Navigating the Perfect Storm: Transforming a Utility to Deliver a Growing Capital Program in a Climate of Shrinking Operating Budgets

Regulatory enforcement, aging infrastructure and the need to support strategic growth of the community created a steady rise in the capital program for the City of Virginia Beach, Public Utilities Department. Pending negotiation of a compliance schedule for sanitary sewer rehabilitation, the capital needs could rise steeply over the next 10 years. After the City negotiates a compliance schedule for infrastructure improvements with regulators, a CIP delivery strategy and resources must be aligned to achieve compliance.As the scope and complexity of the capital program increases, the organization must be strengthened to adequately support it. At the same time, operating budgets and staffing levels are being constrained across the City. Public Utilities Engineering Division convened a leadership team and worked with Brown and Caldwell to develop a unified vision and strategy to meet their CIP delivery commitments.The capacity of existing Engineering Division staff to manage CIP projects versus expected workload for the long-term CIP was estimated. The purpose of this analysis was to determine the resource gap for implementing the long-term CIP over a 30-year period, including refurbishment/replacement (R/R) of existing water and sewer infrastructure.The outcome of this project was a recommended plan for capital project delivery. Several alternatives were evaluated and discussed with staff, including a range of options from minor staff augmentation (outsourcing) to hiring a turn-key program manger. Major considerations in the evaluation included the level of control desired by the City, quality and schedule management, limitations on the ability of contracted personnel to interface with other City Departments (legal, procurement, real estate, etc.), and operating and capital cost impacts.The recommended approach involved the following:• A combination of adding some new staff in the Engineering Division and contracted consultant management and construction inspection support• Organizational development/strengthening necessary to support future compliance and project delivery efforts including streamlining roles and responsibilities, new business processes, and new tools to help manage the growing volume of work.This project has significant benefits to the City and more widespread applications to other utilities. The City desired to understand what other utilities have done in response to Consent Order-driven capital program demands, what staffing and cost models have been used effectively, and what is the best strategy for their specific infrastructure demands and organizational culture. The findings include identified business process improvements, tools and methods for projecting staffing needs by project and employee-type, and key considerations for organizational decision-making.