Introduction to Peer

Creative Solutions
Performance
Solutions
for our Environment
Presentation
to:
Your Name
Asian Development
BankAmerica
Veolia Water North
February 5, 2014
June 2010
Mark SANDERSON

0
Introduction & Agenda

Agenda
Introduction
Veolia & Public-Private Partnership Experience
What is Peer Performance Solutions (PPS)
Key Success Factors (Client/Veolia)
Successful Implementation
Compensation Model Paid for Performance
Contractual Considerations
Case Studies Implementation Results
Ideas to Move PPS Concept Forward
Summary & Conclusions
Q&A

1
Veolia & Public-Private
Partnerships

Veolia Environnement Water & Waste Activities in

Asia
SK Hynix (Icheon, Cheongju, Gumi)
KKPC Resin
KKPC Rubber (Ulsan & Yeosu)
KPC
LG/HONAM
Dongbu Steel (Asan & Icheon)
Incheon (Mansu & Songdo)

Sinopec Yanshan

Chengde HBIS
Dalian Tagal
Urumqi
Beijing
Hohhot

Tianjin
Cangzhou
Handan
Qingdao
Weinan
Changzhou
Xian
Baoji
Anhui JAC
Nanjing
Chengdu
Jiujiang
Tongling Tonghua
Changsha

Japan

Lanzhou

China
Kanhan
Pench 4
Full-city
Mihan

Niloth
i

Nangloi

India Grameen Veolia Water

Nagpur

Kunming

Guangzhou Changle
Huizhou
Liuzhou Shenzhen
Foshan
Jiangmen
Zhuhai
Hong Kong
Kong
Hong

Suzhou
Wyeth
Shanghai Pudong
Hangzhou

Taiwan

Hong Kong

Bijapur

Haikou
IIkal

KUWASIP

South
Korea

EcoCycle

New Taipei City

Yilan
Taichung
Chaiyi
Tainan
Daliao Dist. Kaohsiung City

IISc Bangalore

Showa Denko

Singapore

Saitama
Tokyo
Chiba
Ichihara (Showa Denko)
Yamato
Kahoku
Kizugawa
Osaka
Hiroshima
Matsuyama
Oita
Isahaya (Tarami)

Pinglin, New Taipei City

Chutung, Hsinchu
Wurih, Taichung
Gangshan, Kaohsiung
Dashu, Kaohsiung
Hengchun, Pingtung

Clementi-Bukit Merah
Paris-Ris Tampiness Sector
Tanglin-Bukit Merah Sector
South Western Singapore
Central & North Western
Singapore
Jurong & Jurong Island

Veolia & Public-Private Partnerships

Veolia Environnement has experience in all models of public-private
partnerships.
Common in all projects is an approach tailored to meet the clients
objectives and needs.
Depending on client and project needs models can evolve from one
type to another PPS ideal to evolve to increasing private sector
involvement
Increasing Private Sector Involvement and Control
Consulting/Service
Contracts

Design/Build

Management

Contracts

Contract
Operations

Design/Build
/Operate

Build Own
Operate
Transfer

Concession

Design Own
Operate

Veolias technical and operational know-how is

the basis for our ability to create value

Operating
Functions

Service &
Support
Functions

Strategic
Functions

2
What is Peer Performance
Solutions (PPS)

The type of client relationship sets the boundary

conditions for how value is created

Accountability
of service
provision
Traditional Veolia model
(O&M, concessions)
Long-term contracts
Assets and / or
employees managed
by Veolia
Veolia in control with full
accountability

Private
operator
model

Implementation

Peer Performance Solutions

Flexible term contracts (short to long term will work)
No outsourcing of assets / management / employees
Joint implementation with shared benefits
Client in control of assets/staff; Veolia drives
performance & change

PPS

Know-How

Public Sector
Model

Consulting
model

Technical or business
consulting projects
Short-term contracts,
usually without
implementation
support
No outsourcing of
assets / management /
employees

