Bosnia and Herzegovina - Water for Srebrenica Project

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Washed Out

Bad management can spoil the best of intentions. This is the lesson UNDP learned when it implemented a project to improve the water supply system in Srebrenica, a town of 3,000 in eastern Bosnia and Herzegovina. Incompetent managers at the local water utility prevented the project from achieving some of its chief goals.

Pelicans
Pelicans

Before the project started, the situation was bad. Polet, the water utility, didn't repair its leaky pipes, which lost almost half the water that flowed through them. Consumers were charged a flat fee regardless of how much water they used, which encouraged further waste. Only one in seven households ever bothered to pay its bill.

"Toilets were left running and people didn't pay attention because they simply wouldn't pay the bill - that is, if they received one in the first place", said Alexandre Prieto, project manager at UNDP in Srebrenica.

Starting in October 2004 and lasting for a year, the UNDP project achieved some of its goals. With a budget of 600,000 euros from the Dutch government, UNDP supervised the installation of water meters, which allowed Polet to charge users according to their consumption. It also repaired or replaced many of the leaky pipes, which reduced water losses from 40 to 30 percent.

But assistance in installing a crucial new billing software system and boosting company performance could not be fully implemented because Polet's management resisted.

"Fee collection did not rise to the level expected and financial problems within the company could not be identified", said Prieto. Collections rose from 15 percent to 56 percent as a result of the project, but this is still well below European averages, he added.

The problem was only solved when the municipal government removed Polet's director. UNDP then hired a consultant to analyse the billing system and make other recommendations about how to improve the performance of the company.

"Removing the director was important because in this small town everybody knew him, didn't trust the quality of the water he provided, and thus didn't want to pay for it", said Prieto.

Under the new management Polet is analyzing how much it costs to provide one cubic meter of water. With this information the local government can better understand what size subsidy it needs to provide. Currently water fees are below cost to take into account the population's inability to pay a market price.

Context

Water for Srebrenica Project

Timeframe The project is now completed. The project was implemented from September 2004 till the end of December 2005. However UNDP SRRP is still providing support to the recovery of Polet, the public water utility company.


Status Completed

Focus Areas

Geographic Scope

Stakeholders

This project was a sub-project under the infrastructure component of the Srebrenica Regional Recovery Programme (SRRP). UNDP was responsible for the overall management, monitoring and evaluation of the project according to the key corporate principles as the SRRP is executed and implemented using UNDP-BiH’s proven modalities of Direct Execution (DEX) that have been applied and fine-tuned during the last couple of years.
Inputs

The UNDP, with funding from the Government of the Netherlands, will make the following resources available for the project:

  • The service of SRRP Programme Manager (international) and SRRP Civil Engineer for the duration of twelve months;
  • Administration of the sub-contracts;
  • Supervision of the programme progress;
  • Office premises for twelve months; and
  • UNDP CO administrative and logistical support.


The main partner in the implementation of the project is the public utility company "POLET" from Srebrenica. They will make available the following resources and services:

  • Assignment of formal overall counterpart for the coordination of the programme;
  • Assignment of one engineer for the supervision of the works;
  • Preparation of the detailed scope of the works;
  • Detailed training needs reports; and
  • Key staff members for the competency programme.


UNDP, Government of the Netherlands

Contacts

Contents

Background and Significance

Background

The infrastructure in Srebrenica was severely damaged during the war. This destruction, combined with poor maintenance over an extended period before and especially after the war, has left the water supply system in a poor and deteriorating condition. Since then various projects have been implemented to bring losses and treatment of the water to a normal level. The losses within the network have been brought to a minimum and the water treatment is operational.

