By William Flores
The traditional method of bringing water and wastewater solutions to a growing community or sprawling commercial or home development has been via municipal or county government funds to build the infrastructure of networks and systems. These networks and systems bring water and sewer services to new residents. In some instances, the municipal and county government entities may recover the initial capital expenditures from developers, though local government entities ultimately inherit the maintenance and upkeep of these networks and systems. Operation and maintenance (O&M) funds are generated by the collection of user fees, taxes, and in some cases issuance of bonds to maintain revenue streams healthy enough to cover their costs.
Municipal or county governments’ exclusive role of funding, building, maintaining, and operating water sector infrastructure began to change decades ago by the involvement of private investors. Shortage of capital funding, rising maintenance costs of facilities, and more stringent discharge and environmental standards have put strains on local governments. These monetary shortages helped the popularity of public-private partnerships (P3s) to convert a short-term financial burden to a long-term investment for sponsors. Like the emergence of P3s, privately owned conglomerates preceded the P3s popularity with many large U.S. and global metropolitan areas making use of their services. A more recent trend, however, has been the growth in the number of small, county- or regional-level privately owned utilities. Like their government utility counterparts, the small private utilities’ mission is to provide reliable customer service both in drinking water supplies and wastewater treatment systems that protect the public health and the environment. The added differential between these entities is the small privately held utilities must be financially sustainable and profitable to their investors.
There is certainly no difference between the small and large conglomerates’ for-profit-driven focus. But, unlike the large-conglomerate privately held utility firms, small water companies do not have the broader diversified market coverage and financial power to overcome weaker markets. Small, private utilities may cover one county or one rural area comprised of multiple townships or communities. To maintain a sustainable business and meet customers’ service expectations, they need to be mindful of their procurement methods. Value-based procurement is one method being implemented by these smaller entities.
Value-based procurement means more than just the lowest purchase price. It means the lowest cost of ownership, lowest operational cost, reliability, and the after-market purchase support that does not necessarily come at the most economical offering. Responsive and efficient procurement methods are particularly critical to smaller private utilities to ensure the timely purchase and delivery of specialized equipment goods and services. The optimization of purchasing power by these private utilities can have a direct link to the level of service and value they offer to both customers and investors. Like many towns and cities, private utilities have searched for ways to standardize with one, two, or three types of manufacturers for various economic and logistical reasons. Among the top reasons quoted for standardization practices are (1) commonality of parts and (2) familiarity of equipment with their O&M personnel who are challenged with labor shortages.
As community growth outpaces existing water and wastewater infrastructure, small private utilities are promoting their services to meet those needs. As the projected growth is established, these private utilities are not only standardizing on manufacturers, like some public entities do, but are also finding ways to standardize on equipment modules or capacities (i.e., flow capacity and loading size). In other words, as the small private utility expands into new commercial and home developments, they do not want to reinvent a water or wastewater system design for each new project. Smaller private utilities are seeking “modular” approach solutions and as manufacturers we need to support this trend. As manufacturers encounter the innovative modular approach, it will be important to recognize there will be numerous upfront iterations of design work as the private utility determines the optimum size of the modules to be used as the community development grows to its ultimate size. We must learn to accommodate to these streamlined methods and have offerings with pre-engineered treatment modules.
The drive to a modular approach brings added benefits to the top two reasons for standardization, previously mentioned herein. Most water and wastewater equipment manufacturers experience the need to custom engineer for each application. When contracts are issued, the custom engineering is formalized and a submittal-approval process begins. This can turn into a lengthy process as the complexity of the project rises. With the private utility standardization and modular approach, though the initial process can be lengthy in the determination of the size selection, future contracts could bypass the custom engineering and submittal efforts, ultimately saving time and resources for the benefit of all stakeholders.
Private investment in the water utility market is not new, and has been around since the 1980s. Though the public utilities outnumber private water companies, the emergence of small private utilities servicing small rural counties and communities is a growing trend. Both public and private water utilities follow a set of standards to provide reliable service to users to protect the public health and the environment, with the private utilities’ added goal of being a for-profit organization. With water companies’ equipment standardization practices, public and private entities have benefited due to the commonality of spare parts and familiarity of equipment with their O&M staff. As an added strategic move, small private utilities have found innovative ways to expand the standardization methods. The traditional customized engineered systems are being streamlined when looking to expand their services. Small private utilities are turning to manufacturers for modular system solutions with flow and sizing criteria that’s pre-selected for repeat purchases. With an already-established design that followed value-based procurement methods, the small private utilities can maximize their purchasing power to enable the utility to improve efficiency, shorten delivery of systems, increase competitiveness, and protect the public interest.
William Flores is Vice President, Municipal Systems at Smith & Loveless Inc., headquartered in Lenexa, KS. He is a member of the Board of Directors of the Water and Wastewater Equipment Manufacturers Association (WWEMA). WWEMA is the non-profit trade association representing water and wastewater technology manufacturers and related service providers. Together, we are working to shape the future of water and wastewater technology in the U.S. and around the world. For more information about WWEMA, go to www.wwema.org. Interested in becoming a WWEMA member? Contact WWEMA Executive Director Vanessa Leiby at firstname.lastname@example.org.