Ouch! The real cost of womb-to-tomb consulting

Compos Mentis

This column is to create a forum for ideas, passions and perspectives on our industry that are controversial, provocative and energising. The views expressed here may be unpopular, politically incorrect, heretical or simply humorous. The views expressed may be ideas that all of us have had but didn’t care (or dare) to articulate. The opinions expressed are those of the author alone, but are probably shared by many who have yet to say so.

Your personal physician suggests that you need open heart surgery. You will want to seek out a heart surgeon.

The same doctor next advises that you have lung cancer. You never smoked, you are very worried, and you naturally want to seek out an excellent oncologist to guide your treatment.

Now your physician notes that you also need delicate brain surgery. Desperately, you will be inquiring about the specialists in that field.

Finally this same doctor suggests that you need some costly new drugs, to help recover from the open heart surgery, brain surgery, and cancer.

But it gets worse! Now imagine that this same doctor tells you that he will perform the heart surgery on you because he has read a book on the procedure and has watched it being done. And, he explains, he will try the brain surgery, too. It can’t be risky, because he has heard that there are thousands of successful procedures every year. As for your cancer, “Who knows?” he says. “Perhaps it isn’t aggressive, and I will deal with that after I finish the surgeries.” Then he explains that he, personally, will be formulating the drugs he has prescribed.

Not only has your doctor diagnosed your ailments (or alleged ailments), he has also “written himself in” to perform all the very lucrative procedures he has prescribed. About now, if you are the patient, you are concerned that your doctor is using both you and your health to create his own financial annuity! Forget the dubious accuracy of the diagnosis! Forget his self-serving refusal to refer complicated procedures to other specialists. Ignore the blatant attempt to instead “write himself in!” Forget those things. Get a new health consultant! Separate the initial diagnosis from the treatment! Escape this deadly conflict of interest! It may kill you.

What has all this to do with metering and AMI systems? With any large AMI system there is a critical, large and costly task of system integration. This is the amalgamation of the head-end of the AMI system with the utility’s many new and legacy systems. This may involve integration with a new Meter Data Management (MDM) system. With interval data, whether it is hourly or more granular, there is a vast amount of data to manage, to manipulate, to store, and to present. Yes, the system integration work for large AMI systems sometimes runs to the tens or hundreds of millions of dollars.

System integrators are not stupid. Like the personal physician above, they realise that their dinner ticket can be assured if they can get into the AMI consulting process early. Naturally, they want to do the early diagnosis and prescribe the needed treatment, and thus set themselves up as the sole provider of that downstream treatment. First they must convince the utility to allow them to do the initial business case, RFP and justification work, then develop the detailed requirements and specifications, and “write themselves in” for the downstream system integration work. If the system integration work is sufficiently large and profitable, the integrator can actually afford to give away the early stage consulting. He can make it up later; in spades! But, I ask, at what real cost to the utility? What is the cost of the lack of objective definition of the systems and their integration, and of effective competition for the later consulting and systems integration work?

A few large utilities have not paid enough attention to this blatant conflict of interest, and will spend many millions of dollars more than they should have. This happens simply because they didn’t separate the phase I evaluation, diagnosis and justification from the subsequent system integration. They allowed all the work to go to the same provider. On the surface, it seems more efficient. In practice it deprives the utility of competition.

The Division of Water of the City of Cleveland, Ohio (CWD) issued a Request for Proposals in August 2007 seeking various professional services, including specification of an AMR system. In its wisdom, the City of Cleveland included the following statement in its transmittal to prospective bidders:

“Please note that there are several restrictions to prevent conflicts of interest. As we are seeking an independent evaluation, we wish to ensure the selected consultant team has no stake in influencing the selection of future consultants or contractors in any manner other than the best interests of CWD. Therefore, the selected consultant team will not be permitted to propose on the implementation phase of the programme. Additionally, the consultant team must be able to demonstrate independence from water meter and AMR manufacturers and vendors.”

Bravo! The City of Cleveland’s Division of Water “got it right!” Clearly, Cleveland understands the need to separate the initial evaluation phase and contractor from the implementation phase and contractor. Do you? Then save that paragraph for your next solicitation!