WATER GLOBAL PRACTICE WSS GSG FRAMEWORK FOR UTILITY TURNAROUND Knowledge Brief: When, Why, and How Water and Sanitation Utilities Can Benefit from Working Together Introduction utilities work together has been regarded as an oppor- tunity to improve the cost efficiency and performance The recently adopted Sustainable Development Goals of service providers, thus making them more sustain- (SDGs) set an ambitious agenda of providing universal able. As a matter of fact, there is ample empirical evi- access to safely managed water supply and sanitation dence in the literature of the existence of economies of (WSS) services by 2030. Policy makers and sector prac- scale in the WSS industry, at least up to a certain level. titioners know that the SDGs will be achieved only if Furthermore, it seems that large utilities tend to oper- service providers can provide better services at a lower ate at a lower unit cost and perform better than smaller cost. Yet, the past decades’ policy approaches to struc- ones do. For instance, Abbot and Cohen (2009) found turing service delivery at the right level have been con- that significant economies of scale do exist in the WSS flicting: some countries have chosen to consolidate industry. More recently, Van den Berg (2015) found, in service provision centrally, hoping for greater profes- a study analyzing the performance of WSS utilities in sionalism and economies of scale, whereas others have Africa, that size matters in achieving good perfor- chosen to decentralize and empower local govern- mance. Two recent analyses based on IB-Net data for ments in the hope that more local accountability would utilities in the Danube region (Klien and Michaud provide strong incentives to provide good services. 2016) and in the Latin American and the Caribbean To reconcile those two apparently contrary trends, an (LAC) region (Diaz and Flores 2015) showed lower unit increasing number of countries and local governments costs for larger utility companies. These studies com- are turning, with varying levels of success, to the pare utilities serving cities of different sizes. It is not aggregation of local utility companies. 1 Making clear when the same scale effects are achieved by 1 grouping a number of noncontiguous providers into a work focuses on proposing recommendations for suc- provider. Many utility companies and single, larger ­ cessful aggregation, shaping lessons learned into a countries embarking on such an aggregation process checklist of key questions to ask and pointing out key have therefore found that those benefits do not always decision points. The recommendations are based on materialize in practice and that the accompanying evidence and observed experiences rather than on the- processes are arduous and fraught with political oretical considerations; sometimes the advice runs challenges. counter to conventional wisdom with regard to aggre- gation practices. A Global Study on the Aggregation of This study consists of a review of existing literature Water Supply and Sanitation Utilities and an analysis of both qualitative and quantitative This global study was initiated to provide evidence-based evidence—including a statistical analysis based on guidance to policy makers and practitioners regarding IB-Net data covering 1,306 utilities from more than when, why, and how water and sanitation utilities can 140  countries; a review of global aggregation trends, work together (“aggregate”) to successfully deliver spe- collecting data for 111 countries; and 14 case studies cific policy outcomes, such as better services or lower from seven countries that provide a deep-dive narra- costs. The outcomes of this study are summarized in this tive of aggregation experiences. knowledge brief and detailed further in the main report, Joining Forces for Better Services? When, Why, and How Aggregation Typology Water and Sanitation Utilities Can Benefit from Working To analyze the evidence collected, and to expand on Together, and the accompanying toolkit (accessible the work done by ERM and Kingdom (World Bank at  www.worldbank.org/water/aggregationtoolkit). (See 2005), the report postulates that the design of a suc- also box 1.) cessful aggregation should consider both the purpose This work does not advocate in favor of or against intended and the context in which it takes place, and aggregations but rather presents and reviews global the report characterizes the design of an aggregation in evidence, analyzes specific aggregation case studies, function of its scope, scale, process, and governance. and identifies the key characteristics that successful (See figure 1.) This report defines a successful aggrega- aggregations have in common, depending on their pur- tion as one in which the aggregated service provider pose and the context in which they occur. The authors performs significantly better than the previously acknowledge that it is challenging to make “before disaggregated entities in terms of the intended ­ aggregation” and “after aggregation” cost comparisons purpose, without unacceptable deterioration of other ­ because the levels of service are changing, thus this performance dimensions. BOX 1. Relevant Literature This report builds on previous work from the World Bank and others. It borrows significantly from the conceptual framework and practical typology proposed by the report, “Models of Aggregation for Water and Sanitation Provision.” (World Bank 2005). External literature also has been consulted substantially, for example on the issue of economies of scale. A complete literature review is available in the online toolkit, which provides resources to support aggregation processes. 