Sometimes it is better to buy milk than own a dairy farm.
We continue to witness the disastrous results of the management of numerous government-owned buildings. Not only are many buildings in very poor condition but many of them actually pose a health hazard to government employees and the general public, while a large number have been abandoned and are going derelict. We are not dealing with a problem that arose recently; the problem has been going on for too many years, covering both political parties’ administrations. The cost related to this problem has to be substantial in terms of the cost to renovate buildings, given their bad state (as opposed to the lower cost of regular maintenance) and the cost of having employees sick, both in terms of health costs and work stoppages.
I have witnessed first-hand the rather poor management by Government on two occasions. The first one was on the construction of the Law Courts when I was the CEO of RBTT that financed the project. The second one was when I was the Barbados Ambassador to the USA for seven-and-a-half years and it relates to the Barbados residence.
The building of the Law Courts is an example of poor project finance and management while the Barbados residence is due to poor decision making and a total lack of maintenance.
In the case of the Law Courts project, a lot of time was lost because the project was administered by a Ministry that had responsibility for the courts. Needless to say, time is very important in a project as it can increase the final cost substantially. Government officials did not seem to understand the importance of time as they had a certain way of doing things. While that, on the one hand, may appear reasonable for the Ministry with responsibility for the courts, it really does not make sense because the ministry had absolutely no expertise in construction or in project financing. Hence, the Government also employed specialized consultants to manage the project. While the consultants were well qualified, they often encountered issues with having to converse with Government officials who really were often “out to sea”. I do not think one can blame the government employees because you really cannot expect a senior Government official who had a distinguished career as a Foreign Affairs officer to change gears overnight and become a knowledgeable professional in engineering and project finance.
The lesson, in my opinion, is for the Government to have a project team that does all projects so that you have in-house professional capabilities. In other words, Government should have one team that serves all projects in the various ministries rather than have each ministry try to manage its individual project. Project finance is project finance – whether it is for a road or a building or a bridge, etc.
In Washington, I encountered a residence that was in very poor condition as no proper maintenance had ever been done. I also thought it could be a health hazard to my family. It should be pointed out that the embassy staff could not be expected to be qualified in property maintenance, renovations or environmental problems. They would not have the expertise to do this work and neither would they have the time to do it efficiently.
As it turned out, an environmental study was done and the residence did have health hazards. Unfortunately, it took the Government over six years to decide to sell the property. During that time, the Government would have paid for property insurance, a security system, utilities, lawn maintenance, general maintenance, etc. The property was also depreciating as it was unoccupied. Eventually the residence was sold. However, it would have been much better financially to have sold the property six years earlier. Clearly, the Ministry of Foreign Affairs does not and should not have expertise in construction, renovations and professional maintenance.
It should be noted that Barbados is not alone in doing poor maintenance on government properties. A Brazilian colleague in the diplomatic field once told me that he did a study about the results of countries doing maintenance on their properties. He said that almost every country is guilty of poor maintenance and whenever there is a need to reduce the budget, the first expense to be cut is maintenance.
Some people will say that property is a good investment and that a government should own its buildings. I agree that sometimes property is a good investment. However, if you are never going to sell the property, ownership becomes almost irrelevant from a return on investment point of view. In other words, if the Government occupies a building it will always need office space, unless it decides that it no longer needs to perform the service that it was providing. Yes, in theory, you could make a good capital appreciation but if you are not going to sell, the possible “capital gain” is irrelevant. What matters is the comparative cost of ownership with proper maintenance, versus rental. Professionals can examine these options and there will always be pros and cons. One advantage of renting is it can provide more flexibility.
I believe that the Government would be better off selling properties (both in Barbados and overseas) and realizing capital that it seriously needs. The Government can let investors such as the insurance companies that need a regular cash flow own some of these government properties. The Government then can pay a reasonable rent to occupy the space it needs. Government, in my opinion, is not in the business of real estate and government employees and ministers will not have to waste time with maintenance issues. If we are not careful we could soon have a Minister of Maintenance as maintenance problems exist in many other areas as seen in the poor condition of our roads, buses, water works, etc. Yes, it is possible for the Government to have some people responsible for building maintenance but history has shown that it does not work. I am also against it for another reason. Namely, I believe that a developer or insurance company will manage the maintenance of properties better than any government. Moreover, it would eliminate the possibility of a government official giving the maintenance contract of some buildings to a friend.
Finally, abandoned, derelict government buildings should be put out to tender for restoration and development at an attractive rate for investors. I understand that this proposal was accepted in principle by the Ministry of Culture and the BTII but never actioned. I think there are more than a dozen buildings that could be dealt with in this way.
Derelict buildings are also an embarrassment. A former Ambassador of Canada to the OAS who likes Barbados and has visited here many times told me that once he was walking past the old Eye Hospital on Bay Street and he saw a plaque on the wall that stated that the Canadian government donated funds to assist with the restoration of the building. Unfortunately, the building is in a state of disrepair. The Ambassador wondered what happened to the Canadian government’s contribution. We can and we must do better!
John Beale is the Barbados Ambassador to the United States.