MercoPress. South Atlantic News Agency

Falklands suspends new port facility works due to an 'increase in costs': from £50-70m to some £157m

The projected new port facility, which had an original cost of £50/70 million but now stands at least at £ 157 million

The second phase of the development of the Falklands' new port facility is not to go ahead due to an “increase in costs” according to the Falklands Government, 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 unfavorable 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.”

According to Penguin News weekly, not listed as a factor in the press statement, though widely theorized 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 summarized.

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

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.”

FIFCA

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 recognized 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 normalize 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.”

(PN)