Five years ago I participated in the formulation of the international call for offers for Israel's first seawater desalinization plant. The lowest price in those times was in Florida - about 1 dollar per cubic meter of desalted water. So we were all happy when we got offers of 50 cents. Our experts, Adam Consulting, had predicted offers above the Florida price. I worried about the offer that seemed to good to be real, but my sage bosses said "J, dont worry for those businessmen, they can take care of themselves". But how could it be that they were signing a 25 years contracts to supply water to the State of Israel at a losing price?
The mystery is now solved. In fact, the 50 cent price did not last a month. Soon it was discovered that crude desalinated water was highly corrosive and could not be conveyed through existing pipes, it had to be hardened first. The hardening and the additional price was soon agreed. As the production continued, new refinements were added and the price soon grew to the average 1 dollar of today.
Israel's rainfall has been decreasing since and manufactured drinking water is becoming critical. Today, the State of Israel is begging the three large water consortia to increase production. They are saying "No". What is happening in fact is that the original 25 years contract, written by a large (and arrogant) team of very expensive lawyers hired by the Government, is being re-negotiated. The Government bureaucrats are in a weak negotiating position as the drought appears to be permanent. No one remembers the original 50 cents per cubic meter price, which is not even history as nobody has time to search for the original documents (six years is a long time, the Netzivut HaMaim organization has been re-organized three times since, it has a different name, and the people retired, promoted, transferred, sacked, or just lost interest in their jobs and turned vegetables).
What about that Vision Thing? Six years ago, I suspected that the consortia people were building on the possibility that the 50 cent price would not last. I could not see anything on what to base that calculation. But they were courageous and had that Vision Thing. Today, producing desalinated water for the Government is one of the most profitable oligopolies in Israel. And getting better every year.
2 comments:
J, prices are more between 2.6 to 3.2 NIS per one cubic meter product. Soreq will be only 2.01 NIS
Love your blog
Governments have no "institutional memory" for the reasons that you give. This puts private industry at an advantage. If it is to the advantage of the private party to point out some provision of a contract or letter in the file they will do so, and if it is not, they won't and the lack of institutional memory means that the government won't know where to look.
But in general doing business with a schizophrenic amnesiac (and this is how government behaves) is not an easy process and not everyone has the stomach for it. Sometimes your project gets caught up in politics, sometimes you are made a scapegoat, sometime an ambitious reporter gets ahold of your story and twists the facts to make you seem evil. It can be brutal.
K
K
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