• Structural integration of the laboratories has improved organizational effectiveness and allowed the Department to reduce the number of laboratory positions. Now that these benefits have been achieved, the Director of Laboratories position is no longer required and could be eliminated at an annual savings of up to $147,103 annually in salaries and mandatory fringe benefits.
  
  
• This change in the management structure could be accomplished by (a) transferring executive management for the Southeast and Oceanside Water Pollution Control Plant Laboratories to the new Assistant General Manager, Clean Water position, and (b) balancing workload and sharing laboratory specialization by establishing formal contracts or work order agreements between the laboratories.
  
  
• The deletion of the Director of Laboratory position would eliminate an unnecessary level of management between the Water Quality Bureau Manager and the two Laboratory Services Managers in the Millbrae Laboratory.

The Integrated Water Quality Bureau Laboratories

The Director of Laboratories, who reports to the Water Quality Bureau Manager, is responsible for 55.40 FTE staff located in three main laboratories located at Millbrae, the Southeast Water Pollution Control Plant, and the Oceanside Water Pollution Control Plant. There is also a small laboratory located on Treasure Island which performs clean water laboratory services and which is currently staffed by a 0.50 FTE laboratory position. The Director of Laboratories advises that the Treasure Island Laboratory could be closed in FY 2004-2005 if he is able to negotiate an adequate level of alternative support to the Water Pollution Control Division given the operational problems experienced in the past with the trickling filter wastewater treatment plant on Treasure Island. Departmental staff members advise that the Treasure Island Laboratory workload could be easily handled by the Southeast and Oceanside Water Pollution Control Plant Laboratories.

Southeast and Oceanside Water Pollution Control Plant Laboratories

In Section 9 of the Budget Analyst's Phase I Management Audit of the Public Utilities Commission - Clean Water Enterprise Fund (September 27, 2004), the Budget Analyst analyzed the advantages and disadvantages of transferring the executive management responsibility for the Southeast and Oceanside Water Pollution Control Plant Laboratories, which primarily conduct wastewater analysis,¹ from the Water Quality Bureau to the Clean Water Enterprise. The Southeast and Oceanside Water Pollution Control Plant Laboratories comprise 30.07 FTE positions and a FY 2004-2005 operating budget of $2,762,152.

In the Phase I report, the Budget Analyst summarized the advantages and disadvantages of transferring the Southeast and Oceanside Water Pollution Control Plant Laboratories from the Water Quality Bureau to the Clean Water Enterprise as follows:

Based on this analysis, the Budget Analyst did not make a recommendation about transferring the Southeast and Oceanside Water Pollution Control Plant Laboratories to the new Assistant General Manager, Clean Water position pending the review of the Water Quality Bureau in Phase III of this management audit.

In the interim, the Public Utilities Commission General Manager has announced her intention to create an Assistant General Manager, Clean Water position² to be responsible for the Clean Water Enterprise.

Phase III Findings

During the course of Phase III, the Budget Analyst has investigated whether the benefits put forward to support laboratory integration have, in fact, resulted from the integration which took place in 1996. To ascertain this, the Budget Analyst asked the following questions:

· The Department argues that combined water and wastewater laboratories are becoming the industry standard for both public and private sectors. Is there a specific industry standard for municipalities? Municipalities vary. Some municipalities operate combined water and wastewater laboratories, including Ames, IA; Boston, MA; Detroit, MI; East Bay Municipal Utility District, CA; New York City, NY; Phoenix, AZ; Pittsburgh, PA; Salt Lake City, UT; Seattle, WA; and Washington, D.C. Other large municipalities operate separate water and wastewater laboratories, including Houston, TX; Miami, FL; and Tampa, FL.

· An argument in favor of laboratory integration is that it facilitates cross-training. How many staff have cross-trained since the laboratories' merger in 1996? The Department has not collected data on cross-training but indicated that five technicians and chemists have been cross-trained since 1999. This is less than 10 percent of the current laboratory staffing of 55.40 FTEs. The Performance Assessment Phase I (Draft Interim Report) prepared by Red Oak Consulting noted that "personnel performing tasks requiring less-specialized expertise (e.g., general chemistry) have not been trained to perform analyses and other laboratory functions (such as sample logging) that will broaden their area of service to the organization. Functions within the Water Quality Bureau's capability to train have not been systematically identified." The laboratories now have a single quality assurance officer position and a single safety officer position to standardize those functions. However, the Budget Analyst notes that having single positions responsible for maintaining quality assurance and safety across all the Department's laboratories is not dependent on laboratory integration.

