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Comments on “Opportunities for Beneficial Transfer and/or Outsourcing of O&M Activities” 1. Page 3, 4th Paragraph: The statement: Typically, the terms of the repayment contract require the repayment entity to assume responsibility for O&M upon project completion.” is not completely accurate. Reclamation has 2 O&M transfer articles. Article 5 pertains to federally constructed facilities. This article uses the word “may”. This is because even though an entity has a repayment contract does not mean that entity has the physical or financial resources to O&M a facility. Reclamation’s other O&M transfer article (Article 6) is used where the facilities are constructed with federal assistance. This article does require the contractor to O&M the facilities, typically because the contractor has title to those facilities. 2. Page 4, 1st Paragraph, 2nd Sentence: Change ‘entire’ to ‘entirety of’ or ‘all.’ Also, 18 compared to a total of 243 reserved works facilities would be 7%. 3. Page 4, 2nd Paragraph, 2nd Sentence: What actual savings are there? If we’re suggesting that the water users can do O&M cheaper than we can, we should say so, in the interest of transparency. If we aren’t, then it’s not clear what savings there would be. Whether they advance funds to us that we use to perform O&M or whether they perform the O&M themselves with their own funds, what is the cost difference to us? Presumably we include all billing, administration, etc, in the O&M bills. If we’re referring here to those few projects where we (without a good basis in statutory authority) perform the O&M and THEN bill the water users, then the word ‘funding’ needs to be changed to ‘appropriations’ and end the sentence after ‘transferred facilities.’ We need to be clear here about what we’re really saying. 4. Page 5: In the top two paragraphs, it is hard to follow what we mean by Contracting for O&M. A thorough read of the entire document gets the idea across, but maybe some definitions would be in order, so that it’s obvious throughout when we’re referring to contracting out specific services at a facility as opposed to contracting out the O&M of the entire facility, since the report approaches the two and makes recommendations about them very differently. 5. Page 5, Recommendation 2, last sentence: Delete the word ‘just.’ 6. Page 5, Recommendation 3: What if there are multiple significant beneficiaries, as on the Cachuma Project, for example? What about including some language about JPA’s, Boards of Control, O&M Districts, etc.? 7. Page 6 last paragraph: The sentence beginning with “This representation intended. . .” seems to be either missing the word “was” before the word “intended” or maybe the word “intended’ was meant to be “tended.” The word “following” is misspelled. 8. Page 7: The entire page talks about what the Scope of AI 27 is without really defining what 26 is and, most importantly, what practical difference it makes to Reclamation. 9. Page 7, 2nd Paragraph, 1st Sentence of M4E Report quote: The ‘of’ between ‘agency’ and ‘business’ should be ‘or.’ 10. Page 7, 2nd Paragraph, middle sentence beginning with ‘This type of vendor contracting…”: Suggest re-writing to “This type of vendor contracting is used routinely throughout Reclamation for selected O&M products and services where specialized competencies are needed, but generally not for the entirety of O&M activities at a facility.” 11. Page 7, last Paragraph: This paragraph still fails to discuss what essentially the difference is between O&M that is transferred vs. O&M that is contracted out in its entirety to a beneficiary. What does ‘direct stewardship’ mean, and how is it different than the ultimate stewardship that Reclamation retains when O&M is transferred? Does one of the 18 cases where we’re doing this provide a good example of significant differences in operations and responsibilities between this method and transferred operations? There needs to be a more detailed, precise discussion of why, essentially, the contracting of O&M for an entire facility is so different in its outcome than transferring O&M; one could not be found in other parts of the report. 12. Page 8, 2nd Paragraph, last sentence: Suggest changing for clarity the following “(flood control, recreation, fish & wildlife)” to “(flood control, multi-purpose recreation and fish & wildlife).” Not all recreation and fish & wildlife costs are nonreimbursable. 13. Page 8, 2nd Paragraph: “Some projects only provide irrigation benefits…” This is almost never the case. Some are only authorized for irrigation, but even on those, we generally can calculate significant recreation or flood control benefits. Recommend leaving this sentence out, or maybe saying “Where irrigation is the only authorized purpose, 100 percent of the O&M costs are generally repaid by the irrigators.” ‘Generally’ is important, because there are many exceptions to this, such as the Milk River Project, for example. Also, recommend changing the period after ‘fish and wildlife’ in the 3rd sentence to a comma and add “and portions of the O&M costs may be allocated to these different purposes.” Then delete the next sentence “In most cases…” (since this is true on only about half of our multi-purpose projects) and begin a new sentence “O&M costs allocated to reimbursable purposes are the responsibility of the water users; reimbursability is not dependent on who is operating the facilities.” Then begin again with the sentence that starts “For example…” These changes provide a more accurate picture of O&M cost allocation and recovery. 14. Page 9, 2nd full paragraph, last sentence: This is a circular statement. Why, specifically, is it more difficult to achieve a transfer later? Why is it more difficult to develop a qualified organization subsequent to project completion than before? 