AMOTIA 5 th Annual Conference Best Practices in Privatization of Maintenance Functions

1. AMOTIA 5th Annual ConferenceBest Practices in Privatization of Maintenance Functions Kevin E. Griffin P.E. Director of Maintenance Utah Department of Transportation

2. Outline Why is UDOT looking at privatization? UDOT’s Experience with Privatization. UDOT’s PB study. Contract Risk Analysis Tool. Other Wisdoms

3. Why Is UDOT Looking at Privatization?

4. Assets continue to increase. No longer do more with less. System will continue to grow. Why Privatization?

5. Why Privatization? • Budgets • Labor/Manpower Issues • Not growing government • New technologies/innovations

6. Why Privatization? • Proactive approach • Mandates • Business model for the future • Avoid the mistakes

7. UDOT’s Experience with Privatization

8. UDOT’s Experience • Numerous method contracts. (Tool Box) • Mowing • Guardrail repair and installation • Vegetation Control • Paint striping and messages • Equipment/operator • Etc.

9. UDOT’s Experience • Bangerter Highway Contract. • 6 lane, 24 mile facility. • Complete outsource of maintenance functions. (Except pavement preservation) • Bids came in at 200% to 300% higher than anticipated.

10. UDOT’s Experience • Bangerter Highway Contract. • Too small of a section. • Too high of depreciation costs. • Placed to much risk on the contractor. • Had both performance and method requirements. • To harsh of penalties.

11. UDOT’s Experience • Performance based striping contract • I-15 Salt Lake County • 6 year contract • Minimum retro reflectivity • Not product specific • All inclusive • $5 Million contract

12. UDOT’s PB Study • Contracts • What activities does the contract cover? • Standards and how measured? • How long is the term? • What are the risks?

13. PB Study • What activities does the contract cover? • Specific activities bring more risk to the contractor. • To few activities increases cost to owner. • To small of an area increases cost to owner. • Need to engage the industry early in the contract creation process.

14. PB Study • Standards and how measured? • Complete physical inventory of assets. • Defined performance outcomes. • Do not mix performance and methods in measures. • Train compliance work force. • Consistency in measurements.

15. PB Study • How long is the term? • Amortization of costs. • Short term will mean higher costs. • To long of a term can also mean a higher cost. • Do not expect to save money on the first contract.

16. PB Study • Included inflation factor. • Does it exist in the contract? • Is it adequate? • Inflation • Labor Rates • Commodities • Fuel

17. PB Study • Penalties • All potential penalties are reviewed. • Costs are included in the contract. • Reduced potential for penalties equals lower prices.

18. PB Study • Capital Expenditures and Depreciation • Reduced if equipment, stations, etc can be used for other contractor projects. • Longer term = reduced depreciation. • Optimize term to life of largest fleet type. • Give options to contractor to lease equipment, facilities, etc.

19. PB Study • Unscheduled overtime work. • Need good historical data. • Winter weather. • Need good historical data. More data = less cost. • Changes in standards. • Risk needs to be taken by the owner.

20. PB Study • Price volatility of fuel and oils. • Need to include change clauses in the contract. • Major rehab and reconstruction. • If agreed upon in the contract, time frames need to be upheld.

21. Contract Risk Analysis Tool

22. Risk Analysis Tool

23. Risk Analysis Tool

24. Bangerter Example

25. Bangerter Example

26. Other Wisdoms

27. Other Wisdoms • Engage industry early and often. • This has to be a partnership. • Retraining of DOT staff is crucial.

28. Other Wisdoms • Need to have strong data to support performance requirements. • Have to know what you have. • Don’t hold contractor to different standards.