In a time when many companies are expanding their use of contractor services, the vegetation management department at Arizona Public Service Co. (APS; Phoenix, Arizona, U.S.) analyzed whether it was more beneficial to follow that course or pursue another. Keeping in line with APS's commitment to deliver shareholder value, maintain customer satisfaction and provide an environment that is both safe and rewarding for employees, APS dedicated a team to address this significant issue.
Since 2001, APS had outsourced 100% of its vegetation management services. The company had been mostly pleased with the work completed by its contract partners. However, after considerable research, cost analysis and discussion, APS ultimately found there were numerous advantages to bringing the work in-house. Through careful planning, APS has minimized obstacles and made tremendous progress toward achieving its business goals.
At the end of 1999, the line-clearance contracts APS had in place with its vendors expired. APS invited contractors to submit proposals for the coming year. Two contractors, a nonunion company and a union company, were both successful bidders and won portions of the APS contract in January 2000.
Because APS's line-clearance program was founded on competition, selecting two companies for the contract was no mistake. By having two different partners instead of one, APS was better able to keep costs down and ensure that productivity remained high. This strategy worked well because both contractors wanted to maintain secure contracts. In addition to competing with each other, they also faced competition from others who provided vegetation management services.
However, the landscape changed a couple years later when one of APS's contractors acquired the other one. Though still operating as separate companies, the dynamics of the relationship had clearly changed. APS's edge for managing costs and quality was weakened. This resulted in contract termination between APS and the two contractors. APS had the opportunity to reevaluate how it wanted to run its vegetation management practices going forward. The company recognized that many of the contract workers had become an integral part of its team and that it would be a tremendous loss to the company to stop working with them.
During the following months, the International Brotherhood of Electrical Workers (IBEW) Local 387 ramped up its efforts to convince APS decision makers that bringing the work in-house was beneficial to employees as well as the company. At first, APS was apprehensive and somewhat unwilling to keep line-clearance service positions in-house. Before 2001, APS had five in-house vegetation management crews and also used contract vendor support. Restrictive work rules made operations difficult, and because of the resulting decrease in productivity, APS made the business decision to outsource.
In prior years, when these positions were internal, labor costs and other expenses proved significantly higher than with the outsourcing alternative. From a management and economic standpoint, the IBEW's idea of returning to the former practice of keeping line-clearance workers on staff didn't seem to be the right move for APS.
At this point, APS had several choices:
Contract with one of the two contractors with whom it had recently worked
Contract with other vegetation management companies
Staff the line-clearance crews with IBEW union-represented employees.
Solving how the company was going to complete its already full workload with limited staff resources was an obstacle surely to be encountered. It became abundantly clear that more workers were necessary to maintain continuity in the workflow and ensure schedules would be uninterrupted. Hence, a strategic collaboration ensued.
Both contractors could offer many skilled workers who were already familiar with APS. And one of the contractors' employees were members of IBEW. In its proposal, that contractor inquired about using market-based wage rates, so the IBEW conducted a survey and determined the actual market wage rates for the region. After the survey was completed, the IBEW offered APS the average of the region's market wage rates. Any cost above the market rate included additional benefits and overheads, and revised work rules that would be more in line with APS's business goals.
APS decision makers listened, opened the door for discussions and began to analyze the proposals. After considerable negotiations with the IBEW, APS decided to bring more than 100 line crew worker positions, or 32 vegetation management crews, back inside the company because of significant benefits. The company benefited from wage reductions amounting to an annual cost savings in excess of US$1 million. It also had an opportunity to increase staff, achieving better statewide coverage for all programs. Importantly, IBEW Local 387 demonstrated significant innovation and flexibility in reaching a revised agreement that eliminated many of the restrictive work rules.
Under the new agreement, APS has more control over business decisions. The company has the right to monitor productivity, compare crews' productivity, and make adjustments in personnel, work hours, starting locations and so forth. APS saw the benefit of being able to ask personnel to perform any duties required by the company, and the opportunity to implement incentives, rewards and bonus systems based on safety, productivity, quality of work and customer satisfaction. For example, by being able to add more crew-reporting locations, the company has reduced per diem costs.
