ExCo decides not to proceed with Phase 2 of the new port facility
FALKLAND ISLANDS GOVERNMENT
28 September 2022
On Tuesday 27 September ExCo considered a paper on whether or not to proceed with moving to building a new port facility (Phase 2). Following consideration of all the facts, ExCo has decided not to proceed with Phase 2 of the new port facility.
All agreed that the Falkland Islands need a working, well maintained port facility, and that determination has not changed. Honourable Members have also repeatedly said they will not provide this at any cost, and certainly not at the expense of the wider Islands economy. As such the high cost of the fixed price construction and wider work programme means this decision is in the best interests of the Islands as a whole at this time.
FIG chose a contracting strategy that specifically provided these gateway decision points, so that decisions on whether or not to proceed are made on the basis of firm information, not projections or estimates. This ensures that the Falklands does not invest further public money in a project that is not to our satisfaction and where the costs could escalate through the build process.
All involved in this work are committed to the continuing provision of appropriate port facilities for all industries that make use of the current port. A contingency plan is already in place focusing on remedial and improvement works to FIPASS to ensure operational capability for at least five more years.
FIG will own or have 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. Whilst there have been costs in reaching this point, the work to date is a sound investment which places FIG in a strong position to revisit all options using accurate, detailed technical information.
Chair of the Legislative Assembly, MLA Roger Spink said: “The original goal was to design and build a new port facility for between £50-70m. The detailed costs we have received associated with the current design would be in the region of £157m, excluding costs FIG would incur, which is considered by Members to be un-fundable. 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. I would like to thank the team at Development and Commercial Services for all the work they have undertaken so far. They have been working incredibly hard on this project to ensure that members were provided with all the information to take this decision.”
The Port Project team in DCS will continue to work on options, and will consult widely with stakeholders as part of this work, before returning to ExCo with viable next steps in February 2023. This is not merely another options phase, but a working up of deliverable models known to be truly viable, taking into account the information now available on financing options and scale of acceptability. All previous ideas will be reviewed as part of the next steps, viewed through the prism of the stakeholder engagement work and financial situation of the present day. No option is considered off the table, but the work carried out to date provides a set of criteria to narrow down and identify the best next steps.
The cost of phases 1a and 1b together is in the order of £13-£14m – exact figures are not yet available because phase 1b has not been completed and we are in the process of reviewing all costs against contractual obligations to ensure we only pay for what is delivered. These costs are significantly less than the ExCo approved budget, with the balance having been returned to Treasury.
The increase in costs of the port from the initial rough order of magnitude predictions (£50-70m) is largely due to two factors:
Discoveries about unfavourable ground conditions and discovery of additional silt, requiring removal. During phase 1a an increased scope of works following stakeholder engagement (subsequently scaled back partly in phase 1b but still beyond original scope).
Global markets due to COVID-19 and Russia’s invasion of Ukraine affecting supply chains, costs of materials, and fuel costs.