Charlotte Mecklenburg Utilities

Virtual Managed Competition

Using Benchmarking

October 25, 2006

 Agenda

Managed competition and CMU background

Project description
Benefits of the project
Using benchmarking for performance criteria
 Promise of Managed Competition

One of the first public implementers was the City

of Phoenix in the 1970s with the promise of:
market test assuring elected officials that they were
getting a fair price
discipline of bid preparation promoted focus on
efficiency
purchase of cost saving equipment
gave the public agency an opportunity to learn from
the private sector
 Caveats of Managed Competition
What worked for Phoenix in the 70s and 80s
didnt always translate to others:
all or nothing for smaller systems
a public sector lost could have a devastating effect
on the remaining workers
public sector wins year after year deter private
sector competition
the possibility of the private sector being selected is
very remote
As a result, managed competitions are now rarely done.
CMU showed how you can conduct a virtual managed
competition without the cost in both time and money of a
competition and without the negative side effects.
 Managed Competition in Charlotte, NC

Managed Competition Program (MCP)

implemented in the early 1990s
Applied to business-like operations
Agreements developed with winning low bidders
 Background CMU Lift Stations

Added to MCP in 1997

City growth led by urban sprawl on the
boundaries
Employees won first agreement for five year
period and it was extended until a second
competition could be held
 Scope of the Project

Overview
Lift station performance
Financial audit of lift station operations,
gainsharing and capital budget requests
Future agreement considerations
Performance scoring and criteria
Project Overview

Since the initial contract award, the number of

pump stations to be maintained increased
Problems with gainsharing provisions
No private bidders for the second competition
 New Approach for Performance
The City sought to conduct a virtual competition to
optimize lift station operations

Projected Savings Over Time

25%

20%

15%

10%

5%

0%
1990 2000 2010 2015 2020
 Lift Station Performance
Lift station risk analysis consisted of:
- alarm frequency - cause of alarm
- pump utilization - overtime impact
Figure 2-1: CMU Lift Station Risk Analysis

600
500
Risk Score

400
300
200
100
0
Pump Stations
Survey Says

By a show of hands how

many of you have areas
in your operations that
benefit or could benefit
from performance
standards?
Financial Audit

Budget Analysis
Gainsharing
Future Agreement Considerations

Competitive operations
Procurement Flexibility
SSOs
Predictive over reactive maintenance
Replacement of underground storage tanks
Enhanced cooperation with other CMU divisions
Performance Scoring & Criteria
MOU Performance Scoring Criteria & Targets
Maximum Benchmark
Frequency Criteria Points Target

Annual:
Benchmarks, Entire Peer Group:
6. Spills Per 1000 Miles of Main 3 < 0.83
7. Expenses Per FTE 3 < 0.93
8. FTEs Per Lift Stations 3 < 1.88
Subtotal 9
Benchmarks, Best In Class:
9. Spills Per 100 Miles of Main 3 < 0.60
10. Expenses Per FTE 3 < 0.85
11. FTEs Per Lift Stations 3 < 1.56
Subtotal 9
Practices:
12. Safety 5 0 Days
13. Planned Work 4 > 75%
Subtotal 9
Requirements:
14. Controllable Spills 7 0
15. Current & Accurate Records 3 > 95%
16. Certification 3 100%
Subtotal 13
CMU Benefits

Developed benchmarks for operations and

maintenance
Gainsharing goals established for meeting or
exceeding performance targets
Performance tracked on a quarterly and annual
basis
Performance criteria related to lift station
overflows strengthened
More CMU Benefits

New gainsharing budget addresses items under

staffs control
Simplified budget process
New agreement between management and staff
to reflect actual operations
Process allows for corrections over the duration
of the agreement
Managed Competition
in the Federal Government
White House Scorecard for
Public-Private Competitions
# of Federal Worker-Contractor Competitions 1,060
Federal Worker Jobs Competed 40,147
Competitions Won by Federal Workers 83%
Incremental Cost $210M
Estimated Net Savings (over 5-10 years) $5.6B
Source: Engineering News Record, May 1, 2006
Benchmarking for Performance, pt. I

Explanatory factors
Performance measures can tell you about the
three most important things about a work activity:
Is it being done at a low cost ?
Is it being done quickly, accurately and without the
excessive use of people and material resources
Is it satisfying our stakeholders?
Benchmarking for Performance, pt. II

Some More Words of Caution

Do not expect to be best in everything
Remember this is a snapshot

Things To Keep In Mind

Not everything you can measure is important to track
Performance measures should include data that can
be captured
Use the best performance measures
Any Questions?