OBA in Action

MERP | Bruce Bailey from MERP, on 05/10/2017 12:48 AEST

During a recent Monitoring, Evaluation and Review Panel monitoring trip to Vietnam, we visited Tra Vinh Province in the Mekong Delta where Thrive’s CS WASH Fund project is helping the government to extend water supply networks to households in areas affected by salinity intrusion. As explained by Mr Mung, the director of the Provincial Centre for Rural Water Supply and Sanitation (pCERWASS), salinity intrusion is caused by a number of things including: the breakdown of natural barriers to seawater such as those provided by mangroves; and the construction of dams further upstream on the Mekong River which reduce the flow of freshwater needed to replenish water sources downstream. The situation came to a head during the 2016 El Nino-driven drought when salinity intrusion caused extensive damage, to water supplies, agriculture and the livelihoods of people in the region.

In response to the increasing water shortages, Mr Mung and his team quickly prepared proposals to extend the piped-water network to the affected areas. In March 2016, Thrive Networks agreed to support the extension through its CS WASH Fund Project which uses an innovative output-based aid (OBA) approach; a form off results-based financing designed to enhance access to and delivery of infrastructure and services for the poor through the of use performance-based incentives. OBA differs from other contractual arrangements as funding is provided by Thrive after independent verification of predefined outputs such as working household connections to safe piped water with six months of paid consumption.

Both pCERWASS and Thrive mobilised quickly and in May 2016 work on extending one of the existing network commenced. Within 45 days, 6,700 metres of pipe were laid and 385 households connected at total cost of VND 847 million (AUD 48,000) which comprised VND 683 million (AUD 40,000) from WASHOBA and the remainder from the community. Buoyed by the successful application of the OBA approach, pCERWASS agreed to co-finance a second batch of work which commenced in June 2016. pCERWASS contributed over 50% of the capital costs (VND 1,468 million or AUD84,000) needed to extend the network by 13 kilometres to connect an additional 400 households. This work was completed by November 2016. Encouragingly, pCERWASS then continued to extend the network, using entirely its own funds. This work was completed in March 2017.

Households interviewed during the monitoring visit told us they were very satisfied with the improved service— “the piped water provides all of our needs including drinking, washing, cooking, watering the garden and the cow!”.  Although there were occasional supply disruptions, these we usually short and not considered a concern.

Mr Mung’s view, after successfully applying OBA, is that the approach is efficient and effective. It forced his team to seek opportunities to reduce input costs without compromising the integrity of the work. This was achieved by applying Thrive’s technical guidance, drawing more on in-house expertise and streamlining implementation. He estimated that, compared to the government’s inputs-based approach, the OBA approach reduced costs by around 36%. Another advantage of the approach is that as donor payments are contingent on the verification of functioning household connections, pCERWASS is motivated to ensure this happens as quickly as possible. This also ensures that customers start paying for water as soon as possible thus increasing pCERWASS’s revenue base.