Privatization efforts in government owned water and
wastewater systems have expanded rapidly in recent years
as operating costs, technical requirements, and capital
outlays have escalated. Maximum economic welfare can
be achieved only if competitive elements are introduced.
Feasible possibilities include franchise-bidding, franchise
bidding with modified rate regulation, and contracting
out. The government agency itself can become a
competitive bidder. Contracting out has become the
major mode of injecting competition and, if managed
well, can be an effective device to reduce costs and
improve the quality of service.