PWF’s fifth annual survey of the U.S. water/wastewater outsourcing industry shows a softening in the core municipal contract operations market during calendar 2000. Moreover, relatively small gains were reported in design-build fees and industrial utility services last year, as compared to large increases for both of these market segments in 1999.

The 17 largest firms competing to sell utility operations, maintenance, design-build and asset management services in the U.S. reported outsourcing revenues of $1.68 billion in 2000, 16% higher than in 1999. That compares to revenue growth of 74% and 26% in the two previous years (see p.3).

Among the three market leaders, Operations Management International Inc. grew its business most aggressively in 2000. OMI reported a year-to-year revenue gain of 3 1.6% overall; a 22% climb in its core municipal O&M business; and a 53% jump in design-build fees as part of design-build-operate projects. Employee-owned OMI also won the 2000 Baldrige Award.

In the industrial market, 11 firms reported almost $550 million in 2000 revenue—$ 180 million of that as design-build fees. Contract operations were provided by those firms for 396 different industrial clients at 418 facilities with an aggregate design flow of 830 mgd.

These data and other information presented in the following pages are derived from detailed responses to a six-page questionnaire sent by PWF in January to the largest companies in the unregnlated contract services business. All firms responded and all responses were reviewed by PWF for consistency and reporting accuracy.

PWF’s 1999 survey data (PWF 3/00 p.1) were skewed by US Filter’s first-time reporting of its industrial O&M revenue and design-build fees, plus its inclusion of $150 million from a 622-mgd municipal O&M contract in Puerto Rico. Vivendi, US Filter’s parent, moved that low-margin contract to its Spanish subsidiary last year. PWF’s revenue and design flow data have been restated from 1996 onward to account for the shift.

Reflecting the lowered municipal base and comparatively modest gains reported by US Filter for its industrial revenues, PWF’s 2000 data set shows relatively even growth from 1999 across all market segments:

• Government O&M, up 14% or $115 million, to $917 million;

• Industrial O&M, up 17.5% or $55 million, to $369 million;

• Government design-build (as part of DBO contracts), up 22% or $39 million, to $217 million;

• Industrial design-build (as part of bundled DBO contracts), up 14%or $22 million, to $180 million in 2000.

The market share for private contract operation of municipal utility systems in the U.S. is still less
than 5% of the $35 billion spent by U.S. governments (excluding capital) for water and waste-water services. Moreover, the municipal portion of the O&M market isn’t likely to shrink noticeably until large cities opt for private contract operations and stewardship of water-cycle services, which hasn’t happened yet.

Together, the 17 firms surveyed said they were paid over $917 million in 2000 for operating 2,273 publicly owned facilities with an aggregate design flow of over 6.9 billion gal per day. Those service fees came from 1,882 different municipal, state and federal government clients.