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TOWARDS PERFORMANCE BASED UTILTY SECTOR IN ARMENIA: CASE OF DRINKING WATER SUPPLY SERVICES  By Lianna Mkhitaryan
THE GOAL OF THE RESEARCH The research : Investigates how performance  management increased efficiency, effectiveness and overall quality of the water supply services; how input, activity level, output and outcome targets are used; identifies  existing gaps in the coverage and implementation ; has gathered and analyzed citizen perception, satisfaction with services and citizens’ expectations met by service provision.
CONTEXT INFORMATION  Problems with water supply in urban and rural communities: shortage of water; intermittent supply; low pressure due to leakages in the transmission and distribution networks; poor quality of drinking water.
CONTEXT INFORMATION Supply side  of services: technological backwardness of the mechanical and electrical equipment; old and worn infrastructure; outdated system designs and standards. Demand side  of services: low wages and pensions of the population.
WATER SECTOR REFORMS  Reforms started in 2001 with the adoption of the Decree  “On Reforms of Water System Management” and establishment of SCWS; adoption of the new “Water Code” in 2002; transfer of the tariff setting functions to PSRC; legislative changes enabling private sector involvement and water sector commercialization; decentralization and privatization, development of the investments policies.
SYSTEMS OF WATER SUPPLY Centralized supply provided by five WSCs (80% of the population ): Yerevan-Jur CJSC (YWSC); Armenian Water and Sewerage CJSC (AWSC);  Shirak Water and Sewage CJSC (SWSC); Lori Water and Sewage CJSC (LWSC); Nor Akunk CJSC. 2) Municipal supply/rural areas.
PERFORMANCE MANAGEMENT Objectives:  to improve efficiency, effectiveness and overall quality of the services and  make  monitoring and evaluation more precise and objective. It focuses on results valued by citizens, measured in terms of citizen satisfaction  and involves citizens  in decision making  process. Includes: definition of performance objectives and targets; measurement and reporting actual performance. Results: improved control, increased accountability and savings.
PERFORMANCE INDICATORS 6 categories:  physical, service quality, financial, operational, personnel and environmental. Are developed by the WB and IWA  and serve as a basis for providers; WSCs develop their own lists of PIs taking into consideration their objectives and priorities and local contexts for monitoring and benchmarking purposes.
YWSC serves 1,3 million inhabitants (Yerevan and 32 rural communities ); 50 % of the total water supply; is managed under 10-year lease contract awarded to the French company “Generale des Eaux”, Veolia Water; the investment projects are financed by loans provided by the WB and French Government.
1. PIs in YWSC Source: SCWR Performance Indicator Before Private Sector Involvement At the End of the  Management Contract with  ACEA  –  A.  Utilities After 2.5 Years of Lease Contract  with “Generale des Eaux”, Véolia Water Average duration of water supply  4-6 hours 18.4 hours 20.35 hours Energy consumption 240.3 mln kWh 124.2 mln kWh 115.3 mln kWh Installed water meters 3 856 379 580 401 100 Average water consumption  By norm 250 lcd Actual 797 lcd 110 lcd 87.3 lcd User fee collection rate 20.9% 79% 90.3%
AWSC Serves 37 urban and 264 rural communities (around 700,000 inhabitants in all 10 marzes); accounts for nearly 22 % of the total water supply; Is managed by the French company SAUR based on management contract;  investment projects are financed by loans provided by the WB, EBRD, ADB, USAID, RA Government and company funds.
2. PIs in AWSC Source: SCWR Performance Indicator Before Private Sector  Involvement, (2004) After 5 years of Management Contract with SAUR   Average duration  of water supply  6.0 hours 12.20 hours Energy consumption 0.43 kWh/m 3 0.29 kWh/m 3 Installed water meters 40.0% of subscribers 65.0% of subscribers Average water consumption, lcd Not used Not used User fee collection rate 47.95% 78.2% Number of customers paying 53,000 115,000 Average water bacteriological safety compliance 61.0% 92.0%
SWSC, LWSC, Nor Akunk  SWSC serves the population of Shirak marz (more than 280,000); LWSC  serves the population of Lori marz  (more than 280,000); Nor Akunk serves urban and rural  communities  in  Armavir  marz  (near 100,000); companies are managed in the framework of partnership agreement between the state and German KfW development bank; 51 % of state shareholding and 49% of community.
