Some of the critical challenges in the asset management of public toilets can be traced to gaps and inconsistencies in the contract award and structuring process. Reviewing the contract agreements between municipalities and private vendors and developing standardized and suitable contract templates is the first step to ensure and control effective implementation.
The business model chosen (operational model, footfall, financial viability), capacities of the potential operators, and subsequent division of responsibilities (construction, maintenance, etc.) decide the type of contract. The contractual instruments for managing public toilets must have emphasis on service delivery and address performance concerns (incentives and penalties). The contracts must be drafted on a fair and equitable basis with risks being allocated between parties who are best suited to handle them. The main steps to consider when drafting a contract are:
The three most common contract structures for public toilet projects are Build Operate and Transfer (BOT), Renovation Operation, Maintenance Transfer (ROMT) and Maintenance Contracts (MC) and variants of the same (Table). BOT models are suitable for new constructions and retrofitting, while Maintenance Contracts can be used for new constructions, retrofitting as well as existing assets. They should be adopted in high footfall areas. Cross-subsidization of BOT and MC providers should be considered in areas of low footfall. In case a cluster requires a combination of contracts (i.e. BOT or MC), it should be packaged into 4–5 projects to achieve scale and ensure a reasonable mix of usage levels (e.g. 3 high-to-medium footfall; 2 low footfall locations in one package; 2 open urinals).
The procurement process starts after the project structure has been finalized. Bid documents are prepared according to the project specifics and bidder selection option. Processes are standardized across all states and sectors. The procurement strategy should be suitable to the selected contract type, staged and in line with the key governing principles. The procurement culminates in the issuing of the Letter of Acceptance (LoA) to the private partner.
Box 2: Objectives of the procurement process:
- Reduction of cost associated with selection of a private partner
- Optimization of public services delivery
- Efficient public funds allocation & use
- Fair competition for eligible participants
- Transparency & legal certainty
The main steps of the process are:
Empanelment of operators (at city or at state level):
Identify a pool of agencies that can render services of a particular order and scale. The number of potential bidders for a specific project and their capacities influence the selection of the bidder.
Bid parameters options to select the preferred bidder are:
- Number and capacities of potential operators define the type of contract (i.e. BOT), corresponding concession period as well as the premium and subsidy.
- Number and size of clusters are key aspects for finalizing the procurement strategy.
- Toilet structure & maintenance services rendered: Toilet structure elements such as solar energy system, wastewater treatment, rainwater harvesting, etc. as well as proprietary products such as e-toilets influence the bidder selection. It is recommended to have one contract integrating all elements and their respective modes of procurement to ensure that one entity is responsible for the overall service delivery (rather than separate contracts with multiple entities). To do so, the contract documents are to be adjusted to allow the operator to obtain or provide the specialized services. The corresponding requirements need to be integrated into the overall bid itself (service charter).
- Operation of the assets: Selection of bidder offering the highest premium (bidder’s estimate of the footfalls and revenues when user chargers retained by operator and no subsidy offered) or lowest capital grant or subsidy to be paid by the municipality (make development and O&M as per the prescribed standards more viable).
Check that pre-requisites are fulfilled:
Before the procurement process begins, the municipality needs to ensure that prerequisites such as technical, financial feasibility, administrative approval, funding, etc. are in place.
This is the stage where the project bid documents are prepared to bind both the public entity and the private party upon completion of the procurement process. Bid documents are to ensure:
- Fair and transparent process compliant with public procurement rules and laws (legal strength and tenability to the transactions carried out by the contract parties)
- Submission of informed proposals (project details, eligibility criteria, evaluation methodology, instructions for bidding and submission of proposals, bids, timelines, terms and conditions)
The tender and eligibility criteria (capabilities, number of PT operated) define who (existing national, regional and local PT operators; potential new entrants) will be able to bid for the project.
Roles, responsibilities and capacities of the parties, payment conditions, default conditions etc. need to be considered while developing the contract document. The service charter defines the required facilities, service level and standards (O&M, construction or retrofitting) to ensure quality and sustained use. To guarantee service delivery, clear incentives and penalties should be chalked out. Incentive mechanism can be in the form of awards and recognition for contractors based on the actual service delivery. Penalties can be imposed through mechanism of performance guarantee at the point of signing the contract and appropriated by the municipality upon non-performance. To do so, the municipality is to always retain monitoring and enforcement of roles and responsibilities. The performance monitoring mechanism needs to be set out in the contract (Monitoring Framework).