VA SYD (an acronym for “Southern Water”) is a company formed January 1st, 2008 in Malmö, as a statutory joint authority75. It has the goal of promoting trans-municipal cooperation in order to make water services operate more efficiently and increase their levels of quality, also thanks to savings of scale that could allow restructuring the organisation of service provision and the skills of its personnel.
74 See also:
http://www.sigtuna.se/upload/Kommun%20&%20Politik/Demokrati/Citizen%2Oinfluence%20inte%
20municipality%20of%20Sigtuna.pdf (accessed 2 October 2009)
75 See www.vasyd.se
The idea of “crossing borders” has been an engine for rethinking the old water department of Malmö city since 1994, when a tender was held, with the purpose of restructuring the water services even by outsourcing them to the private market sector.
Today VA SYD is a “hybrid structure” which delivers a broad range of services (supply of drinking water, sewage treatment and/or waste disposal) to Malmö and Lund municipalities, through the work of 295 employees and focusing on developing techniques and processes which can “contribute to a more sustainable society”. It directly supplies households and businesses, in the City of Malmö and the Municipality of Lund, with its own quality-assured drinking water, and a large quantity purchased by another joint-company called Sydvatten76. The latter was created in the ‘80s to import drinking water through a long tunnel (Bolmentunneln, planned in 1975) starting in the lake of Bolmen, to supply 14 cities77 in one of the few Swedish regions which has no abundance of water.VA SYD also treats sewage from Malmö, Lund, Burlöv, Vellinge and parts of Lomma, Staffanstorp and Svedala, and manages the collection and disposal of domestic waste in the Skåne region’s main city (Malmö) and in Burlöv.
At present, given that the cooperation across the municipal borders of Malmö and Lund seems to guarantee “a flexible use of the water supply and sewerage system” and positive outputs in terms of service quality, the “hybrid structure” is ready to open its doors to new partners coming from other territories in Skåne Region or elsewhere.
New headquarters are situated at Hans Michelsensgatan 2 in Malmö, facing the harbour and a future development residential area. Beyond the operational and maintenance units in Malmö, others are located at the Bulltofta water treatment works, the Sjölunda sewage treatment plant in Norra Hamnen, the sewage treatment plant in Klagshamn, and the Turbinen pumping station on Malmöhusvägen. In Lund, there are operational units at the Källby sewage treatment plant and at eight other smaller sewage treatment plants in various parts of the municipality.
A peculiar birth-history
In organisation theory the concept of “hybrid” normally describes an organisation “that uses resources and/or governance structures from more than one existing organisation”
(Borys et. alii, 1989), while in transaction cost theory the concept describes a mix of governance structures (Willliamson, 1996) which play an intermediary role between the poles of market and hierarchy, having its own characteristics and often representing a unique solution to the governance of transactions (Thomasson, 2009).
VA SYD plays with the concept of “hybrid” since its peculiar foundation history, which started several years before its formal creation: in 1994.
76 See: http://www.sydvatten.se
77 The cities are the following: Bjuv, Burlöv, Eslöv, Helsingborg, Höganäs, Kävlinge, Landskrona, Lomma, Lund, Malmö, Staffanstorp, Svalöv, Svedala (endast Bara), Vellinge.
In the early 1990s, in fact, Sweden witnessed a massive wave of privatisations and outsourcing of public services and facilities, which was linked to the belief that
“municipal, regional and state departments where too close to politics to work properly and only drawing them away from political institutions could give back rationality and efficiency to the public service”78. So, in 1994, the Malmö local government decided to open a tender – controlled by the Water Municipal Department – thinking that the private sector could provide the solution for modernising water supply and sewer management.
The municipal unit was unusually motivated to participate in the tender: the main goal was probably to demonstrate the cost/benefit advantages of the private alternatives, but someone in the administration stressed a secondary aim too, which was to check if imagining a new, more efficient structure than the pre-existing one was still possible.
