Appendix S

Pricing & Business Issues

Selecting Drill Trainees: People to be trained in using the LS-100 should: be available for training and not expect to be paid for the training or guaranteed employment; have a high degree of technical aptitude; have experience with physical, hands-on type work; understand basic water supply concepts and ideally have related experience; be meticulous about details and maintenance; be willing to provide a long-term time commitment;

Selecting Team Members After working with the Drill Trainees, choose who will be on the final Team by consulting with local leaders and considering the following factors: Motivation: Trainees should genuinely want to provide rural poor with safe, dependable water supplies. This desire should be rooted in a deep desire to share God's love rather than a desire to gain employment and make money; Trust: There can not be on-going concerns over theft of money, equipment or supplies; Ability: Technical/Mechanical ability, related experience, learn without being told twice and LOTS of common sense! Enthusiasm: Look for people who take the initiative of finding work to do rather than always waiting to be told what to do; Team Dynamics: Team members must get along well. Try to minimize the number of potentially divisive political, economic, tribal or religious splits within the team. In addition, one person should not be so domineering that the drill team or Action Agency can not work efficiently or be open & accountable; Other: Leadership skills, business experience, inventiveness, problem solving skills, ability to drive;

Estimating "Per Well" Costs In estimating the cost of constructing a well, consider: Material Cost; Overhead Cost: Office expenses, vehicle repair & fuel etc; Depreciation: Reserve to replace drill rig, mud pump and vehicle; Labour and Benefits: Retirement plan, injury support fund etc; Required Profit Margin.

Material Cost

The cost of materials should be based on local replacement. This is particularly important for items like PVC pipe which may be initially shipped into the country to help start the drill program. although shipping supplies may be necessary to help get a program started, self-sustaining programs can not be based on importing material.

Overhead Cost
The cost of support staff, renting office space, computers and typewriters, vehicle use expenses etc. should be kept as low as possible. These expenses are particularly critical when few wells are being constructed. In general, try to keep overhead to less than 10% of the amount charged for a well.

Depreciation

• Trucks often need to be replaced every 5 years. Given a price of $5,000 to locally purchase a used vehicle and an average of 10 wells constructed per year, this works out to $100/well!
• Count on replacing the LS-100 drill rig after 1.52 km (5000 ft) of drilling. This can be taken into account by setting aside $3.28/m ($1/foot)of drilling;
• Depending on hours of use and the type of material being drilled, mud pumps may need to be replaced after 760 m (2500 ft) of drilling. This works out to an average replacement cost of $0.65/m ($0.20/ft) of drilling.

Labour rates should be set so that they are in-line with local pay-scales. If people are working full-time constructing wells for others, they should be paid enough so that they can support their families. Separate rates of pay should be established for a borehole and for a cement pad & handpump since sometimes just a borehole is drilled (and a submersible installed by others) and sometimes an existing well is rehabilitated with a new pad and pump. As a rough guide, consider $100 for a borehole and $100 for a pad & pump.

In some countries, there is cultural expectations that employeers will take care of their employees when they are sick, injured or retired. If you and your organization are not prepared to take-on this responsibility, it would be worthwhile to help the team establish a local fund to cover these items. Money for this fund could be taken from the labour stipend (see above).

Profit Margin

It is really important that National Drill Teams work towards becoming financially independent. This breaks the cycle of dependence on foreign aid and enables Lifewater to focus their resources on helping new crews get trained and equipped. This can be done by constructing wells and handpumps for government agencies, in-country aid & development groups and drilling private wells.

The Goal of Lifewater Projects is to supply rural poor with safe water. In order to raise the money needed to do this, National Drill Teams can construct one or two wells for profit and then use the proceeds to fund construction of a well for villages which can't pay full costs.

Drilling for Profit The amount of money which can be charged for private wells is dependent on what local people, businesses and agencies can afford. However, the amount charged should never be less than the total, unsubsidized cost of constructing a well. As a general rule of thumb, charge twice the unsubsidized cost for a borehole and 1.5 times the unsubsidized cost for a cement pad and handpump.