Also, there were significant benefits to workers. In-house coordinators (general foremen) and planners (permitters) no longer have to serve two masters (their contractor company and APS) and have a stake in the success of the operation. In-house crews receive: improved training, safety, tools and equipment; better insurance (health, vision, dental); opportunities for bonuses; ISA certifications; and the benefit of being a part of the utility, resulting in closer ties and better control of the operation.
With the decision having been made to bring APS's vegetation management services in-house and to supplement the staff with contractors, it fell upon the management team to develop an action plan for the business unit. The team's diverse background — from forestry, landscaping, wildlife management, utility arboriculture, business management, computer science, archeology, finance and ecology — helped the project stay on task.
The following are the 13 steps the team took to establish a comprehensive vegetation management program:
Perform financial analysis
Develop and negotiate agreement with union
Research tools and evaluate suppliers
Research and lease available equipment
Create new job descriptions (section leader, coordinators, planners and arborist classifications)
Interview and hire management team
Receive delivery of and customize fleet
Coordinate interviewing, hiring and initial training
Transport trucks, stock tools and equipment
Revise database and train administrative assistants
Prearrange work in advance of crews
Form safety committee
Evaluate available industry training programs.
While safety appears as No. 12 on the list, it most certainly was at the top of the team's mind. And at APS, safety always comes first. Due to the inherent risk of clearing and pruning vegetation away from high-voltage power lines, safety is the single most important consideration. In every area of the company, all APS employees are responsible for safety. It's embedded in APS's culture.
While all contract workers must meet and operate under specific safety requirements to maintain their status as an approved APS vendor, it is mandatory for all APS employees to continuously undergo rigorous safety training. In addition, employees are equipped with and trained to use state-of-the-art tools designed to help keep them safe. APS is proud to have incredibly high safety scores, and its training, tools and standards are light-years ahead of most companies.
By bringing vegetation management in-house, APS had newer employees with high-risk responsibilities, and therefore was concerned about employee safety as well as maintaining its stellar safety record. In 2003, tree workers ranked third on the company's Preventable Recordable list. That ranking continued through 2004. Because APS believes that all accidents are preventable, with management's support, the safety committee stepped up its safety training efforts by ordering new hard hats that were better suited for tree work, establishing an apprenticeship program and providing training through ArborMaster Training Inc. (Willington, Connecticut, U.S.).
Within the first 10 months of transitioning to in-house crews, APS's safety record was unsatisfactory, recording 10 accidents. The team decided to focus on training to turn the safety record around. After the first ArborMaster training module took place in October 2004, APS noticed a remarkable difference in crew safety awareness, and beginning April 20, 2004, the team went accident free for one year.
The crews started learning safety techniques for basic work and now have moved to advanced rigging and climbing. APS credits Rip Tompkins and Ken Palmer, the owners of ArborMaster, for taking the APS team from old-school practices to using modern climbing systems and techniques.
In addition, the safety committee started an Annual Safety Training Day, revised its Customer Profile Sheet so that it focused more on safety and implemented a bonus program that hinged on each employee's safety record for the year. Since implementing these programs and strategies, APS has seen dramatic increases in safety, productivity, cost savings and customer satisfaction.
APS is pleased with the way its program is evolving. Because of a bark beetle infestation, APS continues to use contractors to deal with dead and dying trees near the power lines. Comparing the company's cost per tree in 2006, the contactor average is $59.31 per tree worked, while APS crews cost $30.51 per tree worked. Even more importantly, the APS safety record continues to improve. APS's current path is proving to be a win-win situation for all parties. The company is optimistic that its future is bright.
Michael Neal is manager of Forestry and Special Programs at Arizona Public Service Co. He is a past president of the International Society of Arboriculture (ISA) as well as the Utility Arborist Association. Neal is an ISA-certified arborist and ISA utility specialist. He serves on the Governor Forest Health Oversight Committee and chairs the subcommittee on education. In addition, he is serving on the North American Electric Reliability Corporation (NERC) Transmission System Vegetation Management team, developing vegetation management standards. His background includes five years with the Florida Division of Forestry and more than 20 years of involvement in utility arboriculture. Neal earned a bachelor's degree in forest resource management from West Virginia University. firstname.lastname@example.org