Integrating a Performance- and Outcome-Based Outsourcing Strategy in Auckland Council

1 Summary

Auckland Council (AC) was established in November 2010 after amalgamating 8 territorial authorities and serves a population of 1.6 million with an asset base of over $56 billion. Project 17 (P17) was initiated to develop a new maintenance delivery model for community assets, replacing thirty-eight facilities management contracts delivered by twenty-nine suppliers worth over $150 million per annum, all expiring June 2017.  P17 overcame the challenge to rationalise different service level agreements (SLAs) and key performance indicators to bring about alignment with the operating model of the new council or the current geographical / political boundaries.

2 Introduction

Figure 1- Service Areas and Local Boards

In addition, the contracts were based on Council’s Smart Procurement Framework that enabled multiple outcomes (e.g. various financial or/and non-financial results in the procurement cycle. Incorporating key performance indicators (KPIs) that not only track quality and timeliness of maintenance work, suppliers are also required to meet social/community and environmental outcomes.  An example of a social outcome is the use of small local suppliers on the Hauraki Gulf Islands to deliver simple trade services or developing a Community Workforce and Development Plan that enables targeted apprenticeships, local employment, and training opportunities.  Examples of an environmental outcome include a reduction in agrichemical use or reduction of water and energy usage.  

3 Strategic Context

P17 has enabled a paradigm shift in council’s approach to establish complex in-house and externally procured services and most importantly, how to maximise community and commercial outcomes through a collaborative and strategic approaching with suppliers.

CF facilities management function is delivered by both internal staff (e.g. contractor audit, project management) and external providers. The previous suppliers were mainly ‘transactional’ or ‘prescriptive’. Schedules were agreed between suppliers and council, such as how many times toilets were cleaned, or parks were mowed.  As such, AC had limited flexibility to respond to changes to the use of a facility or account for unexpected weather events; or respond effectively to unplanned service level variations. Conversely, the new full facilities contract is now outcome-based where AC and contractors have a common purpose, moving from providing or receiving a service to ensuring a result through a lump sum pricing agreement. For example, suppliers are required to meet agreed outcomes for rubbish bins to be not more than 75 per cent full at any time, as opposed to just following fixed work schedules. Most importantly, a supplier has ownership of an entire service area to respond to all maintenance issues; where previously multiple suppliers worked on the same site and even similar asset groups.

Successful implementation of a multi-service result-oriented contract framework meant that CF had to ensure that the new agreed levels of service standards and key performance indicators could be adequately managed or controlled through the right organisation / managerial structure and asset management systems support. To achieve full integration, CF had to initiate both internal and external changes simultaneously in relation to people, processes, and systems within the organisation as well as suppliers, politicians, communities and other key stakeholders. Hence, standardisation of data, levels of service, asset performance and contractors’ performance were implemented holistically across services, assets, and the environment to diminish any discrepancies in the interpretation of results or standards; to provide transparency and certainty; to establish consistent references and benchmarks internally and externally. CF was able to realise the benefits of effective use of synergies, economies of scale and technical capability.

Subjected to funding constraints and rigour of Council’s procurement and project management evaluation frameworks, the project execution plan was approved in late 2016 following a comprehensive business needs analysis, strategic assessment, identification of detailed risks and issues registers, all interdependent on two other major restructure and systems projects. These two projects with separate governance and management structures affected over 5,000 staff and involved AC core enterprise asset management systems – GIS and SAP.  

Figure 2 – Project 17 Governance and Management Structure

P17 governance (Figure 2). was provided by a Steering Group composed of senior staff across several departments to ensure deliverables at each milestone met business needs (Figure 3). Business owners provided additional resources when required throughout the project lifecycle. Subject matter experts and workstream leads held daily or weekly meetings to report on any deviation from planned or unforeseen issues that had to be resolved almost immediately.

Figure 3 Project 17 High Level Roadmap & Milestones

Each workstream leads were responsible for change management, stakeholder engagement and communications. Feedback loops were well established at each stage of the Project to ensure there was confirmation from different stakeholders before proceeding to the next stage. Workstream leads were also required to work with other Project Managers because of significant interdependencies between workstreams and different projects across departments, e.g. IT/systems upgrades, organisational restructures, asset portfolio changes.

The Project employed different communication tools to all stakeholders. Regular reporting to the Executive Leadership Team, Governing Body and Strategic Procurement Committee was required throughout the project lifecycle. By applying a top-down and bottom-up approach of sharing information, the Project enabled closer collaboration between internal and external stakeholders which included Council staff, community groups, contractors, and politicians. Introduction to new enterprise asset management systems (EAMs), new asset data structure, new operating models, organisational change, new reporting requirements of performance outputs were carried out over several months to enable the change processes to appear to be more transitional as opposed to transformational to effectively address any barriers to change.

Relationship management focused mainly on providing explanation on why change was necessary and the benefits it brought over the medium to long-term, as well as articulating the possibility of teething issues in the initial stages of mobilisation. Some of the communication tools used include:

• publishing regular newsletters;
• presenting at roadshows across the region;
• attending other departments’ meetings;
• attending local board meetings and workshops; and
• conducting lunch time learning and feedback sessions.

