New Contract Provisions to Assure Timely Maintenance of Publicly Owned WTE Facilities

When the initial generation of U.S. municipal waste combustor (WTE) facilities was developed during the 1980s and early 1990s, the only tools that were included in the service agreement to deal with a contract operator that was not meeting the contract terms was either dispute resolution or default and termination. After 20 years of administering these service agreements, those two provisions have proved inadequate for publicly owned WTE facilities particularly as it relates to ongoing maintenance. Additional provisions have recently been developed and incorporated into the next generation of service agreements to address this need. Contract operators of publicly owned WTE facilities typically focus their attention on facility performance and less on long-term facility asset preservation, especially for the portions of the facility that are not critical to production. If a contract operator is meeting all of its performance guarantees, but is falling behind on the general upkeep of facility buildings and/or infrastructure, owners will likely not invest the time and money in dispute resolution to try to get those items repaired. Additionally, neglect of those items does not rise to the level that the operator can be defaulted and terminated. As a result, conditions generally deteriorate to the point where the relations between the owner and contract operator are adversely affected. If the deferral of maintenance continues until the end of the service agreement term, the public owner will be faced with added capital costs and/or increased operating costs under a new service agreement for items that he already paid the previous operator for. This paper describes the new contractual provisions that have been developed in the latest generation of service agreements aimed at helping public owners of WTE facilities resolve these types of problems at minimal cost. Instead of only having the “nuclear weapons” (e.g., formal—and expensive—dispute resolution or default and termination), a series of mechanisms have been developed that provide owners with some “small arms weapons” to assure that the timely and proper maintenance is performed on all aspects of the WTE facility, thereby assuring its long-term preservation. This paper also sets forth case studies of three WTE facilities in the Tampa Bay, Florida area where these latest contractual provisions are being implemented and the results to date.