WATER AND SANITATION FOR THE URBAN POOR
(WSUP)
BUSINESS CASE
EDRM no. 3568211
October 2012
EDRM no. 3568211
Contents
List of Abbreviations ............................................................................................... 3
Business Case and Intervantion Summary............................................................. 5
Strategic Case ........................................................................................................ 7
A: Context and Need for DFID Intervention ........................................................ 7
B: Impacts and Outcomes ................................................................................. 15
Appraisal Case ..................................................................................................... 17
What are the feasible options that address the need set out in the strategic
case? ................................................................................................................ 17
Strength of Evidence for each Feasible Option ................................................. 27
Environmental Appraisal ................................................................................... 28
What is the likely impact (positive and negative) on climate change and
environment for each feasible option? ........................................................... 28
Social Appraisal ................................................................................................ 29
Summary Value for Money Statement for the preferred option ......................... 31
Commercial Case ................................................................................................. 32
Financial Case ...................................................................................................... 37
Management Case ............................................................................................... 48
Risk Assessment .................................................................................................. 56
References ........................................................................................................... 60
Annex 1: WSUP Programme Strategy 2011 – 2016
Annex 2: WSUP Models
Annex 3: Members’ Contributions
Annex 4: Logical Framework for Results
Annex 5: WSUP Approach to Mobilising Funds
EDRM no. 3568211
List of Abbreviations
AFD
Agence Francaise de Development (The French Development
Agency)
AusAid
The Australian Government Overseas Aid Programme
DALY
Disability Adjusted Life Year
DEVCO
Infrastructure Development Collaboration Partnership Fund
DGIS
Netherlands Ministry of Foreign Affairs
EIB
European Investment Bank
ForEx
Foreign exchange
FISONG
La facilité d’innovation sectorielle pour les Organisation NonGouvernementale
FIPAG
Fundo de Investimento e Património de Abastecimento
de Água. (Fund for Water Supply Assets and Investment
in Mozambique)
FTE
Full-time Equivalent
GPOBA
Global Partnership on Output-Based Aid
IATI
International Aid Transparency Initiative
IEP
Environment
IFC
International Finance Corporation
IFI
International Financial Institutions
IHY
Hygiene
INGOs
International Non-Governmental Organisations
IRC
International Resource Centre for for Community Water
Supply
ISA
Sanitation
IWA
Water
JIRAMA
Jiro Sy Rano Malagasy (National Service Provider for
water and electricity in Madagascar)
JSDF
Japanese Social Development Fund
KPMG
Klynveld Peat Marwick Goerdeler
ME & L
Monitoring, Evaluation and Learning
MFIs
Multilateral Financial Institutions
MSc
Master of Science
NGOs
Non-Governmental Organisations
NRW
Non-revenue water
O&M
Organisation and Management
PIDG
Private Infrastructure Development Group
EDRM no. 3568211
PPP
Public Private Partnership
PSA
Professional Service Agreement
PSD
Private Sector Department
R&D
Research and Development
RED
Research and Evidence Division
SMEs
Small Medium Enterprises
SORP
Statement of Recommended Practice
TAF
Technical Assistance Facility
TI-UP
Technology, Infrastructure and Urban Planning Resource
Centre
USAID
United States Agency for International Development
VAT
Value Added Tax
VEI
Vitens-Evides International
WASH
Water Sanitation and Hygiene
WSP
Water and Sanitation Programme
WSUP
Water and Sanitation for the Urban Poor
Watsan
Water and sanitation
WB
World Bank
WEDC
Water, Engineering and Development Centre
WHO
World Health Organisation
WOP
Water Operator Partnership
WWF
World Wildlife Fund for Nature
EDRM no. 3568211
Business Case and Intervention Summary
Intervention Summary
Title: WATER AND SANITATION FOR THE URBAN POOR (WSUP)
What support will the UK provide?
1. The UK will provide £13.30 million to Water and Sanitation for the Urban Poor (WSUP)
from October 2012 to March 2015. This money will help the urban poor in six countries to
improve their living standards through access to water and sanitation services. This will be
funded jointly by PSD (Private Sector Department) - £10 million, and RED (Research and
Evidence Division) - £3.3 million). This collaboration will enable WSUP to deliver services
at scale in major urban centres whilst collecting robust and rigorous evidence thus
increasing the impact and influence of the programme.
2. £9.5 million of DFID’s contribution will be subject to WSUP raising £6.7 million above the
£12.53 million that WSUP has already secured.
3. In addition to the £3.95 million we disbursed to WSUP from 2005 to 2010, the proposed
new funding would bring our cumulative contribution to WSUP to £17.25 million.
Why is UK support required?
What need are we trying to address?
4. Rapid urbanisation in Africa and Asia means that since 1990 an estimated 171 million more
people are living in slum conditions in the developing world. This is a growing problem with
for example Africa’s urban population predicted to triple to 1.23 billion people by 2050.
Governments and utilities are proving unable to expand their water and sanitation systems
fast enough to reach all these people. This is due to a complex web of restraints such as
limited finances, lack of property rights and outdated laws. Without new models for the
water and sanitation sector that can deliver at scale, an unacceptably large number of
people living in slums will continue to remain without these most basic services.
What will we do to tackle this problem and who will implement the support we provide?
5. WSUP is a not-for-profit partnership between the private companies Unilever, Halcrow and
Borealis, the NGOs WaterAid, Care and World Wildlife Fund for Nature (WWF) and
Cranfield University. To address the challenging situation outlined above and in response
to DFID’s 2009 review, WSUP has restructured its work to deepen its engagement in a
smaller number of countries and to align more closely with international financing agencies.
WSUP has developed a strategic partnership with the Netherlands utility company VitensEvides International to deliver water and sanitation improvements at city wide scale in
Bangladesh, Ghana, Kenya, Madagascar, Mozambique and Zambia.
6. Developing the skills, knowledge and experience of the water and sanitation service
providers to maintain and operate systems in the long term will be a core aspect of the
programme. Successful skills transfer will need close partnership and support from WSUP.
7. WSUP will also work with regulators and ministries in key areas such as water policies and
tariffs to make the delivery of improved services more equitable and sustainable.
8. The magnitude of the urban water and sanitation challenge is beyond WSUP’s capacity to
address through direct interventions. WSUP will:
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EDRM No. 3568211



target the adoption and replication of the models developed under this programme by
international finance institutions.
implement a comprehensive programme of research, publications and communications
to inform and influence the international water and sanitation sector.
develop a training module on delivering improved services to low income areas to be
incorporated into MSc programmes in the UK and in developing countries.
What are the expected results?
What will change as a result of our support?
9. This programme is designed to have both direct and indirect impacts on:
a. Improving health and living standards of low income consumers in cities and towns ;
b. Increased productivity due to more working days as a result of improved health,
reduced productive time lost to caring for ill relatives, reduced time spent fetching
water, and reduced disability adjusted life years (DALYs);
c. Higher incomes as a result of higher economic productivity and less income being
spent on expensive, but poor quality water and on medicines.
10. In addition to the £6.7 million of matched funding to WSUP that is expected to be raised,
DFID support would also help trigger an additional US$69 million of investment from the
Netherlands Government.
What are the planned Outputs attributable to UK support?
11. The Programme will improve access to water, sanitation and hygiene services for 16.5
million people – 3.9 million people directly through WSUP interventions and an estimated
12.5 million people indirectly through improved capacity and institutional frameworks as a
result of the WSUP Programme.
12. Results attributable to UK support:
 Programmes in urban centres in 6 countries improving access to sustainable, affordable
and viable Water, Sanitation and Hygiene (WASH) services for 1.5 million people;
 The development of models that can be adopted in other urban centres by larger scale
water and sanitation programmes;
 Increased service provider capacity and institutional change leading to 5 million people
with improved access to sustainable, affordable and viable WASH services;
 US$88 million (£56.8 million) of finance mobilised and effectively targeted for pro-poor
WASH service improvements;
 Robust evidence in the form of peer reviewed publications and other research outputs
on how to deliver WASH services effectively in urban areas at scale, including testing of
innovative technologies and business/delivery models.
 Testing, learning & dissemination influencing decision-making in the sector (Service
Providers, Governments, development finance agencies, Non-Governmental
Organisations (NGOs) & private sector).
How will we determine whether the expected results have been achieved?
13. Annual reviews will be carried out by WSUP using its own monitoring and evaluation
framework and by DFID against the results framework. An independent impact evaluation
will be carried out at the end of the three-year programme.
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EDRM No. 3568211
Strategic Case
A: Context and Need for DFID Intervention
The Urban Water Challenge
“Since cities are the future habitat for the majority of Africans,
now is the time for spending on basic infrastructure...” 1
1. Population growth will be concentrated in urban areas as developing
countries undergo rapid urbanisation. Urban areas will account for 83.5%
of Africa’s population growth between now and 2050, while rural areas will
account for only 16.5% of growth in the same period.2
2. As a result, the number of slum dwellers in developing countries will
continue to rise as population growth is most likely to occur in low income,
peri-urban and slum areas of cities and towns.3 An estimated 828 million
people are now living in slum conditions, compared to 657 million in 1990.4
Africa’s urban population is expected to triple to 1.23 billion between 2010
and 20505 (Figure 1).
Figure 1: African urban population trend (1950 – 2050)
Source: UN Habitat and UNEP (2010) The State of Africa’s Cities, p.1
3. Access to safe drinking water and basic improved sanitation is failing to
keep pace with this explosive population growth (Figure 2) and as a result
progress towards the Millennium Development Goal (MDG) water and
sanitation targets (under Goal 7 c) in urban areas has been negligible.
Although higher proportions of rural populations still lack access to an
improved water supply “it is the urban areas that are struggling most to
keep ahead of population growth rates, which are commonly double the
national averages.”6.
4. An estimated 55% of the urban population in sub-Saharan Africa and 43%
for South Asia7 are using ‘unimproved’8 sanitation9. Sanitation coverage in
urban areas has increased by only 5% since 1990.10 This situation is set
to worsen as the number of people in urban areas without access to
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EDRM No. 3568211
improved sanitation is expected to increase to 898 million by 201511 .
Based on current trends, the world is likely to miss the sanitation MDG
target by a billion people.12 In terms of hygiene, rates of handwashing
across the globe are low: research in 11 developing countries found that
on average only 17% of child caregivers washed their hands with soap
after defecating.13 In relation to water supply, 140 million people are
estimated to be living in urban areas using an unimproved water source14,
with this figure expected to rise to 296 million by 2015.15 Drinking water
coverage has remained almost unchanged since 1990, rendering progress
towards the MDG water target in urban areas negligible.16 Where there is
access to safe water, supplies are not consistently available17 and poor
urban populations are frequently forced to resort to purchasing water in
small quantities at exorbitant prices, or connecting to networks illegally. 18
Figure 2: The challenge of keeping pace with urban growth:
Population gaining access to improved sanitation and water compared to
population growth, urban and rural, worldwide, 1990 – 2008
Sanitation
Water
5. The impact of inadequate access and use of improved water and
sanitation facilities coupled with poor hygienic practices is stark and
compounding: globally, an estimated 2.4 million deaths (4.2% of all
deaths) could be prevented annually if everyone practised appropriate
hygiene and had access to improved sanitation and safe drinking water.19
Diarrhoea kills more young children per year than HIV/AIDS, malaria and
tuberculosis combined20 , with 88% of cases of diarrhoea worldwide
attributable to unsafe water, inadequate sanitation or insufficient hygiene.21
6. The resulting ill-health, plus the time spent caring for family members and
collecting water, result in drops in productivity, attendance at work and
school which reinforce poverty and low economic and social growth 22.
The value of lost working days due to inadequate sanitation is estimated to
be US$4 billion per year.23 A further US$7 billion in economic costs are
estimated to result from the need for health care caused by inadequate
water and sanitation, while the value of deaths averted adds a further
US$3.6 billion per year.24 Inadequate sanitation and safe drinking water is
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EDRM No. 3568211
estimated to cost sub-Saharan Africa 5% of its GDP per year25 stunting
economic growth and social development.
7. Within this combination of explosive population growth and the high social
and economic impact of inadequate water, sanitation and hygiene
(WASH), low income urban areas present challenging environments in
which to achieve scalable, viable and effective provision of safe water,
improved sanitation and basic hygiene. The complexity of urban WASH
means it is difficult to address adequately the demands and meet the
needs of all stakeholders. Traditional responses and interventions in low
income urban WASH have tended to be implemented on a piecemeal,
project-by-project basis without a link to formal service providers as
opposed to taking a mainstreamed, core-business approach. A selfreinforcing combination of limited capacity among service providers, poorly
targeted and limited investments to address the challenges faced and
weak institutional and public planning frameworks continues to undermine
the equitable delivery of affordable WASH services in urban areas.
Limited capacity
8. One of the most common constraints to effective planning, monitoring and
evaluation in water and sanitation service provision is limited capacity and
resources at the local level.26 Inefficient and financially weak service
providers in large part account for the poor quality of urban services; many
cities do not recover their operation and maintenance costs from user
charges and fare poorly on performance indicators such as availability of
water, non-revenue water (revenue for the utility lost through physical
losses such as leaks and financial losses, such as poor bill collection) and
staff efficiency.27 This results in a cycle of poor services, lagging revenue
collection, weak finances, and inadequate maintenance, deteriorating
assets and lagging coverage. 28
9. This stagnation cycle (Figure 3) is compounded by a challenging human
capital base typically characterised by a lack of adequately trained,
appropriately skilled and capable staff in
the WASH sector.29 Utilities and service
providers are often unable to attract and
retain staff due to inadequate budgets,
uncompetitive salary scales, poor
incentives for staff retention and
prohibitions limiting government
recruitment for positions.30 These
challenges manifest themselves most
when dealing with the challenge of
improving water and sanitation in low
income areas as: “…by and large utility
staff members are trained in a traditional (largely top down) planning
paradigm and are unaccustomed or unwilling to broker complex
neighbourhood agreements or lead community discussions…”31 The
establishment of pro-poor units within utilities and municipalities is
gathering pace, but these units are often under resourced and lack a
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strategy and action plan to address proactively the issue of extending
sustainable services into the low income areas.
Poorly targeted finance and investments
10. Large scale investments in urban WASH led by the international financial
institutions (IFIs) typically target large scale capital works, with limited
priority given to extension of services into low income areas. As a result,
IFI finance mobilised and invested in urban WASH is often not leading to
positive pro-poor outcomes, a situation compounded by: “a haphazard or
project-by-project approach to serving low income consumers, as opposed
to a mainstreamed, core-business approach [is widespread]…Nongovernmental organisations may provide communities with a borehole,
water kiosk or public toilet, but this is invariably done on a piecemeal basis
and without a link to the utility.”32
11. A critical constraint in mobilising finance for pro-poor urban WASH
extensions is the high capital expenditure and associated risk profile. The
sector is perceived by providers of market-based repayable finance as a
“high risk / low return” sector, characterised by commercial, contractual,
foreign exchange and sub-sovereign risks and political interference.33
Critically, investments in poor areas are considered to be particularly risky,
because of assumed low collection rates and limited revenues.34
Collateral is a key issue in water sector lending, as is many utilities’ lack of
a sufficient credit rating and history.35 At the municipal level the political
decentralisation of infrastructure services has created large investment
needs, but fiscal decentralisation has not occurred in parallel. IFIs are
generally unable to lend at sub-sovereign levels, central governments are
usually reluctant to let municipalities borrow36. Thus municipalities’ revenue
and finance generating structures are inadequate and inefficient, 37 and
municipalities have limited access to external repayable finance.38
Institutional framework and policy environment
12. Research indicates that the poor performance of water and sanitation
services is often partly attributable to an inappropriate institutional
framework, lack of regulatory mechanisms, lack of explicit directives and
incentives to serve the poor and a lack of autonomy.39 Within the low
income areas, regulation of services provided by small independent
providers, who play an important role in the delivery of services, is often
weak and their role is often not recognised or linked into formal systems.40
Community-based managers of water kiosks and public toilets have limited
technical, management and financial skills and may experience problems
with social cohesion, or interference by interest groups, including local
leaders or cartels. As a result capacity development and a link with the
utility are crucial for both long-term sustainability and ensuring the poor
benefit from the utility’s economies of scale.41
13. In many cases, while national policies and strategies may exist and
adequately set out the challenge and ideal response to improving WASH
in poor urban areas, the implementation of these in practice is less clear. 42
Limited implementation is linked to the lack of clearly defined
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EDRM No. 3568211
responsibilities and a lack of budget transparency as sanitation
expenditure is often combined with expenditure in other sectors.43
Furthermore, the majority of utilities do not have an explicit government
mandate to serve the poor or to deal with on-site sanitation44 – a 2010 UN
report found that 10 out of 26 sub-Saharan countries surveyed have not
defined roles in sanitation.45
14. The complex nature of urban WASH programmes requires a unique and
multifaceted response which brings together a broad range of technical,
social and economic resources and which is underpinned by a set of
programme principles focused on scale, sustainability and affordability.
The Main Barriers to Progress in Low Income Areas – 4 Core
Problems
15. A specific analysis of low income urban areas suggests that the barriers to
improving services can be attributed to four core problems:
Core Problem 1: Lack of Scalable Models for service delivery to
the poor
16. Single sector approaches to low income urban areas have tended to be
project based and piecemeal, rather than focusing on developing models
that can be scaled to city-level. Projects have tended to focus either on
pro-poor targeting or on commercially viable cost recovery; whilst in fact
both are equally important. Projects have not tended to work with service
providers to change the way that services are delivered to the poor.
17. There has been limited innovation, and limited testing of new technologies
and new business models. Urban WASH is complex; there are multiple
institutions with mandates, interlinked issues such as land tenure, itinerant
populations and often a poor understanding of ability and willingness to
pay. Technological, social and economic barriers to urban WASH require
innovative responses drawing know-how from different sectors which
traditional approaches do not deliver.
Core Problem 2: Weak capacity of service providers, weak
institutional frameworks
18. There is frequently a lack of capacity in city-level service providers to
address the complex challenges of improving WASH in low income
communities. Unclear institutional mandates, weak (or absent) regulators
and inappropriate tariff structures are often barriers to progress. Service
providers are often inefficient and the private sector is typically underutilised and under-developed. A failure to see low income districts as
viable markets (when in fact poor people are often already paying more
per unit than most) and to develop marketing strategies for these areas
means they generate limited revenues and are rarely prioritised for
investment. This situation creates a vicious circle: service levels decline,
so revenues decline, so service levels decline further... this vicious circle
needs to be broken, and reversed to create a "virtuous circle".
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EDRM No. 3568211
Figure 4