15. Page 9, 1st Paragraph under the heading ‘Contracting for O&M Services,’ 2nd sentence: Why didn’t the team explore the option of contracting with commercial vendors? The title of Action Item 27 and the corresponding description of Outsourcing in the M4E Action Plan Report seem to suggest that this is precisely what should have been explored. What was behind the decision not to go there? In the interest of transparency, there should be a discussion here about that. The decision not to explore outsourcing to commercial vendors is part of what leaves the report struggling to define the practical differences between Transfer of O&M and Contracting for O&M. 16. Page 12, Tables 1 and 2: ‘Water Facilities’ should be ‘Water Conveyance and Distribution Facilities’ to match Figure 1 on the previous page and to avoid confusion. Most readers would likely include Dams in their concept of Water Facilities. Same comment Table 3. 17. Page 13, 2nd Bullet under Benefits to Reclamation: If Water Users were paying for these staff, how could this result in cost savings? 18. Page13, 3rd Bullet: The water users have to fund rehab regardless of who’s operating the facility. How does transfer of O&M make these other options available where they weren’t before? At first glance; this bullet doesn’t seem to fit here. The bullet states “Local water districts have other avenues to secure funding for rehabilitation of the project facilities as they age. These options include state loans, public bonding, and a variety of other financial instruments, which can provide greater cost effectiveness.” a. This bullet appears to be discussing “rehabilitation” rather than the project’s general transfer of O&M. Paying for rehabilitation would arise regardless of who is doing the general O&M of project facilities. b. Why does an older facility make it easier for an entity to secure funding for rehabilitating a project? c. How can getting a loan from another entity be more cost effective than an interest free or often a lower interest bearing loan from the United States? d. I understand that often private entities will not provide loans for federal facilities because there is no collateral from the borrowing entity. 19. Page 13, 4th Bullet: Besides the fact that we have no statutory authority to be doing work for which we are reimbursed after the fact, would OMB really go for this idea of taking these same appropriations and moving them elsewhere? Wouldn’t OMB expect to see corresponding decreases in appropriations? This bullet needs further explanation. The statement: “For those reserved works facilities where Reclamation is appropriating funds for the O&M of facilities and getting reimbursed after the fact for the beneficiary share of O&M,” is, on its face contrary to specific Reclamation law requiring payment of O&M charges in advance. 20. Page 13, Table 3: The total number of Dams should be 102, not 100. 21. Page 14, 4th Bullet: change ‘less’ to ‘fewer’ in the last sentence. 22. Page 14, 5th Bullet: This is a rather dubious claim, and one that, if true, reflects rather poorly on Reclamation staff. Why would district employees have more interest in the facilities than Reclamation staff? Often the district employees have no connection to the use of the water (some might be farmers, but many aren’t). In contrast, Reclamation operations staff may well have been involved in the design and construction of the facilities. Also, is there any evidence to back up the claim that beneficiary employees stay on longer than federal ones? I would assume the opposite would be true. Workforce studies indicate that federal employees change jobs less than private sector employees do. Recommend taking this one out entirely. 23. Page 14, Last Paragraph before Authorities Section, 4th Sentence beginning with “Implementing…”: As mentioned before, the report never really makes the case for this statement or backs it up with any specifics about how ‘funding’ would be less for transferred works than reserved works. If we are in fact being reimbursed after the fact for O&M, then ‘appropriations’ might be reduced with a transfer, but appropriations could just as easily (or perhaps more easily) be reduced by requiring advance funding. 24. Page 14, Benefits to Project Beneficiaries, Last Bullet: This almost sounds like Reclamation employees do not have a vested interest in taking care of a project. 25. General Comment: Since there are itemized lists of potential “benefits” to Reclamation and the Project Beneficiary, should there be itemized lists of potential “costs” to Reclamation and the Project beneficiary so that a fair evaluation can be made? 26. Page 16, Last full Paragraph, 1st Sentence: The 66% of facilities that have been transferred would be better described by using the term ‘a majority’ rather than ‘most.’ Nnext to last sentence: Suggest changing ‘seek’ to ‘inquire about’ 27. Page 18, O&M Contracting Opportunities: The meaning of the first paragraph is unclear. The paragraph states: “Although the primary method for achieving project O&M is via a transfer agreement with the project beneficiary, this may not be achievable in all cases. Contracting all or portions of the O&M to project beneficiaries (HUH) can also be an effective method to perform project O&M when total or complete O&M transfer is problematic or controversial (HUH). In cases where O&M of a facility is contracted to the beneficiary, Reclamation typically retains a more significant level of stewardship as compared to when the O&M is transferred to a beneficiary (HUH). Is the discussion here about “contracts” v. “agreements”, or is the word “beneficiary” used wrongly in some cases? If the discussion is about “agreements” v “contracts” then some discussion is needed about the difference between the two and when each is appropriate. Merely labeling an agreement as and “agreement” as opposed to labeling it as a “contract” may make no difference. What distinguishes one from the other is the content, not the label. 28. Pg. 18, 4th Paragraph, 2nd Sentence: Change the order of ‘is’ and ‘it’ 29. Pg. 18, last line: Change ‘Economical’ to ‘Economic’ 30. Page 19, 1st Paragraph under Conclusions and Recommendations: First sentence change ‘have’ to ‘has’ since its subject is ‘responsibility’ rather than the group of facilities. Second sentence, suggest the following re-write: “Only a small percentage of Reclamation’s facilities have not had O&M transferred or outsourced to some extent.” 31. Page 19, Recommendation 1: Again, the report has not yet specifically articulated why this might be easier or more achievable than a transfer agreement. 32. General Comment: If this will be a public document, terms such as O&M and NEPA need to be identified.	09/04/2007

