Page 95 - Urban water supply handbook

IMPROVING URBAN WATER INFRASTRUCTURE THROUGH PUBLIC-PRIVATE PARTNERSHIPS

3.14 HISTORY, PLANNING, OUTSOURCING

that is written to include performance-based incentives and provides for effective
monitoring and oversight by the municipality. With the proper contract provisions
in place, local control can actually be strengthened through public-private part-
nerships. 32
An emerging strategy used by opponents who fear a loss of control is to advo-
cate prior approval by voters of any partnership agreements. Opponents of priva-
tization in Omaha placed a measure on the ballot that would require public
approval of any proposal to privatize the management of operation of the city’s
33
two wastewater treatment facilities. The referendum passed with two-thirds of
voters approving. In New Orleans, opponents floated a similar measure in an
attempt to prevent privatization of the city’s wastewater facilities.

3.6 THE SELECTION PROCESS

The decision to enter into a partnership agreement with a private firm for water
services is a time-consuming and highly technical process. Many large cities first
go through an internal evaluation to determine if reengineering and restructuring
can achieve better performance and lower costs. Atlanta developed a two-step
process for its water partnership that first assessed the city’s water and wastewater
systems and analyzed various options including continued reengineering, out-
sourcing, and privatization.
Once the decision is made to outsource operations, city officials begin a highly
technical, and sometimes laborious, process to select a contractor. After 7 years of
research and hundreds of thousands of dollars spent on studies, San Jose,
California, officials voted in December 2000, to solicit bids for managing the
34
city’s water system. One key element to engaging in such a process is to have in-
house personnel with experience in contract development and oversight or secur-
ing such expertise from consultants.

3.6.1 Performance-based Selection
The process of selecting a private contractor for water and wastewater partnerships
is evolving into a performance-based system. Municipalities are moving beyond
price-based proposals to “best value” contracts that combine cost and quality fac-
tors. Low-bid alternatives are increasingly common for long-term contracts where
municipalities rank potential private partners on a variety of measures instead of
solely on the basis of lowest cost.
City officials are realizing that there are times when they will get more if they
pay more—that best value is not necessarily always the least expensive. The con-
cept of selecting firms to provide complex services or projects should be based on
qualifications and technical merits, as long as the price is a value for what is

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