3. ENVISAGED PIs IN SWSC Source:  SCWS Performance Indicators Project Area Average duration  of water supply  Reconstructed areas -24h;  other areas increase from 1h to 3h daily per year Compliance to water quality standards Maximum 6 tests p.a. do not comply with standards Water losses 1 st  year - max. 80%  2 nd  year - new network: <35%;  old network: max.75% 3 rd  year - new network: <30%; old network: max.70% Improvement of user fee collection rate in 2008 comprised 67%  1 st  year  ≥ 70% 2 nd  year  ≥ 80% 3 rd  year  ≥ 90%
CITIZEN EXPECTATIONS MET BY SERVICE PROVISION?: MONITORING PROGRESS Performance management focuses: on results valued by citizens;  involve citizens in decision making process; measures success in terms of citizens’ satisfaction. Evaluation criteria:  access to information, transparency and accountability, accessibility, timeliness, availability, affordability of services , value for money, redress, responsiveness, conformation to standards.
CITIZEN EXPECTATIONS MET BY SERVICE PROVISION?: MONITORING PROGRESS  Source:  survey of 296 households in 37 communities in Shirak, Gegharkunik and Kotayk marzes  (June – September 2009).
CITIZEN EXPECTATIONS MET BY SERVICE PROVISION?:  SUMMARY OF FINDINGS The research revealed: still insufficient citizens’ access to information; absence of redress mechanisms; lack of citizens’ initiative, fear of possible adverse consequences and underdeveloped participation mechanisms brings to inability to demand better services from the relevant agencies within the limit of available recourses.
SUMMARY OF FINDINGS Established  PPPs  are managed in accordance with performance-based contracts that enabled : to attract external financing and diminish dependence on state subsidies; to increase efficiency and payment discipline. The  PPPs: have different level of service delivery efficiency and use combinations of different output and outcome targets identified on the basis of importance and practicality in implementation; define and link expenditures to each output or outcome targets and sectoral strategic goals.
1.RESULTS OF PERFORMANCE MANAGEMENT Objectives  Characteristics Results on Project Level Results on Organizational Level 1. Efficiency  and  effectiveness   and  internal control  and/or  accountability Focus on outputs and outcomes (results and effects); availability of performance  information Recovery of operation and maintenance for all  projected urban and rural communities; improved access to safe, reliable and sustainable water supply; improved duration of supply Improved technical, financial, and managerial capacity and operating efficiency of WSCs; rehabilitated, replaced, and/or extended WSS; optimized operation of the existing infrastructure; constructed new infrastructure;  improved personnel working conditions;  some increase in salaries;  limited public satisfaction with the quality of services
2.RESULTS OF PERFORMANCE MANAGEMENT Objectives  Characteristics Results on Project Level Results on Organizational Level 2. Improved decision making  in the budget process, and/or allocation of resources and  external accountability Focus on performance budgeting Improved decision making in the budget process and internal allocation of resources  Commercially-oriented operations; increased financial autonomy; meters installed to bulk and domestic consumers; increased tariff collection efficiency; reduced non-revenue water
3-4. RESULTS OF PERFORMANCE MANAGEMENT Source: prepared by author Objectives  Characteristics Results on Project Level Results on Organizational Level 3. Improved external transparency and accountability  to higher administrative levels  and public Focus on the public availability of information Still insufficient public access to information Citizens’ discontent with public access to information 4. Savings Focus on input side of operations Technical and financial management training provided to  personnel of WSCs and communities covered and not covered by WSCs Enhanced workforce skills; decreased number of employees
SUMMARY OF FINDINGS PPPs.  Used policy level PIs (average consumption, etc), financial Pis (collection efficiency, working ratio, etc), operational (UfW, average duration, coverage, etc) are: well defined, measurable and achievable; monitored and updated; have been reached or shown continuous improvement. Absence of PIs measuring service improvement /pipe brakes (km/yr), reaction to major breakdowns (h/yr)/ and enhancing employee motivation and performance gives mixed quality of evaluation. LG providers.  Demonstrate insufficient technical and managerial capacity to implement performance management.
RECOMMENDATIONS To better meet consumers’ expectations the WSC need to undertake more initiatives to treat service users as customers through: increasing number of indicators related to water quality; increasing information accessibility in marzes; holding persons/organizations responsible at every level of service provision; ascertaining awareness about the real cost of services to public; national standards must be defined and published, so that users can know what to expect from providers.