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Comments on “Opportunities for Beneficial Transfer and/or
Outsourcing of O&M Activities”

1. Page 3, 4th Paragraph: The statement: Typically, the terms of the repayment contract require the repayment entity to assume responsibility for O&M upon project completion.” is not completely accurate. Reclamation has 2 O&M transfer articles. Article 5 pertains to federally constructed facilities. This article uses the word “may”. This is because even though an entity has a repayment contract does not mean that entity has the physical or financial resources to O&M a facility. Reclamation’s other O&M transfer article (Article 6) is used where the facilities are constructed with federal assistance. This article does require the contractor to O&M the facilities, typically because the contractor has title to those facilities.

2. Page 4, 1st Paragraph, 2nd Sentence: Change ‘entire’ to ‘entirety of’ or ‘all.’ Also, 18 compared to a total of 243 reserved works facilities would be 7%.

3. Page 4, 2nd Paragraph, 2nd Sentence: What actual savings are there? If we’re suggesting that the water users can do O&M cheaper than we can, we should say so, in the interest of transparency. If we aren’t, then it’s not clear what savings there would be. Whether they advance funds to us that we use to perform O&M or whether they perform the O&M themselves with their own funds, what is the cost difference to us? Presumably we include all billing, administration, etc, in the O&M bills. If we’re referring here to those few projects where we (without a good basis in statutory authority) perform the O&M and THEN bill the water users, then the word ‘funding’ needs to be changed to ‘appropriations’ and end the sentence after ‘transferred facilities.’ We need to be clear here about what we’re really saying.

4. Page 5: In the top two paragraphs, it is hard to follow what we mean by Contracting for O&M. A thorough read of the entire document gets the idea across, but maybe some definitions would be in order, so that it’s obvious throughout when we’re referring to contracting out specific services at a facility as opposed to contracting out the O&M of the entire facility, since the report approaches the two and makes recommendations about them very differently.

5. Page 5, Recommendation 2, last sentence: Delete the word ‘just.’

6. Page 5, Recommendation 3: What if there are multiple significant beneficiaries, as on the Cachuma Project, for example? What about including some language about JPA’s, Boards of Control, O&M Districts, etc.?