WSUP definition of service providers
Water Utilities – Water & Sewerage companies
Municipal Authorities – City Councils
Regulators
Small Independent Providers (SIPs) / SMEs:
o Independent private water operators
o Suppliers of sanitation products and
services
o Community Based Organisations
(CBOs)
o Water Trusts & User Associations
19. Utilities have limited capacity in key areas such as non-revenue water
reduction, financial analysis and effective management. There is limited
interfacing with poor communities and a lack of skills in understanding
their demands and willingness to pay. There are limited policy incentives
and institutional frameworks that encourage investments in low income
areas.
Core Problem 3: Poorly Targeted Finance
20. The international private sector has limited interest in large scale
investments in urban WASH in developing countries due to the perception
of high capital, low return investment. The urban poor are typically not
prioritised in major projects even though finance is primarily from
governments and IFIs and there are rarely clear strategies to ensure
results are achieved for the poor. There is also a perception that serving
low income areas is financially unsustainable, leading to limited
implementation of policies that drive investment to poor districts.
Investments in low income areas therefore tend to be piecemeal and not
mainstreamed into business and investment plans of the main service
providers. The WaterAid “Off Track – Off Target” report46 on the limited
impact of World Bank projects on the poor highlights similar reasons: a)
poor targeting of investments b) lack of incentives in loan agreements for
service providers to reach poor areas c) limited ways of accessing private
sector expertise and d) lack of investment finance mobilised.
Core Problem 4: Unfocused Research, Learning and
Dissemination
21. Research and learning are often not sufficiently focused on success at
scale. In particular, technology research is often not contextualised within
business models ensuring sustainable financing. Learning and lessons are
not embedded in organisations, so application, adoption and replication of
best practice models by service providers is limited. In addition robust and
rigorous evidence is needed to address key aspects of the other core
problems set out above. For example, evidence is needed on how service
provision to low income areas can be financially sustainable, including
understanding the poor as consumers and how best to create and
maintain demand. Further evidence is also required on how to access and
use the private sector to deliver services in these areas.
Justification for DFID Intervention
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EDRM No. 3568211
22. The programme outlined in this Business Case sets forth an ambitious
plan to mobilise additional finance and to influence the design and delivery
of large scale investment programmes, an approach which will maximise
the impact of funding provided by DFID and which is supported by
WSUP’s focus on research, analysis and dissemination of successful
models to the wider sector. One key objective is to increase the probability
that large scale investments being made by Multilateral Financial
Institutions (MFIs) and development banks are more effective at
addressing the needs of low income communities, thereby maximising
bilateral development partners’ investment in these organisations.
23. Providing support to this programme is in line with DFID’s recent policies
and priorities and contributes to the Structural Reform Policies by targeting
improvements in the MDG targets, specifically targets 7 c and d but also
MDGs 1 to 5 as water and sanitation underpins overall poverty reduction
as well as improvements in maternal and child health and the lives of girls
and women. Providing support is also in line with the Secretary of State’s
announcement (EDRM ref: 3553143) of a scale-up of WASH results made
at the High Level Meeting on Sanitation and Water for All on 20 April 2012.
24. The intervention will seek to make investments by the World Bank and
other IFIs in urban WASH more effective in delivering services to the poor.
It also complements DFID’s ongoing investments in Water and Sanitation
Programme (WSP), Global Partnership on Output-Based Aid (GPOBA)
and Private Infrastructure Development Group (PIDG) and initiatives
supported by the Water and Sanitation Team as well as regional offices,
focusing on implementation, innovation and influence at the city-level, and
driving public-private collaboration in WASH for low income areas. The
intervention is well placed to generate opportunities which can be further
advanced by PIDG facilities such as Technical Assistance Facility (TAF),
InfraCo Limited InfraCo Asia, GuarantCo and the Technical Assistance
Facility (TAF).
25. WSUP’s focus on financial viability and engagement with the private sector
will boost wealth creation through fostering the development of the local
private sector and SMEs in developing countries. Value for money will be
achieved as evidence suggests that WASH interventions are among the
most cost-effective in terms of the impact on health and poverty
reduction47.
26. The outputs and outcomes of this programme will make a positive
contribution to the achievement of the ambitious targets for improving
access to water and sanitation set out in DFID’s Changing lives, delivering
results 48publication. The programme makes a direct contribution to
empowering service providers to be more accountable to urban poor
households and ensuring that all citizens have a say in service provision;
strengthening service provider management and operation and
maintenance systems; establishing differentiated levels of service to better
serve low income consumers and ensuring the promotion of low cost
solutions, especially for sanitation; and demonstrating cost recovery and
the development of pro-poor financing mechanisms.
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EDRM No. 3568211
27. The programme will help to support DFID Country Strategies in
Bangladesh, Ghana, Kenya, Mozambique and Zambia, which are DFID
priority countries. Although DFID does not have a programme in
Madagascar, WSUP’s work there has been successful in testing different
approaches including in managing water, sanitation and hygiene services,
which will now be scaled up and extended into peri-urban areas. This will
help generate valuable evidence and learning for application elsewhere.
28. Finally, the work makes a positive contribution to DFID’s focus on the role
of the private sector as set out in the May 2011 publication The Engine of
Development in creating jobs, opportunities and incomes for people
through the delivery of WASH services and facilitating improved access to
affordable finance for people and SMEs to strengthen and grow
businesses. It also supports DFID’s commitment to working with the
private sector, which was reiterated in the WASH Portfolio Review March
2012 (EDRM no: 3443950).
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EDRM No. 3568211
B: Impacts and Outcomes
Impacts
29. Intervening in low income urban areas will contribute to the achievement of
the severely off-track sanitation MDG target as well as MDGs 1, 2, 3, 4, 5
and 7. The overall programme is intended to bring social and economic
benefits to people living in low income areas of town and cities in the low
income and least developed countries. These benefits will include
improved health and living standards through reducing the incidence of
water and sanitation related disease and illness, especially for mothers
and children and increasing productivity through reducing time spent with
illness or caring for sick relatives. Girls and women will be impacted
positively through improved access to safe sanitation facilities and less
productive time spent collecting water which could be used attending
school and for economic activities. WB/WHO benchmarks49 indicate an
economic return of £5 to £11 for every £1 invested in water and sanitation
improvements. This implies an economic value of the programme to the
six countries to be between £163m and £358m in total based on the
planned programme investment of £32.552m.
30. In addition, the overall Programme is planned to have a positive affect on
the institutional capacity and financial strength of all stakeholders
(including the main mandated service providers) as improved operations
and management and the extension of the service areas will lead to
positive gains, a position that will be supported by an improved institutional
framework in each country. The programme aims to boost wealth creation
and foster the local private sector in six countries and will mobilise much
needed finance and technical expertise to strengthen the local private
sector’s role in the delivery of sustainable and affordable WASH services.
Outcomes
31. The intended overall outcome is the adoption and replication of effective,
sustainable and scalable models of pro-poor urban water and sanitation
services by providers and national governments in six countries resulting
in city wide impact.
32. Projected results that would be attributable to UK support for WSUP
include:

Scalable models leading to 1.56m people with improved access to
sustainable, affordable and viable WASH services;

Increased service provider capacity and institutional change leading to
5m people with improved access to sustainable, affordable and viable
WASH services;

US$88 million (£56.8 million)50 of finance mobilised and effectively
targeted for pro-poor WASH service improvements;

Robust evidence in the form of peer reviewed publications and other
research outputs on how to effectively deliver WASH in urban areas at
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EDRM No. 3568211
scale, including testing of innovative technologies and
business/delivery models.

Testing, learning & dissemination influencing decision making in the
sector (Service Providers, Governments, NGOs & private sector).
33. The scale of the intervention has been designed to deliver a good balance
of direct intervention and influence in WSUP’s six programme countries.
Evidence that the Impacts and Outcomes are Achievable
34. WSUP’s work in Mozambique is an example of how pro-poor models can
be adapted and replicated. Through brokering a partnership with Manila
Water Company51, WSUP helped FIPAG (Fund for the Investment and
Asset management of water supply systems) 52 to introduce new water
management systems in the 13 towns for which it is responsible,
significantly improving operational and financial performance and freeing
up water resources for an estimated 2.5 million low income consumers53. In
Maputo, WSUP and Aguas de Moçambique’s joint investment of US$1.5m
in low income districts has shown a 23% return in two years from
increased water revenues and improved efficiency. It has also generated
US$2.3m pa in additional revenue for the service provider and US$1.6m in
fees from new connections. The World Bank has also used the community
sanitation models demonstrated under the WSUP programme in a scale
up programme to be funded by Japanese Social Development Fund
(JSDF), with WSUP as implementing partner54.
35. In Madagascar, promotion of the models demonstrated under the WSUP
programme have resulted in demonstrable outcomes which benefit the
country’s estimated 2.1 million low income consumers. The government
approved the adoption of the city wide sanitation plan developed under the
WSUP programme. City utility Jiro Sy Rano Malagasy (JIRAMA)55 is
expanding the non-revenue water (NRW) reduction strategy, developed
under the WSUP programme, across the capital Antananarivo and is
setting up Regional NRW Units in each of the 8 regions of Madagascar.
The strategy is saving water, increasing revenues and improving supplies
to poor communities. JIRAMA’s 2012 investment strategy prioritises the
expansion of services to peri-urban areas and JIRAMA is creating a periurban consumer management unit to deliver this strategy. The water, solid
waste and canal cleaning system developed under the WSUP programme
is being rolled out across the city by the Mayor of Antananarivo. The World
Bank, along with other IFIs, is investing US$10m in the expansion of the
water distribution systems developed by WSUP and JIRAMA.
36. In Zambia, WSUP has assisted the European Investment Bank (EIB) in
the design of two large water and sanitation investment programmes, with
the aim of ensuring financially sustainable coverage of the low income
areas. Several pro-poor models have been included (Delegated
Management, Positive Community Engagement, City Sanitation
Management, Pro-Poor Non Revenue Water) in the project design. The
project is now with the EIB for final approval and WSUP is named as
implementing partner. The proposed scope of the project is €100m for
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EDRM No. 3568211
capital investment, efficiency and effectiveness improvements, of which
€13m is assigned for extension of services into low income areas56.
37. Two examples of influencing the IFIs to apply pro-poor financing
mechanisms are: a) WSUP has developed the concept of Progress Linked
Finance which incentivises service delivery to low income markets through
a mechanism that is easy to use and accessible for the majority of
developing country utilities; this was showcased at the World Water Forum
in March 2012 and has now been adopted by the EIB in its water
infrastructure investment project in Ghana; b) in December 2011, the
World Bank approved a US$4m project in Kenya designed by WSUP to
utilise results based finance for urban sanitation. Procurement started in
May 201257.
38. The total number of low income consumers in WSUP’s six target countries
is shown in the table below, together with the institutional improvements
that have been achieved over the last 4 years.
Appraisal Case
What are the feasible options that address the need set out in
the strategic case?
39. The options to improve the health and living standards for the urban poor
in target cities, towns and low income countries are:




