PROBLEMS and controversies currently hounding the beleaguered Cagayan de Oro Water District (Cowd) can be traced to the awarding of its Bulk Water Supply Project (BWSP) to a company that had already been disqualified from the bidding.

Cowd management over the weekend made this and other disclosures, as its officials reiterated their opposition to a newly proposed water supply agreement with the same company, chiefly on the grounds that the financially-troubled water district can't afford it and the standing water supply contract is still besieged with legal questions.

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Engineer Bienvenido Batar, acting Cowd general manager, found the reservoir project in Barangay Indahag "laudable" but said this must be pursued only after addressing its legal and financial implications.

First, Batar said the cost of the project would bleed the water utility dry.

Not only does the contract require the Cowd to cough up P6 million a month for the additional water supply from Rio Verde Water Consortium Inc. (RVWCI), it would also entail the construction of a multi-million piping system, said the COWD official.

Under the proposed tripartite contract among City Hall, RVWCI and Cowd, the local government will undertake the construction of the reservoir; RVWCI will supply water equivalent to 10,000 cu.m. daily.

For Cowd, however, Batar said this would mean footing the bill not only of the additional water supply, but also of another 10,000 cu.m. supply "allowance", as stipulated in the proposed agreement.

Cowd is also expected to pay for the amortization cost of the pipelines and the reservoir.

The proposed agreement says City Hall will construct the reservoir using Cowd's annual financial aid to the local government amounting to P6 million, and the additional cost will be liquidated against the letter's water bill.

But the biggest stumbling block to the reservoir project is the questioned status of RVWCI in the bulk water project, whose contract was signed in 2004 and implemented in 2007.

The contract was awarded by Cowd's board of directors despite the fact that RVWCI failed to meet certain requirements in the Procurement Act.

This was discovered by the Commission on Audit, which last year declared the contract as having been awarded without basis.

Consequently, state auditors disallowed the water utility's payment of P144 million to Rio Verde in 2007.

The disallowance is under appeal, Batar said.

Meanwhile, the Ombudsman because of serious discrepancies in the original draft is investigating the 2004 signed contract.

Among the major discrepancies:

-- The insertion of a provision in the signed contract prohibiting the COWD to procure bulk water from suppliers other than Rio Verde

-- Diametrically opposed to the model contract, a provision in the signed contract allows RVWCI to sell its water to a third party

-- The signed contract allows rate hike retroactive to the date the request was first made

"Let's address thee discrepancies in the bulk water supply contract first before going into another agreement. This I think is the most prudent thing to do now," said Batar in a press conference Saturday with the division chiefs of the water utility.

City Hall cites the unavailability of water supply in Barangay Indahag in pursuing the project.

Batar said Cowd is expected to implement its expansion program in the next two years, which means upland villages like Barangay Indahag will finally have water connections by 2011.

Cowd pays around P12 million to P13 million every month to RVWCI for the bulk water supply alone; P5 million is set aside monthly for its loans with the Local Water Utilities Administration. (DVAIII)