Vladimiras Obrazcovas


Why do cities privatise? The top two reasons that the governments privatise are an internal effort to reduce costs (about 90% of the respondents) and external fiscal pressures (about 53%). In other words, governments privatise to save money. An identified infrastructure decay is another important reason; municipalities needed costly new or rehabilitated infrastructure and thus entered into public-private partnerships. Privatisation did provide the expected cost saving. This article describes some basic principles that guided the privatisation/competition effort: the key is competition - privatisation is only one of the possible outcomes; competition will be public and open to all qualified contestants; cross-functional evaluation terms will evaluate competitive responses; as far as practical, current employees will be encouraged to compete; accurate costaccounting information is needed to compare proposals; when in doubt about possible savings, let the marketplace speak; contracts have to contain performance standards and provide economic incentives for good performance. Also, they should be managed effectively. The author describes the practice of water supply privatisation contracts in the USA municipalities. This experience is extremely valuable for other countries.