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8.5.2 Project Implications on Cost Recovery
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8.5.2 Project Implications on Cost Recovery

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The way the project has been set up, and its institutional and legal characteristics, are elements that can have a direct implication on cost recovery, particularly with regard to the following (WHO, 2002):

 

  • Technology selection
  • Community aspects
  • Management options
  • Local, regional and national policies
  • Support to and/or by the community
  • Economic conditions

 

Technology Selection

 

Appropriate technology selection is a key factor in sustainable cost recovery. The ratio between capital and recurrent costs can be the determining factor, in the way that a technology with higher capital costs could be chosen because of lower O&M costs. Therefore, when communities select a technology for their sanitation service with external financial support, the community must have clear information about the costs and required charges needed to recover the financial obligations (loan payments) and the operational, maintenance, and administrative costs. Communities should be aware of the financial implications of choosing a particular technology.

 

Community Aspects

 

The major community aspects may include community awareness, level of interest or demand for the project, and willingness and capacity to pay for improved services. Other factors may include availability of materials or replacement parts, access to skilled labor.

 

Management Options

 

The management system for O&M can directly influence the way cost recovery will be organized. For instance, the sanitation system can be managed and operated by local labor (skilled and unskilled labor) and/or by a private company retained by the village. Each of these approaches will have different interests, capacity and ultimately costs.

 

Policies

 

Different policies can affect how decisions or actions are taken in a village. For example a national policy that sets tariffs or includes subsidies for poorer households can influence the decisions and financial obligations of a village, but they may also result in a more equitable level and coverage of service.

 

Support to the Community

 

In many instances the villages will need training and support for administrative activities (such as book-keeping, establishing a rate structure, and contracting), technical activities for operation and maintenance, and other capacity building needs.

 

Economic Conditions

 

Many rural areas in China have limited financial resources. Therefore, developing feasible cost recovery mechanisms is important to recoup the investment in a financially sustainable and effective way.

 

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