Its Not Business As Usual Anymore

"Teamwork is the fuel that allows common people to attain uncommon results!" This was the message that resonated throughout the course of WWEMAs 90th Annual Meeting held recently in Las Vegas, Nevada. Teamwork was selected as the theme of this years conference in recognition of the water and wastewater industrys fascination with public-private partnerships and managed competition. It was only befitting that WWEMA invite representatives from the nations leading private contract operators and municipal agencies to discuss ways in which equipment manufacturers can team with these customers to better serve their needs.

A lively presentation was given by Paul Eisenhardt of Malcolm Pirnie and Doug Herbst of EarthTech on the growing trend toward privatization, moderated by Bill Reinhardt of Public Works Financing. Bill Reinhardt began the discussion by defining the market potential for privatizing water and wastewater facilities, both here and abroad. He noted that with the increased demand for privatizing these facilities, and with the entry of new players particularly from the energy sector, the U.S. was facing a "critical mass" where it will be difficult for mayors not to consider some form of privatization for their public works facilities.

Doug Herbst warned that several obstacles stand in the way of public-private partnerships to include state laws which may prohibit private ownership of public works facilities, a lack of vision and political will on the part of community leaders to try new approaches, and unfair competition on the part of the public sector which is not subject to the same expectations and requirements as that of the privatizer.

Privatization can take several forms as described by Paul Eisenhardt, with design-build-operate being the preferred course. Unlike the design-build scenario which seeks to produce the lowest capital cost project in a timely fashion, design-build-operate projects take life-cycle costs into consideration and allow for use of quality equipment designed to ensure long-term savings to the customer. Design-build without the "operate" component, he observed, is a cut-throat operation where equipment will be looked at for first dollar costs only.

What does this all mean to equipment manufacturers? From Doug Herbsts perspective, manufacturers must be prepared to respond in a very short time frame to submittal of bids and need to start building relationships with these new players in the field. The equipment has to be competitively priced and reliable, he observed, adding that performance and/or cost-savings guarantees will be an essential part of negotiations. "You must be able to structure guarantee packages to impress us and separate you from your competitor," he noted. An incentive for doing so, he added, is that if the equipment works in one location, there is a strong likelihood his company would employ its use in all the other facilities it operates.

"Manufacturers should be willing to offer greater guarantees to private contractors than they normally would offer to public entities," Eisenhardt opined. He explained that when a private contractor enters into an agreement with a city to manage a public works facility, that contractor is required to state that all equipment will be maintained in accordance with the manufacturers O&M manuals. If something breaks down and the private contractor must show proof that the equipment was maintained according to specs or be personally liable for all replacement costs. As a manufacturer, Eisenhardt concluded, one should feel more confident in offering long-term guarantees to that private operator knowing that the equipment will be well maintained.