At its broadest level, the legislative framework for municipal action is provided through decentralisation legislation. It is likely that municipalities will be very familiar with its content, and will know the extent to which it limits or permits any action they may wish to take with the private sector (both large and small scale) in service delivery.
There are basically three dimensions to effective decentralisation:
1. functions are constitutionally or legally decentralised to the municipal level;
2. municipalities have appropriate capacity to perform their functions; and
3. municipalities have access to the financial resources required to perform their functions.
In many so-called decentralised contexts, however, local governments do not have the power and responsibility to represent their citizens and deliver services; nor do they have staff who are appropriately trained and experienced, or access to their own revenue. They often depend greatly on external sources of finance and the conditions applied to it.
In the context of clear and realistic policy direction from higher levels, if local government has adequate capacity and funding, they should be able to identify and pursue a range of appropriate options for service delivery. This includes partnerships with the formal large-scale private sector (see, for instance, the process in Colombia described in Box 10.6). Where they lack that capacity, power and funding, municipalities cannot negotiate contracts with authority. Under a decentralised governmental structure that brings government closer to the people, municipalities will also have more capacity to consider opportunities for local solutions and the involvement of local stakeholders (such as NGOs and small- scale local service providers).