Economic Sustainability of DBO Water Based on Wastewater Projects in the U.S.: Three Case Studies

Abstract

As public utility owners face increased budget constraints and greater expectations, alternative project delivery methods will increasingly be used to fast track projects, reduce costs, promote innovation, and ensure proper performance for water and wastewater facilities. The goals of public utility owners and U.S. federal tax regulations suggest why design-build-operate (DBO) projects have been selected over other procurement processes. The research reported in this paper contributes to the body of knowledge and benefits industry practitioners, by identifying tax regulations and best practices that when jointly considered improve the project delivery selection process, while enhancing risk-mitigation efforts on DBO water and wastewater projects. A procurement selection process using multiple-criteria decision and financial risk analyses is presented to select the most economically sustainable delivery method given each project’s characteristics. A present value analysis establishes a range of values that takes into account variables that will potentially impact lifecycle costs. The selection of the procurement process and the contractor is based on best value where financial risks to the concerned government and contractor are mitigated through dynamic service fee agreements in accordance with current U.S. federal tax regulations.