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Water and Wastewater Contract Operations and DBO Contracts: the Good and the Bad

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It is well documented that communities entering into private operating arrangements for all or portions of their water or wastewater system have realized significant savings, perhaps up to as much as 25 to 35 percent below historic operating costs. In many cases, these savings have materialized with no appreciable change, or even an improvement in operations and maintenance. In some cases, however, there have been unfortunate surprises. Contract disputes have arisen over requests for changes in the scope of services, the facility(ies) not being maintained as well as promised or expected, environmental performance not meeting historic levels, or responsibility for activities not being clearly distinguished. As increasing numbers of communities consider the prospect of longer term operating contracts, enabled by changes to the Internal Revenue Procedures (IRS Rev. Proc. 97-13) they have discovered that the issues can become significantly more complex. Procurement and contracting arrangements should be structured to accommodate issues such as changing regulatory requirements, capital improvement implementation, and perhaps most importantly, preservation of the communities' assets, and continued ability to meet performance standards without the need for a major overhaul of facilities (at the community's cost) at the end of the contract term.
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Document Type: Research Article

Publication date: 2002-01-01

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