In its 2019 annual report, the Barbados Audit Office found that the Barbados Water Authority (BWA) awarded multiple untendered contracts, paid consulting fees without documenting the work performed for those fees, allowed the assignment of a direct award at inflated prices, and entered into unfunded long-term spending arrangements without obtaining government approvals. As the reported noted, an estimated “forty-nine percent (49%) of the water pumped by the Authority was unaccounted for and this was partly due to faulty meters and undetected burst mains.” The BWA initiated multiple capital works projects to address water infrastructure problems.
The Audit Office performed a review of this portfolio to determine “if the BWA was pursuing procurement practices in line with its policies, as well as the requirements of the Financial Management and Audit (Financial) Rules, 2011.” In performing that review, the Audit Office found widespread spending irregularities. For example, the audit noted that approximately 90 percent of the contracts awarded under the water system upgrade projects were awarded without an open tendering process:
Tender Process
Of the BDS $1.49 billion in goods and services which the Authority sought to acquire, it was observed that approximately ninety percent (90%) of these arrangements did not go out to public tender. This was in breach of the Barbados Water Authority (BWA) procurement rules and the Financial Management and Audit (Financial) Rules, 2011, which have been adopted by the Authority. These require a tender process for the acquisition of goods and services costing more than BDS$200,000. There was no certainty about the origins of a number of these bids as no evidence was provided to indicate that they were requested by the Authority.
Based on these findings, the Audit Office concluded that the contract awards lacked transparency:
The public tender process provides an opportunity for all qualifying firms to submit bids, which increases the chances of the Authority being able to obtain the best possible price the market has to offer, all things being equal. In the absence of a public tender process, it was not clear what basis the Authority had for accepting the submissions and how it determined that the services were reasonably priced. Without such a tender process it was not evident that BWA chose the best option available. In short, the procurement process lacked transparency.
The report also raised serious concerns regarding the payment of project-related consulting fees since BWA’s records failed to show that the services were ever actually performed:
Payment for Consultancy Services
It was observed that the equivalent of BDS$5.50 million was paid to an overseas firm in respect of an invoice for “previous expenses, fees, reimbursable expenses and commissions for the Smart Meter Project for Barbados”. The Audit sought to clarify the nature of the services outlined and to verify whether they were actually performed. However, in discussion with Management from the Authority and the previous Chairman, there was no confirmation that any service was performed. This is a very serious matter which needs to be investigated by the relevant legal authorities.
After concluding that “payment to the Firm for consultancy services has not been explained and there was no evidence of any service being provided”, the report recommended that the appropriate “legal action should be taken on those responsible for this transaction.”
Furthermore, the Audit Office found that the BWA awarded an uncompleted contract for the construction of the Grand View Reservoir in St. Michael for an initial estimated cost of $6 million, and then allowed the contractor to assign that work to another contractor at a revised cost of $23.93 million, which included interest payments of $7.7 million. The report concluded that these awards were non-transparent and that the “high financing cost was not in the best interest of the Authority.”
The Audit Office also found that the BWA failed to obtain required government funding approvals before agreeing to long-term payment commitments for its desalination plants:
Desalination Plants
The Authority, in an effort to improve the national water supply, sought to establish a number of desalination plants across the Island. The Authority entered into two (2) contracts for the provision of permanent Seawater Reverse Osmosis Desalination Plants costing $40.25 million and $40.42 million per annum respectively.
Based on its financial commitments and the need to replace aging infrastructure, the Authority will find it difficult to meet such additional expenditure annually. No evidence was presented to indicate that these contracts were discussed with the Ministry of Finance and Economic Affairs, who would be ultimately responsible for any repayment outside the capabilities of the Authority. The Authority needs to focus on business solutions that are within the realms of its resources, or which have beenprovided with guarantees by the Government before proceeding with any projects.
As the report observed, while the BWA is “operating in an environment of water scarcity and aging infrastructure that needs replacing” it is “also operating with limited financial resources and, as a result, must use its funds prudently.” In its conclusions, the Audit Office raised concerns that there “seemed to be little or no adherence to the Authority’s procurement rules and a lack of sufficient financial and technical analysis of proposals prior to the selection of suppliers of goods and services.” Furthermore, the report raised concerns that the “manner in which a number of these contracts were initiated and awarded lacked transparency.” The Audit Office also raised concerns over the weak recording-keeping for the sole-sourced contracts, stating that in the majority of instances “there was no tender process, and there was inadequate information for determining how the contracted amounts were arrived at, or how the procurement process was initiated.”
The Audit Office recommended stronger oversight to better ensure compliance with open tendering rules. The report also recommended that in the future the BWA obtain all necessary spending approvals prior to agreeing to long-term spending commitments and that it renegotiate its unfavourable current debt arrangements. Finally, the Audit Office recommended legal action against all of those involved in the payment of consulting fees to a firm for which no record of services was ever provided.
As this case study illustrates, when governments allow their infrastructure to deteriorate, they will inevitably face significant pressure to rush contract awards to repair that infrastructure. However, the failure to plan for long-term life-cycle maintenance is not an excuse for downstream sole-sourcing and financial mismanagement. Public institutions that are faced with pressing operational needs must continue to balance those pressures against the due process standards that apply to government contracting.