Ease to implement
9

The PPS model falls in between traditional

consulting and traditional O&M
CONSULTING MODEL

PPS MODEL

PRIVATE OPERATOR MODEL

Accountability of
service provision
Private
operator
model

3-12 months

PPS
model

1-5+ years
Typical contract length

5-30 years

Consulting
model

Ease to implement

10

The PPS model is different from traditional

consulting and traditional O&M
CONSULTING MODEL

PPS MODEL

PRIVATE OPERATOR MODEL

External advisor

Integrated team

Owner or operator

Limited accountability
for implementation

Shared accountability results

Full accountability and management

control

Paid for advice

More billable hours =
higher cost
3-12 months

Compensation for
performance

Paid for actual service delivery

Faster implementation =
greater efficiency and
effectiveness sooner
1-5+ years
Typical contract length

5-30 years

11

Peer Performance Solutions What does it mean?

Peer:

Performance:

Solutions:

Agency and Veolia are peers in the utility

management business as are our managers and
subject matter experts
Integration of team differentiates PPS from
consulting
Tailor performance improvements (efficiency or
effectiveness) to client objectives and needs
Compensation structure of pay for
performance ensures alignment of client and
Veolia objectives skin in the game

Technical, financial, & management solutions

are based on best practices utilizing resources
and capability of Veolia
Implementation of solutions key to PPS much
more value added in implementation than in
development of ideas for improvements.
Comprehensive and sustainable change

12

3
Key Success Factors
(Client/Veolia)

Key Success Factors - Client

Due diligence to determine applicability of model* vehicle to
other model or improvements while building internal capability

Long term objectives determined for utility

Efficiency and Performance objectives
Tariff and funding analysis affordability of investment may be
key to some efficiency and performance goals
Procurement itself will fall within normal practices of most
utilities and is more similar to consulting procurements than
PPP

14

*Due diligence to determine applicability of model

Why?

Client cannot implement concession, O&M, DBO, etc.

but wants/needs performance improvements
Stepping stone to other PPP model, i.e. improve the
utility so it is ready for a concession, etc.
Leverage Veolia world class expertise, know-how and
best practices
Desire to partner with private entity that is fully
committed but not losing as much control as with
other PPP models

15

Key Success Factors - Veolia

Due diligence to determine applicability (legal too) of model and long

term objectives for utility while determining efficiency and
Performance objectives that are possible
Tariff and funding analysis ability to invest may be key to efficiency
and performance goals
Preparedness of client and personnel for integrated team win/win
culture possible?
Change management issues
Conflict of interest issues, i.e. entering into PPS does not preclude
other, larger opportunities
Overall business viability standard to all models

16

4
Successful Implementation

The key to successfully translating technical

know-how into value lies in the practice of
managing a project
Technical
Know-how

Deep technical knowledge

Operational experience
Utility management experience
Asset management experience
Proven tools, systems, and approaches

Practice

Project governance and management

Client interactions and communication
Mindsets and behaviors

Value

Reliable, safe, and compliant service

Efficient operations
Performance improvement
Client value
18

Successfully delivering PPS is done over a

number of (iterative) phases
6 months

5+ years

ASSESS & PLAN

IMPLEMENT & SUSTAIN

STEP 5
STEP 4

STEP 2

STEP 1

STEP 3

TRACK
& VERIFY

STEP 6

Using quick-wins and pilots to

prove our ability to affect
change are often better tools
than analytical impact
assessments; the search for
opportunities continues during
the implementation phase

Enabling and
sustaining change has
to be embedded in the
implementation of all
improvement
initiatives

Rigorous tracking
and verification of
impact is a critical
part of a successful
PPS project; the
work required to do
it right is significant

19

Sustainable impact requires a comprehensive

approach to change management
Streamlined
processes, flows of
information and
materials
Optimized tools and
systems
Standard operating
procedures

Comprehensive
performance
management
Stringent project
management and
governance
Optimal
organizational
design and clear
roles and
responsibilities

Operating
System

Clear vision,
direction and
compelling purpose
Strong leadership
alignment and role
modeling
Improved individual
capabilities and
continuousimprovement
mindset