Option 1: Renew funding to WSUP for 3 years.
Option 2: Achieve results and/or develop knowledge and innovation
through DFID’s bilateral programme.
Option 3: Develop new partnership/fund to support WASH projects
possibly linked to World Bank group work in the sector.
Option 4: Counterfactual – Do not provide funds.
Option 1: Renew Funding to WSUP for 3 Years
Water and Sanitation for the Urban Poor (WSUP)
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EDRM No. 3568211
40. WSUP is a not-for profit company, consisting of members from the private
sector, NGOs and academia; it was established specifically to address the
urban water and sanitation challenge. Based on the belief that the urban
challenges demand a multi-sector response, WSUP harnesses the skills
and expertise of the private sector and NGOs through a mechanism which
overcomes the natural disincentives for the different sectors to work
together.
41. WSUP has a track record in addressing the core problems outlined above
and delivering clear developmental outcomes. WSUP has developed and
demonstrated innovative contractual agreements with water and sanitation
utilities which incentivise investments into low income areas. It uses its
programme to drive policy and institutional reform. It links the
demonstration of service models to the mobilisation of private and public
finance for city wide scale-up. Supporting WSUP therefore combines
implementation, innovation, learning and influence in the urban WASH
sector.
42. WSUP leverages its members’ resources and expertise, with all members
contributing to the programme (See Annex III for WSUP listing of
members’ contributions and eligibility criteria). Members pay fees, and
provide resources both in terms of cash and staff time. For example,
Unilever has invested over US$1m to date in the Clean Team sanitation
business. CARE, Water Aid and WWF have provided use of local offices
and staff resources and raised over US$1.5 million to invest in the
programme. Cranfield has hosted training courses for WSUP local
partners and has committed to develop an urban WASH training module
for students and practitioners, based on evidence from the WSUP
programme. Halcrow has contributed over US$0.5m in expert staff fees,
via the not-for-profit service contract with WSUP.
43. WSUP has partnered with Dutch water operations company Vitens-Evides
International (VEI). VEI has applied to be, and has been accepted as, an
Associate Member of WSUP with a view to full membership once DFID’s
Business Case has been agreed. This was ratified by the Board of
Directors in July 2012 and WSUP has received confirmation of VEI’s
application by letter and a response has been sent by the Chairman of the
Board. Once VEI become a full member, they will sign the WSUP Service
Agreement and other related documents like all members. In the
meantime, the partnership is very much operational, with WSUP and VEI
continuing to develop joint programmes at the country level and have
entered (or are in the process of) into funding agreements in Kenya (x2),
Zambia (x1), planning large scale programmes in Bangladesh, Ghana and
Mozambique through developing joint proposals to DGIS funding streams
which will come on line in the next six months.
44. VEI is expanding its international operations which focus on strengthening
utility operations and this should also help the utilities to be more resilient
to fraud and corruption; the partnership with WSUP helps to ensure that
services reach people of all income levels on a financially sustainable
basis. This partnership, already ongoing in Zambia and under negotiation
in Kenya and Mozambique, has strong support from Dutch financing
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EDRM No. 3568211
agencies and is on track to mobilise substantial additional Dutch finance of
US$69m. This finance is included in the US$160m IFI portion of the
US$220m funds that WSUP plans to mobilise as a result of their
Programme (see para 58 and the related tables).
45. WSUP works in partnership with the Water and Sanitation Programme
(WSP) and International Resource Centre (IRC) for Community Water
Supply as two leading documentation and advocacy organisations to
disseminate evidence of models that successfully increase access for low
income consumers, targeting governments and service providers
worldwide.
46. Following significant results demonstrated in the last four years, WSUP
has ongoing programme support from key water sector funding partners
including USAID, Bill & Melinda Gates Foundation, AusAID, Coca Cola
Africa Foundation, Vitol Foundation, Stone Family Foundation. All of these
are expected to contribute to the 2012-15 programme (See Tables viii and
ix on pages 42 and 43 for summary of confirmed commitments and
possible support under negotiation).
Previous DFID support
47. DFID was the original donor to WSUP in support of this new approach to
the growing urban water and sanitation needs in the poorest countries.
DFID supported WSUP from 2005 to 2010 with a start-up grant of £3.95m.
The project purpose was ‘The provision of sustainable, equitable, and
affordable water and sanitation services to approximately 3.5 million poor
people in urban/peri-urban areas by 2015’.
48. The December 2009 review of WSUP by the Technology, Infrastructure
and Urban Planning Resource Centre (TI-UP)58 concluded that “With their
innovation public-private-civil society approach and with flexible and
adaptable engagement strategies, WSUP, has succeeded in
demonstrating new ways of working, new technological and financial
models and cooperative community engagement which the Review
believes has the potential to be copied at scale by larger financing
institutions in this sector.” On the other hand the review also found that at
project level “The concrete impact to date is however small, barely
reaching 100,000 population.” However, by July 2012, the programme had
impacted 1.76m low income consumers with improved water (0.76m
people), sanitation (0.110m people) and hygiene (0.894m people).
49. The review recommended further DFID support tied to WSUP “reasserting
its strategy and acknowledging that although their project work is valuable,
it is not important in and of itself - it is useful only if it can influence the
implementation of the large scale infrastructure investments in the sector”
and DFID can support WSUP by facilitating “interaction between WSUP
and the International Financing Institutions, IFIs, and other major funders.
WSUP can very usefully be marketed to these major donors as a resource
to help them in the design of the pro-poor components of their large-scale
urban water and sanitation interventions.”
WSUP’s Proposal
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EDRM No. 3568211
50. DFID would make a 41% funding contribution to the WSUP 2012-15
Programme Plan. To date, WSUP’s available funding has allowed it to
reach significant scale in two countries, medium scale in 3 and modest
scale in 3. The additional funding from DFID would enable WSUP to reach
significant scale in 6 countries in partnership with Vitens-Evides and the
Netherlands government (Details of WSUP/ Vitens-Evides partnership in
para. 43). This would enable lesson learning of functioning systems that
serve the urban poor and influence the large scale investments of
mainstream financiers in urban water and sanitation at a global level.
WSUP’s Programme would be implemented through four main outputs
explained below:
Output 1: Scalable models.
51. “Models” are standard packages of activities that can be repeated by
service providers in cities across the developing world to bring water and
sanitation services to low income urban consumers at city scale. WSUP
uses two types:
a) process models which describe a series of defined steps that cities
can follow over a period of say 10 years to achieve city wide access
b) intervention models which are sets of activities which address specific
constraints in the WASH system (see Annex 2 for description of
WSUP models).
52. WSUP will work in partnership with local service providers (including
water utilities, municipalities, regulators, small and medium enterprises
and local
WSUP empowers utilities, municipalities and SMEs
private
to serve the urban poor as viable consumers,
mobilising finance for scale
operators) to
demonstrate
Professional Services Agreement
replicable
Lower capacity
More capacity
Poorer services
Better services
water,
Less local private sector
More local private sector
sanitation
LOW INCOME
URBAN
Stronger service providers,
and hygiene
better services for all
CONSUMERS
POOR
service
Increasing demand
Declining demand
models in
Higher revenues
Lower revenues
Bangladesh,
Ghana,
Finance mobilised
Kenya,
Madagascar, Mozambique and Zambia over three years, reaching
significant scale in each. This will entail combining community
engagement and water resources know-how with private sector expertise
in construction, financial management, innovation, marketing and
branding. WSUP will work under Professional Service Agreements which
leverage resources from and for service providers and set out joint
obligations. These six countries have a combined low income urban
population of over 30 million.
53. Detailed country level programme plans have been developed that build
on a successful record of achievement in each location. Central to all
programme plans is the critical process of convening the institutions
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EDRM No. 3568211
which need to collaborate to find equitable and financially sustainable
solutions. This addresses Core Problem 1 (see para. 16) as it provides
evidence of solutions that work at a representative scale and offers
models that can be adopted and replicated at city/national level.
54. This output will deliver both substantial numbers of direct beneficiaries,
through scaling access for low income consumers in target countries, but
also a better understand of what works and what doesn’t work in the
complex political economy of urban decision making, through field testing
these innovative models at scale in the field. This well-grounded action
research aspect of WSUP’s country level work will help identify models
that can be replicated elsewhere, and will inform some of the more
focussed research questions being tackled under output 4.
55. In these 6 countries WSUP has entered into a strategic partnership with
Vitens-Evides (funded by the Netherlands government). This involves
developing master plans for improving the cities’ water systems and a
division of support between the organisations with Vitens-Evides
concentrating on strengthening the core utility through institutional
capacity building such as improving billing systems and quality control
plus infrastructure investments whereas WSUP works with the poorer
consumers at the urban periphery as outlined above.
Output 2: Increased Capacity & Institutional Change.
56. WSUP will develop critical aspects of service provider capacity in the 6
countries to ensure the improvement process for low income consumers
will continue. Typically, these critical aspects include asset management,
non-revenue water strategy, financial planning, access to finance,
marketing, tariff structure, regulation and contract design. Expertise will
be drawn from local and international private sector. WSUP will support
the development of local private providers through targeted TA and will
work with city authorities to reform policies and institutional frameworks
that are impeding progress. This approach addresses Core Problem 2
(see para.18) as it develops public and private service provider capacity
that is needed to reach low income consumers on a sustainable basis,
mobilising private sector expertise to achieve this and triggering
institutional and policy reforms that are blocking access for the poor.
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EDRM No. 3568211
Output 3: Finance Mobilised.
57. WSUP will use the demonstration of scalable models to mobilise a range
of finance sources and to improve the targeting of large scale
infrastructure investments so they impact the lives of the poor. Specific
strategies are used to mobilise the four key sources of scale up finance:
household, public sector, private sector and IFIs, all of which play an
important role in delivering urban WASH. Household finance is mobilised
through marketing and promotion of better services at lower prices. For
public finance, Professional Service Agreements stipulate that service
models that are proven to be financially viable are adopted by cities for
city wide application with own resources. Private sector finance is
mobilised through assisting local companies to develop viable business
models into which they invest their own resources. This is done through
application of private sector expertise and technology. With IFIs, the
service models are either built in during project preparation or as a preagreement that proven models will be financed at city scale. This
addresses Core Problem 3 (see para. 20) as it provides the incentives for
private and public service providers to reach poor neighbourhoods,
mobilises scale up finance from a variety of sources and seeks to make
IFI investments more effective. Further examples of how WSUP plans to
mobilise capital are given in Annex 5.
58. WSUP has mobilised US$110m of finance to date (classified as ‘Existing
Negotiation’ in the table below), which includes approximately US$31m
agreed funds and US$74m currently under negotiation. The intervention
would seek to mobilise at least an additional US$110m (classified as ‘To
start in 2012’ in the table) with further negotiations to be triggered upon
confirmation of DFID’s support for the WSUP Programme:
Country
Mozambique
Madagascar
Zambia
Kenya
Ghana
Bangladesh
Total
Total
Existing Negotiation
$84,455,000
$65,390,000
$26,620,000
$15,870,000
$25,600,000
$14,700,000
$29,375,000
$5,200,000
$38,610,000
$9,165,000
$15,425,000
$0
$220,085,000
$110,325,000
To Start 2012
$19,065,000
$10,750,000
$10,900,000
$24,175,000
$29,445,000
$15,425,000
$109,760,000
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EDRM No. 3568211
Strategy for Mobilising $220m finance
Finance 2016
Service providers/WSUP install service infrastructure, set up revenue
collection systems and market better WASH services to low income
consumers. This leads to households paying for connection fees, better
WASH services, sanitation upgrades and latrine emptying services.
Finance 2012
Household
Private
Public
IFI
Household
$11m
WSUP provides technical support to private service providers in business
development, technology, contracting, staff development, marketing,
billing & revenue collection systems and facilitates finance. This leads to
providers providers investing in their own funds and accessing local
finance in growing their businesses, improving infrastructure,
equipment, marketing, staff capacity & systems. It helps international
private sector to invest in developing economies by finding a profitable
route to market.
Private
$19m
Public
$30m
Public service providers and municipalities provide funding, staff and
equipment as their contribution to the Professional Services
Agreements. Once service models have been demonstrated and
capacity has been developed, they invest their own infrastructure
budgets in expanding the models in new low income areas.
Results based approach: under the terms of the Professional Services
Agreements, LSPs with IFI financing commit to scale up proven service
models to city level. The demonstration scale improvements provide the
detailed inputs, activities and budgets that are used under the IFI
financed expansion.
IFI
$160m
Planning approach: the IFI requests the service models and budgets to
be written into the IFI project implementation plan from the start,
during the feasibility and project preparation stage.
Output 4: Evidence – Research, Testing, Learning, Dissemination.
59. In addition to the innovations and lesson learning emerging from output
one, WSUP will deliver an enhanced programme of research over the
next 3 years, aiming to deliver world-class rigorous peer-reviewed
research here that will be published and has a chance of changing
behaviour across the sector. This will focus on implementing rigorus
research methodologies to answer key research questions under the
following areas:

Research Area 1. Evidence on the impacts of slum WASH
interventions
Example research question: Which slum sanitation solutions give most costeffective health impacts?

Research Area 2: R&D of improved technologies for use in urban
WASH interventions
Example research question: What improved technologies are effective for
management and treatment of faecal sludges?
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EDRM No. 3568211

Research Area 3. Evidence on how urban WASH services can be
delivered at scale
Example research question: How can in-country institutions and donors
achieve sustainable finance for city-wide urban WASH?

Research Area 4. Evidence on how innovative market solutions can
support sustainable at-scale delivery of urban WASH services
Example research question: How can consumer demand for sanitation
services be most effectively stimulated?