· Another argument in favor of laboratory integration is that it facilitates personnel transfers between laboratories. How many permanent staff transfers have there been between the laboratories? Six in eight years. This equates to approximately 10.8 percent of the current laboratory staffing of 55.40 FTEs.

· Laboratory integration could rationalize staffing numbers. How has integration impacted staffing numbers since FY 1995-96? The Department was unable to provide laboratory staffing figures before FY 1997-98. However, in that year the laboratories employed 27.00 FTEs for the water laboratories and 36.00 FTEs for the wastewater laboratories, for a total of 63.00 FTEs. By FY 2004-2005, the water laboratories had remained constant at 27.00 FTEs, but the wastewater laboratories had reduced to 25.00 FTEs, for a combined total of 52.00 FTEs.³ Therefore, there has been a reduction of 11.00 FTEs in eight years despite the assumption of new laboratory testing responsibilities. Further, the Water Pollution Control Division no longer provides secretarial or clerical support for the laboratories; instead, one secretary based at the Millbrae Laboratory supports all the laboratories. However, the Budget Analyst notes that since FY 2000-2001, when the water laboratories had 24.00 FTEs and the wastewater laboratories had 23.5 FTEs, for a total of 47.50 FTEs, there has been a steady increase in personnel numbers to the present level of 52.00 FTEs. Further, three Classification 2489 Laboratory Services Manager positions directly manage the laboratories, with one position responsible for the Southeast and Oceanside Water Pollution Control Plant Laboratories, one position responsible for laboratory support services and water process chemistry (located at the Millbrae Laboratory), and one responsible for microbiology (also located at the Millbrae Laboratory). Each of these positions is paid up to $129,263 annually, inclusive of mandatory fringe benefits.⁴ These three positions report to the Director of Laboratories position which is paid up to $147,103 annually, inclusive of mandatory fringe benefits. The Budget Analyst questions the need for four management positions costing up to $534,892 for 52.40 FTE staff positions.

· Has laboratory integration facilitated the laboratories' ability to deal with workload increases? The first year of complete workload data that the Department holds on the Laboratory Information Management System is for FY 1999-2000. In the five years between FY 1999-2000 and FY 2003-2004, the laboratories have handled between 121,365 laboratory tests (in FY 1999-2000) and a high of 141,483 laboratory tests (in FY 2001-2002). Since the available data does not compare pre- and post-integration workload, the Budget Analyst is unable to determine if integration has facilitated the laboratories' ability to deal with workload increases. However, the Budget Analyst notes that there does not appear to be a correlation between personnel numbers and workload, as shown in Table 6.1 below:

Table 6.1
Laboratory Workload and Staffing

Staff performed the least average number of laboratory tests (2,544 in FY 1999-2000) and the greatest average number of laboratory tests (2,960 in FY 2001-2002), a difference of 416 laboratory tests, or approximately 16.4 percent per 1.00 FTE, while the number of personnel FTEs changed by only 0.10 FTE. However, as shown in Table 6.1 above, the average number of tests per position has been dropping each year since FY 2001-2002 despite a personnel increase of 4.20 FTEs. This data is inconclusive given that the number of laboratory tests performed could be affected by the complexity of the tests being performed.

• Another argument in favor of laboratory integration is that it allows the Director of Laboratories to prioritize functions quickly, as the need arises, because all of the laboratories are under his management. How many times has the Director of Laboratories reprioritized the laboratories' work programs in the event of an emergency? The Director of Laboratories advises that he has reprioritized laboratory work programs in six or seven incidents related to possible reservoir contamination as a result of facility security breaches. The Director of Laboratories also cited, but was unable to quantify, reprioritization of laboratory work due to consumer complaints, turbidity events, algae growth episodes, reservoir and tank clean out jobs, wastewater system overflows, storm-induced floods, discharges of treated effluents, and seepage in customer premises of unknown causes. The Director of Laboratories argues that the laboratories' response to such emergencies "would occur much more slowly if we had to contract back and forth among laboratories for services via work order or some other system." The Budget Analyst doubts that pre-negotiated contracts, with defined funding and criteria for emergency laboratory service needs, would impede the laboratories' ability to respond to emergencies swiftly. The Budget Analyst considers that work order contracts between the laboratories can be designed with sufficient flexibility to ensure prompt service reprioritization in emergencies. For example, annual lump sum work orders could be negotiated for work flows based on historic data, including provision for an estimated amount of emergency work. Such lump sum work orders could be supplemented by task-specific work orders when extraordinary needs arise.

