PRIVATIZATION/Partnership allows Key West to meet demands

While the number of water and wastewater utilities using contract operators has skyrocketed in recent years, one of the most progressive examples of privatization is found at a utility that has outsourced its operations for more than a decade.

Instead of simply turning over operations to its OM&M partner, Key West, Fla., uses its contract operator as a substitute for city staff. Doing so allows the city to maintain detailed cost and activity control while obtaining operational expertise that would not otherwise be available on staff.

Each year, Key West draws more than 1.4 million tourists, who are attracted to its tropical climate, island culture and colorful history. To meet the consequent wastewater service demands, the city owns and operates a 10-mgd activated sludge extended aeration treatment facility.

The facility has been operated by Englewood, Colo.-based OMI since it opened in 1989. At that time, the city’s utilities department opted for contract operations primarily to access expertise it did not have. (The operations contract has since been broadened to include maintenance of the wastewater and stormwater collection systems.)

Under the approach used in Key West, the city compensates the operations firm for its direct costs, including salaries, benefits, utilities, supplies and all other approved expenses, and the operator submits a detailed annual budget for city approval. (The operator gets a management fee of 16.6 percent of direct costs.)

All staff members remain employees of the operator, but the city retains control of the budget and operating mission. City staff members perform periodic audits of all cost line items.

The operator is motivated to hold the line on the budget to obtain city approval, while disagreements about who is responsible for the costs of a certain repair or expenditure are minimized. Under an incentive program, the operator shares any cost savings with the city.