By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Water & Sewerage Corporation breached global ‘best practice’ through the former Board’s constant meddling and overturning of management decisions, a forensic audit has found.

Ernst & Young (EY), in its probe of the Corporation’s governance and management, found two occasions where contracts were awarded to vendors not selected by management despite the use of a formal tender/bid process.

Noting that both related to capital works projects financed by the Inter-American Development Bank (IDB), the report said Proline Underground Utilities was awarded a $1.389 million contract despite Water & Sewerage Corporation recommending that it go to Island Site Development (ISD) following an evaluation of all bids received.

“However, the Board’s contract committee decided to award the contract to Proline despite their bid being more than 20 per cent below the engineer’s estimate,” the EY report found.

“The Cabinet [Board] noted the concern of management that the Proline bid was too low, but the minutes contained no explanation or context to address these concerns, and no justification for reversing management’s decision.

“Furthermore, a change order was processed subsequent to the contract award which increased project spend by $400,000, justifying the concerns of management and negating the apparent rationale for reversing management’s decision (Proline’s initial bid being lower than that of ISD).”

A similar incident occurred with the $1.604 million contract award to Apex Underground Utilities, as Water & Sewerage Corporation management again recommended that it be given to ISD as the “lowest evaluated bid”.

“The Cabinet paper says the recommendation of the management was overturned by the Board’s contract committee with no justification provided, despite the bid of Apex being significantly more expensive (approximately $500,000/20 per cent more expensive),” the EY report found. The findings raise questions over whether Bahamian taxpayers, and Water & Sewerage Corporation customers, received value for money as a result of many decisions made at the Government-owned water supplier.

The report suggests that too much politically-motivated interference, and the ‘correct’ family, political and other connections, have created a culture that undermines effective corporate governance and results in the bypassing of established procedures and protocols.

EY said “frequent proactive involvement by the former Board of Directors in procurement activities” was contrary to best practice, pointing to the “rejection of management recommendations with no documented justification, particularly as it relates to vendors selected from competitive bids and the recommended termination of certain failing contractors”.

The report added that the use of fixed-rate contracts, where price was pre-determined by Water & Sewerage Corporation, meant there was no competitive bidding while “significant spend” was not reported to or authorised by the Board of Directors.

EY also pointed to “a lack of involvement by the finance and purchasing departments in procurement activities”, with the chief financial officer not involved in assessing or determining the price of major contracts. And the purchasing department was “typically bypassed” on engineering initiated projects.