7. Page 6 last paragraph: The sentence beginning with “This representation intended. . .” seems to be either missing the word “was” before the word “intended” or maybe the word “intended’ was meant to be “tended.” The word “following” is misspelled.

8. Page 7: The entire page talks about what the Scope of AI 27 is without really defining what 26 is and, most importantly, what practical difference it makes to Reclamation.

9. Page 7, 2nd Paragraph, 1st Sentence of M4E Report quote: The ‘of’ between ‘agency’ and ‘business’ should be ‘or.’

10. Page 7, 2nd Paragraph, middle sentence beginning with ‘This type of vendor contracting…”: Suggest re-writing to “This type of vendor contracting is used routinely throughout Reclamation for selected O&M products and services where specialized competencies are needed, but generally not for the entirety of O&M activities at a facility.”

11. Page 7, last Paragraph: This paragraph still fails to discuss what essentially the difference is between O&M that is transferred vs. O&M that is contracted out in its entirety to a beneficiary. What does ‘direct stewardship’ mean, and how is it different than the ultimate stewardship that Reclamation retains when O&M is transferred? Does one of the 18 cases where we’re doing this provide a good example of significant differences in operations and responsibilities between this method and transferred operations? There needs to be a more detailed, precise discussion of why, essentially, the contracting of O&M for an entire facility is so different in its outcome than transferring O&M; one could not be found in other parts of the report.

12. Page 8, 2nd Paragraph, last sentence: Suggest changing for clarity the following “(flood control, recreation, fish & wildlife)” to “(flood control, multi-purpose recreation and fish & wildlife).” Not all recreation and fish & wildlife costs are nonreimbursable.

13. Page 8, 2nd Paragraph: “Some projects only provide irrigation benefits…” This is almost never the case. Some are only authorized for irrigation, but even on those, we generally can calculate significant recreation or flood control benefits. Recommend leaving this sentence out, or maybe saying “Where irrigation is the only authorized purpose, 100 percent of the O&M costs are generally repaid by the irrigators.” ‘Generally’ is important, because there are many exceptions to this, such as the Milk River Project, for example. Also, recommend changing the period after ‘fish and wildlife’ in the 3rd sentence to a comma and add “and portions of the O&M costs may be allocated to these different purposes.” Then delete the next sentence “In most cases…” (since this is true on only about half of our multi-purpose projects) and begin a new sentence “O&M costs allocated to reimbursable purposes are the responsibility of the water users; reimbursability is not dependent on who is operating the facilities.” Then begin again with the sentence that starts “For example…” These changes provide a more accurate picture of O&M cost allocation and recovery.

14. Page 9, 2nd full paragraph, last sentence: This is a circular statement. Why, specifically, is it more difficult to achieve a transfer later? Why is it more difficult to develop a qualified organization subsequent to project completion than before?

15. Page 9, 1st Paragraph under the heading ‘Contracting for O&M Services,’ 2nd sentence: Why didn’t the team explore the option of contracting with commercial vendors? The title of Action Item 27 and the corresponding description of Outsourcing in the M4E Action Plan Report seem to suggest that this is precisely what should have been explored. What was behind the decision not to go there? In the interest of transparency, there should be a discussion here about that. The decision not to explore outsourcing to commercial vendors is part of what leaves the report struggling to define the practical differences between Transfer of O&M and Contracting for O&M.

16. Page 12, Tables 1 and 2: ‘Water Facilities’ should be ‘Water Conveyance and Distribution Facilities’ to match Figure 1 on the previous page and to avoid confusion. Most readers would likely include Dams in their concept of Water Facilities. Same comment Table 3.

17. Page 13, 2nd Bullet under Benefits to Reclamation: If Water Users were paying for these staff, how could this result in cost savings?

18. Page13, 3rd Bullet: The water users have to fund rehab regardless of who’s operating the facility. How does transfer of O&M make these other options available where they weren’t before? At first glance; this bullet doesn’t seem to fit here. The bullet states “Local water districts have other avenues to secure funding for rehabilitation of the project facilities as they age. These options include state loans, public bonding, and a variety of other financial instruments, which can provide greater cost effectiveness.”

a. This bullet appears to be discussing “rehabilitation” rather than the project’s general transfer of O&M. Paying for rehabilitation would arise regardless of who is doing the general O&M of project facilities.

b. Why does an older facility make it easier for an entity to secure funding for rehabilitating a project?

c. How can getting a loan from another entity be more cost effective than an interest free or often a lower interest bearing loan from the United States?

d. I understand that often private entities will not provide loans for federal facilities because there is no collateral from the borrowing entity.