OPERATIONAL
EXCELLENCE

Management
Infrastructure

Mindsets
and
Capabilities

20

Successful pilots motivates team, which supports

further positive changes
Potential
improvements
discussed

Sustainable
solutions

Customer
satisfaction

Inclusion at
all levels

New innovative
ideas piloted
21

Example of diagnostic: Analyzing process to build

business cases for client savings
Current state

Benefits

Solids
content
(DS)

USD million

2.6%

From
liquid
stream

Sludge
thickeners

1.7%

Digesters

26%

Dewatering

To
disposal

Proposed changes
Solids
content
(DS)

Change height
of sludge blanket

Longer retention time results in

higher volatile solids destruction

4-5%

From
liquid
stream

Sludge
thickeners

2.4-2.6%

Digesters

Dewatering

26-28%

Reduce solids disposal

volume

0.15-0.27

Reduce energy needed

for heating sludge in
digester

0.09-0.13

Increase digester gas

production (Capex
required)

0.08-0.16

Reduce polymer for

sludge dewatering

0.03-0.07
0.34-0.63

Pilot to confirm % dry solids

which can be achieved and
potential benefit
of $4-7 million

To
disposal

22

A PPS will require robust process management

systems and tools
Example NYC

23

5
Compensation Model Paid for
Performance

Compensation based on transformation: Pay-forperformance aligns interests and delivers results

Fixed Fees
Promotes
transparency
Cost recovery
without
allowance for
profit
Both entities have
skin in the game

Shared Savings
Promotes
identification of
efficiencies
Incentive to go
beyond lowhanging fruits

Key Performance
Indicators (KPIs)
Promotes best
implementation
of practices
Incentivizes
sustainable
improvements

We jointly benefit from programs success

We only succeed when client succeeds

25

What are the payment models?

Delivery model
Recommended commercial model

1
Assessment
study

2
Assessment
& quick-wins

3
Implementation project

4
Comanagement

5
O&M
project

6
Full
concession

Time and
material
Flat fee (value pricing)

Shared savings

KPI-based performance
payments
E

Co-management fee
26

In some cases, a combination of commercial

models may yield the best value
Delivery model
Recommended commercial model

1
Assessment
study

2
Assessment
& quick-wins

3
Implementation project

4
Comanagement

5
O&M
project

6
Full
concession

Time and
material
For example, the
Pittsburgh PPS project
combines a management
fee with KPI-based
performance payments
and shared savings

Flat fee (value pricing)

Shared savings

KPI-based performance
payments
E

Co-management fee
27

6
Contractual Considerations

Our approach provides a structured project

governance to facilitate communication
Steering Committee

Biweekly/Monthly meetings to
review progress, resolve issues
and agree on priorities

Program Manager
PMO

Sponsor:
Sponsor:
Customer
Customer
Service
Service Team
Utility/Veolia

Weekly progress review and

problem solving sessions
Our Local Partners

Sponsor: Field
OperationsTeam
Utility/Veolia

Subject Matter Experts

Specialist support : Veolia Excellence Group and
Technical Direction Group

In-situ
observations,
data
collection,
interviews and
frequent

29

Joint and high frequency project governance

Performance review

Frequency
Level Real tie

Daily

Weekly

Tracking mechanism

Bi-weekly

Quarterly

Mayor / Deputy
Mayors Operations

Utility Executives

Quarterly Project
Review

Downward
communication around
action planning and
corrective measures
Steering
Committee
Meeting Steerco

Department Head

Program Forecast
Client/Veolia Team
Weekly Meeting

Operations
Managers

Implementation
Team

Daily handover
briefing and
problem solving

Steerco Deck &

Impact Tracker
Initiative Scorecard
&
Action Log

Team
Performance
perfor-mance
Board
& Feedback
board &
Collection
action log

30

Contractual Considerations - examples

Contract is legal in jurisdiction?
Tariff/funding to support objectives
Governance very important as success depends on it to a great
extent
Standard terms, including term, termination, scope,
Objectives important and how they will be evaluated and
updated over time
Compensation for performance
Establishment of base line cost
Determination of savings / revenue enhancement
Elements of compensation
Longer term contracts are possible, even 30 years, but these will
require additional considerations
Conflict of interest
Other terms to meet local objectives
31

