15.1.3 Operational efficiency
The three main indicators of operational efficiency (water losses through leakage, etc., payment collection and labour productivity) were also studied by Marin.
Water losses
Any water lost is a loss in income, and so, perhaps predictably, Marin found (in line with other researchers) that private operators were effective in reducing water losses, some reducing non-revenue water to less than 15% (which Marin states is similar to that of some of the best-performing water utilities in more developed countries).
Can you recall what non-revenue water is?
In Study Session 7 you learned that it is water from which no income accrues to the water utility.
Payment collection
Not surprisingly, because of the financial benefits to the private partner, it was found that the introduction of a private operator markedly improved the payment collection rate.
Labour productivity
There was strong evidence that the introduction of private operators resulted in an improvement in labour productivity. This is the amount of work undertaken by each employee. Many of the public water utilities studied were over-staffed, and the PPPs when set up were followed by significant redundancies, ranging from 20% to 65% of the labour force. Besides the over-staffing issue, layoffs were often motivated by a need to change the overall profile of the workforce and to hire more skilled people (Marin, 2009).
Marin concludes by saying that the biggest contribution that private operators can make in a PPP is in improving operational efficiency and service quality. Improving service quality results in customers becoming more willing to pay their bills, and increasing operational efficiency results in increased income. Both of these factors lead to more money being available for investment in expansion of services. In turn, expansion of services results in more customers and consequently increased income, which again can be invested to bring access to water to even more people.
15.1.2 Quality of service