Monagas Water and Sanitation Services

concluded

In April 1997 the government of Venezuela, through state utility Aguas de Monagas (AdM), awarded a four year management contract for the water and sewage systems in the Monagas province to Spanish private operator FDS. The program was part of a $39 million World Bank loan to finance the medium-term rehabilitation needs of the water sector in Venezuela. In 1997 water coverage in the state of Monagas was high: 93 percent for urban areas and 80 percent for rural communities. However, service was intermitent, water quality low, and tariff collection poor. Only about 30 percent of the water produced was billed for and only 15 percent of the amount billed was actually collected. FDS was awarded the contract through a competitive tender. Eleven consortia submitted expressions of interest and three submitted final bids. FDS scored the highest score on the technical offer. According to the management contract FDS had full control over commercial policies and practices, human resources, services contracting and small capital works, such as repairs, metering, and improvement of the distribution network (pumps and valves). FDS was to be paid a management fee composed of two parts: a fixed compensation paid from a World Bank loan, and a performance based part, financed by AdM’s cash flow and contingent on the operator’s surpassing the annual targets for unaccounted-for water and collection efficiency. The contract also includes penalties for failing to meet pre-set targets. The fixed fee paid to FDS was $4 million. None None