2 Knowledge Brief: When, Why, and How Water and Sanitation Utilities Can Benefit from Working Together Understanding Why FIGURE 1. Context, Purpose, and Design of Aggregations Success Does Not Always Materialize There can be many reasons an aggregation is not successful. Despite the potential for econo- mies of scale, one-off, or long- term transaction costs may prevent the economies from appearing.2 Aggregation also has possible drawbacks, such as loss in accountability and political reluctance that may hamper the process of aggregation, blocking it before it takes off or damaging it after it is launched. Clustering of service areas increases the distance between the service provider and the end user. Salaries of the agglomerated unit might be adjusted to reflect FIGURE 2. Trade-Off between Production and those of the highest-paying utility, a move that would Transaction Costs increase operating costs without necessarily creating equivalent efficiency gains. Lack of political will in Cost per unit the aggregation reforms could arise because local Production cost Transaction cost authorities might perceive such reforms as a threat to their sovereignty. Aggregations also increase the complexity of a utility because the organizational ­ number of systems, employees, and processes could Size increase substantially. In addition, utility owner- ship—in the sense of the allocation of decision and performance—greater size also implies higher transac- control rights—tends to become more complex. tion costs (Williamson and Winter 1993; Williamson Instead of a single owner, several municipalities or 1975). See figure 2. regional entities share ownership or sign a lease It is important to consider that the outcome of a given agreement with a utility. Such fragmentation of con- aggregation should be measured primarily against its trol and decision rights can impose significant trans- original purpose, which might involve economic effi- action costs. ciency or not. In some cases, it might be necessary to In summary, although serving a larger number of cus- accept a permanent transaction cost or change in the tomers has organizational advantages in the produc- cost structure in return for an important externality— tion process for utilities—which can materialize as for example, a cross-subsidy between low- and high- economies of scale in lower unit costs or improved cost service areas or an environmental benefit. Knowledge Brief: When, Why, and How Water and Sanitation Utilities Can Benefit from Working Together 3 What Are Global Aggregation Trends? aggregation. Information was collected on a total of 111 countries, representing 88 percent of the world’s The study collected worldwide information on water population and 51 percent of all countries. The entire and sanitation services provision and aggregation. data set is available publicly on an interactive map, Information was collected from existing public available in the toolkit. sources (Joint Monitoring Program,3 Organisation for Economic Co-operation and Development,4 and Map 1 shows the countries that have observed a certain World Bank databases ), as well as a systematic review 5 degree of aggregation and have been considered in this of publicly available information on the websites of global study either in the quantitative or the qualitative national agencies in the various countries. The global approaches that made up the methodology of the aggregation trends overview, available as an interac- study. Overall, 43 percent of aggregations have been tive map in the toolkit, provides country-specific data observed in European countries, whether from west- such as urban and rural population sizes as well as ern, central, or eastern Europe; 17 percent have been in aggregation-­ specific information covering items such Sub-Saharan African countries; and 14 percent have as the number of WSS utilities; the population served; occurred in Latin America. Fewer aggregations the level of government formally responsible for pro- have  been observed in East Asia and South Asia. Of viding WSS services; aggregation reforms adopted the countries where a legal framework supports aggre- at  the national level; the number of aggregation gations, 57 percent of these aggregation reforms are in processes over the preceding five years; and the ­ European countries and 24  percent are in African predominant process, purpose, scale, and scope of ­ countries. MAP 1. Economies that Have a Formal Policy or Legal Framework that Supports Aggregation IBRD 43046 | JULY 2017 Policy framework exists No policy exists but a few aggregations took place No policy exists and no aggregation took place Note: Based on data collected in May 2017. 