BWA was at a disadvantage: Auditor General’s 2015 report

THE decision by the Barbados Water Authority (BWA) to allow construction of the new headquarters to commence before negotiations were complete, placed it at a disadvantage.

 

“An example of this was observed subsequently, when the BWA received an opinion from its legal representative on the implications of not proceeding with the completion of the building. 

 

The opinion indicated that BWA would have been liable to the contractor, the arranger of finance and all other consultants in damages in the event that it failed to complete the project,” outlined the Auditor General’s 2015 report.

 

Auditor General, Leigh Trotman, highlighted that the opinion of the legal representative illustrated the dangers of commencing a project before negotiations have concluded and pointed out that without the ability to stop the project, BWA’s negotiation strength would have been diminished.

 

The BWA signed an agreement with the contractor in March 2013 for the design, finance and construction of its headquarters complex. The agreement also included the 13-year lease of the premises to the BWA.

 

The report pointed out that generally under a public-private partnership (PPP), payments would only commence on completion of the building, but this did not occur with the construction of the new headquarters.

 

“The MOU made provision for the payment of an initial mobilisation fee (Advance Payment) of BDS$5 million, plus VAT, to the contractor. The MOU did not state how this advance was to be repaid. It should be noted that in this type of PPP, which involves the construction of a building to be leased to the government agency, the developer would be responsible for providing the financing, and lease payments would start at the completion of the facility,” he outlined.

 

Trotman explained that the contractor incurred unforeseen additional costs of $6 111 194, but noted that while a request was made to the BWA for evidence that the additional costs were reviewed and approved by the BWA’s project personnel or consultants, and while the government agency was asked to indicate if these additional costs were as a result of its requested changes to the project, the BWA did not provide any of the requested information. A 

similar result also occurred when all decisions of the Board of Directors related to this project from August 1, 2011 to April 30, 2014 were requested. (JMB)