□ Unbundling
'Unbundling' refers to the disaggregation of components within a service sector (see Box 8.1(f)). An 'unbundled' sector may enable a range of service delivery options to be adopted and may be politically helpful to introduce a private sector approach. Breaking a service sector down into a number of parts may enable municipalities to keep control of controversial functions, for instance, or it may allow them to involve a range of actors and build on existing local assets.
Vertical unbundling occurs when a service is disaggregated from the tertiary to the primary levels.6 In India, for instance, it is not uncommon to find water and wastewater treatment plants or pumping stations effectively managed by the private sector, and water points managed by small-scale service providers. Horizontal unbundling occurs when a city is divided into zones and contracts are arranged for each area. At a large scale this was the approach taken in Jakarta and Mexico City, where the cities were divided into zones for establishing concessions for water and sanitation services. A key problem associated with this approach is that zonal divisions expose the inequalities in the city. If one zone is comprised primarily of the non-poor and another of the poor, the resulting partnerships can be very unequal, and opportunities for cross-subsidies can be lost or made very complex.
Unbundling does, however, allow for a degree of competition and benchmarking in situations tending towards monopoly. It is used at a small scale to franchise solid waste operations for different zones of the city, and is useful for establishing contracts with small firms for solid waste. This has been successfully adopted in Hyderabad in India for street cleaning, and solid waste collection and transfer.
Both horizontal and vertical unbundling can be achieved in sanitation by adopting the strategic sanitation approach to service delivery. As in water supply, vertical unbundling in sanitation occurs when the service is disaggregated from tertiary to primary levels. Different actors are responsible for different services at different levels - wastewater treatment for large flows generated by the city, and local operators for waste removal at household level. Horizontal unbundling occurs by dividing the city into zones for secondary services such as sewerage and drain maintenance. Wherever possible, the full cycle of health and hygiene and sanitation promotion, sanitation demand-generation, infrastructure provision (construction of facilities), operation and use, waste removal and waste disposal is carried out at as local a level as possible.
■ increasing investment by private sector ■ increasing risk allocated to private sector ■ increasing duration of contract ■ tariff collection shifts to private sector ■ operation and management tasks shift to private sector The table above describes some of the key roles commonly prescribed to private business and municipalities in relation to service, management, lease, concession and BOT contracts. Many 'northern' advocates of public-private partnerships specify particular requirements (or characteristics) for each contract type, but analysis of existing contracts and arrangements in developing countries suggests that these requirements are often relaxed in practice. Arrangements often hybrids of more than one contract type seems to vary. In the South, where flexibility is paramount, it is more common to find that the definitions are indisctinct and contract terminology varies, often within the same operating context. While hybrids may be the norm rather than the exception, there are trends in relation to ownership, investment, tariff collection and operation (such as that shown by the arrow above) that can help municipalities understand the opportunities offered by different contractual arrangements. Also, it may be that the standard northern form of contract acts an incentive to private firms, and might increase the chance of doing a deal or reducing costs. Municipalities must weigh these advantages against the disadvantages if a particular model does not offer the components they require. In the current PPP environment, an important question is whether or not predetermined contract forms are appropriate and whther the strong focus on the categories of contracts undermines the ability to craft partnership arrangements that meet local needs and constraints. The cases examined in South Africa illustrate the types of variations that are created in response to perceived requirements and contextual limitations: • The Nelspruit Concession, as it was envisaged, intended to draw on capital investment from the private sector, but to date all finance has come from the Development Bank of Southern Africa. Does this make it just a long lease? • The Queenstown Concession does not include customer management. Tariff collection is still carried out by the municipality as a part of a composite service tariff. The private operator and the municipality still call it a 'concession', but is this really a performance-based management contract with a sizeable capital investment programme from a private firm? • The Stutterheim Affermage - as it is called - also does not include tariff collection. The municipality sets and collects the tariff, but the operator funds all operation and maintenance costs and the operator refers to the contract as an 'affermage' but others may call it a management contract? | ||||||||||||||||||||||||||||||||||||||||||