At the end of one-and-half years which separated the call from the publication of the winners’ list, the result appeared very satisfactory: 7 consortia (with all the major European-based enterprises coming from France, UK and other countries) presented their proposals and that of the former Water Municipal Department of Malmö got the second place after the project submitted by Anglia. The latter consortium had kept its financial proposal low (even in view of a short 5 years concession period), probably due to the ambition of a further regional expansion after setting up operations in the capital of Skåne.
The unexpected results led the local authorities to rethink their strategy, under the pressure of the opposition which strongly criticised the “selling-out” of the public service to a private foreign investor.
The elections of 1995 being too close to the tendering, the contract with Anglia was not signed, and the new socialist government (the former opposition, which today is still running the City Hall) concluded that the Water City Department was efficient and asked its main technicians to shape a new “customer-oriented structure”79retaining a positive element of Anglia’s proposal, which was the “regional approach”.
The Anglia’s ambition of turning the Malmö Water Services into a showcase for expansion across the municipal borders, became an engine and a sort of inspiration for the team in charge of forging a new public company to modernise water and wastewater service provision. Even though the civil servants of the Water Department were coveted by the private companies which were interested in hiring expert professionals knowing the area and the service, the participation in the tender was understood as an important and unique professional challenge. It could valorise territorial competence and the stratification of expert knowledge created in several years of management, by directing it towards new goals and via the use of new tools.
Some of the employees that could act as “historic memory” of the Department were directly involved in the change, especially in the assets area. An important role in this shift was also played by trade-unions, especially that of municipal employees without a higher
78 Interview with Bo Rutberg (SKL), 28/09/2009.
79 Interview with Henrik Aspegren, 21/09/2009
diploma, which gave floor to a participatory common battle for demonstrating the potential efficiency of a restructured public entity and strongly fought against the perspective of outsourcing.
It has to be stressed that the 1994 tender represented a very important reference for the Swedish community all over the country, and especially in the Skåne region, where several municipalities were waiting for the final results of the Malmö experiment, before deciding how to behave in their territory. The anomalous result thus represented a milestone for many other communities and local authorities in Sweden, impacting the national public debate between politicians and citizens, and partially contributing to a substantial decline of the pro-privatisation movement, at least in the water and wastewater domain.
The “natural monopoly” of water by the State was subsequently recognised by the reforms to the Water Act which followed. The controversial results of the experience of privatisations in UK played a pivotal role in promoting this shift in Sweden. The main focus of public debate in Sweden was the “public control of water supply and services management” rather than the issue of public ownership. The latter has been stated clearly in recent normative reforms, being substantially recognised as a central value also by the liberal/conservative parties, which had played a major role in the previous privatisation and outsourcing wave.
The challenges of a new structure after the tendering
“Innovation of management methods through scaling-up” is the motto which oriented the first years of the Water Department organisation after 1995, the main doubt being how to reorganise the assets, whose investment value (stratified in time) was not easy to evaluate in order to create the new company. In fact, while the 1994 tendering was leaving the assets out of the contract with the winner (which was supposed to deal only with upkeeping/maintenance and service management) the new public company was imagined as a body which could also re-absorb the capillary pipe network and treatment plants. A second difficulty came from the average age of many employees, who were close to retirement, thus risking jeopardising a good skilled start. The new company was called VA-Verket Malmö (something like Water Agency of Malmö), and became VA SYD in 2008 when Lund City also joined it.
The internal governance structure.
In the first year and half, Lund wanted to play its own game to demonstrate that it was deciding independently from the Skåne major city. Maybe its politicians had a sort of “teenager crisis”, and wanted to remark their autonomy in front of the
“parental figure” of the bigger Malmö agglomeration, showing they have their own visions and ideas on how to run the service. For 2010 their choices seem far more similar to those of Malmö board, but I think it was a necessary first stage.
