Malawi Peri-Urban Sanitation Project – Experience with a PSP Approach June 2011

Objective of the project Safe drinking water to 723,000 additional people and basic sanitation to 468,000 people in low income areas of the cities of Blantyre and Lilongwe in a sustainable form by It will further result in a 24-hour water supply for 408,000 people in Blantyre. Safe drinking water to 723,000 additional people and basic sanitation to 468,000 people in low income areas of the cities of Blantyre and Lilongwe in a sustainable form by It will further result in a 24-hour water supply for 408,000 people in Blantyre. Building competent and sustainable Water Utilities Building competent and sustainable Water Utilities

Two major problems Extending services to Low income areas Extending services to Low income areas Weak, non-performing Utilities (Water Boards) Weak, non-performing Utilities (Water Boards) Who is able to do what best? –NGOs with experience for LIAs –Capacity Building, Financial sustainability through PSSC

Contractual Relations - Implementation LWB EIB Ministry of Finance BWB EU ACP WF Contribution agreement WaterAid Loan/ grant agreement On-lending agreements Partnership agreement Water For People Private Service Contractor Performance Contracts Implementation agreement

Procurement of Service Contractor Building Ownership with stakeholders Building Ownership with stakeholders Stakeholder workshop facilitated by BPD (EUR 30k) Stakeholder workshop facilitated by BPD (EUR 30k) EIB financed Transaction Advisory Services (Fichtner Consulting, EUR 400k) EIB financed Transaction Advisory Services (Fichtner Consulting, EUR 400k) Alliance Approach for Procurement Alliance Approach for Procurement Open tender for Expression of Interest (EOI) Open tender for Expression of Interest (EOI) Bidders Conference in Malawi with broad international attendance Bidders Conference in Malawi with broad international attendance 8 bids received, 2 companies shortlisted 8 bids received, 2 companies shortlisted Signature of Project Development Contract prior to bid preparation Signature of Project Development Contract prior to bid preparation Both bidders spent close to 15 man-month on bid proposal Both bidders spent close to 15 man-month on bid proposal Loosing bidder was compensated (EUR 50k) Loosing bidder was compensated (EUR 50k) Signature in August 2009 Signature in August 2009

Extending Services in Low Income Areas (LIAs) - some facts LIA = Informal/unplanned settlement areas LIA = Informal/unplanned settlement areas –Limited land tenure –Affordability Water supply via: kiosks Water supply via: kiosks –Poor payment record –vandalism Sanitation: pit latrines Sanitation: pit latrines

Replicating successful models: WaterAid WaterAid (in partnership with LWB) demonstrated a succesful local kiosk management model: WaterAid (in partnership with LWB) demonstrated a succesful local kiosk management model: –The Water User Association built on a strong social/community fabric WUAs: WUAs: –manage up to 100 kiosks –Single customer interface for Water Board –WUAs: charge slightly increased fees to: Pay kiosk operators & WUA administrators Pay kiosk operators & WUA administrators Recover prior debts Recover prior debts Kiosk design with superstructure against vandals/theft Kiosk design with superstructure against vandals/theft Success has sensitised WaterBoards who now have special LIA unit to deal with WUAs. Success has sensitised WaterBoards who now have special LIA unit to deal with WUAs. Sanitation marketing Sanitation marketing

Procuring an NGO for Blantyre ? Only identified 3 potential NGOs; Only identified 3 potential NGOs; NGOs need local grass-root presence; NGOs need local grass-root presence; Do they bid competitively (WaterAid not); Do they bid competitively (WaterAid not); Open to consultants? Open to consultants? Level playing field ? Level playing field ?

Open tender carried out 9 expressions of interest from intl & local: 9 expressions of interest from intl & local: –NGOs –Consultants –JVs 4 pre-qualified bidders 4 pre-qualified bidders 4 bids 4 bids W4P won, on price. W4P won, on price.

Key Lessons PSSC It takes time, experience and perseverance It takes time, experience and perseverance Dont come with pre-conceived solutions, manuals or toolkits Dont come with pre-conceived solutions, manuals or toolkits Buy-in by Water Boards not guaranteed Buy-in by Water Boards not guaranteed PSSC perceived as service provider (consultant) not as partner of the WBs that shares the same goal (service/ performance improvement PSSC perceived as service provider (consultant) not as partner of the WBs that shares the same goal (service/ performance improvement Tax issues, the « human factor » Tax issues, the « human factor » Erratic (political) environment Erratic (political) environment Moving targets (KPIs) compared to a static contract Moving targets (KPIs) compared to a static contract Incentives such as performance bonus may not work as intended Incentives such as performance bonus may not work as intended

Key Lessons Water For People NGOs can be integrated in various ways to work with the Bank NGOs can be integrated in various ways to work with the Bank NGOs can play an important role in reaching the MDGs; NGOs can play an important role in reaching the MDGs; We walked a thin line to procure competitively and proved it can be done, but market is thin; We walked a thin line to procure competitively and proved it can be done, but market is thin; No complaints received from bidders other than tight timing No complaints received from bidders other than tight timing

Thanks

Stakeholders, Budget Lilongwe Water Board Lilongwe Water Board Blantyre Water Board Blantyre Water Board WaterAid WaterAid Privatisation Commission Privatisation Commission NWDP II NWDP II Joint PIU Joint PIU European Union European Union EIB EIB World Bank World Bank NGOs, CBAs NGOs, CBAs Water Users Water Users Low Income Area Users Low Income Area Users Ministry of Finance Ministry of Finance Applied: 15.4 mill EUR = 48.4% EU grant15.4 mill EUR = 48.4% EU grant 15.9 mill EUR = 50.0% EIB loan15.9 mill EUR = 50.0% EIB loan 0.5 mill EUR = 1.6% Water Boards 0.5 mill EUR = 1.6% Water Boards 31.8 mill EUR 42 mill $ total 31.8 mill EUR 42 mill $ totalApproved: 30.8 mill EUR eligible cost30.8 mill EUR eligible cost 14.9 mill EUR EU contribution14.9 mill EUR EU contribution