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Author      Title/Abstract      


The Privatized Alternative Versus Public Financing "Is Low Bid the Lowest Price"
Author: Kenneth D. Fonda, Thomas R. Alspaugh, Bob Rude, Robert L. Martinez
Date:
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In 1991 the City of San Diego began pursuing privatization as an alternative to traditional City owned and operated facilities for beneficial use of byproducts of the biosolids process. A privatized cogeneration facility is currently under construction that will make use of methane gas produced by the anaerobic digestion process and gas collected from a nearby landfill to generate all of the Metro Biosolids Center's electrical and hot and chilled water needs. Since landfill gas test results indicated that additional gas would be available, the Privatizer proposed using this gas at another cogeneration facility located at the North City Water Reclamation Plant (NCWRP) approximately 6 miles away. In an attempt to reduce the cost of electricity, the City investigated financing and constructing the building and improvements using the City's lower interest rate with the Privatizer providing the equipment, facility design, installing the equipment and operating the facility. The result of this investigation was that the City could obtain a better value by having the facility completely financed, designed, built and operated by the Privatizer. Primary factors that influenced this decision were the loss of operating cost savings of approximately $50,000 per month, the increased design costs due to preparing the project for the open bidding process and the increased construction cost due to increased institutional controls. This paper will show how these factors came into play in the City's decision making process to Privatize this facility.