PROJECT SUMMARY
Indianapolis Mayor Bart Peterson and his staff had clear goals in mind when embarking on the development of the nation's largest water public-private partnership. Local control, rate stability and water-quality improvements were crucial to the city's future.

After decades of being served by a regulated utility, the City of Indianapolis acquired the Indianapolis waterworks system in April 2002 for $530 million and launched a multi-faceted procurement that led to the creation of not only the country's largest water partnership but an innovative contract that directly linked performance with compensation. A new industry standard was born.

During the fast-tracked Indianapolis procurement, Veolia Water Indianapolis, LLC (Veolia Water) submitted a bid that included a pay-for-performance incentive outlining 40+ performance criteria in customer service, water quality, capital improvements, operations and maintenance practices, and community involvement. Veolia Water was selected under a 20-year public-private partnership valued at approximately $1.5 billion (including approximately $400 million in capital improvement projects).

After two years of managing all operations, maintenance and customer service facets of a waterworks system serving 1.1 million people, Veolia Water has achieved significant milestones in each of the incentive categories.

The waterworks system serves Indianapolis, Marion County and portions of eight other counties in central Indiana. Veolia Water is responsible for 12 water treatment plants, 18 pumping stations and 15 water storage tanks. The company maintains more than 4,000 miles of water main and 32,000 fire hydrants. The company's Customer Service Center has been expanded and is available 24 hours a day. Veolia Water also manages billing for several other clients including Indianapolis Department of Public Works, the Town of Cumberland and the Town of Plainfield.

In 2004, an aggressive capital program schedule included projects such as main extension to a school corporation, a main extension to a local airport and a new residual tank at one of the system's water treatment plants.

Quality
Many factors were included in the city's selection of Veolia Water including transition plans, employee relations, technical approach, experience, management fees, customer service and local commitment. But key to the selection were the company's aggressive approach to resolving water taste and odor problems that have plagued the waterworks system for years, its commitment to invest in plant upgrades and Veolia Water's incentive-based compensation plan.

• After just 12 months of operation, taste and odor complaints dropped to an all-time low. Taste and odor complaints are down significantly from 501 complaints in 2001 (prior to Veolia Water's management) to 30 in 2002, 37 in 2003, and 18 on a year-to-date basis in 2004.
• As part of its commitment to improve taste and odor, Veolia Water entered into a 20-year, $5 million research and development program with Indiana University-Purdue University at Indianapolis (IUPUI). The goal of the program - the Indianapolis Water Quality Project - is to create a model of excellence in drinking water research. In addition to this program, Veolia Water works closely with the Department of Natural Resources (DNR) and the Indiana Department of Environmental Management (IDEM) on reservoir treatment with algaecide to help ensure minimal customer taste and odor issues.

Economics
The public-private partnership between Indianapolis and Veolia Water has fully met the city's goal of rate stability. Further, economic development has been spurred.

• A guaranteed five-year rate freeze was delivered to Indianapolis Water customers. By operating the waterworks as efficiently and effectively as possible, the company guarantees fixed costs with a CPI increase.
• Veolia Water has well exceeded the city's stated requirements for local economic development through its Minority Business Enterprise (MBE) and Women Business Enterprise (WBE) programs. The program engages the services of many local and national firms and aggressively courts MBEs and WBEs for ongoing projects. These companies are presently responsible for 29% of subcontracted work in Indianapolis.
• Veolia Water has helped area non-profit organizations by donating almost a $1 million a year in the first two years of the partnership. These contributions support education, environmental initiatives, minority organizations and more.

Implementation
Veolia Water inherited a billing system laden with problems. Since May 2002, Veolia Water has worked tirelessly to overcome these problems and increase customer satisfaction. The company now has in place a billing system with statistically few errors and increased customer satisfaction rates to show that improvement. The company's Customer Service Center is now available 24/7 and provides customers with a variety of payment options such as pay by phone or through a secure web site.

In addition to $6 million invested in a residuals handling facility, a $500,000 investment was made in SCADA/technology improvements. This has enhanced chemical and power management through better data collection, on-line monitoring and trend analysis.

Originality
In addition to being the nation's largest water partnership, perhaps what makes this partnership one of the most original is that Veolia Water linked performance to its compensation - an industry first for a major water or wastewater partnership. Veolia Water proposed that incentive fees be paid out once select performance measures of excellence for water quality and service were met. If the company does not meet the standards, it isn't paid certain fees linked to the performance metrics.

This direct compensation-to-performance link establishes a new model in the water industry, as it demands a higher level of performance and addresses specific performance measurements in the areas of customer service, water quality, capital improvements, operations and maintenance, and community involvement.

The company launched an education program in the city schools, delivering 100 "Water Boxes" (education kits with experiments and teaching aids) to 77 schools. The Water Box teaches 4th and 5th grade children about water and the water cycle.

The partnership is also unique in that the City of Indianapolis had to conduct the acquisition of assets and selection of operator simultaneously. The fast-track procurement led to a smoother transition and less cost for both partners.