Lessons from the Compact

Place greater emphasis on implementing entity capacity and incentives in order to maintain infrastructure assets, implement policy reforms, and ensure the sustainability of MCC’s investments. Sustainable practices can be improved by an incentive structure that motivates the utility to perform on a commercial basis and through technical assistance for institutional strengthening and capacity development. In Zambia, preliminary review of the outputs of institutional strengthening efforts on non-revenue water reduction, asset management, social inclusion and gender mainstreaming/IEC and drain maintenance indicated that these initiatives have yet to demonstrate uptake of long-term sustainable practices. Several key factors could have improved the effectiveness of the institutional strengthening activity:

1. Appropriate project management structure, with designated organizational roles at the MCA to support institutional reform and capacity building activities separately from and yet in close coordination with infrastructure activities. At MCA-Zambia, one infrastructure director was assigned to manage both infrastructure and institutional strengthening activities. Managing infrastructure occupied a significant portion of the director’s attention, while insufficient time was allocated to working closely with the implementing entities to ensure successful implementation and ownership of the institutional strengthening technical assistance;
2. The compact should have included all relevant regulators. In Zambia, the water regulator was not part of the compact. It should have been included as an implementing entity to help provide the right incentive structure given their role in ensuring technical and financial performance to LWSC;
3. Depending on the specific project and country context, MCAs should place implementing entity staff in the organizational structure and physically embed them in the MCA office to ensure that there is a high level of coordination with implementing entities. Implementing entity agreements should include requirements and funding for new implementing entity staff to support both infrastructure activities and institutional strengthening/policy reform activities. This staff should also play an important role in the handing over of completed infrastructure projects, following up on policy reforms, and ensuring that implementing entities have budgeted and staffed for operating and maintaining new and refurbished compact assets. (Note: MCA did have some implementing staff embedded in the office but their roles and responsibilities were not adequately developed.);
4. Design a better balance between investments in technical solutions on the one hand and social policies and behavior change on the other, as the latter are critical to the risk management and sustainability of the former. To ensure connections, service uptake, and behavior change, implementing entities such as LWSC and LCC need to (a) develop structures, policies, and procedures that will enhance their ability to provide appropriate, affordable, and sustainable services for the poor; (b) identify information, education, and communications (IEC) needs for water and sanitation, and solid waste management and drainage, respectively, and (c) develop and manage IEC systems that promote behavior change. While substantial work on these policies and programs was undertaken, and initial monitoring and evaluation reports indicate their successful adoption by the implementing entities, this work was under-resourced relative to the scale of response required by LWSC and LCC to meet the service needs of the targeted communities and to ensure sustainability of infrastructure.

Leverage investment master plans. Investment master plans for both water supply and sanitation were drawn up during the development of the Zambia Compact, and a stormwater management master plan was developed during compact implementation. These master plans not only helped the GOZ prioritize MCC investments, but also added significant value beyond the compact investment by outlining clearly to the private sector and donor community where funding was necessary, resulting in hundreds of millions of dollars of leveraged funding. If no relevant sector investment plans exist, they should be prepared during compact development. And if they do exist, they should be used to help prioritize compact investments.

Consider using incidence analysis to inform beneficiary identification. Even before master plans were available, MCC’s project design and due diligence process would have benefited from an incidence analysis study linking water and sanitation sector expenditures with associated physical outputs and levels of service and access enjoyed by different classes of consumers. Such work could highlight inequalities across the population and serve to inform strategies for selecting potential beneficiaries. This analysis could inform estimates of likely levels of subsidy needed to defray the costs of initial connections to the water and sewerage networks. An extension of such work, moreover, could include an examination of institutional capacity and operational effectiveness to increase MCC’s understanding of planning, budgeting, and spending (for both capital investments and O&M expenditures) and the association of these factors with key sectoral performance metrics.