Laboratory integration is in conformance with the organizational structure chosen by many, but not all, municipalities. There has been little cross-training or transfers of staff between laboratories. The Budget Analyst is unable to determine if integration has facilitated the laboratories' ability to deal with workload increases. However, the Budget Analyst notes that there does not appear to be a correlation between personnel numbers and number of laboratory tests performed. While the total number of personnel FTEs has decreased, despite the assumption of new laboratory testing responsibilities, staffing has been steadily increasing since FY 2000-2001 and there are three Classification 2489 Laboratory Services Manager positions directly managing the laboratories, each of which is paid up to $129,263 annually, inclusive of mandatory fringe benefits. These three positions report to the Director of Laboratories position which is paid up to $147,103 annually, inclusive of mandatory fringe benefits. The Budget Analyst questions the need for four management positions costing up to $534,892 for 52.40 FTE staff positions.

Further, as noted in the Phase I Management Audit of the Public Utilities Commission - Clean Water Enterprise Fund report, the Southeast and Oceanside Water Pollution Control Plant Laboratories' independence could be assured by maintaining the laboratories as a separate bureau if they are located in the Clean Water Enterprise, and integrated technical services (for example, trace metals and microbiological testing) and centralized support services (for example, quality assurance, safety, and information technology support) could continue to be provided even if the laboratories are disaggregated, by means of contractual agreements or work orders between the laboratories.

Recommended Actions

The above information indicates that there have been some benefits related to laboratory integration, most notably rationalization of technical and support services. Further, there has been an overall reduction in staffing, although that particular efficiency gain is being incrementally eroded. Continued integration is not necessary to maintain these gains and does not outweigh the benefits of transferring executive management responsibility for the Southeast and Oceanside Water Pollution Control Plant Laboratories to the new Assistant General Manager, Clean Water position. The benefits of such a transfer include: (a) a unified business identity for clean water staff that is characterized by shared goals, shared long-term planning capacity, functional coordination, and efficiency; (b) improved decision-making among staff working on clean water issues, and clear accountability lines; and (c) implementation of the Commission's stated policy preference for the Public Utilities Commission to be structured organizationally into business enterprises.

The transfer of the Southeast and Oceanside Water Pollution Control Plant Laboratories, under their own Laboratory Services Manager, to the Clean Water Enterprise would reduce the Director of Laboratories position's span of management control to two direct reports. That represents insufficient justification for a management layer between the Water Quality Bureau Manager and the two Laboratory Services Managers in the Millbrae Laboratory given that the two Millbrae Laboratory Services Managers are already responsible for daily management of their laboratories and the interface with the Southeast and Oceanside Water Pollution Control Plant Laboratories. The three Laboratory Services Managers can collectively work together to maintain the benefits achieved from integration through contracts or work orders between the laboratories. Further, they can collectively ensure the quality assurance and Laboratory Information Management System functions (currently managed out of the Millbrae Laboratory) and client services function (currently managed out of the Southeast Water Pollution Control Plant Laboratory) continue to support all of the Department's laboratories.

Having the two Laboratory Services Managers located at the Millbrae Laboratory report directly to the Water Quality Bureau Manager would create seven direct reports to that position, rather than the current six. Counterbalancing the increased number of direct reports, the Water Quality Bureau Manager's overall managerial responsibility would decrease because of the transfer of the Southeast and Oceanside Water Pollution Control Plant Laboratories to the Clean Water Enterprise. Therefore, the Water Quality Bureau Manager's position should have sufficient capacity freed up to assume responsibility for one additional direct report.

