Public-Private Partnerships
Many towns, cities and counties select private-sector companies to operate, manage, and/or construct water and wastewater facilities and systems. These agreements can include meter reading, billing and customer services, maintenance, replacement of distribution and collection pipes, and various other public works functions.
Public-private partnerships entailing operations and management (O&M) and design-build-operate arrangements are the most common and fastest-growing segments of the U.S. water market.
Such arrangements began in the 1970s but proliferated in the 1990s following various Presidential Executive Orders and changes in tax policy that facilitated such arrangements.
Under such arrangements, a municipality retains ownership of the utility, but a private company is brought in to run all or part of the operation. The municipality retains responsibility for setting rates and making necessary capital investments.
Today, the entire public-private partnership market is a $1.7 billion industry with more than 1300 government entities contracting with private companies to provide water and/or wastewater services. The impressive contract renewal rate, about 93% per year, speaks to the strength and popularity of public-private partnerships.
Glossary of Public-Private Partnership Options
Acquisition – Public partner sells facility to private partner resulting in private ownership and operation.
Joint Venture – Private partner owns facility in conjunction with public partner.
Concession or Built, Own and Transfer - Private partner builds, owns and operates the facility. At the end of the specified period, such as 30 years, the facility may be transferred to the public partner for a nominal fee.
Turn Key Facility – Private partner designs, constructs and operates the facility. The public partner retains ownership and generally assumes the financing risk, while the private partner assumes the performance risk for minimum levels of service and/or compliance.
Full Service Contract – Public partner contracts with private partner for a fee to operate and maintain the facility. The public partner owns the facility (although it may have been built by the private partner).
Contract Operations – Private partner operates and maintains public partner’s facilities over long or short term.
Contract Management – Private partner manages and supervises the public partner’s personnel.
Operations Assistance – Private partner provides transition management or program management to improve effectiveness of public partner’s operations.
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