Transcript Slide 1
Public/Private Partnerships
for
Water & Wastewater Systems
2006 ACMA Summer Conference
Loews Ventana Canyon Resort
Tucson, Arizona
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
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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
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Why Consider a Public/Private Partnership?
Potential cost savings
• Design/construction of capital improvements
• Operations
Risk reduction
Improved performance
Need for alternative financing
4
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
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Challenges
Loss of control
Loss of public accountability
Personnel impacts/employee
concerns
Complexity of the transaction
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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
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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
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Description of the
Municipal Water & Wastewater Services Market
Engineering
Firms
Financial
Advisors
Law
Firms
State & Federal
Regulations
Customers
Service
$$ Billing
Distribution &
Transmission
Clean Water
Tax-Exempt
and/or
Taxable Bonds
Bonds
Municipality
$$$
Fee
Debt and
Equity
Financing
$$$
Loan
Agreement
Service
Agreement
Water System
Well
Collection &
Pumping
Wastewater
Public/Private
Partnership
Existing
Existing
Wastewater
Plant
Effluent
With Capital
Improvements &
Sludge Disposal
Equity
Design
Construct
Start Up
Operate
Performance Guarantees
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Public/Private Partnership Structures
There are three basic structuring approaches based on project ownership,
construction and operation:
Ownership
Operation
Agreement
Model
I
Public
Private
5 to 20 years
O&M of system constructed
through traditional design/
bid/build delivery method
II
Public
Private
10 to 25 years
Design/Build/Operate (DBO)
III
Private
Private
25+ years
Design, Build, Own, Operate
and Maintain (DBOOM)
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Potential Scope of Services
Customers
$$
Service
Engineering
Municipality
Legal
Financial
$$$
Fee
Regulatory
Compliance
QA/QC
O&M of Plants
Service
Agreement
Private Contractor
Pretreatment
Programs
Distribution &
Collection
Customer
Service
Capital
Improvements
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Traditional Project Delivery Approach
(Design/Bid/Build)
Disadvantages
Government
Grants
Municipality
Financing
Design
Engineer
Advantages
Maintain Control Over Process
Change-Orders Easily Accommodated
Well-Tested/Universally Accepted
Competitive Bidding at All Levels
General
Contractor
Equipment
Generally More Costly
Can Take Longer
Poor Incentive Structure/Risk Allocation
Limited Recourse if Things Go Wrong
Operations
Construction
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Alternative Delivery Structures:
DB/DBO/DBOOM
Advantages
Single Point of Accountability
Risk Assumption by Developer
Shorter Project Schedule
Reduced Costs
Municipality
Financing
Design
Disadvantages
Project scope defined by Performance rather
than by Design Specs
Legal and Procurement Barriers
Project
Developer
Equipment
Construction
Operation
Performance Guarantee
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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
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Public/Private Partnership Case Study:
Pasadena, Texas
3 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
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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
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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
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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.
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Public/Private Partnership Case Study:
Boyertown, Pennsylvania
Water & Wastewater Systems
Background:
Retirement of key
operations personnel
Challenge of finding
qualified staff
Compliance & operational
issues at WWTP
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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
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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
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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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