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Towards The Result Based Utility Sector In Armenia

  • 1. TOWARDS PERFORMANCE BASED UTILTY SECTOR IN ARMENIA: CASE OF DRINKING WATER SUPPLY SERVICES By Lianna Mkhitaryan
  • 2. THE GOAL OF THE RESEARCH The research : Investigates how performance management increased efficiency, effectiveness and overall quality of the water supply services; how input, activity level, output and outcome targets are used; identifies existing gaps in the coverage and implementation ; has gathered and analyzed citizen perception, satisfaction with services and citizens’ expectations met by service provision.
  • 3. CONTEXT INFORMATION Problems with water supply in urban and rural communities: shortage of water; intermittent supply; low pressure due to leakages in the transmission and distribution networks; poor quality of drinking water.
  • 4. CONTEXT INFORMATION Supply side of services: technological backwardness of the mechanical and electrical equipment; old and worn infrastructure; outdated system designs and standards. Demand side of services: low wages and pensions of the population.
  • 5. WATER SECTOR REFORMS Reforms started in 2001 with the adoption of the Decree “On Reforms of Water System Management” and establishment of SCWS; adoption of the new “Water Code” in 2002; transfer of the tariff setting functions to PSRC; legislative changes enabling private sector involvement and water sector commercialization; decentralization and privatization, development of the investments policies.
  • 6. SYSTEMS OF WATER SUPPLY Centralized supply provided by five WSCs (80% of the population ): Yerevan-Jur CJSC (YWSC); Armenian Water and Sewerage CJSC (AWSC); Shirak Water and Sewage CJSC (SWSC); Lori Water and Sewage CJSC (LWSC); Nor Akunk CJSC. 2) Municipal supply/rural areas.
  • 7. PERFORMANCE MANAGEMENT Objectives: to improve efficiency, effectiveness and overall quality of the services and make monitoring and evaluation more precise and objective. It focuses on results valued by citizens, measured in terms of citizen satisfaction and involves citizens in decision making process. Includes: definition of performance objectives and targets; measurement and reporting actual performance. Results: improved control, increased accountability and savings.
  • 8. PERFORMANCE INDICATORS 6 categories: physical, service quality, financial, operational, personnel and environmental. Are developed by the WB and IWA and serve as a basis for providers; WSCs develop their own lists of PIs taking into consideration their objectives and priorities and local contexts for monitoring and benchmarking purposes.
  • 9. YWSC serves 1,3 million inhabitants (Yerevan and 32 rural communities ); 50 % of the total water supply; is managed under 10-year lease contract awarded to the French company “Generale des Eaux”, Veolia Water; the investment projects are financed by loans provided by the WB and French Government.
  • 10. 1. PIs in YWSC Source: SCWR Performance Indicator Before Private Sector Involvement At the End of the Management Contract with ACEA – A. Utilities After 2.5 Years of Lease Contract with “Generale des Eaux”, Véolia Water Average duration of water supply 4-6 hours 18.4 hours 20.35 hours Energy consumption 240.3 mln kWh 124.2 mln kWh 115.3 mln kWh Installed water meters 3 856 379 580 401 100 Average water consumption By norm 250 lcd Actual 797 lcd 110 lcd 87.3 lcd User fee collection rate 20.9% 79% 90.3%
  • 11. AWSC Serves 37 urban and 264 rural communities (around 700,000 inhabitants in all 10 marzes); accounts for nearly 22 % of the total water supply; Is managed by the French company SAUR based on management contract; investment projects are financed by loans provided by the WB, EBRD, ADB, USAID, RA Government and company funds.
  • 12. 2. PIs in AWSC Source: SCWR Performance Indicator Before Private Sector Involvement, (2004) After 5 years of Management Contract with SAUR Average duration of water supply 6.0 hours 12.20 hours Energy consumption 0.43 kWh/m 3 0.29 kWh/m 3 Installed water meters 40.0% of subscribers 65.0% of subscribers Average water consumption, lcd Not used Not used User fee collection rate 47.95% 78.2% Number of customers paying 53,000 115,000 Average water bacteriological safety compliance 61.0% 92.0%
  • 13. SWSC, LWSC, Nor Akunk SWSC serves the population of Shirak marz (more than 280,000); LWSC serves the population of Lori marz (more than 280,000); Nor Akunk serves urban and rural communities in Armavir marz (near 100,000); companies are managed in the framework of partnership agreement between the state and German KfW development bank; 51 % of state shareholding and 49% of community.
