In the 1990s, Kansas City, Mo., launched an initiative to revitalize its deteriorating urban core by upgrading infrastructure and attracting developers. By 2003, though, it had only issued 45 capital construction contracts, and it faced a capital project backlog of more than $400 million. Funded projects were stalled from three to 10 years because city departments lacked a common, systematic approach to complete them. “We had a very decentralized process, which was disconcerting to the contracting community,” says City Manager Wayne Cauthen, noting that contractors were hesitant to bid on projects because of lengthy bid-to-notice-to-proceed and payment schedules. “We needed a centralized, streamlined way to get those projects out on the street and manage them from design through completion.”
In 2004, city officials created a Capital Improvements Management Office (CIMO) to take charge of the majority of infrastructure projects. Officials assembled a public/private program management team comprised of city staff and private consultants to establish and direct the office’s operations. The city placed consultants in leadership roles, giving them authority and responsibility to make decisions on the city’s behalf.
Since then, Kansas City has eliminated its project backlog and improved its image with contractors. “We’ve gone from an organization that contractors would charge a premium to do business with, to an organization that they want to do business with,” Cauthen says.
As other local governments face similar challenges to upgrade or expand their infrastructure, some find that their procedures are not designed to handle additional projects efficiently. So, they are turning to the private sector, bringing consultants in house to form public/private management teams and charging them with coordinating numerous capital projects as a single program. Using the new approach, local agencies from the Clark County, Nev., Water Reclamation District (CCWRD) to New York City’s Department of Environmental Protection (NYCDEP) are revitalizing assets and accelerating revenue growth.
Learning on the job
Kansas City’s CIMO goals included becoming a preferred client among contractors, reducing project backlog, and serving as an economic engine for city development. Under a three-year contract, the consultant was charged with teaching city staff better project management skills and project controls, as well as building a culture of efficient project delivery that city staff would continue at the end of the term.
With CIMO’s improved payment processing, contractors now see the city as a reliable client who pays in a timely manner, and contractors want to work for the city. As a result, the number of bids has increased, leading to increased competition. Since 2004, CIMO has completed 199 projects, valued at $159 million, which includes the new construction and renovation of nine fire facilities, construction of 10 bridges and 69 traffic signal upgrades.
Now a formal division of city government, CIMO directs more than $1.2 billion in downtown revitalization projects, including a public/private funded $835 million, seven-block entertainment district, a $276 million Sprint Center Arena and a $135 million Bartle Hall Convention Center expansion. CIMO also manages $190 million in neighborhood and public service projects, including police and fire facilities, sanitary sewer connections, stormwater/flood control, street and bridge improvements, and traffic signal upgrades and street lighting.
As the workload dictates, CIMO contracts with private engineering firms to manage projects, but city personnel currently comprise 95 percent of its staff. “We now have one, centralized city department for capital improvement projects, with standards in place for moving projects from steps A through Z,” Cauthen says. “Before, we weren’t actually managing contracts, but rather reacting to contracts and the problems they presented.”
So far, the city’s revitalization has created more than 4,000 new jobs and is generating $170 million per year in new sales benefits to the state. “The new approach has stimulated our local economy,” Cauthen says. “For every dollar the public sector spends, we generate $3 to $4 in private sector investment. We’re building a stronger tax base for local and state government, creating thousands of jobs and inspiring renewed community confidence in city government’s ability to deliver capital improvement projects.”
Improving the odds
Last year, CCWRD officials in Las Vegas identified more than 50 infrastructure replacement and expansion projects totaling $1.2 billion that need to be completed by 2011 to keep up with residential and commercial growth. With 24 engineering and construction management staffers, and with the previous highest annual capital expenditure at $100 million, district managers knew their staff would be overwhelmed quickly. “This large capital work increase was too much for district staff to accomplish without help,” says District Assistant General Manager Sam Scire. “We recognized the need for a program approach to get ahead of the curve and proactively deliver more capital projects.”
CCWRD worked with a consultant to plan the capital improvements over five years, including schedules against which to measure performance. “We needed better controls in scheduling, budgeting and forecasting, cash flow projections, document management, project monitoring and reporting,” Scire says.
To help manage the district’s capital program, the CCWRD staff was joined by eight full-time consultants. “Supplementing district staff with experienced consultants has benefited the district with a quick infusion of resources and talent for the larger CIP [Capital Improvement Plan],” Scire says.
The consultants are creating the program’s master schedule, reviewing district procedures and recommending ways to increase efficiency, and instituting standard operating procedures. In addition, a Capital Program Management System has been designed to monitor and report program and project status so staff can identify problems early enough to take corrective action.
The new approach is providing better, faster information for all district staff. “In particular, the ability to accurately identify problems such as schedule, cost and progress negative variances sooner allows us to more quickly take appropriate corrective action and keep moving projects forward,” Scire says.
Striking a balance
Over the next 10 years, NYCDEP will implement a $19.6 billion program to upgrade and repair its water and wastewater infrastructure, which delivers drinking water to 9 million residents and customers in several upstate counties. With such a large price tag and large numbers of projects to coordinate, department heads recognized their existing procedures needed to improve to keep costs under control.
For help in completing repairs on time and within budget, NYCDEP hired a consultant in March 2006 to reorganize its project delivery methods. Under the contract, a consulting team was brought in to help NYCDEP’s project managers develop project delivery guidelines and centralize permitting. The consultant currently is developing an automated tracking system for information storage, archiving and retrieval on every project. “With the new approach, we’ll still have functions such as facility planning, design and construction, but the local project manager will have ownership, responsibility and accountability all the way through the system,” says Deputy Commissioner Al Lopez. “We think it’s the right combination of centralized/decentralized control.”
Although engaging private-sector consultants to take on management roles within local government agencies can help clear project backlogs and improve program management, the approach is not without its challenges. Differing motivations and perspectives between public agency staff and consultants can create a culture clash.
Placing private-sector consultants in positions where they influence spending public funds, even if only in appearance, requires public officials to increase oversight and transparency during the contract. The arrangements must be structured with an end-point in mind, providing a clear goal to consultants who otherwise might be inclined to extend their stay.
Cauthen believes Kansas City’s arrangement was successful because the private firm and local government staff analyzed the issues together and developed solutions that respected both public and private business processes. “In order for this to work, however, local governments have to be willing to challenge the status quo,” he says.
Mike Musgrave is vice president for the Business Solutions Group of Broomfield, Colo.-based MWH.