SOW.pdf

SCOPE OF WORK

Introduction

MCC101

The Millennium Challenge Corporation (MCC) is an innovative and independent U.S. foreign aid agency that is helping lead the fight against global poverty.

Created by the U.S. Congress in January 2004 with strong bipartisan support, MCC is changing the conversation on how best to deliver smart U.S. foreign assistance by focusing on good policies, country ownership, and results.

MCC is a prime example of smart U.S. Government assistance in action, benefiting both developing countries and U.S. taxpayers through:

• Competitive selection: Before a country can become eligible to receive assistance, MCC’s Board examines its performance on independent and transparent policy indicators and selects compact-eligible countries based on policy performance.

• Country-led solutions: MCC requires selected countries to identify their priorities for achieving sustainable economic growth and poverty reduction. Countries develop their MCC proposals in broad consultation within their society. MCC teams then work in close partnership to help countries refine a program.

• Country-led implementation: MCC administers the Millennium Challenge Account (MCA). When a country is awarded a compact, it sets up its own local MCA accountable entity to manage and oversee all aspects of implementation. Monitoring of funds is rigorous and transparent, often through independent fiscal agents.

MCC forms partnerships with some of the world’s poorest countries, but only those committed to:

• Good governance,

• Economic freedom, and

• Investments in their citizens.

MCC provides these well-performing countries with large-scale grants to fund country-led solutions for reducing poverty through sustainable economic growth. MCC grants complement other U.S. and international development programs. There are two primary types of MCC grants: compacts and threshold programs.

Compacts are large, five-year grants for countries that pass MCC’s eligibility criteria.

Threshold Programs are smaller grants awarded to countries that come close to passing these criteria and are firmly committed to improving their policy performance.

MCC has approved over $10 billion in compact and threshold programs worldwide that support country-determined projects in such sectors as:

• Agriculture and irrigation,

• Transportation (roads, bridges, ports),

• Water supply and sanitation,

• Access to health,

• Finance and enterprise development,

• Anticorruption initiatives,

• Land rights and access, and

• Access to education.

The aggressive implementation of compacts and threshold programs is promoting growth opportunities, opening markets, raising the standard of living, and creating a more prosperous future for some of the world’s poorest people.

Tunisia Context

Tunisia is a lower-middle income country of 11.4 million people, located on the northern coast of Africa, directly south of Italy. In 2011, a peaceful revolution overthrew the regime of Zine El Abidine Ben-Ali in events that initiated the “Arab Spring” throughout the Middle East and North Africa. The revolution was in part fueled by a sense of economic and political disenfranchisement by residents in non-coastal areas of the country and by youth who struggled to find economic opportunities under the previous regime.

Tunisia is the only country to emerge from the Arab Spring with a successful democratic transition. In 2014, Tunisia ratified a new constitution and successfully held presidential elections with a peaceful transition of political power.

Despite a successful democratic transition, Tunisia struggles to reduce youth and female unemployment and inequalities in social and economic opportunities. Significant disparities remain across regions of Tunisia, especially between the more affluent coastal region around Tunis and the interior regions where 65 percent of poor Tunisians live. Jobs and economic opportunity remain concentrated in coastal, urban areas with favorable proximity to European and Mediterranean export markets. Tunisia has traditionally sought to protect domestic industries and sectors, and intervened heavily in many of these with the stated goal of providing social services or preserving jobs for Tunisian nationals. This level of involvement and control has generated a heavy regulatory burden on these sectors. The result has been unequal growth and job creation skewed towards the urban coastal areas, and unemployment in interior regions is significantly higher than in the two coastal regions.

After demonstrating a strong scorecard performance and a commitment to working with the United States, Tunisia was selected by MCC’s Board of Directors as eligible to develop a compact in December of 2016. Tunisia passed 14 out of 20 indicators on its fiscal year 2018 MCC scorecard, including both the Democratic Rights and Control of Corruption hard hurdles. Tunisia is a reliable partner for MCC and has demonstrated an early commitment to an inclusive and transparent compact development process. From March to July 2017, MCC and the Government of Tunisia conducted research, stakeholder meetings, and regional consultations to identify the binding constraints to economic growth and investment in Tunisia.