Use conditions precedent to drive sustainability, but don’t sacrifice flexibility. Conditions precedent (CPs) are an essential tool to strengthen implementing entities, thus supporting the sustainability of these institutions and securing lasting benefits from MCC’s compact investments. However, CPs must be flexible enough to allow MCC and MCA to adjust to changing conditions on the ground. For example, installing bulk pre-paid meters on approximately 200 government buildings was a condition precedent before the Zambia Compact could enter into force. This CP was designed to eliminate reoccurring arrears and improve the financial viability and sustainability of the water utility. However, it was a prescriptive solution to a symptom of a larger and complex management challenge. That management challenge needed more due diligence and understanding, which might have revealed better solutions prior to the design of the CP. A more effective approach would address the root issue and lead to a permanent resolution to the GOZ’s arrears to the utility. The method to satisfy the CP should be collaboratively developed and adapted over time with the parties before the CP deadline. In the case of this compact some CPs had to be changed to create a more effective outcome pathway.

Plan adaptability into dynamic urban construction environments. Public urban environments are multi-layered systems that include utility services, vehicle and pedestrian traffic, and public and private interests. A city without planning, like Lusaka, is characterized by unpredictable and rapidly changing land use, irregular traffic flows, a lack of legal easements, and utility corridors without georeferenced locations. All these characteristics are risks in the planning, design, and construction of infrastructure. Urban work requires significant upfront planning to locate and negotiate utility crossings, traffic disruptions, community reactions, and safety concerns. Procurement methods that consider more than just cost can support adaptive approaches. Urban works need contractors with experience in challenging environments; a selection that is partly or wholly based on quality may be considered to improve construction outputs.

Adopt a flexible, just-in-time approach to resettlement in urban contexts. In unplanned and rapidly changing urban environments, it is difficult to identify the people who will be affected by the project until detailed designs are complete and the project impact area has been physically identified and marked. When the construction works occur months or years after resettlement planning is conducted there is a high risk that circumstances on the ground in the construction corridor will have changed considerably at the time of construction, and that earlier plans and related cost estimates will prove inaccurate. Close coordination between key parties is necessary so that contractors can segment and sequence their work with just-in-time resettlement efforts. Dynamic population growth and implementation delays can both lead to dramatic changes in the final design and resettlement impacts. At the beginning of the Zambia Compact, the resettlement budget was roughly $6.7 million, and it was estimated that there would be 1,600 project-affected people. By the end of the compact, the budget increased to $26.3 million with 5,167 project-affected people. The difference was due to changes in construction design, rapid growth in Lusaka, and a two-year lag between the original resettlement plans and construction implementation, illustrating how work in a dense, dynamic urban environment requires a more nimble and adaptive approach to estimating costs and planning budgets.

Integrate stakeholder engagement throughout compact implementation. MCA integrated several MCC stakeholder engagement requirements into one overall stakeholder engagement plan that clearly defined roles and responsibilities while not overburdening MCA with excessive bureaucracy. Stakeholder consultation and engagement should be addressed in the design of the project and in the corresponding budget. MCA’s early and inclusive consultation helped minimize the number of grievances, garnered support for the project, and facilitated the resettlement and construction processes despite the large increase in the number of people who were affected by resettlement. Consistent, two-way engagement with stakeholders, particularly those who are directly impacted by construction, promotes positive outcomes for the community and the compact.

Carefully consider whether to use a grant facility to strategically complement compact investments. In Zambia, the Innovation Grant Program (IGP) was intended to complement compact investments. It funded sanitation projects that allowed households to connect to compact-financed wastewater networks, and it supported solid waste projects to reduce litter in Lusaka and help ensure sustainability of compact drainage investments. In addition, it identified a water supply project that allowed the compact to test a model for the provision of clean water outside of the major infrastructure investments. By providing more flexible funding instruments for partnerships and demand-driven projects, the IGP was a tool with potential for high impact. However, the execution and oversight processes could have been streamlined to reduce the time and cost of administering the facility. Increased standardization of grant-making processes and learning from other institutions on the best grant-making approaches should be a priority for future grant facilities. Indeed, MCC has already begun these efforts, particularly for grant facilities which are leveraged by the private sector. In some contexts, MCC might also consider partnering with other institutions, such as those that have significant experience in very small, community-based grants.

