Internal Delivery Mechanisms

1. Internal Delivery Mechanisms Module 2 What are the different options? JRT Joint Response Team - DWAF, SALGA, NT and dplg

2. Purpose of this presentation The purpose of this presentation is to: • Provide a broad overview of different internal delivery mechanisms • Explain the advantages and disadvantages of each internal mechanism • Highlight when the different internal mechanisms are appropriate

3. WSA WSP What is an internal service delivery mechanism? • The Municipal Systems Act defines an internal service delivery mechanism as: • BUT within these definitions, internal mechanisms can take many forms • Department or administrative unit • Business unit • Any other component of the municipality’s administration

4. What is a Department or Administrative Unit? • The Systems Act doesn’t provide definitions • Can be described as an arrangement where the responsibility for the delivery of the service is carried by more than one unit within the administration of a municipality • Currently it’s the most common internal arrangement • The department or administrative unit usually takes responsibility for the technical aspects of the service, while other departments or administrative units take responsibility for other aspects of the service such as financial, legal, social, human resources and the like

5. Example Water Services Department supported by other units Municipality Legal and HR Infrastructure development Customer Care Maintenance Operations Other units or departments provide support functions Billing Asset management Water Services Department is responsible for aspects of water services Meter Reading Business Planning Credit control and debt collection Budgeting

6. Example of a Administrative Unit Municipal Manager This depicts a departmental organisational design. The red arrows show the need to link water services to other support functions

7. What are the pros of a Department or Administrative Unit? • Skills can be shared across a number of municipal services (electricity, roads, water, etc. all have access to the same financial, technical, legal, etc. expertise) • Resources can be optimised • Allows an integrated approach to the package of municipal services, i.e duplication of functions in different units is avoided • It facilitates a one stop shop approach for customers • Forces interdepartmental co-operation • Whilst business practices require transformation it minimises the impact of major organisational change

8. Potential shortcomings of a Department or Administrative Unit? • Accountability for different aspects of the service (e.g. technical, financial, human resource, customer care) vests in different units and thus ultimate responsibility for service delivery is divided - with implications for internal HR and external customer relations. • May result in services rendered in a fragmented and unco-ordinated manner • The real cost of providing a specific municipal service is often unknown or difficult to ascertain • No control over support services costs • Cross-subsidisation to or from other services is unknown or difficult to ascertain and monitor These shortcomings can be overcome through appropriate management systems

9. When might a Department / Administrative Unit be appropriate? • In smaller municipalities • Where administrative capacity is low or still being established • Where separating the WSA and WSP functions are not critical to improve or enhance effective service delivery and accountability • Where skills can be shared across services

10. What is a Business Unit? • A business unit - • operates within the municipality’s administration • under council’s control, and • in accordance with operational and performance criteria of Council • The Act does not define a ‘business unit’ • It can be described as a ring-fenced unit within the municipal structure operating within a defined framework and fully accountable for all aspects of service delivery

11. Water Services Business Unit Municipality Business Planning Infrastructure development Operations Maintenance Business unit is responsible for all aspects of water services, including support functions Billing Asset management Meter Reading Legal, HR, Procurement Credit control and debt collection Customer Care

12. How does a Business Unit work? • Similar to a department or administrative unit it is an integral part of a municipality and does not have a separate legal personality • It functions as a ‘ring fenced unit’ where it makes decisions for and performs all aspects of the water service provision function including support functions such as meter reading, billing and credit control, customer care, human resource, procurement and legal functions. • Once its budget is approved by Council, its income and expenditure is ring-fenced (kept separate) and surpluses remain with the unit for the benefit of water services. • Transactions with other departments are ‘at arms length’ • The business unit focuses on water services provision and constitutes a holistic approach to rendering the service.

13. Business Units Advantages • The municipal service can easily be managed and accounted for separately • The costs of providing the service and cross-subsidisation to or from other services are known • It creates a service orientation that provides a complete single point of service to its customers • It is holistically focused on effective delivery of a specific municipal service Disadvantages • A duplication of functions may occur, e.g. different business units (electricity and water services) are undertaking credit control • Lack of sufficient skills and expertise to ring fence

14. When may a Business Unit be appropriate? Business Unit • When you want to achieve accountability for a service, for example, the unit responsible for delivering the service is also responsible for: • Long term planning to improve and expand the services • Budgeting, revenue collection, managing debt • Customer care • Reporting on financial and technical issues • When you have existing capacity to deliver the service and there is opportunity to improve management of the service • When existing inter-departmental systems are impeding service delivery, customer care and revenue collection

15. WSP WSA Decentralised Units The unit may be located within the WSA. Depending upon the size and the challenges of the municipal area a single unit may be sufficient to serve the whole area DM Operations 300km Operations But if the distances across the municipal area are very far – it may be necessary to have a centralised unit in a head office with operations decentralised in locations closer to the assets and customer.

