The tender for the Gaza II water and sanitation Project was originally scheduled to be awarded in February 2001, but the ongoing intifada and Israeli occupation of much of Gaza have led to severe delays. Of the seven groups to express an interest in the project in late 2000, four were prequalified - the Ondeo Groupand Vivendi, both of France, Germany's Ruhrwasser International and Severn Trentof the UK. However, the German group is understood to have withdrawn from the bidding process due to the security situation (MEED 1:12:00).

Under the terms of the eight-year contract, the successful bidder will undertake full responsibility for the operations and maintenance of the infrastructure, in which some $11.5 million will be invested, and for the billing. It will also directly manage the municipality staff seconded to CWU, although it will have to seek approval from the PWA before exercising its power to hire and fire staff at the utility.

The overall aim of the project is to improve water and sanitation services in Gaza and develop a sustainable institutional structure in the sector through the establishment of the area's first single water utility, the CWU. At present, the water delivery networks are physically separated between the various municipalities.

Various incentives are being offered to encourage the international companies to participate in the project at a time when water is increasingly seen as a high-risk area for the private sector. The selected group will receive $1 million a year if they meet predefined targets, while the World Bank has agreed to cover the revenues collected by the operator during the first four years of the contract.

The Gaza II project follows a $28 million, four-year water and wastewater management contract awarded to France's Lyonnaise des Eaux, now part of the Ondeo Group, and Lebanon's Khatib & Alamiin July 1996. The consortium succeeded in reducing unaccounted for water in Gaza to 31 per cent from almost 50 per cent, and almost doubled revenue collection over the course of the contract (MEED 5:7:96).