Page 88 - Urban water supply handbook

IMPROVING URBAN WATER INFRASTRUCTURE THROUGH PUBLIC-PRIVATE PARTNERSHIPS

IMPROVING URBAN WATER INFRASTRUCTURE 3.7

of municipalities with long-term contracts ranges from major cities, such as
Atlanta, to small towns, such as Port Byron, Illinois (pop. 1350). In the first 2 years
after the regulation went into effect, more than 80 cities began the competitive
process for contracts with initial terms of more than 10 years. During the same
period, 45 municipalities agreed to O&M contracts of more than 10 years.
The trend of slow but steady growth in the number of long-term water and
wastewater contracts continues into the 2000s. In 2000, another 25 cities entered
into long-term contracts at least 10 years in length. Table 3.2 lists some of the
water and wastewater public-private partnerships currently in existence across the
United States.

3.4 FACTORS CAUSING WATER AND
WASTEWATER PARTNERSHIPS

While philosophical or ideological factors formerly played a role in officials’ deci-
sions to privatize, more practical considerations have emerged in recent years that
have increased the attractiveness of privatization. There are a variety of factors
forcing local officials to consider private sector alternatives.

3.4.1 Cost Savings
According to the U.S. Conference of Mayors, expenditures for water and waste-
15
water services are among the largest facing local governments today. Thus, there
are more opportunities for cost savings from public-private partnerships. Water
companies can utilize advanced technology, more flexible management practices,
and streamlined procurement and construction practices to lower costs. In addi-
tion, larger firms that operate several facilities can use economies of scale to
achieve better prices for chemicals, capital equipment, and supplies. For example,
energy costs, which can comprise approximately two-thirds of a water utility’s
budget, are one area where efficiencies can be gained in a short period of time. 16
The White River Environmental Partnership between the city of Indianapolis
and United Water provides an example of some of the cost savings possible
through a public-private partnership. Officials with the partnership estimated that
the contract would reduce utility costs by 20 percent through engineering process
control and improved performance; lower personnel costs by 30 percent through
better training, streamlined management, and lower overhead costs; and reduce
maintenance costs by 30 percent through increased preventive maintenance and
bulk purchasing.
Private firms can not only generate significant O&M savings, they can also
reduce capital costs between 10 to 50 percent through design and build techniques
rather than the traditional design, bid, and build approach used by many munici-

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