One utility’s solution to outsourcing – create your own partner8 January 1999
On 2 June 1998, Altran Corp, an engineering and management-consulting firm based in Boston, opened an office in San Francisco staffed with a group of engineers who were previously part of Pacific Gas & Electric’s (PG&E’s) Nuclear Technical Services Department. The creation of this office was the result of a unique solution to a dilemma faced by PG&E, which operates the Diablo Canyon Nuclear Plant, and many other US nuclear utilities – how to reduce costs associated with engineering staffing levels, while ensuring that outsourcing nuclear services will provide the expertise needed for your plant.
Like most electric utilities, PG&E is facing the need to reduce costs in response to growing competition as the industry is deregulated. As part of its cost-cutting strategy, PG&E targeted engineering services, intent on reducing its own staffing levels, and relying on outsourcing.
The company well understood the potential danger in losing these people, with their expertise and historical knowledge of the company’s generating facilities, and wanted to minimise that risk by retaining access to their knowledge. To do this, and provide its staff with more opportunities, PG&E came up with an innovative solution – the “Consultant Option.”
The Consultant Option involved finding a consulting firm to absorb its key engineering talent located in San Francisco, thus preserving access to the resource the people represented, and developing a partnership with that firm to meet the future needs of Diablo Canyon. The result was the formation of a partnership with Altran Corp that keeps intact a critical mass of individuals with detailed knowledge of the plant. This “critical mass” remains available to PG&E and is now also available to other utilities throughout the country.
PG&E’S DOWNSIZING STRATEGY
The basic strategy undertaken by PG&E involved reducing capital and overhead expenditures, consolidating essentially all of the staff to the plant site and increasing the degree of outsourcing. One result was the closure of PG&E’s Nuclear Technical Services engineering office in San Francisco at the utility’s corporate headquarters.
While opportunities existed for a number of the engineering employees to go to the Diablo Canyon station, many were unwilling to relocate. Under normal circumstances, when the office was closed, the remaining 120 engineers would be severed, with the consequent loss of knowledge and experience.
To avoid this scenario, the company hit on the idea of the “Consultant Option.” The Consultant Option was not the sale of business. Rather it created an opportunity – for the employees, PG&E and the successful firm – that depended on the ability of that firm to attract and retain the employees and interesting work.
SELECTING A PARTNER
To select the best consulting firm, PG&E established a multi-discipline team with representatives of management, bargaining units, and different parts of the organisation who were stakeholders in the decision. The group first developed a list of criteria for selecting a potential partner. This included the following key components:
• Ability to provide PG&E with high-level, high-quality technical support beyond what just the people in the San Francisco office were able to provide.
• Ability to attract and retain employees with whom PG&E wanted to retain access.
• Confidence in the engineering service company’s ability to develop an effective working relationship with PG&E.
• Responsiveness to PG&E’s request-for-proposal soliciting potential partners.
The team considered engineering consulting firms that had a pre-existing relationship with Diablo Canyon. The utility narrowed the potential partners to three firms: two large firms well known in the electric industry and Altran Corp of Boston. After two rounds of interviews, the team recommended to PG&E’s Nuclear Power Generation officers that the utility should form a partnership with Altran. Altran’s ability to provide technical expertise, attract employees, and the willingness of Altran to consider the utility’s needs in-depth were key factors leading to the team’s recommendation.
The agreement stipulates that PG&E will consider Altran for future work, but does not guarantee contracts for the engineering firm, thus providing PG&E with even greater flexibility in managing its engineering costs. The utility can access the expertise of the new Altran employees on a person-by-person basis, only paying for the individual’s consulting time associated with the project.
IMPLEMENTING THE ARRANGEMENT
To integrate the new San Francisco office staff with the entire Altran organisation, the firm engaged in several initiatives, including one-on-one coaching to improve the engineers’ marketing abilities and workshops to help the entire staff understand the differences between their current and former organisations and work environments. “Part of what we did,” explains Tom Esselman, Altran’s president, “was to recruit people who were interested in consulting and would be successful in a consulting environment.” Altran successfully recruited 40 PG&E employees with many new skills, including:
• Systems design.
• Mechanical and nuclear engineering.
• Instrumentation and control.
• Electrical power engineering.
• Civil/structural/seismic engineering.
• Piping engineering.
• Probabilistic risk assessment. And,
• Fluid systems.
In addition, this group brings with it significant management and business capabilities. These skills are being integrated with Altran’s existing capabilities in structural design, mechanical analysis, and its engineering laboratory.
Former PG&E employees have the opportunity to further develop their professional careers by serving new clients and learning new skills. They play a critical role in shaping Altran, forming one-quarter of the company.
INSTRUMENTATION & CONTROL
An example of the new arrangement is in the area of instrumentation & control, which was one of PG&E’s most effective engineering capabilities transferred to Altran.
Altran acquired the ex-PG&E group virtually intact. Since 1988, this group was responsible for the design, procurement and implementation of a series of digital upgrades that enabled the Diablo Canyon plant to become an industry leader in plant availability, capacity factor, and full power run time between refuelling outages. Inadvertent, preventable reactor trips have been nearly eliminated. Plant startups are much more “relaxed” and error-free following the I&C system modifications. Additionally, required maintenance and testing support for these systems have been significantly reduced.
Design changes that have been designed or, in some cases, integrated by the now-Altran engineers include:
• ATWS mitigation (AMSAC) (1988).
• Main annunciator system (1989).
• Turbine supervisory (vibration) monitor (1989).
• Digital feedwater control system (1989).
• Plant process computer (1990).
• Systems for 6th commercially procured emergency diesel generator (1991).
• Digital radiation monitoring system (1992).
• Condensate polisher computer system (1992).
• Eagle 21 Process protection system (1994).
• Safety Parameter Display System (1997).
Currently, Altran is working under contract to PG&E to develop and install a new digital feedwater pump speed control system described in the sidebar. This upgrade is especially significant, because the project was initiated by the former PG&E engineers before the Altran partnership was formed. Because of the condition of the system and its importance to daily operation of the Diablo Canyon Power Plant, the upgrade was the first contract initiated between PG&E and Altran. The design work continued during and after the transition, and scheduled delivery dates for hardware and design details have been met. Successful continuation of a major project such as this would have been extremely difficult without the close cooperation enabled by the Altran partnership.
At the bottom line, PG&E enjoys real cost savings and the availability of continued strong technical support from Altran. The former PG&E engineers now divide their time between PG&E projects and new work successfully developed from Altran’s relationships with nuclear and non-nuclear clients.