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Veterans Affairs Outsourcing- Ending an Era

After years of predominant in-house laundering, the Department of Veterans Affairs (VA) has started to review the potentials of Competitive Sourcing. This, when from 1980 to 1997, the VA spent about $13 million annually to modernize approximately 61 facilities with the ultimate goal of reducing the cost of operations through modernizing and consolidation of laundry facilities.

The move towards outsourcing is a result of President Bush initiatives and Textile Rental Services Association of America (TRSA) lobbying efforts, stimulated by a General Accounting Office (GAO) audit requested by the US Congress recommending that the VA explore outsourcing.

The VA’s modernization program, which reputably demonstrated cost benefits in the millions, came to a rapid halt in 1997 due to decentralizing the funding and management of the modernization efforts from Washington, DC to field facilities. The decision to re-focus the modernization program has created an irrevocable long and short-term gap. Laundries that were modernized in the early and mid 1980’s now need tremendous capital investments to bring efficiencies back into the forefront of prosperity and cost reasonableness. VA management may have realized that they now or in the near future cannot afford to bridge the financial gap now required to upgrade their laundry program.

Law permits VA laundries to sell services to other healthcare groups, so one would wonder why the VA stopped the original modernization effort that lasted close to 20 years. Have we come full circle to questioning the fiscal benefits of infrastructure modernization and cost-effective in-house laundering, in a pre-1980 Déjà vu?

The VA, which is organizationally broken into over 20 networks, recently began a regional pilot study to ascertain whether outside sources could handle their goods which amount to approximately 180-million pounds annually. The study was conducted simultaneously in networks that had approximately nine laundry facilities representing less than 15 percent of the total infrastructure. The laundries that were examined were located at VA Health Care Facilities at Augusta, Ga.: Tuscaloosa, Al.; Hines, IL. Madison, Wi., Milwaukee, Wi.; Murfreesboro, Tn.; Mountain Home Tn; Dayton, Oh.; and Cleveland, Oh

While it is thought by some that it may be more cost effective for the VA to outsource based solely on the cost of labor and benefits paid by the government, a national effort may delay VA efforts. Concurrently, the Office of Management and Budget (OMB), which sets the government wide policy for purchasing services for the government, is in the process of releasing new rules on outsourcing. .

Competitive sourcing is an examination of private like activities in order to determine the most cost effective and efficient method by which to obtain services. In many instances external to the government, private consultant support may be required in order to assist government agencies so that procurement models can be established and coordinated with the private sector. Consultants may also be required to provide draft performance work statements (specifications for services required). Other consultants may be retained to actually work on the development of the governments bid. It is the hope of the current administration that if consultants are utilized that these services would be acquired from a qualified base where expertise would outweigh selection of a consultant at lowest cost.

As OMB puts the final touches on the rewrite of the new outsourcing rules, it will spell out significantly how agencies, like the VA should make decisions. A special panel established by the government’s GAO, called the Commercial Activities Panel has made the recommendations to OMB. The panel which included the Director of OMB and other government executives also included national business leaders. One of the panel’s more controversial recommendations was to revise the standard of low cost used to award most federal contracts. The panel recommends using best over-all value, which is currently being contested by government unions.

In any event, OMB feels that retaining in-house government functions like VA laundries would place more accountability on these activities. There is also the potential issue that should the government not prepare open and fair statements of work that explore the variable means of obtaining laundry service i.e., linen rental, government owned-contractor operated or more traditional solely contractor provided services, that protest will be issued halting the entire process until resolutions are made. Potential contractors could easily protest the government process if all aspects of service are not fairly addressed and evaluated based on best overall value. Government protest can be handled by other external agencies such as the GAO and it would take much government time and effort if specifications are not coordinated with the private sector. The competitive sourcing process will be lengthy, complex, frustrating and certainly subject to much scrutiny to all who are involved. The key concern and challenge will be the ability to establish a level playing field that will protect all interested parties, particularly the American Taxpayer.

It will be interesting to watch the efforts of one of the world’s largest laundry operations (VA) while they attempt to serve the nation’s veterans and other customers and at the same time chart an unsheltered course for the future.

Quick Rinse - News From Around The World

Ecolab Acquires Dober Chemical’S Textile Care Business

ST. PAUL, Minn. — Ecolab Inc. a leader in cleaning, sanitizing, food safety and infection prevention products and services announced it has purchased the commercial laundry division of Dober Chemical Corporation. The acquisition includes Dober’s laundry chemical and waste water treatment and Ultrax dispensing businesses as well as an exclusive partnership to market and provide key components of its Spindle monitoring software.

“Dober is respected throughout the industry for its innovative monitoring technology, product chemistry and commitment to service – qualities that complement our own strengths at Ecolab,” said Brian Henke, vice president and general manager, Ecolab Textile Care North America. “As we expand our North American commercial laundry business, innovation and service excellence will continue to be our top priority as we partner with our customers to deliver unsurpassed value to run their operations more efficiently, sustainably and cost effectively.”

“Ecolab and Dober share the same customercentric approach to service and innovative technology,” said John Dobrez, president Dober Chemical Corp. “This is an exciting development because it builds on the strengths of both companies to move the industry forward.”

Through this agreement, Spindle Technologies,a division of Dober, is forming a strategic alliance with Ecolab Textile Care in an exclusive licensing agreement for its ChemWatch Software technology and the OPTRAX Utility Module.

“There will be no movement of people as they currently all operate remotely,” said Henke. “The Dober leadership team is very skilled and respected in the industry. We plan to have them as part of the team moving forward. During the transition, both businesses will operate as usual and we do not expect there to be any changes in the service the customers are used to receiving.”