Public/Private Partnershipsfor

Water & Wastewater Systems

2006 ACMA Summer Conference

Loews Ventana Canyon Resort

Tucson, Arizona

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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

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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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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

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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:

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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

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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

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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

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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, 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

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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, PennsylvaniaWater & 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.