4 Knowledge Brief: When, Why, and How Water and Sanitation Utilities Can Benefit from Working Together The review of international aggregation trends led to statistical analysis classified utilities according to core the following observations: structural characteristics and compared the perfor- mance of the different utility types. A detailed descrip- • The level of decentralization of WSS services tion of the methodology of the statistical analysis is increases in countries with higher levels of develop- available in the main report; a supporting paper is also ment and overall service coverage. available in the online toolkit. • Aggregation is a relatively recent trend mainly The analysis of actual utility aggregations using IB-Net observed in African, European, and Latin American data shows that in some cases the reforms have led to countries. both improved financial sustainability and performance, • Aggregations are happening in a diversity of con- whereas in other cases the benefits did not materialize. texts but are more frequent in countries with high The research also shows that most aggregations involve WSS services coverage. larger, urban utility companies taking over utility service • The predominant aggregation type is a top-down, in small, more rural towns, thus adding few customers mandated process targeted toward economic effi- and decreasing the density of service area. In fact, utili- ciency that encompasses all functions and services, ties serving several towns do not see straightforward follows administrative boundaries, and takes the economies of scale when their size increases, contrarily form of a merger. to utilities that serve a single town. In addition, the anal- • Aggregations in countries with limited sector perfor- ysis of available empirical data shows evidence that mance are predominantly aimed at improving ser- many aggregations do not generate lower labor unit cost vices, whereas in countries where the coverage is per customer served in the way one would have expected high, economic efficiency is the main driver. given potential economies of scale. The empirical analysis of IB-Net data also shows that the effect of aggregations varies widely and does not When Do They Work? The Quantitative automatically show lower unit cost or better perfor- Evidence mance, because of the emergence of significant trans- A statistical analysis based on IB-Net data, which cover action costs in some cases. These results are based on 1,306 utilities from more than 140 countries, was con- before-and-after comparisons of utilities that aggre- ducted to understand in greater detail the potential gated with similar utilities that did not. Looking specif- gains from aggregation. Comprehensive time-series ically at the post aggregation period, some evidence data for 79 actual aggregation cases identified in the indicates that managerial efficiency tends to improve data set were used to understand the effect of aggrega- through aggregations. Additional statistical tests show tions on disaggregated performance measures as well that some utility types might benefit more than others as differences in the cost structure. The statistical anal- and that the design of the aggregation matters: ysis comprised two complementary approaches: an empirical assessment of the performance conse- • On the one hand, small, less complex aggregations quences of aggregations and a cross-sectional analysis. and aggregations that involve utilities that are The cross-sectional analysis complemented the first already serving multiple towns are more likely to part of the analysis to understand how the different achieve cost savings. configurations of utility structure that are subject • On the other hand, aggregations that involve small to  change in the aggregation process determine or weak utilities tend to improve their overall per- ­ long-term performance differences. This part of the formance rather than lowering their costs. Knowledge Brief: When, Why, and How Water and Sanitation Utilities Can Benefit from Working Together 5 Why Do They Work? The Qualitative process and scope. Availability of data was also a key Evidence selection criterion. To complement the hard data analysis, the study Among other findings, this analysis provides evi- also investigated in greater detail a set of 14 case stud- dence that many of the observed aggregations started ies in seven countries, centering on the stakeholders from a low cost and low performance situation and involved, the decisions made, the roles of sector actors went through a higher cost and higher performance and their incentives, and the perceived outcomes with status before finally reaching the ideal high