A little west of Indianapolis, Indiana, is Plainfield; but, as in many large metropolitan areas, the two are contiguous. Like many other U.S. towns, Plainfield has some standard outsourcing agreements for trash collection, curbside recycling and janitorial services. But the town's outsourcing contract for operation and maintenance of its water and sewer plants, water distribution, sewer collection system and utility billing is not standard. Richard Carlucci, Plainfield's town manager, says, "This was a major undertaking. We would not have done it without the right partner." Choosing that partner involved a great deal of trust.
The five-year contract (with option for a five-year renewal), signed September 1999 gives those responsibilities to White River Environmental Partnership (WREP), a group comprised of four companies (Indianapolis Water Company Resources, United Water Services, Lyonnaise American Holding Incorporated, and United Water Resources, Inc.).
With a chuckle, Carlucci talks about trust. "I remember when Reagan used to say we trust the Russians but we want verification." The verification of trustworthiness, Carlucci believes, begins with finding a vendor who will perform the way it says it will perform.
"Trust is first building relationships with the people you are trying to negotiate the contract with," says Carlucci. "The key in maintaining trust is a very strong, detailed contract that each side understands. If you don't have a strong contract, then it's hard to hold their feet to the fire to get them to do what you said you wanted them to do." But the trust is really developed as the parties go forward, he believes, and a good relationship makes it possible for that to occur. Many of the WREP people live in the Plainfield metro area, which was helpful in developing relationships.
Plainfield's Town Council decided to use Competitive Government Strategies, Inc. as its consultant for the procurement process. They had seen its president's success when he had implemented in earlier years the privatization of the operation and maintenance of the Indianapolis sewer utility and the utility billings. Plainfield wanted to take a similar approach.
Beginning with a Request for Qualifications, they narrowed the respondents to five and then asked for detailed proposals. Each was interviewed and analyzed. In the end, there were two companies being considered. Carlucci says that other variables obviously must be considered alongside trust. "You can trust someone that may not be the most competent, and the most competent one may not be the one you trust to do the job." WREP's competitor was a brand new group with a lot of financial backing. "They seemed very competent," he recalls. "But we were concerned about the fact that they were new and were taking on a lot of new contracts all at once. Did they have enough people to perform the way they said they would perform?"
WREP won the contract for two reasons. It was, first of all, WREP's actual experience, as a group and also as four separate entities. Plainfield's Town Council members talked with people in other communities where the four companies were supplying services. "We contacted them to find out if they performed the way they said they were going to perform. Everyone said they were very pleased. And the four vendors' employees were happy. That built up a feeling that these were the right people to enter into a contract with," explains the town manager.
The other winning reason was WREP's proposal - a deal sweetener that truly met the needs of Plainfield.
Water, Water Everywhere
Plainfield's motivation for outsourcing was threefold. The town kept losing its skilled water and sewer plant workforce to private sector jobs with higher salaries. "We also thought a group with the experience of WREP would help us through the weekly paper blizzard of new rules and regulations for operating water and sewer utilities coming from the federal government," says Carlucci.
Strategic issues were the third part of the town's objectives. Plainfield is surrounded by IWC and, although Plainfield had acted on its master plan for the future by putting water lines and plants in the area, there are no specific territories in Indiana. "We wanted to be able to protect our service area from encroachment by a much larger utility that could go anywhere they wanted to because they were financially capable," he says. "Our customers don't get the benefit of the investments we have made in oversizing water and sewer lines and plants if just anyone can encroach on those areas. We already had an investment and infrastructure to protect."
IWC proposed a separate side agreement for 10 years (with a 10-year renewal). Plainfield can make "make" water for less cost that IWC, and the agreement is for the town to sell IWC two million excess gallons of water a day. From that revenue, Plainfield will have funding for the future capacity of its water treatment plant. IWC has agreed not to serve specified areas around the Plainfield community, allowing the town to grow its business.
Technology, politics and budgets - many things can change in a five-year contract, so a flexible vendor is of the utmost importance. In just the first year of their contract, there is already a significant change. IWC's parent company has bought Columbia Energy, so federal regs dictate that IWC must be sold. "We don't know who is going to buy IWC," says Carlucci. "But we thought that by having such a large pool of people to draw from in these four partners, that they would certainly be able to come up with some cost-savings ideas that would - through sharing the savings - benefit them and our community. Maybe one of the other partners will even buy IWC."
Plainfield is confident that its original plan will go forward because the town selected WREP as a vendor that can be trusted to perform as it promised.
Lessons from the Outsourcing Primer
- A criterion in establishing a vendor's trustworthiness is to find out from other customers if the vendor performed the way it said it was going to perform.
- Trust is built during contract negotiations by establishing relationships with the people on the other side.