They had an understandable and normal fear of being phagocyted by the major town, castrating their independent capacity of decision-making. In metropolitan
areas it often occurs…I think now joint-efforts in decision-making can be less tense…Now there is no more need of imposing their new presence through differentiating positions; they do not feel anymore new entries, and may better listen to the experience of whom has reflected for longer time on the relation between fixed costs and consumption-proportional tariffs […]. What is more interesting is that VA SYD’s structure allowed this necessary process. It allowed reaching a meeting point… Well, this structure was exactly conceived to balance autonomy and synergies at the same time, thus obtaining efficacy and efficiency through a gradual process of jointing energies (interview with a VA SYD employee, 21/09/09)
The idea of creating a “hybrid company” which could potentially operate at a supra-municipal level came through observing the higher difficulties of management in rural areas nearby Malmö, and the need to respect the political differences of all the cities which could potentially converge in the new body.
The chosen model was gradually shaped in order to maintain the ownership of assets within the different municipal hands, while sharing the management of services, and creating a political body which could bring together representatives of the different municipal councils in order to take the major decisions on management. So, the idea of a
“limited company” which could risk to be sold in the occurrence of a future political change was discarded.
The basic idea was not only that every municipality maintained the property of assets, but also that it could feel independent while deciding on issues of strictly political nature, as – for example – tariffs. The “model for a new body” here illustrated was shaped ten years after the 1994 tendering and it proved to be of high interest both for Malmö and Lund. It provided a variable geometry of governance bodies ready to welcome new partners in every phase of possible future growth, safeguarding their decisional autonomy in several fields of decision making as well as the municipal ownership of assets. The
“Kommunforbund” – a joint authority model which acts in Sweden as a “merger” of municipalities towards developing together some specific and clearly defined functions – was a main source of inspiration for the new hybrid company which was to be created. As in that model, local assemblies take independent decisions on all the issues of their specific competences, and in the “common fields” they suggest their positions and recommendations to the General Board, which transmits them (adding its technical point of view) to the General Assembly, the supreme decisional body where all decisions of common interest will be ratified. In this model, if one city decides to step back from the commonly-created new company, it is free to do it, being that it still owns its assets and could reorganise is management structures alone. The pivotal idea of such a type of hybrid organisation is to guarantee the existence of a general common budget which refers to a number of “separate economies”, one for every partner city.
An example comes to light when reading the differences in water consumption between Lund and Malmö, which are included in the 2008 VASYD Report, and are even summarized in English to facilitate the understanding for foreign citizens (see annex 1). As the figures point out, in 2008 Lund had a higher consumption rate: 181.4 lit person/day vs.
178.4 lit in Malmö. Here the daily consumption has been constantly reduced in the last 6 years. So the idea of Lund political administrators for 2009 was to implant an “educational policy”, maintaining low the fixed fee which composes each tariff, and increasing the
“consumption fee”, in order to stimulate water savings80.
In Malmö the policy is the opposite, and is more linked to the idea of “equalisation of burdens”: so, the fixed fee is higher and varies between 49.5% (for apartments) and 62.1%
(for detached family houses), while for industry it is 32.2% of the total bill price (see annexes 2-4). There is the widespread perception that – in their first year at VA SYD - Lund administrators could have passed through an “inferiority syndrome” fearing that the capital could phagocyte their autonomous policy-making visions (as stated in the intense quotation which opens this paragraph). But now, the Lund political agenda seems open to change, and the joint-reflexions (passed through a necessary stage of differentiation) could make tariff strategies converge. In fact, several interviews indicate that the experience of VA SYD technicians (especially those coming from Malmö’s longer experience in creating the new management structure) was fully understood by Lund politicians who integrate the Assembly, as far as it comes to the risk that a fare-policy centred on consumption-proportionality could not fully cover the fixed costs that the water and wastewater management yearly requires. This means that in the future the growth of a highly virtuous consumer-behaviour by Lund inhabitants could jeopardise the feasibility of a balanced management between incomes and costs. One figure illustrates this risk (see annex 1), when observing that the water-dispersion rate due to leaking in Malmö is constantly growing (even if consumption went down in the last 6 years) and the future need to substitute some parts of the pipe network could require investments not matching with tariff-incomes, being that leaking is not calculated by consumption water-counter meters.
