TERMS OF REFERENCE FOR WASCO FINANCIAL AND TECHNICAL DATA IMPROVEMENT
Project Name: Lesotho Lowlands Water Development Phase II
Project No: P160672
The Government of Lesotho has received funding from the World Bank for the implementation of the Lowland Water Development Project II. The project among other activities include construction of bulk and distribution water infrastructure in Zones 2 and 3 which primarily cover Hlotse and Maputsoe and villages around the main pipelines. Other project activities include strengthening of the Sector institutions under the Ministry of Water and the Water and Sewerage Company of Lesotho (WASCO) . The Government of Lesotho now intends to use part of the funds to finance the hiring of a consultant for asset verification and valuation for the Lesotho Water and Sewerage Company (WASCO).
The Lesotho Lowlands Water Development Project Phase II is being implemented by the Government of Kingdom of Lesotho, which is the beneficiary country. The official Project Contracting Authority (Owner) is the Ministry of Water (MoW) and the implementing agency (hereinafter also called “Client”) will be the Commissioner of Water.
Lesotho is a mountainous country with a population of about two million people; the country is 30,000 sq. km whose only neighbour is the Republic of South Africa. Lesotho’s highlands constitute two-thirds of the country’s territory, less than 13% of which is suitable for cultivation.
The Lesotho Government’s development goals are reflected in its “Vision 2020”, the Strategic Development Goals (SDGs) and the National Strategic Development Plan (NSDP). Its long-term strategic priorities are that Lesotho has a healthy and well-developed human resource base, a strong economy, a well-managed environment and an established technological base. Further strategic goals include to pursue high, shared and employment generating economic growth, develop key infrastructure, enhance the skills base, technology adoption and foundation for innovation, improve health, combat HIV and AIDS and reduce vulnerability, reverse environmental degradation and adapt to climate change.
The Lesotho Lowlands Water Supply Scheme (LLWSS) was designed to address the chronic shortage of potable water supply to the Lowlands area of the country and promote socio-economic development to a design horizon of 2045. It covers urban, peri-urban, and rural areas. The first phase of investments constructed under the scheme comprised the multi-donor funded Metolong Dam and Water Supply Programme (MDWSP), which covered Zones 4 and 5. With funding from WSIP APL2, the GoL has updated the designs of the bulk water infrastructure for the remaining zones of the scheme based on a revised design horizon to year 2045 (from 2035 adopted in 2008).
Implementation of the LLWSS program has been grouped into six packages, with two prioritized for the next phase of the program: Project Package 4 entailing Zones 6 and 7 (Mafeteng and Mohales’ Hoek, Financed by EIB) and Project Package 2 entailing Zones 2 and 3 (Hlotse - Maputsoe). The World Bank, will finance bulk water infrastructure in Zones 2 and 3 comprising a water intake, water treatment works, transmission mains, pumping stations, reservoirs, and distribution networks. Packages 2 and 4 form the infrastructure component of the Lesotho Lowlands Water Development Project-Phase II (LLWDP II).
The Government of Lesotho has secured funding from the World Bank, which will finance the project components in Zones 2 & 3 (Package 2), and European Investment Bank and European Union Delegation which will finance the project components in Zones 6 & 7 (Package 4). The Government of Lesotho will also provide counterpart financing on annual basis for the duration of the project.
The Development Objectives of the Lesotho lowlands Water Development Project (LLWDP) Phase II are therefore to:
The key beneficiary of the LLWDP is the Water and Sewerage Company (WASCO) which will make use of the augmented infrastructure and to improve its services to the areas affected by the project. For WASCO to adequately benefit from the project a sub-compnent has been introduced to deal with technical and financial capabilities of WASCO for it to be able to take up and operate the improved infrastructure. This will be through the introduction of an output-based incentive system supported by a change management program. This will entail the financing of three categories of Disbursement Linked Indicators (DLIs) that will incentivize WASCO to: (a) improve the quality of its technical data and thus improve management decision making and the regulatory interface with the regulatory agency, LEWA; (b) improve the quality of its financial data for improved management decision making, regulatory interface, and better statutory financial reporting; and (c) deliver improved technical and financial performance against annual targets set by The Regulator.
The Water and Sewerage Company (WASCO) is a government-owned utility responsible for water and sewerage services in urban areas and the operation of bulk water infrastructure. Recently, WASCO has taken on an additional role as service provider in some peri-urban and rural growth centers. Key responsibilities for urban and rural sanitation are split between WASCO and DRWS, respectively, as well as the Ministry of Health (MoH), which is responsible for hygiene and sanitation promotion. WASCO is responsible for waterborne reticulated sewerage and wastewater treatment plants mainly in urban centers. For on-site sanitation, WASCO’s responsibility relates to emptying septic tanks and latrines in its service areas and disposing off sludge and septage at sewage treatment works. Investment and operation and maintenance (O&M) of household on-site systems are the responsibility of the household.
While Lesotho’s reform efforts supported through the previous projects have resulted in some important strides to improve WSS in urban areas, challenges remain to transform WASCO to a well-performing water utility. The corporatization of WASCO in 2010 and the creation of an authority (Lesotho Electricity and Water Authority [LEWA]) to regulate and enforce water and energy services brought much-needed change to the sector. WASCO reduced water losses, covered more operating costs and some debt service costs with tariffs, and widened its consumer base. Although the recipient of extensive technical assistance (TA) over the years from various donors, WASCO has yet to operationalize that support and achieve its full potential. For example, its financial statements have been routinely ‘qualified’ by independent auditors, collection rates had notimproved, drinking water effluent quality is below par, and sewer connection rate is low. There appears to be a highly centralized, low-incentive culture, which requires to be addressed by a major change management initiative.
