Making the country work - the dpsa · Unicity Metro Council CEO Comm Serv Planning & Dev Corp Ser...
Transcript of Making the country work - the dpsa · Unicity Metro Council CEO Comm Serv Planning & Dev Corp Ser...
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Making the country workMaking the country workMaking the country work
LEARNING ACADEMY19 JULY 2002:
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LEARNING ACADEMY19 JULY 2002:
INTRODUCTION1. Jhb Story
2. Spectrum of Possibility
3. Pre-PPP Structuring
4. PPP Process
5. Regulation
6. Conclusion
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FINANCIALFINANCIAL INSTITUTIONALINSTITUTIONAL• Arrears - 2.1bn - 1bn bad debt• No cash in “funds”• Long term debt + call bonds 98/99 721m ; 75 on CB 99/2000 696m• Despite cuts in OP/CAP 291m deficit last 2yrs current s/fall - 257m (partly un-funded)• Next year CAP - 84m net OP - 7072m• Wastage fraud housing/water non essential bad management
• No distinction between commercial and other• 5 admins - duplication & un co-ordinated• Fragmentation - COS, divided by 5; split businesses; staff vs line functions• Gap between policy/decisions and implementation• Not performance linked• Bureaucratic procedures slow, wastage, low initiative• Weak man. info systems & management skills
• Running down infra• Reduced services• Backlog growing• Low morale/productivity 2bn - 1bn value• Bad/Under utilisation of money / people / assets
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CEO
Elec HRCSPlanning & Urb
SACEDFinancePublic safetyTransportTech Serv
GenDistrFleetPolicyRegions
Bulk WaterDisposal wwLabsRds & S/watFleet
AirportPlanningMBS
Art & CultureMarketLibMuseumsSport & RecParksZooHealthEco Dev
Bud & accRev
ClustersAssetsProcure
SecurityTrafficEM SerLogistics
LRODTrainPolicy
ClustersStaffing
ITCommLegalValuation
PlanningLUMHousingInner city
Plan Com DevTech Serv CS Fin HR
Water distWaste waterWaste ManRds & S/water
HealthLibrarySport & RecArt & CultureSoc Serv
ITCommLegalValuationPropertyFleetAdmin
HousingEnvLEDProj Fac.Planning
Bud & AccAssetsProcureRevenue
ClusterEO X 6Staffing
Trans & DevStaffingPersonalODLR
ClusterEO X 6
CEO
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THE SPECTRUM OFPOSSIBILITY: JHB CITY
GOVTDEPTAdmin
Bureaucratic
GOVT BUS UNTIntegrated cost
CentreEMS, MPD
CONTRACT OUT
Billing, MaintenanceMeter reading
CORPORATISATIONElec, Refuse, Zoo,
CT, FPM, Mbus,JDA, JRA, Parks
CORP/MANGMTCONTRACT
WaterPropcom
CONCESSIONNone: Jhb
Other Cities:Dolphin Coast&
Nelspruit
JOINT VENTURE
Kelvin PowerGeneration
LONG TERM LEASE
Jhb Stadium
FULL SALERand Airport
Metro Gas
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Board
MD
2900 367m
Waste Management
Prog A - Utilities
Board
MD
2500 1.9bnWater & Sanitation
Management Contract
Electricity Utility
Board
MD
2800 1.7bn
Power Generation - JV
Prog B - Agencies2264 400m
Roads andstormwaterAdv Board
MDContractor
1100 294mParks and Cemeteries
MDContractor
Metro gas Rand airport
Stadiums
Prog C - Privatise 1 %
Prog D - Corporatise 7%
- Zoo- Civic- Bus Co- Property & Projects- Fresh Produce Market
Unicity Metro Council
CEO
Comm Serv Planning & Dev
Corp Ser Finance MPS
Comm HealthWelfareArts & cultureMuseumslibrariesSport and rec
“Clients”Spatial PlannLum-systemHousingM T Planning
IT/infoCommLegalHRSecurityFleetAdminFacility M\Ment
TrafficBy-lawsCrime prev.
11 RegionalDirectors - ContractorsComm HealthWelfareLibrariesSport & rec CS & FinHRAdmin supportPlanning InfoBldg ControlHousing
Exco
Prog E - 40 %Str Plan Unit
Short TermFinancial Plan
Steering ComiGoli 2010
ExecutiveExecutive
MayorMayor
Contract Contract M \ M \ MentMent
EmergEmerg Ser Ser
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NEED FOR SEPARATIONOF ROLES IN GOVT.
