Purpose:
To enable water utilities to learn from each other the extent to which they are contracting-out what services with what benefits by which contract approach in order to encourage further use of contracting-out.

Outputs:
1. Database of contacts
2. Database of variety of services being contracted out, the utilities using contracting-out and samples of contract forms
3. Report detailing varieties of services being contracted out and representative contract forms circulated to all respondents and interested bodies
4. A conceptual review of contracting out of services
5. Guidelines for project design

The research utilises a qualitative approach complemented by quantitative data collection. The latter is based mainly on literature reviews and surveys. The former comprises fieldwork with data collection, interviews and workshops, with an emphasis on the case study method.

The first stage

In the first stage of the research, previous literature work was continued, extended and updated, whilst the initial survey questionnaire was prepared, piloted and sent out. This was done on a world-wide basis, targeting WATSAN organizations in L&MIC with direct responsibility for the provision of the service. The initial Postal Survey was undertaken to determine which institutions are currently contracting-out what services, and to stimulate interest in the research area. At the same time, fieldwork was undertaken by the researchers, including interviews, workshops, observation and hard-data collection. A stage I research report presents the analysis of this first stage, its results and databases.

The second stage

In the second stage of the research, a second questionnaire has been developed and sent out, to follow up in detail the benefits obtained from contracting-out, and the strengths and weaknesses of different contract approaches. The basic target institutions are the respondents of the first Survey who declared that they were currently involved in contracting-out operations, over and above the traditional tasks of design and construction. Additionally, it will be send to organizations contacted in the parallel bibliographic and field study research, especially those currently developing New PPP contracts.

In conjunction with the analysis of the results of the second survey and final fieldwork, the research is focusing on a small number of institutions. These cases will be analysed in depth with regard to contract structures and their application, based on a Case Study methodology.

Special attention will be given to dissemination of results and setting up of the institutions' network during the final period of the research.

The initial stage I questionnaire was sent to 672 organizations in 103 countries spread over four continents: Asia (including Middle East), Africa, Latin America and the Caribbean (LAC), and Eastern Europe. There was a good 17% response rate from 43 countries, particularly bearing in mind the sensitive nature with almost the same proportion for Africa, Asia and Latin America but only a single response from Eastern Europe.

It is interesting to note that, from the total sample, the service-management PPP account for twice the number of Complex PPP (Leasing, BOTs and Concessions) excluding construction and consultancy for both cases.

The research shows that of the 111 water supply and sanitation organisations responding 53% are using PPP and of those 69% are using service-management PPP, the focus of this research; the remainder being involved in more sophisticated forms of partnership which we describe as complex PPPs.

Field research on smaller PPP contracts has revealed that problems have been experienced in the use of some small "Service" contracts, where the precise number of staff are specified by the Employer/Client. This tends to lead to there only being competition on labour rates, which drives wages down and calls into question the capability of such low paid staff. These are in effect labour only contracts. Further guidance is needed on developing service and management contracts and this will be an output of the last phase of the research.

The most popular tasks to out-contract are meter reading, billing and collection, operation and maintenance of pumping stations and operation and maintenance of waste water treatment plants.

For the future, 67% of those not using PPP at present are actively considering developing public private partnerships. Of those using complex PPP 41% are considering extending their partnership activities - an intriguingly low figure with 59% declaring that after their initial experience of PPP they do not want to undertake further contracts of this nature. There appears to be a greater willingness to continue with the PPP with those using service-management PPP as opposed to those using complex PPP.

The literature review provides a considerable body of literature on the complex PPP such as BOOT, Lease and Concession contracts. However, there is only limited information and guidelines on the simpler forms of contracts, such as Service and Management Contracts and all its variations, despite their increasing popularity. Hence the focus for this research project and the need for the proposed outputs which include: a Review of Contracting Out of Services, Database of PPP contracts and Guidelines for Service/Management contracts.

There appears to be considerable scope for lessons learnt in one part of the world being transferred to other countries, provided that the local socio-economic and institutional environment is adequately taken into account.

a) Franceys RWA, Private Sector Participation in the Water and Sanitation Sector, DFID Occasional Paper no. 3, 1997

b) Sansom KR, Improving Services through Private Sector Participation, published in the journal of the Indian Water Works Association, July 1997, copies also sent to 630 water utilities around the world as part of the postal survey.

c) Sansom KR & Franceys RWA, Private Sector Participation in WATSAN Services, presented at the 1997 WEDC Conference and published in the conference proceedings, 1997

d) Morales-Reyes JI, Contract Key Issues and Financial Formulae for Public-Private Contracts, presented at the WEFTEC conference, Chicago 1997

e) Franceys RWA, Private Sector Participation in India, presented at a PPP conference in Costa Rica, Feb 1998.

f) Morales-Reyes JI, Franceys RWA and Sansom KR, Contracting Out of Water & Sanitation Services: Report of First Phase Survey, WEDC, Oct. 1998

g) Webster M., Sansom K., Public - Private Partnerships and the Poor - An Initial Review, DFID WELL Draft Paper, March 1999.

The draft completed outputs, including the Guidelines document, will be circulated for comment and finalised. The dissemination strategy will then be agreed, including the final workshop plan and the list of recipients of the documents.

Tel: +44 1509 222617 or 222885
Fax: +44 1509 211079
Email: K.R.Sansom@lboro.ac.uk

Tel: +31 15 215 17 83
Fax: +31 15 212 29 21
Email: rwf@ihe.nl