80 As explained in annex 2-4, in Lund the fixed fee varies a lot: is 38,2% for the family-houses typologies and 8,5% for apartment buildings with around 15 dwellings and 200 m3 of consumption per year. For industry it is even lower (2,8%).
Fig. 1 – VA SYD decisional structure
Is worth underlining that in January 2008, when VA SYD was officially created, this governance scheme was already working, but in the most simple way, having only Malmö City as a partner, so that the internal structure of the Board and the Assembly was almost monolithic in terms of territorial belonging, and was not differing so much from the traditional departmental service structure of the past. Soon, the entrance of Lund City into VA SYD allowed developing the real potential of the last two institutions, making the political and technical representatives of both cities converge inside of them.
The open model chosen for VA SYD’s general governance is a welcoming structure for ongoing enrichments, not only in terms of partner cities, but also for what is related to the policy sectors devolved to the company, which also show a “variable geometry”. For example, Lund has not delegated the domestic waste collection to VA SYD, while Malmö considers this delegation an important added value, being that the level of problems of this sector appears to be more relevant in the relationship with customers/inhabitants, and thus requires a joint-effort to innovate and modernise the service in order to increase efficiency and quality standards.
In the general organigram of VA SYD, the “Board” is conceived as a “self-learning space”
which gathers every Monday (adding meetings whenever needed): there, all the department directors are represented. The area of “external affairs” mainly deals with the relations with other municipalities, especially those whose wastewater is treated by VA SYD, but which are not member of the joint-company.
Fig. 2 – VA SYD internal organigram
The working of vertical subsidiarity
Soon, VA SYD had to create tight relations first of all with another joint-company – called Sydvatten - which was built in the late seventies in order to supply water for the Southern Sweden (where water had always been more scarce) through a tunnel linking the Malmö metropolitan area with a lake to the north. Currently this no-profit public company – with a complex internal election system – collects almost 90% of drinking water distributed by VA SYD, while 10% is provided locally. Together, Lund and Malmö detain more than 50% of Sydvatten, so that the present chairman of Sydvatten is the same person who chairs VA SYD, in order to guarantee a continuity of interests between the two bodies. But, the sharing of a board is more a praxis than a fixed rule, and in the future there could be different persons chairing the two companies, so that it is important to build tighter formal governance relations, taking into consideration that VA SYD much depends on Sydvatten supplies.
As far as the relations with the Skåne Region are concerned, to which both Malmö and Lund belong, they always have been very cooperative. Relating to water issues, the Regional Government acts as a State arm, with tasks of controlling the conformity to laws and monitoring the quality of water and service performances, especially concentrating its focus on treatment plants. From the VA SYD perspective, the Region does not have a
“proactive” role, even if its politicians and technicians think the other way around.
However, no conflicts have been developing during the last years.
VA SYD is an active partner of the Swedish Water and Wastewater Association (Svensktvatten) and pays fees proportionally to the habitants of its member cities. Even if VA SYD does not have ambitions to expand outside the regional area, the company seems aware of the important role it can play as an example at the national level. That is why VA SYD technicians frequently accept to explain their company’s experience to other cities, even though the “self-marketing” approach seems limited. Especially abroad, VA SYD mainly appears on invitations, having neither a special foreign cooperation policy sector nor a highly flexible budget devoted to cover “foreign relations”. It must, in fact, be
underlined that - provided the Swedish regulation on water and wastewater services – VA SYD’s target area is limited to each directly administered local territory, so that an
“international diplomacy” (as is the case for other companies in Europe) is neither suitable nor encouraged.
Transnational cooperation with Southern countries (which can concern the water sector) appears to be mainly centralised in the special SIDA national agency and does not directly involve specialists from the scarce personnel of the local water sector. Four years ago, a
“Swedish Water Development Agency” existed, where the biggest cities (Stockholm, Malmö and Gothenburg) where working together with SIDA on cooperation abroad. It was stopped when the World Bank and SIDA asked to be competitive on the international market, and the commitment was evaluated by the three cities as “a loss of time, requiring too much energy which could distract us from our main local tasks”81. Nevertheless, VA SYD is part of some transnational projects (for example with South Africa or Beijing City) where its experience in running water is under discussion as a good example of quality management.
