By Dawn Kristof
The U.S. Senate Environment and Public Works Committee approved a bill on May 17 titled the "Water Quality Investment Act of 2002" (S. 1961). It authorizes nearly $40 billion in assistance over the next five years for water infrastructure related projects. The fate of this bill, and its counterpart in the U.S. House of Representatives (H.R. 3930), remains uncertain. Homeland security and foreign policy continues to dominate Congress' attention. With the upcoming national elections, an already partisan Congress will become even more divisive, making passage of any controversial legislation difficult to attain in the few remaining months of this year's congressional calendar.
Regardless of its ultimate fate, S. 1961 is noteworthy - not for what's in it (in the sum of $40 billion plus) but for what's NOT in it! At the eleventh hour of negotiations, the Committee voted to remove a one-sentence provision contained in its original draft that would have had enormous consequences on the water and wastewater industry.
Under the guise of "competition," this provision called for use of "brand name or equal" specifications on projects receiving state revolving funds (SRFs); the same federal procurement rule which applied to the former EPA Wastewater Treatment Construction Grants Program of the 70's and 80's. This provision appeared to some legislators to be a reasonable condition for ensuring that maximum value is achieved in the use of taxpayer dollars through receipt of multiple bids. The underlying thinking here is the belief that multiple bids drive down price and that the lowest bid begets value. Nothing could be further from the truth!
To illustrate this point, WWEMA and the Association of Metropolitan Sewerage Agencies (AMSA) published a document titled "Optimizing Public Agency Purchasing Power" which describes nine different procurement methods that can be employed by public drinking water and wastewater agencies in the acquisition of goods and services. Each method was rated against seven relative values as it pertains to the interests of the owner. The "brand name or equal" method only offered one value, that being initial purchase price. The other six relative values, such as reliability and operating costs, were not readily afforded through this procurement method.
With regard to purchase price, the document goes on to state that "Value means more than just the lowest purchase price. It is the lowest total cost of ownership, which includes operating costs, cost of procurement, reliability and after-purchase support. To ensure wise investment, the assumption that the lowest price automatically equals the best deal must be challenged. The process should be more value-focused than price-conscious."
Fortunately, WWEMA and other industry organizations succeeded in making this argument in the Senate, which ultimately resulted in the defeat of this provision. Had we not prevailed, it would have reversed decades of advancement in the application of innovative technologies used in the water and wastewater industry. The authority to specify the most appropriate, value-based technologies for a given project would have been stripped away from the owners and consulting engineers. We would have returned to the days when companies were named 'Or Equal, Inc.' to ensure automatic inclusion as a qualified bidder. Lest we never forget the General Accounting Office report citing the "brand name or equal" procurement requirement as a primary cause for wastewater treatment plant failures due to inferior product offerings during the EPA Construction Grant days.
We commend Congress for heeding our call and preserving the right of owners to utilize the full range of procurement methods available to them which ensure the lowest total cost of ownership to public agencies and the customers they serve. We now call upon the administrators of the State Revolving Fund (SRF) programs to ensure that their rules and requirements also allow for full use of these procurement methods. Failure to embrace all value-based procurement methods will only serve to stifle innovation and reward complacency at a time when new solutions are needed to meet the enormous infrastructure challenges facing our industry.
About the author
Dawn Kristof is president of the Water and Wastewater Equipment Manufacturers Association. WWEMA member companies are among the world's leading producers of technology to the water and wastewater industry, employing 43,000 workers with collective sales nearing $6 billion (USD) worldwide.
