In Turku, technical production was incorporated according to a long formula and at the right time. Instead of the last one turning off the lights, the making came alive again.
Text: Sari Okko
"We analyzed the city's activities for the first time in the 1990s. This started a long process, during which we started looking for a new operating model from an agency-like operation towards a development-based activity", director of the real estate industry Jouko Turto says.
"We thought about how the production operations will be handled in 10–30 years, how to keep the know-how in the organization and how to develop the market."
Who turns off the lights?
One of the options was to do nothing. In Turku, however, it was not believed that the agency-like model would have sufficiently attracted new young workers.
"We calculated that when 30 percent of the agency's employees remain, the organization is already too small for the necessary changes. The know-how would have disappeared, and the market would not have developed either. That way, before long, we would have been in a situation where we would only have to think about who would turn off the lights," Turto recalls.
"We analyzed the benefits of agency-based work. If there is no benefit, why run the agency model pointlessly."
A commercial facility was chosen as the second scenario, which was then implemented in the 2000st century. From the beginning of 2013, the city's business establishments changed to production companies.
We are talking about millions of euros
Turto emphasizes that a limited company requires a sufficiently large production organization. There was enough capacity and know-how in Turku to make incorporation possible.
According to Turto, incorporation has had a big impact on everything we do. The previous agency-like operation has been exposed to the market and competition.
"With the new tenders, it has been possible to raise the quality level and reduce costs by an average of 36-38 percent. The processes have also developed across the board. When we talk about savings, it's not just any small change, but millions of euros."
"We use one, consistent bidding process. A more cost-effective model than before will benefit the entire city's economy as well as all residents."
Now we do it with a guarantee
Turto also raises as an important development step the fact that everything he does now has a guarantee, which his own doing did not have before.
"One of the cardinal sins of doing it yourself is often making it with higher quality, more expensively, but without a guarantee. Today we get exactly what we order and confirmed with a guarantee."
"Ultimately, it's all about know-how and asset management. The city's own infrastructure expertise remains and has been strengthened, although the expertise is focused on different things than before, i.e. ordering work from the market and supervision."
Prices are still finding their place
Turku-based Kuntec Oy, separated from the city's organization, is now on its own: a company operating on the market as a private company. What's up with that?
"As a city, Turku is a progressive and well-managed group, where the efficiency of the companies is highly valued. The group is effectively managed in accordance with the interests of the city's residents", CEO Karri Knaapinen prime.
According to Knaapinen, Kuntec is making good progress. The biggest changes have been passed and we will move forward with normal business development activities. There are enough challenges.
"The industries freed up to competition due to corporatization are still in an unstable state, because new players enter the opened market. The prices are also still finding their place."
The most difficult task has been directing the personnel in the chosen direction, as 80 percent of the personnel were not used to operating on commercial terms in a competitive market.
Chief Steward Ari Larkamo admits that the employees found the process difficult, even though it was known that things cannot continue as before. "In the beginning, the views of the staff and the CEO were far from each other. However, the personnel has recovered quite well from layoffs and layoffs."
According to Larkamo, since the spring of 2016, the company has chosen work peace and everyone has been able to focus fully on their work. The change of premises has also been well received.
"The move has even brought closer cooperation between the company's different branches. The competitive market has brought uncertainty, but the work motivation has increased thanks to the increased responsibility", says Larkamo.
Entrepreneur: "Necessary development"
CEO Janne Schmandt Turku's Maanrakentajat Oy thinks the Turku model is good.
"If any of the municipality's tasks should be incorporated, it is technical production. Incorporating in Turku has been a good thing and necessary for development," says Schmandt.
"A lot has been said about transparency, but there is always room for improvement. For example, there is no publication channel for real-time information on small or large infrastructure investments until they are possibly published in HILMA. There is also little information about the extent of the transition period - that is, how much will be ordered directly from Kuntec and for how long."
Schmandt sums up that the corporatization has brought more items to the competition and a new, strong competitor.
"Kuntec has a huge amount of know-how, a strong balance sheet, an exceptionally favorable profitability development and the momentum is on. It remains to be seen where this will lead after the transition period. There is still uncertainty about what tactics Kuntec will continue with after the transition period. As the largest operator in the region, it has the opportunity to influence the development directions of the industry."
"If you can't make it, drive down"
CEO of Maanrakennus Kivelä Oy Ville Kivelä considers it a good thing that the profitability and productivity of the municipality's own production is monitored. Even better is the situation where the municipality's own companies have to compete with private companies. According to Kivelä, corporatization also brings cost savings to the municipalities.
"If the municipality competes with private companies and does not succeed, the municipality's own production company should be shut down and give the work to competitive companies. The municipality's staff will certainly find employment in the private sector as well, if there is a desire to work," Kivelä says.
According to Kivelä, things are working well in Turku because there are now more jobs available for private companies. The bad thing about the pattern is that Kuntec can be a price disturbance if the city financially assists a possible loss-making operation.
"Through incorporation, we have been able to do and offer the city of Turku small and large contracts with partners. It is about work that previously would not have been put out to tender, but given directly to the municipality's own production."
Infra magazine In addition to Turku, greetings from Oulu, Varkaus, Joensuu, Imatra and Hyvinkää have been brought in the series of municipal stories.
More success recipes for municipalities: Infra.fi/Resepti