19. Page 13, 4th Bullet: Besides the fact that we have no statutory authority to be doing work for which we are reimbursed after the fact, would OMB really go for this idea of taking these same appropriations and moving them elsewhere? Wouldn’t OMB expect to see corresponding decreases in appropriations? This bullet needs further explanation. The statement: “For those reserved works facilities where Reclamation is appropriating funds for the O&M of facilities and getting reimbursed after the fact for the beneficiary share of O&M,” is, on its face contrary to specific Reclamation law requiring payment of O&M charges in advance.

20. Page 13, Table 3: The total number of Dams should be 102, not 100.

21. Page 14, 4th Bullet: change ‘less’ to ‘fewer’ in the last sentence.

22. Page 14, 5th Bullet: This is a rather dubious claim, and one that, if true, reflects rather poorly on Reclamation staff. Why would district employees have more interest in the facilities than Reclamation staff? Often the district employees have no connection to the use of the water (some might be farmers, but many aren’t). In contrast, Reclamation operations staff may well have been involved in the design and construction of the facilities. Also, is there any evidence to back up the claim that beneficiary employees stay on longer than federal ones? I would assume the opposite would be true. Workforce studies indicate that federal employees change jobs less than private sector employees do. Recommend taking this one out entirely.

23. Page 14, Last Paragraph before Authorities Section, 4th Sentence beginning with “Implementing…”: As mentioned before, the report never really makes the case for this statement or backs it up with any specifics about how ‘funding’ would be less for transferred works than reserved works. If we are in fact being reimbursed after the fact for O&M, then ‘appropriations’ might be reduced with a transfer, but appropriations could just as easily (or perhaps more easily) be reduced by requiring advance funding.

24. Page 14, Benefits to Project Beneficiaries, Last Bullet: This almost sounds like Reclamation employees do not have a vested interest in taking care of a project.

25. General Comment: Since there are itemized lists of potential “benefits” to Reclamation and the Project Beneficiary, should there be itemized lists of potential “costs” to Reclamation and the Project beneficiary so that a fair evaluation can be made?

26. Page 16, Last full Paragraph, 1st Sentence: The 66% of facilities that have been transferred would be better described by using the term ‘a majority’ rather than ‘most.’ Nnext to last sentence: Suggest changing ‘seek’ to ‘inquire about’

27. Page 18, O&M Contracting Opportunities: The meaning of the first paragraph is unclear. The paragraph states: “Although the primary method for achieving project O&M is via a transfer agreement with the project beneficiary, this may not be achievable in all cases. Contracting all or portions of the O&M to project beneficiaries (HUH) can also be an effective method to perform project O&M when total or complete O&M transfer is problematic or controversial (HUH). In cases where O&M of a facility is contracted to the beneficiary, Reclamation typically retains a more significant level of stewardship as compared to when the O&M is transferred to a beneficiary (HUH). Is the discussion here about “contracts” v. “agreements”, or is the word “beneficiary” used wrongly in some cases? If the discussion is about “agreements” v “contracts” then some discussion is needed about the difference between the two and when each is appropriate. Merely labeling an agreement as and “agreement” as opposed to labeling it as a “contract” may make no difference. What distinguishes one from the other is the content, not the label.

28. Pg. 18, 4th Paragraph, 2nd Sentence: Change the order of ‘is’ and ‘it’

29. Pg. 18, last line: Change ‘Economical’ to ‘Economic’

30. Page 19, 1st Paragraph under Conclusions and Recommendations: First sentence change ‘have’ to ‘has’ since its subject is ‘responsibility’ rather than the group of facilities. Second sentence, suggest the following re-write: “Only a small percentage of Reclamation’s facilities have not had O&M transferred or outsourced to some extent.”

31. Page 19, Recommendation 1: Again, the report has not yet specifically articulated why this might be easier or more achievable than a transfer agreement.

32. General Comment: If this will be a public document, terms such as O&M and NEPA need to be identified.

09/04/2007