Change Leader: Utility Providers Increasingly Turn to Third-Party Private Contractors
These profiles are based on interviews, and the opinions and statements are those of the subject and are not necessarily shared or endorsed by this publication.
Third-party contracting has been growing among mid-size municipalities for some time, particularly in the complex areas of energy, water and wastewater systems. The COVID-19 pandemic is adding to that trend as many governments needed to quickly adjust to new levels of safety and expertise, while having fewer employees to meet the crisis. VNA is one such contractor providing these services.
Why Use Third-Party Contracting?
“We’re considered a contract operator, and under those contracts, we typically sign long-term contracts between five and 20 years long to provide operation and maintenance services while the customer maintains ownership of the assets,” explains Oldewurtel. “We provide all the staffing, pay all the bills. The contracts are typically structured as a lump sum.”
Customers often turn to contractors because they’re having environmental-compliance issues, sometimes a result of an inability to attract experienced and qualified staff or to control operating costs.
“Our industry has an aging workforce, and all these plants typically require staff who have been certified by state agencies,” he notes. “You need so much experience, so much education and continuing education. So the pool of people available to fill these positions is continuing to dwindle. That’s another thing that drives a customer to contract their services.”
Cost savings often is another driver. Customers look to reduce operating costs and extend the life of aging infrastructure by outsourcing its management. Risk sharing is another factor.
“If I’m responsible for a treatment facility, and I lose my management through a retirement, and I don’t have the ability to bring someone up from within, that’s a risk I have,” adds Oldewurtel. “What do I do in the interim? How do I stay on top of all the changing regulatory requirements? These are all things we’re able to bring as a contract operator.”
The COVID Effect
The COVID-19 pandemic added another stressor to local municipalities under increasing pressure to mitigate disease spread of COVID-19 as well as maintain key operations, such as ensuring residents have access to essential water and energy while employees may become ill or have to work remotely. Municipalities unable to effectively handle the added emergency often looked to third-party contractors.
According to Oldewurtel, VNA was well prepared to help as the new safety measures had long been part of their standard business practices.
“Everything we needed to do—increased vigilance on hygiene, using face coverings and PPE—those were already part of our culture,” he notes. “We’re doing the same thing we were doing before, except with an increased vigilance and a heightened awareness.”
The pandemic has changed how VNA uses remote communications and meetings, but Oldewurtel believes this has increased the quality and frequency of connection with all its locations by going virtual.
“We became very granular in communications,” he adds. “By tracking daily absenteeism and potential exposures, we’re able to keep an eye on, and be ready with, contingency planning if we felt we were at a situation at any of our facilities where we might have an issue with staffing levels or being able to keep facilities operating.”
Working with Third Parties
Bringing in a third-party contractor may be intimidating to any municipality or business who hasn’t looked into that route before, so Oldewurtel suggests a few important concepts and mindsets when getting started.
“For anyone considering using a third-party contractor, first of all, go in with an open mind,” he says. “Oftentimes, people have a preconceived notion or a certain perspective that may or may not be correct. One thing that’s important for anyone looking at third-party services: talk to others who have done it. There are a lot of partnerships out there.”
In addition to current customers of contractors, there are several industry associations that provide advice on how to seek and solicit third-party services. And like almost every aspect of every business, it’s critical to seek as much information and data as possible.
In his experience, when there are issues with a contract, it’s often not technical issues; it’s typically because there are issues with transparency, communication and the relationship. “We’re a people business,” he adds. “We don’t make a product we sell from a shelf. What makes people and companies successful? It’s the relationships.”
“One of the things I stress is ‘know your numbers, and have your facts,’” says Oldewurtel. “No matter where you work, understanding financial performance is critical. The other important lesson is to listen and ask questions, which will result in getting input, ideas and information, which results in engagement and ownership.”