Making the Right Moves
More Municipalities Are Turning to Program Managers for Large Infrastructure Initiatives
Bruce Howard — Apr 01, 2008
Many cities, states and investor-owned utilities across the United States are working diligently to upgrade aging infrastructure, seeking to improve their communities, including their water and wastewater systems, by undertaking massive capital improve ment programs. Motivated by aging water systems that in some cases feature components more than 100 years old, there is an important push nationwide to refurbish or replace the vast water infrastructure that each year transports trillions of gallons of water and wastewater through miles and miles of pipelines. To accomplish this, elected and appointed officials, along with business executives and professional engineers, must make an array of management and engineering decisions before the first shovel digs into the dirt. Chief among them: Should they hire a program manager?
While the program management concept has become increasingly popular in recent years, especially in the Western United States, some municipalities and utilities are unsure about the role and value program managers can play when embarking on large-scale redevelopments. Some decision-makers are unclear about what program managers can provide in regard to day-to-day operations of program, while others might struggle to understand why the additional cost in the short run of hiring a program manager consistently pays dividends in the long run.
Simply put, program management is the formal integration of a portfolio of projects, with one company or team responsible for ensuring that the individual projects fit within the scope and requirements of the broader program. A program management firm does not actually design or construct the facilities, underground tunnels or pumping stations necessary for the programs it oversees. Rather, a program manager supervises the planning, purchasing and execution of design and construction for the entire program, ensuring that each project meets all necessary regulations and quality standards; maximizes any and all available cash flows; and satisfies the needs of taxpayers – doing so on time and on budget. Program managers can prove helpful in an array of redevelopment efforts, ranging from water and wastewater systems to airports to citywide infrastructure upgrades.
Ahead of the Curve
Countries such as Australia and England began using program management firms widely nearly two decades ago to oversee complex redevelopment and underground infrastructure programs, while the management concept has only become popular in the United States since the late 1990s. Some cities, including Kansas City and San Diego, have used program managers with great success, helping to push complex infrastructure projects through to completion more efficiently, with higher quality, and with a reduced burden on taxpayers. A program management approach can save time and money, improve consistency, and promote a level of continuity across separate, albeit interconnected, projects. Program managers, in essence, provide a level of quality-control that is difficult to match when compared to tackling projects on a one-off basis.
Well-respected program management firms employ experienced engineers who possess the proper perspective and technical expertise to effectively oversee large redevelopment efforts — a specialized set of skills not always found among workers on the payrolls of city or state governments or private industry. As a result, program managers are becoming increasingly relied upon, a fact that has motivated a number of engineering companies to launch program management practices. While additional competition raises the bar and provides additional choices for municipalities and utilities, decision-makers must make sure to perform the proper due diligence before hiring a program manager.
New Tools
The rise of program managers can be attributed, in part, to recent technological advances. Because of the Internet and program management software, program managers can remotely track projects in real-time. In addition, program managers are able to use search filters to focus on specific projects that, for instance, are encroaching upon deadlines or nearing budget limits. Instead of culling through reams of data that might include outdated information provided by engineers in the field, the interconnectivity that the Internet and other technologies provide — coupled with a systematic overview and approach — allows program managers to add value and improve operations in a way that was largely impossible in years past. Program management firms can use a combination of in-house, proprietary tools and off-the-shelf software programs such as Primavera and ProjectWise from Bentley.
A program manager is also responsible for reducing its client’s costs, whenever possible. For example, by purchasing the water pumps needed to overhaul a city’s wastewater system through an indefinite delivery contract, the program manager can buy in bulk, and thus leverage economies of scale, to procure the best possible price for the city. What’s more, the program manager has the perspective to understand how many water pumps are needed for the entire project and is in a position, and has the authority, to make the purchase all at once. By making the buy at the outset of a large overhaul, the program manager locks in the price and reduces the risk that inflation or a momentary spike in the cost of raw materials will create havoc on the program’s cost projections. For the most part, those advantages can’t be achieved by tackling projects one by one.
