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ADB – Workshop on PPP in Water
Water Management ContractsKey Principles
Anand K Jalakam+91-99720-01819
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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
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Water Utility Service Regime PUMP
SOURCE TREATMENT STORAGE CUSTOMER
MEASUREMENT
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Strategic Business UnitsPUMP
SOURCE TREATMENT STORAGE CUSTOMER
MEASUREMENT
Bulk Retail
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Key Operational Functions
WTW OHT
WRU CORD’NPROTECTIONMANAGEMENTMONITORING
MECH & ELECCHLORINATIONQUALITY& SAFETY
PRODUCTIONVALVINGLABORATORYFACILITY MGMT
DISTRIBUTIONMAINTENANCEREPAIRS
CUSTOMER SERVICEMETER READINGBILLING & COLLECTIONDEBT MANAGEMENT
ACCOUNTS, FINANCIAL CONTROL, HUMAN RESOURCES, SAFETY, AUDIT, LEGAL
PLANNING,WATER SAFETY, ENGINEERING, ASSET MANAGEMENT, PROCUREMENT, IT
DEMAND MGMTVALVINGREPAIRS
SOURCEPUMP METER
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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
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Possible options for reform
A. Integrated Municipal Management (IMM)
B. Dedicated Municipal Management (DMM)
C. Municipal Water Company (MWC)
D. Regional Water Corporation (RWC)
E. Delegated/Outsourced Management (DOM)
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A - Integrated Municipal Management
Consumers
Shahdol Municipal Council
Urban Development Department (UDD)
Pol
icy,
Sub
sidy
, Reg
ulat
ion
Wat
er S
ervi
ces
Use
r Cha
rges
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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 levelWeaknesses 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
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B - Dedicated Municipal Management
Mumbai, PuneNagpur, Surat
Consumers
Ujjain Municipal Corporation
Urban Development Department (UDD)
Pol
icy,
Sub
sidy
, Reg
ulat
ion
Wat
er S
ervi
ces
Use
r Cha
rges
Municipal Water Department
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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 staffWeaknesses Limited career opportunities to staff Un-economical for small towns Councilor and operator conflicts leads to
controversies
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C - Municipal Water Board/Company
Bangalore, ChennaiHyderabad, Delhi
Consumers
Municipal Water CompanyULB and PHEO Staff
Urban Development Department (UDD)
Pol
icy,
Sub
sidy
, Reg
ulat
ion
Wat
er S
ervi
ces
Use
r Cha
rges
Bhopal City Corporation
Gra
nt sup
port
Ass
ets, B
ulk
supp
ly
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C – Municipal Water Board/CompanyAdvantages 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
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D - Water Corporatisation
Electricity Cos’ Orissa, AP, Karnataka
Consumers
Urban Local Bodies(ULB1, ULB2,….ULBn)
Urban Development Department Independent Regulator
Pol
icy,
Sub
sidy
, Reg
ulat
ion
Wat
er S
ervi
ces
Use
r Cha
rges
Cap
ital
, sub
sidi
es
Regional Water Corporation
Fee
Con
trac
t
Reg
ulat
ion
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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
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E - Delegated Management (PPP)
Tar
iffs
Serv
ices
Customers
Indore City Corporaiton
Urban Development Department/ Independent Regulator
Pol
icy,
Sub
sidy
, Reg
ulat
ion
Use
r Cha
rges
Gra
nt sup
port
Private Water Operator
Fee
Con
trac
t
Belgaum, Hubli, Mysore Nagpur
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E - Delegated Management
Advantages Suitable for medium to large size ULBs Performance based incentive linked contracts feasible Contractual Regulation possible ULB would gain value time for policy Contract management skills sufficient for ULBsDisadvantages Low information availability can hinder business
planning Large companies can exploit small municipal
authorities Some initial legal preparation required
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Management Options
Management ServiceProviders
Full ServiceProviders
Technical Service Providers
Bulk SupplyProviders
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Level of Private ParticipationPlanning Consultants PrivateDesign Consultants PrivateDetail Engineering Consultants PrivateFunding Multilaterals PrivateProcurement Consultants PrivateSupervision Consultants PrivateConstruction Contractors PrivatePlant Operations Contractors PrivateLeak repair Contractors PrivateConnections Lic. Plumbers PrivateValve Operations Staff PublicMeter reading Staff PublicBilling Staff PublicCash collection Banks PrivateContract Payments Staff Public
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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
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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
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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
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Performance Deliverables
Preparatory Phase– Service improvement plan– Annual Operating Plan – Information Management SystemService Improvement Phase– Incremental increase in cash collected per unit
volume of water sourced– Metering, increased coverage of HSCs– Response times– Service InterruptionsOperating Phase– Incremental performance improvements
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Operator RemunerationPreparatory 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
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Other Key Contract Principles
Dispute Resolution– Amicable Settlement– Adjudication - local– Courts
Indemnity– Historical defects– Negligence
Termination– Continuous default by either Party– Fraud– Insolvent
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Experience in Karnataka
Parameter UnitBefore After
Supply Frequency Hours 2hr in 3-10days 24 hour StandardNumber of connections Number 16,399 24,145 47%Volume of water supplied Cum/month 664,350 554,847 -16%Volume of water consumed Cum/Conn/month NA 20 Non Revenue Water % >45% 6% -39%Revenue billed in the Zone Rupees/month 1,383,243 2,880,826 108%Maintenance Cost Rupees/month NA 129,697
Total% change
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Acknowledgements
KUIDFC BWSSB KUWSDB KRWSSA USAID FIRE Project WSP-SA, World Bank
“Thank you”[email protected]
+91-99720-01819