That analysis identified three binding constraints: (i) excessive state control of markets for goods and services, (ii) restrictive labor market regulations, and (iii) water scarcity in the interior regions, which was found to be a constraint to regional equity and sustainability. In September 2017, MCC and the Tunisian Compact Development Team initiated diagnostics to better understand the root causes of the binding constraints. By October 2017, Tunisia completed consultations with many stakeholders, including the private sector and civil society in four of Tunisia’s six regions. Together with MCC, the Government of Tunisia agreed to narrow the focus for potential compact investments to address root causes of the binding constraint related to the excessive market 2 controls and water scarcity, while incorporating some specific interventions to reform restrictive labor regulations. The Government of Tunisia then submitted two concept notes for MCC consideration, which were developed in an inclusive and transparent process from October to December 2017.

Potential compact projects may focus on the following objectives:

Improvements of the Business Climate. If this project proves viable, MCC would work with Tunisian counterparts to create a rationalized, transparent, accessible and equitably administered business environment that encourages growth, job creation, investment, and efficient allocation of economic resources. The project aims to address market distortions, minimize the role of the state in the economy, reinforce the role of the private sector, and reduce bureaucracy. Despite needing more analysis before specific projects can be identified, the Tunisian Compact Development Team has proposed a number of potential interventions to achieve these objectives. These include (i) simplifying procedures for authorizations, permits, and approvals; (ii) supporting small and medium-sized enterprises and female entrepreneurs; (iii) improving the competition framework; (iv) improving availability of information about and monitoring of Tunisia’s labor market practices; (v) restructuring and improving the efficiency of state-owned enterprises; (vi) establishing public-private partnerships; and (vii) improving service delivery and reducing corruption through an e-government platform.

Alleviating Water Scarcity to Promote More Consistent Agricultural Production in the Interior Regions of Tunisia. If this project proves viable, MCC would aim to improve the livelihoods of farmers and households in the interior region by providing them with an adequate, consistent, and sustainable supply of water. The project may support four goals: increase water supply, reduce the negative impacts of variable water supply, remedy problems stemming from poor water quality, and improve the governance and management of water resources. To achieve these goals, the following interventions have been proposed: (i) improve the management of existing infrastructure; (ii) mobilize alternative water resources (i.e.: additional rain water collection, water reuse, and desalination); (iii) fix and renovate existing water infrastructure; (iv) promote smart agricultural practices in irrigated zones; and (v) implement policy reforms in the water and agricultural sectors to increase the economic value and efficient use of water as well as provide incentives for water conservation

About the Water Project

The Project problem statement states that while challenges associated with water scarcity are most acutely felt by residents of Tunisia’s interior regions, it is an issue that is national in scope and will require interventions at that scale to suitably address the root causes of the binding constraint. Based on this problem statement, a well-balanced Water Project containing a suite of activities that will optimize supply, manage demand to promote water conservation and sustainable use, and increase productivity in the agricultural sector through more efficient use and allocation, thereby alleviating water scarcity in Tunisia.

The Water Project will consist of the following three activities, assuming that MCC’s economic and technical feasibility criteria can be satisfied:

1. Supply side improvements aimed at (i) preserving and enhancing the ability to mobilize surplus water from the north of the country to satisfy demand along the coast and (ii) reducing water transfers from central regions to the coast, thereby increasing water availability in these interior regions, possibly via upgrades to an existing water conveyance system known as the Northern Water Transfer System1

(NWTS);

2. Demand management and productivity investments aimed at reducing water consumption primarily through loss reduction, increasing the value generated per unit of water with a focus on the agricultural sector, and improving allocative efficiency; and

3. Policy and institutional reforms with a focus on tariff setting, water allocation, decentralization, improved social benefits to rural laborers, and targeted agricultural policy changes to allow farmers to better match crops with available water resources; this series of interventions is aimed at improving (but not fully achieving) cost recovery, increasing incentives for efficiency, improving the operational efficiency of water delivery services in select areas of the country (Oases and Central Interior), and aligning crop production with water availability.

The reform piece is an essential overall element of the Water Project. The country’s institutional framework governing water resources is highly centralized; local operators have limited capacity and are significantly under-performing. This situation has been ongoing but has become particularly acute since the revolution. The right to (potable) water is included in Tunisia’s new Constitution.2 However the performance of potable and agricultural water service delivery in rural areas is not meeting citizen expectations. The international donor community is very active in capacity building efforts to strengthen Tunisia’s water operators, including economic and tariff reform assessment for SONEDE, assessing various public private partnership models (national and local levels), and developing/implementing reform and capacity building efforts for local water user associations.

