Why Contract Management?

There are several alternatives for the small water system faced with the ever-increasing burden of new regulations. One possibility is to turn over ownership of the system to a government agency, such as a Public Utility District or the public works department of a local government jurisdiction. Another possibility is to sell the system to a private utility company.

There are some problems with relinquishing ownership of your water system. The first, and largest, is the loss of control. When the community no longer owns the system, they can no longer make decisions as to how compliance will be achieved, and the costs will be passed on to the system customers.

Some people think that, when the community no longer owns the system, the costs of regulation will be reduced. This does not happen. The only source of revenue for the system is the people served by the system. No matter who owns the system, one way or another, the costs of compliance will come out of the system user's pockets. It is far preferable for those users to have a say in how that money is used.

A second problem is the quality of service. Yes, users can complain to the Department of Health, or to the local health district, but this is an indirect method of addressing problems. Some of the problems may not be regulated, so the regulatory agency may have no power to force the owner to fix a problem. Conversely, the controlling entity may decide to provide a quality of service in excess of what is required, and for which the community does not want to pay. If the community owns the system, the community can decide the quality of service desired once the basic regulatory requirements have been met.

The third problem is control of costs. If the system is owned by a third party, the users must support all of that party's costs, direct and indirect, with little or no control over those costs. Government organizations are particularly notorious in this regard, building huge administrative costs with little or no motivation towards efficiency.

All of these problems are avoided if the community (or even an individual) retains ownership of the system and contracts management to a certified management organization. The community maintains control of the system, while the contracted manager provides the professional expertise necessary to ensure that the system stays in compliance with the regulations. The community decides how to comply with regulations, and what the quality of service will be. If the manager's costs get out of control, or the quality of service declines, the management organization can be fired and a new one retained. You cannot fire an owner.

We actively advise small water systems to retain ownership of their system and contract for professional management services. Retaining ownership is the only way to ensure that the vital asset a water system represents is maintained and operated to the satisfaction of the community. The costs of retaining ownership and hiring a water system management company will likely be less than the costs of supporting a government agency or private utility company.