perfor- a view to bringing forward the essence of each case mance and lower cost scenario. Figure 3 depicts these experience. The seven countries were Brazil, Colombia, findings—the yellow circle shows the starting point Hungary, Indonesia, Mozambique, Portugal, and and the blue circle, the aggregation outcome. The Romania. The selection of the countries and specific overall reform path was to increase performance providers was done in a manner to ensure a diversity of first, and only in a second step to improve the cost geography, development levels, size, and aggregation situation. FIGURE 3. Starting Point and Aggregation Outcome for Case Studies 6 Knowledge Brief: When, Why, and How Water and Sanitation Utilities Can Benefit from Working Together Furthermore, the analysis of the 14 case studies Building on the aggregation typology—the proposed enabled the identification of the following success four design dimensions of scope, scale, process, and factors: governance—the study seeks to highlight the trade- offs and potential challenges associated with each of • Having a stable champion throughout the aggrega- those design decisions. A summary of the findings tion often improves the likelihood of success. follows. • Building ownership and aligning interests of stake- holders at all levels is essential. Scope of aggregation • Defining principles but allowing flexibility in imple- The scope of aggregation varies among the case stud- mentation ensures local ownership. ies; however, all functions have been aggregated in • Aggregation takes time to show results; gradual most case studies. All stages of the service chain6 have improvement strategies with consequent focus on been aggregated in all case studies except for Águas do results are particularly successful. Alentejo (Portugal), which supplies bulk water and oversees wastewater treatment only. Water and waste- Conversely, a series of risk factors that may prevent water services have been aggregated in eight case aggregation from delivering its benefits were also studies. In four case studies, aggregation was limited identified: to water service only, and in one case study, the opera- • Not acknowledging context and purpose when tor is in charge of water supply and sanitation as well designing an aggregation can lead to failure. as waste collection. Those findings are consistent with • When political leadership changes over time, aggre- the findings of the global aggregation trends review. gation may be jeopardized. Scale of aggregation • Harmonization of administrative practices may level performance down and costs up. The scale of aggregation follows administrative bound- aries in 12 case studies; in the two Brazilian cases, • Transaction costs can hamper aggregation success. aggregation happened within watershed limits and • Cherry-picking practices can undermine the out- concerns only rural areas. The population covered var- come of an aggregation whose purpose involves ies from 32,000 inhabitants in the regional market of externalities such as cross-subsidies or capacity La Línea (Colombia) to 2.2 million inhabitants in the transfers. regional market of Atlántico (Colombia). In Brazil, A list of the analyzed case studies with references for where aggregations happened in rural areas, the case further information (available in the online toolkit, studies cover 89,500 inhabitants located in 153 settle- including multimedia field stories and Q and A with ments for SISAR and 303,000 inhabitants from 239 practitioners) are available at the end of this brief. localities for Copanor, thus showing the low popula- tion density. In contrast, in Indonesia or Mozambique, How Does WSS Utility Aggregation Work? where aggregations happened in urban areas, the case Concrete Insights studies exhibit high density (respectively, 2.1 million The qualitative and quantitative analyses have enabled inhabitants located in seven cities for PDAM Tirtanadi the authors to delve into the nuts and bolts of set- and 400,000 inhabitants located in three cities for ting up a successful aggregated service provider, high- FIPAG Northern Unit). The number of towns covered lighting aspects such as scale and scope, the allocation in an aggregation varies widely among the case stud- of power, the management of assets and liabilities, and ies, ranging from two cities for PDAM Intan Banjar the harmonization of information technology systems. (Indonesia) to 239 localities for Copanor (Brazil). Knowledge Brief: When, Why, and How Water and Sanitation Utilities Can Benefit from Working Together 7 Process of aggregation Governance The process of aggregation was mandated in 4 case In most case studies, aggregated utilities have adopted studies, all located in the European Union (EU), and a corporatized structure and have used a delegated was voluntary for all others. Among the 14 case stud- governance arrangement. A variety of situations have ies, 6 received financial incentivizes from donors and been encountered regarding shares and power distribu- 4 were