PROJECT SUMMARY
Partnership: American Water contracted to operate, maintain, and manage the City of Buffalo's water system.

Inception: September 1, 1997

Contract Term: Original contract five years, with a one-year extension. New five-year contract started July 1, 2003.

Key Achievements/Successes:

• $21 million savings in six years via across-the-board operating improvements and improved financial management.
• Initial water rate reduction of 8% held for five years.
• Innovative labor contract utilizes city employees with no involuntary staff reductions; work rule changes and improved deployment yield 26 % increase in productivity.
• Complete automation of customer records and general operations (90,000 customer records were previously maintained on index cards).
• Collection rate increased from 80% range to 97% resulting in significant positive revenue impact.
• New state-of-the-art customer service center built, with easy access to mass transit.
• Conversion to metered water from flat rate, with installation of over 60,000 water meters.
• Improvement in water quality through implementation of best practices reduced turbidity by 450%.
• Responsiveness and efficiency of water line repairs increased substantially with implementation of computerized maintenance and management system (CMMS).
• Vehicle reliability improved via new replacement and repair program. Average age of fleet reduced from 14 years to 8 years.
• Community involvement and support is integral part of mission - water education in schools, help to disadvantaged, involvement in civic improvements and redevelopment efforts.

Background
In September 1997, the Buffalo Water Board entered into a contract with American Water Services, Inc. to upgrade, operate, and maintain its water system. The original contract had a five-year term, which has since been renewed for another five years.

Buffalo had the foresight to form a partnership with American Water for the overall management of the city's water system. Buffalo required that water-industry standards be implemented with benchmarking to measure and enhance performance. The service American Water provides to Buffalo includes repair and maintenance of the distribution system, water treatment and pump station operation, residuals management, customer service, billing and collections, and water meter repair and installation. Buffalo and American Water collaborate for capital planning and implementation of capital programs.

Facts at a Glance

Buffalo Water System
Source: Lake Erie
Population Served: 290,000
Service Connections: 80,000
Service Area: 4.67 square miles
Average Flow: 78-91 million gallons per day (MGD)
Treatment Capacity: 160 MGD
Miles of Distribution Main: 843

Positive Labor Relations - A Key to Success
The contract required that the labor force remain as Buffalo city employees in order to preserve pensions and benefits. A six-party agreement was signed with four unions, Buffalo, and American Water, enabling American Water to manage the unionized employees. This cooperative partnership yielded many positive results including no involuntary staff reductions in the water division.

Other improvements included:

• Work rule changes to improve flexibility and responsiveness

26% increase in productivity as measured by the number of water customers per employee

Facts at a Glance

Work Place Improvements for Union Workers

• Safety training
• Improved maintenance
• Streamlined procurement and inventory processes
• Better tools and equipment to enhance performance
  

No More Index Cards
Prior to American Water's contract, over 90,000 customer billing records were maintained and updated via index cards stored in filing cabinets. All records, including customer account and billing information, were manually updated in a highly labor-intensive process.

Job one was to automate processes via advanced information technology (IT). First, we developed an IT plan defining local networking, hardware, and software requirements. The next step was to install a centralized internet-based system to cover processes including e-mail, office applications, operations and maintenance, water quality analysis, customer service, and billings. By centralizing systems and applications, we gained efficiencies in operations and processes that reduced costs, and reduced or eliminated redundancy in systems, staff, and support. These efficiencies continue to improve as the applications are leveraged.

Facts at a Glance

Previous Manual Processes Now Automated

• Meter Reading
• Customer Accounts
• Communications
• Collections
• Consumption Calculations
• Water Quality Analysis
• Work Orders, Purchase Orders, Inventory*

Customer Service - The "Bus" Stops Here
From the start, we recognized the need to improve accessibility to our customers and work conditions for staff. A new customer service center was built that offered free parking and easy access. We even worked with Buffalo's Regional Transportation Authority to add a new bus stop at our customer service center!

Facts at a Glance

Customer Service Enhancements

• Installed new Invensys (Oasis) - customer account management system
• Re-engineered and standardized processes
• Adopted standard operating procedures
• Reduced errors and greatly improved efficiency
  

Collections Rate Soars to 97%
Prior to our partnership, for every $100.00 that was billed, only $80.00 was collected. Buffalo and American Water agreed to a 94% benchmark collection rate, and our current collection rate is 97%, which exceeds the benchmark. This 17 point jump in collections has resulted in a significant annualized revenue increase. By bringing delinquent accounts up to date, our revenues have exceeded 100% of service charges in three of the past eight years.

Facts at a Glance

Improvements in Collections

• Systematic follow-up: letters, reminder calls, door hangers
• Flexible payment options
• Credit card payments
• 24-hour payment drop box
• Fair but firm enforcement of water cut-off policies
  

The Meters Are Running Now
At the inception of the contract, New York State mandated conversion of the system to metered water usage and billing. This was a big challenge and required the installation of 60,000 water meters in new locations and the replacement of 20,000 old meters. A proprietary software scheduling program was developed to help manage the process, including an automated "wizard" to convert customers' billing from the old flat rate. With the help of the union, work rules were modified to permit meter installation, which actually protected union jobs.

