Vera van der Grift, IRC Information Officer gives examples of how the life-cycle costs approach has been taken up by global level actors. From international donors to regional lending banks, WASH sector actors are thinking about the importance of financing asset management and capital replacement in order to support sustainable service delivery of services.
Published on: 19/10/2012
Over the last two years, there has been a growing uptake of the underlying concepts of life-cycle costs approach (LCCA), what it involves and how it can be applied. To understand the overall concept, the “cost pie” chart has been really useful and people really ‘get it’.
The cost pie is a particularly powerful image to use in explaining the cost components of the LCCA. Initially, LCCA was taken up by governments where WASHCost did the action-research and a range of organisations including small NGOs. Now the larger bi-donor organisations are thinking about it too. Some of the bigger donor organisations and the (regional) lending banks in particular already have a good understanding of life-cycle costs. They were already broadly thinking through things like asset management and capital replacement in their work in the urban sector, more so than most people do in the rural sector. This means that LCCA resonates very strongly for a group of multi-lateral lending banks.
However, the picture gets blurry when trying to understand costs against service levels. Some organisations have taken up LCCA more deeply by attending trainings to acquire a better understanding f what is behind each of the pieces of the pie. Many organisations will not get to the more detailed analysis of what it means for sustainability when some of the costs are not being financed. These organisations need some form of guidance and some user-friendly tools in order to do this. WaterAid and the Millennium Water Alliance for example are finding the LCCA useful and have requested training for staff at regional level.
The most commonly adopted or most accessible part of LCCA’s framework are the cost components (illustrated by the cost pie). It is the most popular because it helps users to easily and clearly visualise costs beyond capital investment cost. One area that remains challenging is linking costs with the concept of service levels and applying the concept of service levels. It is less the service levels in themselves that present a challenge, but how they can be translated into the context of each country and how they relate to country norms and standards, which are often lacking.
Both the cost pie and the application of the service levels are very useful for Triple-S. LCCA is a key part of the shift towards adopting a service delivery approach. Without understanding costs and without identifying who can meet which costs, we cannot start to have a grounded dialogue about sustaining services. If we can’t meet all lifetime costs of a service, there will be unacceptable levels of service. It is as simple as that. Triple-S found WASHCost’s work very valuable, particularly in supporting national monitoring frameworks, where Triple-S is advocating for looking beyond monitoring only basic coverage and infrastructure built to track quality and continuity of service, as well as the performance of service providers.
One of the big questions is of impact beyond the end of WASHCost as a ‘project’—how can we ensure that LCCA ‘lives on’? There is the online training and the development of simple, user-friendly interfaces with LCCA including the ‘WASHCost calculator’ which is already in prototype form. The calculator would be an invaluable tool to help people apply the concept of LCCA.
Another approach is to embed LCCA more strategically at the global level with key organisations so that LCCA can have an impact in their decision making and programming. One of the most strategically placed development partners in this sense is the Water and Sanitation Programme (WSP) administered by the World Bank. The WSP is a multi-donor partnership which has the leverage to take up LCCA and apply it at scale. It has direct links with governments, national sector stakeholders and many development partners in a range of countries. WASHCost already started working with WSP a number of years ago when it started to apply the principles of LCCA to their work on sanitation. According to Harold Lockwood, from a strategic point of view, WSP remains the most logical target for WASHCost as WSP nears the end of its three year lifespan. WASHCost can also link with key bi-lateral donors such as the Dutch ministry (DGIS), UK’s DFID and USAID.
(Based on an interview with Harold Lockwood the Director of Aguaconsult)
22 October 2012