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INTRODUCTION
Context in Bahrain
In the arid Gulf region of the Middle East, potable water is expensive to produce, with the vast majority coming from desalination. The Electricity and Water Authority (EWA) of the Kingdom of Bahrain report that the total production and delivery cost of water, over 90% of which is desalinated, works out at US$1.98 per m3. Until 2016, water bills in the small island nation were heavily subsidised for domestic users. Since then, subsidies have been gradually removed, such that by 1st March 2019, the full production cost of water will be charged for all commercial and expatriate domestic users, and for Bahraini domestic users with more than one home (EWA 2016). This means that water in Bahrain has as high an economic value as anywhere in the world and is a powerful driver for ensuring that water losses are minimised. This led to a decision to prepare Terms of Reference for private sector involvement in management and control of non-revenue water (NRW) in the country.
Performance-based contracts for non-revenue water
Performance-based contracts (PBCs) for NRW reduction are an innovation that has seen increasing use in recent years, a successful example being New Providence, Bahamas (Wyatt 2018a). The concept involves linking payment terms to the service provider with actual achievement of volumetric reductions of NRW (Richkus et al. 2016). This is as opposed to conventional utility projects, which would typically involve payment to a service provider based on a series of inputs such as staff resources, time and equipment. PBCs aim to incentivise the service provider by linking a proportion of the payment to quantifiable outputs or benefits.
The World Bank have instigated a programme to develop good PBC practices for managing NRW (World Bank/PPIAF 2016). This involves the creation of a series of diagnostic tools, term sheets and standard Terms of Reference for NRW PBCs that could be adapted to a specific country or utility context anywhere in the world. These would factor in issues such as the economic value of water, institutional capacity and commitment of the utility to reducing NRW, data availability, supply intermittency and interest of the private sector in providing such services.
Proposed contract models for NRW PBCs include a Design, Build, Operate, Maintain (DBOM)...