TU Water RFP Expert: a water privatization fiasco

This comes from a mid – 2000s tanPublic Citizen document. I know a little of the inside ball on Atlanta, as I have worked for years with a consulting engineer down south who was fired for saying critical things about the United Water proposal and pointing out that rates for water would have to go way up in order to make the deal work. I also know and have worked with one of the main attorneys for Atlanta, who took a pass on working on this particular project, as did several piping and equipment contractors whom we know. A good choice on their part. What Public Citizen knew when it published this item was just the stuff on the surface, but it has just enough twists and turns to be interesting and reveals enough to be instructive.

Atlanta, Georgia, USA_____________________________

In January 2003, after ongoing contention between the city of Atlanta and United Water, city officials decided to terminate the largest water privatization contract in the USA. In 1998, the city of Atlanta signed a 20-year, $428 million contract with United Water, a subsidiary of the French corporate conglomerate, Suez. The industry held great expectations that Atlanta would serve as the “model” for other communities and open the door for private water companies to do business in other major U.S. cities. Instead, the fiasco in Atlanta serves as a model for what to avoid.

United Water vastly overstated the amount of money that it could save the city and vastly underestimated the amount of work needed to maintain and operate the system. Almost immediately after signing the contract, United Water started hitting up the city for more money, and tried to add $80 million to the contract. The city refused. United Water came back with charges of $80 million for additional expenditures. Atlanta’s Water Commissioner refused to approve the payments, but in a bizarre twist, letters authorizing the payments showed up with the signature of former Mayor Bill Campbell. Campbell denied he had ever signed the documents. The city attorney ruled the authorizations invalid, and United Water eventually backed away from pressing the claim.

United Water was also improperly billing the city for work it didn’t do. The company billed an extra $37.6 million for additional service authorizations, capital repair and maintenance costs, and the city paid nearly $16 million of those costs. Pay was withheld for the rest because the work either wasn’t complete or hadn’t even been started. Routine maintenance was billed as “capital repairs” and much-needed infra- structure rehabilitation was neglected.

Desperate to cut costs, United Water more than halved the number of employees, from more than 700 to just over 300. Still the much-vaunted savings from privatization didn’t materialize, and the promise that a consumer rate hike could be averted through savings turned out to be empty. Sewer bill rates went up every year that United Water had the contract – rising, on average, about 12% annually. Chris New, the Deputy Water Commissioner in Atlanta said, “My biggest concern is a lot of people have lost confidence in the water itself. Over the past year, we’ve had so many boil water advisories and discolored water around the system.”

Very soon trust in the company eroded to the point that the city spent $1 million to hire inspectors to verify United Water’s reports. City officials concluded it was time to end the relationship. Now Atlanta faces the daunting task of taking back its water system and performing the needed upgrades that were neglected during United Water’s tenure.”

Source: “Water Privatization Fiascos: Broken Promises and Public Turmoil.” Public Citizen, 2003 <http://www.citizen.org/documents/privatizationfiascos.pdf>

© Copyright 2012 Tanna K, All rights Reserved. Written For: Tinytown Unleashed
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  1 comment for “TU Water RFP Expert: a water privatization fiasco

  1. Mary A. Parsons
    March 12, 2012 at 5:39 pm

    this is a good example why the RFP should be scrutinized.

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