AUTHORITY(Govt)
Sets Policy
REGULATORImplements policy
& monitorsefficiency
OPERATOR(Provides Services)
COMMUNITY/OTHER
Authority Regulator
Operator
Current Situation
New ApproachGlobalRoleplayers definedAccountability existsServices becomeefficient
Blurred accountabilityGame Ranger & Poacher in one
Services provided can never be efficient
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PRIVATE SECTOR PARTICIPATION IN URBAN WATER & SANITATION SERVICES5/6 DECEMBER 2001:
Peoples CentresPeoples Centres
Zoo Civic Zoo Civic Bus Co. Bus Co. Property Property Fres h PMFres h PM
Executive Executive MayorMayor
Counc il
Contrac tsFinance
CorporateCommunity
CEOCEO
The PeopleThe PeopleGood governance
Sus tainable s ervicesSoc ial & Economic Deve lopment
Healthy and Safe EnvironmentPartic ipatory and Inc luc ivity
EMSEMS
PlaningPlaning
MPSMPS
Heritage Heritage ServicesServices
Regions X 11Regions X 11
HealthSoc ial
ServicesHous ing Librarie s
Sport &Recreation
Was teWas te
WaterWater
Electric ityElectric ity
RoadsRoads
ParksParks
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PRE PPP STRUCTURINGEnabling Legislation
InformationData gathering
Ensure legislation allows for PPP. Remove uncertaintyEmpower local authorities. Contain enabling framework
Develop program for communication with : CustomersEmployees,Unions, State and National Government.Other relevant stakeholders eg. business Understanddynamics prior to choosing option. 80% of Work
Communication
Obtain data : Carry out feasibility: Finance, Humanresource, operations, fixed assets, environment, etc
Finance determine funding availability. Allocate funds. Highercosts may be incurred in short term.
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PRE PPP STRUCTURINGIdentify Functional areaFor PSP
Establish InstitutionalMechanism:PSP Steering Committee
Water and Sanitation, Electricity,Solid Waste , etc
Ensure that there is strong leadership & skill todrive process. Separate from normal adminfunctions. Give Full accountability to apptd person.Appt Project leaders dedicated solely to PSP.Political & Functional system to be integrated. Ifavailable strategically select politically able person tolead PSP. Allocate financial resources to PSPprogram. Local and international. Advisors shouldbe apptd/available. Appt. labour relations advisor.Develop time frame & performance measures.Incentivise team. Regulatory system to be a project
LEARNING ACADEMY19 JULY 2002:
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PRE PPP STRUCTURING• Determine and understand PPP’s.
• Assess govt’s performance in service delivery eg. Refuse ,water etc.
• Identify core function and areas of poor performance
• Govt and Management highlight the problems to all stakeholdersespecially employees and unions.
• Indicate the need to implement PPP options.
• Develop a programme and time frame to investigate and submitoptions. Information should be as detailed as possible.
• Establish a specialist team viz. Economist, financial specialist,institutional and legal specialist, labour relations
• Allow stakeholders to be given an opportunity to provide possibleselections/options for delivery.
• Report back and agree on preferred optionPPP’s
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Data Required for Ring-Fencing
Human Resources
Financial Statements
Fixed Assets
ManagementReportingSystems
Decision-making
TotalInventory
Bottom LineCost of Staff
Support Services
Cost of support
Operations Business requirementsBusiness requirements
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PRIVATE SECTOR PARTICIPATION IN URBAN WATER & SANITATION SERVICES5/6 DECEMBER 2001:
PSP PROCESS : JOHANNESBURG WATER
Conduct due diligence
study
Select PreferredBidder
Request forQualification
Request forProposals
Negotiations
Bidders Conference
FinaliseContract
Establish InfoCentre
Evaluate Bids
Take time : getReliable data
Put in specific Criteria
Info must beThe same for all
Put in contractFor mark up
And second best Have financial&Tech envelopes
Structure well
Match team With bidder
Keep legal teamsmall
M. FeePerf. FeeUpside Fee
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Why Why FFormorm a a Separate Entity Separate Entity ??
