Friday, August 16, 2013

A Third Way of Doing the Regina WWTP Project

Alternative Analysis of the Regina Wastewater Treatment Project

By Daniel Huang

Executive Summary

The author suggests having a public debate at the Council on TV before holding the referendum. Simply voting DBB or DBFOM may not be a good idea.

There are not many notable successful examples of DBFOM (note that Deloitte also admits that there are few examples of DBFOMs in the water/wastewater sector) in the water sector in Canada. From the Deloitte Report, one present project is the Wastewater Treatment Plant Upgrade at the capital cost of 15 million (which is insignificant) in the Town of Taber, AB. 

If the government does not lose money but profit from the Regina project, the taxpayers will be better off than if they are required to pay more if there are unexpected cost overruns. The difference of the interest, the extra money lost from leasing, the lack of transparency and the bundling of P3 Canada makes us to reconsider the choice of DBFOM.

The author suggests outsourcing the project for the designing and building stage and leasing the plant for the operating and maintenance stage. It is actually contracting the right to operate the utility to a private party, while ownership of public utilities is still in the government’s hands. Under normal circumstances, the assignee is generated through open competitive bidding other than one to one negotiation. The main objective of leasing is to reduce the operating costs of the government and consumer usage charges as leasing is granted to those who meet the technical and financial requirements and who can provide the most services at the present rate. Public bidding increases competition pressures on businesses, and regular tenders on natural monopoly utilities concession form pre-contract competition. The example of German water companies’ management (such as outsourcing and making shares available to the public) can also be learned, so that our perspective can be broadened.

Private management can be more cost saving, efficient, accountable and even more beneficial to consumers. However, private management is not the aim but a means to encourage competition, improve the quality, increase service access and give customers more choices.

For supervision, a committee consisted mostly of elected members from independent organizations (which may include government officials in charge of different related departments) may be necessary to supervise the project and make decisions on some important issues. 

What should also be noted is how much of the old plant can be utilized and how the workers in the present plant will be restructured to both meet the upgrade’s need and stabilize the employees. Also, an ecologically sound, environmentally friendly and socially beneficial and accountable project would be a priority.

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