects to them and I hope I can link them in as we go.

Firstly the Police Station and the prison has been the topic of quite a lot of discussion on Social media in the last few days and it has been very helpful and informative. And we were able to do a discussion programme on FITV recently on the subject and again I hope to inform people about some of the options available to us.

The fact of the matter is that the prison at the moment is pretty well full  not quite but it is very, very close to it. And that is the result of some excellent work over the last several months by the Police, the Social Work Department, Medical Services, the AGs Chambers and of course the Court staff. As a result of all of that, the Court has judged that a number of people who are dangerous should be locked away for a lengthy period of time. And that is now the case so the prison is a bit of a problem for us.

There are various options about what to do and these are the things we are currently trying to discuss  we are discussing. One is to extend the existing prison. The other is to build a new prison on another site and the third option is to remove both the Police Station and the prison from the existing site to another site.

They all bring with them particular implications. If we simply extend the prison here it is almost certain that the cheapest way to do it from a capital cost perspective and an operational perspective but there are a number of people who object to the extension of the prison next to educational facilities. That is entirely understandable. And already having upset the Reverend Hines by suggesting earlier on that one should be playing football instead of going to church what I should have meant was playing football after we had been to church, I hesitate to suggest that we could move the prison any more further to the East. But there is very limited space on that site.

By simply moving the prison to another site that is probably the second cheapest capital option but it is an expensive operating option because you have to basically double up the staff.

By moving both the police station and the police station to a new site, is clearly going to be the most expensive capital option. It has certain attractions in that you can maintain the working relationship between the Police and the prison by reducing some of the operating costs so provide the opportunity of incorporating the Customs and Immigration Department into that facility which is perhaps where they ought to be and saving some rent so their operational cost affects that. It also then releases this site here for other use and other use could most certainly include the possibility of use for educational purposes. So that is quite a complex range of issues. But we do need to come to some conclusions on that in due course.

The second important Capital project in my area of responsibility is the Fire Station. The Fire Station occupies a very important piece of real estate right in the middle of the town with old buildings that were inherited from the Military many years ago. They have run their time and we do need to move. We dont have to move instantly. We can make do and mend for a little while but we do need to move. And the benefit of moving the Fire Station and as you release that piece of real estate for potential development purposes, not only for potential Government offices or possible medical services or whatever  any number of potential uses can be made for that particular site. So it actually pushes it further up the list than it might be just because it has to move in and of itself.

And the third important Capital project in my area of responsibility of course is the care for the elderly facility. And you will find the theme here is the same. It is release of space. The West end of the Hospital is full of elderly people who need special care and attention and its overflowing. The last time I went there were 2 possibly 3 people on a long-term basis and that isnt appropriate. So there is a relatively urgent need to create a care for the elderly facility somewhere, hopefully near-by. If it is near-by you can still share a lot of the facilities with the current medical establishment. If you move it somewhere else that some people favour, inevitably the operating costs will be significantly more because you will need a lot more people and services.

And the important issue there  again  is release of space, not only to release some of the work space back to the Hospital for normal use but also the potential to release other bits of space in the Hospital for the development of the primary care service which many of us strongly espouse.

So there are three separate projects actually with a common theme to them. We need to release the space and there is a lot of interaction between each one of those projects. So like my Colleagues before, I would strongly urge anybody with an interest in any one or all of these projects to attend the discussion about the Capital Programme on the 1st of May to make sure you have understood as much as you need to understand and you know as much as you need to know to help us make informed decisions about which way to go with these projects.

There was no debate.

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