I attended on Oct 14 a meeting of the Massachusetts Water Resources Authority wastewater committee in Boston. The tangibles in this example are so unappealing, it helps put the spotlight on the intangibles!
The meeting was about the public-private partnership between the MWRA and a company called New England Fertilizer Company (NEFCO), a private processor of biosolids.
Turns out that NEFCO's role is to process the "sludge" from the Deer Island sewage treatment plant near Boston's Logan International Airport. NEFCO has a 20-year contract to do so, using facilities owned by the MWRA. The MWRA is preparing for the process of renewing the operating contract for the facility (NEFCO's current contract expires in 2015).
NEFCO's only tangible asset is the sludge that arrives at the plant by pipeline as it flows from Deer Island (NEFCO takes title to the sludge as it arrives at the facility it operates), and the inventory of fertilizer made from the sludge. This "asset" wouldn't seem to have a lot of tangible value!
NEFCO's major asset is the experience it has gained by operating the plant, and the recommendation it earns from the MWRA when it bids for other contracts.
The committee members remarked that NEFCO maintains the plant in excellent condition, even though they don't own it. NEFCO's incentive to maintain tangible property owned by someone else is the recommendation and enhanced reputation it gets by operating the high-profile facility in an exemplary manner. It's building its own intangible value by maintaining another's tangible property.
NEFCO also builds its value by investigating and implementing the latest technologies for converting biowaste into useful and marketable product. As part of its preparations for the contract renewal, the MWRA is taking steps to draft the renewed agreement in such a way as to encourage and/or mandate a new level of improvement of the technology. The MWRA is thus also taking steps the manage its share of the intangible value arising from the public-private partnership.
Maybe we all need a few examples like this - where the contrast between tangible and intangible is so stark!
Thanks for sharing this Craig -
I see that one of our goals as IC advocates is to help people think explicitly about this dynamic including identifying and managing the specific intangibles that are necessary for success.
It's fun to imagine how the contract might evolve if the two parties were to start off with such an inventory and understanding!