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S&WB opens bidding to all interested firms

Single bid endangers privatization effort

Thursday July 17, 2003

By Martha Carr
Staff writer

In an unexpected development that could doom the four-year drive to privatize the city's water and sewer systems, the Sewerage & Water Board voted Wednesday to abandon its effort if only one company bids on the roughly $1.5 billion contract.

To create the competition it seeks, the board also voted to open the bidding to all interested companies. As it stands now, USFilter is the only private company that has said it is seriously considering bidding on the 20-year proposal, while two other companies previously qualified to bid have shown little interest.

Both votes Wednesday were prompted by Mayor Ray Nagin, who serves as water board president.

"We have spent a lot of money on this process, and it is time to call a question," Nagin said. "I suggest if we get more than one bid, we move
forward. If we only get one bid, we shut it down."

Nagin also suggested that the board rethink whether it should allow a group of S&WB employees, headed by top water board managers, to bid against the private companies this time around. The mayor posed the question after the Managed Competition Employee Committee, or MCEC, told the board it needed $1.3 million to prepare a new bid.

So far, the water board has spent almost $4.5 million in emergency funds exploring privatization. About $1.3 million has gone to the employee group to hire consultants and lawyers. The rest has been paid to the board's own
consultants.

"I cannot, in good conscience, support another $1.3 million," Nagin said. "I, for one, am for getting an RFP (request for proposals) through the public process at a reasonable price. Let's end this. Let's put it to bed."

'Welcome competition'

The board's decision to open the bidding came just weeks after United Water said it probably won't vie for the contract a second time, mostly because of laws that require a public vote before any contract can be approved. The company's regional president, Troy Henry, is leaving the company this week and will not be replaced.

United Water and USFilter were the only private companies that submitted bids last year on a more limited version of the current privatization proposal, estimated even then to be one of the largest in the United States. The MCEC also submitted a proposal. All bids were rejected in October.

A third qualified bidder, OMI/Thames, sat out the first time and has not been active in the privatization drive, which was resurrected by Nagin after the board unexpectedly torpedoed the first round last fall. The joint venture has not ruled out bidding, however, according to officials from both companies. No other companies currently are qualified to submit bids.

USFilter said Wednesday it is still in a ready-to-act mode and welcomed the board's decision to open up the bidding process to other companies.

"We always welcome competition," spokesman Scott Edwards said. "Especially if it gives citizens more comfort in selecting a company."

Questions unanswered

Plenty of questions remain, however, such as: When will the board decide whether the employee group will be allowed to bid? What other companies could compete for the contract? What qualification process will companies be required to go through before being allowed to bid? And just how much more will all of this cost?

Janet Howard, president of the Bureau of Governmental Research, urged the board Wednesday to decide quickly whether the employee group will be allowed to bid. Much of the current draft bid proposal, which is in the midst of a 60-day public comment period, deals with the MCEC and would be irrelevant if it is not allowed to bid, she said. A series of public
meetings to get public comment begin Monday.

"This is a very important question for the public," Howard said. "Will they be accepted as a serious contender in the race? If not, it would be helpful to know that."

As for the number of companies that may join in the process, there are at least two or three more that could potentially bid, said Charles Rice, Nagin's acting chief administrative officer. Rice did not say who those companies might be. BGR, however, issued a list of 14 companies in 2001 that would have been qualified to submit bids under the criteria laid out at
the time.

Many of those may have changed hands since then, and Howard said she did not have an up-to-date list.

Then there is the issue of making sure any new potential bidders have the experience and financial resources to take on the job. During the last process, the board drafted a document called a request for qualifications, which outlined the information private companies had to provide before
being allowed to submit bids.

Howard said the board likely will have to draft another RFQ, further delaying the process.

Rice said the delay should amount to no more than 30 days. Nagin has said he hopes to approve a final bid document in September.

Board business

In other business:

The board once again put off approving a baseline cost analysis that says the agency spends $75 million a year to run the water and sewer systems as well as more than a dozen other departments included in the current draft bid proposal.

The analysis, prepared by Deloitte & Touche and top water board staffers, was commissioned to give members a clear idea of what the agency spends on services it is considering turning over to a private company. It will be critical in determining how much private bidders can save taxpayers.

Rice said the mayor is still analyzing the numbers, but so far does not have any major issues with the report. Howard said her review indicates that there are serious flaws in the way the baseline was calculated. The analysis also does not accurately reflect the services the board is considering
outsourcing, Howard said.

At Councilman Eddie Sapir's suggestion, the board agreed to begin a national search for a new water board director. Last month, the board fired Harold Gorman, who served as executive director for the past 17 years. Board members Penelope Randolph, Norma Grace and Councilman Marlin
Gusman will serve on the search committee. Acting Executive Director Marcia St. Martin is expected to be a candidate for the permanent post.

Absent from Wednesday's meeting were Bill Grace and Councilman Oliver Thomas.

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Martha Carr may be reached at mcarr@timespicayune.com or (504) 826-3306.