Preparation Stage – Collecting Information

4.1 What types of information are required?

Information is critically important to a successful venture of any kind. In the case of PPPs, the information should be drawn from all relevant stakeholders from all three sectors (the public and private sectors and the community).

A. Information from the public sector

Below is a set of information blocks that will need to be provided by the public sector. This information needs to be further analysed with the goal to optimise the involvement of the private sector or/and the community in the PPP process.

Legal and legislative framework

Information from the public sector will include assessment of the existing legal and legislative framework, and how this framework will affect private sector involvement. A guide checklist of information includes the following:

• national policies;
• constitutional and legislative issues, including roles and responsibilities for service amongst the various levels of government (national, provincial and municipal);
• general legislation on private sector participation, including foreign companies;
• environmental, competition, contract and labour laws, including trade union issues;
• rules on procurement, public sector borrowing, currency control and rights of access;
• public/social policies, including subsidies, tariff setting and disconnection rights;
• tax liability and importation laws; and
• information on stakeholders [Tools 3 and 9].

State of the utility

Public sector information will also include an assessment of relevant municipal utilities and/or agencies involved in service provision. Information requirements on the state of the utility will involve a performance and technical assessment and a financial assessment.

The performance and technical assessment of the utility…

…should include the following:

• organisational structure;
• documentation system, amount and reliability of basic information on the existing systems and its performance;
• human resources (staff numbers, salaries, conditions of service etc.);
• existing and proposed service areas and coverage;
• the system of service delivery to poorer consumers and the billing mechanism for this group;
• service characteristics, including types of services, quantities supplied and duration of supply;
• the current standard of performance and previous records in relation to reliability of service, quality, interruptions, timing, space between breakdown and repairs and so on;
• existing tariffs, including levels of bills and payment arrangements and disconnection and reconnection systems;
• performance of utility’s customer service in terms of dealing with consumer complaints and requests;
• an inventory of the utility’s assets, conditions and service history;
• an assessment of the condition and capacity of existing assets to achieve current and planned objectives;
• age and quality of existing systems, including pipes; and
• quality of existing infrastructure and ground conditions.

 

The financial Assessment of the utility…

…should include the following:

• current tariff and tariff structure;
• the method of calculating tariffs;
• the current cost for operation and maintenance;
• the current rates of consumption in various service areas and demand projections for the future – including extending services to poor areas or groups of people who were not served or underserved previously.
• the cost of resources and improvements in the infrastructure necessary to achieve the projected service levels;
• willingness and ability of consumers to pay for the intended service levels; (A participatory approach, through which the public would have a say in the decision-making, could help to determine the level of service for which the customers are willing and able to pay. Customers need to make an informed decision about the service they want, rather than accept or reject whatever is being offered to them.)
• the possibility of providing credit facilities (for example, low interest loans, grants, subsidies etc.) to very poor households to support
  service improvements; and
• annual government, private and/or external donor funds, including grants and loans expected for financing the necessary improvements.

Stakeholder Information

Stakeholder analysis is the third block of information required from the public sector. It is needed to identify those who could be affected, and those who are likely to support or oppose private sector participation [Tool 9]. The stakeholder analysis could be provided by either of the parties (by the public or the private sector), by the working group or by an independent consultant. A guide to information required from various stakeholders includes the following:

On the part of the government itself

• identification of key stakeholders, their current responsibilities and the changes in responsibilities necessary for private sector participation;
• possible allocation of future responsibilities amongst various agencies, especially the one that will have the regulatory authority. These agencies include:
  - national government – ministries with some jurisdiction in the relevant service provision;
  - regional and municipal governments – responsibilities in the PPP process, such as acting as grantors of private sector contracts, partners and regulators of financiers of the utility;
  - regional or local planning departments;
  - political parties and individual politicians; and
  - other established regulatory bodies.
• Identification of the nature of stakeholders’ interests in the design and outcomes of private sector participation;
• identification of likely politically sensitive issues or issues that may require political decisions and action;
• identification of key policy decisions required; and
• identification of methods for securing stakeholder input and commitment to the reform process, the costs of this and who will be responsible for them.