financially supported by public funds; 2 tion (such as according to the asset value transferred to ­ ubsidies. These received both donor aid and public s the aggregated entity or the volume or the population financial incentives or support, when effectively served per participating municipality). In most cases, provided, enabled the funding of large investment ­ asset transfer has been an opportunity to set up or projects, which acted as a “big push” to improve WSS update inventories. Similarly, cost and revenue are coverage, quality, and performance. being consolidated for the utility as a whole, and tariffs are harmonized across the operating area. In half of the case studies, no staff transfer was undertaken. Entry and exit rules are not clearly stip- FIGURE 4. Stages in Undertaking Aggregation ulated systematically. Almost none of the aggregated utilities took on liabilities from previous operators. Road Map to a Successful Aggregation This study set out to provide ­ concrete, evidence-based policy guidance on when, why, and how the aggregation of water and sani- tation utilities can successfully deliver specific policy outcomes. It was found that the implementa- tion of an aggregation is typically a long-term effort, taking anywhere from 3 to 20 years and involving, broadly speaking, four stages: (a) deciding on whether an aggrega- tion process is the appropriate pol- icy instrument to achieve the purpose sought; (b) designing the aggregation, (c) implementing the designed aggregation, and (d) sus- taining its achievements. For each stage, figure 4 provides a sum- mary of the main guidance pro- vided by the study. 8 Knowledge Brief: When, Why, and How Water and Sanitation Utilities Can Benefit from Working Together Key Messages space for those to be considered in the final design of a given aggregation. The evidence base is not always as conclusive and clear cut as a policy maker would want. Some of the conclu- 3. The design of a successful aggregation will depend on sions might appear counter-intuitive or contradict the intended purpose of the aggregation, as well as on conventional wisdom. This, by itself, is an important the overall context in which it takes place. For those finding because it underlines the importance, for pol- practitioners and policy makers considering an icy makers and practitioners, of pausing and thinking aggregation process, the report recommends con- about reforms before replicating a model that might sidering first what policy outcome is being sought: have appeared successful in a different context, for a Better service? Lower costs? Solidarity between different purpose. A few broad conclusions can be urban and rural areas? Environmental benefits? derived from the overall effort for anyone contemplat- Furthermore, the overall context— political econ- ing an aggregation, in addition to the more detailed omy, performance and size of utilities, and so on— guidance provided in the report and toolkit. should be considered before undertaking the design of the aggregation’s scope, scale, governance, and 1. Aggregation is a policy option among others, not the process, preferably reflecting on the guidance pro- panacea for all sector challenges. A growing number vided in the study. Most of the cases of failure are of national and local governments are turning to linked to designs that responded poorly to the com- aggregation to face the double challenge of increased bination of purpose and context in which the aggre- demand for better services and limited fiscal space. gation was taking place. In many cases, those aggregations have delivered positive outcomes, but not always those expected 4. In the developing world, aggregation is primarily a initially. In some cases, the process has stalled or means to deliver better services rather than to lower failed because it was not the right policy action or costs. Many practitioners will associate aggrega- because it was poorly designed. One-off and long- tions with the concept of economies of scale and term transaction costs have prevented expected expect to see cost reductions. However, in many economies of scale from materializing at the scale cases, the preaggregation costs of services are expected, or such economies of scale have been below those necessary to provide a reasonable qual- reinvested into higher levels of service rather than ity of service (low-level equilibrium). In fact, the into lower costs. study shows that most often in the developing world, aggregations involve larger municipal com- 2. Aggregations come in many different shapes and panies that take over smaller, underperforming forms, depending on the local circumstances. The ones nearby with an aim to improve the coverage scope, scale, process, and governance of aggrega- and quality of services. This process often involves tion varied greatly between regions and countries significant infrastructure investments—and, in and even within countries. Although some utilities effect, takes the utilities out of their low-level