Strengthening the sector’s regulatory model and improving the performance of WASCO are critical to better service delivery and long-term financial sustainability in the sector. Under LLWDP, a TA will be provided to LEWA and WASCO to improve the technical and financial data quality that is foundational for good regulation. To transform itself into an efficient and effective utility WASCO faces a number of challenges, which have been categorized under four thematic areas: governance and general management, staff productivity, structure and systems enhancement and development, and commercial and customer services. To support WASCO in addressing these challenges, a change management consultant will be financed for the duration of the project period to guide WASCO as it determines its own feasible reform path. In parallel, the board will be supported by a coach to further professionalize the board function.
The institutional TA is complemented by disbursement-linked indicators (DLIs) to further incentivize the management and board of WASCO to deliver results (see Annex 1 for more detail). The provision of performance incentives can help deliver better results. In this case, the DLI approach has been adopted to encourage achievement of higher levels of performance by WASCO. The DLI financing will allow WASCO to invest in assets that will further improve the technical and financial performance of the company in support of the Project Development Objectives (PDO). Through TA and DLI financing, expected institutional improvements will ultimately lead to better governance and improved financial and service performance and the possibility to mobilize private finance in the future.
The Project Implementation Unit (PIU) established under the Commissioner of Water (CoW), will lead project implementation and project management. The PIU will therefore be responsible for daily management, operations, coordination, implementation, providing assurance on environmental and social issues, and monitoring and evaluating project performance. The PIU core staff will include experts in the following fields but not limited to: Civil Engineering, Mechanical Engineering, Procurement, Monitoring & Evaluation, Financial Management, GIS and Remote Sensing, Water Resources Management, and Environmental and Social Safeguards Specialists headed by Project Manager. The PIU’s primary function would be to spearhead implementation and management of the project, as well as coordinate inputs from other implementing and cooperating entities like Department of Rural Water Supply (DRWS), Department of Water Affairs (DWA), Water and Sewerage Company (WASCO), Department of environment, Department of Roads and others. WASCO will establish a project team that will be responsible for the implementation of project activities specific to WASCO
The PIU will be supported by Project Management Consultant (PMC) that will be hired for project management and management of complex activities of the project related to works. The two will work closely however the primary responsibility of project implementation will rest with the PIU. The PIU will on day-to-day be reporting to Commissioner of Water, however, there will be an established Project Steering Committee (PSC) that will provide oversight of the project, in turn reporting to Ministry of Water (PS). The World Bank (WB), European Union (EU) and National Authorising Office (NAO) will be observers/advisors members in the PSC.
The financiers of the project are the WB, European Investment Bank (EIB), EU and GoL. The project will therefore be implemented according to World Bank, EIB and GoL procedures.
In order to fully appreciate the full status of an organization and to determine its correct path to performance improvement, there is a need for sound technical and financial data. WASCO in this regard is lacking in the credibility and quality of such data. The financial health of the company has been brought to question over the years and as such WASCO has received qualified audit reports by numerous external auditors. It is with the above backdrop that a thorough technical and financial audit has to be carried out to pave a robust turnaround for the company as a blueprint for performance improvement.
The main objective of the consultancy will be to facilitate the implementation of the Disbursement Linked Indicators (DLIs) that will incentivize WASCO to:
4.1.1 Information and data gathering and assessments
4.1.2 Engagement with WASCO Management
4.2 The 16 WASCO Centres with respective estimated number of customers as per WASCO Customer Care System are shown in the table below
|WASCO CENTRE||No of Potable Water Customers||No of customers on Sewerage Services|
|Maseru||64, 751||7, 248|
|Qacha’s Nek||1, 913||2|
|Total||111, 175||7, 836|
The consultancy will work with the Manager Strategic Services and will report to the Director Enterprise Project Management Division.
The consultant shall provide the following deliverables:
The report should further detail the state of WASCO financial and technical data as presented in records and repositories (including both manual and automated systems). The report should include an assessment of compliance to financial management and reporting standards and recommendations for improvement.
The Client shall provide the following;
The consultant shall be responsible for providing the following;
The Firm (or consortium of Firms) should have demonstrated expertise in carrying out operational, management and financial consultancies and studies across a wide spectrum of corporates. Experience in consulting for utility companies (especially water) in developing countries would be a key consideration.
Specifically the following are a requirement:
Team Composition & Qualification Requirements for the Key Experts
The composition of the team working on the assignment is of critical importance and should include at a minimum of:
The duration of the assignment will be 40 months. The consultant is expected to be full time on site during the first 3 months to deliver the first three reports (see 5 above). Subsequent to those the consultant is expected on site only to carry out the bi-annual audits and to present reports.
In addition to the standard tables for financial proposal in the Request for Proposal (RFP), the consultant must provide a summary table for the full cost of each task (fees , and reimbursables and any other costs). Bids not including this will be deemed incomplete.
The payment shall be aligned to submission and approval of reports as follows;
The Consultant will be required to provide contact details of 5 referees relevant to the assignment.
The selection process will follow the Bank’s Guidelines: World Bank Guidelines: Selection and Employment of Consultants by World Bank Borrowers, September 2018. The contract to be signed is a Lump-sum contract.
The Consultant shall perform the services in accordance with the terms of reference and carry out their services with due diligence, efficiency and economy in accordance with generally accepted techniques, practices, professionalism and consulting standards recognized by international bodies. In respect of any matter relating to the services the Consultant shall always act in respect of any matter relating to the services as a faithful adviser to the employer and shall at all times support and safeguard the employer’s legitimate interest.
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