Outsourcing and franchising How ONEP (Morocco(

Transcription

1 Water and Sanitation Services in Small Towns and Multi-Village Schemes Addis Ababa June 11-15, 15, 2002 Water and Sanitation Program The World Bank and the World Bank Institute Outsourcing and franchising How ONEP (Morocco( Morocco) mobilizes small scale local entreprises to cut down running costs Bernard Collignon Hydroconseil

2 ONEP is mostly a bulk water supplyer.. Rural areas accounts for only 0.1 % of its turn over. ONEP delivery Production and bulk sales management contract for 251 small towns direct distribution in rural areas (PAGER) 3 private utilities 13 municipal. pop > pop < villages population sales (Mm3/year) ,1 sales/capita (l/day) 6 turnover (M$US/year) ,4

3 PAGER objectives in rural areas are very ambitious: 80 % coverage in year 2010 ( villages) Coverage in rural areas 100% 80% PAGER 60% 40% 20% 0%

4 ONEP has been asked to cover a large part (> 50%) of PAGER scope. Task sharing between ONEP and DGH ONEP "territory" areas without local water sources DGH areas with local water sources water sources present management model promising management model tariff setting supply from remote dams (regional schemes) regular customer service + outsourcing franchising national (cross subsidy between urban and rural areas) on site boreholes community management management contract local (full cost recovery)

5 The challenge for ONEP is : how to supply many thousands more villages and small towns..although the utility is already loosing money in small towns and villages and is supposed to stay financially autonomous (no subsidy)?

6 In order to reduce costs in small towns and villages, ONEP uses three main contracting arrangements : (a) Outsourcing technical functions to local entreprises (b) Outsourcing some retail sales (standposts) (a) + (b) = (c) Franchising local small entreprises for water distribution

7 (a) Outsourcing technical functions ONEP outsources many technical tasks to entreprises Pumping station operation Network inspection Leakage detection Field water analysis and water sample collection House connection.

8 (a) Outsourcing technical functions Typical entreprises contracted by ONEP Typical micro-enterprises total (202) age 0 to 7 years staff size turnover 2 to 10 people 10,000 to 50,000 US $/year 600 people (compared with 6000 for ONEP) 5 M $/year (compared with 250 M$ for ONEP)

9 (a) Outsourcing technical tasks ONEP provides strong support to these local entreprises Typical micro-entreprises total (202) age 0 to 7 years staff size turnover 2 to 10 people 10,000 to 50,000 US $/year 600 people (compared with 6000 for ONEP) 5 M $/year (compared with 250 M$ for ONEP)

10 (b) Outsourcing retail sales Outsourcing standpost management : it works, but water sales at standposts are very low in small towns and villages Water delivery for all the ONEP standposts (year 1999) Standposts number average delivery concerned population consomm./ inhabitant m 3 /day.sp l/day.inhab large towns 731 8, ,8 small towns and villages , ,5 total , ,8

11 (b) Outsourcing retail sales 60% Standpost managers monthly incomes (US$/month) are very low in small towns and villages 40% 20% 0% < >160

12 For ONEP, the challenge is to cut running costs for small towns, villages and scatered customers : For the time being, small towns are highly unprofitable (50 % financial losses) In villages, perspective are worst Long pipes and few users (rising maintenance costs) Remote villages (rising logistic costs) Few customers per village (rising metering / billing / recovery costs)

13 Franchising is the most promising solution to cut running costs in rural areas : (a) Simple technical outsourcing is not feasable (turnover in village is not enough to keep alive a professional entreprise) (b) Outsourcing retail sales (standpost( standpost) ) do not meet the demand (users ask for connections) and do not pay the standpost manager (a)+(b)=(c) But a contract for all the local operations is feasible : operating the system, managing the standposts,, installing house connection, managing customers (metering, billing, recovering)

14 The management option chosen by ONEP in rural areas is one step ahead of its management system in towns : ONEP manages most of the investments and supplies bulk amount of water at the head of the branch. The local micro-entreprise manages all the functions, downstream a bulk meter Connecting new customers Running equipment (including booster stations) Recovering costs (metering / billing )

15 Valve General meter (ONEP billing basis) Extension with kiosks and house connections ONEP Main pipe ONEP (franchisor) management Micro-enterprise (franchisee) management

16 It looks like a franchising agreement : The franchisee (local entreprise) ) : Manages all relationships with customers Uses the ONEP trade mark Pays a fee (according to water consumption) The franchisor (ONEP) : Provides bulk amount of water Defines standards for service, tariffs But ONEP undertakes all initial investment and that is a big difference with most common franchising aggreements

17 What is different with ONEP? (Most water utilities do not practice franchising in small towns) Most national water utilities provides water to some dozen of medium sized towns and negotiated contracts excluding very small towns On the other hand, ONEP has been assigned a global ambitious objective by Morocco government : 5,400 villages in year 2006 and that makes the difference! NB : SODECI is another water utility providing water to very small towns (545 towns in Côte C d Ivoire) d Ivoire).and it is also outsourcing daily management of the systems to local sub-contractors