Program managers also can improve a program’s cash flow. By taking a 50,000-foot view of a redevelopment, program managers are able to strategically decide how to prioritize projects. By doing so, municipalities and utilities can avoid bottlenecks and make sure to prioritize revenue-generating projects that are vital to maintaining service levels. This approach can smooth out cash flows, helping to allay fears of lenders, ratings agencies or investors, while reducing interest costs associated with major overhauls by more consistently meeting debt obligations more consistently.
In the United Kingdom, program management has been in vogue since shortly after utilities were first privatized nearly two decades ago. Since then, residents there have seen a steady string of environmental infrastructure upgrades, including the latest effort: A five-year, $30 billion construction program aimed at replacing aging water treatment facilities, pipelines, reservoirs and aqueducts, upgrading water treatment and pumping equipment and reducing intermittent waste spills. More than 3,200 projects are in the works through 2010 as part of the overall program, a massive undertaking requiring a variety of public and private workers and organizations to act in concert. Of that total, 1,100 projects are being handled by United Utilities, one of the United Kingdom’s largest water utilities.
Managing so many separate projects is a daunting task with more moving parts than a Rube Goldberg machine. Equipment and contractors must be ordered, tracked, installed, monitored and maintained. Regulators must be apprised of developments and their questions or concerns must be addressed. Service disruptions must be minimized to avoid inconveniencing residents and crimping cash flows. To help accomplish all that, United Utilities selected MWH as program manager. In this role, MWH’s engineers and consultants have worked directly with contractors and subcontractors handling the individual construction projects. The United Utilities portion of the overhaul, which is just being completed for a total program cost of $4.4 billion, is currently on-time and under budget by more than $200 million.
To be sure, program management is not ideally suited for all infrastructure improvements. Construction of a series of small, inter-related maintenance projects may not benefit from the economics of a program manager in the same way larger efforts do. Likewise, the value a program manager can add is not as great for projects that can be accomplished within a confined geographic space or that require a relatively small number of subcontractors to complete. By comparison, a city seeking to upgrade and overhaul its water and wastewater infrastructure must account for scores of projects spread across many miles and neighborhoods — the type of overhaul that typically benefits most from the oversight provided by a program manager.
The City View: Atlanta
Such is the case for Atlanta, which is in the midst of a $3.9 billion water and wastewater system overhaul. In 2001, the bustling metropolis was confronted with two consent decrees requiring the city to revamp its water and wastewater system, which was producing more than 1,000 sewer spills per year, a problem that was especially acute during wet weather conditions. In designing the solution for Atlanta, MWH divided the project into two categories: the combined sewer overflow system (CSO) and the sanitary sewer overflow system (SSO). The CSO, which carries sewage from homes and businesses and stormwater runoff from streets and buildings when it rains, was of primary concern. The SSO, which handles spills of untreated or partially treated wastewater from sanitary sewer systems, would be largely revamped later.
Some Atlanta residents and politicians wanted the overhaul of the entire CSO system to occur across the city, serving all residents in some manner at roughly the same time. MWH served as the program manager and was able to take a high-level view, suggesting that such an approach would prove too costly and time consuming. Instead, MWH and its engineering partners decided to focus efforts on specific areas and projects. The rationale was that because the trenches were already open, the city would save time and money focusing its efforts and avoiding going back into the same areas to finish the work at a later time. The entire project is on track for completion in 2014, and MWH was recently reauthorized for a seventh year as program manager.
Although program management may not be the answer for all engineering projects, the upsides are starting to convince many city, state and utility officials that investing in a skilled program manager can save time, money and headaches when launching a large or complex underground infrastructure program.
Bruce Howard is president of MWH Business Solutions, a division of MWH that offers management consulting, technology implementation, automation and communications, and project and program management services.
