Module 19: Monitoring and Evaluation

19.2. Performance monitoring of capital and operational projects

Performance monitoring can be broken down into two components:

capital projects and
operations.

Capital Projects

When infrastructure and facilities are being constructed, performance monitoring is crucial for the local government that has contracted the work. This is especially true in any situation where the project will be transferred back to the local government upon completion or at some later date.

The local government must ensure that all capital projects are constructed to specification. A Request for Proposal document for such facilities is often developed to encourage flexibility of design by the private sector partner. This type of innovation is what creates cost savings and efficiencies in the project. However, once the innovative design has been confirmed and agreed upon, the private sector partner will not necessarily be permitted to construct the facilities as it sees fit. Rather, the local government should ensure that the capital project is built to specification and that the facilities provide the service that was agreed by both the public and private sector partners. An engineer, architect or other qualified individual can carry out this monitoring through periodic inspections; he or she would either be on staff or retained by the municipality.

Operations

Where the partnership arrangement involves operation of services, the public-private partnership contract should include provisions for performance in this regard. These provisions will cover not only the operation and maintenance of infrastructure and services, but also the performance of the private sector partner in terms of delivery to the end user.
Weekly or monthly reporting structures allow the local government to monitor the performance of the private sector partner. Once the project has been completed, a number of reports will allow the local government to discern trends and respond to problems and issues quickly.

Another factor in operations monitoring is the quality of service received by end users. The provision of the service by the private sector partner should always have the end users’ satisfaction in mind. The municipality can establish phone lines for complaints, circulate surveys or have an Internet web page and e-mail address for users to voice their comments or concerns about services. This will allow the local government to monitor the performance of the private sector partner in terms of actual service delivery.

Regulation requires accurate information about the cost and the quality of service; however, the regulator is at a disadvantage with regard to information when compared to the service provider.

Some of the mechanisms that the regulator can use to improve the availability of reliable information include:

◊ requiring operators to report specific performance indicators;

◊ independent audits and spot checks to verify reported information;

◊ publication of contracts and performance information, so that consumers know what is expected of the operator;

◊ consumer surveys and complaints mechanisms;

◊ intra- and international exchange of information on costs and quality of service to promote yardstick competition – that is, comparison of performance of services in similar conditions;

◊ the employment of expert advisors, particularly for periodic renegotiating of fees – for example, to determine whether the prices of equipment procured from the operator’s affiliates are competitive or not; and

◊ collaborative research and training programmes with local academic and research institutions.

One useful instrument for bridging any gap in capacity that might exist, and for creating credibility and transparency when local capacity is very weak, is to use independent laboratories and private auditors to monitor the performance of service providers and to advise the regulatory authority. This approach is widely used for monitoring environmental and health standards, but could be applied to the more qualitative aspects of services provision as well.

Reporting and analysing information imposes costs on both the regulated industry (or private company) and the regulator. Information reporting and analysis should be kept to a minimum, with a premium placed on simplicity and practicality. Keeping in mind that consumers will eventually bear most of the costs, the regulator should choose the information to be reported carefully and use it effectively so that the benefits of reporting and analysis outweigh the costs.

As it has been highlighted in Tool 7, the preferred approach for regulating quality of services is for the regulator to specify and monitor performance outputs rather than inputs. In this way innovation and efficiency improvements will be promoted. In addition, specifying and monitoring a limited number of outputs helps to minimise regulation and avoid costly and bureaucratic regulatory practices and interference in day-to-day operations.

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