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1. 1 ADB – Workshop on PPP in Water
2. 2 Presentation Structure Water utility operational functions
Policy issues for sustainable O&M
Management Structures for O&M
Key issues for delegation
Key principles of contracting
3. 3 Water Utility Service Regime
4. 4 Strategic Business Units
5. 5 Key Operational Functions
6. 6 Policy issues for sustainable O&M Governance
Operational autonomy
Ability to manage staff
Flexibility in decision making
Transparent subsidies
Management
Responsiveness to consumers
Efficiency
Commercial viability
Capacity to grow and transform
7. 7 Possible options for reform Integrated Municipal Management (IMM)
Dedicated Municipal Management (DMM)
Municipal Water Company (MWC)
Regional Water Corporation (RWC)
Delegated/Outsourced Management (DOM)
8. 8 A - Integrated Municipal Management
9. 9 A – Integrated Municipal Management Advantages
Simple to administer
Managerial control with Municipal Commissioner
Customers can deal with one agency for all services
Democratisation at the grass-root level
Weaknesses
Low accountability
Key staff does not belong to ULB
Difficult to link tariffs to service delivery
Less focus on water
Councilor and operator conflicts leads to controversies
10. 10 B - Dedicated Municipal Management
11. 11 B – Dedicated Municipal Management Advantages
All the strengths of Option A holds good
Ring-fencing of water account leads to improved financial control and discipline
Tariffs can be linked to service levels
Transparent subsidies to poor can be ensured
Possibility of performance incentives to staff
Weaknesses
Limited career opportunities to staff
Un-economical for small towns
Councilor and operator conflicts leads to controversies
12. 12 C - Municipal Water Board/Company
13. 13 C – Municipal Water Board/Company Advantages
Protected from daily interference from policy makers
Civil society can be included in management
Functional autonomy but ownership with ULB
Tariffs and service delivery can be linked
Better financial planning and management
Weaknesses
Require detailed initial planning and preparation
Staff who are deputed may be unwanted by the parent agency
Not economical as each ULB requires a separate agency
Require elaborate training to induce corporate culture
Councilors involvement low hence they may resist
14. 14 D - Water Corporatisation
15. 15 D – Regional Water Corporation Advantages
Facility to regulate by comparison
Payments and performance can be lined
ULBs can choose any utility
Electricity unbundling experience in the state
Weaknesses
Initial preparation and legislative support required for sound organisational structure
Regulatory regime required for ensuring competition
Low competition as there can be max 2/3 regional utilities
16. 16 E - Delegated Management (PPP)
17. 17 E - Delegated Management
18. 18 Management Options
19. 19 Level of Private Participation
20. 20 Key Contractual Issues - 1 Imperfect Baseline Data
Either a Baseline study (with consultants) or
Include as contractual obligation as a preparatory period + Contract rebasing or readjustment
Scoping of Work
Bulk supply vs Distribution services
Service improvement planning
Business Planning
Billing and Collection
Procurement
21. 21 Key Contractual Issues - 2 Contract management capability
ULB being the Obligator for service
SLA can support contract administration
Technical Auditor
Payment to Operator
Availability of funding stream
Payment security
Incentives
22. 22 Key Contractual Principles Selection methodology – Transparent bidding
Parties to Agreement
ULB as obligator
Operator as service provider
SLA as contract administrator
Contract Phasing
Preparatory Phase
Service Improvement Phase
Operating Phase
Obligations of parties
Risk Allocation
Operating, Market, Collection
23. 23 Performance Deliverables Preparatory Phase
Service improvement plan
Annual Operating Plan
Information Management System
Service Improvement Phase
Incremental increase in cash collected per unit volume of water sourced
Metering, increased coverage of HSCs
Response times
Service Interruptions
Operating Phase
Incremental performance improvements
24. 24 Operator Remuneration Preparatory Phase
One off Set up costs
Annual Operating Costs
Fixed Fee
Service Improvement Phase
Rehabilitation costs
Annual Operating Costs
Fixed Fee + Performance Fee
Share of positive cash accrual
Operating Phase
Annual Operating Costs
Fixed Fee + Performance Fee
Share of positive cash accrual
25. 25 Other Key Contract Principles Dispute Resolution
Amicable Settlement
Adjudication - local
Courts
Indemnity
Historical defects
Negligence
Termination
Continuous default by either Party
Fraud
Insolvent
26. 26 Experience in Karnataka
27. 27 Acknowledgements