Research Area 5. Evidence on environmental sustainability of WASH
Example research question: What are the implications of city-wide WASH
scale up for water security and energy use?
Examples of methodologies that WSUP will explore using include
randomised contron trials and multi-country evaluations. There will be a
strong focus on producing peer reviewed publications (Minimum target 5).
60. WSUP will evaluate, document and disseminate successful models
through a clear M&E process and an intensive and highly structured
communications programme, targeting sector practitioners, service
providers, national governments, academia, funding agencies and the
public. It will continue to develop new models and strengthen existing
models through a programme of research and innovation. It will also
disseminate successful models via its WSUP Advisory Service. WSUP
will continually assess its own performance through a structured M&E
programme, based on a set of 16 key output and outcome indicators
which measure progress against WSUP’s four strategic objectives (see
Figure 5). This addresses Core Problem 4 (see para. 20) as WSUP uses
its experience in 6 countries to stimulate change in other countries
through an effective research into use and communications strategy and
training which is designed to influence decision makers.
Figure 5:
WSUP Strategic Objectives
WSUP will deliver the following four strategic outcomes in six countries:
1) Demonstrated models of service delivery to the urban poor
2) Strengthened institutional capacity to sustain improvement
process
3) Investment mobilised for scale up of models
4) Successful models promoted to sector worldwide
61. The intervention can be summarised in the following Results Chain which
is based on actual WSUP experience and results achieved over the last 5
years in six countries:
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EDRM No. 3568211
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EDRM No. 3568211
Option 2: Achieve results and/or develop knowledge and
innovation through DFID’s bilateral programme
62. The UK decides not to support WSUP and deliver the results on urban
water and sanitation and the associated knowledge and evidence base
through DFID’s bilateral programme.
63. Although several DFID bilateral programmes are supporting water and
sanitation, these mainly have a rural focus and usually involve building
capacity of national or local government systems. To deliver a peri-urban
programme would require DFID country offices to develop more
specialised skills and expertise in urban watsan which would require
substantial investment amidst many conflicting priorities. A bilateral
approach would struggle to emulate WSUP’s innovation amongst its
private sector members. This option would present high transaction
costs for DFID bilateral programmes in setting up and managing
specialised projects in this area, and would involve the loss of WSUP’s
lesson learning and dissemination of best practice.
Option 3: Develop new partnership/fund to support WASH
projects possibly linked to World Bank group work in the sector
64. The Water and Sanitation Programme (WSP) has a global programme on
WASH which includes work on urban policy, but their domestic private
sector programme remains complementary to WSUP and is aimed at
supporting regulation and capacity building of small providers compared
to the scaling up and innovation promoted by WSUP.
65. The International Finance Corporation (IFC) has supported some water
and sanitation privitisation transactions and, in collaboration with WSP,
proposed a new Water and Sanitation Access Fund to DFID’s Water,
Sanitation and Hygiene (WASH) team to help scale up new and
innovative models of private sector participation in water and sanitation
service delivery and investment. This proposal was later withdrawn by
senior IFC management but is a model of a possible intervention that
could be designed around the opportunities identified by WSP. Such an
intervention should also draw upon the city wide models developed under
this programme.
66. However IFC has a different focus from WSUP and lacks the crucial
linkage between the core utility and the providers in the low cost areas of
cities. At an estimated cost of US$120 per person served59, IFC gives less
value for money than WSUP (see para. 85). There is also a danger of
over concentration of DFID support to private sector WASH policy
development through the World Bank Group with the loss of dynamism
and innovation from competition.
Option 4: Counterfactual – Do not provide funds
67. The counterfactual is that DFID decides not to provide funds and relies
on other donors to fund innovation and knowledge generation on urban
water supply and sanitation. This option would have negative impacts on
the production of knowledge and results in the sector; and we would lose
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EDRM No. 3568211
the benefits of the insights, contacts, advocacy and innovation of WSUP.
The implication of this option is that DFID would be unresponsive to the
demands of the growing numbers of poor urban consumers in Asia and
Africa for better and affordable water and sanitation services when
international trends show that this is a vital part of the MDG response. It
would also be counter to the Ministers’ commitment to scale up
investment in water, sanitation and hygiene made on 20 April 2012.
Strength of Evidence for each Feasible Option
Option
Strength of
Evidence for Option
Notes
Castalia report on ‘IFC Demonstration
Effects’ provides evidence that supports the
integrated approach
1
2
3
Medium
WSP (2009) ‘Guidance Notes on Services
to the Urban Poor: A Practical Guide for
Improving Water Supply and Sanitation
Services’.
Limited
Limited evidence to draw on as so few
bilateral programmes have a water and
sanitation programme.
Medium
Evidence of the likely investments can be
deducted from WB data on its water and
sanitation portfolio that it now gathers
systematically. These are mainly linked to
the core utility rather than the services to
the poor at the urban periphery.
Strong evidence base on the links between
water, sanitation and health. For example:
4
Strong
Boschi-Pinto C, Velebit L, Shibuya K (2008)
‘Estimating child mortality due to diarrhoea
in developing countries’ Bull World Health
Organ 86: 710–717,
Bartram J, Cairncross S (2010) ‘Hygiene,
Sanitation, and Water: Forgotten
Foundations of Health’ PLoS Med 7(11):
e1000367.
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EDRM No. 3568211
Environmental Appraisal
What is the likely impact (positive and negative) on climate
change and environment for each feasible option?
68. Categorise as A, high potential risk / opportunity; B, medium /
manageable potential risk / opportunity; C, low / no risk / opportunity; or
D, core contribution to a multilateral organisation.
Option
Climate change and
environment risks and impacts,
Category (A, B, C, D)
Climate change and
environment opportunities,
Category (A, B, C, D)
1
C
B
2
C
B
3
C
B
4
C
C
69. On the basis of the evidence provided in this Business Case, it can be
assumed that none of the four options proposed would generate any
potentially high or unmanageable risks associated with the environmental
impact of their activities, or their effects on global climate.
70. Water scarcity is becoming more acute as a result of population growth
and climate change; this makes finding better ways to reach cities’ fast
growing poor areas even more important. WSUP supports water
resources planning which helps ensure that urban demand fits within the
capacity of the water catchment and makes sure services are resilient to
climate change.60
71. Research into new approaches and technologies should aim to develop
solutions that are suited for various geographical, geomorphologic and
topographic settings. These are particularly important aspects of the
realities facing policy makers and service suppliers involved in the
delivery and provision of water and wastewater services on the ground.
These solutions should have the capability to reduce potable water
demand, provide fit for purpose reuse options where possible, and
minimise impacts on the local and global environment61.
72. Failures by policy makers and service providers are attributable to a
variety of reasons, including lack of appropriate evidence and
weaknesses in the design and implementation of policies and
interventions, which can then have negative results on the ground. For
example, the lack of sound strategies for community water supply and
sanitation programmes in developing countries was also found to have
limited the impacts of many water and sanitation programmes, with many
systems breaking down and being abandoned prematurely62. Along
similar lines, Karn and Harada (2001)63 noted how inadequate sewerage,
on-site sanitation, and wastewater treatment facilities on the one hand,
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EDRM No. 3568211
and lack of effective pollution control measures and their strict
enforcement on the other, were the major causes of rampant discharge of
pollutants in the aquatic systems in three cities in Nepal, India and
Bangladesh.
WSUP’s Environmental, Social and Governance (ESG) Standards
and Policies
73. WSUP requires that all programmes it supports adhere to WSUP’s
Business Procedures64, which include objectives and standards for ethical
conduct and performance and specifically cover:
•
•
•
•
Bribery and Corruption
Conflicts of Interest
Corporate Governance
Environment, Health and
Safety
•
•
•
Human Rights
Individual Conduct
Labour Standards
Transparency
74. Responsibility for adherence and implementation of WSUP’s policies
rests with the WSUP Chief Executive Officer, who is answerable to the
WSUP Board of Directors. The Secretariat ensures that WSUP’s policies
are applied in all their activities and dealings with development partners,
agents, contractors and other third parties with whom WSUP has
business relationships.
Social Appraisal
75. Access to water and sanitation is widely accepted as crucial to poverty
reduction and is recognised as such in the MDGs. UNESCO65 estimates
that the lives of an estimated 1.8 million children a year can be saved
with safer water and better sanitation.
76. Evidence shows the access gaps in water and sanitation affect the
poorest people in society the most. Almost two in every three people who
need safe drinking water survive on less than US$ 2 a day and one in
three on less than US$ 1 a day. The richest 20% of the population in
Sub-Saharan Africa is almost five times as likely to use an improved
sanitation facility as the poorest quintile. 66
77. WSUP’s interventions benefit poor people through direct service delivery
and through the application of its evidence on best practice in the design
of more effective policies and delivery systems for the urban poor. In
FY11-15, WSUP will help approximately 3.9 million67 low income urban
consumers directly (and a further 12.5 million68 indirectly) gain access to
improved water and sanitation services. 41% of these total projected
results will be attributable to UK support for WSUP and include:

Programmes in urban centres in 6 countries improving access to
sustainable, affordable and viable Water, Sanitation and Hygiene
(WASH) services for 1.5 million people;

The development of models that can be adopted in other urban
centres by larger scale water and sanitation programmes;
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EDRM No. 3568211

Increased service provider capacity and institutional change leading to
5 million people with improved access to sustainable, affordable and
viable WASH services;

US$88 million (£56.8 million) of finance mobilised and effectively
targeted for pro-poor WASH service improvements;