Tunisia’s revolution provides an opportunity to re-vision water resources management, and there are several important legislative shifts and policy reforms under way, including:

• The Water Code, which is the principle legislative tool for the water and sanitation sector, is in the process of being updated, although this process appears to be stalled due to disagreements between the GoT and labor unions on role of the private sector in water management;3

• A new law on public private partnerships (PPPs) has been drafted but not yet passed;

• A new policy on agricultural tariffs is being developed;

• Recent passage of the “Code des Collectivités Locale” (April 2018) which formally delegates certain authorities to municipal governments; and,

• New approaches to local / decentralized management of irrigation services are being piloted.

1 The Northern Water Transfer System (NWTS) is an existing water transfer system designed to transfer surplus water from the northwest corner of Tunisia, currently captured in a series of dams, to meet water demand in seven mostly coastal governorates served by the NWTS as well as four southern coastal governorates through existing National Society for the Exploitation and Distribution of Waters (SONEDE) water transmission pipelines.

2 Article 44 – “the right to water is guaranteed” 3 First adopted in 1975, amended in 1987, 1997, and 2001.

A key area for policy reform engagement is on bulk and irrigation water tariffs and water allocation policies and practices – consistent with the GoT’s new agricultural tariff policy which calls for O&M cost recovery in 5 years and O&M plus renewal cost recovery in 10 years; these efforts may be the most difficult elements to implement and the mostly likely to cause public objections. MAHRP with support from KfW has sponsored a review of the agricultural tariffs and is developing guidance for implementation4. The CT will need to proceed cautiously and aim to identify reforms that have the GoT’s support and potential to be understood and accepted by the public, particularly recognizing that Tunisia is a key US ally in a difficult region, struggling with economic growth goals after a mostly-successful democratic transition.

Irrigation tariffs were last raised in 2002 and most GDAs do not collect sufficient revenue to cover operating and maintenance costs (often only 60% of the required amount)5, let alone their scarcity value.

It also appears that most of the water used in agriculture is not “invoiced” and thus not paid for. Tunisia’s tariff structure for agricultural water use has the following issues and implications:

• Revenues from irrigation water sales are not cost covering;

• Low tariffs encourage inefficient use of water; and

• Tariff structure is heterogeneous but often provides little incentive for farmers to become more efficient and consume less irrigation water.

Water user associations are characterized by challenges faced by any small (often volunteer) led organizations charged with the responsibility of managing tangible physical assets. In addition to the aforementioned challenge of raising the revenue necessary to operate and maintain shared infrastructure, these groups often lack the necessary technical, administrative, or financial skills. As a consequence, the performance and legitimacy of regional and local water service providers is low and a potential risk factor as well as potential intervention area for MCC investments. The World Bank is piloting two approaches to address these issues: at the regional scale they are testing an approach based on creating a SOE responsible for the delivery of irrigation water; at the local scale they are testing an approach designed to better engage the private sector in service provision to GDAs. KfW is testing a facility-like approach to engage GDAs in the identification and financing/resolution of specific infrastructure requirements.

Other MCC Contractors

Although the contractor will be expected to work independently, MCC’s expectation is that all of our consultants and contractors make every effort to respect the time of our counterparts. As such some coordination between various consultants will be necessary to reduce duplicative meetings and data calls.

The following are the consultants currently working under MCC contracts to support the Compact Development Process.

4 “Evaluation Study of the Politics of Tariffs and the Implementation of New Tariffs in Tunisia” (Gammarth, Tunisia:

KfW, 2018).

5 KFW. 2018. Projet d’Investissement dans le Secteur de L’Eau Phase II (« PISEAU II »)- Mesures d’accompagnement.

Etude d’evaluation de la politique tarifaire et revision et mise en œuvre de nouveaux modes de tarification. BMZ N˚ 2005 70 259.

• TetraTech – is providing engineering, agricultural, and economic due diligence services.

• Nathan – provided an assessment of economic & job opportunities, potential benefits for excluded groups, propose measures to ensure benefits

• Integra – is providing agricultural project design services.

• MBO Consultants – various individual consultants have been retained to provide specialized/surge capacity to support the Compact development process.

