Water Environment Federation (WEF)

Charlotte-Mecklenburg Utilities` Virtual Managed Competition Using Benchmarking

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Courtesy of Courtesy of Water Environment Federation (WEF)

The City of Charlotte, North Carolina’s Managed Competition Program is a City initiative that seeks the best service at the lowest cost through a competition between City forces and the private sector. The program reaches into many facets of City services delivery such as solid waste collections, fleet and street maintenance, and water and wastewater utility services. The units providing these services are considered to be business-like government operations meaning that they conduct operations that can be compared to private sector operations and have more autonomy over purchasing, employee reclassifications, employee duties, and job procedures.

The competition allows the City forces and the private sector to bid against each other for a given scope of services over an extended time period, typically 5 years. Agreements were negotiated with the low bidders that defined the operational parameters for the service period. Performance goals were established and gainsharing programs and financial incentives created to promote efficiency and reward the success of the individual business units responsible for
achieving the established goals.

For the Lift Stations operating unit in Charlotte-Mecklenburg Utilities (CMU), the program has been so successful for the City that there were no private industry bidders for the last competition. As a result of that success, the City embarked on a virtual managed competition process to optimize the performance of the Lift Stations division. The virtual managed competition process provided the benefits of managed competition, improved the agreement between the City and the Lift Stations Division, and provided clearer operating priorities and performance measure targets for success.

History of Managed Competition in the Wastewater Industry
The concept of managed competition was introduced to the wastewater industry by the City of Phoenix in the 1970s. The City of Phoenix’s managed competition approach offered the following benefits:

  • Assured elected officials that they were getting a fair price.
  • Increased public sector focus on efficiency.
  • Allowed for the purchase of cost saving equipment.
  • Gave the public agency an opportunity to learn from the private sector.

However, what worked for the City of Phoenix in the ‘70s and ‘80s didn’t always translate to success in other wastewater utilities. The benefits of managed competition were often limited or offset by the following factors:

  • Utility size.
  • Employee morale.
  • Claims of unfair competition.
  • Decreasing competition over time.
  • Limited possibility of the private selection.

As a result, managed competitions are now rarely done. CMU’s use of virtual managed competition provides an alternative approach to achieving the benefits of managed competition without the time, expense, and negative impacts of conducting a competition.

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