By NEIL HARTNELL
Tribune Business Editor
The Water & Sewerage Corporation’s water supply contracts are “not good enough”, its chairman revealing many consist of just a two-page Letter of Acceptance.
Adrian Gibson told Tribune Business he had discovered “great inconsistencies” and “inadequacies” in the state-owned water supplier’s contracts with the private sector operators responsible for running its reverse osmosis plants.
These provide all the water that the Corporation supplies to Bahamian consumers, but the Long Island MP said the commercial arrangements with the Corporation frequently lacked specifics beyond the amount of water to be supplied and price.
Disclosing that he planned to create a ‘reverse osmosis’ unit within the Corporation to ensure “good and proper contract administration” of its dealings with the private operators, Mr Gibson said many of the Family Island arrangements were coming to an end.
Pledging that he would issue no contracts of a similar 15-year length during his tenure, the Corporation’s chairman said the expiring contracts “presented opportunities” for some reverse osmosis plants to be placed in the hands of Bahamian-owned co-operatives and local Family Island communities.
“Coming in here, one of the things that I realised is that we have to strengthen the Corporation’s position with respect to reverse osmosis plant contract administration and so on,” Mr Gibson told Tribune Business.
“Many of the plants are build, own, operate (BOO) plants and, over the years, I realised there was no reverse osmosis unit in the Corporation. I’m going to formalise a reverse osmosis unit to ensure good and proper contract administration, and to ensure plants are in good working condition at the end of the contract, and that the quality of water produced is of a high-standard.
“Some of the issues we would have had here on New Providence and the Family Islands with respect to reverse osmosis plants would be the lack of proper contract administration. We are moving the Corporation towards becoming more proactive in contract administration duties.”
Mr Gibson said this would enable the Corporation to more quickly identify - and deal with - commercial and operational challenges impacting its relationship with Bahamas-based reverse osmosis plant operators. This is critical to its smooth functioning given the outsourcing of desalinated water production and reliance on the private sector for wholesale supply.
The Corporation’s chairman, though, expressed dissatisfaction with the fact that many reverse osmosis supply contracts - especially for the Family Islands - appeared not to have gone beyond a ‘back of the envelope’ arrangement.
“As it stands, there are great inconsistencies with the reverse osmosis plant contracts, particularly in the Family Islands,” he told Tribune Business. “There are no standard systems. We want to move the Corporation to a more standard contract. “Most of the reverse osmosis plants in the Family Islands operate with a two-page ‘Letter of Acceptance’. It has no specific terms and conditions beyond the provision of water and the price. As an attorney, what I also recognise is that a ‘Letter of Acceptance’ is not good enough.”
Mr Gibson said such commercial contracts should outline the responsibilities and obligations of both the Corporation and its reverse osmosis operator partner, plus set out the process and triggers for default, termination and associated penalties.
He argued that many reverse osmosis contracts contained too much “flexibility”, and added: “We have had deficiencies or inadequate terms and provisions with respect to contract duration.
“There’s been inadequate provisions for quality control and maintenance. The legal transfer of the plant and equipment is not properly outlined. The properties the plants sit on; the contracts do not clearly provide operators with ownership rights.”
Mr Gibson said deficiencies had also been identified with the insurance and service provisions in many contracts, adding that he had been informed that in many instances insurance costs were included in the price of water paid by the Corporation and its consumers.
With the rights of all sides, including the Corporation and Bahamians, inadequately protected, the Long Island MP pledged: “To mitigate with respect to risk management, it’s important to understand the contract risk. The plan is to have a proper contract in place and do away with these Letters of Acceptance.
“A lot of contracts need to be revisited, and there are no terms and conditions in many of them with the exception of North and Central Eleuthera and South Andros.”
Mr Gibson promised that the tender for the Ragged Island reverse osmosis plant, which the Corporation has just put out to bid, will be “a real tight, properly drawn contract”.
He told Tribune Business: “Many of the reverse osmosis contracts are expiring. It gives us an opportunity to renegotiate them, and negotiate in the Corporation’s interests and go from there to get the best market value in terms of the production of water.
“I’ve noticed most of the contracts have a 15-year lifespan. I can say that while I’m chairman there will be no 15-year contract. A review could be conducted of reverse osmosis plants.
“This approach could include local co-operatives and communities managing and owning these reverse osmosis plants.”
Mr Gibson said he was also concerned over whether some reverse osmosis plant operators had been fulfilling their obligation to submit weekly, monthly and annual operations reports to the Corporation in accordance with their contract terms.
Weekly reports detailed the water volumes produced and any outstanding balances owed by the Corporation, while the monthly reports summarised the replacement of parts, maintenance, employment levels and other operational aspects.
“We’ve had inconsistencies in the past where these reports are not submitted in a timely fashion or at all,” Mr Gibson told Tribune Business. “The contracts in the Family Islands don’t call for the submission of reports.
“We’ve had cases where the annual operating report was never submitted. In future, the creation of the reverse osmosis unit will ensure persons in the Corporation have greater familiarity and experience with the operations of the reverse osmosis plant and their technical modifications.”