Improving Performance through Bilateral Utility Partnerships

1. Improving Performance through Bilateral Utility Partnerships Meike van Ginneken, World Bank Water Operators Partnership Workshop Johannesburg, April 24th

2. Outline • Delegated management vs professional support • How to ensure accountability for results from both partners? • Financial flows • Selecting partners • Type of fees (fixed or performance based) • Contractual arrangements • Parting thoughts

3. But reality is more complex TA arm of public utility Statutory body Govt owned company Empresa mixta Private company Department The public – private (non) divide Simple slogans…… Why does the state have to do so much? ..there is no need for the state to actually do them, when a competitive market can work so much better.Adam Smith Institute

4. …or enter in a professional support arrangement ..enter in a delegated management arrangement The real divide: Delegated management and professional support A utility that has lost its way, can…

5. Service contract management contract Lease/affermage concession Delegated management contracts Amman, Jordan Ghana Kosovo Senegal Cote d’Ivoire Mozambique Manila, Philippines Gdansk, Poland Tangiers, Morocco

6. Professional support models consultancy Riga, Estonia Mozambique Yemen twinning Formosa, Argentina Siem Reap, Cambodia Performance based P.S.

7. Areas of know-how utility management asset management billing and collection engineering (construction, O&M) human resources management procurement etc Modes of know-how transfer capacity building systems continuous specialist assistance special services The professional support package

8. Outline • Delegated management vs professional support • How to ensure accountability for results from both partners? • Financial flows • Selecting partners • Type of fees (fixed or performance based) • Contractual arrangements • Parting thoughts

9. Tied donor partnership Fee for service contracts Supportor utility fee $$ donor utility Supportor utility support support support fee $$ support Supportee utility utility Supportee utility Typical international twinning arrangements, little say for supported utility Typical consultancy contract, not many ‘deeper’ partnerships Financial flows Two way partnerships Many are lauched, but often proof unsustainable

10. Example: NWSC (Uganda) support to several utilities in Africa • Since 2003; various past and ongoing contracts with utilities in Kenya, Tanzania, and Zambia • Executed through External Services Unit • Scope: advisory, commercial and customer care/IT, block mapping, laboratory services, performance improvement programs, institutional development • Modes: capacity building, systems, continuous specialist assistance, special services • Mostly initiated by donor/NWSC; financed by donors to NWSC • Consultancy contracts: • Short term (typically 1-3 years) • fixed fees for services Evaluation No evaluation available yet, but: • arrangement seems to be to satisfaction of both parties • some performance improvements in supportee utilities (unclear whether can be attributed to this support) • Repeat contracts

11. Selecting partners • Initiated by donor/supportor • Most international twinning arrangements • Through competitive selection • Most consultancy contracts • Through partnership building exercise • Often in preparatory phase

12. Duration: 1994-1999 (one of seven twinnings between Stockholm and Baltics in 1990s) Twinning agreement defines roles & responsibilities: Twinnee: ‘sole responsible to fulfill its obligation and to ensure the overall success of the project’ Twinnor: ‘only advisory role and responsible to make best possible use of twinning program’ Performance indicators measure performance of twinnee not of twinning arrangement Scope: Mngt and admin procedures, Institutional development. Operational enhancement Financed by Sida to twinnor; fixed fee Initiated by twinnor/donor; parallel to EBRD loan 2-3 full time in-house advisors & visiting specialists Twinning between Kaukas (Lithuania) and Stockholm (Sweden) Evaluation All parties were happy with arrangements “The overall impact of the twinning arrangement between KWC and SWC is overwhelmingly positive” But, arrangement was expensive “If the Baltic utilities have been given the choice and asked to pay the market price for twinning, very little, if any, twinning in the present form would have taken place” Sida evaluation, 98/19

13. Capacity building Systems and continuous specialist support Special services Support packages over time $$ time

14. Upfront fee Monthly fee Performance-based fee Unit fee Fees over time $$ time

15. Services delivered Fees paid Balancing services and fees $$ time

16. Formalizing the partnership legalistic partnership Contracts  Agreements  MoUs Functions: • Establish the rules of the game • Define objects and obligations Develop a climate of confidence. Prompting partners to focus on results • Strengthen relationships by giving them periodic opportunities to discuss progress and problems the process of introducing, updating and monitoring an agreement is at least as important as formal enforcement

17. Siem Reap and Phnom Phen (Cambodia) Five year contract (from 2006) Performance based fee paid by supportee Scope: utility management, asset management, other areas Modes: capacity building, systems, continuous specialist assistance Taiz (Yemen) and Vitens (The Netherlands) 3 years twinning contract (from 2006) Performance based fee paid by donor Scope: utility management, asset management, other areas Modes: continuous specialist assistance Some recent (and exciting) examples

18. Summary of various options

19. Outline • Delegated management vs professional support • How to ensure accountability for results from both partners? • Financial flows • Selecting partners • Type of fees (fixed or performance based) • Contractual arrangements • Parting thoughts

20. Opportunity but mixed track record Performance data are scarce, but: • Some partnerships are perceived by both partners as success • Not all partnerships have performed well • There are many aborted attempts Lessons learned from success stories • Good design is necessary but insufficient ingredient for success • Success depends on commitment of partners and trust • Accountability is key, including • Transparency: give each other an account of activities and progress • Responsiveness: take account of each others’ needs or concerns • Compliance: hold each other to account • A balance needs to be struck between legalistic and partnership approach • Supportors often do not use own staff but hire external experts  this diminishes the value of having a utility partner

21. TA arms of public utilities Consortia between actors Mixed companies Foreign public utilities Local public utilities Small scale providers scaling up Local private operators International private operators The P in PPP: is it public, is it private or is it… Professional utilities

22. Accountability, but also trust…. No way: I am going straight I advise you to turn right

23. Help mobilize resources Match demand and supply Monitor & benchmark performance Disseminate lessons learned The role of WOP in bilateral utility partnerships Starting with identifying and supporting existing partnerships

24. Thank you! Meike van Ginneken mvanginneken@worldbank.org www.worldbank.org/watsan