OUTSOURCING INDUSTRIAL WASTEWATER TREATMENT Jerzy Kołłajtis – Magda Trybuch – (+48 22) Bytomska 5A, Warszawa ADVENT-ENVIRON

WHAT IS OUTSOURCING? Replaces existing in-house function Contractor will reduce industry costs May provide better service Contractual arrangements are key Established in municipal market Growing trend in industrial market

WHAT CAN BE OUTSOURCED? Staff Services Programs Utilities (water, power, wastewater treatment, waste disposal) Equipment (i.e. leasing) All of the above

DEGREES OF OUTSOURCING Process & Detailed Design Engineering & Construction Startup Support & Operator Training Troubleshooting Problems Troubleshooting Problems Technical Support Technical Support Operations Labor Operations Labor Contract Management Contract Management Purchase Assets, i.e Own/Operate Traditional contract engineering services Applicable to new plant or upgrades Ensures smooth transition to client control Can help safeguard warranties Emergency response Not cost-effective if it becomes routine Identify and avoid/reduce problems Ranges from data review to operator direction Manpower service Client management remains in place Assume control of all labor, budget, reporting Establish performance criteria Can transfer more risk to operator Detailed contracts needed to address risk

REASONS TO OUTSOURCE Go to your core competencies Redirect management time Reduce operating costs Better performance Capital upgrades can be annualized Selling assets improves bottom line

POTENTIAL PROBLEMS Perceived loss of control Resistance from in-house staff Define performance specifications? Upfront additional effort Transfer of staff to contractor Contract can reduce flexibility

WHAT ABOUT COMPLIANCE? Industry must control this Contractor image versus yours Responsibility for any violations? Who is the permit owner/operator? Contractor has core competency More outside resources available

PATH TO OUTSOURCING Determination of Need Decide on How to Implement Due Diligence Business Proposal Confirm Final Scope Negotiate Contract Transition to Provider Clearly define corporate or site driving force Get preliminary buy-in from stakeholders What is the upper & lower limit for contractor scope Identify qualified contractors Open book or bid package Prepare responses to bidder questions Range on bids is proportional to info provided Normalize bids based on your priorities Scope is firmed up for contracting stage Confirm handling of development costs Formalize the risk/reward equation Very time consuming Provide qualified client liaison person Contractor A-team onsite for short term

TREATMENT PLANT BUDGET

CONTRACTS Payment terms Establishing performance criteria Extent of liabilities Share risk & savings Cost of termination Can lock out creativity

SUMMARY OF OUTSOURCING Focus on core competencies Lower operational costs Annualize future capital costs Contract is key Can increase industry overall control Needs commitment from all Assess contractor performance