Presentation is loading. Please wait.

Presentation is loading. Please wait.

Mayor’s Guide to Water and Wastewater Partnership Service Agreements: Terms and Conditions Patrick Cairo Executive Vice President U.S. Conference of Mayors.

Similar presentations


Presentation on theme: "Mayor’s Guide to Water and Wastewater Partnership Service Agreements: Terms and Conditions Patrick Cairo Executive Vice President U.S. Conference of Mayors."— Presentation transcript:

1 Mayor’s Guide to Water and Wastewater Partnership Service Agreements: Terms and Conditions Patrick Cairo Executive Vice President U.S. Conference of Mayors 2005 Urban Water Summit Albuquerque, NM September 30 – October 1, 2005

2 Oct IMayor’s Guide to W&WW Agreements2 Document Sponsors and Contributors – USCOM Urban Water Council Urban Water Council – Co-Chairs: Douglas H. Palmer, Mayor of Trenton, NJ David G. Wallace, Mayor of Sugar Land, Texas Richard Anderson, Guide Editor American Water DLA Piper Rudnick Gray Cary Hawkins Delafield & Wood LLP Poseidon R. W. Beck, Inc. United Water Veolia Water North America External Reviewers City of Indianapolis Alternative Resources, Inc. CH2H-Hill U.S. CONFERENCE OF MAYORS URBAN WATER COUNCIL

3 Oct IMayor’s Guide to W&WW Agreements3 Table of Content Section I Introduction Section II Scope of Work Section III Managing Risk Allocation and Performance Criteria Section IV Contract Term and Duration Section V Contract Termination Section VI Bonding and Insurance Section VII City Responsibilities to Perform Contract Management During the Contract Term Section VIII Method and Timing of Payments to the Private Partner and Related Issues Section IX Employment Issues

4 Oct IMayor’s Guide to W&WW Agreements4 Growth and Advantages of PPP  >1800 Successful PPP (>90% renewed but some ended early)  Terms Year Contracts (From 3-5 Year Contracts post-IRS )  Alternative Management, Modernization and Financing Approaches of Service Companies  Strong Performance Orientation  Trend towards Incentives for Customer Service levels, Taste and Odor (DW), Odor Control (WW), Reduced Nutrient Loadings from Non-Point Sources and Advanced Pollutant Removals  Asset Management  Financing limited but growing  Legislation to remove Volume Cap in PAB’s

5 Oct IMayor’s Guide to W&WW Agreements5 PPP Requires Cooperation  Both Parties have to work effectively to insure success  Public must be kept Involved  Unbalanced Risk Sharing may ultimately doom a Project  Process should be Fair and Transparent

6 Oct IMayor’s Guide to W&WW Agreements6 Fair and Transparent Process  Evaluation and Selection Criteria in RFP  Best Value versus Best Price --- (limit BAFO’s)  Opportunity for Due Diligence  Reliability of Information (Underground Infrastructure)  Initial Capital Improvements  Define Expected Performance Guarantees and Penalties  Provide Incentives for Enhancements  Avoid Detailed Prescriptions  Exclude Technologies not Wanted or State Technology Preferences (DBO’s)  Provide Draft Service Agreement or Contract Summary/Principles

7 Oct IMayor’s Guide to W&WW Agreements7 Some Major Contract Issues 1. Approvals 2. Subsurface Conditions / “As Is” Risk 3. Performance Standards and Fees 4. Termination and Damages 5. Uncontrollable Circumstances 6. Employment

8 Oct IMayor’s Guide to W&WW Agreements8 Approvals Local Government (Muni.)  Involvement in Approval Process Critical  Obtain Enabling Legislation  Take Active Role in Permit Approval Service Company  Permitting for Specific Technology (ex. Sludge Dryer)

9 Oct IMayor’s Guide to W&WW Agreements9 Subsurface Conditions / “As Is” Risk  Shared Risk  Service Co. rightfully reluctant to take risk for Facilities not previously operated and which are difficult to inspect  Muni. should provide information about above and below ground Facilities (guarantee accuracy ?)  Solution: Above Ground Facilities treated as an “As Is” Risk and Subsurface Facilities as a Shared Risk  Subsurface Risk Sharing options: Muni. Subsurface Improvements and Vendor Grace Period Service Co. Work Metric Approach Muni. Assumes Subsurface Risk Mechanism for revisiting the state of the assets after initial operation

