The costs associated with maintaining safe and reliable rights of ways for electric utilities are significant. In fact, vegetation management costs are typically utilities’ single largest maintenance expense.

It is indeed a challenge to define the total expenditure on vegetation management related activities. Some larger investor owned utilities are spending more than $100 million annually to maintain safe reliable service, while smaller municipal or cooperatives may spend considerably less. However, the total market is estimated to be in the billions of dollars.

That being said, it is difficult to project how much of these dollars are directed specifically to assessment activities. Assessment of rights of ways can encompass a broad range of activities from pre-inspection, post audits, aerial patrols etc. Some utilities sub-contract these services while other utilities have their own resources. Depending on a program’s design, implementation and management the investment for assessment activities could be as small as 5-6% of the total budget. However, more progressive utilities often allocate a much higher percentage of overall budget to assessment, pre-inspection, auditing, management, customer relation activities etc.

There is no single contracting strategy that will work for every utility. The best contracting strategies adapt to right-of-way conditions, budgets, line clearance, contractor strength’s or weaknesses and internal management processes and procedures.

It is typical in the industry to see a variation of three basic types of contracts used for line clearance and each has its own strengths and weaknesses. Each is often modified to meet the specific needs of each individual utility. The key to selecting the right system for you is to be knowledgeable of the conditions on your right of way, have a clear set of specifications for the line clearance contractors to follow, and have measures in place to audit completed work.

The basic contract types are:

Time and Materials

Standard time and materials contracts are designed to pay a fixed hourly rate to line clearance contractors for equipment and labor. This type of contract typically affords the greatest flexibility for work assignments, non-routine work such as hot spotting and storm restoration. A potential drawback of this system for routine work is that the utility is burdened with the risk of production. For that reason we recommend you include in the contract some standard of production and quality of work, with an associated process to measure that work quality and production.

Firm Price/Fixed Price/Lump Sum

Fixed-price contracting bids operate on a fixed cost-per-line-mile, circuit, area etc. This system lessens the utility’s production burden because line-clearance contractors are compensated only on work completed. The natural incentive for line-clearance contractors is to complete the work as quickly as possible, but this also may lead line-clearance contractors to select only the minimum acceptable work units, and provide the minimum acceptable work quality. In this case, it is recommended that a company consider a standardized post audit process that uses internal personnel or third-party contractors as part of a lump sum contract.

Tree removal also can be an issue with fixed price contracts since the cost to remove trees can be extremely variable. It is recommended that in order to maintain a stable pool of contractors, lump sum contracts should be awarded as longer-term contracts (three-year contracts). Utilities also should avoid unrealistic completion deadlines or startup schedules as the net result will generally be higher costs.

Unit Price

A unit price contract establishes a fixed cost-per-trim-type, removal size/class and area of brush. Unit price contracts shifts the production risk to the contractor, but also requires pre-planning by the utility or requires a third-party contract to select which work units the contractor should complete. Unit price contracts are suited well for utilities with a high variability of work across the system. Like fixed-price contracts, unit-based contracts require a comprehensive audit system.