Five-year management contract signed for water sector
-includes stiff penalties for poor performance
November 30, 2002
The five-year contract between the government of Guyana and UK-based Severn Trent Water Inter-national for the management of Guyana Water Incorporated (GWI) was signed yesterday.
And according to Minister of Housing and Water, Shaik Baksh the five-year contract with the British company is performance-based and contains stiff penalties for poor performance. Speaking at a press conference yesterday Baksh said the contractors will collect a total of $3.2M Pounds Sterling for the five-year period and an incentive fee of $284,992 Pounds Sterling. The contract will be funded by the British Government through the Department for International Development (DFID). Baksh said, “it must be made clear that this is being funded through a grant by the British Government and will not call on taxpayers of this country.”
In September, Severn Trent Water International was selected from a number of other international bidders after Cabinet gave the Water Ministry the green light to enter into negotiations. Baksh told reporters that the decision to bring in a management operation was because the government recognised there was a need for both technical and managerial expertise. He said Severn Trent is a well-qualified firm with international standing. He said the firm would be bringing in a total of five persons to occupy the five most senior positions: the Managing Director, Operations Director, Customer Services Director, Hinterland Manager and the Corporate Planning Director. There will also be eight support staffers who will come in to work for short stints.
Baksh contended that “this is a performance-based management contract and we need different types of specialists like leakage specialists, network modellers, investment specialists, and water quality specialists...”
In addition, Baksh said while the contract would be funded by DFID the government has set benchmarks which provide for the contractors to meet certain important targets which would be set and must be achieved. He warned that if the targets were not reached then there would be penalties.
He disclosed that the management contract has a fixed fee and an incentive fee.
One of the targets is non-revenue water (or the reduction of unaccounted water).
The contractors are expected during the five years to reduce this to 25% from its present level of 75%.
Baksh added that these losses were having a significant impact on the cost for the utility. Moreover, the contract stipulates that there must be continuity of service. Baksh said many communities were now having 6-10 hours of water service, but the contractors are expected to change that to 24 hours. The contractors are expected to maximise collection which is now at 65% and should be 90% in five years. He said the metering service would also continue. “We see metering as an important aspect of the modernisation programme and the effort to ensure that the water utility is sustainable.” The metering coverage was set at 85% for the five years. Baksh observed that through metering, citizens have been conserving.
The minister noted that the energy cost for the water utility at the beginning of this year was $67M per month, but in the past two months this has moved up to $96M. He said disposal efficiency and response time to consumer complaints are also important clauses in the contract. He added that currently GWI takes almost two weeks to rectify a major leak but the new contractors would have to correct that in five days and a minor leak in one day.
Further, Severn Trent is expected to provide water to 85% of the hinterland within the next five years.
In terms of training, Baksh said “we have retained most of our managerial and other staff of GWI, but the management operators would have to have counterparts to work with and it is clear from the terms of reference that they will have to train people.”
Baksh noted that one of the functions of the contractors is to develop and implement a management training programme. (Nigel Williams)