Environment in emerging and transition economies
Promoting the Use of Performance-Based Contracts between Water Utilities and Municipalities in EECCA
The project on promoting the use of performance-based contracts in the water sector, initiated by the OECD EAP Task Force and financially supported by the TACIS Regional Co-Operation Programme for the NIS Region, seeks to support selected EECCA municipalities in their efforts to contractualise or to improve the contractual relationship with their water utility.
The specific objectives of this project are:
To provide support to 4-5 EECCA municipalities in improving the performance-based contracts with their (public or private) water utilities. This implies analysing and evaluating existing contracts or contracts under preparation against the criteria and benchmarks identified in the Guidelines and providing practical recommendations for the improvement of these contracts in line with international good practices. It should be noted that this project does not aim at substituting legal advice on regular contracting but it rather seeks to provide additional expertise based on international experience with performance contracts in the water sector.
To deepen the analysis that is contained in the Guidelines in order to further improve their relevance to EECCA municipalities and water utilities so as to ensure a wider dissemination of best practices in this area. This will be achieved by drawing lessons from the case studies as well as analysing the experience with relevant contracts in other EECCA and/or other regions in the world, as appropriate, summarised in a separate synthesis report.
To help increase the understanding of potential benefits from using performance-based contracts and the respective demand for such contracts in EECCA. This will require extensive communication and dissemination to specific audiences.
Three performance-based contracts have been reviewed so far: two in Armenia and one in Kazakhstan. There are two private international operators in Armenia: the French company SAUR has a management contract for the Armenia Water and Wastewater Company and another French company, Veolia Water, operates the Yerevan Water Utility through a ten-year lease contract. The reports from the reviews of these two contracts are attached below.
Kazakhstan has opted for a different path: a large number of water utilities have been fully or partially privatized and bought by domestic private companies. The water utility in the city of Shymkent, in South Kazakhstan oblast, has been selected as a case-study for the project. The report from the review is expected to be ready in July 2008.