Educating the masses

Published 24th November 2011

Insight from Christopher Gasson, GWI publisher

The voting down of two municipal outsourcing contracts in the US and Canada this week should not be seen as a victory for the anti-private water brigade. The fact that both projects would have been deliverable for less money using private sector expertise means that municipal leaders simply have to get smarter about educating their voters - and their councilmembers.

The outcome of last Saturday’s referendum in Abbotsford, British Columbia, means that the Can$291 million (US$279 million) design-build-finance-operate project for a 150,000m³/d water treatment plant at Stave Lake – which had been eligible for Can$62 million (US$59 million) of federal funding – will now not proceed as a public-private partnership. The project would cost as much as Can$328 million (US$315 million) under traditional procurement.

Similarly, the decision to reject SouthWest Water’s low bid to operate the new 37,850m³/d surface water treatment plant serving the city of Lodi in California will end up costing the city an extra $90,000 every year.

The success of the Canadian PPP programme has to some extent relied on the fact that the majority of projects have been in sectors such as healthcare, roads and transportation – all of which are controlled at the provincial level. The fact that water and wastewater are under municipal control means that not only are there relatively few precedents in terms of completed PPP projects, but also that the fate of each initiative ultimately lies in the hands of the voters.

Although the outcome of the referendum in Abbotsford is a setback for private water in Canada, it should not be seen as a reaction against private water per se. All projects – irrespective of the sector they fall into – will inevitably generate some form of opposition, and the challenge for municipalities is to get the voters on side to the extent that when the time comes to vote, the result is a fair decision taken by an educated electorate.

Dwelling on private water operators’ imperfect track records – which sowed the initial seeds of doubt in the minds of the authorities in Lodi – is one of the easiest ways to alienate voters. Fears over tariff increases and job security for unionised labourers are also grist to the municipal mill. It seems they do not see the bigger picture. Canada’s public sector pension funds are some of the biggest investors in global infrastructure. Rejecting bankable PPP projects now could come back to haunt dissenting voters in retirement.

This week's columnist is Ian Elkins, GWI's editor. Christopher Gasson is away.