Outsourcing and Efficiency in the Management of Rural Water Services

Rural areas are finding it increasingly difficult to manage water services for householdpurposes. Local governments cannot afford the high investment andmaintenance costs theservice entails, leading many rural towns in Spain to outsource the service. Doing so enableslocal governments to balance their budgets and professionalise management in response to themore exacting requirements imposed by European water regulations. In Spain it is possible tooutsource 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 utilitiesin 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 moreefficient than public companies, no differences in efficiency can be observed between the threeforms ofmanagement when environmental variables are taken into consideration. Results showthat public-private partnerships are no less efficient than fully private or fully public companies.