18 ONEP is mostly a bulk water supplyer.. Rural areas accounts for only 0.1 % of its turn over. ONEP delivery Production and bulk sales management contract for 251 small towns direct distribution in rural areas (PAGER) 3 private utilities 13 municipal. pop > pop < villages population sales (Mm3/year) ,1 sales/capita (l/day) 6 turnover (M$US/year) ,4

19 PAGER objectives in rural areas are very ambitious: 80 % coverage in year 2010 ( villages) Coverage in rural areas 100% 80% PAGER 60% 40% 20% 0%

20 ONEP has been asked to cover a large part (> 50%) of PAGER scope. Task sharing between ONEP and DGH ONEP "territory" areas without local water sources DGH areas with local water sources water sources present management model promising management model tariff setting supply from remote dams (regional schemes) regular customer service + outsourcing franchising national (cross subsidy between urban and rural areas) on site boreholes community management management contract local (full cost recovery)

21 The challenge for ONEP is : how to supply many thousands more villages and small towns..although the utility is already loosing money in small towns and villages and is supposed to stay financially autonomous (no subsidy)?

22 In order to reduce costs in small towns and villages, ONEP uses three main contracting arrangements : (a) Outsourcing technical functions to local entreprises (b) Outsourcing some retail sales (standposts) (a) + (b) = (c) Franchising local small entreprises for water distribution

23 (a) Outsourcing technical functions ONEP outsources many technical tasks to entreprises Pumping station operation Network inspection Leakage detection Field water analysis and water sample collection House connection.

24 (a) Outsourcing technical functions Typical entreprises contracted by ONEP Typical micro-enterprises total (202) age 0 to 7 years staff size turnover 2 to 10 people 10,000 to 50,000 US $/year 600 people (compared with 6000 for ONEP) 5 M $/year (compared with 250 M$ for ONEP)

25 (a) Outsourcing technical tasks ONEP provides strong support to these local entreprises Typical micro-entreprises total (202) age 0 to 7 years staff size turnover 2 to 10 people 10,000 to 50,000 US $/year 600 people (compared with 6000 for ONEP) 5 M $/year (compared with 250 M$ for ONEP)

26 (b) Outsourcing retail sales Outsourcing standpost management : it works, but water sales at standposts are very low in small towns and villages Water delivery for all the ONEP standposts (year 1999) Standposts number average delivery concerned population consomm./ inhabitant m 3 /day.sp l/day.inhab large towns 731 8, ,8 small towns and villages , ,5 total , ,8

27 (b) Outsourcing retail sales 60% Standpost managers monthly incomes (US$/month) are very low in small towns and villages 40% 20% 0% < >160

28 For ONEP, the challenge is to cut running costs for small towns, villages and scatered customers : For the time being, small towns are highly unprofitable (50 % financial losses) In villages, perspective are worst Long pipes and few users (rising maintenance costs) Remote villages (rising logistic costs) Few customers per village (rising metering / billing / recovery costs)

29 Franchising is the most promising solution to cut running costs in rural areas : (a) Simple technical outsourcing is not feasable (turnover in village is not enough to keep alive a professional entreprise) (b) Outsourcing retail sales (standpost( standpost) ) do not meet the demand (users ask for connections) and do not pay the standpost manager (a)+(b)=(c) But a contract for all the local operations is feasible : operating the system, managing the standposts,, installing house connection, managing customers (metering, billing, recovering)

30 The management option chosen by ONEP in rural areas is one step ahead of its management system in towns : ONEP manages most of the investments and supplies bulk amount of water at the head of the branch. The local micro-entreprise manages all the functions, downstream a bulk meter Connecting new customers Running equipment (including booster stations) Recovering costs (metering / billing )

31 Valve General meter (ONEP billing basis) Extension with kiosks and house connections ONEP Main pipe ONEP (franchisor) management Micro-enterprise (franchisee) management

32 It looks like a franchising agreement : The franchisee (local entreprise) ) : Manages all relationships with customers Uses the ONEP trade mark Pays a fee (according to water consumption) The franchisor (ONEP) : Provides bulk amount of water Defines standards for service, tariffs But ONEP undertakes all initial investment and that is a big difference with most common franchising aggreements

33 What is different with ONEP? (Most water utilities do not practice franchising in small towns) Most national water utilities provides water to some dozen of medium sized towns and negotiated contracts excluding very small towns On the other hand, ONEP has been assigned a global ambitious objective by Morocco government : 5,400 villages in year 2006 and that makes the difference! NB : SODECI is another water utility providing water to very small towns (545 towns in Côte C d Ivoire) d Ivoire).and it is also outsourcing daily management of the systems to local sub-contractors

34 Water and Sanitation Services in Small Towns and Multi-Village Schemes Addis Ababa June 11-15, 15, 2002 Water and Sanitation Program The World Bank and the World Bank Institute Outsourcing and franchising How ONEP (Morocco( Morocco) mobilizes small scale local entreprises to cut down running costs Bernard Collignon Hydroconseil