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Outsourcing and Efficiency in the Management of Rural Water Services

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Abstract

Rural areas are finding it increasingly difficult to manage water services for household purposes. Local governments cannot afford the high investment and maintenance costs the service entails, leading many rural towns in Spain to outsource the service. Doing so enables local governments to balance their budgets and professionalise management in response to the more exacting requirements imposed by European water regulations. In Spain it is possible to outsource the management of the water service to a public, private or public-private company. This research applies Data Envelopment Analysis (DEA) to a sample of 80 rural water utilities in Southern Spain in order to compare the efficiency of these three forms of management. Despite initially finding that private companies and public-private partnerships are more efficient than public companies, no differences in efficiency can be observed between the three forms of management when environmental variables are taken into consideration. Results show that public-private partnerships are no less efficient than fully private or fully public companies.

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Notes

  1. Town councils can only privatise the management of the water service, because the infrastructures still belong to the public administration. The firm that holds the concession is responsible for the running of the service and the maintenance of the supply networks during the time stipulated in the contract. At the end of the contract, the local government must decide once again how the service is to be managed.

  2. Further detail of the regulatory aspects of the procedure followed by the Public Administration to contract externally can be found in the Public Contracts Act 30/2007 and Royal Decree 1098/2001, which approves the General Regulations implementing the Public Administration Contracts Act.

  3. These data were obtained from information available in 2010 from the website of the General Secretariat of Water of Andalusia Regional Ministry of Environment. Please contact the corresponding author for the list of the water utility managers in each Andalusian town in 2009.

  4. The service coverage rate is 100 % in all the towns in the sample used in this research.

  5. The review of the literature by De Witte and Marques (2010, p.198) shows the set of inputs and outputs employed by studies that have analysed the efficiency of water utilities.

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Acknowledgments

The authors gratefully acknowledge the highly constructive comments and suggestions from two anonymous referees. It is also acknowledged the financial support from the following Spanish institutions: Instituto de Estudios Fiscales from the Ministerio de Hacienda y Administraciones Públicas, the Consejería de Economía, Innovación, Ciencia y Empleo from the Junta de Andalucía (P11-SEJ-7039) and the Ministerio de Economía y Competitividad (ECO2009-08824/ECON and ECO2011-30260-C03-01).

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Authors and Affiliations

  1. Department of Applied Economics and Institute of Water Research, University Of Granada, Granada, Spain

    Francisco González-Gómez & Miguel A. García‐Rubio

  2. Department of Economics, University of Jaén, Jaén, Spain

    Francisco Alcalá-Olid & M. Isabel Ortega-Díaz

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  1. Francisco González-Gómez
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  2. Miguel A. García‐Rubio
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  3. Francisco Alcalá-Olid
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  4. M. Isabel Ortega-Díaz
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Correspondence to Francisco González-Gómez.

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González-Gómez, F., García‐Rubio, M.A., Alcalá-Olid, F. et al. Outsourcing and Efficiency in the Management of Rural Water Services. Water Resour Manage 27, 731–747 (2013). https://doi.org/10.1007/s11269-012-0212-0

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