Govt agrees to pay Chinese contractor $1.4M daily for project delay

Govt agrees to pay Chinese contractor $1.4M daily for project delay – contract document

Mar 31, 2013 News

…Guyana to supply sand, stone, build roads

Government, in November 2011, signed a US$138M with China Harbour Engineering Company Limited (CHEC) for an ambitious expansion of the Timehri airport but millions more are likely to be spent before the facility is completed.
Under an agreement with China, financing will be provided to the tune of US$130M with the Guyana Government indicating it will foot the remaining US$20M or so that it will take to fully complete the project at the Cheddi Jagan International Airport (CJIA).
An examination of the contract between the Ministry of Public

Government has allocated $5.3B for the CJIA expansion this year.

Works and CHEC signed in late 2011 revealed a number of interesting details. The contract had been released to Members of Parliament and the media.
Government has to supply all sand and other filling materials for free. This is likely to use up a significant portion of the US$20M.
The contract price does not include the construction of a new car park, internal roads and handling equipment area. Rather, CHEC is only charged with the designs but government will have to take responsibility for the construction.
CHEC’s US$138M price tag also does not include the construction of a new cargo area and fuel farm. Government is charged with the responsibility for designing and constructing both.
However, CHEC will be responsible for land backfilling to extend the runway area, constructing a new terminal building, pavement of new apron, layout structures and systems, oil tank, water supply and drainage for runway extension area and fire pump station and power supply line for runway extension area.
The new airport terminal will entail the installation of power supply, communication and water supply and fire control system, and air conditioning system for the terminal.
It said that the US$138M does not include the removal of the existing terminal, cargo store and containers. Rather, the employer (government) will have to do it. Government has since announced that it will no longer tear down the current terminal building but has plans to convert it for cargo storage and other services.
There are penalties for any delays. “If because the employer could not cooperate with Contractor to finish the Auxiliary work as well as the Contractor’s schedule, the progress will be delayed, the Employer shall remedy the Contractor by the time extension and cost compensation.”
The contract price excluded taxes, duties, royalties and other fees normally imposed. The government will have to take charge of this.
CHEC also managed in the contract, to secure an advance of 15% of the total contract price…US$20.7M.
The entire project is expected to last 32 months with the government guaranteeing that CHEC be accorded a situation that it will work no less than 10 hours daily. Any failure will see CHEC being given extra time and cost compensation. Government agreed that this cost compensation could come up to US$7,000 ($1.4M) daily.
According to this year’s national budget estimates, $5.3B has been set aside for the expansion. In local dollars, China will be financing a total of $26.78B.
Government, in justifying the expansion, said that it was looking to capitalize on the emerging tourism market with the current runway too short to accommodate the bigger, wide-body planes. With Guyana’s unique location at the tip of South America, it could also tap into markets from Africa and Asia.
Recently, new communication and navigation systems at the CJIA’s control tower were commissioned. Over $1B has been spent to upgrade the equipment.
China, which has overtaken North America, in its lending to Guyana, has made millions of dollars available to Guyana in a credit line.
With preliminary works underway, authorities say that construction could commence as early as May.