Through a unique partnership between management and labor, the Phoenix Water Services Department (PWSD) is re-engineering itself to improve operations and customer service while slashing operational costs. The department started its re-engineering program in 1996 with a goal of becoming the country's "best in class" utility.

The first step involved forming teams consisting primarily of line employees who were charged with evaluating the department's operations and recommending improvements. The teams determined early on that a broader level of work could be done with fewer people through the application of available technology. With that in mind, the department implemented a hiring freeze.

Normal attrition resulted in about 160 vacant positions over four years. Those positions created jobs for remaining employees if their existing job classifications were deemed unnecessary under the new structure. Consequently, jobs - but not employees - were eliminated.

Then, the labor/management partnership began looking at specific goals and projects. The American Federation of State, County and Municipal Employees Locals 2384 and 2960, and the Administrative, Supervisory, Professional and Technical Employee Association formed the Participative Association of Labor and Management (PALM) to oversee the development of the re-engineering program and resolve labor issues.

Phase I of the re-engineering program set the overall project framework and determined ways to obtain immediate cost savings. Phase I cost-cutting involved optimizing electrical and chemical usage and eliminating some already vacant job positions. The process saved $3.1 million annually.

In Phase II, the re-engineering concepts - combining the operations and maintenance functions - were tested, and a team-based work culture was established. In the past, an operations staff member would hand off work to a maintenance staff member and then go on to another task. Under the new title, Operations and Maintenance Technician, an employee is expected to handle a problem or situation and see it through to completion, sometimes with the assistance of a fellow O&M team member.

Employees are no longer able to "pass the buck" by issuing additional work orders and waiting for repairs. "Now, instead of just telling somebody [about a problem], you can fix it," says O&M Technician Michelle Heilman.

As part of Phase II, the teams also tested "program- driven maintenance" using a computerized maintenance management system (CMMS). In the past, the maintenance approach was mostly reactive, although some preventive maintenance programs were in effect.

Additionally, employees now are able to make decisions previously made by the supervisory staff, which has been reduced by 60 percent. (The team still reports to a plant administrator.)

Phase III - implementation of the team's ideas - is currently under way and is expected to be completed in fiscal year 2000-2001. Thus far, the process has been successful at both creating a better work environment and at saving money. For example, at the Squaw Peak Water Treatment Plant, the first PWSD facility to undergo the process, re-engineering is saving more than $800,000 each year by combining O&M functions. The approach also decreased the staff from 30 to 14.

At the 23rd Avenue Wastewater Treatment Plant, combining job functions allowed the department to cut staff by more than half and save about $2 million annually. Overall, the annual savings for the department from Phases I and II is currently more than $10 million. In 1999, an independent audit by the city auditor showed an estimated savings of $63.1 million over the six-year period that included final implementation.

For all its successes, however, re-engineering has had its difficulties. Various bureaucratic hurdles slowed some changes, but, throughout the program's history, the city council, mayor and city management were informed of progress. With their continued support, the department has begun to re-engineer other divisions including Customer Services and Pollution Control and Management Services.

"Everybody on our pilot team worked hard to make the changes in the operation of the department a reality," says Tom Martin, plant administrator at the Squaw Peak Water Treatment Plant. "We had a lot riding on whether we succeeded or failed - and we succeeded."

This article was written by Michael Gritzuk, director of the Phoenix Water Services Department. He can be reached at (602) 262-6627 or via e-mail at