Privatizing Municipal Water and Wastewater Systems

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Abstract
This article examines the argument that using design-build-operate (DBO) contracting instead of traditional approaches (such as contract operations) to expand the private sector role in the management of municipal water and wastewater systems will lead to more efficient investment and operational practices. Privatization research reviewed in this article suggests that capturing and maintaining the benefits of market competition on the cost of service under a DBO contract may be an elusive objective. For cities considering long-term DBO privatization, the research and case studies presented demonstrate the importance of investing in the necessary expertise to (a) plan and structure a procurement process that generates meaningful price competition, (b) develop contract terms that give the public owner input into and control over key design criteria for capital improvements, and (c) realistically assess the impact of changing circumstances on future costs to develop accurate long-term cost projections.

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