Challenges in contractualization Session
Regional Workshop on PPPPs (contractualization) in WSS Service delivery
Kampala Uganda 2-4 June



Session 1 – Interactive Session: What are the Main Challenges for a successful PPPP?
Jack Moss/Meike van Ginneken

 

Objective of the session:
To get a structured overview of challenges (and opportunities!) of contractualization and their relative importance.

Background
Public utilities are often confronted with a range of objectives to consider – without clear guidance on how to weight or trade-off these objectives. A ‘contract’ can clarify the objectives for a public utility – and their relative weight - between the government and the utility, its corporate oversight board or its managing directors.

AAA“Contracts” define the left hand arrow called “compact” in the WDR 2004 diagram at the left. “Contracts” come in many guises - including performance agreements/contract plans, business plans, regulations, or – in the case of private operators – leases /affermages/concessions.

The draft hierarchy of challenges (and exploratory questions) is designed to be used in a group discussion focusing on the experience of participants on their own experiences with contractualization.

The facilitors believe that ‘contracts’ can make it easier to hold managers and boards accountable for performance. Performance agreements cannot turnaround failing utilities. However, agreements can establish the rules of the game, define objects and obligations, and develop a climate of confidence. They prompt parties to focus on results and strengthen the relationship between parties by giving them periodic opportunities to discuss progress and problems. Often the process of introducing, updating and monitoring an agreement (also referred to as ‘contractualization’) is at least as important as the longer term accountability through formal enforcement.

But we are happy to be convinced otherwise…

The hierarchy of challenges/exploratory questions

The hierarchy of challenges focuses on three areas:

  • Challenges in setting targets/contract design
  • Challenges in implementing contracts: enforcement and dialogue
  • Challenges in the enabling environment

Area 1: Challenges in setting targets/contract design

Challenge

Questions for discussion?

Most agreements are dictated by the one party (the principal) without giving the other party (the agent) a realistic choice to opt out.

  • Who sets targets? 
  • Is this done unilaterally or through negotiations?
  • What document are targets in (contract plan, business plan, etc) – duration?

All agreements or contracts (whether public or private) in the WSS sector face an information imbalance between contracting agents. Utilities have a great deal of information that the government contracting body lacks. Those with an information advantage– understandably – use it to negotiate attractive conditions.

  • Are targets too stringent, too low or realistic?

 

Many agreements had too many performance indicators that were hard to measure, were not independently verified and there was no baseline values
  • How many targets? Complete? Manageable?

Failure of agreements is frequently due to bad design.

Is agreement clear or open for multiple explanations?
Does agreement include responsibilities of each party including performance targets
Does agreement include reporting requirements (format, frequency).
Does agreement include realistic sanctions for (not) complying with performance targets.

 

Area 2: Challenges in implementing contracts: enforcement and dialogue

 

Challenge

Questions for discussion?

Agreements require monitoring, data analysis.

  • Who monitors performance? Does the monitoring unit have enough capacity?
  • Are financial and technical data audited?
  • Are performance data public?

Data are often not used for dialogue?
  • Are monitoring data used as a base for discussing present status and future planning of the utility?
  • Is there a formal structure that brings together various stakeholders is a useful second step of implementation?

Sanctions for public entities are hard to impose.
  • Is data quality good enough to apply sanctions?
  • Have sanctions been applied in past X years?

Introducing positive sanctions (‘carrots”) in formal contracts has been more productive than introducing negative sanctions (‘sticks’).
  • What are positive (bonuses) and negative (penalties) sanctions  -both monetary or non-monetary?
  • At what level (institutional / individual)?

 

Area 3: Challenges in the enabling environment

Challenge

Questions for discussion?

The effective use of any type of contractual arrangements assumes a set of pre-requisites, such as the existence of a legal and administrative framework for enforcement, which may not be fully present in many countries

  • Level of rule of law?

Countries that have used agreements as a positive force, have introduced them gradually and as part of a wider set of reforms. As a first step to increase accountability, informal agreements - which lay out responsibilities but do not specify specific sanctions – were introduced. Formal agreements that include sanctions can only be introduced when performance evaluation systems were functioning properly.

  • Are contract plans used in other sectors? With success?
  • Are PSP contracts used in WSS or other sectors? With success?

Performance agreements can only improve performance if utilities have the discretion to improve the efficiency and effectiveness of their operations. Failure of agreements is often due to introduction within a hierarchical procedure-based system in which utilities have little effective autonomy.

  • Does utility have the autonomy to improve performance? Obstacles?

 


Documents à Télécharger

Module 1 and 2
Modules_3_and_7
Modules 8 and 9