❒ Accountability
❒ Reduce political bureaucracy
❒ Attract / retain good staff
❒ Investment
❒ Transformation
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PRIVATE SECTOR PARTICIPATION IN URBAN WATER & SANITATION SERVICES5/6 DECEMBER 2001:
Water and Sanitation
PAST
Fragmented : 5 water, 5 sanitationand Sep Rev, HR, ITand Fleet
42% UFW : Capex Constr18% Technical losses24% Commercial losses
Non-payment : Sep of rolesnot commercial
Backlogs : Capexno invest plan
Customer Care : Bureaucracyno incentives
Comm delivery : inflexibleCapacity
PRESENT
SERVICEDELIVERY AGRMT
COUNCIL
BY-LAWEnables……
BOARD
Man. Contract
• 5 Years• Share upside
• functions and obligations
• standards• tariff process• KPI’s• Funding of socialobligations steppedtariff/subsidy
Produces 5yr + 1yrBusiness Plan
• Financial model• Capex plan• Delivery outputs• Perfomance targets• Dividends
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Operator’sOperator’sremunerationremuneration
❒❒ Fixed fee (R25 million) - linkedFixed fee (R25 million) - linkedtotodeliverydelivery
❒❒ Incentive A (up to R20 million)Incentive A (up to R20 million)for:for:
➠➠ Human resourceHuman resourcedevelopmentdevelopment
➠➠ CapexCapex delivery delivery
➠➠ Sewer overflowsSewer overflows
➠➠ Customer serviceCustomer service
➠➠ Plant downtimePlant downtime
❒❒ Incentive B - % of improvedIncentive B - % of improvedoperatingoperatingmargin (“x” factor)margin (“x” factor)
❒Two envelopes❒Technical / Financial: 60/40❒75% hurdle on technical, withscore retained❒Financial “x” factors
➠Northumbrian Water JV =0.18%➠Vivendi-Rand Water JV =1.25%➠Thames Water JV = 5%
Bid StructureBid Structure
JOHANNESBURG WATER:JOHANNESBURG WATER:MANAGEMENT CONTRACTMANAGEMENT CONTRACT
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RISK ASSESSMENT & MITIGATION• Design Risk : If desired standards of performance not met then
private party accepts the risk and pays the costs.
• Construction Risk : Performance specifications and time schedule. Private party must bear all costs.
• Operating Risk : Private party is responsible for all operatingcosts.
• Demand Risk : Private party must ensure that there is a demandfor the service. South African context requires caution.
• Tariff Risk : Contractually private party often has to accept thattariffs may not be adjusted automatically & balance costs/ revenues.
• Collection Risk : Responsibility of the private party. No guarantees from govt.
• Credit Risk : Private party takes full responsibility. But risk togovt when services get suspended due to insolvency.
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LESSONS LEARNT
Due Diligence : This is most time consuming due to data reliability. Provide adequate time for process and debate. Understand the market
RFQ : Advertisements must be clear and should safeguard LG.Adjudication panel should be carefully selected. Keep ittechnical. Evaluation criteria should be determined upfront
RFP : Contract should be submitted as part of the RFP for markup.Ensure transparency throughout. Have two envelopes :Technical and financial
Pre PPP : Strong Political Will and Leadership is needed. Reliable and accurate data . Appt Skilled project managersCommunicate with all stakeholders. Put program in place to address Unions/employees
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PRIVATE SECTOR PARTICIPATION IN URBAN WATER & SANITATION SERVICES5/6 DECEMBER 2001:
LESSONS LEARNTRFP Evaluation: Adjudicators should be carefully selected. Criteria
must be sent out with RFP. Be wary of point scoring & its limitations. Evaluation process should be audited.
Selection ofPreferred bidder : First and second bidders should be selected to use
as a negotiating tool. Check background of bidder.
Negotiation : Most critical phase. LG do NOT negotiate well. Neitherdo consultants. Issue of Risk and its allocation must becarefully determined. Ensure that contract mark up lead toonly a few important negotiation points. Only the lawyersget rich out of this process. Only have one legal advisor.
ContractMonitoring : Set up regulatory system in parallel with PSP process.
Identify what must be monitored . Know what must gointo contract.
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PRIVATE SECTOR PARTICIPATION IN URBAN WATER & SANITATION SERVICES5/6 DECEMBER 2001:
LESSONS LEARNTCommunication : Make sure all stakeholders are informed.
Keep records of interaction –unions
Customers : Ensure that all customers are taken over byresponsible entity.
Risks : Make sure risks are properly defined andallocated eg. Revenue management. Inmanagement contract risks are with utility
Red Tape : Make sure bureaucracy is limited.
Time : Momentum must be maintained. Speed isessential but must not compromise quality
Separate Roles : Policy maker must be separated fromregulator and operator . Regulator &
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• PPP’s are not a panacea for addressing government problems.
• Government must determine whether it is a delivery agent or aregulator/facilitator of services .This can be decided by assessingGovernment’s performance in service delivery.
• The above relates to how effective and efficiently are services beingdelivered, is the quality of the service provided acceptable to thecommunity, is the tariff structure affordable and acceptable , isfinance available , are skills available, is government able to deliverservices to the poor ?
• Is it a core function of government ?. Can the private sector do itbetter.
• If the answer is “no” to any one of the above then G must seekalternative delivery mechanisms.
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• TREAT COMMUNITY AS IF THEY HAVE ACHOICE
• CONSTANTLY ASK R’U DOING THE BEST THATU CAN?
• IF IT IS THE RIGHT THING TO DO THENNOTHING CAN GO WRONG!!
• TAKE THE LEAP OF FAITH