• Willingness-to-Pay Survey – this contract will be used to help assess the benefits associated with water program and to help better understand consumer (retail domestic consumption, farmer) preferences with respect to service levels and willingness to pay.

Objective of the Assignment

MCC seeks to conduct an in-depth institutional review and political economy analysis with the aim of assessing the potential scope and viability of policy and institutional reforms in the water sector. In so doing, MCC seeks to better understand the context in which the proposed Tunisia Water Project will operate; help us identify entry points for and possible coalitions to advance change; and identify key risks.

These questions are intended to generate an analysis of how MCC might support ambitious but realistic reforms in the Tunisian context.

1. How are decisions made?

2. How might MCC’s investments support nascent decentralization in the sector?

3. Is there a viable strategy for increasing the price and/or improving the allocation of water, and what does it look like?

It is anticipated that the findings from this study will inform future research requests– including a deeper dive into some of the issues and questions raised in the deliverables outlined here, and a more focused study of water management at the regional level.

Working definition of political economy analysis

There is no single conceptual framework for political economy analysis, but the following OECD-DAC definition is useful in capturing some of the main elements:

Political economy analysis is concerned with the interaction of political and economic processes in a society: the distribution of power and wealth between different groups and individuals, and the processes that create, sustain and transform these relationships over time.

This definition draws particular attention to politics, understood in terms of contestation and bargaining between interest groups with competing claims over rights and resources. However, it is equally concerned with the economic processes that generate wealth, and that influence how political choices are made. In reality these processes are closely inter-related and part of a unified set of dynamics which influence development outcomes.

Political economy analysis is particularly useful for development practitioners since it helps us to understand what drives political behavior, how this shapes particular policies and programs, who are the main “winners” and “losers”, and what the implications are for development strategies and programs.

Specifically, it is concerned with understanding:

• The interests and incentives facing different groups in society (and particularly political elites), and how these generate particular policy outcomes that may encourage or hinder development.

• The role that formal institutions (e.g. rule of law, elections) and informal institutions (social, political and cultural rules of the game) play in shaping human interaction and political and economic competition.

• The impact of values and ideas, including political ideologies, religion and cultural beliefs, on political behavior and public policy.

In this way, political economy analysis helps us to understand how incentives, institutions and ideas shape political action and development outcomes in a given country. This can be extremely useful when thinking about the feasibility of policy reform and institutional change, the contribution that MCC can realistically make, and the risks involved.

Scope of Work

The Consultant will read background documents including but not limited to those provided by MCC and develop a coherent work plan. Analyses should capture major forms of variation across regions (North, South, and Central) to the extent possible.

For each of the below tasks, the Consultant shall provide recommendations for action (programmatic and/or strategic) and identify options and opportunities to be gained from further research in the field, including LOE and ODC related costs.

Prior to arranging field research, the Consultant will work with MCC to develop a mutually acceptable approach to keeping researchers’ presence in-country discrete.

Task 1. [Base – Fixed Price] Provide an analysis of the political economy of decision-making in water-management (with a focus on decisions around price-setting, rationing, and regulatory enforcement). How are decisions made (or not made), and where de facto arrangements diverge from the de jure system, why and how does this happen? The analysis should consider both formal and informal regulatory institutions in the sector, the organization of power and resources, and organizational capacities. It should also include some discussion of the roles of key stakeholders in water management – both those with influence and those “organized out” of decision-making. The analysis should provide insight on the drivers of social unrest related to water allocation and use and the role that coastal versus interior dynamics may play and the various scales at which these various decisions are being made.

Include a discussion of the 5-year water plan: its major features, how effectively proposed activities fit into its goals, and the political economy of plan development and implementation (e.g., address to what degree the plan is influencing decision-making; discuss the regional politics of the plan). In consultation with MCC, the Consultant might be asked to assess the alignment of proposals being received from Tunisian counterparts with unpopular/unfunded/low priority elements of the current or former 5-year plan.

Deliverable:

• Summary Document suitable for sharing outside MCC o Word Document and PowerPoint deck o Structured so as to be actionable

• Main reported intended for MCC o Word Document and PowerPoint deck o Executive summary highlighting key actionable findings o Key formal and informal stakeholders at the national, regional and local levels

(focusing on targeted governorates) o Key drivers for change/status quo o Summary of key issues facing decentralization and tariff revisions o SWOT analysis of key roadblocks and opportunities

Task 2. [Base – Fixed Price] Provide recommendations about how MCC’s investments might support the nascent decentralization of water management. Include a discussion of the current capacities and interdependencies of the major regulatory bodies in the sector (which we understand to be the MAHRP, CRDAs, and GDAs), and of opportunities to strengthen the capacities of local actors. Identify likely opposition to decentralization, the interests and positions of potential “blockers,” and a viable strategy to overcome or sidestep anticipated opposition.

