Outsourcing Public Services

All around the world, the management of a common and essential resource - water - is the responsibility of public authorities. But faced with increased urbanization and changes to the climate, it requires specialist skills and resources. For 150 years, Veolia Water has worked in partnership* with local authorities, a relationship based on mutual trust and on a clear and fair division of responsibilities.

*public private partnerships take the form of a contractual agreement best suited to the requirements of the local authorities. Operations & Maintenance (O&M),leasing including modernization investments, Design, Build, Operate (DBO), Build, Operate, Transfer (BOT), concessions etc.

Currently the proportion of the world's population whose water services are provided by private operating companies lies between 6 to 7%; while the proportion of the population who benefits from wastewater services operated or maintained by private operating companies is around 4%.

Outsourcing services does not entail transferring ownership of either the resources or the infrastructure. When we talk of outsourcing municipal services to a private operating company, we do not mean privatization. Moreover, it is the local authorities who set the price and service levels for the duration of the contract that they sign with the operating company.

THE OCDE (Organisation for Economic Co-operation and Development), which brings together thirty of the most developed countries in the world, confirms that this public-private partnership has been a success in its area: "Private operating companies have brought to the sector a level of technology, investment and expertise which the public services would not have attained due to a lack of resources. Whilst entrusting the private sector with the responsibility for supplying and treating water, ownership responsibility for the resource still remains in public hands. It is still the State who sets the standards and retains control of the service." ("Improving Water Management" policy brief by the OCDE).

In a few countries, such as Great Britain and Chile, water operating companies own the water service infrastructure (wastewater treatment plants etc.).

The responsibilities of the operating company are written into the fixed-term contract. It has autonomy over its organization and in the choice of resources needed to fulfill its contractual obligations.

The flexibility of the outsourcing services model (leasing, concessions etc) facilitates the use of technical expertise and necessary financial resources to achieve the goals that the operating company are set by the public authority.

In 2001 at the behest of the Moroccan government, who was concerned about the sustainable management of water, the cities of Tangiers and Tetouan entrusted the management of their water, wastewater and electricity services to Amendis, a subsidiary of Veolia Water.
There was a wide divergence in the requirements of the local community. On the one hand, there was the expansion of the water supply system for the benefit of the poorest communities. At the same time there was also rehabilitating the water quality of the beach water in the Bay of Tangiers and along the Tetouan Coast in order to improve the health conditions of the local community and for the better development of the region by giving a boost to the tourist industry.

The efficiency of outsourced public services has shown itself to be particularly suitable for developing countries. In some countries, due to geographical, climatic, environmental or financial constraints, the technical expertise and know how of private operating companies, such as Veolia Water, are in fact necessary in order to guarantee access to water and wastewater services for the greatest number of people.

Today Veolia Water is the main private operating company of these services in developing countries. It distributes drinking water to 5.5 million people in Africa and to almost 1.5 million people in South America.

As part of the contracts awarded to it, Veolia Water also transfers its know how and develops local talent. The company trains local employees, motivates them, provides them with the tools for their development and shares experiences in order to improve their long term performance.

Good management often means optimizing the efficiency of the water infrastructure and thus conserve the collective heritage.