New Orleans water Board takes criticism
but still moves to privatize

Friday April 11, 2003

By Gordon Russell

Staff writer

The New Orleans Sewerage & Water Board inched slightly closer Thursday toward contracting with a private company to manage New Orleans' water and sewer operations by approving the release of a draft of a request for bids.

But the board's often raucous four-hour meeting also served as a reminder that questions about privatization remain in the minds of many civic groups, residents and board members.

Among the more pointed queries that arose Thursday: Why does the draft limit the "managed competition" for the contract to three private firms and the employees' group that were eligible to participate in last year's bid?

And why hasn't the board looked at Atlanta's privatization debacle and tried to learn from that city's mistakes? And who decided to expand the scope of services covered in the new request for bids?

The board met with an ostensibly narrow purpose: to vote on releasing a draft of the bid request for public comment. Instead, board members critiqued the bid proposal in some detail and voted to incorporate into it every change suggested by board members during the meeting.  Like the document the board issued two years ago, the draft seeks proposals to manage the S&WB's water and sewerage systems, while leaving drainage and power-generation systems under board control.

Unlike the earlier request, the new draft would put much of the oversight of capital projects into the contractor's hands. In addition, the draft envisions the contractor's managing a host of ancillary departments, including payroll, human resources, risk management and purchasing.

Whereas the S&WB spends roughly $50 million annually to provide the services covered under the previous bid request, the board spends roughly $80 million a year on the services outlined in the new draft, according to Tom Ingoldsby of Sullivan & Worcester, the board's lead consultant. Of the board's 1,183 employees, 892 would work for the contractor.

Board member Henry Dillon wondered aloud who told Ingoldsby to expand the scope of services to be outsourced. Ingoldsby replied that he and the other consultants were recommending the change, based on input received from the potential bidders and conversations with board members.

Dillon, the board's president pro tem, said he wasn't consulted and suggested the board shouldn't release the bid request until there was more agreement about its contents. "If we can't get together and decide what we want to do, how can we expect the public to do that?" Dillon asked. "It seems to me unreasonable to release something that we are not in  sync with."

In the end, the board went with board member Sidney Evans' motion to approve the draft after it is amended with the objections raised by board members Thursday. But how that will be accomplished is unclear, because some of the suggestions seemed to contradict the bid request directly.

For instance, Barbara Lamont said the board should outsource just the specific areas it handles poorly, including legal services, fiscal management, internal controls and information technology, instead of hiring a contractor to manage water and sewer operations in general.

Other suggestions seemed easier to incorporate. Board member Penelope Randolph, for instance, advocated removing two areas from private control: legal services and recruitment of employees who ensure the contractor is meeting contract terms. After the board's vote, a few audience members offered a taste of the objections the board is likely to hear at future meetings.

Linda Walker of the League of Women Voters said the month long period the board envisions for public comment should be doubled, at minimum.

West Bank resident Betty LeBlanc blasted the board for continuing to talk about privatization, saying that if the process results in any savings it will be due to layoffs of S&WB workers.

And Bureau of Governmental Research Director Janet Howard listed a litany of gripes with the new bid request. She questioned how much real competition the board was generating by limiting the bids to the three companies and the employees' group. Only two of the companies actually submitted bids last time, and it's not clear how many will bid this time.

Howard also questioned whether the board or its consultants had done a detailed review of what went wrong with privatization in Atlanta. In January, that city canceled its 4-year-old contract with United Water, one of the three companies eligible for the New Orleans contract, because the company hadn't realized the savings it promised. The firm said Atlanta's water system was in worse shape than it realized.

Howard said some of the debates the board engaged in Thursday, including a discussion of who is charged with enforcing the contract, touched on tricky questions that eventually arose in Atlanta.  "This could be an economic disaster for New Orleans without the proper oversight," Howard said. "The oversight on something like this has to be so intense; otherwise, we could get taken to the cleaners."

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Staff writer Martha Carr contributed to this story. Gordon Russell can be reached at grussell@timespicayune.com or (504) 826-3347.