Evidence, research, testing, learning & dissemination influencing
decision making in the sector (Service Providers, Governments,
development finance agencies, Non-Governmental Organisations
(NGOs) & private sector).
78. The impact of these programmes will be broadened further by WSUP’s
high quality dissemination of lessons learned and applicable models.
79. Women and girls often bear the brunt of these gaps: Women and girls are
a central focus of DFID’s strategic vision for Girls and Women (2011)
because they are disproportionately affected by a lack of access to clean
water and basic sanitation69. Women without toilets spend a great deal of
time each day queuing for public toilets or seeking secluded spots to
defecate, during which time they are at risk from sexual or other
violence70. Women who choose to urinate or defecate only before
daybreak or after dusk risk having health problems (bladder, urinary tract)
as well as severe discomfort. Absence of appropriate sanitation facilities
has been identified as a major reason for women not to participate
effectively in economic activity outside the home. It is usually women who
go to the source to collect drinking-water. Surveys from 45 developing
countries show that this is true in almost two thirds of households71.
80. WSUP embraces the importance of prioritising and mainstreaming a
gender approach that supports the participation of women in particular,
recognizing their key role in the supply and management of water and
sanitation services.
81. There is emerging evidence that safe water supply and well-maintained
toilets, separate for girls and boys, can help to improve enrolment and
attendance. Having clean toilets in schools may improve the attendance
rates of adolescent girls. In addition, poor menstrual hygiene can lead to
increased health problems72. There is evidence that WASH interventions
positively impact prevalence of childhood disease73.
82. Ensuring accessible, affordable, reliable and good quality water,
sanitation and hygiene in clinics and communities reduces maternal
mortality. Handwashing by birth attendants before delivery has been
shown to reduce mortality rates by 19 percent, while a 44 percent
reduction in risk of diarrhoea was found if mothers washed their hands
prior to handling their newborns.
83. Understanding the true impact of water and sanitation (watsan)
interventions on the health of communities is often perceived as having
high cost implications and being labour intensive, with many
organisations working in the watsan sector relying on proxy indicators of
success and assumed impact. In response to this, WSUP has developed
an approach to more cost effective Health Impact Evaluations which
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EDRM No. 3568211
enable a clearer understanding of the overall social and health impact of
interventions.
84. At the operational level, WSUP helps strengthen municipal government
and service provider capacity to shape the sector’s engagement with
communities by helping them develop institutional policies and strategies
that address gender throughout their project cycles of planning, design,
budgeting, implementation, monitoring and evaluation. To do this,
institutions need to embrace internal reform, adopt gender assessment
and analysis tools, participatory approaches and communication
strategies to implement and monitor that their interventions engage and
benefit men, women and special groups.
Summary Value for Money Statement for the preferred option
85. Option 1 is the preferred option. The WSUP programmes use financial
modelling at planning stage to identify the most cost effective solution for
each context. A substantial proportion of programmes are delivered by
the service provider partners themselves with their own resources in the
form of staff time, materials, and financial contributions. An indicator of
the efficiency of the programme is the overall cost per beneficiary. This
equates to £8.1 per direct beneficiary (Total programme cost divided by
total number of direct beneficiaries) and £2.6 per indirect beneficiary
(Total programme cost divided by total number of direct beneficiaries).
This is firmly within the range of costs reported in the DFID WASH
portfolio review (between £0.91 and £18.8)74. The total volume of finance
that is projected to be mobilised by the replication of models developed in
this programme is US$220m. Finance intended to be mobilised that is
contingent on DFID support in the six countries consists of £9.478m of
matched funding and US$68m of Dutch funding for Vitens Evides.
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EDRM No. 3568211
Table i: Estimated Cost Per Direct and Indirect Beneficiaries
2012/13
Total Programme
Costs
2013/14
2014/15
Total
£9,664,000
£11,557,000
£11,331,000
£32,552,000
1,015,000
1,335,000
1,645,000
3,995,000
Indirect beneficiaries
0
3,975,000
8,585,000
12,560,000
Average cost per direct
beneficiary
-
-
-
£8.1
Average cost per indirect
beneficiary
-
-
-
£2.6
$32m (£21m)
US$77m (£50m)
$111m (£72m)
US$220m (£142m)
Direct beneficiaries
Finance mobilised
86. WSUP has selected the six countries it believes will be most effective in
achieving the intended results, outputs and outcomes. These countries
have been selected using a range of criteria including service provider
commitment, investment plans, available financing as well as potential to
achieve scale.
87. The principal instruments to monitor impact of DFID’s funding to WSUP
are the medium term business plan and the log frame based results
framework (Annex 4).
Commercial Case
Direct Costs
88. WSUP is a multi-sector partnership organisation comprising members
from UK and international private sector, international NGOs and a UK
based academic institution. DFID will fund the acquisition of goods and
services by WSUP through indirect procurement. DFID will not be a direct
implementer and will not contract directly for supplies or services as part
of this programme. Procurement of works, goods and services will be
carried out in line with WSUP’s business procedures which include a
robust business ethics and membership policy and a USAID compliant
procurement policy developed with support from private sector members.
Financial, project and procurement management and control is provided
by WSUP’s central office in the UK and implementation and management
will benefit from the institutional strength of its members.
How does the intervention design use competition to drive
commercial advantage for DFID
89. Programme design has been undertaken by WSUP and is the
culmination of an internal 18 month process of strategic review and
planning which has focused on evaluating programme delivery, extracting
learning and lessons from implementation and horizon planning for the
organisation. This programme design has built upon internal and external
evaluations and monitoring assessments carried out as part of donor
funded programmes (Bill & Melinda Gates Foundation (EDRM no.
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EDRM No. 3568211
3687901), AusAID (EDRM no.3686226), USAID (EDRM no. 3687886) all
of which have highlighted programme strengths and weaknesses and the
niche that WSUP can and should occupy in urban WASH. This process
has enabled WSUP to develop a deeper understanding of how it can
influence and link into the wider sector, thereby increasing its impact.
90. The outcomes of this process have fed directly into the development of
WSUP’s Programme Strategy 2011 to 2016 “Stronger service providers,
better services for all” (see Annex 1),which sets out WSUP’s apirations
for the next five year period to take its programme to scale. In order to
achieve impact at scale, WSUP seeks sector influence and impact, which
will be achieved through the adoption and replication of WSUP’s pro-poor
models of urban WASH by other sector actors including MFIs,
development banks, local service providers and International NonGovernmental Organisations (INGOs). This process will be supported by
providing evidence and data to demonstrate the effectiveness of these
models and working with these organisations to include them in
investment plans and projects. To support capacity development, lessons
learned and best practice in the delivery of the models developed and
demonstrated will be documented and published.
91. WSUP’s membership and partnership model means programmes have
access to a reserve of sector leading experts which are responsive to the
demands of the programmes and can be targeted effectively and
efficiently, ensuring value for money. This is further supported by
business approaches adapted from the private sector which have
become central to WSUP’s business systems and procedures. All
programme inputs are subject to a centrally managed procurement
system which obliges all suppliers and members to formalise inputs,
deliverables, budgets and timelines in contracts, with all expenditure over
£5,000 subject to WSUP’s Procurement Policy. Reliance on the WSUP
members to deliver programme inputs has reduced over time and 60% of
programme inputs are now derived from the use of local contractors,
other southern hemisphere providers and experts. Delivery of new
research outputs will be done through open competitive processes to
enable value for money and contracting of the best expertise. WSUP
standard contract terms allow for these contracts to be terminated.
How do we expect the market place will respond to this
opportunity?
92. WSUP is creating new opportunities for small domestic private sector
providers of water and sanitation services. An example of this is the
sanitation work being developed in Ghana which is branded as the
“Clean Team”. Unilever is contributing product design, branding and
franchising expertise with community development carried out by WSUP.
The scheme presents opportunities to small entrepreneurs to set up a
franchised operation.
93. Other opportunities are linked to the investments needed to achieve city
wide scale up of water and sanitation services. These are for both small
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EDRM No. 3568211
and larger firms including service providers, equipment suppliers and
engineering consultants.
What are the key underlying costs drivers? How is value added
and how will we measure and improve this?
94. The main cost categories are supplies (which includes infrastructure,
contractors, transport and local office costs), consultancy and personnel.
A major factor affecting these costs is local inflation, which varies
according to prevailing economic conditions. This is offset by devaluation
of local currency against pound sterling (See Table v on page 40 for
analysis of key cost categories). All procurement of goods and services is
governed by WSUP’s comprehensive procurement policy, which ensures
value for money through identifying the best and most appropriate quality
at the most competitive price. DFID will closely monitor financial reports
provided by WSUP to ensure that expenditure against the main budget
line items set out in Table v are maintained within the agreed ceilings.
How will contract and supplier performance be managed through
the life of in the intervention?
95. All programme inputs into the WSUP programme are governed by
contracts (Task Orders or Consultancy Agreements) which set out
deliverables, costs and timelines. Performance against these contracts is
managed by the Country Programme Director. Regular monitoring of task
order and contract delivery is undertaken by budget holders and
contracts are terminated in the case of unsatisfactory performance.
Indirect Costs
Why is the proposed funding mechanism / form of agreement the
right one for this intervention, with this development partner?
96. WSUP is a not-for-profit-organisation and as such an Accountable Grant
Agreement is the most appropriate mechanism through which to fund this
Programme. WSUP’s programmes have access to sector leading
expertise (from within and outside the membership) which is sourced on
the basis of being the most appropriate, cost effective and available for
the task. This combination of expertise and technical ability from a wide
range of private sector, non-governmental and academic institutions to
deliver complex integrated urban WASH programmes is unique.
97. By supporting WSUP, DFID is able to capitalise on the combined
institutional strength of the members and make a significant contribution
to the WASH sector. A single contract with WSUP provides access to the
technical strengths and expertise from all the members without the
significant additional costs arising from individual arrangements with
each.
What has been done to assess whether the third party
organisation has the necessary capability and capacity to obtain
best value for money from the funds they are spending on behalf
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EDRM No. 3568211
of DFID? Where improvements in capability or capacity have been
identified how are these being taken forward?
98. One indicator of value for money is programme management costs.
WSUP has a lean central management structure of 12 in the UK, and the
majority of funds are spent in country. The UK based office provides
overall programme leadership, governance, accountability to the Board
and Members, financial control and management, communications and
monitoring and evaluation support. The total support costs (excluding
research management costs provided by RED for WSUP’s London office)
are 9.39% of total programme costs in Year 1 (Table viii), which
compares favourably to UK based INGOs at 15% to 30% 75, 8% for
Homeless International 76 and organisations like WSP at 12% to 15%77.
99. WSUP local management teams are also deliberately small (three to five
people) and coordinate the inputs on the ground in-country. WSUP does
not establish large offices in-country, especially where WSUP Members
already have a presence. Most inputs are outsourced to members,
partners, consultants and contractors, all of which are selected
competitively. Selection criteria are those which are included in WSUP’s
procurement policy and which deal with issues such as cost
effectiveness, competitive tendering, value for money, source, conflict of
interest etc. When contracting with a member, WSUP consider these
issues and if better value and technical resource can be found externally,
WSUP will use this external source. Members’ inputs are on a not-forprofit basis and many other suppliers work at discounted rates.
100. WSUP has a core set of established and robust business procedures
which include both policies and implementation strategies for financial
management, accounting, procurement, information technology, child
protection, a detailed monitoring and evaluation framework and an
organisation risk register which is updated regularly. WSUP is audited on
an annual basis by an independent audit firm, the appointment of which is
reviewed regularly by the Audit Committee. As a USAID grantee, WSUP
has been audited in line with both US Federal Government and US
Agency for International Development Policies and Procedures, passing
the most recent audit (September 2011) with no disallowable costs.
101. In addition, WSUP has recently been the subject of a due diligence
review78 conducted by the audit firm KPMG on behalf of DFID for a Global
Poverty Action Fund (“GPAF”) funding proposal with no major findings,
two minor findings related to administrative tasks and two examples of
best practice to be shared with the development sector (relating to the
robustness of the financial systems and of the monitoring and evaluation
framework). DFID decided not to commission a further due diligence
report for the current project being considered under this business case.
Transparency and accountability to its stakeholders and to the sector is
demonstrated through the publication as a standard procedure on the
WSUP website of quarterly Board meeting minutes and annual audited
accounts ; additionally WSUP is in the process of signing up to the
International Aid Transparency Initiative (IATI).
WSUP Procurement Processes
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EDRM No. 3568211
102. Each WSUP member signs a Membership Agreement which defines
the core principles of the organisation, expected roles and
responsibilities, procurement policy and the Member terms and
conditions.
103. WSUP’s membership draws on well-established water utility,
engineering, humanitarian, environmental and academic centres of
expertise which are available to the programmes. Due to the expanding
programme and the need to draw on a wider range of expertise, WSUP
increasingly contracts expertise from outside its membership, and
external inputs now represent approximately 60% of programme inputs
by cost.
104. Suppliers are selected on the basis of the best technical, cost and
availability offer. There is no presumption that a project team should
include NGO, private or civil society in its make-up, rather that the
technical, social and managerial requirements of the task are covered by
the best available expertise
105. Where WSUP Members are assigned to projects, the contracts require
that Members staff rates are on a not for profit basis and all inputs from
Members are subject to the provisions of the Members’ Declaration,
which states that the Secretariat is responsible for confirming that all
inputs meet WSUP procurement standards. The effectiveness of this role
is reviewed in the course of the annual audit. Contract rates are based on
the individual’s day rate (which varies according to skills/seniority) plus
salary on-costs including overhead allocation plus VAT. Travel,
accommodation and subsistence are billed at cost and all staff rates are
calculated on a not-for-profit basis. WSUP thus seeks to ensure that the
contracting of goods, services and works is governed by clear procedures
and policies and that transparency, as well as value for money, is
achieved.
106. All programme inputs over £5,000 are subject to WSUP’s Procurement
Policy. This policy, adapted from WSUP’s private sector members such
as the Halcrow Group, is compliant with the requirements of the United
States of America Federal Government and United States Agency for
International Development and has recently been audited.
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EDRM No. 3568211
Financial Case
How much will it cost
107. The overall budget for WSUP’s three year Programme Strategy is
£32.552m. The budget has been built up by WSUP from detailed country
plans for the six target countries. The analysis by year between the
WSUP Programmes and Programme Support costs is summarised in the
table below.
Table ii: Total Project Budget by year by Programme and Programme
Support costs
2012/13
2013/14
2014/15
Total
£’000s
£’000s
£’000s
£’000s
WSUP Programmes
9,205
11,098
10,855
31,158
Programme Support
459
459
476
1,394
9,664,
11,557
11,331
32,552
Total
108. The analysis by country is shown in Table iii. WSUP may reallocate
funds between countries as new funds are secured or take the
opportunity to increase delivery of programme outcomes where this can
be achieved.
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EDRM No. 3568211
Table iii: Analysis of Total Project Budget by Country
2012/13
£’000s
2013/14
£’000s
2014/15
£’000s
Total
£’000s
Bangladesh
1,406
1,578
1,115
4,100
Ghana
1,533
1,636
1,387
4,556
Kenya
1,805
2,020
2,177
6,002
Madagascar
1,695
1,961
1,995
5,649
Mozambique
1,244
1,834
1,884
4,963
751
1,288
1,498
3,537
8,434
10,317
10,056
28,807
109
88
88
285
Learning, Monitoring &
Evaluation
351
351
364
1,066
Advocacy & Mobilising
Finance
311
342
347
1,000
Sub-total
771
781
799
2,351
WSUP Programmes
9,205
11,098
10,855
31,158
Research Management
Cost (funded by RED)
100
100
100
300
Programme Support
359
359
376
1,094
9,664
11,557
11,331
32,552
Zambia
Sub-total
Communications
Total
109. The project budget by country and workstream is shown in Table iv
together with analysis by budget lines in Table v. The WSUP budget in
these countries is essential in realising the overall package of
investments which totals US$220 million as shown in paragraph 58.
Table iv: Project Country budget analysed by Workstream
IWA
ISA
IHY
IEP
Water
Sanitation
Hygiene
Environment
£’000s
£’000s
£’000s
£’000s
Total
£’000s
Bangladesh
1,041
2,469
590
-
4,100
Ghana
2,301
1,773
482
-
4,556
Kenya
3,101
2,457
219
225
6,002
Madagascar
2,666
2,320
390
273
5,649
Mozambique
1,422
3211
330
-
4,963
Zambia
2,456
990
91
-
3,537
12,987
13,220
2,102
498
28,807
Total
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EDRM No. 3568211
Table v: Project Country budget analysed by budget line item
Cost category
Personnel
Technical
assistance
Travel
Indirect
overheads
Supplies
Equipment
Total
£’000s
£’000s
£’000s
£’000s
£’000s
£’000s
Bangladesh
533
21
2,130
1,409
0
7
4,100
Ghana
499
23
1,522
2,503
0
9
4,556
Kenya
928
20
1,358
3,689
0
7
6,002
Madagascar
693
20
2,311
2,592
0
33
5,649
Mozambique
974
19
615
3,344
0
11
4,963
Zambia
343
24
862
2,295
0
13
3,537
3,970
127
8,798
15,832
-
80
28,807
Total
How will it be funded
110. DFID’s contribution to the WSUP programme totals £13.3m
(comprising £10m from PSD and £3.3m from RED) for the three year
period from 2012 to 2015 and is to be channelled through an accountable
grant agreement with WSUP. DFID will provide £0.1m from the PSD
budget to cover the cost of an independent evaluation in 2015. The first
tranche of support in 2012/13 (£3.822m) will be disbursed immediately
and WSUP is to raise the balance of £5.842m required in that year from
other donors. The DFID support in 2013/14 and 2014/15 (see table
below) will be subject to WSUP raising matching funds from others. The
analysis of DFID contribution by year is shown in the following table.
Table vi: Analysis of DFID contribution by year
2012/13
£’000s
2013/14
£’000s
2014/15
£’000s
Total
£’000s
DFID (PSD)
Contribution
2,722
3,686
3,592
10,000
DFID (RED)
Contribution
1,100
1,100
1,100
3,300
Total DFID
Contribution
3,822
4,786
4,692
13,300
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EDRM No. 3568211
£’000s
111. DFID support in 2013/14 and 2014/15 totalling £9.478m as shown
above will be subject to WSUP raising funds above the £12.53 million
that WSUP has already secured from other donors. The table below
shows that in order to meet the total project budget at least £6.722m as
yet uncommitted funding is required from other donors; on this basis
DFID would need to match each £1 from other donors with £1.41p from
DFID. Ideally the uncommitted balance of £16.2m would be contributed
equally as to £8.1m from DFID and £8.1m from other donors, in which
case the surplus DFID funds of £1.378m (ie £9.478m less £8.1m) would
be carried forward to be available for WSUP funding required after
2014/15.
Table vii: Matched funding after year 2012/13
DFID
Other
donors
£’000s
Total
£’000s
Matching
ratio
£’000s
Committed
3,822
12,530
16,352
Not committed
9,478
6,722
16,200
13,300
19,252
32,552
Project total
1.41
112. In addition to the £6.7 million of matched funding to WSUP that is
expected to be raised, DFID support would also help trigger an additional
US$69 million of investment from the Netherlands Government to be
used to fund Vitens-Evides International (VEI) for its work in their
partnership with WSUP on strengthening the core utilities in the 6
countries.
113. The table below demonstrates that DFID’s proposed funding is 40.86%
of the total project budget. WSUP originally requested DFID to fund all
the Programme Support costs; DFID is proposing to contribute 78% of
Programme Support costs in year one but has reduced the contribution in
the following years to approximately 40% (in line with DFID’s overall
contribution to the project).
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EDRM No. 3568211
Table viii: DFID funding to Programme and Programme support
2012/13
2013/14
2014/15
Total
£’000s
£’000s
£’000s
£’000s
DFID funding
3,463
4,606
4,504
12,573
359
180
188
727
DFID Total
3,822
4,786
4,692
13,300
Programme support
as a % of DFID Total
9.39%
3.76%
4.01%
5.47%
Programmes
Programme support
%
%
%
%
DFID funding as a
% of the total cost
Programmes
37.62%
41.50%
41.49%
40.35%
Programme support
78.21%
39.22%
39.50%
52.15%
DFID Total
39.55%
41.41%
41.41%
40.86%
114. DFID will contribute a total of £0.727m to WSUP’s programme support
costs over the three years of the project and the balance of the
programme support costs at £0.667m will be met by WSUP’s other
potential donors (e.g. The Bill & Melinda Gates Foundation, The Coca
Cola Africa Foundation, USAID, AusAID) as new funding agreements
currently under negotiation are secured. If additional funds for the WSUP
programme supports costs are secured from other donors in Year 1
(2012/13), then the unallocated amount of DFID’s planned contribution of
£0.359m to programme supports costs for that year will be reallocated to
programme costs. This reallocation would result in a more even share of
the programme support costs between donors.
115. The WSUP programme will be funded from DFID, from other
committed aid and from a pipeline of uncommitted funding. DFID’s
contribution will be funded from Private Sector Department’s (PSD) and
Research and Evidence Division’s (RED) programme resource budgets
(RDEL). Additional funding has been committed by other aid partners
(including for example the Australian Agency for International
Development and the United States Agency for International
Development), and there is an additional pipeline of unconfirmed funding
from other funding partners (including for example The Bill & Melinda
Gates Foundation).
Table ix: Other Potential WSUP Funding Partners
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EDRM No. 3568211
WSUP
Amount
£’000s
DFID – PSD commitment
10,000
DFID- RED commitment
3,300
Total DFID commitment
13,300
Other commitments
12,530
Total commitments including DFID
25,830
Unconfirmed funding
21,550
Total possible funding
47,380
WSUP Programme Budget
32,552
Possible overfunding if all
Unconfirmed funding is received
14,828
Table x: Other commitments made by WSUP Funding Partners as at July 2012
WSUP
Amount
Stage
Start
Donor
£’000s
6,700
Committed
Apr-12
5-year work programme through a
strategic relationship with AusAid
330
Committed
Aug-12
USAID increased committed
amount on an existing contract
and funding coming from
Washington DC budgets
UK Foundation
1,500
Committed
Jan-12
Global Poverty
Action Fund
950
Committed
Jun-12
1,200
Committed
Mar-13
UK Corporate
Foundation
500
Committed
Jun-12
UK Foundation
400
Committed
Feb-12
WOP in Naivasha
(Dutch
Government)
950
Committed
Jun-12
AusAid
(Mozambique)
USAID
Japanese Social
Development
Fund
Total (without
DFID)
Notes
World Bank Administered Trust
Fund; joint programme with WSP
of World Bank; awaiting contract
issue
12,530
Table xi: Unconfirmed funding
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EDRM No. 3568211
Significant Pipeline
negotiations
AusAid Civil Society
WASH
Amount
£4,650,000
Likelihood
High
Dependency
Low
Start
Feb-13
AusAid strongly
encouraging WSUP to
apply, following positive
programme evaluation
USAID
Gates Foundation
£1,000,000
High
Medium
Sept13
USAID have increased the
agreed amount on an
existing contract and funds
are being identified through
USAID missions
£2,000,000
Proposal
stage
Medium
Nov-12
WSUP proposal submitted
and response awaited
£500,000
High
High
Jan/Apr
-13
EC and VEI funding
triggered by DFID match
funding
£1,650,000
High
Medium
EC in Kenya
US Corporate
Foundation
Notes
Aug/
Oct-12
Ongoing - Due to be signed
Aug/Octt 2012
Water Operator
Partnership (WOP) in
Mombasa (Dutch
Government)
£1,900,000
High
High
Mar-13
WOP in Ghana
(Dutch Government)
£2,000,000
Medium
High
Apr-13
DGIS funding triggered by
DFID match
Mar-13
Full proposal being
developed in partnership
with Vitens-Evides
International
Jan-13
Proposal submitted with
CARE to AFD sanitation
budget line. On-going
negotiation
DGIS PPP Facility
(Mozambique)
AFD FISONG
(Madagascar)
£7,500,000
£350,000
Total Significant
Pipeline
negotiations
Medium
High
Medium
High
DGIS funding triggered by
DFID match
£21,550,00
116. WSUP reported a 54% success rate last financial year (2011/12) in
converting potential funding opportunities into confirmed funding (54% is
considered a reasonably good success rate, as the industry standard for
the institutional fundraising market is about 30%). As a result, WSUP has
decided to maintain a pipeline of potential funding opportunities which
exceeds the programme budget. In the event that surplus funds were to
become available, WSUP would:

ensure that the timeline for the surplus funding stretched forward
beyond the 3 years (2012/13 to 2014/15), allowing the programme to
continue expanding or,
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EDRM No. 3568211

invest more in Strategic Objective 4, ie. Promote successful models to
the WASH sector worldwide (see Figure 5) during the next 3 years in
order to improve the targeting of IFI funding in other countries.
117. WSUP plans to strengthen its financial sustainability and reduce its
reliance on large grant funding mechanisms over the long term. WSUP
plans to establish and develop a cost plus contracts service, referred to
as “WSUP Advisory”, to generate additional revenue streams to support
the core WSUP operation. In addition, WSUP plans to broaden the
membership base through introducing new members where appropriate,
and will use the revision of the governance structure as an opportunity to
achieve this. WSUP is also developing a strategy to diversify the funding
base with a view to developing a number of larger corporate and private
individual partnerships to provide long term support to the organisation as
it grows. This strategy will be developed in the first six months of the
Business Case with implementation of the strategy planned to deliver
results within the three years of the Business Case.
How will funds be paid out
118. DFID funds will be paid out quarterly in advance to WSUP, and
subsequent disbursements will be made against an agreed annual
implementation plan, subject to receiving satisfactory programme
progress and financial reports. This advance payment mechanism
applies to all WSUP donors although the disbursement frequencies vary.
Payment in advance has been requested as WSUP operates under an
unusual structure. WSUP's funding is largely received through grants and
contracts and is restricted to specific activities with a limited contribution
to Programme Support costs. WSUP's only source of unrestricted funding
is the annual membership fee from the seven members of WSUP which
contributes to the costs of the UK Secretariat. WSUP does not therefore
have sufficient unrestricted funding to pre-finance the costs of activities
but does monitor programme commitments and expenditure on a regular
basis to ensure resources are sufficient to cover planned activities.
What is the assessment of financial risk and fraud?
119. Governance on financial risk and fraud is provided by the WSUP Board
(supported by the Secretariat and Audit Committee) who ensure that
controls built into WSUP operating policies, procedures and systems are
regularly checked and monitored. As a pre-condition of releasing WSUP
funds, authorised representatives of all WSUP member organisations,
project partners, sub-contractors and sub-consultants that receive
funding for WSUP projects must agree to adhere to WSUP’s Business
Ethics Policy and further commit to abide by the principles set out in
performing the services contracted to WSUP.
120. With members drawn from a number of sectors including the private
sector, WSUP is conscious of the potential for conflicts of interest and
concerns relating to unfair advantages gained through membership.
WSUP maintains two procedures to deal with any potential conflicts of
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EDRM No. 3568211
interest which may arise as a result of participation in WSUP
programmes.

Firstly, all contract documentation requires suppliers (member and
non-member) to declare their adherence to WSUP’s Business Ethics
Policy (in the public domain on WSUP’s website) which sets out the
principles by which all of WSUP’s business partners will undertake
business as part of its programmes. This Policy documents how
WSUP addresses issues such as fraud, corruption and conflicts of
interests and includes a whistle blowing policy and business integrity
and ethics clause section for inclusion in contracts.

Secondly, Members must declare potential conflicts of interest at the
start of each Board Meeting as do the Senior Management. If a
Member’s interests are deemed to be in conflict with either the WSUP
Business Ethics policy or wider WSUP interests, the WSUP Board
considers each case and makes recommendations for how each
should be managed to ensure compliance with the WUSP Business
Ethics Policy.
121. In addition, WSUP Members sign a Members’ Declaration as a
condition of membership which commits them to the WSUP Procurement
Policy, outlined below under paragraphs 102 to 106. The WSUP
Procurement Policy requires Members tendering to deliver services to
demonstrate that they are the best qualified and most appropriate to
deliver tasks within programmes. See also paras. 127 – 128.
How expenditure will be monitored, reported and accounted
for
122. The WSUP Board of Directors has overall responsibility for the funds
disbursed to the Programme, and the WSUP Secretariat has day-to-day
responsibility for the delivery of the Programme and effective financial
and technical reporting back to DFID and other funding partners and
members.
Financial reporting
123. Financial management and control is provided centrally in WSUP and
is led by the Finance Manager, a qualified accountant with 20 years’
experience. Funds will be disbursed in line with WSUP standard
operating procedures as follows:

against Task Order contracts with WSUP members: for local office
hosting and the delivery of components of programmes. Monthly
reports are provided

through local WSUP managed bank accounts in-country. Monthly
reports are provided

against contracts with suppliers and consultants: for the delivery of
works, goods and services in-country which include retention
payments for infrastructure contracts, invoicing clauses and
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EDRM No. 3568211
termination clauses. Contracting with external agencies is governed
by the WSUP Procurement Policy

