10/20/2011 Letter to City Council and Staff plus Maggie Creamer of the Lodi News-Sentinel follow-up to the 10/19/2011 City Council meeting:
Subject: Staffing of the new Lodi Surface Water Treatment plant
The council meeting procedure that allows council to have the last word can be irritating for the public, even though I can appreciate the wisdom of it. In last Wednesday night’s city council meeting, Councilman Larry Hansen’s last word was to state philosophically that outsourcing a service is not the same as outsourcing the manufacture of "widgets." Further, that an "essential" service similar to the police department should not be outsourced, water being one of those services. Frankly, Mr. Hansen is wrong.
In fact, outsourcing widget manufacturing is outsourcing the "service" of manufacturing a product, often using the customer's facilities and resources.
Mr. Hansen seems to define an "essential" service as one so critical that the city is the only one that can successfully perform it. I would suggest a better definition is that an essential city service is a critical service for which the provider must deliver a high quality service at a competitive cost and delivery. Therefore, someone other than the city could successfully provide that service if the criteria was met.
Mr. Hansen also implied that using value analysis to select the best candidate was inappropriate because water and police are not widgets. Perhaps an explanation of "value analysis" is appropriate. Value analysis is a technique developed by GE specially to improve a service or a product from the customer's perspective, not the provider. Value is made up of cost, delivery and quality and is often represented by a three-legged milking stool. The analogy is that the seat (“value”) is level only if the three legs (“cost, delivery and quality”) are properly balanced. I can easily use this technique to evaluate competing solutions intended to staff a police department if Mr. Hansen is interested.
The open question Wednesday night was is Southwest so inexpensive that they will not perform their function with the required delivery, quality and reliability, or does Southwest have a highly efficient model rending the other competitors overpriced? That this performance attribute was not validated either way frustrated me.
Council and staff understand the need for high quality and reliability but do not seem to understand how to get it other than to default to city staff, the option with the least attractive value rating to date. Unfortunately, the length of time a company has been in business is not a good indicator of quality nor is a supplier’s claim of quality. Your concern is not unique; all customers need quality but do not know how to guarantee it when they first look into outsourcing.
The key to outsourcing successfully is the supplier's quality system, and Lodi's lack of understanding of this is another source of frustration. It is impossible to write into the contract enough requirements and restrictions to guarantee quality. The dilemma is how one evaluates a potential supplier's quality system beyond their word.
The answer is with suppliers with quality system certifications such as ISO and ISO-like quality systems. Briefly, ISO is the abbreviation for the International Organization for Standardization. ISO is a family of standards relating to quality management systems and is designed to help organizations ensure they meet the needs of customers. Organizations must have robust Preventative Maintenance (PM) systems to be certified. Organizations that are ISO-certified or have ISO-like quality systems are periodically recertified by third-party auditors for conformance and effectiveness. In addition, internal audits are performed that are often tougher to pass than third party audits. The idea is to insure an organization delivers consistent, predictable performance over time. Any supplier organization losing its certification is a “red flag” to its customers and this is considered a violation of the service contract.
To the point that a significant city staff resource would be required to manage an outsource supplier, a robust supplier quality system removes much of that requirement as quality audits and PM metrics provide oversight beyond what a staff member can reasonably do. This is not to say a city representative should not occasionally perform audits, attend audits, visit plant, etc., but very few hours are required. The plant is in town and easier to travel to than White Slough.
The point for Lodi is that its competitor evaluation process must strongly consider the supplier’s quality system (including Lodi’s since they are a competitor) to insure that this essential service will reliably be delivered, exceeding water standards at a competitive price.
