Charting Port’s Course : L.A. Harbor Must Cut Costs, Staff to Stay Ahead, Audit Finds

The Port of Los Angeles is locked in a highly competitive struggle withneighboring Long Beach for supremacy as the West Coast’s top harbor and must slash its large paper-shuffling bureaucracy to stay in fighting trim, according to a management audit released Wednesday.

The audit said the Los Angeles port, although still an international leader, should reduce its staff by 35% over the next five years to save $9.5 million annually.

Such streamlining will enable the port to remain competitive with the Long Beach facility, which has 61% fewer employees but generates 50% more revenue per employee, according to the audit by Booz-Allen & Hamilton Inc., a management consulting firm.

“We’re not taking something that’s sick and trying to fix it,” said Harbor Commissioner Leland Wong. “We’ve got something that’s well and we’re going to make it better.” Wong was appointed by the commission to head a task force to

implement the audit recommendations.

“There is no time to waste” in following through on the report’s findings, Harbor Commission President Frank Sanchez added. “The competitive forces we face increase daily.”

However, Sanchez maintained that the staff reductions urged by the audit will be accomplished through normal attrition and possibly a buyout program, rather than through layoffs.

The audit was initiated by the Harbor Commission appointees of Mayor Richard Riordan. Booz-Allen did a similar audit of the port in 1986.

Riordan, a businessman, has also been the force behind similar efforts to streamline the Department of Water and Power and the Airport Department, which are the city’s two other quasi-independent agencies.

“These are compelling and hard-hitting findings,” Riordan said of the audit. “They should serve a real wake-up call for the Port of Los Angeles.”

The audit did not fault the port administration, headed by Harbor Department General Manager Ezunial Burts, who won the job in 1984 with the support of then-Mayor Tom Bradley. Burts has Riordan’s support, the mayor’s spokesman said Wednesday. “As far as we are concerned, the general manager will lead the changes and we’ll support him in this,” said Steve Sugarman, Riordan’s public relations chief.

The audit provides the Harbor Department with keen insights on how to improve its operations, Burts said. “We’re excited about this,” he said, while denying that he saw any criticism of his own tenure in its findings. “This is one of the most successful port operations in the world.”

Although the Port of Los Angeles--which in 1993 had annual revenues of $196.5 million, compared to $114.9 million for the Port of Long Beach--emerged as the leading North American harbor in the 1980s and has retained its position in the 1990s, “its position is threatened” by Long Beach, the report found.

The Booz-Allen analysis said Los Angeles spends $47 million a year on salaries and benefits for its 751 employees, compared to the $18 million its Long Beach competitor expends on its 298 employees.

More important, Long Beach gets more out of its employees than does Los Angeles. For example, the average annual revenue generated by a Los Angeles employee is $258,000, compared to $385,000 at Long Beach, a 49.6% difference.

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Using another measure, the audit found that the average employee at Long Beach generates 101,000 tons of business, while Los Angeles’ average employee generates only 32,000 tons of business.

Cutbacks in staff will enable the Port of Los Angeles to reinvest the savings in a pending $990-million port improvement plan, maintain the port’s AA credit rating and keep its tariff charges down, Wong said.

The audit found that the Los Angeles port is too heavy with staff doing secretarial, clerical, engineering, legal and public relations work. To support its public relations efforts, for example, the Port of Los Angeles has 19 employees, compared to seven in Long Beach, although “both ports are held in equally high regard throughout the world,” the report noted.

The reasons for the port’s staffing arrangement, the audit found, include an organizational bias against privatization.

“The practice of the Port of Los Angeles (is) not to contract for many of the services it requires . . . (which is) reflective of its organizational philosophy,” the audit said. “The port believes that control of quality is best achieved . . . through internalization of management function. As progressive as the port is, this policy is a remnant of management practices many corporations and public agencies have determined to be obsolete.”

In addition, a large part of staff time in Los Angeles is spent pushing paper--in effect, preparing written communications and processing standardized forms, the audit said. Part of the reason is that the City Charter requires Harbor Department actions to undergo review by City Hall.

“After Long Beach signs a contract with a new port tenant, it only takes five days for them to take occupancy,” Wong said. “For us, it takes two months on average because everything must go Downtown to be reviewed by the council and the City Administrative Office.” Revising the charter to lift these restraints would be a big help, Wong said.