Water and Wastewater PPPs: Challenges and Solutions

Challenges

Substantial procurement costs. High procurement costs and high uncertainty about the availability of technology require a contractual framework with shorter procurement times that fosters innovation.

Uncertainty. The condition of assets in existing facilities may result in an increase in project costs.

Scale. The size of the project may not allow for efficient use of private finance.

Politics. Water and wastewater are often seen as falling squarely under the public sector domain. Public employees may have deep concerns for their welfare under the new management.

Solutions

Thinking creatively about the best financing and delivery model can help overcome some of the challenges in this sector. For example, governments can reduce the length of the procurement process and attract companies with stronger financial and operational capacity by using a bundling approach. This saves procurement time and effort as the public sector is no longer required to contract with different private partners in delivering individual small-scale projects.

A key challenge in this sector is that the consumer is generally not exposed to the full cost of water. Moving to full cost pricing of water utilities before moving to a PPP approach can help to avoid rate shocks that may derail the project.