Utility privatization benefits, substantial for utilities

Posted in: Infrastructure, Military, Water

As a municipality or privately-held utility, you should consider the benefits of adopting a public-private arrangement with a local military base to “share” your utility infrastructure. If you agree, I have suggestions on how to help you make that happen.

The military point of view

Utilities privatization is a U.S. government investment strategy to capitalize military bases’ utility infrastructure and bring the utility systems up to current industry standards. It offers military installations a long-term solution for sustaining important infrastructure systems and the services they provide to base personnel and operations.

What’s the current picture?

  • The Defense Logistics Agency has privatized more than 600 utilities’ systems for Army and Air Force, and has 600 more to go. The Navy has privatized several and is looking to re-engage in the process.
  • The contracts are substantial. They typically span 50 years where the municipality or privately-held utility owns and operates the utility.
  • Systems include water, wastewater, gas and electric. The systems are located all around the US. New to this target group are thermal and power systems.

The Army and Air Force’s mission does not include owning and maintaining utility systems. Privatizing removes this burden, allowing these critical infrastructure facilities to be maintained at higher standards by a local community or private utility.

Value for municipality

The value of this partnership if you are a municipality or privately-held utility can be substantial. For example, it will:

  • Add revenue from a stable ratepayer.
  • Distribute fixed costs across broader rate base.
  • Provide economic opportunity to recapitalize systems.
  • Reduce installations utility costs over the long-term.
  • Benefit the local economy by helping local government resist potential base closures.

Bottom line is that your existing ratepayers have a very good chance of benefiting.

Where do I begin?

To best prepare yourself to understand and evaluate these complex contracts, the first step is to find a consultant who is familiar with the process. You need a partner who has proven success winning these type of contracts.

The second step is to register on FedBizOps to be alerted when a privatization opportunity becomes available. Be on the lookout for “sources sought” notifications, which is the government’s means of gauging the interest of potential proposers. This same system is used to issue pre-solicitation notices, which update interested proposers on the status of pending requests for proposals.

The final step is to monitor DLA’s RFP release schedule. The release schedule hasn’t been updated for some time, but it could be at any moment as they reprioritize and run facilities through their assessment process.

Once you identify opportunities that might fit your utility’s portfolio, perform an initial evaluation of it. This should be completed well before the RFP is released. Quantify the financial opportunity, along with your utility’s strengths, weaknesses, opportunities and threats. If you don’t have the resources to complete this research, bringing your consultant on board at this stage will better prepare you for when the RFP is released.

Shannon Saramaa, PE

About the Author

Shannon Saramaa, P.E., is a member of Mead & Hunt’s water and wastewater team. A true entrepreneur with innovation in her heart, Shannon founded a municipal water and wastewater consulting firm that continues to serve numerous Colorado utility districts, cities, institutions and other water and wastewater providers. Shannon now goes forward in the same spirit as a member of Mead & Hunt.

Read more posts by Shannon Saramaa, PE

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