equi- chose to associate with neighboring ones for only librium. In such cases, costs increase alongside ser- specific functions such as the purchase of chemi- vice quality, a necessary but not always expected cals, others fully merged their operation at the outcome of the aggregation. regional level or set up a separate company to man- age shared assets such as a large-scale water treat- 5. Aggregation is a gradual, long-term process ment plant. That diversity of cases reflects the that  requires strong stakeholder commitment. diversity of local circumstances, and governments Aggregations take time to design, and even more developing aggregation reforms will do well to leave time to implement and sustain. Among the study’s Knowledge Brief: When, Why, and How Water and Sanitation Utilities Can Benefit from Working Together 9 14 concrete cases, only 2 took less than 5 years in aggregation process with a solid sector reform package total, with some needing as long as 20 years to fully that ranges from clarifying arrangements for corporate consolidate their effect. Aggregations shift the bal- governance to establishing a solid regulatory frame- ance of power among stakeholders significantly work and a financing program that not only provides and therefore require time to build support and incentives toward aggregation but also helps achieve consensus in the first place. In addition, utilities some of the performance gains that are often desired aggregating often do so in successive phases rather from the process (concept of the big push). than in a single step, as success builds experience This study does not provide a definitive answer to the and confidence into the process. Finally, many questions of when, why, and how aggregation can suc- aggregated utilities find that dealing with harmoni- cessfully deliver specific policy outcomes. Aggregation zation issues, whether human resources, informa- is a relatively recent phenomenon, and longer time tion technology systems, or administrative series would be necessary to understand the long-term processes, is best pushed to after the actual merger effect of aggregation. Similarly, the existing data sets and addressed gradually once the dust settles and do not enable researchers to fully understand the the commitment to an aggregated provider grows. nature of the transaction costs that emerge during 6. Finally, aggregations are most successful when accom- aggregations, how they evolve over time, and how panied by a broader sector reform that addresses they can be mitigated best. Aggregations are con- governance, financing, and regulatory issues at the ­ ducted for a wide variety of purposes, and the limited sector level. Many countries accompany the actual data available on aggregation reforms primarily focus BOX 2. Online Toolkit For more information, refer to the online toolkit (www.worldbank.org/water/aggregationtoolkit), which offers a broader set of references and resources to inform aggregation processes, including, among others: • Full report, Joining Forces for Better Services? When, Why, and How Water and Sanitation Utilities Can Benefit from Working Together • Main feature video with information about the purpose of the report and leading voices from around the world • Supporting documents on the aggregation of WSS utilities, presenting the results of the statistical analysis • Literature review and an annotated bibliography on the aggregation of WSS services • Summaries of 14 case studies that present the knowledge gathered through the report in multiple political, economic, and environmental contexts • Multimedia field stories, including three short videos that share concrete experiences in WSS utility aggregation • An engaging visual representation of Aggregation Global Trends through an interactive map that displays information from the data set of aggregation or fragmentation of the water sector in more than 111 countries • Q and A with diverse global practitioners that provide concrete advice and unique glimpses into firsthand experiences with utility aggregation in multiple contexts 10 Knowledge Brief: When, Why, and How Water and Sanitation Utilities Can Benefit from Working Together on their effectiveness regarding cost savings and per- designing and implementing aggregation reforms, formance improvements only. And, of course, the case while also providing relevant guidance on how to make studies demonstrate time and again the importance of those as successful as possible. With that, let us hope a favorable political economy and overall country that this work will allow policy makers and practi- environment for the success of the process, but more tioners who are considering aggregation to better work would be needed to detail those findings. understand whether it is a relevant policy option for them, and to use the analysis and case studies to make Nevertheless, this study seeks to shed some light on more informed decisions with regard to the design and the complexities and trade-offs associated with