  • 14. 3. ENVISAGED PIs IN SWSC Source: SCWS Performance Indicators Project Area Average duration of water supply Reconstructed areas -24h; other areas increase from 1h to 3h daily per year Compliance to water quality standards Maximum 6 tests p.a. do not comply with standards Water losses 1 st year - max. 80% 2 nd year - new network: <35%; old network: max.75% 3 rd year - new network: <30%; old network: max.70% Improvement of user fee collection rate in 2008 comprised 67% 1 st year ≥ 70% 2 nd year ≥ 80% 3 rd year ≥ 90%
  • 15. CITIZEN EXPECTATIONS MET BY SERVICE PROVISION?: MONITORING PROGRESS Performance management focuses: on results valued by citizens; involve citizens in decision making process; measures success in terms of citizens’ satisfaction. Evaluation criteria: access to information, transparency and accountability, accessibility, timeliness, availability, affordability of services , value for money, redress, responsiveness, conformation to standards.
  • 16. CITIZEN EXPECTATIONS MET BY SERVICE PROVISION?: MONITORING PROGRESS  Source: survey of 296 households in 37 communities in Shirak, Gegharkunik and Kotayk marzes (June – September 2009).
  • 17. CITIZEN EXPECTATIONS MET BY SERVICE PROVISION?: SUMMARY OF FINDINGS The research revealed: still insufficient citizens’ access to information; absence of redress mechanisms; lack of citizens’ initiative, fear of possible adverse consequences and underdeveloped participation mechanisms brings to inability to demand better services from the relevant agencies within the limit of available recourses.
  • 18. SUMMARY OF FINDINGS Established PPPs are managed in accordance with performance-based contracts that enabled : to attract external financing and diminish dependence on state subsidies; to increase efficiency and payment discipline. The PPPs: have different level of service delivery efficiency and use combinations of different output and outcome targets identified on the basis of importance and practicality in implementation; define and link expenditures to each output or outcome targets and sectoral strategic goals.
  • 19. 1.RESULTS OF PERFORMANCE MANAGEMENT Objectives Characteristics Results on Project Level Results on Organizational Level 1. Efficiency and effectiveness and internal control and/or accountability Focus on outputs and outcomes (results and effects); availability of performance information Recovery of operation and maintenance for all projected urban and rural communities; improved access to safe, reliable and sustainable water supply; improved duration of supply Improved technical, financial, and managerial capacity and operating efficiency of WSCs; rehabilitated, replaced, and/or extended WSS; optimized operation of the existing infrastructure; constructed new infrastructure; improved personnel working conditions; some increase in salaries; limited public satisfaction with the quality of services
  • 20. 2.RESULTS OF PERFORMANCE MANAGEMENT Objectives Characteristics Results on Project Level Results on Organizational Level 2. Improved decision making in the budget process, and/or allocation of resources and external accountability Focus on performance budgeting Improved decision making in the budget process and internal allocation of resources Commercially-oriented operations; increased financial autonomy; meters installed to bulk and domestic consumers; increased tariff collection efficiency; reduced non-revenue water
  • 21. 3-4. RESULTS OF PERFORMANCE MANAGEMENT Source: prepared by author Objectives Characteristics Results on Project Level Results on Organizational Level 3. Improved external transparency and accountability to higher administrative levels and public Focus on the public availability of information Still insufficient public access to information Citizens’ discontent with public access to information 4. Savings Focus on input side of operations Technical and financial management training provided to personnel of WSCs and communities covered and not covered by WSCs Enhanced workforce skills; decreased number of employees
  • 22. SUMMARY OF FINDINGS PPPs. Used policy level PIs (average consumption, etc), financial Pis (collection efficiency, working ratio, etc), operational (UfW, average duration, coverage, etc) are: well defined, measurable and achievable; monitored and updated; have been reached or shown continuous improvement. Absence of PIs measuring service improvement /pipe brakes (km/yr), reaction to major breakdowns (h/yr)/ and enhancing employee motivation and performance gives mixed quality of evaluation. LG providers. Demonstrate insufficient technical and managerial capacity to implement performance management.
  • 23. RECOMMENDATIONS To better meet consumers’ expectations the WSC need to undertake more initiatives to treat service users as customers through: increasing number of indicators related to water quality; increasing information accessibility in marzes; holding persons/organizations responsible at every level of service provision; ascertaining awareness about the real cost of services to public; national standards must be defined and published, so that users can know what to expect from providers.