Develop evidence-based approaches to meet user connection targets for MCC-financed infrastructure, such as sanitation networks. The Zambia Compact did foresee the need to support households in connecting to the wastewater network, and it asked the GOZ to dedicate funds for these efforts. However, the compact did not specify an approach to achieve connection targets. As a result, the strategy wasn’t laid out until the compact was already in implementation, and the resources to design and execute the program (e.g., MCA staffing for oversight) were insufficient. The connection work was, however, of critical importance. Without a successful approach to getting households hooked up to the sewer system, the compact could not achieve its desired results in terms of improved sanitation. Furthermore, sewers require a certain minimum flow through the system in order to function optimally, so insufficient user connections will jeopardize the infrastructure operations. The importance of user connections to the infrastructure suggests that more emphasis should have been placed on utility policies and practical support to help households overcome affordability barriers that made it difficult for them to connect to the network and build an appropriate toilet. Also important is preparing household-level water and sanitation connection outreach during compact development, with more resources provided for development of IEC materials and execution of outreach campaigns during implementation. In addition, implementation actors focused on infrastructure should be sensitized to the importance of engaging with those responsible for outreach and connection activities so that works and outreach may be coordinated through integrated work planning.

Establish voluntary female employment targets for the temporary employment opportunities created by MCC-financed infrastructure works. Globally, women represent only 10 percent of the workforce in construction jobs. In the U.S., they are 9 percent of the construction workforce and in Zambia only 3 percent. MCA was able to broaden access to the temporary employment generated through compact investments by encouraging contractors to hire women (as well as to hire from local communities). This was done through explicit language in standard bidding documents encouraging the employment of women, strong implementation and oversight structures on site, and high level managerial support—all of which were simple steps that brought visible impact. The works contracts set a voluntary target of 30 percent female employment as well as requirements for compliance with working conditions standards. These measures resulted in women holding approximately 22 percent of the jobs created under the construction works. Women worked in a range of occupations—as professionals, managers, skilled, semi-skilled, and unskilled workers. MCC will continue to improve upon this approach to ensure broad access to employment opportunities stemming from compact investments in other partner countries.

Provide prescriptive health and safety guidance early for proactive impact. Globally, construction health and safety is a regulated government function. In developing countries, however, donors are challenged to require health and safety controls because government institutions are insufficiently robust in policies and implementation. MCC developed, and MCA chose to accept, a prescriptive health and safety program for the Zambia Compact. Prepared well in advance of construction, it included a Health and Safety Manual as part of the Invitation for Bids. The program fostered a culture of safety, and it supported MCA’s capacity to invest in staff and in measures to manage health and safety during the construction phase of the project. As a means to strengthen health and safety programs for other infrastructure projects in developing countries, the Health and Safety Manual should be updated to 1) take into account local practices, 2) match the type of infrastructure activity (e.g., water, roads, power, etc.), and 3) be user-friendly for developing countries.

Set realistic expectations for health benefits from WASH investments. There is no question that a clean water supply, adequate sanitation, and good hygiene practices are crucial to public health. However, it is important to set realistic expectations for the health benefits that can be achieved through any single WASH intervention, and for the time frame over which these benefits may appear. Exposure to waterborne disease comes through multiple pathways—including not only every drink of water throughout the day, but also food, swimming, bathing, dirty hands, flies, irrigation water and manure fertilizers in garden plots, etc.— and it is the cumulative dose across all these pathways that determines whether a person gets sick. The relationship between the incidence of illness and exposure to enteric pathogens is non-linear: public health literature tells us that even a very large decrease in exposure will generate no health benefit at all if the residual exposure is still high enough to make people get sick regularly. Eliminating the dominant exposure pathway is not necessarily sufficient to reduce the incidence of disease if the remaining exposure pathways are big enough. But at some point, a small additional decrease in exposure will bump the system over the threshold, and with overall exposure to disease-causing organisms being low enough, each additional reduction in exposure will correspond to a visible health benefit. This system is illustrated in Figure 3. Expecting that health benefits will appear shortly after the completion of an MCC WASH project assumes that MCC’s investment will be the one to bump the system over the threshold. The non-linear nature of the system poses an additional challenge: it is difficult to know how to value the benefits of a WASH investment that makes a permanent and significant dent in exposure without achieving measureable health outcomes, even though it has laid the foundation for a future project to see health benefits from an additional small exposure reduction that would not otherwise have been significant enough to matter.