Transcript 2002. Morocco - Outsourcing and franchising

Water and Sanitation Services in Small
Towns and Multi-Village Schemes
Addis Ababa
June 11-15, 2002
Water and Sanitation Program
The World Bank and the World Bank Institute
Outsourcing and franchising
How ONEP (Morocco) mobilizes small
scale local enterprises to cut down
running costs
Bernard Collignon
Hydroconseil
ONEP is mostly a bulk water supplyer. Rural
areas accounts for only 0.1 % of its turn over.
ONEP delivery
population
sales
(Mm3/year)
sales/capita
(l/day)
turnover
(M$US/year)
Production and bulk
sales
management
contract for 251
small towns
direct distribution
in rural areas
(PAGER)
3 private
utilities
13
municipal.
pop >
30 000
pop <
30 000
1000 villages
6 000 000
1 000 000
1 100 000
900 000
500 000
654
45
1,1
256
62
6
2 100
300
2,4
PAGER objectives in rural areas are very ambitious:
80 % coverage in year 2010 (31 000 villages)
Coverage in rural areas
100%
PAGER
80%
60%
40%
20%
0%
1980
1990
2000
2010
2020
ONEP has been asked to cover a large part
(> 50%) of PAGER scope.
Task sharing between ONEP and DGH
ONEP
DGH
"territory"
areas without local water sources
areas with local
water sources
water sources
supply from remote dams
(regional schemes)
on site boreholes
present management
model
regular customer service +
outsourcing
community
management
promising
management model
franchising
management
contract
tariff setting
national (cross subsidy between
urban and rural areas)
local (full cost
recovery)
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) ?
In order to reduce costs in small towns
and villages, ONEP uses three main
contracting arrangements :
(a) Outsourcing technical
functions to local enterprises
(b) Outsourcing some retail sales
(standposts)
(a) + (b) = (c) Franchising local
small enterprises for water
distribution
(a) Outsourcing technical functions
ONEP outsources many technical
tasks to enterprises

Pumping station operation

Network inspection

Leakage detection

Field water analysis and water sample
collection

House connection…….
(a) Outsourcing technical functions
Typical enterprises contracted by ONEP
Typical micro-enterprises
age
total (202)
0 to 7 years
staff size
2 to 10 people
600 people (compared with
6000 for ONEP)
turnover
10,000 to 50,000
US $/year
5 M $/year (compared with
250 M$ for ONEP)
(a) Outsourcing technical tasks
ONEP provides strong support to
these local enterprises
support from ONEP
training
1 to 3 months
first equipment
credit
4 000 - 10 000 $ US
contracts
a big first contract (1 year of
expected turn over)
(b) Outsourcing retail sales
Outsourcing standpost management : it works,
but water sales at standposts are very low in small
towns and villages
m3/day.SP
large towns
consomm./
inhabitant
concerned
population
average
delivery
Standposts
number
Water delivery for all the ONEP standposts (year 1999)
l/day.inhab
731
8,8
436 504
14,8
small towns and
villages
1 312
2,2
512 880
5,5
total
2 043
4,5
949 384
9,8
(b) Outsourcing retail sales
60%
Standpost managers monthly incomes
(US$/month) are very low in small towns
and villages
40%
20%
60
>1
60
80
-1
0
-8
40
0
-4
16
<1
6
0%
For ONEP, the challenge is to cut
running costs for small towns,
villages and scattered 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)
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) 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)
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-enterprise manages all the functions,
downstream a bulk meter

Connecting new customers

Running equipment (including booster stations)

Recovering costs (metering / billing…)
Valve
00026
7
General
meter (ONEP
billing basis)
Extension with
kiosks and house
connections
ONEP
Main pipe
ONEP (franchisor)
management
Micro-enterprise
(franchisee) management
It looks like a franchising agreement :

The franchisee (local enterprise) :

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
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 d’Ivoire)…….and
it is also outsourcing daily management of the
systems to local sub-contractors
Water and Sanitation Services in Small
Towns and Multi-Village Schemes
Addis Ababa
June 11-15, 2002
Water and Sanitation Program
The World Bank and the World Bank Institute
Outsourcing and franchising
How ONEP (Morocco) mobilizes small
scale local enterprises to cut down
running costs
Bernard Collignon
Hydroconseil