The PWA is negotiating with the bank, which was to fund the original contract, to transform the project into a three-year emergency scheme. The proposed plan would entail the PWA joining forces with the Coastal Municipalities Water Utility (CMWU) to form an operating management unit in place of the previously-envisaged private operator. Under the original scheme, the PWA was to have acted as the executing agency while the CMWU - comprising representatives from Gaza's 16 municipalities - was to have been the client.

The aim of the original Gaza II project was to rehabilitate, upgrade and expand the existing water and sanitation facilities and services in Gaza, and to develop and strengthen a sustainable institutional structure within the water and wastewater sector.

Under the terms of the original project, the World Bank pledged $25 million to cover the costs of operating and maintaining the network. The financial model forecast that the first four years of the scheme would run at a deficit. If the revised project is approved, the PWA and CMWU will require $10 million-15 million from the bank for the initial operations and maintenance costs. At the end of the period, the local authorities expect the project will be run on an independent basis. Capital investment requirements, which total $1,000 million for the next 20 years, will be obtained from bilateral and multilateral donations.

The project follows on from a $28 million water and wastewater management contract awarded to France's Lyonnaise des Eaux, now part of the Ondeo Group, and Lebanon's Khatib & Alamiin 1996. The contract was due to expire in August 2000, but was extended until September 2003 to enable a seamless transition into Gaza II (Water, MEED Special Report, 9:2:01).