In the world of sanitation, cost is often mentioned as important though seldom scrutinized. Perhaps strange as one considers that cost is one of the main reported reasons for people not having a toilet. Reducing costs while maintaining quality is a key driver of WASTE’s sanitation programmes. Yet even in our own programmes it is notoriously difficult to compare costs of sanitation systems within countries, let alone between countries.
There are several reasons for this, people use different systems, different units, and currencies. Most complex though is the local context of sanitation, dry systems, wet systems, high groundwater tables etc. But what if we could disentangle the context, can cost comparisons be made possible? Through the sanitation decision support tool (further developed with AKVO), an attempt was made to make rational sanitation decisions based on contextual factors, yet costs have not been added yet. IRC tried another route through Life Cycle Analysis Cost.
Cost comparisons remain difficult though. As we are working with banks and micro finance institutions and they have to develop financial products, we needed to find a solution for this. This paper describes our solution.
We start with a methodology applied in (civil) engineering; the Bill of Quantities. In the Bill of Quantities, materials, parts, and labour are all itemized. One needs to fill in costs per item and add it all up to get a complete overview of the cost of a system. Of course, this pre-supposes that items all use the same standards. Therefore, we converted all local used units into SI units. Furthermore, we converted all local prices into Euro (€), making it comparable.
Even after establishing the cost of a sanitation system, what does it mean in practice? If a sanitation system costs € 180 in India and € 400 in Kenya (fictive prices), what does this mean? Is the supplier in Kenya making massive profits or are other forces at work?
Next, we outline a price purchase parity mechanism, in other words we compare cost with a globally available asset. The chosen asset is a (cheap) motorcycle. Just like for sanitation all economic (in)efficiencies are at work from the place of manufacturing, transport duties, mark-ups, profits etc. Our proposition is now as follows: how many sanitation systems (type X, Y, or Z), can one purchase for one low-cost motorcycle? Based on data from nine countries, we have formulated it as a hypothesis, if your sanitation system is half or less of the cost of a low-cost motorcycle, the sanitation system is well priced.
More can be read in our paper, free to download