an Eldis Resource
Utility provision: contract design in the interest of the poor
Providing poor people with utilities through public-private partnerships
Authors:
D. Hailu; P. Hunt
Publisher:
International Policy Centre for Inclusive Growth, 2009
While access to basic utility services such as water, electricity and sanitation are essential for meeting internationally agreed development goals, many of these services remain unaffordable or unavailable for the world’s poorest people. The public sector’s ability to deliver these services has been limited, primarily due to financial constraints particularly in highly-indebted countries. But privatisation too has failed to deliver adequate investments, more so in rural and low-income areas where there economic incentives for private operators are few. In this context, what is an alternative way of delivering utility services to the poor? A new policy brief brought out by UNDP’s International Poverty Centre looks into the issue.
The note explore experiences in Bolivia, Philippines, South Africa and Zambia to argue that unless public-private arrangements, long-term contracts between public agencies and private companies to deliver utility services, operate within a legal framework that acknowledge poor people’s rights to water, sanitation and other social outcomes, they are unlikely to be pro-poor. Such a framework ensures that when contracting out or in corporatisation arrangements, addressing people’s access to basic services becomes the primary objective of the contract. In order to prevent breach of contract or other disputes from arising, transparency and open participation in the contractual process are also important. Open bidding mechanisms that ensure proper competition, publication of contracts, media coverage and a voice for stakeholders are equally necessary. Likewise, the selection of a private operator should be a fair and transparent process.
When consumers understand the goals of corporatisation, have had a chance to express their needs and concerns, and have a say in the type of service and tariff, they are more likely to accept the outcome of a particular initiative. Therefore, it is important that service recipients, especially the poorest, have access to an open channel of communication. This can be stipulated in the contract itself.
Ultimately, independent agencies working for the poor should be mobilised to monitor the transparency of contract negotiations. The brief points out that the participation of a neutral body, such as a United Nations agency, would provide greater transparency and increase confidence in the fairness of contracts among governments, private firms and the recipients of utility services, while providing an additional safeguard to ensure that contracts are signed in the interests of poor consumers.
