Water Privatization - Selecting Private Operators

Selecting Private Operators

Private companies are typically selected through international competitive bidding and need to have demonstrated previous experience. Selection is either done through a combination of price and quality, or solely based on price. In the case of a management contract, the price is the management fee (fixed fee plus performance-based fee); in the case of a lease it is the lease fee per unit of water sold; in a concession it is the water tariff; and in an asset sale it is the price paid for the company. In some cases – such as in Casablanca in 1997 and in Jakarta in 1998 – private companies have been selected through direct negotiations without competitive bidding. In other cases – such as in Cartagena (Colombia) in 1995, Cochabamba (Bolivia) in 1999 and Guayaquil (Ecuador) in 2000 – only a single bid was submitted. If development aid agencies are involved in directly financing private sector participation, they systematically require competitive bidding. However, in some cases – such as in Timisoara, Romania – the European Bank for Reconstruction and Development has financed parallel investments, while a concession was awarded by the government after direct negotiations.