Sector:

Water and sanitation

Name of Agreement:

Contract for performance based leakage reduction and management services

Type of Agreement:

Output-based Service Contract

Region (if known):

East Asia

Year of Agreement/ Draft:

2007

Annotated by:

Contact:

Victoria Delmon, LEGPS, World Bank

William Kingdom, SASDU, World Bank

Purpose and Context:

This is a services contract focused on reducing leakage in networks and maintaining those reductions over time.  The main incentive for the contractor is a performance-based fee linked to volume of water saved and the fixed fee paid to the contractor for its services is relatively small.

Circumstances where this contract may be                     appropriate:

Town or city in a developing country where leakage is a problem and employed wishes to reduce leakage and maintain such reductions.

Main Features:

Documents are based on the World Bank’s Standard Bidding Document for Works (March 2003) and the Performance-Based Contract for the Management and Maintenance of Roads (Feb 2002), subject to significant modification and also input from the World Bank’s Standard Bidding Documents for Supply and Installation for roads (March 2003).

This is an output rather than input focused contract.

Term of contract – intended to be 5-7 years

Scope of work – establishment of district meter areas (“DMA”s), reduction of leakage in the various DMAs, installation of new connections for new customers within the contract area.  Contractor responsible for design of the works

Contractor to follow the detailed specifications regarding pipe width, ISO compliance etc set out in the Technical Specification and application Laws, Codes and Standards.

Contractor submits plans and drawings to the Project Manager (Employer’s representative responsible for overall administration of the contract)

Copyright remains with the Contractor

Fee – small fee is a fixed fee to pay Contractor for works and cover some of costs and materials – larger fee is a periodic incentive based fee for leakage reduction and maintenance of the reduced levels of leakage

Dispute – through Dispute Review Board and then arbitration (ICC appointment, UNCITRAL rules)

Possible additional provisions that it might be appropriate to include:

Interface between the Contractor and the Employer needs to be made clearer – in particular what is to happen in the event that the Employer’s actions have a negative impact on the activities of the Contractor or his work, what happens if there is a problem arising from the operation of the system (that is outside the control of the contractor) that increases leakage levels (such as a burst water main) or due to lack of maintenance by the Employer.

Process by which Contractors is to establish new connections to new customers needs to be set out more clearly.

Provisions that may not be advisable to replicate/ may need further thought:

Provisions of wider general use:

Generally a well-drafted contract – and the bidding documents are also clear and simple to follow

Experience Since Coming Into Force (including any amendments)/ if draft form, whether it has been applied:

Successful bidding process and project where used is working well with leakage being reduced significantly.

Tracking Number:

Waterperformancebasedleakagereductionservicecontract.docx

water - performance based leakage reduction and management services Bid doc sanitized.pdf

PQD performance based leakage reduction and management services contract.pdf