For Subscribers

Private Partners

Can the privatization trend help your company grow?

By Joshua Kurlantzick

Opinions expressed by Entrepreneur contributors are their own.

For decades, essential services like drinking water, sewagecollection and education have been the job of state and localgovernments. But over the past decade, the private sector hasincreasingly taken on some of these tasks. With state and localgovernments desperately short of revenue, the privatization ofpublic services is likely to increase at a faster pace. In somesectors, small businesses that get in on privatization early canreap the rewards.

Drinking-water and wastewater management are two of the mainservices being privatized. Many cities' water and wastewatersystems are in dire straits, with pipes dating back 100 years; areport by the EPA estimates that the U.S. water system needs morethan $140 billion in repairs. Yet America's cities can'tafford these upgrades. Privatization allows city governments tohave a contractor do the upgrade and manage the systems, often forfar less, since private firms are given incentive-laden contractsthat push them to work more cheaply, says Clay Landry, a principalat WestWater Research LLC, a water economics research firm inLaramie, Wyoming. "The cities and states are in fiscal crisis,and the Bush administration's answer to them is to look to theprivate sector to handle services, so we'll see more ofthis," Landry says. What's more, as water scarcityincreasingly becomes an issue, privatization will become even moreattractive, since handing water management to a private firm thatcan set market-oriented rates helps manage scarcity.

Continue reading this article — and all of our other premium content with Entrepreneur+

For just $5, you can get unlimited access to all Entrepreneur’s premium content. You’ll find:

  • Digestible insight on how to be a better entrepreneur and leader
  • Lessons for starting and growing a business from our expert network of CEOs and founders
  • Meaningful content to help you make sharper decisions
  • Business and life hacks to help you stay ahead of the curve

Related Topics

Editor's Pick

The Dark Side of Pay Transparency — And What to Do If You Find Out You're Being Underpaid
Thinking of a Career Change? Here Are 4 Steps You Can Take to Get There.
A Founder Who Bootstrapped Her Jewelry Business With Just $1,000 Now Sees 7-Figure Revenue Because She Knew Something About Her Customers Nobody Else Did
Everything You Need to Know About Franchise Law