Boats on Danube
Boats on Danube

At the time of the proposal submission, the needs for the reconstruction of the network only concerned two settlements of Srebrenica at the exit of town towards Potocari. For the treatment of the water, the water and waste disposal Utility Company “Polet” has been facing a more structural problem. There was no efficient billing system and the fee collection was practically non-existent. Households were paying their consumption of water on a fee basis. The fee collection has not been systemised and consumers were paying in cash. From the information we received from the Utility Company only 12% of the consumers were paying their bills. Last year income through the fee collection was KM 49,763.82, which represents a monthly income of 4,146.98 KM. All of this resulted in an insufficient income bringing the Utility Company in a position where it had difficulties to cover the running costs necessary for the treatment of water and proper maintenance of the network. This results in an insufficient income bringing the Utility Company in a position where it has difficulties to cover the running costs necessary for the treatment of water and to properly maintain the network. Prior to the start of the project, the fee collection has increased but is still insufficient to cover the operational costs for the treatment and supply of water.

The side effect of this outdated billing and fee perception systems is that consumers do not pay attention to their consumption of water and that the current average consumption per user is way above the European standards. This obliges the utility company to treat more water than needed and to use a bigger amount of chemicals per month than needed.

The Company has a contract with the municipality for potable water supply and waste disposal. The budget that the municipality allocated to Polet is currently of 40,000 KM per year, which is insufficient to cover the costs necessary for both activities that the Company has to perform.

These structural problems are faced by most of the water Utility companies throughout Bosnia and Herzegovina. For that reason, 67 water Utility companies of Bosnia and Herzegovina created an association, the “Bosnia and Herzegovina Water Works Association”, whose aim is to promote integrated national and regional policies in the sector of water management based on the up-to-date principles and knowledge.

Goal and Objectives

The goal of this project is to provide constant supply of potable water to citizens in Srebrenica town. The main objectives are: 1. to assist the public power utility company in becoming an efficient and well run organization, through competence transfer and training programs; 2. to bring about improvements in the water supply network; and 3. to improve the fee perception income of the utility company.

The Experience: Challenges and Solutions

WHAT

1. The setting: In Bosnia and Herzegovina, the supply of potable water is mainly contracted by the municipalities or cities to public utility companies. In Srebrenica, it is the same case. The utility company “POLET” is a municipal-owned public company that is responsible for potable water supply and waste management. Prior to the war, the utility company sources of income were fee collection and, mainly, subsidies by the municipal authorities as the billing system was never efficient. As a result of the war and lack of maintenance, the infrastructure have been severely destroyed and damaged. The utility company was not able to invest funds to restore the network and international agencies implemented projects for the rehabilitation of the network. A second constraint is the limiting municipal budget, which in turn does not allow the municipality to allocate sufficient subsidies to the public utility company.

It is important to mention that State regulations do not allow the utility company to disconnect consumers from the network even if they do not pay their bills. The only option for the utility company is to start legal proceedings. However they seldom do so and usually only against private companies.


2. Description of the solution: The project approach was to first resolve the structural problems of the water and waste removal utility company through the provision of technical assistance with financial planning and management for the company. The second part of the project included the reconstruction of the primary and secondary water distribution network and installation of water meters both for assisting leakage detection as well as introducing a new billing system. Benefits of SRRP interventions should ensure the reduction of water losses and more systematic collection of charges, thus contributing to building a more effective water utility company for Srebrenica.

WHO

This project was a sub-project under the infrastructure component of SRRP. UNDP was responsible for the overall management, monitoring and evaluation of the project according to the key corporate principles as the Srebrenica Regional Recovery Programme is executed and implemented using UNDP-BiH’s proven modalities of Direct Execution (DEX) that have been applied and fine-tuned during the last couple of years. DEX is being applied in different ways in different components of the programme, and is mainly motivated by its high potential for maximum cost-effectiveness and tailored flexible capacity development of local governments and institutions. However it should be understood that the UNDP’s direct execution model is fully open for involvement of different partners, with focus on the other UN Agencies, local NGOs and other organizations working in the region, which can take over implementation of various components and sub-projects through sub-contracting procedure for their implementation. UN Agencies based in BiH, in particular, will, whenever applicable, be involved in programme components with funding provided in the respective component budgets.

The main stakeholders were the municipality of Srebrenica and the public utility company “POLET”. For the implementation of works, UNDP SRRP procured works from local contractors.

