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Regional News

Big Ebeye water, power revamp hits snag

MAJURO — A disagreement between the Marshall Islands Combined Utilities Board and the Asian Development Bank has put a major infrastructure project for Ebeye Island in jeopardy.

After several years of planning, a contract was awarded late last year for the first phase of a $19 million project to improve the water, sewer and power systems for the island community located next to the U.S. Army’s Kwajalein missile testing range.

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Aerial view of Ebeye Island in Kwajalein Atoll, home to about 11,000. The island’s largest infrastructure project is in jeopardy because of a contract dispute.  Photo by Anjojo KabuaAerial view of Ebeye Island in Kwajalein Atoll, home to about 11,000. The island’s largest infrastructure project is in jeopardy because of a contract dispute. Photo by Anjojo Kabua

But the dispute over the contract award and future directions of this multi-donor funded project has put it in danger of having its funding cut off. ADB is overseeing the project, with major funding from the United States and Australian governments. Ebeye has long been called the “slum of the Pacific” with failing infrastructure that is unable to support the population of 11,000 living on an 86 acre island.

Jack Chong Gum, CEO of the Marshall Islands Combined Utilities, told ADB last month that the board has decided to cancel the bid award and re-advertise and re-bid Ebeye’s largest-ever construction project. But ADB fired back that it does not agree with the plan to re-bid the contract award.

“Should the Combined Utilities Board proceed with cancellation of the bidding, ADB may not finance any works included in the scope” of the Ebeye water and sewer project, said James Lynch, deputy director general of ADB’s Pacific Department based in Manila. Other donors are expected to follow ADB’s lead since it is coordinating the project for Ebeye.

Marshall Islands Combined Utilities wants to re-bid both the water and sewer project and the electrical network upgrade and power plant monitoring system project for KAJUR, Ebeye’s power and water utility company.

“Recent infrastructure projects in the Marshall Islands have proven that the project development approach for these two projects will result in high cost, project construction delays, compromised quality and liability risk for the Marshall Islands,” said Chong Gum. “If the consultant design is complete, as is contracted and if the projects are re-bid according to Marshall Islands law and the Amended Compact Agreement, it will ensure that appropriate steps are taken to properly assigned responsibility and reduce risk.”

ADB’s Lynch said the contract was awarded last year after the Marshall Islands Combined Utilities Board endorsed the recommendations of the bid evaluation report in November and instructed KAJUR to proceed with awarding the contract to the recommended bidder. KAJUR issued a “letter of acceptance” on November 16, a “binding contract.” “If KAJUR intends to terminate the contract for convenience, KAJUR will be liable for costs for materials and equipment already procured by the contract, estimated at more than $1.3 million,” said Lynch.

He added that ADB does not agree that bid documents are incomplete and any changes needed “can adequately be accommodated through the contingency amount provided.” Lynch said $500,000 has been designated for contingencies.

Lynch said “there does not appear to be any basis for canceling the bids.”

Chong Gum said the current contract “will transfer extraordinary responsibility and risks to the owner, such as unacceptable or high cost overruns tromp potential change orders, significant time delays and negative impact on quality.”

The matter remains in limbo pending discussions between Marshall Islands Combined Utilities and ADB.