STAFF REPORT

Operations Committee, October 2, 2008

Utilities Division Competitive Assessment Studies (PWUT09-05)
Consideration of a summary of four competitive assessment studies performed on Utilities Division of the Public Works and Utilities Department
Speaker:  Mr. Steve Brown
 

From:  Stephen J. Brown, P.E., Public Works and Utilities Department
Prepared by:  Robert P. Bonné, Utilities Director
Approved by:  William B. Coleman, Jr., Town Manager
Approved by:  Benjamin T. Shivar, Assistant Town Manager

Historically, change in the water and wastewater utility industry has been regulatory-driven, with a focus on providing high-quality public service at a reasonable cost.  Recently, change involves market-driven initiatives that challenge public systems to compete with the private sector to provide the same high quality service at a lower cost.  In the late 1970’s less than 100 public water/wastewater facilities were privately operated.  In today’s market over 900 facilities are privately operated.  To remain competitive all utilities must balance many competing objectives for success.  Between October 2001 and June 2008 the Public Works and Utilities Department completed four competitive assessment studies of operating divisions within the Utilities Branch of PWUT. The competitive assessments were performed by HDR Inc.’s Utility Management Planning Services Group.  Ken Barrett, P.E., their National Director for utility management planning, has over 30 years’ experience.  HDR’s work included projects for the cities of Charlotte NC, San Diego CA, and Winston-Salem NC to name a few.  The divisions studied were:  North Cary Water Reclamation Facility (October 2001); South Cary Water Reclamation Facility (April 2002); Cary/Apex Water Treatment Facility (March 2006); and Utility Systems Maintenance (June 2008).

For many years the Utilities divisions met their mission and achieved an industry leading success in the area of regulatory compliance.  The goal of the studies was to assess the competitive standing of the divisions and how they would fare in a competitive challenge by private sector contract operators.  In other words, would these highly regarded divisions, with years of notable regulatory compliance, be competitive should there be an opportunity for the public sector to compete for service provision with a private sector-based operator.

Summary of Results

Each division was evaluated for:  1) overall facilities assessment; 2) assessment of inner workings of the division (including confidential written surveys of staff and one-on-one interviews; 3) benchmarking with other high-functioning utility providers; and, 4) optimization improvements and strategies.

Facility Assessment – Key cost centers including labor, energy and chemical usage were reviewed.  Focus areas for study included:  performance data, equipment condition, operation and maintenance practices, plant staffing, work rules and scheduling, training programs and past economic performance.

Assessment of Inner Workings of the Division – Reviewed areas in this section included: employee understanding of organization, interpersonal and hierarchical communications, performance goal understanding, employee morale and organizational culture.

Benchmarking with Top Tier Agencies – The metric and process benchmarking phase of this project focused on the comparison of public employee operation to that which would be expected by efficiently operated public facilities or a private sector service provider.

Optimization Improvements and Strategies – Identification of opportunities to be considered for future implementation.  The successful career ladder effort which is close to being implemented in all divisions was a recommendation to improve retention, efficiency and effectiveness.  Additional energy conserving measures were evaluated and implemented where appropriate.

General Summary of Conclusions

At the conclusion of the studies the following general conclusions were determined:

• The operations and maintenance performance was excellent as noted by the long history of regulatory compliance.
• All of the divisions’ operations were within the competitive range of operations.
• Cost savings could be realized via a managed competition effort, but this may involve taking less conservative operations and maintenance strategies that could risk environmental compliance.  Even with the relaxing of the Town’s high standards, a private firm could not compete for operations and maintenance of the Town’s facilities and turn a profit; contract operations firms would not be interested in competing for this work.  Further, the cost of developing a competitive bid would be too costly to justify moving forward with that approach.
• Staff morale is very high.  Staff in the divisions is motivated and exhibit a very high degree of commitment and dedication to the Town’s mission and objectives.  Staff view change as a welcomed challenge; they are not set in their ways with regard to facility operating and maintenance and continually look to improve the division operations and maintenance.  Overall, the division’s staff is efficient, versatile and motivated.

Fiscal Impact:  No fiscal impact associated with this staff report.

Staff Recommendation:  This staff report is provided for information purposes only; no Council action is required.