By NATARIO MCKENZIE
Tribune Business Reporter
THE Water & Sewerage Corporation’s (WSC) chairman yesterday revealed that it “amazingly” issues 22 contracts to reverse osmosis plant (RO) operators “without a single one going to tender”.
Adrian Gibson, the Long Island MP, made the revelation as he tabled a forensic audit of the Corporation by the accounting firm, Ernst & Young (EY), in the House of Assembly.
He said: “To add insult to injury, EY observed that the contracts are - on average - for 10 years, and have fixed rates that have noticeably increased by 78 per cent in favour of RO operators.
“A formal contract was in place for just one of 22 plants, with the remaining operating on letters of acceptance that contained no provisions relative to insurance, penalties, performance targets or any legal protection for WSC.”
“This is disgraceful,” added Mr Gibson. “I have already begun taking steps to address this unfortunate and dicey state of affairs. Notably, EY noted the erratic purchasing of service laterals by Miya Bahamas relative to the non-revenue water project. Miya encouraged the purchasing of such parts from European vendors.
“This ultimately incurred WSC greater shipping costs, currency conversion fees and inconvenience. The auditors referred to concerns by WSC’s own technical auditor, noting that WSC could be disadvantaged by not purchasing completed assembled service laterals, purchasing from a single supplier and cutting down lead times by purchasing from North America as was previously done.”
Mr Gibson sad EY had discovered several instances where contracts were awarded to vendors that did not bid, or were not selected, and inadequate contract protection for WSC.
“One example is Miya Bahamas.,” he added. “Miya has a 10-year contract, signed in 2012 and valued at $82 million. The contract has performance goals. However, WSC has no way to verify Miya’s calculations. WSC has been reliant upon Miya’s calculations, based on readings from meters Miya installed, using software Miya set up and administers.
“An engineering consulting firm, Water Management International, reviewed Miya’s calculations and questioned the integrity of the meter readings and urged for a calibration protocol to be a compulsory component of the performance contract (performance contract valued at $23.775 million. That has not been done.”
Mr Gibson added that there were “gross irregularities” over the Blue Hills reverse osmosis expansion contract, including non-compliance by plant owner, BISX-listed Consolidated Water. Consolidated Water first received a contract in 2005, and he added: “An amendment to that contract was then executed in 2011. Thereafter there were major complaints concerning red, rusty water.
“The auditors found that a previous report was carried out, which discovered that the amendment reduced important water quality standards that were set out in the original. When asked why WSC never rejected the unsatisfactory water from Consolidated Water, the general manager told the auditors that the demand for water in New Providence was too high and did not allow for rejecting unsatisfactory water, and that one of the reasons the water quality standards were removed was because of the use of a corrosion inhibitor which should have addressed the red water issue but was never used.”
Mr Gibson continued: “When questioned as to why, the general manager responded that “it fell through the cracks”. In an interview with engineers, the auditors also report that allegations were made that the general manager adjusted the water quality standards and they produced a draft copy of the water quality standards in his handwriting, which showed edits to the water quality table.”
Mr Gibson said EY had identified 37 contracts, valued in excess of $10,000, where no formal tender was undertaken and no alternative option entertained. “It could not be shown where management followed a documented exception process or criteria. A few of these contracts were: no tender on an award of contract to Sunshine Insurance,” he added.
“In May 2016, the former Board directed that a contract be completed. The original price for the annual insurance premium was $438,813, cheaper than the previous insurers JS Johnson, which was pegged at $474,012. However, a year later, the annual premium suddenly increased to $514,107.
“Board approval was not sought or received by management, nor was a tender process performed, for the award of a contract on new service connections. A fixed rate was executed with Bakerwick Construction, Apex and several other contractors. Between May and September, 2017, Bakerwick Construction earned in excess of $254,750.
“The tender process was again bypassed in the award of a contract to Sol Petroleum. Likewise, EY observed that Castalia Strategic Advisers have a subsisting contract for $250,000. No competitive tender was performed notwithstanding the fact that the Corporation’s own technical auditor felt that the consultants lacked the experience necessary for the scope of the project.”