Operator Institutional Arrangements

Most people in developing countries are being served by traditional low-performing utilities or do not have access to piped water supply, and many are locked in a vicious spiral of weak performance, insufficient funding for maintenance leading to deterioration of assets, and political interference.

Some utilities have been able to escape the vicious spiral and transform into modern service delivery organizations.  In many countries, centralized providers have been broken up into decentralized public providers operating at the municipal level, in some cases making them more autonomous and accountable. Simultaneously, hundreds of water supply and sanitation utilities in developing countries have improved management efficiency, transparency and responsiveness to consumers through public private partnerships (PPP).

Given the variety and complexity of country circumstances, a panorama of institutional models for service provision will need to be applied to serve all with adequate water supply and sanitation services. Using the private sector, public entities, communities, or a mix to deliver services is an effective way to improve performance.

In the traditional direct public management model, ownership, management oversight (the responsibility for the medium to long-term management of the utility) and service provision are concentrated in one body, mostly a department or ministry. This body often also has a policy making and a nominal regulatory function. Direct public management has proven in general to be badly performing service provider model.

Performance of public utilities can sometimes be improved - interdependently - by increasing autonomy and ensuring adequate accountability mechanisms. This is done through separation of various functions into separate entities. Policy making remains with the local or central government, while an autonomous entity with a separate corporate oversight board becomes responsible for service delivery. This can either be a statutory body (functioning under public law) or a government owned company (functioning under commercial law, which in many countries offers more flexibility in operations).

Public-private partnerships (PPPs) are a means to improve autonomy and accountability orientation of service providers. PPPs in the WSS sector vary greatly in the allocation of responsibilities, risks and rewards within the partnership.  They range from service contracts, to management contracts, to leases/affermages, to concessions. Each of these transfers different risks and responsibilities to the private sector. Recent PPPs are often hybrid contracts, which explicitly allocate responsibilities to the partner that can execute them most effectively. Recent PPPs generally involve low investments from the private sector.

A well-functioning utility is essential for extending and sustaining services to the poor. But this alone will not guarantee that the poor are reached. Extending services to the poor requires specific attention and targeted interventions. Partnerships between governments, utilities, and civil society can play an important role in this. Where traditional utilities cannot or will not provide service to the poor, standards and by-laws that prevent small scale providers to operate efficiently should be revised.

The World Bank Group operates across the entire spectrum of public and private and works with well performing public utilities and those that put in place credible programs to improve performance over time.  The World Bank Group also supports reform where PPP is introduced as a means for increasing the efficiency and performance of service providers.

World Bank WSS projects support utilities to address key operational performance issues. As part of this, projects support institutional restructuring and foster the financial sustainability of the utility.  Feasibility of programs is assessed by comparison with prior performance and benchmarks within the sector.

The World Bank supports countries in specifically addressing the needs of the poor by raising awareness of the priorities and needs of the poor; developing knowledge on the characteristics and requirements of poor households; improving consultation and communication with poor households; and monitoring progress towards improved access.