Administrative, Commercial & Technical

The Initial Stage of the Study

The initial stage of the study into the Municipal Development Project found numerous administrative, commercial and technical problems, including:

Administration and Commercial Irregularities - The Recipe for Fraud, Corruption and Embezzlement.

1. The Municipal Development Project Management Unit (MDPMU) was Not Legally Established at the time of project implementation. A Counterfeit Stamp was used in the preparation of project documents. The World Bank requires that a Project Management Unit Must Be Established and Fully Staffed prior to release of project funds.
2. The Authorized Representative of the International Operator (ACEA – A. Utilities) was appointed General Director of the Yerevan Water & Sewerage Company shortly after the start of the project. That created a Serious Violation of the Management Contract and resulted in a Serious Conflict of Interests.
3. 'Ghost Consultants' - The International Operator falsely claimed comprehensive involvement of International Consultants in the Municipal Development Project.
4. The Yerevan Water & Sewerage Company (YWSC) assets had not been pledged as security against the World Bank loan. The Commission reported the oversight to the World Bank. Subsequently, the YWSC manipulated asset valuations, vastly Over-Valuing non-fixed assets and vastly Under-Valuing fixed assets, thereby enabling exclusion of the fixed assets from the Security Agreement when it was eventually signed - in violation with the requirements of the Credit Agreement.

Technical

There were numerous serious divergences from the original Municipal Development Project objectives, many of which were misrepresented by the World bank, in their Implementation Completion Report (ICR) of 2006 and on their web site.

Leak testing & Pipe Replacement

A priority objective under the Municipal Development Project was to test for leaks in the Main Distribution Water Pipeline and repair or replace major sections of the older and more seriously corroded pipes. But that was all but eliminated in the first year, after the technical auditor rejected the International Operator's method of testing for leaks - by looking under manhole covers!!

The International Operator reported to the Commission that new pipes bought under the Municipal Development Project had been used in a number of specific projects. When asked to provide evidence, the International Operator submitted a Ledger of Works Orders, showing that the pipes had actually been used for a variety of repair works. The National Assembly Lawyer deemed All the Works Orders to be Fallacious.

(Anecdotal evidence strongly indicated that thousands of meters of new pipes purchased for initial stage projects under the Municipal Development Project were actually used to produce Stanchions and Frameworks for the hundreds of Advertising Hoardings that sprang up in Yerevan at that time.)

Old Pipes used for New Water Reservoir

A New Water Reservoir built under the Municipal Development Project used old pipes to connect the reservoir to the drinking water system. This picture was shown to the National Assembly, after which the pipes were coated with bitumen.

Water Meters

The World Bank Implementation Completion Report (ICR) of 2006 reports that the target for the program to install or replace 20,000 subscriber meters was exceeded by a factor of 13, with 277,000 subscriber meters installed. The report is not consistent with reports by the International operator, which detail that 277,000 subscribers were registered, some having more than one meter, an average of 1.5 water meters per subscriber, which extrapolates to 415,500 water meters installed.

A Project Amendment, agreed by the World Bank April 28, 2003, states: "(d) establish and strengthen condominiums by Purchasing and Installing Retail Water Meters for Apartment Residents;” The meters were not purchased and installed by the project, but were Sold to Yerevan’s domestic water consumers, who also Paid for the Installation.

The revenue generated by the sale and installation of the water meters amounted to $12,450,000 (approx), assuming 415,500 meters. Based on the World Bank number of 277,000 water meters installed (incorrect), the potential income was $8,310,000 (approx). In either event, contrary to the requirements of the project, almost all the cost of this revised program, plus built-in profits, was born by Yerevan’s water subscribers, resulting in very healthy profits for the project managers.

Booster Pumps

The World Bank Implementation Completion Report (ICR) of 2006 reports that the number of booster pumps for high-rise buildings was reduced by about 31%, and about 44% of pumps remaining are new, more efficient units.