implementation of the process. Case Studies and References for Further Information Case study References available in the toolkit All 14 case studies are analyzed in the main report, Joining Forces for Better Services? When, Why, and How Water and Sanitation Utilities Can Benefit from Working Together (World Bank Forthcoming). Additionally, more detailed information is available in the sources listed. The main report and supporting material are accessible in the online toolkit. Brazil Copanor Minas Gerais • Case study: “Copanor Minas Gerais” SISAR Ceará • Case study “Sisar Ceará” • Short video: “The Case of Sisar Ceará in Brazil” Colombia Mercado Regional del Atlántico • Case study: “Mercado Regional del Atlántico” Regional La Línea • Case study: “Regional La Línea” Hungary Alföldvíz • Case study: “Alföldvíz” • Blog: Q and A with Deputy Chief Executive Officer (CEO) László Nagy and Financial Director Károly Uhrmann, “Unexpected Challenges of WSS Utility Aggregation Reform in South East Hungary” Kiskun-Víz • Case study: “Kiskun-Víz” Indonesia PDAM Intan Banjar • Case study: “PDAM Intan Banjar” PDAM Tirtanadi • Case study: “PDAM Tirtanadi” Mozambique Chimoio/Gondola/Manica • Case study: Chimoio/Gondola/Manica” • Blog: “Federico Martins in Mozambique Shares Experiences with WSS Aggregation” • Blog: “Mozambican Water and Sanitation Utility CEO Nelson Beets Shares Experiences with WSS Aggregation” Nampula, Nacala, and Pemba/Metuge • Case study: “Nampula, Nacala, and Pemba/Metuge” • Blog: “Federico Martins in Mozambique Shares Experiences with WSS Aggregation” • Blog: “Mozambican Water and Sanitation Utility CEO Nelson Beets Shares Experiences with WSS Aggregation” Portugal Águas Públicas do Alentejo • Case study: “Águas Públicas do Alentejo” Águas do Ribatejo • Case study “Águas do Ribatejo” • Short video: “Case of Águas do Ribatejo in Portugal” Romania Brasov • Case study: “Brasov” Raja Constanta • Case study: “Raja Constanta” • Short video: “The Case of Raja Constanta in Romania” Knowledge Brief: When, Why, and How Water and Sanitation Utilities Can Benefit from Working Together 11 Notes Sources 1. Aggregation is defined as the process by which two or more WSS ser- Abbot, M., and B. Cohen. 2009. “Productivity and Efficiency in the Water vice providers consolidate some or all their activities under a shared Industry.” Utilities Policy 17 (3-4): 233–44. organizational structure, whether it implies physical infrastructure Diaz, C., and B. Flores. 2015. “Quick & Dirty Analysis: The Case interconnection or not, and whether the original service providers for  Aggregation-Water Supply and Sanitation Utilities.” World Bank, continue to exist or not. Washington, DC. 2. Transaction costs refer not only to costs incurred during the singu- Klien, M., and D. Michaud. 2016. “Utility Consolidations: Review of lar  event when the utilities are merged but also to the additional Existing Evidence and Lessons from Central and Eastern Europe.” World costs in the aggregated utility, which may arise continuously. Bank, Washington, DC. Therefore, transaction cost is defined here as comprising all costs except production cost, and it may be divided into one-offs Van den Berg, C. 2015. Regional Study on the Performance of Water and and  repeatedly incurred costs. (Williamson 1975; Williamson and Wastewater Utilities in Africa. Draft version, November. Washington, DC: Winter 1993). World Bank. 3. Available at https://washdata.org/data. Williamson, O. 1975. Markets and Hierarchies: Analysis and Antitrust Implications. New York: Free Press. 4. Available at http://www.oecd.org/regional/regional-policy/Subnational​ -governments-in-OECD-Countries-Key-Data-2016.pdf (complete data- Williamson, O., and S. Winter, eds. 1993. The Nature of the Firm: Origins, base available at: http://stats.oecd.org/). Evolution, and Development. 2nd ed. New York: Oxford University Press. 5. Available at http://data.worldbank.org/. World Bank. 2005. “Models of Aggregation for Water and Sanitation Provision.” Water Supply and Sanitation Working Notes 1. Prepared by 6. Aggregated utilities can only supply stages of water and wastewater ERM in association with Stephen Meyers Associates and Hydroconseil services—that is, production, distribution, collection, or treatment and William D. Kingdom for the World Bank, Washington, DC. (World Bank 2005). ———. Forthcoming. Joining Forces for Better Services?: When, Why, and How Water and Sanitation Utilities Can Benefit from Working Together. Washington, DC: World Bank. © 2017 International Bank for Reconstruction and Development / The World Bank. Some rights reserved. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. This work is subject to a CC BY 3.0 IGO license (https://creativecommons.org/licenses​ by/3.0/igo). The World Bank does not necessarily own each component of the content. It is your responsibility to /­ determine whether permission is needed for reuse and to obtain permission from the copyright owner. If you have questions, email pubrights@worldbank.org. 12  SKU W17064