ONE OF THE UTILITY MANAGEMENT ENIGMAS PUZZLING ME is that, on one hand, our industry is being pushed steadily and persistently to be more competitive, involve more players and encourage innovation. On the other hand, increased internal pressure is being put on vegetation managers to reduce the number of contractors.
BC Hydro has a policy in place to maximize competition from outside sources. We offer 300 to 400 lump-sum contracts each year, encouraging bids from as many of our 40 qualified contractors as possible. But the accounting company that manages our purchasing is now advocating fewer contracts. The argument is that by reducing our contracts to 10 or fewer, we could save hundreds of thousands of dollars in administration costs. Although this may seem true on the surface, a close analysis of our current firm-price system indicates this tendering method actually saves us millions each year in contract billing.
Aside from the advantage of having a highly competitive marketplace, the use of lump-sum contracts benefits BC Hydro in other ways. As the system owner, we need to ensure our standards are met and that all work is of the highest quality. This is a tall order best addressed by clear and unquestionable criteria. To get the best quality control, specifications should be site specific so that the contractor has no doubt as to the work being tendered, and the contract inspector knows exactly what to expect and what to look for in the field.
Many of our peers use time and materials (hourly) contracts, which present difficulties insofar as the utility's internal people have to spend extra time addressing not only quality but also productivity. Our own experience shows that ensuring quality with hourly crews is not difficult because problems can be quickly remedied with a callback and the time has been taken into account. Monitoring productivity, however, needs to be done on a daily basis, which requires extraordinary amounts of time.
Our choice to offer smaller lump-sum contracts provides key advantages:
The number of competitive bidders can be maximized as contracts are small enough to be taken on by qualified mom-and-pop shops and large enough to be of interest to multinational companies.
There is no need to constantly monitor progress because, if the specifications are made clear from the start, deficiencies and callbacks can be assessed at any time. The contractor is responsible for productivity because the time is paid regardless of how long the job takes to complete.
The key to the success of competitive bidding is in the number of qualified contractors who are attracted to the table. BC Hydro's approach is to offer ample bidding opportunities to ensure that smaller companies can stay in business and remain interested in working for the utility. In addition, the British Columbia Certified Utility Arborist is an indentured apprenticeship and a recognized trade — a qualification required to bid on any vegetation management work for BC Hydro. This enables the establishment and maintenance of small operators and helps provide an all-important balance with the multinationals, which presently receive between 55% and 65% of our work.
Brian Fisher is president of the Utility Arborist Association and serves as strategic coordinator of vegetation management for BC Hydro. firstname.lastname@example.org