Savings from closures

The US Department of Veterans Affairs (VA) can reduce its annual operating costs by more than $2 million by closing 13 of its 67 laundries and consolidating their linen work into under-used VA laundries, according to a report issued by the General Accounting Office (GAO).

The GAO report also contended that the VA could avoid costs of $9 million by foregoing equipment and building renovations required by its more outdated facilities. The consolidations would involve shipping linen work to under-used facilities located within a four-hour drive of existing VA laundries.

In addition, the VA could potentially achieve further savings by making use of competitive bidding from private sector commercial laundries.

“The VA has made good progress in consolidating its laundries, but more remains to be done,” said the GAO report.

“It has the opportunity to save millions of dollars by systematically assessing where it could consolidate laundries, obtain laundry services through competitive sourcing, or both.”

Major support services

The recommendations are contained in a new report, VA Laundry Service: Consolidations and Competitive Sourcing Could Save Millions, which was submitted to the Committee on Veterans Affairs of the US House of Representatives.

The House had ordered a study of major support services to determine whether efficiency could be improved at the VA, the world’s largest textile-care system, which processes 167 million pounds (lb) of goods a year. In compiling its report, the GAO visited VA laundry facilities and gathered production, management and cost information from both VA and private sector laundries. A GAO review of both on-premises VA laundry operations and commercial laundries determined that competitive sourcing achieved the goal of reduced costs. Currently, the VA uses 10 commercial laundries to provide off-site laundry services to its facilities and two commercial laundries to operate two of the 54 laundries scheduled to remain open. The laundry system supports some 36,000 patients a day in VA nursing homes and hospitals across the US at a cost of more than $53 million a year. VA laundries employ more than 1,150 workers.

The GAO report cited higher labour costs and outdated equipment as a rationale for the consolidation. It contended that 34 of the VA’s core of 52 remaining laundries would be “prime candidates for achieving cost savings” through competitive sourcing. It recommends closing 13 facilities entirely.

However, 13 of the remaining core of 52 laundries are also facing “major” capital investments over the next five years to renovate their facilities or to replace outdated laundry machinery. The renovations would cost a minimum of $3 million and potentially much more. The 13 sites, which employ approximately 150 people, are also considered likely candidates for consolidation.

Twenty-four VA plants are located in multi-laundry markets, defined as within a four-hour drive of one or more VA laundries.

The VA has already been squeezing fat and inefficiency out of its system through consolidation for more than 20 years. Under Federal law, the VA is already required to assess all options and methods for obtaining the most cost competitive laundry services. Since 1979, the VA’s consolidation programme has reduced the number of laundries from 116 to 67.

The GAO report identified the following VA laundries as targets of the proposed consolidation: Dallas, TX; Fayetteville, AR; Madison, WI; Hines, IL; Cleveland, OH; Murfreesboro, TN; Huntington, WV; Northampton, MA; Walla Walla, WA; St. Cloud, MN; Salem, VA; Clarksburg, VA; and Lebanon, PA.

Central laundry

After consolidation, the VA’s central laundry facilities would be expected to meet the VA’s production standard of 160,000 pounds of linen annually per employee.

However, critics are quick to point out that privatisation seldom achieves the goal of lowering the cost of laundry operations; in many cases, over the life of a contract, commercial laundries ratchet up the cost of laundry services above and beyond the prices of VA laundries.

A random sampling of VA laundries’ costs across the US showed, however, that VA laundry costs are already among the lowest and most competitive in the US.

The 13 VA laundries in jeopardy of closing have an average production cost of 36.5 cents per pound, a productive figure comparable to those of the more cost-effective operations in the private sector. Some of the 13 VA facilities are among the more productive “diamonds in the rough” in the VA laundry system.

For instance, the 17 employees of the VA laundry in Cleveland produce three million pounds of linen a year at an average cost of 27 cents per pound, while the 16 employees of the VA laundry in Madison produce 3.2 million pounds of linen a year at an average cost of 25 cents per pound.

Useful life

The GAO report, however, raises the point that equipment at several VA laundries will soon “reach the end of its useful life.”

It is easy to identify examples of the benefits of consolidation within the VA laundry system. For instance, the VA has invested some $6 million in new equipment, including tunnels systems and ironing systems, for the St. Albans Consolidated Laundry on the VA campus in St. Albans, Queens, a suburb of Manhattan.

The 69 employees of the Consolidated Laundry, which now serves nine VA facilities in the New York area, produce some 13.1 million pounds of goods a year at a cost of 24.5 cents per pound—one of the lowest costs anywhere in North America.

“The general savings of consolidation will be tremendous,” said Carlos Wilson, general manager of the facility.

“At the same time, those laundries are facing very high capital investment costs. It makes sense for the VA to consolidate. Otherwise, the VA has to renovate many laundries.”

The GAO recommends studying the potential impact of consolidation or outsourcing on the “career work force” at the VA laundries and suggests that the Undersecretary of Health direct the VA to assess each laundry individually to determine which option would improve the quality and reduce the cost of laundry operations.

There is as yet no timetable for implementing the most cost-effective strategies recommended by the GAO report, according to the office of Hershel Gober, acting secretary of Veterans Affairs.