PRIVATE OPERATIONS AND MAINTENANCE CONTRACT FOR THE SPRINGFIELD WASTEWATER SYSTEM RESULTS IN AN INNOVATIVE RISK ALLOCATION FOR RESIDUALS MANAGEMENT

In August of 2000, the Springfield Water and Sewer Commission (Commission) of Springfield, Massachusetts and Springfield Water, L.C.C. (a subsidiary of US Water) (Company) executed a 20-year Service Contract for the Commission's wastewater treatment system (System). The Company's scope of services includes: operation and maintenance; delivery of capital improvements; repairs and replacements; and residuals management. This paper discusses both the procurement process used to select the Company determined to be the most advantageous to the Commission and the key provisions of the resulting 162 million Service Contract. The key focus of the paper is on residuals management and the risk allocations aspects of residuals management responsibilities. Private contract management of the System is expected to provide the Commission and its regional customers with long-term, cost effective, and reliable wastewater treatment system services, delivered in compliance with all applicable environmental standards and guaranteed by an experienced and creditworthy Company.The paper describes 1) the residuals management practices employed by the Commission and the residual management requirements placed on the proposers in the Commission's request for proposals; 2) the strategies proposed for residuals management by the four private bidders; and 3) the benefits afforded to the commission by the most advantageous bidder.Because of the inherent interdependence of changes in law and the market for sludge products, the Commission and Company agreed to share the combination of change in law and market risks. This paper describes this unique risk sharing provision of the contract. The Company also agreed to bear all costs associated with the risks of obtaining permits to build the sludge dryer, the performance of the sludge dryer, the blending of dried sludge with wet sludge for use in the compost plant, the sizing of the compost plant, the current regulatory requirements for sludge products, delays caused by or failure to perform by the compost contractor, and disputes with the compost contractor.