IT’S TIME TO MODERNIZE PROCUREMENT IN THE WATER AND WASTEWATER UTILITY INDUSTRY
The nation’s 70,000 water and wastewater systems represent a mostly locally-owned and operated ecosystem of separate utilities. They are governed by separate bodies (often elected or appointed by local elected officials) and primarily funded by local ratepayers. This creates a great sense of empowerment on the part of local communities when it comes to their local water or wastewater utility. Read More...
The nation’s 70,000 water and wastewater systems represent a mostly locally-owned and operated ecosystem of separate utilities. They are governed by separate bodies (often elected or appointed by local elected officials) and primarily funded by local ratepayers. This creates a great sense of empowerment on the part of local communities when it comes to their local water or wastewater utility.
However, the fragmented ecosystem has significant drawbacks that are costly to both utilities and local communities. The area where the costs are realized more acutely is in procurement where an estimated $45 billion is spent contracting for construction projects, software, goods, and services. Public utilities are required to place major infrastructure contracts out for public bid, but it is often difficult for a potential bidder to become aware of the bid opportunity as it is impossible to track thousands of utilities. Consequently, bidders can miss an opportunity simply because they we were not aware of where the bid or RFP was posted.
The fragmented ecosystem also creates many other problems due to the inherent inefficient nature of the industry: transparency is reduced, competition is limited, access to new technology is also limited, and prices can be higher — which gets passed on as higher rates for ratepayers. In recent years, there has been a number of elected officials who have been convicted of corrupt activities involving the awarding of water and wastewater contracts (e.g., former Detroit Mayor Kwame Kilpatrick is serving 28 years for corruption involving water and sewer contracts).
There is a solution that exists but has not been applied to the water and wastewater industry. It is called an exchange, or marketplace. An exchange has been used to create efficient commerce for thousands of years. Go to any country and you can find marketplaces representing a collection of vendors selling all sorts of wares. In 1817, the New York stock exchange was created to make it more efficient to buy and sell stocks (rather than buyers and sellers trying to find each other without a market). Another example of the efficiencies created by a marketplace is the modern shopping mall where you can visit and shop at many stores in a single location. In short, the exchange model is a well-established method of creating efficient commerce between large disparate groups of buyers and sellers.
With technology, we can now create an exchange to more efficiently connect water and wastewater utilities with vendors and contractors. Today, utilities can maintain their separate autonomy yet still receive the benefits of participating in an exchange.
H2bid has taken the initiative to develop a platform for such an exchange. H2bid was co-founded by Glenn Oliver, a former water and sewer commissioner who saw the limitations in the current ecosystem first hand. H2bid was created specifically to solve the problems caused by a fragmented water and wastewater industry. Utilities can use H2bid’s exchange to post bids and RFPs and receive electronic responses for formal (sealed) bids and informal bids. Utilities can also conduct reverse auctions and award contracts. The platform is simple and user-friendly. Whether a utility is posting a bid or a vendor responding to a bid, both can be accomplished in minutes and it's as easy as sending an email.
More importantly, this marketplace has been created specifically for water and wastewater procurement. All utilities — large and small — can use it without a significant drain on resources or staff time. The exchange eliminates the problems of a fragmented market by:
- Providing a single exchange where all utilities can post bids and RFPs
- Providing a single exchange where vendors and contractors can find bids and RFPs from every water or wastewater utility. Vendors and contractors can respond electronically through the exchange in minutes (eliminating the time and expense of traveling to drop off paper responses, not to mention the environmentally-friendly aspect of no longer needing to print paper responses).
- Assuring maximum transparency because maximum exposure is guaranteed (H2bid has already assembled the largest database of vendors and contractors serving water and wastewater utilities).
- Making it easy for smaller companies with new technology to find customers.
- Enabling utilities to learn from each other and get the benefits of analytics derived from the exchange.
It is time for a new day in the water and wastewater industry. Hopefully, the idea of a fragmented water and wastewater industry will soon be relegated to a distant memory.
About the Author: Glenn Oliver is the CEO of H2bid (www.h2bid.com), a leading source for water and wastewater utility contract opportunities. He has over 15 years of public and private experience in the water industry, including formerly serving as a water commissioner. Oliver is a leading advocate for making infrastructure procurement more efficient in the water and wastewater industry, which drove him to lead the development of H2bid’s exchange to more efficiently connect water and wastewater utilities with vendors and contractors.