This picture is of a New Booster Pump, installed in 2003 in a New Pump House, with All New Pipework. The pumps are of the standard horizontal type, and the motors, contrary to claims by the International Operator that they are Italian, are cheap and unreliable motors from China.

In 2000, at the start of the Municipal Development Project, according to International Operator reports, Yerevan had 795 Booster Pumps. The elimination of 31% leaves about 550 pumps. Assuming 44% of those were replaced by new, more efficient units, then 308 old pumps remain. Why then, in January 2007, did Veolia, the present day operator of the Yerevan water company announce that 500 new, more efficient pumps are to be installed? In fact, the International Operator of the Municipal Development Project only rushed to replace 50 old booster pumps for new, more efficient units, after pressure resulting from the Parliamentary Commission study.

Garni Pumping Station

One of the major tasks under the Municipal Development Project was to convert pumped water to gravity feed. One priority project was to carry out ground excavation and re-route a section of pipework to eliminate the Garni Pumping Station, which is located at the bottom of a gorge, some 25 kilometres north of Yerevan.

According to reports from the International Operator, more than a hundred thousand dollars was expended to complete this work - on project design work, materials and construction. It was seen during a site visit in March 2004 that re-routing of the pipework had not been carried out (although the remnants of old works were apparent) and the Garni pumps continued to operate.

This picture is of the Garni Pumping Station still in operation in March 2004.

Consistency of Water Supply

The World Bank Municipal Development Project Implementation Completion Report (ICR) of 2006, states “the number of subscribers with Continuous Water Supply in Yerevan increased from about 28% to about 50%”. In contradiction to that statement, the World Bank IDA Report – “More Reliable Water for Armenia’s Capital and Municipalities”, states “In Yerevan, water supply has increased from about 7 hours to about 18.5 hours a day. More than 70 percent of Yerevan now has 24-hour service”.

It is interesting to note the distinction between “Service” , which is provided for 24-hours each day, and water supply which is about 18.5 hours a day.

Veolia, the present International Operator for Yerevan water, expresses a similar philosophy in an agreement it is signing with water subscribers, in which Clause 2.2.1. states: The water company will supply ‘Round-the-Clock’ water (on a scheduled basis) to the subscriber. In practice Veolia’s ‘Round-the-Clock’ water supply can be ‘Scheduled’ from as little as 4 or 5 hours each day to as much as the 18.5 hours the World Bank quotes.

The several hours that the Water Flow is switched off Every Night has helped the International Operator to achieve the impressive cost reductions under the Municipal Development Project. But the practice is Highly Undesirable.

Danger from Contamination

The massive amount of water lost from the system during the daytime is due to Internal Pipeline Pressure, which forces the water out through the Thousands of Faults in the Pipes. [T]he Higher the Pressure – the Higher the Loss. In the same way, when the water is evacuated from the pipes, the External Pipeline Pressure forces all manner of Contamination into the Water Delivery System.

Water Losses

The major problem, which the World Bank passes off as a simple statistic in a single phrase, is the massive and ever-increasing proportion of water that is fed into the Yerevan water system and continually lost. The Municipal Development Project was actually designed to attend to that problem, through the scheduled replacement of large diameter water pipes. But to the greater extent it was not implemented. The pipes that were bought for the Municipal Development Project went missing and instead of the International Operator making the improvements needed to Yerevan’s pipeline distribution system, he used project funds to purchase water meters, which he then sold for profit to Yerevan's domestic water consumers.

According to the World Bank Implementation Completion Report of 2006, 80% of the water fed into the Yerevan water system each day is LOST. The Yerevan Water Company pours 903,750 cubic meters in to the system every day, out of which consumers use 180,750 cubic meters and a Massive 723,000 cubic meters of water is LOST EVERY DAY

Although the Yerevan Water Company is servicing a city of about ONE Million people, it is apparently delivering enough water for FIVE Million people!!

It is no wonder that VEOLIA, the present International Operator of the Yerevan Water Company is asking Yerevan’s residents to pay more than 40 million dollars for their water each year, when Government data shows the figure should be less than 20 million dollars.