Information required from government stakeholders – for example, public sector trade unions and employees – includes

• number, skills and qualifications of staff currently involved in various operations;
• existing labour unions and those likely to support or oppose private sector participation;
• concerns of various trade unions with regard to various categories of employees and ways of meeting those concerns;
• the sort of skills and experience, including number of people, that will be needed for future service provision;
• reputations of the key staff and who are likely to head the restructured units, if necessary; and
• retrenchment possibilities, categories of employees that may be involved, possible retrenchment packages and the trade unions that will be involved in negotiations.

B. Information from the consumers (or a real demand survey)

Characteristics of coverage areas and existing service levels

An assessment of the areas covered will provide information on the extent to which the poor benefit from the services of the existing utility. A guide checklist of information will include:

• categories of building currently receiving services, especially houses in informal settlements;
• common types of service delivery in each category;
• average location of service delivery points in each category;
• parameters of service received: quality and quantity;
• A schedule of supply and average number of days without supply;
• alternative services provision (especially in informal settlements);
• current cost of services received and payment systems;
• connection, disconnection and reconnection procedures; and
• perceptions of the public relations unit of the utility.

Market research

Conducting a market research will provide information on the socio-economic characteristics of various segments, existing experiences, preference, willingness and ability to pay. Outputs from the market research should provide information on all the “4Ps” of marketing – Product, Price, Place and Promotion – and should provide answers to the questions below.

• What is the problem that the municipality is trying to address?
• What is the context in which the problem exists?
• Who will be the target audience (for example, dwellers in informal settlements)?
• What type of services will appeal to the target audience and at what price?
• What is the best channel for getting to the target audience?
• Which messages and materials work best?
• What will be the best marketing mix?
  

C. Information from the private sector

An appraisal of the private sector will provide better understanding of the existing skills, capacities and types of services already provided and the costs of delivering those services. An association of current providers (a bus owners’ or water vendors’ association, for example) could provide this information, which it could collect through aggregating statistics across its particular sector. A guide checklist of necessary information in this area could include:

• a list of existing private service providers, including small-scale informal providers;
• the nature of services provided by various groups, such as water vending, water collection and transportation, solid waste collection from primary and secondary locations, desludging and so on;
• the cost of the various levels of services provided and seasonal fluctuations;
• an assessment of the strengths and weaknesses of, and the opportunities and threats faced by, the private sector providers; and
• an assessment of the capacity of existing local service providers to take on the responsibilities that will be required of them as compared to the areas that will require input from external (foreign) private firms.

 

 

Product

*Assessment of existing services by all suppliers, including small-scale service providers
*Consumer perceptions of existing services and products
*Coping mechanisms adapted by consumers, especially in informal settlements
*Types of services preferred by different segments
*Projection of future demand and resources that will be required in order to provide the improved services
*Analysis of the possible impact of improved services on the poor (for example, financial burden)

 

Price

*Cost of formal and informal services, including time spent searching or queuing, seasonal variations, treatment costs and storage costs
*Analysis of existing tariffs (formal/informal) structures, including seasonal fluctuations for current services received, systems for payment of tariffs, connection and reconnection charges
*Socio-economic analysis of different categories (segments) of consumers
*Willingness to pay for improved services and appraisal of the ability to pay amongst various segments
*Levels of services preferred by various segments and prices they are willing to pay
*Attitudes of consumers towards connection schemes and payment options

 

Place

*Understanding of living conditions and problems specific to various areas; this will support the development of appropriate solutions
*Appraisal of alternative service providers and the areas where they operate
*Assessment of present and potential customers, including socio-economic characteristics and preferences
*Understanding of the landlord-tenant relationship and its effect on service provision

 

Promotion

*Assessment of existing communications used by utility to communicate to various market segments
*Appraisal of existing alternative channels that could be used for marketing
*Investigation into methods used by alternative providers to market their services and appraisal of potential methods for marketing
*Knowledge of consumer groups and associations who may like to participate in the management of services

 

Tool 4-1: The “4Ps” of marketing – Product, Price, Place and Promotion