The beneficiaries of the project are the citizens of Srebrenica town.


WHERE

The project is located in the municipality of Srebrenica in the Eastern Bosnia. The Srebrenica region is well known for the events that took place in July 1995 and the massacre of around 8,500 Bosniaks in an area that was declared a “safe area” by the United Nations. The wider Srebrenica area continues to suffer the traumatic legacy of the 1995. The Bosniac population fled, while more than 6,000 displaced Bosnian Serbs occupied the remaining housing in the town. Until June 1999, local political obstructionism led the international community to place Srebrenica municipality and much of the Eastern RS under a funding embargo. Consequently, Srebrenica was ‘frozen’ in its 1995 context with no rebuilding, no recovery, no development, no reconciliation and no returns.

Today, the return of Bosniak in the city of Srebrenica is still lower than in rural areas but as a promising sign for the future and the start of a reconciliation process, Bosniak returnees are opening small shops. The mosque has been reconstructed. They start to be active in local NGOs. The industry is practically inexistent and families’ incomes are very low. This explains why the municipal authorities have set consumption fees too low for the utility company to be financially viable with only the collection of fees.

WHEN

The project was implemented from October 2004 till December 2005. The original timeframe was 12 months. However due to the lack or inexistence of information at the utility company, UNDP SRRP had to request from the Embassy of the Netherlands an extension of two months.

Even if the project is completed, UNDP SRRP is still working with the municipal authorities on the improvement of the water supply system in Srebrenica. The public utility company is now close to bankruptcy due to incompetent management of the company. The municipality has now formed an emergency committee for the management of the company. The director has been removed from office.

HOW

Steps taken by Objective

Immediate Objective 1

To assist the public water Utility Company in becoming an efficient and well run organization, through competence transfer and training programs, Output 1 Technical assistance provided to the communal Utility Company

Main Activities

1. Preparation of the terms of reference for the technical assessment of the utility company UNDP/SRRP was responsible to design the terms of reference for the technical assessment of the utility company. The terms of references were needed for the request for proposal for consultancy.

Status: Completed

Progress Description:

At the start of the project implementation UNDP/SRRP found out that the World Bank approved a project «Urban Infrastructure and Service Delivery Project» with BiH Ministries of Agriculture, Forestry and Water Resource and relevant Ministries of Urban Planning in the late August 2004. In its Component 2., Institutional strengthening, The World Bank intended to finance institutional strengthening and capacity building programmes for service delivery focusing on efficiency and cost recovery; involvement of local operators; a national study of tariff-setting methodology and guidelines; a national study to quantify the extent of cross-debt among budget enterprises; urban management plans; training of local government staff based on a needs assessment; and other appropriate capacity building.

After that the « Water for Srebrenica » project was approved, UNDP/SRRP organized a meeting with the World Bank Operations Officers (on October 15th, 2004 with Ms Vesna Francic and Mr Goran Tinjic) in Sarajevo in order to set up mechanisms of coordination. During the meeting it was agreed that UNDP/SRRP would concentrate on the financial management aspects of technical assistance provided to „Polet“ while the World Bank will focus more on technical issues, like network investment plans. The World Bank for this purpose hired a Water Specialist for the assessment, training, restructuring and strategic planning.

UNDP/SRRP prepared a call for proposal for the Srebrenica Utility Company «POLET» audit related to the financial periods, from 01.01 to 31.12.2003, and from 01.01 to 30.06.2004. The Audit proposal contained:

  • Orientation of the accounting systems and internal control measures;
  • Examination of the working of these systems and measures;
  • Analyzing financial and other data;
  • Verifying these data on their eligibility, reliability, acceptability and correctness.


2. Technical Assessment of the utility company

The technical assessment provided UNDP/SRRP with a clear picture of the current situation in which the utility company finds itself like:

  • management practices;
  • human resources;
  • financial management;
  • billing system; and
  • fee collection system.

The second part of the technical assessment included recommendations for technical assistance to be provided to the utility company.

