Peer-to-Peer Review of St. Louis City Water Division: Details & Kickoff

In late October, the City of St. Louis asked MSD to conduct an operational efficiency – or peer-to-peer – review of the City Water Division. MSD accepted this request and has been preparing for the work. On Monday, November 25th, MSD staff met with City Water staff to finalize details of the review and formally begin the process. We estimate the review will take 4 to 6 months to complete. The work will be led by MSD’s Director of Operations, Jonathon Sprague. Jon has been Director of Operations since 2007 and has over 25-years of professional experience, specializing in operations management and strategic planning in the water/wastewater industry. In his current role, Jon is responsible for a budget of over $94 million and staff of 588. From January to March of this year, he served as MSD’s interim Executive Director after the retirement of Jeff Theerman.  More information on Jon’s background and credentials can be found here.

Once completed, MSD will present a report to the City on its findings, including a list of recommendations. What recommendations are implemented, when they are implemented, and how they are implemented, will be at the discretion of the City.

MSD’s review will focus on identifying areas of the City’s water operations where cost savings are possible through the use of new technologies and different business practices. Or, in other words, MSD will work to identify how City Water might achieve maximum efficiency with every dollar spent, while still delivering high quality drinking water and the best possible customer service.

Several questions may come to mind:

  • Why is MSD doing the peer-to-peer review?
  • How can MSD – a sewer utility – conduct a peer-to-peer review of a drinking water utility?
  • What areas of City Water’s operations will MSD review?
  • What is the cost of the review?
  • Will MSD use outside consultants?
  • Is there an additional cost to MSD ratepayers?
  • Will there be a contract or agreement between MSD and the City?
  • How will MSD employees do their jobs while they are conducting the review?

Q: Why is MSD doing the peer-to-peer review?
A: Quite simply, City Water customers are also MSD customers. MSD also has the skills and expertise to perform this work. If we can partner with the City to better serve our shared customers, MSD welcomes the opportunity.

Q: How can MSD – a sewer utility – conduct a peer-to-peer review of a drinking water utility?
A: The underlying challenges a drinking water utility faces are not all that different versus a wastewater utility. In the 21st century, utility performance is and will be about delivering service and maximizing efficiency within an ever increasing regulatory framework; and, at the same time, finding the funds to rebuild, improve, and invest in systems that are decades, if not hundreds, of years old. With that in mind, over the past 10 to 15 years, MSD has undergone numerous changes in its management and structure, all with a focus on efficiency, customer service, and regulatory compliance. Knowing we would one day be subject to a Consent Decree with the Environmental Protection Agency (EPA) to establish a schedule for future improvements, we systematically reviewed our operating structure and business processes so as to obtain the highest level of efficiency and value from every dollar paid to MSD by our customers.

Q: What areas of City Water’s operations will MSD review?
A: MSD will focus on five key areas:

  • Reduce the overall cost of water treatment
  • Maintain or improve the revenue to expense ratio
  • Continue to meet Partnership for Safe Drinking Water Standards
  • Improve water main repair time and efficiency
  • Reduce non-revenue water production

In addition, we feel can provide valuable feedback to aid the City’s efforts – but not do a complete review – in the following areas:

  • IT functions
  • Lab data collection and transfers
  • Work flows and approval process for routine activities
  • Time sheet/cost accounting
  • Fleet maintenance
  • Customer service
  • Asset management
  • Use of Supervisory Control & Data Acquisition (SCADA) computer systems for gathering and analyzing real time data
  • Improvements to organizational structure, with a focus on operational effectiveness

Additional areas where MSD might be able to offer assistance:

  • Benchmarking data and comparisons
  • High level energy analysis and recommendation
  • Recommendations for consolidation of facilities
  • Major process improvements

MSD will seek to perform as much of the review as possible. And there may be other areas we can offer assistance, but have not yet identified. However, MSD cannot perform the entirety of the review the City originally sought.

Q: What is the cost of the review?
A: There will be no cost to the City. Peer-to-peer reviews of this nature are not uncommon in the utility industry. As an example, MSD recently conducted a peer-to-peer review for the City of Sacramento’s $2+ billion capital program to address sewer issues. Another example – and closer to home – St. Louis County conducted a similar review of MSD’s Engineering Department in 2003. These reviews are traditionally done at no or minimal cost (the cost of travel and incidental expenses).

Additionally, the fact that City Water and MSD serve the same customers in the same geographic area provides MSD with specific knowledge that can be applied in doing the review.

It is important to note MSD will not perform the full scope of the efficiency review the City was originally seeking to perform. There are activities MSD is not qualified to perform or, as a stand-alone government agency, MSD should not perform. (Examples of these activities are examining new business opportunities, expanding the customer base, public-private partnerships, and bond rating initiatives. These activities are best performed by outside consultants and/or are matters of policy the City must examine independent of MSD’s work.) In layman’s terms, MSD will mainly focus on the expense side of the ledger.

Q: Will MSD use outside consultants?
A: No, MSD will not use outside consultants to perform this peer-to-peer review. We have the in-house expertise, skills, and experience to perform the work on our own.

Q: Is there an additional cost to MSD ratepayers?
A: No, there will be no additional cost to MSD ratepayers. The MSD employees involved in the review are employees that are not eligible for overtime or other compensation in addition to their annual salary. They will draw the same salary they normally would for performing their regular duties – no more, no less.

Q: Will there be a contract or intergovernmental agreement between MSD and the City?
A: No, there will not be a contract or intergovernmental agreement. In essence, this is a professional courtesy that MSD is able to perform within the framework of its current workload. No goods, funds, assets, etc. will be exchanged. MSD ratepayers will bear no additional costs for the services being provided to City Water. Thus, an agreement is not necessary.

Q: How will MSD employees do their jobs while they are conducting the review?
A: Quite simply, this will be extra work for the MSD employees involved in the review. However, these employees are not vacating their MSD responsibilities while the review is underway.

Over the 4 to 6 months we estimate the review will take to complete, various MSD employees will be pulled into the work at different times, based on their expertise, experience, and workload. 3 to 4 MSD managers will perform the majority of the review. The work will be spread over several months, thereby allowing all staff to still fulfill their MSD duties.

Taking on extra work is not new for MSD employees. We do it all the time. Furthermore, we also have some of the most dedicated and hardworking professionals in the industry. (We are, after all, the 4th largest sewer utility in the United States and our organization is well respected throughout the industry.) This is what we do for our customers.

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