MEETING THE CHALLENGES OF WATER UTILITIES: THE EVOLVING PRIVATE SECTOR ROLE
Posted on Tuesday, April 15 @ 08:08:04 EST by jgprimenews |
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WASHINGTON, DISTRICT OF COLUMBIA - On April 15, 2008, in Houston, Texas, 17 senior executives from firms
advising municipal water utilities met to discuss the evolving
private-sector role in helping municipal water and wastewater utilities
face the challenges of the 21st century. Sponsored by the Water
Partnership Council, an organization of the leading providers of
operational services for municipal water and wastewater treatment
systems, the workshop was organized to advance private-sector efforts
to provide municipalities with more effective management consulting,
engineering, legal, and operational services.
Executives in attendance called for a new paradigm between private and
public sectors in which private firms not only address problems
identified by their municipal clients but also facilitate solutions.
Private support may entail assistance in managing programs or
performing functions previously done in-house, as firms move
increasingly from a project orientation to a relationship orientation.
Expanded services included asset management, program management,
operations improvement consulting, design-build (DB),
design-build-operate (DBO), and public-private partnerships.
Workshop participants expressed the hope that private financing can
help meet public water infrastructure needs. In addition, most believed
that DB, DBO, and public-private partnerships can yield cost savings to
provide some help in narrowing the funding gap. It was noted, however,
that these private-sector capabilities have not fully kept pace with
the challenges faced by the public sector.
Participants discussed the use of public-private partnerships. Workshop
participants were nearly unanimous in concluding that partnerships have
demonstrated value. Both public and private partners have learned from
the experiences of the last two decades. Contracts are not enough.
Successful partnerships are based on relationships of trust, which must
be continually nurtured. While private partners have come to understand
the importance of tailoring services to individual client needs, public
partners have developed a better appreciation of how they can benefit
by leveraging the capabilities of their private partners.
Most workshop participants expect the partnership market to achieve
stronger annual growth over the next decade, although some believe this
growth will be based on providing more than just treatment system
services. Likely drivers of future growth include a reorientation of
the core competencies of public water utilities from an emphasis on
engineering and operational excellence to one of managing project and
service delivery. Human resource challenges were also examined in light
of fundamental demographic trends and the technical/training demands of
operating advanced systems. This reorientation has implications for the
future role of private sector partners.
Workshop participants made a strong case for the use of
performance-based contracts with quantitative metrics geared to public
partner objectives. Many saw incentives as the best way to demonstrate
value and counter public opposition.
Participants also weighed in on new private-sector services that raise
issues of allocating risks between public utilities and private firms.
Generally, public water utilities are willing to absorb cost
escalations, particularly during long periods between cost estimating
and the beginning of construction. Public agencies have also
demonstrated a greater willingness to assume as-built risks and risks
associated with subsurface assets. In addition, the strong records of
most partnerships have convinced many utilities that duplicative
guarantees, such as surety bonds and letters of credit, are not
necessary. Workshop participants were in general agreement that risk
allocation between private and public entities is rarely a stumbling
block to the provision of private services.
This enlightening workshop brought varying perspectives and opinions,
but participants agreed on many conclusions. All recognized that public
water utility executives face increasingly difficult challenges. An
unfolding housing crisis, credit crunch, and the specter of recession
figure to compound those difficulties in the near future. Innovative
solutions by private firms, however, have enabled municipal clients to
meet some of those challenges, though doing so has required these firms
to overcome institutional hurdles, many of which still remain.
Executives agreed that DB, DBO, and public-private partnerships have
demonstrated their value. Most significantly, these distinguished
attendees affirmed their sincere commitment to finding new and more
effective ways to serve their municipal clients.
SOURCE: Water Partnership Council
CONTACT:
Sarah Chittenden
Water Partnership Council
Office: 202 466 5445, ext. 4
e-mail: chittenden@waterpartnership.org
WEB SITE:
http://www.waterpartnership.org
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