Strategic Business Plans for Water Supply and Sewerage

Model
Build, own operate
and transfer (BOOT)
Delegated
management
Concession
(franchise)
Main points
• Contractor builds, owns and operates for a long term (typically 25 years).
• Most of the risk is transferred to the contractor.
• Optional transfer to Council at the end of period.
• Council retains ownership.
• Contractor takes over operations and management
• Contractor is responsible for asset management and makes
recommendations for capital works.
• Fair degree of risk transfer.
• Council retains ownership.
• Contractor takes over operations and management (including customer
service and billing)
• Contractor is responsible for asset management and capital works.
• Payment is a single tariff, increasing with inflation.
• High degree of risk transfer.
At this stage, Council has identified the following advantages and disadvantages of private
sector involvement:
Advantages Council can transfer some of the risk to the private sector operator, thus
increasing the certainty of the cost of service to customers. The extent of
the risk transfer is dependent on the selected option.
Private sector finances some of the investment.
Cost reduction from efficiency gains.
Disadvantages Council would lose some control over operation.
Asset base may degrade through insufficient maintenance, as operator
may have a short-term view.
Cost of service may rise, because private sector operator would have to
cover the cost of risk and allow for profit and tax.
Some of the models have a long term commitment and cannot be easily
reversed if unsuccessful.
Corporatisation
In 1995 the Council of Australian Governments (COAG) ratified the National Competition Policy,
with one of the aims being to “encourage efficient public sector service provision by exposing
public business functions to competition, when appropriate.” The application of this policy to
Local Government has a number of implications for Council as set out in the publication; “NSW
Government Policy Statement on the Application of National Competition Policy to Local
Government.”
May 2012
HydroScience Consulting
Coffs Harbour City Council Strategic Business Plan Page 33