OUTSOURCING INDUSTRIAL WASTEWATER TREATMENT

1. OUTSOURCING INDUSTRIAL WASTEWATER TREATMENT Jerzy Kołłajtis – jkollajtis@environ.pl Magda Trybuch – mtrybuch@environ.pl (+48 22) 833 09 36 Bytomska 5A, 01-612 Warszawa ADVENT-ENVIRON www.environcorp.com www.advent-environ.com

2. WHAT IS OUTSOURCING? • Replaces existing in-house function • Contractor will reduce industry costs • May provide better service • Contractual arrangements are key • Established in municipal market • Growing trend in industrial market

3. WHAT CAN BE OUTSOURCED? • Staff • Services • Programs • Utilities (water, power, wastewater treatment, waste disposal) • Equipment (i.e. leasing) • All of the above

4. DEGREES OF OUTSOURCING Process & Detailed Design Engineering & Construction • Traditional contract engineering services • Applicable to new plant or upgrades • Ensures smooth transition to client control • Can help safeguard warranties Startup Support & Operator Training Troubleshooting Problems • Emergency response • Not cost-effective if it becomes routine Technical Support • Identify and avoid/reduce problems • Ranges from data review to operator direction • Manpower service • Client management remains in place Operations Labor Contract Management • Assume control of all labor, budget, reporting • Establish performance criteria Purchase Assets, i.e Own/Operate • Can transfer more risk to operator • Detailed contracts needed to address risk

5. REASONS TO OUTSOURCE • Go to your core competencies • Redirect management time • Reduce operating costs • Better performance • Capital upgrades can be annualized • Selling assets improves bottom line

6. POTENTIAL PROBLEMS • Perceived loss of control • Resistance from in-house staff • Define performance specifications? • Upfront additional effort • Transfer of staff to contractor • Contract can reduce flexibility

7. WHAT ABOUT COMPLIANCE? • Industry “must control” this • Contractor image versus yours • Responsibility for any violations? • Who is the permit owner/operator? • Contractor has core competency • More outside resources available

8. PATH TO OUTSOURCING Determination of Need • Clearly define corporate or site driving force • Get preliminary buy-in from stakeholders • What is the upper & lower limit for contractor scope • Identify qualified contractors Decide on How to Implement Due Diligence • Open book or bid package • Prepare responses to bidder questions Business Proposal • Range on bids is proportional to info provided • Normalize bids based on your priorities • Scope is firmed up for contracting stage • Confirm handling of development costs Confirm Final Scope Negotiate Contract • Formalize the risk/reward equation • Very time consuming Transition to Provider • Provide qualified client liaison person • Contractor “A-team” onsite for short term

9. TREATMENT PLANT BUDGET

10. CONTRACTS • Payment terms • Establishing performance criteria • Extent of liabilities • Share risk & savings • Cost of termination • Can lock out creativity

11. SUMMARY OF OUTSOURCING • Focus on core competencies • Lower operational costs • Annualize future capital costs • Contract is key • Can increase industry overall control • Needs commitment from all • Assess contractor performance