Contract Management, Supervision and Payment

Sub-principles

• Normally, contract management should be based on Government systems. These should follow international best practice and use standard contract forms.

• Contract documents need to be straightforward and readily understandable by the drilling contractors.

• Supervision should be undertaken by Government personnel or by the private sector. Additional expertise can be brought in to cover capacity gaps with a view to building expertise over the long term.
• Payment for construction works should be timely.
• A defects liability period should be considered whereby a financial retention (of about 10%) is held in an insurance bond, bank guarantee or cash.
• Ideally a robust legal framework that supports compensation, financial retention mechanisms, and audit and compliance procedures is required.

Discussion

Expertise and experienced personnel for the design, management, supervision and scheduling of drilling programmes is essential to ensure that the wells drilled are of high quality and that drilling costs are reasonable. For example, downtime at the drill site while waiting for decisions to be made can raise the overall drilling costs considerably. Likewise planning drilling during the rainy season may lead to other costly delays.

Contracts for borehole drilling can be paid according to a Bill of Quantities (BoQ – see Annex A of code of practice document (pdf)) or as a lump sum. Although lump sum contracts are simpler to manage, it is still essential that supervision is competent. In general, the contract must ensure that it is in the driller’s interest to construct a high-quality borehole. Lump sum contracts are more appropriate under conditions where there is no payment for dry wells, although this can also be written into a contract which is paid according to a BoQ. However this requires a categorisation of the risks of drilling a dry borehole and appropriate payment mechanisms, such as set out in Annex C. Contracts may either bundle the pump installation with the borehole construction or handle this separately, for procurement and installation by local mechanics.

In cases where performance bonds from a bank can only be secured through cash payments, it is preferable that Contracts insist on insurance bonds from a reputable company.

Proper supervision is a good investment that ensures high quality construction and that wells are not drilled deeper than necessary and prevents boreholes from being abandoned prematurely. However, there is a need for regulation of drilling supervision. Borehole drilling works should preferably be supervised full-time by skilled and qualified personnel in order to ensure high quality construction. Part time supervision should only be undertaken when there are significant resource constraints. In such cases it is still essential that there is supervision of the pumping test and that the borehole depth is measured.

Staff of the client organisation or private sector consultants should undertake drilling supervision. In both cases they need to have adequate skills and financial resources as well as sufficient time. Supervisors need to be well-trained and operate independently from the driller in terms of finance and logistics. A remote location should not be an excuse for not undertaking supervision. Typical outcomes of poor drilling supervision are:

• Drilling contractor claims borehole is deeper than in reality;
• borehole of smaller diameter than specified is drilled;
• borehole drilled deeper than necessary (e.g. if drilling contractor is paid against a bill of quantities and tries to maximise revenue);
• incorrect screen placement or use of non-specification screen materials;
• insufficient or use of non specification gravel;
• lack of grout;
• insufficient borehole development;
• drilling contractor claims well success, but in reality it is dry. This is often the case when drilling is undertaken soon after a rainy season. The well may go dry during the dry season as water levels fall;
• installation of non-specification pumps (either oversized or undersized).

Community monitoring of the construction and supervision should also be considered. If properly trained, communities can, for example monitor the number of casing pipes installed, number of bags of cement used by the contractor and presence of the supervisor.

Third party monitoring, paid for by the client but undertaken by an independent trained professional following construction can also be undertaken as a control mechanism. This requires a well-defined and consistent checklist for every water-well drilled, with the results published.

In cases where the required legal framework and public institutions to underpin contract management procedures are weak, there is need for considerable emphasis on building the required systems through legislation and improving capacity.

What do we know?

Doyen (2003) states: “over-drilling is roughly inversely proportional to the degree of supervision of drilling operations”.  The quality of drilling supervision, as well as authority is important.  Some drillers complain about being supervised by inexperienced hydrogeologists who are just out of university.  Others use their monopoly on knowledge to their advantage and exploit the situation.  Unfortunately, degree courses in geology and hydrogeology do not provide their graduates with a solid foundation in drilling supervision.  Kaduna State Ministry of Water Resources in Nigeria realised that they did not have sufficient competence to supervise their drilling programmes and invested in training (Adekile, 2007).

References

• Adekile, D.  2007. The Drilling Environement and Establishing a Drillers Association in Nigeria. Consultancy report RWSN/WSP
• Doyen, J.  2003.  A comparative Study on Water Well Drilling Costs in Kenya.  Unpublished Report.  Research commissioned by UNDP- Water and Sanitation Programme of the World Bank