10 Oct IMayor’s Guide to W&WW Agreements10 Performance Standards and Fees Guarantee for meeting all regulatory obligations ( Penalties for Non-Compliance) But :  If System Assets is not Capable of Compliance ---  Muni. should be responsible for funding Capital Improvements and should bear Risk of Non-Compliance until Improvements made  Influent Water Quantity and Quality “Window”

11 Oct IMayor’s Guide to W&WW Agreements11 Performance Standards and Fees (cont) Enhanced Standards ---  Opportunity to achieve Socially Desirable Environmental and Aesthetic Results  Ex. Customer Service levels, Taste and Odor (DW), Odor Control (WW), Reduced Nutrient Loadings from Non-Point Sources and Advanced Pollutant Removals  Financial Incentives for Achievement (IRS allows 20% Fee Incentives) Avoid “Scope Creep” (define clearly performance expectations) Annual Fee adjustments based on “basket of Indices” (ex. CPI, ECI …)

12 Oct IMayor’s Guide to W&WW Agreements12 Termination and Damages  Termination for Cause  Termination for Convenience (Bilateral)  Termination for Uncontrollable Circumstances (ex. Hurricanes)  Liquidated Damages and Limitations on Damages

13 Oct IMayor’s Guide to W&WW Agreements13 Termination for Cause  Most Non-Performance Situations can be handled through Payment of Damages and do not become a basis for Termination unless they are repeated and persistent  Service Co. payment of any Fines and reasonable Liquidated Damages  Basis for Immediate Termination ---  Abandonment of Operations or Failure to meet minimum operating standards over longer period

14 Oct IMayor’s Guide to W&WW Agreements14 Termination for Cause (cont)  Service Cos. often express concern that offering Unlimited Liability is too great a Risk  Trend Is to cap Liability  Investment of Private Funds, through Equity Contribution or Financing, requires more extended Rights to Cure and more Limited Termination Rights

15 Oct IMayor’s Guide to W&WW Agreements15 Termination for Convenience Municipality Option  Change in City Policy and Strategy  Compensation to Service Company --- recover mobilization cost and capital investment Service Company Option  Change in PPP Objectives --- ex. Municipality stops Asset Renewal Investments  Compensation to Municipality --- cost of finding new operator

16 Oct IMayor’s Guide to W&WW Agreements16 Uncontrollable Circumstances 1.Limits of Definition 2.Performance and Price Relief 3.Termination

17 Oct IMayor’s Guide to W&WW Agreements17 Uncontrollable Circumstances ---- Limits of Definition  Fair and Reasonable Definition with List of Items that are not UC will go long way to creating Long-Term Partnership  Definition often General with list of Specific Excluded Items  Typically include Acts of God, Changes in Law, Certain Labor Shortages, Conditions Outside Facility Design Capacity and Capability, and Discovery of Hazardous Substances  Change in Law – Suggests Vendor Responsible for Current Laws and Laws Parties know will be in place

18 Oct IMayor’s Guide to W&WW Agreements18 Uncontrollable Circumstances --- Performance and Price Relief  Suggests Consideration of Materiality – Service Co. responsible for defined portion of risk and Muni. for remainder  Generally both Price and Performance Relief  Influent/Raw Water Quality – if Influent/Raw Water exceeds Design Capabilities, then Performance and Price Relief, but only Price Relief Otherwise  Performance excused for reasonable amount of time and if Service Co. mitigates situation, where possible  Equitable Adjustment to Base Fee appropriate

19 Oct IMayor’s Guide to W&WW Agreements19 Uncontrollable Circumstances --- Termination  If UC Cost exceeds certain amount ---  Service Co. paid Termination Fee Including reasonable Lost Profit Component  Since with UC neither Party at fault it may be appropriate, in Longer-term Contracts, to share burden and reduce Lost Profit Service Co. might otherwise have received

20 Oct IMayor’s Guide to W&WW Agreements20 Employment  Guide lists several positive examples in Employment Area  PPP’s have been very flexible about existing employees  Service Cos. usually agree to make employment offers to existing employees, subject to employee drug screening  Agreements with Unions often signed


Download ppt "Mayor’s Guide to Water and Wastewater Partnership Service Agreements: Terms and Conditions Patrick Cairo Executive Vice President U.S. Conference of Mayors."

Similar presentations


Ads by Google