This piece was originally published here on April 1, 2016.
The National Association of Clean Water Agencies, the Water Environment Research Foundation, and the Water Environment Federation collectively hatched "the utility of the future" (UOTF) concept in 2013 in "The Water Resources Utility of the Future: A Blueprint for Action." In this and ensuing documents, these organizations not only explain why transformative change is necessary but also provide guidance on how utilities can make the essential transformation.
Transforming into a UOTF has nothing to do with science fiction and everything to do with embracing necessary change. Impediments to this transformation are well-established. Many utility managers, procurement specialists and legal professionals in the water industry struggle with the specific changes necessary for a successful transformation. Regulatory pressures, limited budgets, political pressures and the common human hesitancy to try something different push status-quo mindsets to follow the natural inclination to stick to the same ole’ thing. Unfortunately, transformational change does not grow from status quo.
The UOTF model uses collaboration and innovation to break through these impediments. These UOTF traits are evident in case studies provided in the blueprint document. These two tenets of transformation are also common to the world of design-build and other collaborative project delivery models; they are the common language of success.
Transformation into a utility of the future requires many kinds of innovation, including new technologies, unique financing approaches and more collaborative capital-project delivery mechanisms. The “Business Case for Action” from the blueprint document states, “The most cost-effective solutions for the communities they [utilities of the future] serve increasingly involve others outside of their direct control.” That sentence carries a lot of weight. When coupled with the UOTF tenets of collaboration and innovation, it implies the necessity for the transformational UOTF to forge relationships with business partners in finance, engineering and construction, community and policy. These are the types of relationships forged through collaborative project delivery models, including progressive design-build delivery, public-private partnerships and performance contracting.
Working collaboratively side-by-side with — rather than across the table from — its business partner(s), the UOTF also begins to see risk differently. This and other tendencies for collaborative teams to solve problems and meet needs in new ways reinforce the benefits of collaboration and innovation. The UOTF begins to perceive risk as an investment opportunity rather than something to avoid. Collaborative-minded utilities and their business partners are motivated to create balanced risk models that jointly address their common concerns. Together they assign the risk to the party best suited to manage or mitigate the risk. Under the traditional model, the utility avoids risk through carte blanche assignment of risk to the builder or engineer. This is detrimental to ratepayers because built-in risk costs result in higher capital costs.
Savings result for the collaborative-minded UOTF, which no longer overpays other parties to assume ill-fitting risks. Proper allocation and sharing of risks translates into lower costs for utilities of the future, ultimately stabilizing or even lowering rates. This strategy enables the UOTF to overcome political impediments and limits the reasons to raise rates.
Transformational partnerships for the UOTF come from other sources as well. Industry research from the Water Design-Build Council (WDBC), the Design-Build Institute of America (DBIA), and other leading organizations are clearly showing, through industry education and communication, how the use of collaboration and innovation provides results that are desired and expected. Utility professionals are increasingly comfortable and inclined to step outside of the status quo by using collaborative delivery models for capital project delivery. Over the last 10 years, owner testimonials speak volumes about the benefits and are advancing the concept of collaboration and innovation as more than just feel-good language.
The truly transformational utilities of the future are pushing the flexibility of collaborative delivery models from “just another way to build a project” to models that form business partnerships, thereby creating strategic alignment and long-term benefits for stakeholders. In this way, they transform into a relationship-driven business partner that views balanced-risk profiles as investments, embraces not only technological but also pervasive programmatic innovation and ultimately creates the most appropriate business environment for itself while simultaneously creating the highest value for its ratepayers.
Transformation begins today. I strongly encourage utilities of the future to begin not only speaking the new common language of innovation and collaboration, but also acting on it by stepping out further as industry leaders and mentors, collaborating with project delivery partners and organizations such as the WDBC and DBIA to follow the blueprint and change the industry.