public/private partnerships for water & wastewater systems 2006 acma summer conference loews...
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Public/Private Partnershipsfor
Water & Wastewater Systems
2006 ACMA Summer Conference
Loews Ventana Canyon Resort
Tucson, Arizona
2
Overview
Background & Introduction• Joseph Graziose, Vice President Business Development, Severn Trent
Services
Understanding Public/Private Partnerships Benefits/Challenges of a Public/Private Partnership Procurement Approaches Key to a Successful Partnership Public/Private Partnership Structures/Models Case Studies Questions & Answers
3
Options for Public/Private Partnerships
Public ownership• Private operations• Private design construction
– Improvements– New facilities
• Public or private funding
Private ownership & provision of services by private company or utility
Lease/sale facilities & provision of services by private company or utility
4
Why Consider a Public/Private Partnership?
Potential cost savings• Design/construction of capital improvements• Operations
Risk reduction Improved performance Need for alternative financing
5
Benefits of a Public/Private Partnership
Single point of contact/accountability Improved levels of customer service Regulatory compliance Availability of technical resources Access to the latest technology Cost control Volume purchase discounts Availability of capital Maintenance management systems Streamlined procurement
6
Challenges
Loss of control Loss of public accountability Personnel impacts/employee
concerns Complexity of the transaction
7
Procurement Approaches & Strategy
Request for Qualifications (RFQ) Request for Proposals (RFP) RFQ/RFP (Two Step) Hybrid approaches
• Request for Qualifications & Expressions of Interest (RFQEI)• Draft RFP (for Comment)/Final RFP• Expanded RFP – Menu Approach
8
Procurement Process
Setting objectives Selecting a procurement strategy Defining service & key terms & conditions for business
arrangements Preparing the request for proposals Interacting with prospective proposers Evaluation of proposals Selection & contract negotiations
9
ServiceAgreement
$$$Fee
Effluent Riv
er
Existing
Clean Water
Wastewater
Collection &Pumping
Distribution &Transmission
Equity
$$$
LoanAgreement
$$ BillingService
Well
Description of the Municipal Water & Wastewater Services Market
Engineering Firms
Financial Advisors
LawFirms
OperateStart UpConstructDesign
Performance Guarantees
Customers
Water System
Tax-Exemptand/or
Taxable Bonds
Debt andEquity
Financing
Bonds
Existing Wastewater
Plant
With Capital Improvements & Sludge Disposal
Municipality
State & FederalRegulations
Public/Private Partnership
10
Public/Private Partnership Structures
Ownership Operation Agreement Model
I Public Private 5 to 20 years O&M of system constructed through traditional design/bid/build delivery method
II Public Private 10 to 25 years Design/Build/Operate (DBO)
III Private Private 25+ years Design, Build, Own, Operate and Maintain (DBOOM)
There are three basic structuring approaches based on project ownership, construction and operation:
11
ServiceAgreement
$$$ Fee
$$Service
Customers
Engineering
Potential Scope of Services
Legal
Financial
Private ContractorRegulatory Compliance
QA/QC
O&M of Plants Distribution & Collection
Customer Service
Capital Improvements
Pretreatment Programs
Municipality
12
Advantages Maintain Control Over Process Change-Orders Easily Accommodated Well-Tested/Universally Accepted Competitive Bidding at All Levels
Disadvantages Generally More Costly Can Take Longer Poor Incentive Structure/Risk Allocation Limited Recourse if Things Go Wrong
Traditional Project Delivery Approach(Design/Bid/Build)
GovernmentGrants
OperationsDesign
Engineer
Equipment Construction
Financing
GeneralContractor
Municipality
13
Advantages Single Point of Accountability Risk Assumption by Developer Shorter Project Schedule Reduced Costs
Disadvantages Project scope defined by Performance rather
than by Design Specs Legal and Procurement Barriers
Financing
Alternative Delivery Structures: DB/DBO/DBOOM
Equipment Construction
Project Developer
Municipality
OperationDesign
Performance Guarantee
14
Key to a Successful Partnership
Equitable risk allocation Reasonable financial security Attainable & objective performance
standards Well defined work scope & division of
responsibilities Mechanism to monitor performance Communications & reporting
15
Public/Private Partnership Case Study:
Pasadena, Texas3 WWTPs – 10 MGD, 4 MGD, 7 MGD
Background:
History of non-compliance
Costs continued to rise, year after year
Non-existent maintenance programs
Overstaffed
Lack of leadership & management
16
Pasadena, Texas
City’s Approach
Procurement through an RFP Standard O&M contract Maintenance cap fixed by City O&M of the City’s 3 wastewater
treatment plants Guaranteed compliance No layoffs
17
Pasadena, Texas
Selection & Negotiation Process
City selected Severn Trent Severn Trent hired all existing
personnel• Better salaries & benefits• Recognized seniority
Severn Trent began detailed transition process Severn Trent began immediate process changes &
achieved compliance
18
Pasadena, Texas
Summary
The City achieved immediate savings of over $800,000 per year.
Within 3 months, 2 consent orders were lifted.
Flow restrictions were lifted at 2 of the plants, allowing for an increase in capacity.
The partnership between Severn Trent and the City has continued from the initial 5-year term in 1994 through today.
19
Public/Private Partnership Case Study:
Boyertown, PennsylvaniaWater & Wastewater Systems
Background: Retirement of key
operations personnel Challenge of finding
qualified staff Compliance & operational
issues at WWTP
20
Boyertown, Pennsylvania
Borough’s Approach
Procurement through an RFP Standard O&M contract Maintenance cap fixed by Borough O&M of the Borough’s:
• 0.75-MGD wastewater treatment plant• 1.6-MGD water treatment plant• 5 pump stations
Guaranteed compliance No layoffs
21
Boyertown, Pennsylvania
Selection & Negotiation Process
Borough selected Severn Trent Severn Trent hired all existing personnel
• Leased Water Superintendent for four months until his retirement
• Recognized seniority• Better salaries & benefits
Severn Trent began detailed transition process
Severn Trent began immediate process changes & achieved compliance
22
Boyertown, Pennsylvania
Summary
The Borough saved nearly $500,000 by eliminating unnecessary capital improvements; additional savings of $60,000 per year due to process changes.
Severn Trent operations in Boyertown have been recognized:• Safety awards from Eastern Pennsylvania WPCOA and Pennsylvania WEA• Commendation from the Department of Environmental Protection
Scope expanded to include collection and distribution systems and meter reading in 1999.
The partnership between Severn Trent and the Borough has continued – and grown – from the initial 5 year term in 1994 through today.
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