Five years after BK International had been granted contracts to drill three wells worth $252 million for the Guyana Water Inc (GWI), only one has been completed raising questions about the selection of the contractor and why there was no termination of the arrangement.
An audit of GWI done for the Inter-American Development Bank (IDB), a key financier of the utility, homed in on the contracts for the three wells at Hope and Mon Repos on the East Coast Demerara and at Eccles on the East Bank Demerara.
In a scathing comment, the audit report dated May 18, 2016 said that the contracts for these wells were awarded to BK Inter-national in 2011 and were to be completed in August, 2012.
“These contracts have not been completed to date and the contractor has not been faced with any penalties. The problem with these contracts was that the BOD (GWI Board of Directors) procrastinated and allowed the contractor to determine when the contracts would be finished. In addition, the delays, time spent by management and cost to resolve issues with the contractor has compromised the BOD as can be seen from the extracts of the Board minutes.”
The audit report further said that stakeholders who were hoping for improved water service continue to wait.
When the question of the delayed projects was put by the auditors to the management of GWI, its response was that it was the National Procurement and Tender Administration Board (NPTAB) which had awarded the contracts after the evaluation of a contractor who had not sunk water wells before.
“These contracts were awarded by the National Procurement and Tender (Administration) Board based on their evaluation of a contractor that had no experience in well drilling. These contracts were consistently discussed at the level of the GWI Board and there has been consistent agreement to allow the contractor to complete the three wells. The maximum liquidated damages have been applied under each contract which is 10% of the value of works for each of the contract to the total value of $18.6 million for the three contracts. At present the respective status of the contracts are provided in which one well (Hope) is completed, the contractor has been issued an ultimatum to complete remedial and development works on Eccles by April 30, 2016 and they are required to recommence drilling of a replacement well for Mon Repos by April 30, 2016 or the contract will be terminated and legal actions taken against the contractor,” GWI management said.
The auditors adverted to meetings of the GWI Board of Directors to demonstrate how the projects had been delayed without decisive action being taken by GWI.
The minutes of the GWI board meeting of December 20, 2012 acknowledged that the contracts had been awarded in 2011 and should have been completed by August 2012. Disappointment was expressed at the delay then and it was also stated as a result that GWI should develop its well drilling capacity.
Despite concerns being raised as early as December, 2012, GWI continued with the projects. The minutes of the February 28, 2013 meeting stated that the liquidated damages period had expired and that it would therefore not be feasible for the contracts to be terminated. The minutes said that it was agreed that the contracts be extended but that a meeting be held with BK Head Brian Tiwarie.
Problems with the three well projects continued for the rest of the year with the board still not taking decisive action. The minutes for the March 27, 2014 board meeting said that an unnamed member queried why the contractor had not completed any of the three wells. It was then suggested that GWI terminate the contracts but the minutes then reported the view being expressed that “there isn’t anyone else to do the work and the company is working along with the contractor to complete the wells.”
The board meeting of July 31, 2014 was again told of the ongoing problems with the wells and that BK had been written to and given an extension up to August 31, 2014 failing which “the process for termination will begin.”
A meeting on September 30, 2014 passed without action and at the meeting on October 30, 2014, the board was told that at the Mon Repos well the screen had collapsed “possibly due to poor development of the well.”
Yet still, there was no termination.
The board meeting of November 27, 2014 was told of further problems with the Mon Repos well.
“A meeting was subsequently held with the contractor who further proposed a five-year defects liability period. This was not accepted. Opinions were sought on the matter and it was suggested to the contractor that the well be plugged. Contractor agreed to this suggestion and is attempting to contact an expert from Trinidad. A member noted that where there is a structural defect the risk involved must be assessed.”
Months passed and by the April 30, 2015 board meeting, members were told that electrical works at the Hope well were almost complete and that it was producing and in operation. However, the wells at Mon Repos and Eccles required more work. While the Hope well was functioning, Mon Repos and Eccles were only 60% complete. From the contract sum of $92.6 million for Hope, the contractor was paid $60.8 million. For the contract sum of $84.2 million for Eccles, the contractor had been paid $53.1 million, while for Mon Repos, out of a contract sum of $75.5 million, the contractor had been paid $49.2 million.