The Southeast and Oceanside Water Pollution Control Plant Laboratories represent approximately 22.9 percent of the Water Quality Bureau's total technical staffing of 131.26 FTE positions. Therefore, if those laboratories were transferred to a new Clean Water Enterprise, they would warrant the transfer to the Public Utilities Commission of a proportionate share of the Water Quality Bureau's eight administrative and clerical support staff funded by the PUC Operating Fund, or 2.00 FTE positions, for a total of 32.07 FTE positions.

Conclusion

Structural integration of the laboratories has achieved some benefits, namely rationalization of technical and support services, and a decrease in the number of laboratory positions. Now that these benefits have been achieved, the justification for the Director of Laboratories position is unclear given that the three Laboratory Services Managers can collectively work together to maintain the benefits achieved by integration through contracts or work orders between the laboratories, under the oversight of the Water Quality Bureau Manager and the new Assistant General Manager, Clean Water position.

Recommendations

The Public Utilities Commission General Manager should:

6.1 Transfer executive management responsibility for the Southeast and Oceanside Water Pollution Control Plant Laboratories to the new Assistant General Manager, Clean Water position.

6.2 Eliminate the 1.00 FTE Classification 5133 Program Manager II, Director of Laboratories, position.

6.3 Transfer 2.00 FTE administrative support positions from the Water Quality Bureau to the Southeast and Oceanside Water Pollution Control Plant Laboratories.

6.4 Direct the Water Quality Bureau Manager and the new Assistant General Manager, Clean Water to develop contracts or work orders between their laboratories to ensure the continued rationalization of technical and support services and prompt service reprioritization in emergencies.

6.5 Resolve in FY 2004-2005 whether or not there is sufficient business justification to continue operating a laboratory at Treasure Island.

Costs and Benefits

Elimination of the 1.00 FTE Classification 5133 Program Manager II, Director of Laboratories, position would save between $97,196 and $118,155, plus mandatory fringe benefits, for a total savings of up to $147,103 annually. There would be no diminution of management coverage because the laboratories are directly managed by 3.00 FTE Classification 2489 Laboratory Services Managers, each of whom is paid up to $129,263 annually, inclusive of mandatory fringe benefits. One of these Laboratory Services Managers would report to the new Assistant General Manager, Clean Water position. The remaining two Laboratory Services Managers located at the Millbrae Laboratory could report directly to the Water Quality Bureau Manager who, under the current organizational structure, would have seven direct reports rather than the current six. Counterbalancing the increased number of direct reports, the Water Quality Bureau Manager's overall managerial responsibility would decrease because of the transfer of the Southeast and Oceanside Water Pollution Control Plant Laboratories to the Clean Water Enterprise.

Transferring executive management responsibility for the Southeast and Oceanside Water Pollution Control Plant Laboratories to the new Assistant General Manager, Clean Water position would contribute to the benefits of consolidating clean water functions under that position outlined in our Phase I Management Audit of the Public Utilities Commission - Clean Water Enterprise Fund report. These benefits include: (a) a unified business identity for clean water staff that is characterized by shared goals, shared long-term planning capacity, functional coordination, and efficiency; (b) improved decision-making among staff working on clean water issues, and clear accountability lines; and (c) implementation of the Commission's stated policy preference for the Public Utilities Commission to be structured organizationally into business enterprises.

The transfer of the Southeast and Oceanside Water Pollution Control Plant Laboratories to the Clean Water Enterprise would reduce the Director of Laboratories position's span of management control to two direct reports. That represents insufficient justification for a management layer between the Water Quality Bureau Manager and the two Laboratory Services Managers in the Millbrae Laboratory. Hence the above recommendation to eliminate the Director of Laboratories position.

¹ These laboratories also perform some drinking water laboratory analysis.

² While the position title presented by the Public Utilities Commission General Manager is "Assistant General Manager, Wastewater," this report refers to the position as the "Assistant General Manager, Clean Water" to be consistent with the Phase I and II management audit reports.

³ The difference between 52.00 FTEs and the 55.40 FTEs quoted at the beginning of this section is accounted for by 3.40 FTE client services coordinator and administrative support positions.

⁴ To maintain consistency with the Phase I and II reports, mandatory fringe benefits are calculated on an average of 24.5 percent for non-uniformed positions. However, the Department is budgeting for FY 2005-2006 mandatory fringe benefits on an average of 30.0 percent to reflect the upcoming budget year's increases related to Charter mandated retirement provisions and increased health and dental benefit costs.