Question

From United Water's perspective, what were the lessons learned from the Atlanta Water Project?

Answer 1

Lessons from the Atlanta Experience

What will ultimately happen remains to be seen and will play out in the coming months. The Atlanta deal will offer some valuable insight into how to structure and negotiate public-private partnerships.

1. Communication is essential. Sometimes a lack of understanding or agreement about performance expectations can lead to disputes and even termination-this certainly has been the case in Atlanta .Establishing a trust relationship requires structuring the right risks, rewards, benefits and opportunities early in the contract negotiation stage. Also, the more that the expectations of the contract are based on measurable outcomes and outputs (costs, quality, reliability), rather than inputs (like work levels, hours, personnel, etc. ) the less subjective everyone’s assessment will be and the less likely it is that conflicts will arise.
2. Oversight, reporting, and monitoring are critical. Few would disagree that accountability is important. Your contract is only as strong as the monitoring, reporting, and direct oversight that is built into it. Periodic reporting and monitoring are standard in privatization contracts. The higher the risk and uncertainty the stronger these requirements should be.
3. Clear and agreed upon expectations and definitions. Expectations and definitions need to be clearly established and understood by both parties. Open and consistent communication both before and during the contract period will help eliminate ambiguities. Both sides also need to do their due diligence in the status of the system, which should be agreed upon and confirmed with data.
4. Contracts should be value based. Saving money is important, but having a well-run system is more important. Thus, cities should avoid low bid or cost-plus contracts that provide little incentive for contractors to hold down their costs. The change orders submitted by UW have certainly been an issue in Atlanta .Even though the consultants involved in the contract argue that a best value contract was used the emphasis seemed to be placed on cost. Thus not accurately assessing the existing conditions and limitations of facilities has led to cost overruns.
5. Appropriate long-term business models need to be developed. Atlanta was the first city to take advantage of new legislation that allowed for long-term contracts. Long-term contracts were largely uncharted waters and neither the city nor the contractors knew exactly how to account for this. The contractors attempted to take the existing O&M model (typically 3-5 year contracts on individual plants) and simply extend them, both in terms of scope and length. The industry has started to recognize that it isn’t healthy to simply extend a boilerplate approach and is readjusting their approach to long-term contracting and starting from scratch.
6. Atlanta’s experience is not indicative of privatization. Data tells us that over 90 percent of cities that have privatized do not de-privatize. With the dire status of our nations water and wastewater infrastructure privatization will continue to be an important policy tool, as identified by both the EPA and GAO, in improving services, meeting tougher environmental standards, and lowering costs.