This is an excerpt taken from an ENR article. Click here to read the article by Peter Bailey, Vice President for Alternative Project Delivery, PLW Waterworks in its entirety on the ENR site.
During the past two decades, we have seen tremendous change in the way water infrastructure projects are delivered. Fifteen years ago, design-bid-build was by far the dominant delivery mechanism. Today, alternate project delivery has increased significantly and, for large projects, is becoming the delivery vehicle of choice.
In the next 15 years, we will be challenged to find more efficient and creative ways to finance and implement projects. Currently, public water utility owners face unprecedented challenges in funding the work to keep their infrastructure current.
Alternate project delivery, privatization and public-private partnerships are logical solutions. However, the challenges in implementing these types of solutions require the industry to evolve. For example, many older cities in the northeastern U.S. have a fundamental math problem to solve. They are losing population and revenue base, yet their maintenance costs are increasing due to the age of their infrastructure, with some systems up to 100 years old. Privatization and consolidation can supply funding to repair or replace infrastructure while improving service and efficiency for customers.
Privatizing, however, is not simple. In fact, water infrastructure is one of the most difficult utilities to privatize because it is composed of an integrated and complicated system, with thousands of underground connections, spread over a very wide footprint.
Follow the Money
There is money available. Wall Street firms want to invest in water and private water companies are showing that economy of scale can make water systems a solid investment. Companies like United Water, American Water and Veolia are good examples of models that work.
The water industry must embrace different solutions, much like the transportation industry has done with toll roads. Taxpayers spend billions of dollars to access the convenience of toll roads; they will do the same for their water systems once they understand the value proposition. As an industry, we need to move beyond the status quo to find collaborative, joint solutions that are more efficient.
Engineers, contractors, financiers and developers must evolve together by promoting collaboration, not disaggregation. We have much to learn from our European counterparts as we, as a nation, move toward joint ownership models that bring public and private resources together successfully.
Risk that Leads to Reward
Embracing new paradigms for the water utility market isn’t easy. Consider, for example, that there are over 52,000 municipally owned water utilities in America, compared to just around 3,000 mostly private gas and electricity providers. Most municipalities cannot benefit from economy of scale if they continue to operate independently. They need to consolidate to be more efficient. The private sector can help them initiate scalable change. As an industry, we all need to work together to meet the challenges ahead of us in the next 15 years.