Small Growth, Big Change Seen for Industry

June 1, 2000
The water/wastewater industry may only be growing a small amount each year, but big change is coming in the years ahead.

James Laughlin
Editor

The water/wastewater industry may only be growing a small amount each year, but big change is coming in the years ahead.

I recently had the opportunity to attend the WWEMA Washington Forum, a very informative annual conference on the state of the water/wastewater industry in the United States. Consultant Joan Berkowitz is a regular speaker at the forum. Managing Director of Farkas Berkowitz & Company, a management consulting firm, she gave an eye-opening talk on the state of the U.S. water market.

According to her figures, the market was valued at about $89 billion in 1999, with 60 percent controlled by municipalities. Public wastewater was the single largest sector, with 34 percent of the market. It was closely followed by public water supply at 32 percent. Construction was a distant third, representing about 11 percent of the market. Interestingly, contract operations and maintenance represented only 2 percent.

The industry is growing about 3 percent a year, but that small number masks a great deal of change in the industry, Berkowitz said. Changes already taking place are new modes of product/service delivery, privatization, outsourcing and an increasing emphasis on water conservation, reuse and reclamation.

Although contract O&M represents a small portion of the market so far, privatization in its many forms is growing. Perhaps the fastest growing segments are design-build and operations and maintenance. The market was up 15 percent in 1999, reaching $1.3 billion. For operations firms, U.S. Filter led in revenue in 1999, with $369 million for the year. United Water Services led in growth, at 42 percent on revenues of $136 million.

Berkowitz said growth in contract operations has been slowed by intense competition, long procurement times and high bidding costs. She noted there is a growing backlash against privatization. She pointed to four large procurements that were cancelled in 1999, including Birmingham, Ala., and Camden County, N.J.

Despite resistance to public private partnerships, private contractors are setting high benchmarks, in some cases reducing O&M costs by 24 percent while providing comparable or better service and higher return on assets, she said.

For those of you who don't know, WWEMA is the Water & Wastewater Equipment Manufacturer's Association. Company executives attending the forum were especially interested in learning how the changing marketplace might impact their business.

According to Berokwitz, manufacturers can expect to see changes in the buying hierarchy, greater consideration of life cycle costs and more emphasis on service. The pressure is on to bring prices down. There is also a trend toward using fewer suppliers and promotion of the "one-stop shop" concept of product purchasing.

E-commerce is also a force that can't be ignored and could change the way companies do business.

Further consolidation in the equipment industry is inevitable, Berkowitz said. This will lead to bundling of products and services in new and interesting ways. The French have a formidable lead in the equipment and services industry, and dealing with global companies will almost certainly become the norm in the years ahead.

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