Presented By

Project Location: Indianapolis, IN
Public Sector Partner: City of Indianapolis, IN
Private Sector Partner: Veolia Water North America
Contact Name: Christie Kaluza, Marketing Communications Manager, 281.985.5481, christie.kaluza@veoliawaterna.com

PROJECT SUMMARY
In April 2002, following a competitive bid, the City of Indianapolis selected Veolia Water (formerly USFilter) to manage its waterworks system. The 20-year, $1.5 billion agreement calls for Veolia to manage all operations, maintenance and customer service facets of the city's waterworks system. Additionally, the company will oversee more that $400 million in capital improvement projects. This move by the nation's twelfth-largest city marked the largest water public-private partnership in the United States and set an industry standard by directly linking contract performance with compensation.

With a treatment capacity of 143-million-gallon-per-day (MGD) and peak demand exceeding 200-MGD, the Indianapolis water system serves 1.1 million people within a 25-mile radius. Components of the water system include four water treatment plants, ranging in size from 76-MGD to 8-MGD; seven groundwater treatment plants, ranging in size from 3-MGD to 1-MGD; 4,000-mile distribution system; 58 wells; 31 pump stations; and numerous storage tanks. The system employs more than 450.

An Effective, Fair Selection Process
Until April 2002, Indianapolis was the largest city in the nation without ownership of its own water system. That all changed when the regulated utility company NiSource (then-owner of the Indianapolis Water Company) was required by federal law to divest all its water utility assets when it merged with a large energy company.

"The Indianapolis Water Company was going to be auctioned off to the highest bidder," said Indianapolis Mayor Bart Peterson. "We concluded that this would result in our most important natural resource being controlled by somebody outside of our city or even outside of our state who might not be as responsive as we wanted, so we decided that we would buy the water company."

Required to select an operator to manage the assets of the Indianapolis Water Company before the purchase could take place, the Indianapolis City Council turned to the newly formed Indianapolis Board of Waterworks. The board handpicked a team of external consultants and internal managers to evaluate the city's needs and created a request for proposal (RFP). A selection was made and a contract was signed with Veolia in approximately 90 days.

Raising Quality and Service
The city selected Veolia based on many winning aspects of its proposal, including the company's proposed transition and employee relations plans, technical approach, overall industry experience, customer service and a local commitment to the city. But key to winning the project was Veolia's innovative, incentive-based compensation plan.

By directly linking performance with compensation, the partnership introduced new standards in the water outsourcing industry. In addition to a base contractual fee, Veolia proposed, and now follows, an incentive-based performance plan that provides payment of fees based on meeting 40 specific and quantifiable performance metrics of excellence for water quality, customer service, operation and management, and community involvement. If the company does not meet those standards, it will not be paid fees linked to the performance metrics.

Further addressing the city's concerns, Veolia pledged to a long-term commitment to solving water taste and odor problems that have plagued the city's waterworks systems for years. In fact, within six months of the partnership's beginning, Veolia was able to significantly reduce odor complaints. In addition, a five-year commitment to freeze water rates demonstrates that stabilizing rates and improving drinking water quality can occur simultaneously.

"Our partnership will have tremendous value to the community on a very cost-effective basis," said Ron Davis, executive vice president and general manager, Veolia. "The specific performance measures will make it clear to the citizens of central Indiana that they are being well served."

A True Community Partner
Veolia and the City of Indianapolis are not just water partners; they are community partners as well. Veolia was not new to the Indianapolis community. Prior to entering into the water partnership, the company employed more than 150 people in the area and generated more than $40 million in annual revenue through Culligan, Veolia Distribution and Process Water groups.

The company illustrated its dedication to the community by committing approximately $1 million to the Children's Museum, offering summer employment opportunities for community youth and providing full community access to Veolia and the Indianapolis water supply system. Additionally, Veolia will introduce its Water Box program, an educational toll widely used in Europe, to teach school-age children the basic concepts of water treatment.

"Our partnership is summed up by two issues - local control and quality of life," said Mayor Peterson. "Through our agreement with [Veolia], we are controlling our community's most precious resource, controlling the assets that treat and deliver that resource and stabilizing our water rates.