The New Engineer

Citation: This is article was published as Sharon Beder, 'The downside of corporatisation', Engineers Australia, September 1998, p. 62.

This is a final version submitted for publication. Minor editorial changes may have subsequently been made.

Sharon Beder's Other Publications

Following the water crisis in Sydney in August, questions are being asked about the corporatisation and privatisation of engineering organisations and facilities that provide essential public services. When giardia and cryptosporidium were found in their water supply, Sydney-siders discovered that the private company running the faulty filtration plant was not contractually obliged to test for and remove these organisms. The content of the contract was never made public.

How can we be sure that private contractors, working to meet contract conditions whilst making a profit, will take the same care as government entities committed to public service? The privatisation of government responsibility for engineering works could have the undesirable effect of shifting the delicate balance between cost and public welfare away from public welfare and we should be particularly wary of this. Engineers, whomever they are employed by, are already aware of the need to cut costs to the bone. They should not be put under any additional pressure to do this.

Corporatisation also raises the question of accountability. Premier Bob Carr was cited in the Sydney Morning Herald as saying that the obligation to provide safe drinking water was the Sydney Water Corporation's, not the government's.

Historically there has been a shift away from democratic control of and responsibility for Sydney's water and sewerage authority. Between 1888 and 1924 the parliamentary standing committee on public works which approved water and sewerage schemes held inquiries to which members of the public were invited to give evidence. When the Board became totally responsible for sewerage schemes in 1924, the public hearings ceased and the opportunity for local residents to have a say became limited to lobbying and gaining occasional media attention. Nevertheless there was still some democratic control of the authority at this time through its Board, which consisted of elected representatives (councillors) from various regions. These representatives had the power to authorise sewerage proposals.

In 1983 the state government moved to bring the Board more closely within its control with a government appointed general manager and board. It was argued that it was not necessary to have elected local government representatives on the board as had happened in the past as the benefits of such representation could be met by encouraging community participation in decisions and the systematic canvassing of community opinion. But rather than consulting with the public, except where it was required to under the provisions of environmental planning legislation, the Board chose to deal with the public through public relations and advertising campaigns.

Nevertheless as a government authority, the Board was still subject to political pressure and in 1989 when the sewage pollution of Sydney waters became a political embarrassment for the government, Camp, Dresser & McKee were hired to undertake an independent review of the Board's proposed solutions. Camp, Dresser & McKee was especially critical of the shift in Water Board's policy to 'commercialisation', that is maximising returns on investment. They argued that priority should be given to protection of public health and minimising impacts on the receiving water environment instead.

Corporatisation was a further step in the commercialisation process, which emphasised financial goals above those of community service and environmental protection. The Board, a public instrumentality whose major purpose was to provide a service to the community, was transformed into a commercial organisation selling products to customers, and paying dividends to the government.

It is this commercial orientation that has impeded the implementation of environmental reforms, such as those promised by the government in 1989. Rather than spending the money necessary to ensure safe drinking water and a clean environment, Sydney Water has had to pay the state government hundreds of millions of dollars each year in dividends. According to the Attorney General, the government has a right to expect a healthy rate of return on investment from the multi-billion dollar assets of Sydney Water. However, the return on investment that ratepayers are interested in is a safe, environmentally friendly service.

Corporatisation has reduced the public scrutiny that is necessary to protect the environment. What is more, it has deprived ratepayers of their rights as owners of this public authority by reducing them to the status of customers, whose only recourse is compensation when things go wrong.