16. WSP WSA Insufficient internal management capacity • PROBLEM: The internal WSP lacks sufficient management capacity • What are the potential solutions? 2 POTENTIAL SOLUTIONS Build the municipality’s management capacity with expert assistance (internal option) Bring in someone else to operate the municipality’s assets (external option)

17. WSP WSA Internal Option: Management Support Contract Management Support Contract Contractor • Purpose: To strengthen the management capacity of the internal WSP option • Obligations of contractor: • Building the capacity of the WSP • Put necessary systems in place • Train personnel • Develop operational capacity • Develop measures for performance • Final outcome: Capacitated internal mechanism

18. WSA External Option: Management Contract Management Contract WSP • Purpose: To appoint someone else to undertake the water services provision function (external WSP) • Obligations of contractor: • Operate and maintain the water works (system) • Deliver water services to the customers • Collect revenue and manage the budget • Achieve agreed upon key performance indicators (KPIs) • Report against KPIs • Manage staff • May include extension of infrastructure / services • Final outcome: Delivery of service for a specified period of time (including KPIs to improve existing performance)

19. WSP WSA Keeping it internal – but addressing the problem POOR REVENUE COLLECTION Revenue Enhancement Contract Contractor • Purpose: To strengthen the revenue collection of the internal WSP option • Features: • Procured by the WSP • Is not subject to S78 (since the contractor is procured to provide support services not water services) • Is subject to supply chain management (in terms of MFMA requirements – needs) • Final outcome: Capacitated internal mechanism

20. Serving deep rural? Accessible?

21. WSP WSA Serving deep rural? Far away DM Contract depends on the tasks that need to be performed on behalf of the WSP. The tasks will determine who the contractor should be, for example an individual operator, a CBO, a tribal authority, an entity with greater technical capacity, and so on. Support Services Contract Contractor (water services agent)

22. Using CBOs as part of an internal mechanism • It is possible to use CBOs as the decentralised service delivery agent of the WSP if: • WSA still remains the WSP, assisted by the CBO • CBO acts as an agent and not as external mechanism • Since CBOs tend to fulfil functions where the risk is limited, for example daily operations, minor repairs, they can be appointed as an agent of the internal mechanism.

23. Status of LMs no longer authorised for water services • What is the WSP status of an LM that has been providing water services, but after the division of powers and functions, is no longer a WSA? DM = WSA DM is the WSA for the entire district area LM LM LM LMs’ WSA power is shifted to the DM when it is no longer authorised for the water and sanitation functions Local municipality LM

24. Implications of water services powers and functions to the DM • All the water services staff, assets and liabilities of the LMs tranferred by law to the DM as of 1 July 2003 • Thus, the DM becomes the employer of the staff and the owner of the assets and liabilities - even if the water services staff and assets remain in the jurisdiction of the local municipality (e.g. continue operating from the LM’s offices) • This means that when the DM conducts its internal assessment, it must include the water services staff and assets which may practically operate at the LM as part of its internal assessment.

25. LMs as part of internal delivery mechanism • Decentralised service delivery units can operate within the administration of the LM. The units deliver services locally but they are centrally controlled by the DM • This is an internal delivery mechanism DM = WSA Water services staff and assets are ring-fenced and are part of the DM’s internal assessment LM LM LM LM LM

26. Benefits of a decentralised internal mechanism • The capacity to deliver water services stays ‘local’ • Minimise the risk of losing staff as a result of relocation within the District • The DM can optimise its skillsto manage service provision • The DM can manage issues of cross subsidisation and economies of scale over its entire jurisdiction • The model is relatively straight forward to implement – an external assessment and a feasibility study [s78(3)] are not required • Minimal disruption to service delivery and staff morale

27. S78 where LMs are not authorised for water services s Recommendations: • Water services capacity of LMs must be properly ring fenced in the Status Quo Assessment • This capacity must be treated as part of the DM’s water services capacity in the assessments • The option of an internal mechanism with a service level agreement with the LM for support services to be considered as a variation to the internal option

28. Ways to use LMs in water services provision There are two ways to use LMs: • You can use them to provide support services (for example billing, customer care, legal services) to a decentralised internal mechanism • You can appoint them as an external mechanism in terms of a service delivery agreement (SDA)

29. Using an LMs for Support Services When is this appropriate? • When the LM has support service capacity • When that capacity is needed in that locality • Most likely, when the LM has previously provided water services, and is geared up for supporting water services provision The arrangement • The DM provides the water services (operations, maintenance, meter reading, customer care) – this may vary from municipality to municipality … through a decentralised unit • The LM provides support services (billing, IT support, office space, and so on) through a Service Level Agreement

30. Thank You!