Status: Completed

Progress Description:

The company “AREAS” performed the audit and submitted the audit report in mid January 2005. The main reasons for conducting an audit are that during the first implementation months UNDP/SRRP became aware that there were insufficiencies in the accounting and internal control systems. Also given the complexity of the situation in regard to the management of the utility company, it was the first logical step to start with. This was the first audit ever conducted for the Utility Company.


3. Preparation of the technical assistance plan

According with the recommendations made in the technical assessment, UNDP/SRRP, together with the utility company and the municipal authorities prepared a plan for the provision of the technical assistance.

Status: Completed

Progress Description:

The activity has been divided in two segments. The first one was related to the financial management of the company, which included the provision of new hardware and software. The second was on the technical capacity of the utility company with the supply of equipment and machinery.

UNDP/SRRP, in its efforts to improve "Polet", aimed to raise the awareness of the senior management to the importance of financial management. For that reason, UNDP/SRRP organised the preparation of Polet’s business plan with the support of Srebrenica Business Centre. The business plan is providing information on the financial self-sustainability of the company. Given the responsibilities assigned to the utility company, water supply and waste disposal, the company cannot be self-sustainable. With the introduction of the new billing system and the expected improvement in fee collection, the utility company will be able to cover the operational costs for the supply of water. The business plan will provide the basis for the utility company and UNDP/SRRP to advocate at municipal level for an increase of the annual municipal budget allocated to the utility company.


4. Implementation of the technical assistance plan After the approval of the plan by all relevant parties of this project, UNDP started with its implementation. It included sub-activities such as supply of new equipment, training and restructuring of the company.

Status: Completed

Progress Description:

The finance department of “Polet” has been supplied with two new computers and three printers, as well as two software applications, one for bookkeeping and one for billing. Training was included in the supply of software. The Srebrenica Business Centre provided additional training in computer skills.

As part of the technical assistance to “Polet”, UNDP also purchased basic equipment for network maintenance and one backhoe loader as proposed in the first addendum.

Immediate Objective 2

To bring about improvements in the water supply network

Output 2 Reconstructed network in the settlements of Vidikovac – Solocusa and Srebrenica town

Main Activities

1. Preparation of the technical documentation UNDP/SRRP delegated to the utility company the preparation of the technical documentation including description of the works and bill of quantities. Upon its completion, UNDP/SRRP reviewed the documentation for approval.

Status: Completed Progress Description: In the original proposal, UNDP only planned to reconstruct the networks in the settlements, Vidikovac and Solocusa. With the savings made under the water meters installations, it was approved under the first addendum to increase the scope of works with the inclusion of the network reconstruction in Srebrenica town. The utility company has completed the technical specifications.


2. Award of work contract for the network reconstruction UNDP/SRRP conducted the award procedure according to its regulations. The procurement was done through the international open tender since the value of the contract was above USD 30,000.

Status: Completed Progress Description: All procurement procedures have been completed in accordance with UNDP rules and regulations. Three contracts have been signed for a total amount of EUR 262,108.16.

3. Reconstruction works Upon signature of the contract for works, the reconstruction works started and were monitored by the utility company with UNDP/SRRP supervision. Payment requests were approved by UNDP after receipt of the monitoring reports of the utility company.

Status: Completed Progress Description: The works in the settlements Vidikovac and Solocusa were completed in a timely manner. No issues were faced regarding the contract implementation. However, the situation in town proved to be drastically different. The realisation of the contracts was delayed due to the non-existence of blueprints recording the underground utility installations like water pipelines, electricity and telephone lines. As a consequence, the contractors were not able to use heavy machinery to dig the channels where the new pipes would be laid down. All channels had to be dug manually, which was a very slow process.

4. Technical Acceptance of the works After completion of the works, the technical acceptance of the works was organised and UNDP handed over the new installation to the municipality.

Status: Completed. Progress Description: The technical acceptance of the works was performed in cooperation with the utility company.

