Title: Overview of Public-Private Partnerships and Privatization
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Permanent Link: http://ufdc.ufl.edu/WL00001542/00001
 Material Information
Title: Overview of Public-Private Partnerships and Privatization
Physical Description: Book
Language: English
Publisher: Bookman-Edmonston Engineering, Inc.
 Subjects
Spatial Coverage: North America -- United States of America -- Florida
 Notes
Abstract: Overview of Public-Private Partnerships and Privatization
General Note: Box 8, Folder 7 ( Vail Conference, 1997 - 1997 ), Item 20
Funding: Digitized by the Legal Technology Institute in the Levin College of Law at the University of Florida.
 Record Information
Bibliographic ID: WL00001542
Volume ID: VID00001
Source Institution: Levin College of Law, University of Florida
Holding Location: Levin College of Law, University of Florida
Rights Management: All rights reserved by the source institution and holding location.

Full Text







OVERVIEW OF
PUBLIC-PRIVATE PARTNERSHIPS AND PRIVATIZATION


I. Definition

A. Public-private partnerships and privatization involve the shifting all or
some of the operational or ownership responsibilities for water or
wastewater service from the public to the private sector.

B. The complete transfer of assets and operations is perhaps the absolute form
of privatization, but privatization also includes:

1. Contracts for operation, maintenance, and administrative services

2. Financing arrangements that make use of private capital

3. Various forms of public-private partnerships for the construction
and/or operation of all or part of a water or wastewater system.

C. The "best" option depends on the needs and preferences of the principal
water utility and the community it serves.

II. Closely related concepts

A. Privatization

B. Competitivization or Managed Competition

C. Marketization

D. Reinvention, re-engineering

E. Public-Private Partnerships

I. Alternative privatization arrangements

A. Acquisition by investor-owned utility

B. Joint venture between public and private partners

C. Concession or build, own, and transfer

D. Turnkey facilities with public ownership

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E. Full-service contract with a private firm

F. Contract operations by a private firm

G. Contract management by a private firm

H. Consulting and operations assistance by a private firm

IV. Potential private partners

A. Investor-owned water utilities

B. Affiliates of investor-owned water utilities

C. Engineering or technical firms

D. Management and operations firms

E. International and multinational utilities and operations firms

V. Theoretical reasons for exploring privatization

A. Ideological (less government)

B. Commercial (more business)

C. Populist (better society)

D. Pragmatic (effective solutions)

E. Top-down (British experience) versus bottom-up (USA activity)

VI. Practical reasons for exploring privatization

A. Funding needed for capital improvements

B. Environmental compliance issues

C. Source-of-supply or capacity limitations

D. Wanted expert water management

E. Potential to lower construction costs

F. Potential to lower operating costs

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OVERVIEW OF PUBLIC-PRIVATE
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G. Opportunity costs associated with municipal funding

H. Potential to increase system efficiency

I. Local labor issues or disputes

J. Getting out of the water or wastewater business

K. Potential to increase cash flows

VII. Potential savings from privatization

A. Economies of scale and scope

B. Increased labor productivity

C. Technological improvements and innovations

D. Automation of some utility functions

E. Competition and related performance incentives

VIII. Why some cities choose not to privatize

A. Economic, financial, and taxation barriers

B. Legal, regulatory, and process barriers

C. Political and policy concerns

D. Desire to maintain local control

E. Other means to efficiency (benchmarking evaluations)

IX. Myths about privatization

A. Myths (or stereotypes) about privatization usually are founded on grains
of truth.

B. Myths about privatization raise some important implementation issues for
stakeholders.

C. Myths about privatization can be counterproductive if they interfere with
meaningful dialog.


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D. Privatization can be the right solution, but implemented for the wrong
reasons.

E. Privatization decisions should be based on analysis rather than myths.




TABLE 1
COMMON PUBLIC-PRIVATE PARTNERSHIP OPTIONS

Partnership Option Description

Acquisition Public partner sells the facility to private partner
resulting in private ownership and operation.

Joint Venture Private partner owns facility in conjunction with
public partner.
Concession or build, own, Private partner builds, owns, and operates the facility.
and transfer (BOT) At the end of the specified period, such as 30 years, the
facility may be transferred to the public partner for a
nominal fee.

Turnkey 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 the 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.


Source: National Association of Water Compan
"
ies, Common Public-Private Partnership
Arrangements," (handout, not d sted)


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OVERVIEW OF PUBLIC-PRIVATE
PARTNERSHIPS AND PRIVATIZATION


TABLE 2
CONSIDERING PRIVATE OPERATIONS AND MAINTENANCE:
EPA'S QUIZ FOR A MUNICIPAL WASTEWATER UTILITY

If your answer to most of the following questions is "yes," then you may want to seriously
consider using contract operations and maintenance.

Design problems? Has the plant had trouble meeting design
specifications from the beginning? Have increasing design problems
come to light as the plant has aged? Has staff had to jerry-rig solutions
to design problems too often? Is the plan being run to design
parameters?

Excessive costs? Has the wastewater budget been increasing
disproportionately as the plan has aged? Are replacement costs high?
Are the same items being replaced too frequently?

Personnel problems? Is moral low? Is staff overworked, but poorly
utilized? Is staffing out of synch with workload and shift requirements?
Are there labor-management disputes? Is salary not commensurate
with performance? Is staff hard to acquire and keep?

Public-image issues? Do citizens complain about overflow and backup
problems? Odors? Appearance? Higher use charges? Water-quality
problems?

Operating inefficiencies? Do plant managers fail to take advantage of
opportunities for cost savings or economies of scale? Are certain
operating units underused? Have chemical or energy costs risen
excessively?

Compliance difficulties? Has plant effluent frequently been in violation of
standards? Has the plant experienced enforcement actions? Is
compliance regularly marginal? Are periodic problems from industrial
loads frustrating compliance?

S Training issues? Do plant manager fail to provide training in a consistent
effective manner? Is staff inadequately prepared to deal with
sophisticated equipment? Are there too many specialists and not
enough generalist on staff? Does the plant have above average safety
problems or lost-time accidents?
Source: U.S. Environmental Protection Agency, "Contractingfor O&M," Waterworld Review 9
(July/August 1993), 12




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OVERVIEW OF PUBLIC-PRIVATE
PARTNERSHIPS AND PRIVATIZATION


TABLE 3
KEY COMPONENTS OF A SERVICE CONTRACT

S Contract period and general terms

S Assignment of risks and responsibilities

S Guarantees, warranties, insurance, and indemification

S Cost allocation and terms of payment

S Provisions for compatible accounting and information systems

S Mechanisms for financing upgrades and expansion

S Procedures for accounting, reporting and auditing

S Responsibility for securing permits and certificates

S Responsibility for regulatory compliance

S Accountability to customers and guarantee of customer satisfaction

S Operational requirements and performance standards

S Methods of conflict identification and resolution

S Methods of alternative dispute resolution

S Options and conditions for takeover, repurchase, and renegotiation

S Incentives for performance excellence

S Penalties for nonperformance, delays, or default

S Limits on liabilities and damages

S Procedures for emergencies, unanticipated events, and force majeure
Source: Author's construct








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