New Falklands port project stalls out due to high costs
Written for the September 30, 2022 issue of Penguin News. Printed under the headline “High costs mean port won’t be funded - industry not surprised”.
THE second phase of the development of the new port facility is not to go ahead due to an “increase in costs” according to FIG. Both the Chamber of Commerce and the Falkland Islands Fishing Companies Association have indicated that while they support the building of a port they understand the decision.
The building of the port has increased from the initial rough order of magnitude predictions of £50-70m to a most recent cost “in the region of £157m, excluding costs FIG would incur,” said Chair of the Legislative Assembly MLA Roger Spink.
A government press statement read that the costs escalated due to “discoveries about unfavourable ground conditions and discovery of additional silt requiring removal,” which was in part due to “increased scope of works following stakeholder engagement.”
The second reason provided for the increase of cost was “global markets due to Covid-19 and Russia’s invasion of Ukraine affecting supply chains, cost of materials and fuel costs.”
Not listed as a factor in the press statement, though widely theorised by the public to be a factor, is a decision to use a fixed cost approach for the project - which may have caused the planned contractor for the project, BAM Nuttall, to factor in maximum risk to the cost of the project.
The Port Project Team, the government statement read, would “continue to work on options” and consult with stakeholders as part of this, with a plan to return to Executive Council in February 2023 to consider “viable next steps.”
The FIG Statement noted this phase was “not merely another options phase, but a working up of deliverable models known to be truly viable” and would take into account “information now available on financing options and the scale of acceptability.”
The government press statement said the contingency plan was “focusing on remedial and improvement works to FIPASS to ensure operational capability for at least five more years.”
In a public meeting regarding the port on August 22 the state of FIPASS was briefly summarised.
It was said that between 2015 and 2017 investigatory surveys were conducted and the reported condition was “much worse than assumed.”
In 2019, as part of planning works surrounding the new port facility, FIPASS was given a working life of a further three years if £5.8m was spent on repairs and maintenance.
MLA Roger Spink, Chair of the Legislative Assembly, stated costs were “considered by Members to be unfundable.
“We are responsible for ensuring a sensible balance between maintaining our financial reserves, not taking on excessive national debt, and moving forward with other vital capital projects such as the new power station.”
MLA Spink added thanks to the Directorate of Development and Commercial Services “for all the work they have undertaken so far,” as “they have been working incredibly hard on this project to ensure that members were provided with all the information to take this decision.”
Chamber of Commerce comment
Penguin News reached out to the Falkland Islands Chamber of Commerce for comment on the decision not to proceed with the new port facility.
Chair of the Chamber of Commerce, Mike Summers, said “The Falkland Islands Chamber of Commerce strongly supports the development of a working port system that underpins the activities of all of our members in all sectors of business, but understands why Executive Council has chosen not to proceed with the current proposal at this time.”
Mr Summers added that “as a maritime nation, we require adequate port facilities to enable our businesses to function efficiently and support our aspirations for the future of our community” and “it is now vital that work continues at pace to develop an affordable and suitable alternative.”
Falkland Islands Fishing Companies Association (FIFCA) comment
A statement on the decision not to proceed with the port at this time was also released by the Falkland Islands Fishing Companies Association (FIFCA).
James Bates, Executive Secretary of FIFCA, said “whilst disappointed that the port isn’t going ahead, FIFCA are not surprised by it.
“All along, we have recognised the benefits and economic value that a new port will bring to Islands and have been perhaps the strongest advocates for it, but not at any cost.”
Mr Bates added FIFCA “look forward to seeing what alternative measures are put in place and as we always have, will continue to support the development and economic growth of local businesses by working with the infrastructure we currently have.”
The FIFCA statement concluded they “would urge the Government to revisit the port development as a matter of urgency and as soon as the global position changes and things start to normalise once more.”
While the port as planned in phase one of the project is not to go ahead at this time the plans may be able to be used at a later time as FIG maintains “the right to use all the designs, surveys and other intellectual property associated with phases 1a (basis of design) and 1b (detailed design) of the project so far” - the statement read.