authorisation limits for commitments and expenditure are set out in a
financial scheme of delegation in the Financial Principles and Policies,
a Board of Directors approved document.
124. WSUP records information at programme, donor and thematic level (i.e
water / sanitation / hygiene) such that information can be analysed to
meet different reporting requirements specified in different donor
contracts. Reviews and reconciliations of balance sheet accounts
(including bank accounts, suppliers accounts against supplier statements,
control accounts etc) are undertaken on a monthly basis, and funder
returns are reviewed and reconciled on a quarterly basis as specified in
the reporting requirements of each funding agency. A register of
contracts is maintained and is analysed both by programme and by donor
agency. Commitment reports are regularly provided to Programme
Directors and Managers.
125. Programme level budgets are developed and spent in local currencies
where possible, and foreign exchange risk is managed centrally and
monitored by the Finance Manager, CEO and the Audit Committee.
These budgets are developed for the start of the financial year, with
variances against budget reviewed quarterly and revised forecasts
produced every six months.
126. WSUP will provide six monthly financial and technical statements to
DFID in line with the grant agreement signed. More detailed annual
reviews will be provided to DFID which will record progress against
agreed milestones and indicators as well as setting forward a plan and
budget for the following year. The WSUP web-site will also give good
details of WSUP programmes on a per country basis.
Auditing
127. WSUP is a not-for-profit company, limited by guarantee, and although it
could possibly take advantage of the audit exemptions for small
companies WSUP is audited on an annual basis, and this will continue in
throughout this Programme (See in para. 97 in Commercial Case for
more detail). WSUP is committed to following UK Charity Statement of
Recommended Practice (SORP) guidelines on auditing, and WSUP has
its annual accounts audited in line with Charity SORP. In addition, WSUP
has regular project audits as part of contract compliance with donor
requirements including USAID and AusAID as well as due diligence
assessments during set up (USAID, AusAid, KPMG).
128. As outlined in the Commercial Case, the Audit Committee is a subcommittee of the Board of Directors and meets on a quarterly basis in
advance of the Board meetings. This Audit Committee takes the lead in
financial risk management and reports directly to the Board of Directors.
The WSUP Treasurer is an member of the Board and is a partner in a
large international accountancy firm.
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EDRM No. 3568211
Management Case
Oversight
129. The overall oversight and accountability for WSUP lies with a Board of
Directors with an independent Chair.
130. The board has representation from each of the seven member
organisations and three independent directors. The Board meets on a
quarterly basis with the Annual General Meeting held on the same day as
one of the board meetings. An Audit Committee, chaired by one of the
independent directors who is a Deloitte partner. operates as a subcommittee to the Board and again meets on a quarterly basis. Tenure on
the Board of Directors is time bound and there is regular rotation. The
Board reviews annually, with the help of external assessment and
feedback from senior management, the adequacy of its governance
arrangements including the performance of the management team and
makes any changes appropriate to meet the growing needs of the
organisation.
131. Upon confirmation of DFID funding support, WSUP will initiate the
implementation of the governance reform process that was agreed in July
2011 aimed at increasing the numbers the number of independent
directors. This will include the following process:
a) Board Meeting October 2012: Propose draft Board Director profiles
based on desired skills and expertise for comment;
b) Board Strategy Day January 2013: Approve Board Director profiles,
Members recommend internal candidates and, for those roles where
Members are not able to provide suitable candidates, approve initiation of
search for Independent Directors;
c) Board Meeting April 2013: Shortlist candidates and agree selection
panel for interviewing of candidates;
d) Board Meeting July 2013: Approve new Board Directors; review Board
structure, balance and Member participation; consider alterative Member
participation structure, for Members not represented on the Board i.e. a
Members Council separate from the Board of Directors, or a Members
Assembly/AGM.
132. The Board also approved the formation of a bi-annual funders panel to
review governance arrangements and programme performance. Minutes
from WSUP Board Meetings are published on WSUP’s website and are
therefore in the public domain.
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EDRM No. 3568211
WSUP Governance Structure
WSUP Board
Member Directors
Independent Directors
Funding Sub-Cttee
Audit Committee
CEO, finance, fundraising
ME&L, comms
WSUP Kenya
WSUP Ghana
WSUP Mozam
WSUP Mad’car
WSUP Zambia
WSUP Bangla
Management
133. The Board of Directors devolves day-to-day operation and
management of WSUP to a UK based Secretariat which provides
programme and financial management and control, resource
mobilisation, monitoring and evaluation and communication support to
the country offices. The Secretariat is led by the Chief Executive Officer
who is ultimately accountable to the Board of Directors for the delivery of
the organisation business plan and strategies. The Secretariat will take
the lead in the management of the grant agreement with DFID and will be
accountable for the delivery of the overall Programme of work to DFID (to
include regular logical framework reports and financial accounting
together with the provision of documents and publications developed by
the programme).
WSUP Governance Structure
Country Level (e.g. WSUP Kenya)
WSUP Kenya Programme Director
WSUP Kenya Programme Team
Programme Manager; finance
function; technical capacity;
coordinate programme inputs
Partner
Municipality
Partner
Water Utility
Partner
SMEs
Partner
Communities
134. Each country has a dedicated Programme Manager who acts as the
WSUP representative and coordinates resources, member and partner
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EDRM No. 3568211
inputs and manages the partnerships with the service providers and
communities. The Programme Manager is supported by a small team
covering finance, monitoring and evaluation and community
development. These staff are accountable to a Programme Director,
allocated at 0.5 FTE per country and typically recruited from a private
sector infrastructure background with an ability to work across sectors.
135. Quarterly and annual reporting from the countries will be through the
WSUP Monitoring and Evaluation framework and information will be
collated and analysed by the Secretariat. This information will be used to
develop the reports submitted to DFID.
DFID Management
136. The WSUP Programme will be managed by the Private Sector
Department (PSD), and PSD’s Infrastructure Team will be WSUP’s main
point of contact in the day-to-day management of the grant agreement.
RED’s (Research and Evidence Division) Climate and Environment Team
will be the lead contact on the agreed WSUP research deliverables.
137. The WSUP Secretariat will be accountable to DFID and will report
regularly on overall progress, successes and challenges in
implementation, to seek guidance and advice and to make further
linkages into other departments in DFID (in particular, the Research and
Evidence Division and the Water, Sanitation and Hygiene Team). In
addition, WSUP will regularly provide copies of research findings,
publications, and evaluation findings as well as communications materials
to DFID.
138. WSUP will share minutes of all appropriate meetings and work with
DFID to forge closer ties to other DFID funded initiatives such as the
PIDG Facilities and CDC.
139. At country level, WSUP Programme Teams will foster relationships
with DFID country and regional offices in the core countries through
regular meetings, invitations to programme events and requests for
technical support.
Monitoring and Evaluation
140. WSUP uses independent annual evaluations and its own quarterly
M&E framework to assess the effectiveness of programmes. This
includes looking at value for money, the impact of capacity building, the
impact on people’s lives especially health, cost per capita, standard
designs for facilities and construction costs. Evaluations and monitoring
data are used to plan future work.
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EDRM No. 3568211
Routine monitoring
141. WSUP routine monitoring processes include quarterly reports
submitted by in-country programme teams to the WSUP Secretariat.
These comprise three standard-format components:
 a spreadsheet report, in which a numerical assessment of programmewide progress is made against the WSUP core indicators set out in the
logical framework.
 a narrative report, in which teams describe progress in major areas
(water, sanitation, hygiene, capacity development), and respond to a
number of key questions (for example, "Can you report any significant
progress over the last quarter towards triggering donor-independent
finance for WASH improvements?")
 an assessment of progress against the logical framework or project
matrices of specific projects within the programme in order to track
progress against the various funding agency templates.
142. WSUP personnel from the UK Secretariat Progress perform
programme reviews each year. These reviews are based on country
visits, interviews with programme teams and partners, and the analysis of
data on specific projects; they allow assessment of programme-wide
progress ensuring, where appropriate and required, adjustments to
programme plans and delivery.
Impact evaluation
143. Household baseline surveys will be carried out in all intervention
districts or target areas at the beginning of implementation in each area
and these will focus on the collection of socio-economic data and
household information including existing levels of service and household
ability to pay. Focus groups will be used throughout to collect regular, but
less formal, data from households and communities to ensure that
implementation is meeting their needs and demands. End-ofimplementation evaluations are carried out by independent evaluators
and these evaluations specifically assess performance against the
specific objectives of each set of activities or intervention in that area,
providing a rigorous basis for assessing the impact of the work carried
out. In addition, this information contributes to WSUP's ongoing
programme planning and to wider sector learning.
144. To assess the impact of WSUP’s capacity development work in an
effective and rigorous way, WSUP has developed a series of capacity
rating scales which assesses the capacity development area (SMEs,
water utilities, mandated sanitation providers, mandated environmental
agencies and relevant government institutions) in five key capacity areas,
each scored out of five against criteria and identified milestones. WSUP
is targeting a score of 15 out of 25 on each scale as being the minimum
standard and the achievement of this score would reflect institutional
capacity, strength and commitment to serving low income communities.
An initial assessment has been made for each city and country and these
will be independently reviewed in the initial implementation phase,
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EDRM No. 3568211
tracked through the course of implementation and evaluated at the end,
again independently.
Documentation of pro-poor models
145. At the core of this Programme is the concept of models, being
innovative concepts and approaches which can be demonstrated, tested
and scaled up at the city or national level, both in the six focus countries
and across the developing world. WSUP has defined three sets of
models: process, intervention and finance, which will be demonstrated
and tested throughout implementation. To facilitate scale up and
replication, both by WSUP and its partners and by other sector actors
and stakeholders, WSUP will continually analyse these models as they
are implemented (action research) and will document this information to
be published as part of the WSUP publication series, as Practice Notes,
Topic Briefs and Discussion Papers. These publications are widely
disseminated to the sector and target service provider senior
management and staff, development partners and funding agencies,
multilateral financing institutions, civil society and sector practioners.
WSUP will also work closely with DFID’s Research and Evidence Division
and Policy Division’s WASH team to explore critical gaps in the
knowledge base from DFID’s perspective and will look to work
collaboratively with staff to develop joint scopes of work where
appropriate. Successful pro-poor models will be promoted worldwide,
with the aim of positioning WSUP as a key centre of knowledge and as a
driver of change in the international urban WASH arena.
Assessing the Evidence – Priority Research Questions
146. WSUP will pursue a structured research agenda in collaboration with
RED, investigating the processes, outcomes and impacts of the action
research carried out in the six target countries in order to advance
understanding of the delivery and financing of pro-poor urban water and
sanitation services. WSUP will also identify, design and implement
focused research programmes in five core areas:





Evidence on the impacts of slum WASH interventions;
R&D of improved technologies for use in urban WASH interventions;
Evidence on how urban WASH services can be delivered at scale;
Evidence on how innovative market solutions can support sustainable
at-scale delivery of urban WASH services, and;
Evidence on environmental sustainability of WASH.
147. On-the-ground implementation in real urban contexts offers powerful
opportunities for learning, highlighting the specific questions that need to
be answered in order to achieve genuine change. At the same time,
research and evaluation feeds back into and informs WSUP's ongoing
interventions in the 6 programme countries.
148. WSUP will work in collaboration with key research partners including
members and non-members such as Unilever, Cranfield University,
Overseas Development Institute, Building Partnerships for Development
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EDRM No. 3568211
as well as the SHARE consortium. There will be an open competitive
process for new research programmes.
Dissemination of evidence – Research into Use
149. WSUP will disseminate research results, lessons, successes and
challenges widely to a range of target audiences in the WASH and
development sectors and focus on the promotion of pro-poor models at
the national, regional and international levels. Each audience has
different interests, capacities and motivations, and WSUP has developed
a differentiated strategy to reach each one:
Sector Practitioners

Convene sessions at key sector fora bringing African and Asian
service provider partners to share practical successes and to
challenge sector thinking in urban water and sanitation service
delivery (Stockholm, World Water Forum, World Bank Water
Week);

Participate in multilateral sector initiatives providing practical
evidence and case studies and disseminating learning and research
documents developed (Sanitation and Water for All, Global
Framework for Action, World Sanitation Financing Facility);

Open access publication of priority research through peer review
and grey literature;

Work with International Water Association Task Forces targeting
the NRW Reduction, Performance Based Contracting, Sanitation 21
Framework and O&M Task Forces in particular.
Service Providers, National Governments

Work in partnership with WSP to document successful programme
outcomes and informing activities under Output 3 of the WSUP
Programmes Logical Framework;

Develop technically accessible and practical thematic guidelines for
service providers to support operations and service delivery in low
income areas (guide to setting up Water User Associations; an
introductory guide to NRW reduction).
Donors and Funding Agencies

Regularly present programme findings and evidence to key
individuals within donor agencies to inform policy development
(bilateral donors) and investment planning processes (IFIs);

Develop urban water and sanitation Discussion Papers aimed at
donor policy makers and decision makers challenging the sector
with innovative debate on urban water and sanitation issues and
opportunities;
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EDRM No. 3568211

Present programme outcomes and learning and share information
on potential business opportunities with Private Infrastructure
Development Group donors and facilities on a regular basis;

Use the influencing power of private foundations such as The Bill &
Melinda Gates Foundation to disseminate successful approaches.
The Public

Work with UK national media outlets such as the Guardian
Development pages to communicate WSUP’s approach and
programme successes;

Work with local media outlets in-country to raise the profile of
service provider efforts to address urban water and sanitation
challenges and to encourage and stimulate poor consumer voice in
the water and sanitation sector.
150. To facilitate this process, WSUP will also expand the scope of its
website and explore the use of web based networking tools and crowd
sourcing tools to pose questions about urban water and sanitation and
harness successful approaches for the sector. WSUP will use proxy
indicators such as visits to the publications section of the WSUP website,
numbers of downloads and traffic from social media platforms to monitor
and evaluate regularly the effectiveness and range of dissemination of
these materials.
Training
151. WSUP will support the development of the water and sanitation leaders
of the future through the design and delivery of training initiatives in the
UK and in the six target countries. These training initiatives will build on
the success of the WSUP Professional Fellowship Programme during
2008-2010, which has demonstrated that developing capacity among
service provider staff accelerates the transfer of know-how and influences
governments to make investment decisions that are poor inclusive. This
result is strongly linked to Outputs 2 and 4 of the WSUP Programmes
Logical Framework.
152. WSUP will:

Work with Cranfield University and other partners (WEDC, Open
University) to design and deliver professional training modules on
pro-poor urban water and sanitation service delivery using evidence
from programmes.

Establish partnerships with learning institutions in the focus
countries (and beyond if possible) to incorporate the modules into
ongoing undergraduate and MSc programmes in-country, thereby
training the water and sanitation leaders of the future.

Make training material available in an on-line distance learning
format for other interested service providers, as a means of
disseminating successful service models.
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EDRM No. 3568211
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EDRM No. 3568211
Risk Assessment
[1 = low; 2 = medium; 3 = high]
Risk
Probability
Potential
impact
Political

Political instability in
the focus countries

Decreasing national
commitment to water
and sanitation
Mitigation strategies

Ongoing monitoring of political
situations in each country; regular
review and updating of organisation
risk register; security responses
developed and updated regularly.
2
3
1
2

Focus country selection includes an
assessment of the political, social and
economic environment with respect to
enabling the conditions for successful
implementation.
2
3

1
3
Ongoing monitoring of political
situations in each country; regular
review and updating of organisation
risk register; security responses
developed and updated regularly.

Community involvement in design,
planning and delivery as well as
management of facilities integral to
the programme ethos. Issues of
affordability and tariffs key aspect of
work with regulators and service
providers to ensure equitable and
affordable service delivery.

Mitigated through WSUP's strong
partnerships and working relationships
with key senior staff at service
providers, building on successful
partnership to date.

Focus country selection took into
account these partnerships and
relationships.

Capacity development is a core and
critical component of the Programme.

Programme builds on strong existing
relationships with World Bank,
Social


Civil / social unrest
in the communities –
including hostility to
water charges
Communities
unwilling to
participate in
implementation
activities, unable to
make contributions
or afford services
Institutional


Lack of commitment
from mandated
service providers
Weak human and
institutional capacity
in service providers

Organisational
restructuring of key
local service
providers delaying
the programme

Influence on
international finance
1
2
3
3
2
2
3
2
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EDRM No. 3568211
Risk
Probability
Potential
impact
Mitigation strategies
institutions and
project finance
processes does not
materialise

European Investment Bank and Asian
Development where WSUP is
advising on pro-poor models and
financing. WSUP written into ToRs for
two investment programmes.
NGO challenge to
water privatisation

The programme works on the last mile
infrastructure to reach the poor at the
urban periphery in partnership with
utilities that are mainly state owned.
WSUP is therefore unlikely to be
targeted by opponents of privatisation.
WSUP also includes WaterAid, WWF
and Care in the partnership and has
access to their networks in defending
their position.

Access to wide range of international
and national expertise and experience
developed through 5 years of
implementation and through multisector membership and partners.

Continue Programme Steering
Committee at the city-level to
coordinate partner inputs and facilitate
decision making processes.

All construction activities include
environmental impact assessment and
monitoring

WSUP programmes work with service
providers and national environmental
agencies to monitor implementation
and ensure within national guidelines.

WSUP’s Business Ethics, other
operating policies and procedures
(including on financial management
and reporting, audits) are robust and
compliant to multi donor agencies
including US Government Federal and
USAID: includes Business Ethics
Policy, Procurement Policy, Expense
Technical

WSUP is unable to
deliver technical
support required

Partnerships on the
ground fail to deliver
programmes
1
2
1
3
Environmental

Negative
environmental
impact of
construction
activities
1
2
Financial

Financial fraud,
corruption or funds
not being used for
planned purpose
1
3
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EDRM No. 3568211
Probability
Risk
Potential
impact
Mitigation strategies
Policy, Member Service Agreements.




In April 2012 the WSUP Board and
senior management adopted a policy
of zero-tolerance on bribery and
corruption and approved specific
actions to implement the
recommendations of the 2011 UK
Bribery Act, which have been included
in the WSUP Business Ethics Policy.

Professional Service Agreements and
Contracts are robust and audited
annually.

Infrastructure contracts ensure
purchase of materials at the contract
start date when prices are at the
levels agreed in the contract.

Project funds are held in the UK and
only disbursed locally when funds are
needed.

WSUP is in negotiations with key
funding organisations including the Bill
& Melinda Gates Foundation,
Australian Agency for International
Development and the Netherlands
Foreign.

