In recent years, abrupt, contentious, and widely publicized terminations of contract operations (ConOps) agreements for water systems in Atlanta, New Orleans, and other municipalities have raised many questions regarding this form of facility management. Is ConOps a cost-efficient option to keep a community's water and wastewater treatment systems in regulatory compliance while providing a valuable resource to the communities served?
The answer is still yes. Professionally implemented in appropriate situations, ConOps serves taxpayers and ratepayers, municipal government, and the public employees who staff these facilities. But it is not a cure-all, and it is not the best approach for every city and town. Misguided outsourcing opportunities quickly can lead to frustration and end in failure for both the community and the operations firm. An unsuccessful outcome is most likely to result when buyers are inadequately informed about the factors that most influence success or perceived failure. Potential buyers must be well-educated on the key factors involved in selecting the firm that best matches their needs. Consider ConOps if you can answer yes to these questions:
Is your town or district budget too small to afford a staff with the scientific, engineering, process, maintenance, and information technology skills required to stay current with compliance, personnel, and financial challenges? Water and wastewater treatment operations face a changing and complex regulatory playing field. Access to staff with sound technical and managerial skills is increasing in importance. In smaller communities, knowledge access may be limited by various salary and demographic factors. A firm committed to science, engineering, and operational services is most likely to have various environmental specialists who can be drawn on cost-effectively when requested or needed. Furthermore, an experienced water and wastewater service firm will be familiar with ways to staff and manage smaller facilities to take advantage of economies of scale, perhaps by sharing staff from nearby facilities, or by purchasing chemicals, tools, or supplies at wholesale rates.
Does your town have difficulty recruiting and retaining highly skilled operators, maintenance staff, or plant managers? The water-resource management industry suffers from a shortage of qualified environmental professionals who can manage and maintain treatment facilities. This resource deficiency tends to have a greater impact on communities with population bases of fewer than 50,000 people. A quality service firm develops a process to recruit and retain certified staff, often by opening doors to more career choices, professional development, and better compensation.
Could your facilities benefit from technology upgrades that your in-house expertise can't address? Communities often are faced with significant regulatory or technical challenges. For example, simply having a mercury limit added to your renewed National Pollutant Discharge Elimination System permit presents an array of monitoring, sampling, financial, and public relations challenges. Administrators may struggle with the issues of defining needs and resources—basically wondering where to begin. Such challenges may require surveys or facility audits, and may involve supervisory control and data acquisition system upgrades, detailed information collection, improved maintenance practices, and tailored staff training programs. The best service providers tend to stay abreast of the latest technology, offering experience, creativity, and people willing to share their time and expertise to assist their clients.
Are your facilities plagued with breakdowns, inconsistent performance, or simply underperforming? Service firms worth consideration will present evidence on operations and maintenance approaches to protect assets, control process compliance, provide a safe working environment, document progress, communicate openly, and be responsive to the customers—the public. They will demonstrate the ability to draw on additional technical expertise to be fully prepared to respond to both routine and emergency situations. Finally, they will provide performance guarantees to the community.
Do your costs fluctuate uncomfortable, making budgeting and cash flow a challenge? If you encounter unexpected repair or upgrade costs, not caused by acts of nature or truly unforeseeable catastrophes, you may benefit from the fiscal planning experience of a successful operations and management firm. Specific assistance in capital forecasting may completely offset some major expenses. If you are concerned that preventive maintenance and sound process control programs are lacking, a service firm may offer customized approaches to increase your comfort levels. Simply stated, the experience of running dozens of similar facilities gives a professional service group the added advantage of anticipating potential problems, solution approaches, vendor recommendations, relevant supplies, and their attendant costs.
The Pitfalls of Low Bids
Often, when the driving factor toward outsourced services is to slash costs, a signed agreement initiates the beginning of an uncomfortable ride on a rocky road. Successful experiences have demonstrated that a well-managed operations firm can affect cost efficiencies in many utility budget line items. However, when money savings becomes the sole driving objective, some firms conclude that the winning strategy is "low-balling."
A contracting officer determined to drive the best bargain for the community unwittingly can persuade bidders to submit bids that are enticing at the outset, but that lead to problems over time. While this strategy is not dishonest, it does imply that the bidding firm is willing to compromise its profit margins or take more risk. At the end of the day, the contracting entity's attention begins to focus on risk management instead of customer service.
In another scenario, public officials may be seeking ways to save money through staff reductions, assuming that the service firm naturally will deliver higher performance with fewer staff at less cost. Often this may be true, but sometimes it is impossible. Workload allocations to operate water and wastewater systems can be significant. For some communities the reason they are having so many problems is that they were under-staffed and under financed in the first place. The point is that prudent managers will analyze carefully why they are where they are, discuss the potential merits of hiring a service firm, and select a team that matches their culture and needs. In such a case, longer-term success is highly probable.
One of the most important things a client can do to guard against unrealistically low bids is to review detailed line items and inquire how the low bid firm got its figures, especially when other firms, grouped closely together, may have priced line items higher. If the explanation is technically sound, then the low bid may be good. If not, drop the low bid and continue.