Immediate Objective 3

To improve the fee perception income of the Utility Company

Output 3 Water meters installed for individual houses and apartments buildings

Main Activities

1. Preparation of technical specifications UNDP/SRRP delegated to the utility company the preparation of the technical documentation including description of the works and bill of quantities. Upon its completion, UNDP/SRRP reviewed the documentation for approval.

Status: Completed Progress Description: UNDP/SRRP delegated to the Utility Company the preparation of the technical documentation, which includes description of the works, bill of quantities and consumers database (that previously didn’t exist).

In the project proposal, UNDP/SRRP indicated that the number of water supply consumers was 3,100 based on utility company’s plan. Following the preparation of the consumer database, it came out that exact number of consumers is 2,221. SRRP eventually ordered 1,618 upon reviewing the business plans, and 1,040 were actually installed. The balance was on a sale-or-return basis and has been replaced by electronic reader meters to deal with the issue of multiple users in apartment blocks. UNDP/SRRP seriously warned "Polet" that such an unprofessional estimation is damaging to them and to UNDP/SRRP in relation to Donors. Preparation of the technical documentation and database of consumers took much longer than it was initially planned despite constant pressure from UNDP/SRRP.


2. Award of work contract UNDP/SRRP conducted the award procedure according to its regulations. The procurement was done through the international open tender since the value of the contract was above USD 30,000. The scope of the works included:

  • manholes;
  • instalment of meters; and
  • manhole covers.

The manholes are closed with a padlock, preventing people to access the water meters. In the case that consumers accessed the water meter and damaged it, the utility will automatically cut them off. The costs for the replacement of the water meter will be charged to the consumer.

Status: Completed Progress Description: Given that there was still some uncertainty about the beneficiaries’ database, the procurement has been done in two phases. The first one was for the purchase of 1,618 water meters. The second one was for the installation works including manholes.

Two contracts were signed for a total amount of EUR 145,766.69.

3. Installation of water meters Upon signature of the contract for works, the instalment works started. In parallel, UNDP signed an agreement with the utility company for the instalment of water meters where manholes already existed. The water meters were donated to the citizens. No capital costs recovery were calculated in the water pricing.

Status: Completed Progress Description: The purchase of the water meters was completed within the time frame set in the contract and without any difficulties. For the installation of the water meters, the contractor faced several issues related to the accuracy of the database. Works during the contract implementation had to be stopped so that the database could be checked once more. The mistakes corrected and the contract was closed successfully.

4. Technical acceptance of the works Upon completion of the works, the technical acceptance of the works was performed.

Status: Completed Progress Description: The technical acceptance of the works was done in accordance with state regulations. Each beneficiary for the individual connections signed a hand-over note stating that the water meter was installed and that he was taking over its ownership.

Problems faced during the implementation of the project

Since the project started in October 2004, many issues have been faced. The main issues are listed below and UNDP/SRRP’s responses to those issues are described later, separately for each activity in Part III:

  • Lack of accounting systems, internal control mechanisms, unknown current debts and realistic price of water in “Polet”, created confusion within the Utility Company.
  • Inexistence of database of beneficiaries influenced on incorrect data in the project document.
  • Too many leakages in the primary network have arisen in the central part of Srebrenica city.
  • Water supply and waste collection together are too big tasks for the Utility Company that cannot be together covered professionally.
  • There has never been proper strategic planning for the Company, priority list of projects or similar.
  • Lack of qualified staff hindered preparation of quality technical documentation within the Company.
  • Inexistence of blueprints for the underground utility installations (water, electricity and telephone)

Results and Impact

Within the project, UNDP/SRRP intended to respond to the needs of the Srebrenica town community in terms of constant potable water supply. The project approach was to first resolve the structural problems of the water and waste removal utility company through the provision of technical assistance to allow the introduction of new billing and fee perception systems. The second segment of the project included repairs to the network and instalment of water meters.


