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BACON'S
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To the untrained
eye, highway maintenance looks like a
straightforward business. Hire some guys with
orange jackets, slap down some traffic cones,
then start patching the potholes. It ain't rocket
science. The Virginia Department of
Transportation is staffed with competent civil
engineers who know roads inside and out. How much
room could there be for boosting productivity and
saving money?
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| Quite a lot, actually. In a pilot program, privately owned VMS Inc. has contracted to maintain 250 miles of Interstate highway. Over a five-year span, VDOT will save $22 million, or 17 percent of what it would have spent on its own. Now, consider that the commonwealth devotes 44 percent of its $1.8 billion in annual roadway expenditures to maintenance -- about $800 million a year. VMS President Nicholas J. Masucci estimates that his business model could be applied to 80 percent of the state's road network and generate savings of $100 million annually. |
The Richmond company has no silver bullet: It just applies small innovations systematically and relentlessly. Masucci uses activity-based accounting, a foreign concept to most state agencies. He aggressively deploys new technologies. And, with a five-year contract horizon, he doesn't go for the quick patch. He invests in procedures with a multi-year payback.
Masucci developed his ideas from 20 years of experience as a transportation consultant. Several years ago, he began looking around for states that would be receptive to them. His nationwide search brought him to Virginia, where VDOT was already pioneering new approaches to transportation problems. VDOT agreed to a pilot contract, and in July 1997 Masucci took over a big chunk of highway maintenance.
VMS is applying management techniques that swept the private sector in the 1980s but have so far eluded government. Upon winning the contract, the company took an inventory of the highway "assets" under its control. High-resolution video cameras captured images of every mile of pavement and roadside, including bridges, drainage structures, fences, guardrails, signs and lights. Where appropriate, the company used ground-penetrating radar, coring and other tests to measure the condition of the roadway. With data in hand, VMS established priority projects, projected workloads and created mechanisms for tracking and measuring the quality of its program.
Masucci calls his philosophy just-in-time maintenance. He brings in subcontractors to perform the work when needed. Unlike VDOT, he doesn't pay for a huge inventory of equipment and material that sits idle between jobs. He says he also has greater flexibility when negotiating with subcontractors.
VMS' information system forecasts when pavement, guardrails and other structures require attention. The company supplements computer projections with real-life inspectors who patrol the highways looking for problems. The company is scrupulous about sealing cracks and joints and employs more expensive materials -- practices that can extend pavement life by three years.
Masucci tracks 65 different activities, collecting detailed data that alert him to cost-cutting opportunities. For instance, the company purchased a mobile pothole-patching machine, which uses a spray-injection system to clean and fill potholes. Rolling down the highway at 10 miles per hour, followed by a truck flashing an arrow, the machine eliminates the need for a crew to close down the traffic lane. Masucci cuts labor costs by 75 percent -- and motorists suffer less traffic disruption.
Under the VDOT contract, VMS is committed to maintaining the high quality of Virginia roadways. The company conducts an internal inspection three times a year, rating roads according to VDOT criteria. The state also conducts its own inspection to confirm VMS performance.
Assuming VMS continues to deliver, VDOT should commence privatizing as much of the state road network as possible. Although Virginia has attracted worldwide attention, privatization has its detractors at home. A number of road contractors have hired a lobbying firm to restrict outsourcing, and some die-hards in the state still think road maintenance should always be a government function.
By turning over maintenance to the private sector, however, VDOT doesn't lose command of Virginia's roads. Indeed, because VMS arguably is more responsive than the state's own bureaucracy, VDOT leaders could increase their control. The state would continue planning, setting spending priorities and devising standards. But instead of operating road crews, VDOT would focus on assembling projects for bid, evaluating proposals and holding contractors accountable.
Virginia's transportation needs in the coming decade are underfunded by billions of dollars. The Gilmore administration has made it clear that raising taxes is not a political option. If Virginia's business leaders want less congested roads and highways -- critical for quality of life and manufacturing competitiveness -- they should start pushing the state to accelerate privatization. Channeling an extra $100 million a year from maintenance to new construction won't solve all the state's problems, but it will be a good start.
James
A. Bacon
Publisher & Editor in Chief
© FEBRUARY 1999, VIRGINIA BUSINESS
MAGAZINE