Development Bank Seeks to Revitalize O&M in Asia

Sep 21, 2022
 by Seven Seas News Team

The failure of water infrastructure often is caused by a lack of maintenance. A new effort in Asia includes the cost of operations and maintenance in the financing of new water infrastructure.

Standardized contract templates may encourage private positions in the water sector

The Asian Development Bank (ADB) has formed a working group to address Asian water infrastructure neglect by developing a standardized operations and maintenance (O&M) contract template for the region.

ADB has provided $1.7 billion in financing annually for Asian infrastructure projects. A concern now is that those water entities frequently lack the knowledge, experience, and resources to operate the systems ADB finances.

A lack of commitment to O&M often leads to infrastructure failures that cause public health crises, environmental degradation, and damage to public trust. Some call it the “build-neglect-rebuild” cycle, and ADB hopes standardized contracting and the resources of specialized companies can help.

ADB increasingly is including O&M in projects it finances, alone or bundled with civil works. Once the new standardized template was completed, ADB moved to use it for pilot projects in India and Timor-Leste.

Privatization Offers Advantages

While public water system problems are widespread in Asia, privatization has lagged. Yet the advantages of private involvement are proving hard to ignore. Vietnam, for instance, recently rolled out a standardized public-private partnership (P3) legal framework.

As an alternative to P3 build-operate-transfer contracts, the ADB template addresses perennial sticking points and offers the expertise, organizational capabilities, and resources of specialized water companies.

Companies are profiting most from engineering, procurement, and construction and from design-build, with little profit from operations. Yet they welcome the ADB template because those contracts prevent lowball competition from inadequate O&M companies.

Each Nation Has Different Needs

China’s need for private involvement is driven largely by ambitious 5-year targets for water quality in rural areas that lack skilled labor forces. In India, 100 private companies are active in the O&M space and often are low-cost. Southeast Asian countries that lack financial resources need infrastructure so acutely that they frequently skip O&M in their long-term planning and suffer for it later.

While some reticence about privatization persists, standardized, performance-based contracting allows public entities to bundle long-term O&M with water infrastructure. Seven Seas Water Group offers a full range of financing options, with Water-as-a-Service® (WaaS®) P3 projects front and center. With standardized P3 laws coming into force in the United States, Seven Seas has demonstrated the ability of performance-based WaaS® contracts to align interests.

For example, the citizens of Alice, Texas, benefited from a Seven Seas desalination plant that not only eliminated upfront capital expenditure, but also delivered water at a lower rate than they were paying before. Contact Seven Seas to learn how to off-load both risk and long-term O&M in your region.

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