Luncheon defends GRA deal for NIS building but admits rent error

Head of the Presidential Secretariat Dr Roger Luncheon yesterday defended the financing by the Guyana Revenue Authority (GRA) of the upgrade of the hitherto unused multi-storeyed building on Camp Street, saying that the National Insurance Scheme – the current owner – cannot be saddled with the cost of customising that edifice for occupancy.

He was speaking at his weekly post-Cabinet press briefing held at the Office of the President about a deal that some have likened to helping the troubled NIS using taxpayers’ money from the GRA.

Dr. Luncheon said he erred in announcing that the rental by the GRA of the former CLICO building which NIS now owns was $10.5 million monthly.

Dr Roger Luncheon

“I had indicated last week that the NIS was seeking $10.5 million a month from the GRA for the long term lease. The $10.5 million [a month] is quite inflated…and the actual rental has not been settled,” he said.

Dr. Luncheon said that subsequent to his erroneous announcement last week, the GRA said it had no interest in negotiating a long term lease in the amount of $10.5 million a year. However, he clarified that the arrangement between the GRA and the NIS is a concluded one, save and except the fixing of the monthly lease amount.

The staggering $10.5M figure had raised the questions of whether the GRA was exercising financial prudence with taxpayers’ money and whether it was the negotiator for the deal or the government.

CLICO building

Last week the HPS had announced that a contract had been given the no objection by the Cabinet for preparatory works to the building so that the GRA could occupy it. The implication was that it was the government that was footing this bill when it should really be the landlord, the NIS. However, yesterday the HPS said that for the contract that he spoke about last week, the funding was coming from the GRA in the amount of $227 million.

The HPS noted that much of the infrastructure work at the building is to enable the GRA to have access to cleaner power, since the agency’s TRIPS system is dependent on this.

When questioned as to why the NIS as the owner of the building is not meeting the expenses of the building, he said that it is not uncommon for the tenant in such arrangements to undertake to meet the expense of making the necessary modifications. “The NIS is not responsible for meeting the expenses of the upgrade,” said Dr. Luncheon.

In a recent comment, Commissioner General of the GRA Khurshid Sattaur told Stabroek News that the GRA stands to make significant savings by consolidating most of its operations at the building.

Sattaur said that the necessary cost/benefit analyses had been done and these determined that it made economic sense to rent the property at the sum of $10.5 million as Dr. Luncheon had previously announced. That $10.5M figure is no longer applicable.

Further, Sattaur said that there would be savings in electricity, security and water costs because of the consolidation of offices and departments of the GRA at the single location

The GRA Commissioner General had said the agency hopes to commence its operations in the building by August 17, 2012.

Analysts say it would make no sense for the GRA to spend $227M to upgrade a building and then pay a monthly rent. The$227M should essentially form part of a purchase negotiation. Queries have also been raised about why the GRA hadn’t bid for the building in the first place when it was advertised for sale. Alternatively the analysts say the GRA should have constructed its own custom-made building or bought another building. Since it has been spread out over a number of buildings for decades, analysts have queried the need for the GRA’s rush to occupy the CLICO building.

The NIS is likely to end this year having paid out more money than it has taken in and analysts suggest that this present deal seems intended to help it out financially at the expense of the sound use of taxpayers’ dollars. Dr Luncheon has been Chairman of the NIS since 1992 and the precarious state of the scheme’s finances has raised questions about the stewardship of scheme under his chairmanship.

High Street building

Dr. Luncheon, when questioned on the newly constructed but not yet utilised building at the corner of Princes and High streets, said that this premises presents a formidable challenge. He said that the cost of that building’s construction is in the billions. At one stage this building had been identified to house the operations of the GRA.

Dr. Luncheon said that there has been a halt to the construction of the building originally constructed to house the Ministry of Labour, Human Services and Social Security.

Luncheon said that the reason the building has not been completed and outfitted is because this would be determined by the occupant and that agency’s intended use of the building. The HPS said that one possible occupant is the Guyana Geology and Mines Commission which at present is operating in an overcrowded environment. However, he said that discussions are ongoing with a number of potential occupants of the building.

The High and Princes Sts building has been pointed out as an example of the bungling of a major building contract under the supervision of the government. It is also unclear when the project will be completed and who will bear the cost of redoing defective work.

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