Lessons for Replication

The lessons learned during the implementation of the “Water for Srebrenica” project can be summarized as follows:

1. In any project aimed at providing support to the public utility companies, it is essential during the project design phase to assess the competency of senior management since they will play a key role in the project implementation. If they are displaying an unprofessional behaviour, the implementing agency should pay special attention to: § The accuracy of data provided; § The utility company’s ability to design an effective investment plan, and engage an advisor to the senior management during the whole duration of the project; § Allocate sufficient resources and time to build a stronger sustainable organization; § Whether or not, there is a genuine readiness and/or ability from the utility company’s senior management to adopt new management techniques.

2. In a one-year project, special attention should be given to the coordination with other agencies with longer timeframe for the implementation of their project. This is especially important when there is a potential for synergies between the activities. If not planned properly, it could impede the achievement of the expected results of the project.

3. Setting realistic project goals and objectives is of great importance when it comes to the interventions with a one-year timeframe, especially if tackling the issues of the utility company’s sustainability and weak management structures.


Sustainability

There are concerns about the financial sustainability of the Programme’s investment in the Srebrenica water company, which continues to generate losses and accumulate debt. The Municipal Assembly sets the price of water according to social rather than economic criteria, but does not provide any financial support to the company, forcing it to run at a loss. This form of household subsidy is untargeted and therefore not effectively pro-poor. If it continues, it will force the company to neglect basic maintenance. Furthermore, in spite of [SRRP]’s technical assistance provided through the project, there is continued evidence of utility company’s limited management capabilities, whose managers display little initiative and are wedded to traditional approaches.

In order to address these issues, UNDP/SRRP has brought the subject up to the Mayor of Srebrenica and emphasized the need to appoint more competent staff in the management positions of the company. As an immediate response to the meeting, the Mayor has appointed a new chairperson to the executive board of Polet. His main tasks will be to measure the quality of the work done by the senior management of the utility company. “Polet” has also been requested to prepare a detailed financial report for 2005 which would take into consideration the investments made by SRRP as well as the business plan for the period 2006-2008.

Main Results

The outputs of the project are: · Technical assistance provided to the communal utility company; · Reconstructed network in a total length of 4 km; and · 1,618 water meters installed for individual houses and apartments buildings.


Testimonies, Opinions, Validation (Reality Check)

N/A

Outlook (Conclusions and Next Steps)

Although UNDP/SRRP is not planning any further support in terms of capital investments for the Utility Company, measures will be undertaken to follow up the situation so as to ensure continuity of the efforts to bring about improvements in the financial situation of “Polet”. SRRP will establish a process to work with the water utility company (Polet), the municipal administration and the Municipal Assembly to set a realistic price for water, and to ensure that the cost of any concessional pricing is met from the municipal budget, rather than by the company. Future support to the company should be provided jointly by the municipality and SRRP, according to an agreed plan, in order to ensure sustainability. This is also in line with the recommendations of the external evaluation which was conducted in October-November 2005.

Testimonies and Stakeholder Perceptions

Type/Modality

Water Supply and Sanitation

Organisation(s)

UNDP

Budget

Total: EUR 598,069.60; Sources of Financing: Government of the Netherlands

References

See also

  1. Water for Srebrenica Project
  2. Transfer of environmentally sound technology in Bosnia and Herzegovina Danube river basin
  3. Strengthening the Implementation Capacities for Nutrient Reduction and Transboundary Cooperation in the Danube River Basin
  4. Strengthening capacities in the Western Balkans countries to address environmental problems
  5. Srebrenica Regional Recovery Programme (SRRP)
  6. SDC - River Basin Management in Bihac und Prijedor, Bosnia
  7. Protection and Sustainable Use of the Dinaric Karst Aquifer System
  8. Promoting Replication of Good Practices for Nutrient Reduction and Joint Collaboration in Central and Eastern Europe
  9. MDG Update Report for Bosnia and Herzegovina
  10. Environmental Performance Review Chapter 7 Management of Water Resources
  11. Capacity and Community Building for Industrial Water Stewardship in the Danube/Black Sea region
  12. Assessment of the Management of Shared Lake Basins in Southeastern Europe
  13. A look at water management in Bosnia & Herzegovina
  14. A Human Rights-Based Approach (HRBA) to Improve Water Governance in Europe & CIS

External Resources

Attachments

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