The costs of these works so far were said to be in the region of £13-14m, though it was noted that “exact figures are not yet available.”
It was noted in the press release that the contracting strategy used with BAM Nuttall was chosen as it “specifically provided these gateway decision points” which would allow decisions on whether or not to proceed to be made “on the basis of firm information, not projections or estimates” to prevent investment in a project “not to our satisfaction.”
Penguin News have not yet been given an opportunity to ask the Assembly questions regarding the port decision, though a press conference is due to take place prior to the release of the October 7 issue of Penguin News.
Editorial for the September 30, 2022 issue of Penguin News by Nicholas Roberts
After much deliberation, public meetings, hints at changes in Falklands life, and planning for various eventualities, the decision is finally made: no new port - at least now, or as currently offered.
I have to say I’m glad. We in the Penguin News office have watched, much like the rest of the public, as costs have continually risen and the facilities of the proposed port have reduced. No roll-on roll-off (RORO); only “absolutely essential” buildings; significant reduction in quay size; some works to be picked up by the Public Works Department, at cost to government; and all of that for a price which was indicated a few weeks ago to be “three to four times” the original estimated costs, and has now been said to be roughly £167m.
We were warned by Financial Secretary Tim Waggott that if the port was to go ahead at this time there would have to be prioritisation of capital projects, with some potentially having to be delayed or dropped, and that we would even have to look “dispassionately” at subsidised services, and here we can see why.
I’m glad to see the decision go this way, at least for now. I sit in the same boat as many others; pro-port, but decidedly against the proposal which has been developed in the last few years, or at the very least this timing for undertaking it.
Because we truly are in challenging times, and now this proposal has been denied by Executive Council there are new tough decisions ahead. If not this port, or if not now, then what? And when?
FIPASS is in a sorry state, and it’s an artery through which the majority of the lifeblood of the Falkland Islands economy flows.
To continue on the cardiovascular metaphor: We’ve agreed to not undertake a quadruple-bypass surgery because we recently caught pneumonia. It’s not good timing. Costs and risks are at an all-time high, but that doesn’t remove the issue in the long term. We can cut back on bacon and cheese, but eventually something major is going to need doing, and preferably before a heart attack - or complete failure of the port, to abandon the metaphor. Because damage control becomes even harder, and even more expensive, if we wait until the failure happens.
I don’t envy this assembly, and future assemblies, in weighing a decision which is well beyond the scale of anything else the Falklands has undertaken before, or will again for some time.
That being said, the press is feeling a bit put out due to a press conference being set-up for a full week after the decision was made. We’ve been aware of when the decision was coming for some time, and the next steps after the decision not to proceed are just as important, if not more, than if we had decided to go ahead.
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On a separate note, considerations on terms for workers has been a quietly bubbling topic for some time, and the feature on maternity leave on page 5 makes for an interesting read.
As the Falklands continues on its path of development a lot of decisions are being made about how we want to treat people, and whether our workforce is treated like people or cogs in the machine to be used until exhaustion, and this is worthy of discussion. If we hope to address The Churn of workers in the Islands then desirable terms need to be offered beyond an unimaginative approach of: “More money?”
Offering staff reasonable pay is essential, but if you don’t back that up by making it possible for them to take a step back when a loved one dies, or a new loved one is born, then no amount of money is going to persuade them to stay long-term. I’d add that paternity leave is also as essential a consideration as maternity leave. I'm of the understanding that Government currently provides 6 weeks of maternity leave, but only 10 days of paternity leave for its staff as standard.
This goes to show in another way the out of date policies regarding parental leave, which is based on the dated assumption that parenting is women’s work and - if the father fancies it - he can take off a few days to help with the dishes at the beginning. A modern approach to parental leave which embraces all forms of parenthood is needed if we’re going to encourage people to settle in the Islands.
Nicholas Roberts