After years of underinvestment and deferred maintenance have left water and sewer utility systems in dire need of attention in Wichita, Kansas, city leaders have issued a Request for Proposals (RFP), shopping for private sector interest in a public-private partnership (PPP; P3) to develop a long-term asset management plan.
Necessary investments in water and sewer systems between now and 2024 could total more than $1.6 billion, according to public works and utilities director Alan King, who believes that bringing in private sector expertise and incentives could help the city realise greater operating efficiencies and tap into new streams of capital unavailable through traditional procurement methods.
Rather than running the risk of committing to a long-term contract straight away without knowing the full implications of such a decision, the city of Wichita is taking measured steps into the world of P3s.
At a May 12 Wichita City Council meeting, Mayor Jeff Longwell approved a plan to issue an RFP calling for bids to develop an asset management plan over the course of one year that would provide a detailed cost estimate of long-term needs, with an eye toward the possibility of a long-term development, operations and maintenance contract (which, King said, could potentially have a duration of about 10 years).
A private-side benefit to this approach, as was rooted out in a conference call discussing the RFP, is that bidding firms and consortia will not be required to use the same teams for the first and second phase of the project, allowing greater flexibility.
Even if phase one reaches completion only to show that a fully public approach is more beneficial than a P3, King said that since development of an asset management plan needs to be completed, going forward with phase one makes good sense.
“The [only] downside is really that we find out that the economic impacts just aren't there but we've paid for world-class expertise on giving us those deliverables that we're going to need anyway,” King said.
On the whole, King told the council that he saw several benefits to employing a P3 even beyond risk sharing.
“There are certain constraints that we operate under. For example, our debt-to-coverage ratio, our bonded indebtedness – things we are required as covenants in our bonds to adhere to.”
Even with the possibility that the project partner selected to complete phase one of the project may not be invited back to complete phase two, the RFP has drawn international interest from developers, private equity players, engineering firms and advisers.
Amoung those who participated in a pre-proposal phone call were North American investment banker BMO Capital Markets , US-based public-private partnership specialists Corvias Solutions, Spanish urban waste services firm FCC Citizen Services, global tax audit and advisory firm KPMG, Canadian investment bank RBC Capital Markets, and Madison Avenue business and technology consultants West Monroe Partners.
Engineering firms and consultants such as AECOM, Brown & Caldwell, Burns & McDonnell, CH2M, MKEC, Parsons Brinkerhoff, Poe & Associates, Professional Engineering Consultants PA, Ruggles & Bohm, and TW Summit also dialed in to hear about the project. Others present included EPCOR and EPCOR Water, Schneider Electric, Suez Environment North America, United Water, and Veolia North America.
THE WATER PRESSURE IS ON
For these companies to participate, they will have to prove they could do better than the city can on its own.
“The city could complete $155 million in new projects through customary issuance of revenue bonds. Any proposal that cannot provide an amount of new projects greater than $155 million will be deemed as non-responsive and will not be evaluated or selected,” the RFP document said.
Proposals for development of an asset management plan are due to Wichita's public works and utilities department by Thursday, June 11. The program launch is tentatively set for mid-July.