The WSUP CEO communicates with
high level managers in Member
organisations to ensure that they
remain committed and are aware of
the possibility of reputational risk for
their companies.
Inflation in-country
Insufficient funds to
deliver full
programme
WSUP Members not
putting their best
experts behind the
programme
153. This Programme is judged to be low / medium risk. The risks identified
above are a mix of external and internal risks. WSUP maintains a
detailed risk register, including country specific assessments, which is
reviewed by the Board of Directors on a regular basis. WSUP has robust
policies and procedures to manage these risks and which reflect recent
changes to UK law which relate to Overseas Aid such as the UK Bribery
Act.
154. There is high political commitment in the UK, internationally and in
each of the focus countries to improving water and sanitation coverage.
In addition, there is recognition that urbanisation is a pressing
development priority and that the delivery of improved services on a
sustainable, financially viable and affordable basis is critical.
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EDRM No. 3568211
155. The critical challenge will be to build sufficient capacity within the
service providers and SMEs to take on and replicate the demonstrated
models and to work with service providers, funding partners and
institutions to replicate these models successfully in investment plans and
strategies. The potential role of the private sector, both in the fostering of
existing local private sector as well as channelling both UK and
international private sector expertise to the local level, is being
increasingly recognised, especially in areas such as sanitation and
hygiene promotion.
Results and Benefits Management
156. A detailed logical framework for results for the Programme is attached
at Annex 4. Once the Business Case has been approved, the results
framework will be adjusted to include an indicator to track the affordability
of services to the Programme’s end-users (Data on affordability is
expected to be collected through the household baseline surveys noted in
para. 143).
157. The log frame concludes that over 3 years the Programme will improve
access to water, sanitation and hygiene services for 16.5 million people,
3.9 million people directly through WSUP interventions and an estimated
12.6 million people indirectly through improved capacity and institutional
frameworks as a result of the WSUP Programmes. Results attributable to
the UK are noted in para. 32.
158. These indicator targets are based on a recent comprehensive planning
process and business planning and reflect WSUP’s experiences to date
as well, the opportunities in each country and city and existing
partnerships and relationships.
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References
1 UN Habitat and UNEP (2010) The State of the African Cities Report 2010: Governance, Inequality and Urban Land Markets, p.1
(emphasis in original)
2 Calculated from data in UN Habitat (2008) The State of the African Cities Report 2008: A Framework for Addressing Urban
Challenges in Africa
3 The Millennium Development Goals Report 2010, United Nations, 2010
4 The Millennium Development Goals Report 2010, United Nations, 2010
5 UN Habitat and UNEP (2010) The State of Africa’s Cities: Governance, Inequality and Urban Land Markets
6 Hunter PR, MacDonald AM, Carter RC (2010) ‘Water Supply and Health’, PLoS Med 7(11): e1000361. p.4
7 WHO and UNICEF (2010) Progress on Sanitation and Water: 2010 Update, JMP
8 There are inconsistencies in the sector regarding the definition of improved sanitation – the Joint Monitoring Programme
definition does not included shared facilities, which some sector experts regard as effective solutions in certain contexts (e.g.
communal toilets in Ghana). 494 million people living in urban areas use shared sanitation facilities, although this figure does
not indicate the quality of these shared facilities - JMP figures for 2008, http://www.wssinfo.org/dataestimates/introduction/, accessed 2011
9 JMP figures for 2008, http://www.wssinfo.org/data-estimates/introduction/, accessed January 2011
10 The Millennium Development Goals Report 2010, United Nations, 2010
11 JMP figures for 2008, http://www.wssinfo.org/data-estimates/introduction/, accessed January 2011
12 JMP (2010) WHO/UNICEF http://www.wssinfo.org/data-estimates/table/
13 Curtis VA, Danquah LO, Aunger RV. (2009) ‘Planned, motivated and habitual hygiene behaviour: an eleven country review’,
Health Educ Res 24(4):655-73
14 JMP figures for 2008, http://www.wssinfo.org/data-estimates/introduction/, accessed January 2011
15 JMP figures for 2008, http://www.wssinfo.org/data-estimates/introduction/, accessed January 2011
16 The Millennium Development Goals Report (2010) United Nations
17 WSP (2009) ‘Guidance Notes on Services to the Urban Poor: A Practical Guide for Improving Water Supply and Sanitation Services’, Guidance Notes p.10
18 Gulyani S, Kariuki M & Talukdar D (2005) ‘Water for the Urban Poor: Water Markets, Household Demand, and Services
Preferences in Kenya’, Water Supply and Sanitation Sector Board Discussion Paper Series. Paper No. 5, and WSP (2009)
‘Setting up pro-poor units to improve service delivery’, Field Note
19 Bartram J, Cairncross S (2010) ‘Hygiene, Sanitation, and Water: Forgotten Foundations of Health’ PLoS Med 7(11):
e1000367.
20 Boschi-Pinto C, Velebit L, Shibuya K (2008) ‘Estimating child mortality due to diarrhoea in developing countries’ Bull World
Health Organ 86: 710–717, and Bartram J, Cairncross S (2010) ‘Hygiene, Sanitation, and Water: Forgotten Foundations of
Health’ PLoS Med 7(11): e1000367.
21 UN-Water and WHO (2010) ‘GLAAS 2010: UN Global Annual Assessment of Sanitation and Drinking Water: Targeting
resources for better results’
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22 Carter RC, Bevan J (2008) ‘Groundwater development for poverty alleviation in sub-Saharan Africa’, in: Adelana SA,
MacDonald AM, editors. Applied groundwater studies in Africa. Selected Papers on Hydrogeology 13, and Hunter PR,
MacDonald AM, Carter RC (2010) ‘Water Supply and Health’. PLoS Med 7(11): e1000361.
23 Hutton G, Haller L, Bartram J (2007) Economic and health effects of increasing coverage of low-cost household drinkingwater supply and sanitation interventions to countries off-track to meet MDG target 10, and Mara D, Lane J, Scott B, Trouba
D (2010) ‘Sanitation and Health’. PLoS Med 7(11): e1000363.
24 Hutton G, Haller H (2004) Evaluation of the costs and benefits of water and sanitation improvements at the global level,
and Mara D, Lane J, Scott B, Trouba D (2010) ‘Sanitation and Health’. PLoS Med 7(11): e1000363.
25 UNDP (2006) Human Development Report
26 UN-Water and WHO (2010) ‘GLAAS 2010: UN Global Annual Assessment of Sanitation and Drinking Water: Targeting
resources for better results’
27 WSP (2006) ‘Urban Water Sector in South Asia: Benchmarking Performance’, Field Note, pp.2-4
28 P. Cross and A. Morel (2005) ‘Pro-poor strategies for urban water supply and sanitation services delivery in Africa’, Water
Science & Technology Vol 51 No 8 pp 51–57, IWA Publishing
29 WSP (2009) ‘Guidance Notes on Services to the Urban Poor: A Practical Guide for Improving Water Supply and Sanitation
Services’, Guidance Notes p.6, and UN-Water and WHO (2010) ‘GLAAS 2010: UN Global Annual Assessment of Sanitation and
Drinking Water: Targeting resources for better results’
30 UN-Water and WHO (2010) ‘GLAAS 2010: UN Global Annual Assessment of Sanitation and Drinking Water: Targeting
resources for better results’, p. 48, see also Cavill, S. and Saywell, D. (2009) ‘Water, Sanitation and Hygiene: Sustainable
Development and Multisectoral Approaches: The capacity gap in the water and sanitation sector’, 34th WEDC International
Conference, Addis Ababa, Ethiopia, 2009. Refereed Paper 335.
31 WSP (2009) ‘Setting up pro-poor units to improve service delivery’, Field Note p.4, and Connors G & Brocklehurst C (2006)
Connecting the slums: A utility’s pro-poor approach in Bangalore. Water and Sanitation Program-South Asia
32 WSP (2009) ‘Setting up pro-poor units to improve service delivery’, Field Note p.4
33 OECD (2010) ‘Innovative Financing Mechanisms for the Water Sector’ pp.15-16
34 OECD (2010) ‘Innovative Financing Mechanisms for the Water Sector’ pp.15-16
35 WSP (2006) Mobilizing Market Finance for Water Utilities in Africa: Practitioners' Workshop, Pretoria, South Africa, August
7-9, 2006 p.3, and WSP, ADF and PPIAF (2007, revised 2009) ‘How Can Reforming African Water Utilities Tap Local Financial
Markets?’ Insights and Recommendations from a Practitioners: Workshop in Pretoria, South Africa’ p9
36 UN-Water and WHO (2010) ‘GLAAS 2010: UN Global Annual Assessment of Sanitation and Drinking Water: Targeting
resources for better results’ p.7
37 UN Habitat and UNEP (2010) The State of Africa’s Cities: Governance, Inequality and Urban Land Markets, p.3
38 OECD (2010) ‘Innovative Financing Mechanisms for the Water Sector’
39 WSP (2009) ‘Guidance Notes on Services to the Urban Poor: A Practical Guide for Improving Water Supply and Sanitation
Services’, Guidance Notes p.6
40 WSP (2009) ‘Guidance Notes on Services to the Urban Poor: A Practical Guide for Improving Water Supply and Sanitation
Services’, Guidance Notes p.6
41 WSP (2009) ‘Setting up pro-poor units to improve service delivery’, Field Note p.4, and Dagdeviren H & Robertson S (2009).
Access to Water in the Slums of the Developing World. Working Paper No. 57. Center for Inclusive Growth.
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42 WSP (2009) ‘Guidance Notes on Services to the Urban Poor: A Practical Guide for Improving Water Supply and Sanitation
Services’, Guidance Notes p.7
43 UN-Water and WHO (2010) ‘GLAAS 2010: UN Global Annual Assessment of Sanitation and Drinking Water: Targeting
resources for better results’, p.43
44 WSP (2009) ‘Setting up pro-poor units to improve service delivery’, Field Note p.4
45 UN-Water and WHO (2010) ‘GLAAS 2010: UN Global Annual Assessment of Sanitation and Drinking Water: Targeting
resources for better results’, Table 7, p.38
46
http://www.wateraid.org/international/what_we_do/documents_and_publications/10192.asp
47
It is estimated that every US$1 invested in sanitation leads to between US$8 and US$9 in
economic payback
48
UK Aid: Changing Lives, Delivering Results, May 2011 available on DFID website
http://www.dfid.gov.uk/What-we-do/Publications/?p=SP
49
“The World Bank/WHO Disease Control Priorities Project”
50
Calculation based on an exchange rate of £sterling equals US$1.55
51
Based in the Philippines, this privately owned water utility has been highly successful at
integrating their commercial and social objectives to reach the poor.
52
Fundo de Investimento e Património de Abastecimento de Água. (Fund for Water Supply Assets
and Investment – state owned asset holding company for urban water infrastructure which is also
responsible for contracting privitised management services)
53
A WSUP figure based on National Population Statistics for Mozambique and assuming 35% of
urban population categorised as low income
54
World Bank JSDF Grant Agreement for Maputo Peri-Urban Sanitation Project 29th June 2012
55
National Service Provider for water and electricity in Madagascar
56
Reference EIB Multi-Country Report Zambia Copper Belt Feb 2012 Mott McDonald
57
Ref: World Bank Request for Expressions of Interest for Selection #1076651 dated 22nd June 2012
58
Review of the DFID-funded Water and Sanitation for the Urban Poor WSUP, The TI-UP Resource Centre,
Alison Barrett, December 2009.
59
DFID WASH Portfolio Review Report 2011 EDRM 3442661
60
WSUP ESG strategy
61 Sharma, A. L. Grant, T. Grant and F. Pamminger Sustainable sewerage servicing options for peri-
urban areas with failing septic systems; Water Science and Technology, Volume 62, Issue 3, 2010,
Pages 570-585
62 R. C. Carter, S. F. Tyrrel, and P. Howsam; The Impact and Sustainability of Community Water
Supply and Sanitation Programmes in Developing Countries; Water and Environment Journal,
Volume 13, Issue 4, pages 292–296, August 1999
63 Sunil Kuamr Karn and Hideki Harada; Surface Water Pollution in Three Urban Territories of Nepal,
India, and Bangladesh Environmental Management; Volume 28, Number 4, 483-496 (2001)
64
WSUP Business Ethics Policy was approved by the Board in January 2012 (See “Introducing WSUP”
page at: http://www.wsup.com/intro/index.htm)
65
WASH interventions have significant effects on all MDGs. For examples, please see
http://www.unesco.org/water/wwap/facts_figures/mdgs.shtml
66
DFID WASH Portfolio Review Report 2011 EDRM 3442661
67
Projected number of direct beneficiaries for the whole WSUP Programme including support attributed to the
UK
Page 62
EDRM No. 3568211
68
Projected number of indirect beneficiaries for the whole WSUP Programme including support attributed to
the UK
69 WHO/UNICEF (2004) Meeting the MDG drinking-water and sanitation target: A mid-term assessment of progress
70 WHO/UNICEF (2004) Meeting the MDG drinking-water and sanitation target: A mid-term assessment of progress
71 JMP 2010
72 Bapat, M. and Agarwal, I. (2003). Our needs, our priorities; women and men from the slums in Mumbai and
Pune talk about their needs for water and sanitation. Environment and Urbanization, 2003, 15(2), 71-86.
73 Waddington, H., B. Snilstveit, et al. (2009). "Water, sanitation and hygiene interventions to combat
childhood diarrhoea in developing countries." Study Report. Synthetic Review1.
Briend, A. (1990). "Is diarrhoea a major cause of malnutrition among the under-fives in developing countries? A
review of available evidence." Eur J Clin Nutr44(9): 611-628.
Guerrant, R., R. Oriá, et al. (2008). "Malnutrition as an enteric infectious disease with long-term effects on child
development." Nutrition reviews 66 (9): 487-505.
Humphrey, J. (2009). "Child undernutrition, tropical enteropathy, toilets, and handwashing." Lancet 374 (9694):
1032-1035.
74
DFID WASH Portfolio review www.dfid.gov.uk/Documents/DFID%20WASH%20Portfolio%20Review.pdf
75
WSUP calculation based on analysing organisation plans and annual reports (i.e. WaterAid)
76
Based on analysis of actual costs for Phase 2 of the CLIFF programme for 2010 to 2012 and proposed budget
for 2012 to 2013 (EDRM no. 3691250)
77
Analysis of Table 4 “Cost breakdown by category of expenditure” from WSP’s Annual Financial Report as at
30 June 2012 (EDRM no: 3691265)
78
GPAF Pre-Grant Due Diligence Assessment 7 November 2011 available on Policy Division’s Teamsite
Page 63
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