From a conservation standpoint, the meter changeover has been partially responsible for saving nearly 3.6 billion gallons of water per year.

Clear Improvements in Water Quality
American Water has reduced water turbidity (a measure of suspended solids and clarity) by 450%. This improvement was the result of a great deal of effort and expertise, and the employment of best operating practices in water treatment. Additionally, over the next five years, the Buffalo Water Board has earmarked $22 million for a major rehabilitation of the water treatment plant, originally built in 1915.

Facts at a Glance

Action Steps for Better Water

• "Best practices" implemented
• Optimized chemical dosing
• Sedimentation basins constructed to improve settling
• Backwash sludge-handling system added
  

In From the Cold - Work Order Management
Winters can be downright nasty in Buffalo, and they present special challenges for the water distribution system. In an average winter, crews repair 250-300 main breaks. Tracking response time and performance is critical, especially in sub-freezing conditions. So American Water implemented an internet-based Computerized Maintenance Management System (CMMS), DataStream 7i. This program records, tracks, and provides maintenance schedules throughout the system. We worked with the distribution department and DataStream developers to create a customized fieldwork order that also tracks all job-related data. Main and service leaks and repairs are recorded by size, type, date, and location and reported both to the Water Board and to the City's Public Works Department to assist in planning for capital improvements projects.

This state-of-the-art system allows us to continuously improve performance and meet or exceed the response benchmarks stipulated in our contract.

To date, we have exceeded benchmark performance.

On the Road Again - Vehicle Management
When our contract started, most service vehicles were already beyond their useful life - with an average age of 14 years. And they were routinely out of service for extended periods. Vehicle maintenance was performed with in-house staff that lacked the proper resources and training. Updating the service fleet was, therefore, a high priority. Buffalo collaborated with American Water to access the city and state vehicle purchasing program and began outsourcing repairs to reduce downtime. The renewed contract included a $1.6 million combined replacement and repair program over five years. The outsourcing repair program has resulted in more reliable repairs, reduced downtime, and more cost-effective use of funds. The average age of the fleet is now down to eight years, a fact much appreciated by our front-line employees.

Financial Management and Controls
Team-built financial controls and budgeting processes were implemented. Department managers and supervisors were not only included in the process of developing their departments' budgets but ultimately took ownership of managing budgets too. Setting specific departmental budgets with allocations for maintenance and repair allowed managers to improve equipment dependability using new learnings and "best practices." Purchase order and payment modules were implemented with the financial program package to improve cost tracking.

American Water also worked with Buffalo to improve the existing Supervisory Control and Data Acquisition (SCADA) system, which monitors and controls outlying pump stations and tanks. Our efforts, in conjunction with Buffalo's capital improvement plan, expanded the scope of the SCADA system to improve the speed and detail of the information, adding a radio back up and video security. One significant result is better pressure management of the distribution system. Pressure transmitters provide detailed, real-time information allowing better management of pressures. Consistent pressure has made service more reliable and reduced main breaks and associated labor.

Supporting the Community
From the onset, American Water's management team has understood the importance of community involvement in Buffalo. We've supported numerous programs to strengthen and uplift the community, and also many special events like the Pine Grill Reunion Jazz Festival, Winterfest, and the "Buffalo in Bloom" garden contest.

As for water education, American Water is "in the classroom" with our Adopt a School Program. We've developed a number of educational multi-media presentations to improve understanding of the Great Lakes as a valuable water resource.

American Water has developed strong relationships with a number of certified minority and women's businesses as both suppliers and business partners. We worked with a local minority developer to build our new state-of-the-art customer service center in a targeted redevelopment area adjacent to downtown Buffalo. This commitment was instrumental in helping to spawn the growth of new business in this depressed area. American Water's project manager serves on the Board of Directors for the Michigan Street Preservation Corporation, which is focused on the restoration of important African-American historic churches and buildings, many of which played an important role in the Underground Railroad.

Facts at a Glance

Community Involvement

• Police Athletic League Youth Program
• Shelter programs
• Roswell Hospital Children's Cancer Unit
• Martin Luther King Scholarship Breakfast
• City Mission
• YMCA Strong Kids Project
• Local food banks
  

Conclusion: This Public-Private Partnership Works!
The partnership between American Water and the City of Buffalo has resulted in truly remarkable achievements. American Water's industry-leading internal systems and procedures, coupled with Buffalo's willingness to proactively modify its practices, have lead to substantial cost reductions, measurable performance improvements, and superior service to citizens. Buffalo's initial goals of rate decrease and stabilization have been achieved, and the union is working side by side with American Water's management team to ensure decisions are made in all parties' best interests. American Water has established itself as a good corporate citizen and trusted partner within the Buffalo community.