The most direct organisational arrangement for municipal service partnerships is that in which the private sector is contracted directly to the municipality. This creates a formal relationship between the municipality and the private operator, described in Box 8.1(a). It may be refined to include roles for higher levels of government or NGOs for instance, but the fundamental basis of the arrangement is a primary link between the municipality and the operator.
However, this is not the only organisational arrangement possible and municipalities are advised to explore other options.
• The municipality may wish to create an independent utility to separate responsibility for the service. In order to introduce private sector involvement, the municipality in Johannesburg first corporatised the delivery of water and sanitation through the formation of an independent utility. The municipality has an agreement with the utility and the utility has a management contract with a private operator (see Boxes 4.4 and 8.5). This organisational framework creates a series of contractual relationships at the higher level, supplemented by subsidiary (or secondary) contracts for delivery. This is represented by Box 8.1(b).
• In Cartagena, the municipality established a joint venture with the private sector for the delivery of water and sanitation services, and this public-private venture then established a lease contract with the (same) private operator (Box 8.1(c)).
In each of these cases the institutional relationship between the municipality and the formal private partner is more complex (and may even be a source of conflict), but the bilateral relationship at the operational level is maintained. These two models are discussed in more detail later in this section.
Other operational arrangements can be formulated when the existing constraints of a municipality - such as its the size and scope - hinder its ability to attract private partners. The concepts of bundling and unbundling the service-delivery package open up possibilities of multidimensional organisational arrangements that may be appropriate for smaller municipalities and for pro-poor partnership initiatives.
In order to establish an organisational framework, a municipality needs to consider what type of organisational framework will help it meet its objectives and respond to the specific opportunities and constraints of its situation. For instance:
• Who is the client? (Is the client body made up of more than one organisation? How is the client body organised?)
• Who is contracted? (Is one operator contracted on a single basis, or are there many operators? Are they large or small- scale, or both?)
• What function or segment of the service is being considered? (Will the municipal function be delegated in its entirety or in part?)