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Veolia Water America, LLC

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Tel: 317.917.3700

Myths About Public-Private Partnerships (PPPs)

Government agencies and political officials from all spectrums have endorsed the idea of combining the resources of the public and private sectors to manage their community's water system in public-private partnerships. These partnerships with water companies are enabling local officials to solve their most pressing water challenges. In fact, public-private partnerships are at work in more than 2,000 North American communities.

However, several special interest groups have challenged the public-private partnership concept and have published numerous articles and news releases with inaccurate or dated information, often based solely on false rumors or myths.

Myth: A private company will own our water.

In a public-private partnership, the public maintains ownership of all assets - and the public authority sets rates. Partnerships ensure public control and ownership.

Myth: A private company will set our rates.

Although often misunderstood by critics who confuse regulated utilities with non-regulated utilities, rate-setting authority remains the responsibility of the municipal government (city, town, regional authority, etc.).A partnership is not a regulated utility, where a private-sector company owns assets and seeks rate increases. In sharp contrast, under all public-private partnerships, the public partner:

  • Owns the assets
  • Controls the management of the assets
  • Establishes user rates.

In short, a public-private partnership is not privatization.

Myth: A private company will only drive costs up - so it can make a profit!

To be clear, water service companies are comprised of tens of thousands of workers that would take issue with this statement. Many have devoted their life's work to providing solutions to the world's environmental problems and issues of water usage. This includes environmental scientists, asset managers, environmental and civil engineers, safety managers and economists. Many proudly consider themselves environmentalists.

Thousands of North American communities served by public-private partnerships have experienced cost reductions of 10 to 30 percent. For instance, Oklahoma City has saved more than $150 million through a partnership.

According to a 2009 Public Works Financing survey*, less than one-tenth of one percent of private contracts reverted to municipal management in 2009. We consider this the best testament of the stability of costs and the provision of good quality water and service.

*Public Works Financing. March 2009, Volume 236. www.PWFinance.net.

Myth: Privatization will cost municipal employees their jobs.

In a public-private partnership, staffing levels can be governed by the municipal entity as expressed by the partnership agreement. Staff reductions are generally achieved by transfers or attrition. Still, it is true that partnerships are typically more efficient in their management of water and wastewater assets.

Myth: Environmental compliance will erode.

Quite the contrary, private-sector companies are often hired specifically to address a municipality's past compliance issues. Veolia Water North America's compliance with the Clean Water Act exceeds 99 percent.

This number is even more remarkable given that Veolia's overall compliance score includes historically non-compliant facilities previously managed by the public sector, facilities that Veolia Water was brought in to fix. The majority of our facilities are 100% compliant.

Myth: Companies pad the bottom line by cutting costs and laying off employees.

Cities typically determine staffing level requirements. And companies want to take advantage of employees' local knowledge. The majority of Veolia Water employees are former public-sector employees who are local to their individual communities.

Myth: When given the opportunity, municipal employees prove the most efficient.

Employee groups cannot provide financial guarantees. They cannot assume liability for operations and performance. They cannot finance the significant capital investments required by many projects. Nor do employee groups have the experience that comes from adopting a wide range of technologies and management approaches in numerous conditions and settings.

However, a partnership is not about whether public or private employees are "better" or "harder working." Partnerships are about a management approach that provides efficiencies, improved service, life-cycle costing, asset management practices, efficient technologies and other tools that deliver value.

Myth: Companies only care about profit, so the public should manage public resources.

Private-sector profit does not come at the public's expense. Typically, lower costs and service improvements are provided regardless of whether a private-sector company generates a profit. Savings for municipalities range from 10 to 30 percent in most cases. Further, partnerships enable more local control and flexibility to meet the community's needs.

Again, many of our scientists, technologists, engineers and operations experts choose to work in the private sector as a means to improve our environment.

Myth: The city will be left with a bucket of bolts

Contracts can easily be written so that assets are maintained and preserved. The municipal customer conducts "check ups" to ensure proper functioning of assets. Finally, the public-sector customer always controls spending, to help preserve the life of assets.

Myth: A new company just won't understand our system like we do.

Companies specializing in water are the same companies that drive innovation in the water industry's technology and operations. Municipal employees are readily welcomed into the private-sector "family," as their local, public experience is blended with private-sector expertise. The majority of Veolia Water employees are former public-sector employees who are local to their individual communities.

What are the benefits of public-private partnerships? The benefits are numerous:

  • Clean, quality water and improved customer service
  • Tremendous costs savings and rate stability
  • Environmental compliance

Employee opportunities can include better pay, improved training, professional growth and development, and opportunities in other markets or industries, depending on an employee's skill sets and interests.

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