Identify positive deviants (high performing) GDAs and CRDAs and assess factors contributing to success. Similarly, if there are obvious champions of reform, offer recommendations on how alliances might be built. Finally, the analysis should address the consequences (or limitations) of recent moves toward decentralization: the recent law, the creation of regional water councils, recent municipal elections, and donor efforts to reform GDAs. Evaluate and assess World Bank’s two pilot activities: the creation of corporatized state owned entities to manage irrigation services in the extreme northern parts of the country6] and developing a private sector service market place to support GDAs7].

Deliverable:

• Summary Document suitable for sharing outside MCC o Word Document and PowerPoint deck o Structured so as to be actionable

• Main reported intended for internal use at MCC o Word Document and PowerPoint deck o Executive summary highlighting key actionable findings o SWOT analysis o Generation of multiple alternatives/strategies related to implementation

Private sector participation (see WB pilots)

6 “Tunisia - Irrigated Agriculture Intensification Project Project Appraisal Document” (Washington, D.C.: World Bank, 2018).

7 “Etude de Faisabilité de La Délégation de Service Public Pour Les Services D’eau Potable En Zones Rurales En Tunisie” (Tunis, Tunisia, 2018).

Youth and women’s participation

Task 3. [Base – Fixed Price] Is there a viable path forward for increasing the price and/or improving the allocation of water and what does it look like? Discuss policy options, potential allies or champions, opportunities, and strategic options. Offer a frank assessment of the viability of price hikes, given the recommended strategies and opportunities. MCC aims to support an ambitious but realistic reform agenda – discuss and outline the potential features and parameters of such an agenda, and risks involved.

Deliverable:

• Summary Document suitable for sharing outside MCC o Word Document and PowerPoint deck o Structured so as to be actionable

• Main reported intended for internal use at MCC o Word Document and PowerPoint deck o Executive summary highlighting key actionable findings o Current practices and constraints on tariff setting o Likely Implementation Challenges to Tariff Reform o SWOT analysis

Role of independent regulator (local/national level price setting)

Task 4. [Optional – Time and Materials] Follow-on services and updates. Because of the dynamic and complex institutional and political environment, MCC may, at its sole discretion, require follow on services from the consultant. These may include additional work to deepen our understanding in specific areas or to include updates based on changes operating environment.

The total value of the optional services and should be US$100,000 covering both labor and ODCs.

Bidders shall provide unit labor rates for the staff indicated below.

Deliverables & Timeline

The consultant will deliver reports for each of the tasks listed above.

Tasks 1-3 shall be covered in the base period – 4 months. Each report shall be submitted in draft form followed by a final version.

Task 4 is optional and shall authorized at MCC’s sole discretion. The period of performance shall be up to 12 months.

Deliverable Date Due Work plan; proposed staff Draft report MCC feedback received Final report

Staffing:

Key Staff:

1. Team Lead/Political Economy Specialist

Other Staff

2. Water Sector Specialist

General qualifications:

• ALL proposed staff must have functional French (no translation required).

• The team must demonstrate French fluency

• Team must demonstrate English fluency (reporting will be in English); Arabic strongly desired

• 15 years of relevant experience

• Demonstrated expertise in conducting political economy analysis

• Working knowledge of the broader Tunisian political economy

• Experience conducting interviews and discussions for data collection purposes

• Experience conducting research in the MENA region

• Expertise in water management in the MENA region`

Preferred

• An advanced degree (MA or PhD) in the social sciences and engineering

• 2-plus years of demonstrated experience or expertise in Tunisia in the post-2011 period

• Experience conducting sectoral analyses of the political economy of natural resource management

• Arabic fluency

Staff positions can be combined.

Evaluation

1. Prior experience conducting In-depth Institutional Analysis and Political Economy Analysis and ability to transform that knowledge in practical actionable implementation strategies.

2. Understanding of MCC processes and procedures

3. Working knowledge of Tunisia

4. Working knowledge of Water Sector

Evaluation