Water contract ended as targets not met -Nawbatt

Housing and Water Minister Harry Narine Nawbatt yesterday said that Severn Trent Water Incorporated’s (STWI) contract to manage the country’s water sector was terminated because of its failure to achieve specific targets.

The minister was addressing the National Assembly yesterday as the 2007 budget debate continued.

He said the decision was made by the Guyana Water Incorporated (GWI) board after prolonged discussion and taking all the relevant facts into consideration and the move comes into effect from February 15. The five-year contract was originally to come to an end on December 31st, 2007.

The minister however reserved further comment as to what else might have influenced the decision.

“Due to ethical considerations I would prefer not to comment further on the decision to terminate this contract until all the outstanding matters have been finalized except to say that the contract was terminated for their failure to achieve certain specific targets,” the minister insisted in response to heckling from opposition MPs.

Nawbatt said those who have gone to the media have obviously breached an agreement reached on this but noted that the Government did not intend to follow that direction. Stabroek News had reported in its edition on Saturday that the Severn Trent contract was to be terminated. This newspaper was told that the decision to terminate STWI’s contract was made at a recent GWI board meeting.

Nawbatt made no disclosure as to what would happen to the remaining, if any, money from the $3.2m pounds sterling grant management contract which had been funded by the UK’s Depart-ment for International Deve-lopment.

He said discussions are at the moment continuing between the GWI board, government and Severn Trent to conclude the most “amicable termination possible.”

“The management of GWI is at the moment preparing a turn around plan for the company, which should be presented to the board and government by February 15, 2007. Nawbatt said the transformation was intended to, and quoted from Finance Minister Ashni Singh in his budget presentation, result in an organisation that is characterized by efficiency, reliable production and distribution and customer services.

Meanwhile, Alliance For Change member of parliament David Patterson was the first to challenge why parliament was only now being told about the GWI board decision.

He quoted the Stabroek News article of February 10 which said “At a board meeting on January 25, 2007 representatives of the board and Severn Trent had discussed the board’s plan for a termination of the contract.”

Patterson said that discussion came a full week before the finance minister presented the 2007 budget to the National Assembly and so he questioned why there was no mention of such a decision prior to yesterday’s sitting and moreso in the budget.

“Why hadn’t the minister even provided an explanation, he made no mention about the five year water supply management plan,” Patterson said.

The other side

Meanwhile in a statement yesterday Severn Trent acknowledged that its contract ended earlier than expected. STWI in the statement said the two have reached an amicable agreement which would also see it assisting GWI efforts to improve water services during a transition period up until the end of April this year.

It said too that discussions are taking place between the Government of Guyana and itself to retain the services of the current Managing Director, Michael Clarke, during this period.

But the housing and water minister yesterday gave no confirmation of this statement in his presentation.

STWI, in the statement, said that “it was proud of the solid achievements and improvements that have been realized by GWI during the past four years including better drinking water quality, better levels of customer service, reductions in non-billed water losses and GWI’s performance in providing emergency drinking water supplies during the disastrous 2005 floods.”

The firm said that both it and the water company would have liked to achieve more but events such as the floods and delays in securing funds for capital investment have thwarted that.

However STWI said that it believes that GWI is now in a position to continue the drive to improve water services under the leadership of a Guyanese Management team.

It acknowledged too the full support and wide infrastructure investment funding received by GWI from the international donor community (including the World Bank and the Inter-American Deve-lopment Bank and major contributors) along with the financial and moral support of the Government of Guyana and its ministers.

Sources had told Stabroek News that the decision to terminate the contract was taken following a series of meetings where the $3.2m pounds sterling contract was scrutinized. Levels of performance, efficiency and other matters had always been a sore issue between the board and the UK managers and even Govern-ment had been critical of aspects of the water company’s performance.

Nawbatt in his presentation also acknowledged that problems continued to plague the entity and much more could have been accomplished.

Sources told Stabroek News that over the last few weeks, Severn Trent had been discussing with the board an amendment of the contract which would allow a more amicable parting of ways but the board was disinclined to move in this direction.

The board indicated that a letter of January 16, 2007 had said that the notice of termination was issued under Clause 2:10:1 of the contract which says at a) “Failure to meet a Composite Perfor-mance Factor of 3.5 shall be automatic ground for the Employer to terminate this contract”.

Sources said too that Severn Trent had been contending that another clause related to disputes about events of termination should have been utilized for an amicable agreement as Severn Trent was interested in continuing as the manager of GWI. The board maintained however that it was proceeding with termination and in the end no agreement was reached on the amending of the contract.

The sources said that Severn Trent had drawn up a plan for a transition which would allow it to stay in place up to April 30, 2007 but that GWI would now have to make alternative arrangements.

The Severn Trent contract was signed in November 2002 and at the signing then Minister of Water, Shaik Baksh had pointed out that the contract contained stiff penalties for poor performance. One of the major targets had been non-revenue water. Severn Trent had been expected to reduce this figure from 75% to 25% at the end of the five-year period. Sources say this figure has not been met. Collections were to be increased from 65% to 90% and many communities which were only getting water for 6 to 10 hours per day were to get all day. Further, Severn Trent was to have provided water to 85% of the hinterland within five years. This was also a bone of contention.

In February of last year Minister Baksh had said that though key benchmarks had not been achieved by GWI there was no intention on the part of the ministry to terminate the UK-funded contract of Severn Trent.

Earlier last year, government moved to undertake a “bail out” of GWI with a payment of more than $700M to the Guyana Power and Light Company (GPL) in partial settlement of the water company’s huge and continually mounting electricity generation debts.

At that time, Stabroek Business was told that the collection rate continues to be below the company’s expectations. A GWI source had said that the existing billing system was “grossly inefficient”.

GWI was also faced with the problem of water tariffs that are among the lowest in the region and well below the cost of providing the service. Stabroek Business was told that water rates proposed by the company were subject to scrutiny by government before being forwarded to the Public Utilities Commission for approval. The GWI source tol
d Stabroek Business that “the impractical official policy of low water rates means that GWI is condemned to operating at a loss. Additionally, the source said that in the absence of proper management systems it was doubtful whether GWI could say “with any precision” what it costs to provide water to a consumer. “If you do not have that kind of insight into the cost of operations you cannot propose realistic rates,” the source said.

Other GWI sources had told Stabroek Business that the day-to-day administration of the company continued to be hobbled by board and political interventions in routine management decisions. In January last year, Cabinet approved the sum of $238.9 million for the procurement of a customer management and billing system for GWI. (Heppilena Ferguson)

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