US Filter of New London Seeks 2 Automatic Extensions of 5-Year Contract; Spurred by Labor

By Larry Chertoff

New London, CT, January 26, 2001 --

By a majority vote, the  Water & Water Pollution Control Authority of New London, CT voted to approve two automatic extensions of U.S. Filter Operating Services' five year operating contract for the City's water and wastewater systems. The contract, awarded in 1997, to Filter's predecessor company, PSG, is nearing the end of its fourth year. The contract to operate the 10 MGD wastewater, and 15 MGD water system is valued at slightly under $4 million/year.

A vote of the Authority, taken at an earlier meeting, was split, 4 in favor, 3 against, the company's request for two 5-year automatic renewals and a fee renegotiation of the final year of the original contract. One dissenting director, Bob Kotecki, is the recently retired president of the municipal water/wastewater operating workers of New London, a group opposed to the original agreement. 

Tried Early Termination

In 2000, US Filter requested termination of the contract at the end of the third contract year. That request for early termination, permitted by either party on 90 days notice, was quickly withdrawn. Although no official reason for the termination request was given by US Filter, it is widely assumed in the industry that the hotly contested project was won by PSG at a price insufficient to assure profit although the company did gain market share. New London, apparently pleased with the company's performance, agreed to negotiate the automatic extensions and and increase the fees paid for the fifth year of the original agreement.

Labor Support Citied

Virtually all of the Authority's 34 operating personnel signed a petition to requesting the extensions of the agreement. This is all the more impressive from a labor force that had strongly opposed the original public-private partnership with PSG.

Industry Advisors Question Procedure

At a regularly scheduled meeting of the New London Water & Water Pollution Authority, Janaury 25, 2001, two industry advisors spoke to the Authority about the virtues of a competitively bid new long-term contract. Frank Mangravite, President of Public Works Management, a consulting firm to municipalities retained by nearby Stonington, CT, suggested to the Board that new IRS rulings allow for 20 year contracts. Mr. Mangravite suggested that a single long-term contract would allow for added savings through a better return on invested capital of the operator. David Singer, an attorney associated with the Elias Group, a New York law firm specializing in public-private partnerships suggested that the City could obtain stronger guarantees if it opened the process to competitive bidding.

None of the speakers suggested that US Filter was not performing to the satisfaction of its agreement or to the expectations of the City. They did suggest that industry practices have changed to reflect new, more liberal federal regulations favoring long-term agreements for contract operations. The speakers advised the Authority to investigate alternative procurement procedures learning from recent experiences in other cities. Both speakers agreed to send the Authority additional supporting material.

DISCLAIMER

The following organizations cited in the above article are members of the Water Industry Council, sponser of this Water Industry News on-line publication:

US Filter Operating Services
Elias Group
Public Works Management

                Please email Larry Chertoff with comments or corrections.