Multiple one-on-one meetings were conducted for certain audiences who required a deeper understanding of the technical aspects of the operating model changes, contract specification, data linkages, and dependencies with supplier system interfaces.  As Local Boards expressed strong support to enable community empowerment, CF had to liaise with Community Empowerment Advisors to jointly identify opportunities within the communities. In addition, several publications such as operating manuals and guidance materials on compliance with health and safety, legislative obligations, agreed service levels and operating procedures were provided.

Figure 4 – An example of regular updates

4  Project Success

While we originally expected project success to eventuate benefits after a considerable amount of time, evidence of P17’s success manifested almost immediately when Auckland experienced record-breaking adverse weather conditions of long dry spells, extreme heavy rainfall and high winds. As a result of the robust implementation of the new contracts and transparency of Council’s expectations, it was possible to “performance-manage” the contractors to close any gaps in service delivery. P17 was also able to provide a balance between maintaining asset resilience against managing growth, as well as maintain consistent service levels with aging facilities. Within a very short timeframe of less than a year, the Project deliverables have become part of Auckland Council’s 2018-2027 Long Term Plan.

P17 has enabled contract and contractors performance to be linked to cost, time and quality as well benefits to the community and the environment during the different asset management lifecycle. Suppliers are expected to work with Council to deliver actions over and above business as usual to help achieve the goals of the Auckland Plan for the city and its people.

To achieve active continuing interest, participation, and support from key sponsors, business owners and stakeholders, it was imperative that P17 outputs were link to some relevant metric of business importance or benefits. Since “go live”, many service areas have shown continuous improvement in delivering positive and enduring community outcomes such as:

• increasing capability and capacity to ensure business sustainability;
• facilitating the connection of work-ready youth to local employment by creating local jobs with training and development opportunities;
• promoting inclusion, reducing discrimination and removing barriers to opportunity and participation, particularly for disadvantaged groups who face barriers to employment;
• working collaboratively with Maori communities and business by supporting skills development and labour market participation;
• supporting further training, development and labour market participation for Pacific youth and communities;
• supporting local business where reasonable/practical, that could meet the social needs of the delivery area; and
• establishing and continually improving an accredited environmental management system that captured appropriate practices, objectives, targets and outcomes.

After 18 months, in addition to the above, P17 reported:

• reduction in waste and unnecessary resource duplicates, compared to previous years;
• better coordination when responding to customers and resolution of issues quickly;
• better collaboration between different parts of the council family such as Healthy Waters, Waste Solutions, Auckland Transport, etc.;
• improved asset information from suppliers; and the public
• successful innovation from suppliers and increased ownership/accountability for multiple service line delivery into geographic areas.

Flexibility of the full facilities contracts has also enabled local boards to:

• negotiate enhanced services through their respective discretionary budget allocation; and
• remove assets (by contract variation) to facilitate active participation by the third sector/volunteers to deliver maintenance outcomes.

The current contract arrangements have enabled the implementation of value-add whole-of-life asset strategies that better balance corrective maintenance and preventive maintenance whilst at the same time minimising risks-related service delivery reductions or failure.

5 Conclusion

As with most public sector organizations in the world, Auckland Council is expected to achieve value-for-money for its ratepayers through achieving effectiveness and efficiency as business-as-usual, not simply as a one-off objective. Community Facilities through Project 17 has demonstrated the delivery of significant positive change to the FM sector such as improved competition by introducing two major Australian suppliers to New Zealand that have advanced technologies and capability.

In addition to its unique size and scope equivalent only to a large New Zealand government agency, P17 was completed mainly by council staff as opposed to engaging external resources. Whilst the success of P17 can be attributed to various factors including a rare occurrence that the contracts were all expiring at the same time, CF was able to effectively seize the opportunity to innovate and efficiently introduce a major change of a scale previously unseen in the local government sector. P17 closely aligned current technological advancements, changing weather patterns and the growth environment.

In terms of project learnings, critical success factors applicable to all of the workstreams were identified as:

• appropriate leadership and project management capability;
• high quality of communication and engagement;
• sufficient, flexible and competent staff;
• risk management capability; and
• quality of customer/stakeholder interactions.

Other lessons learnt include better cost estimation of external resources requirements and preventing the scheduling of critical tasks during school holidays.

These learnings are now shared across the organisation via the Council’s intranet/internet and Wiki pages, induction sessions with new staff, and incorporated training in the Council’s learning portal. The above considerations are currently being applied to a new $40 million streetscapes and town centre maintenance contract procurement.

For CF to be a best-in-class facilities management organisation, it needs to be able to identify and analyse current and future needs and expectations of stakeholders through with the right people capabilities in place supported by an efficient facility management system that does more than just generate work orders or pay bills. For the last eighteen months CF has focused on enhancing its system capabilities to enable better reporting of KPIs or contract outcomes. In addition to improving master data, CF has enabled staff and suppliers to access information from mobile phones, tablets, and traditional desktop or laptop computers. Further integration with other systems including customer relationship management (CRM), financial and supplier systems are currently being implemented.