Efficiency in the Public and Private French Water Utilities: Prospects for Benchmarking

Efficiency in the Public and Private French Water Utilities: Prospects for Benchmarking
Aude Le Lannier and Simon Porcher (Chaire EPPP)
Abstract: This paper uses a Data Envelopment Analysis (DEA) and a Stochastic Frontier Analysis (SFA) to assess the relative technical efficiency of 177 decision making units in the water supply sector in France in 2009.
Water utilities can be directly managed by the local authorities or contracted out and then managed by a private operator. The use ofa three-stage model mixing DEA and SFA enables us to dissociate managerial inefficiencies from the structural inefficiencies and statistical noise. Our results show that private managers face more difficult environments. However, after having taken into account the environmental variables, we find that private management remains on average slightly less efficient than public management. An explanation to this performance gap can be different resource management.