The Decision No. 660, on the “Transfer of shares of water and sewer utilities to local government units” taken by the Council of Ministers of the Albanian Government (GoA) on September 12, 2008, has finally executed the provisions of the organic law of local government (Law no. 8652, date July 31, 2000, “On the organization and functioning of local government units in Albania”), thus making a major step forward towards decentralization of water and wastewater sector in Albania.The MPWTT is committed to make effective the decentralization of the sector and support the process by developing a standard Performance Agreement Model to build upon the existing document provided by the Inter-Ministerial Working Group, that would facilitate regulation of relationships of LGUs, as new owners, with utilities, as service providers, as well as a Performance Based Investment Transfer Scheme (PITS) as a legal mechanism for the allocations of capital investments to target strengthening of financial and operational performance of utilities.
|
|
The Urban Research Institute is contracted by the MPWTT to carry out the completion of the objectives as set forth in the Terms of Reference that stand on the bases of the contract.
The above specified main objectives shall be achieved by completing the following tasks:
Task 1: Review and improve on the existing standard Performance Agreement Model between a given utility, and the owners of the shares of the same utility. In doing so, the consultant will suggest, working closely with the other consultant to devise rules and regulations to institutionalize the implementation of Business Plans and Performance Agreements. The document will be guided, but not limited, by the principles and structure as set forth in the PNAP. It shall:
- Define the main directions of development of the utility aiming to achieve the targets set forth in the PNAP in the shortest possible time;
- Define utility development goals and resources;
- Define the role of Local Governments, and the Utility, to reach these goals, and the need for other resources including domestic and foreign investments;
- Define a specific schedule for the reduction of operating subsidies from Central Government to the utility by not less than ten percent (10%) per year, with the intent of phasing out Central Government operating subsidies altogether during the next four coming years;
- Commit the LGU’s and the Utility to reducing operating deficits by a corresponding amount, without significant sacrifices in service quality;
- Commit the LGU’s to retaining the Service Area of the Utility for at least two years in order to avoid unnecessary fragmentation;
Task 2: Assist the five utilities, selected to develop a business plan in the development and completion of their respective Performance Agreements. The Consultant shall prepare draft performance agreements for each of the five pilot utility companies and assist stakeholders to adopt and endorse it according to the roles and responsibilities that each one of the parties is obliged to play within its implementation.
Task 3: Review the current competitive grant mechanism and system of allocation of capital investment in the water sector and assist and design a Model for the Performance-Based Investment Transfer Scheme (PITS) that would help consolidate the flows of capital investments. Where needed, amendment to the current competitive grant scheme in the Annual Budget Law and in the respective Government Guidelines for the implementation of the Annual Budget Law will be introduced. The Consultant will also prepare the methodology standard documents for the preparation of new projects to be financed under the PITS. The Consultant is responsible for proposing a formula for the PITS allocation, which will have a component of performance, and a component of non-performance, to consider:
- The performance based part of the allocation criteria should assess performance of utilities, against pre-defined targets in the Performance Agreement.
- The non-performance based part of the criteria should be based on need (in the sense of focusing investment in places with the lowest level of coverage, the fewest hours of service, the lowest water quality and/or severe poverty exist;
- A scheme for allocation of subsidies shall be proposed, taking into account both, i.e., the non performance based need for subsidies and the remaining gap for covering operation and maintenance cost according to the plan for reducing subsidies.
Task 4: Assist the five utilities that are selected to develop a business plan, in the preparation of application documents for new projects to be financed under the PITS that are consistent and supported by the documented and approved business plans.
Task 5: Another task requires to URI to coordinate with the Business Planning Consultant to develop a standard methodology aimed at defining the main performance and needs based criteria and the methodology for monitoring the performance of the utilities, consistent with the business plans and performance improvement programs that they each contain. The methodology to be developed by the Consultant shall:
- Define from a sensitive analysis standpoint the main factors (gradients) that water utilities must consider in order to achieve the targets set forth in the PNAP in the shortest time;
- Indicate and define the specific key performance criteria to be considered to be used to measure the performance of specific utilities;
- Prepare the methodology for monitoring the performance of the Company.
|