7
Case Studies
Implementation Results

PPS Indicative Impact: NYC example

What we did in the

diagnostic phase
Performed site assessment of
treatment plants, pump stations,
reservoirs, repair yards, etc.
Observed ~800 person-hours of
work
Reviewed more than 35 contracts

Conducted negotiation training for

DEP and NYC procurement staff
Conducted interviews and
workshops with management,
supervisors, and field staff

Main initiatives being addressed

in the four-year implementation
phase
Est. impact
Initiatives cluster
Improve sludge thickness from gravity
thickeners of WWTP

$5m

Reduce energy consumption through

DO optimization

$3m

Improve procurement, renegotiate

main contracts, optimize central
functions

$14m

Improve work efficiency (maintenance

$18 m

optimization, work with mini-excavators,

leverage automation, insourcing, )

Improve revenues by replacing underrecording old large meters

$42m
-

Financial Impact to Date $57.5m / Forecast Impact for the Program $108M
33

PPS Indicative Impact: Pittsburgh example

Interim management services
Operational responsibility similar to
our traditional O&M project

What we did in the

diagnostic phase
Performed site assessment from
intake in Allegheny River to
reservoirs, treatment plants,
pumping stations, water distribution,
sewer lines, repair yards, etc.
Observed ~570 person-hours of
work

Reviewed more than 30 contracts

Conducted interviews and
workshops with management,
supervisors, and field staff

$0.15m/mth

Performance compensation
Key Performance Indicators
Set of 7 operational improvements (from
customer service to safety)
Operational Performance Improvements

Revenue enhancements:
- Key Customer Account Management
- Replace under-registering large meters

One-time
earned fee
$0.45m
Est. annual
savings
$1.1m
$0.3m

Cost reduction:
- Optimizing membrane plants retreating of
treated water
- Improve laboratory work efficiency
- Procurement strategic sourcing

Financial Impact to Date $3.8m / Forecast Impact for Program $9.6m

$1.4
$0.5m
$1.7m

34

8
Ideas to Move PPS Concept
Forward

Ideas to Move PPS Concept Forward

Knowledge and Expertise to identify issues and
approaches to overcome them.
Identification of areas where efficiency and
efficacy improvements can be made
Reference documentation, including contract
templates, to aid in development of project
specific procurement and implementation
documents
Governance examples and experience
Change management issues identification and
resolution
Client references and contacts
Resource to assist as issues come up

By bringing Veolias considerable technical expertise along with its culture

of innovation, we can tailor a PPS to a clients objectives
36

9
Summary & Conclusions

What do clients get out of a PPS project?

Performance

Know-how &
Experience
Doing the
right thing

Time
Veolia as a peer provides
extensive technical
knowledge, operations
experience and utility
management
Joint application of Veolia and
client know-how and
experience to identify those
performance improvement
initiatives bring the most
value to the client

Change
Management

Performance
Transformation

Doing it the
right way

Time
Drive ambitious and
sustainable performance
transformations using a
comprehensive change
management approach
Prioritize initiatives in the
context of the client
organization and
approach implementation
to achieve improvement
sooner

Time
PPS projects create
significant value for the
client over relatively
short periods of time and
prepare client to sustain
the gains and to continue
improving

38

Summary & Conclusions

The rapid and accelerating growth in the adoption of the PPS approach to
achieving sustainable performance improvement provides evidence of its
effectiveness in combining the benefits of private sector involvement
through a low-risk and relatively easy to implement commercial model.
The range and variation in scope and scale, and in tenure and commercial
arrangements, demonstrate the flexibility of the model to adapt, allowing
it to be aligned to the strategic plans and business imperatives of utilities.

39

10
THANK YOU
Questions?