Horizontal subsidiarity: the relationship with organised society
VA SYD – as it previously was the case with the Malmö Water Department – has a long tradition of cooperation with several universities, which constitute a “ring” for networking activities, within the framework of national and European-level projects Mainly, relationships refer to environmental engineering and research groups on economics (especially with the Universities of Malmö, Lund and the Danish Technical University), while fields like communications and sociological analysis are barely contemplated.
“Storm water management” constitutes an important area for cooperation in which VA SYD has a remarkable curriculum comprising two important books (also published in English) with policy-making suggestions, both edited by Peter Stahre, one of the most prominent historic memories of VA SYD, recently passed away. They are “Sustainability in urban storm drainage” (SvenskVatten, 2006) and “Blue-green fingerprints in the city of Malmö, Sweden” (VA SYD/Malmö Stad, 2008).
There is neither a specific “research sector” nor a “statistics department” within VA SYD, but the issue appears to be pivotal and involves a considerable amount of time, mainly through University cooperation and the collaboration with the research units constituted in SWWA for carrying out statistical and technical inquiries and reports. Being that SWWA is considered “a proper space to foster innovation and a high-profile learning network especially for small cities which could lose a lot on information working alone”82, VA SYD seems to be a committed active contributor and proposer. VA SYD often submits topics for debate, training and research on the base of what its workers detect as a need for innovation or increasing quality. The last proposal was to involve SWWA in testing a complex system of cost-measurement for water-flows to treatment plants, which could allow improving cost planning in the future.
81 Interview with board managers of VA SYD, 22/09/2009.
82 Id.
The unit of Environmental Engineering is in charge of the majority of research cooperation links. However, establishing cooperative relations for academic and technical research is a
“decentralised issue”83, usually left to the initiative of every VA SYD unit. The involvement in research is generally tailored to VA SYD needs (as a strategy focussed on its own local goals) and it involves around 1% of the total budget, which is a bit less than 50 million euros.
At VA SYD, the policy of internship (hosting short students’ traineeships) is also unequal in the different units, wastewater and waste being the sectors which have the most requests.
An “educational unit” does not exist, but – as we will see further- working with schools and universities is an important growing issue while the continuous training of personnel is a pivotal internal policy.
Consumer Participation: a managing style or a formal recognition?
Customer relations seem to always have been an important issue at VA SYD, even during the transitional phase from the tendering of 1994 to the new organisational structure. It is around them that some peculiarities of VA SYD have been organised.
Below are listed some tools and policies which VA SYD uses to dialogue directly with its customers, which happen to coincide with the two cities inhabitants: in fact, except for a reduced number of households in the countryside, which are not linked with the wastewater network, it could be said that all citizens in Malmö and Lund territories are to be considered customers of the services provided by VA SYD, as no other companies exist which could challenge this “natural monopole”.
As is possible to see in the official organigram of VA SYD (fig. 2), only internal functions (Departments and units inside of each of them) are really considered part of the formal company structure. The “dialogue arenas” which could bridge with customers/citizens are neither officially mapped nor specifically described, even if – obviously – functions like the “customer care service” have their important space in the external communication strategy.
It has to be noted – to be precise - that VA SYD has a broader number of indirectly-affected targets, due to the fact that several treatment plants administered by VA SYD concern other municipalities. In this respect, the tools of dialogue which VA SYD set up are open to interact with a larger number of people than the direct clients of the water, wastewater and waste collection services (the last only for Malmö).
A last consideration refers to city planning, which in the two member cities is subject to a different range of information, communication and consultation processes. These often involve VA SYD technicians (especially in the planning and development unit) when it comes to discussing about the infrastructures of new parts of the city, the rehabilitation of
83 Interview with Ulf Thysell, asset department (22/09/2009).