Capital Delivery Optimization and Best Practices

This is a historic time in the water, wastewater, and stormwater world of critical needs where $50B in federal funding has been made available through the Bipartisan Infrastructure Law. The funding can address legacy projects in need of funding, or new projects that need further planning and development to solve local flooding, watershed water quality, regulatory compliance, or asset management problems in our communities. This new funding coupled with continued supply chain delays and continued construction cost inflation has provided a number of challenges to efficient and cost-effective capital program delivery. Utilities are also facing rate increase pressures and asking if they are planning, designing and constructing their capital program projects in the most efficient and cost-effective manner. Northern Kentucky Sanitation District No. 1 (SD1) was faced with this same challenge to efficiently deliver its capital program amidst rate increase pressures, take advantage of SRF funding, and ramp up its annual capital spending from less than $20M to $150M to meet regulatory and asset management requirements. SD1 decided to not hire an outside program management firm and instead called on existing engineering and operations staff to be the program management team. SD1 had 4.5 FTEs total - one Director of Planning & Design, three Project Managers in the Engineering group and one Collection Systems manager who could dedicate about half his time to capital delivery 4.5 FTEs total. The other half of the Collection Systems manager's time was dedicated to day-to-day sewer and stormwater systems operations. At the height of SD1's capital program, the 4.5 FTEs were delivering $150M of wastewater and stormwater capital projects annually. SD1's experience along with capital delivery utility best practices other communities are implementing will be discussed in this presentation. The following practices communities are using to make their capital delivery and execution programs more efficient and cost-effective will be discussed: Integrated Watershed Management Plans provide watershed roadmaps to prioritize project execution. SD1 followed their Integrated Watershed Management Plans to prioritize projects based on greatest water quality and public health benefits and align new capital projects with existing asset management needs in each watershed. This eliminated the guesswork on whether pipes needed upsizing, what the quantified projects benefits to the ratepayers were, and how regulatory requirements could be met through rehab and repair projects versus costly, new construction. Processes first, complicated software second SD1 kept it simple and used Excel and MS Project to track project schedules and budgets. Communities are taking a close look at the efficiency of their capital programs, annual spending versus encumbrances, their capital delivery tools, and cost estimating process, then making improvements before using complicated program management or schedule software, so current, inefficient processes are not perpetuated in the new software. Accountability & Key Performance Metrics (KPMs) All 4.5 FTEs at SD1 understood the importance of meeting schedule and budget for projects. The same requirements were impressed on the design consultants to keep project execution on budget and schedule. Communities improving their capital delivery to meet best practices are developing KPMs such as Baseline schedule compliance; Baseline budget compliance; Change Orders; Scope Creep; Program Cashflow target compliance to closely monitor projects and communicate clear expectations and accountability for their project delivery staff. Organizational Review. Evaluate spans and layers within the Capital Delivery Division: Review should include: obenchmarking across peers & defining levels and roles & responsibilities for project management and program management staff. oIdentifying support positions and how knowledge will be captured through succession planning. oEstablishing strategies for staff capability development, cross-training and utilization on specialized tasks. oGiving PMs the opportunity to manage all phases of water and sewer projects; Planning, Design and Construction. oIn-house Easement Acquisition and Negotiations SD1 had two field staff that, in addition to their construction oversight work, also negotiated easements for projects. Automation & Rehab/Repair Planning staff in Operations group. a.Automating the process of performing sewer inspections, summarizing results, and clearly defining next action steps can save significant staff time and costs. For SD1, CCTV data was uploaded from the trucks directly to the CMMS at the end of each workday. Each pipe was then automatically scored and a next action generated overnight for either maintenance or structural repair. This information was captured in SD1's CMMS and GIS systems. Similar automation for next action decision-making can be used for water main leak detection and condition assessments. b.For SD1, an Operations staff member reviewed pipe maintenance next actions and simple point repairs were then grouped into efficient work orders for the cleaning & construction crews to complete. c.For SD1, pipes requiring larger scope structural repairs or replacement were filtered and reviewed by four in-house planning staff in the Operations group. These staff reviewed the generated next actions, CCTV data, pipe locations, terrain, etc., to confirm the appropriate type(s) of repairs or replacements. This work resulted in a preliminary planning level design (about 15% design) and cost estimate and helped determine if easements were needed. Projects were grouped together by neighborhood or street and converted into work orders in the CMMS for in-house construction crews or external maintenance contractor crews to complete. Having rehab/repair planning staff in the Operations group greatly increased the efficiency and spending for rehab/replacement of the existing system and allowed SD1's Engineering group to remain focused on the larger design projects to meet schedule and cash flow spending goals. IT, Finance, and Procurement Groups Focused on Project Delivery. Each group adopting and embracing a common mission to assist with efficiently delivering capital projects is critical to capital delivery success. SD1 engineering staff and the managers and staff in each group built relationships, understood each other's communication styles, and removed the 'walls' and 'red-tape' between each group to efficiently plan, design, procure, fund, and construct the projects. Procurement typically took less than one month to get an RFP on the street or advertise for bids. Engineering met regularly with Finance to discuss capital forecasts, cash flow spending and capital versus expense costs. IT was responsible for the GIS and CMMS systems, so IT was integrated with the Engineering and Operations groups and empowered in the day-to-day work to quickly resolve software issues. Streamline Meetings and Empower Staff. Having staff in too many meetings can waste time and delay projects. SD1 developed a process where the Project Manager attended the project meetings and kept the Program Manager, Operations Manager and other Executive level staff informed through either project executive summaries, one-on-one briefings or sometimes both. Operations staff were included in project meetings to help make decisions on design details. Both the PMs and Operations staff were empowered to take ownership of the design project so it was successful. Full support by Executive level leadership and the Board of Directors. Efficient capital delivery and spending involves all levels of the utility with consistent messaging and support from Executive level leadership. Staff are empowered to identify inefficient processes and 'waste' and those processes are changed or staff reorganized with support and change management from Executive level leadership. The staff not willing to change are addressed by Executive level leadership. SD1's Executive Director impressed on staff to run SD1 like a private company where 'profit' was measured as savings to the ratepayers. Those savings were not only cost savings but also efficiency savings. This approach removed red-tape and inefficiencies while also building close relationships that allowed existing staff of about 4.5 FTEs to deliver $100M - $150M of wastewater and stormwater capital projects annually. The audience will learn how Northern Kentucky SD1 and other utilities are implementing best practices to adjust their organizations, maximizing the utilization of existing staff, and supporting automation and other efficiency improvements to increase their capital delivery efficiency and cost-effectiveness.