Public or Private Management and Operation of Wastewater Treatment Utilities
Approved December 1, 2000, by the WEF Executive Committee
The Water Environment Federation believes that efficient wastewater treatment protects the water environment at acceptable costs to ratepayers. Regardless of whether a plant is publicly or privately operated, management should enhance the environment, safeguard the condition of public assets, treat its employees fairly, and provide clearly defined services at a reasonable cost to its customers. The presence of competition between private entities and public agencies can be a significant incentive for positive change.
The primary goal of wastewater treatment is to protect public health and the water environment. National and municipal governments have vastly improved water quality through efficient management and operation of wastewater treatment facilities. The rising costs of regulatory compliance and plant upgrades, among other factors, now pose a major challenge to the excellent service and stable prices citizens have enjoyed under many publicly managed wastewater treatment facilities. Although publicly operated wastewater utilities occupy naturally strong positions in the market, private companies are actively pursuing opportunities to offer options for private management of local wastewater utilities. Communities around the world have incorporated private management of wastewater utilities. Their performance is governed via the terms and conditions of the service agreements developed for each business relationship.
WEF believes that public and private management of wastewater treatment utilities must preserve environmental gains and seek to make further improvements in water quality through responsible and cost effective utility management; the application of advanced yet, viable technology; continuous planning; and timely infrastructure replacement. The decision to privatize services or to sell critical environmental assets is of local concern, and the decision should be based on a thorough examination of local circumstances. Government officials, utility managers, plant operators, and financial analysts should use all appropriate financial and planning tools to carefully assess present and future capital needs and environmental objectives.
If a local government opts to pursue private management or operation of a wastewater treatment system, the following guidelines should be observed:
1. Rigorous Procurement Planning and Review of Contractual Arrangement: Procurement specifications should take into account the full scope of services desired and make clear any differences between current and future service requirements. They should also include provisions that make it possible for ratepayers to benefit from competitive forces as the need arises to address contract modifications that result from unanticipated changes in customer demand, changes in law or other uncontrollable circumstances. Procurement and contracting processes should attempt to assign risk and responsibilities as well as accountability based upon the strength of the parties involved. Contracts and the accounting practices of prospective private operators or owners should be comprehensive, clear and straightforward. All contracts should go through a rigorous local review process. The cost of procurement, administration, and monitoring needs to be included in the cost of the private alternative.
2. Open and Fair Competition: Full cost wastewater agencies, whether public or private, should be permitted to compete with private companies for wastewater treatment service contracts when practical. Fairness should be an overriding goal, and it is important to recognize that every competitor has its own set of strengths and weaknesses and that a fair process is one that is honest and transparent. Recognizing that the purchasers of service have the right to decide what they wish to buy and how they will buy them, it is paramount that selection criteria be clearly defined early on and consistently applied once the purchasing process is begun.
3. Consideration of Current Workforce: Competitive processes have the potential to result in reductions in workforce. If either a public team or private contractor is chosen, the fate of the present workforce should be carefully considered and addressed in the rules that govern the competitive process. Effort should be made to achieve reductions through attrition, placement in other municipal divisions, buyout arrangements, voluntary early retirement, or via the use of fair severance packages with outplacement services. The full cost of the accommodation should be taken into consideration as part of the evaluation of service options.
4. Stable Rates: Rates should remain at reasonable levels, especially with respect to economically disadvantaged citizens. Savings associated with competitive processes should be reinvested in additional productivity initiatives, infrastructure maintenance and improvement, or passed on to system customers in the form of rate relief.
5. Basic Legal Compliance: Facilities under both public and private sector management must meet or exceed all applicable laws and regulations.
6. Asset Protection: Any wastewater facility service contract should require that the operators keep pace with technology and maintain the facilities at standards viewed as acceptable in the industry.
7. Performance Standards, Incentives, and Disincentives: Clear, comprehensive, and detailed performance standards with incentives are always helpful to performance improvements. They are essential for a fair and credible competitive process.
WEF supports effective and efficient management of wastewater treatment facilities by public or private entities. Whether to privatize is the decision of local authorities. Each community must assess its individual situation and make the decision based on the most efficient means of achieving regulatory compliance and enhancement of the water environment and in meeting the needs of its customers as expressed through its elected officials.