MINUTES OF THE SPECIAL ENGINEERING AND OPERATIONS COMMITTEE MEETING
Feb. 9, 2006
CALL TO ORDER/DETERMINATION OF A QUORUM
Chair Knutson called the Engineering and Operations Committee to order at 1:34 P.M. Committee members present were Chair Knutson, Vice Chairs Ferguson and Johnson, Directors Brammell, Lewanski, Lewinger, Loveland, Morrison, Sundrum and Thompson. Committee members absent were Directors Broomell, Croucher, Rogers, and Tu. At this time, there was a quorum of the Committee. Other Directors present were Directors Bond, Bowersox, Dailey, Irvin, Muir, Pocklington and Saunders. Staff present was General Manager Stapleton, Deputy General Manager Lanspery, General Counsel Hentschke, Director of Engineering Economides, Assistant Director of Engineering Stift, Engineering Manager Steele, Senior Engineer Chamberlain and Engineer P.E. Rodgers.
Public Comment
There were no members of the public who wished to address the Committee.
STAFF PRENTATION ON LAKE HODGES PUMP STATION
a) BACKGROUND/HISTORY
b). CONSTRUCTION BID RESULTS AND ANALYSIS
c). ALTERNATIVE FOR PROJECT IMPLEMENTATION
Chair Knutson introduced Mr. Lanspery who discussed the overall CIP process, budget, progress, and the budgetary context within, which the ensuing discussion would occur.
Chair Knutson introduced Mr. Economides to begin the Lake Hodges Pump Station presentation. Mr. Economides stated there would be three parts of the presentation with periods of time for questions and answers. Mr. Chamberlain would present on the background and history. The construction bid results and analysis would be presented by MWH, the design engineers for the project. Mr. Steele would present on the alternatives for project implementation. The consultants, contractor and subcontractors present were: George Foote, Area Manager, Archer Western; Mike Medford, Project Manager, Archer Western; Phil Waterman, Southern Contracting; Rick Lassiter, MCCG, SCOOP Consultant; John Maher, Traylor Pacific; Murli Tolaney, Chairman of the Board, MWH; Bob Aaserude, Vice President; Jim Lindell, Project Manager and Jim Whitnik, Project Engineer, MWH.
Mr. Economides informed the Committee that the low-bid price came in at $23 million over the estimate and, as difficult as it was to accept the results, staff concluded it represented the current market conditions. Mr. Chamberlain then provided a history and quick overview of the project, the significant issues discovered during and following the bid period, and the budget implications based on the bid received for the project.
Questions from the Committee included:
Director Loveland asked if the water level at Lake Hodges had any effect on the design or the bid. Mr. Chamberlain stated that it did not.
Director Brammell inquired about the 20,000 acre feet of emergency storage mentioned in the background and history portion of the presentation. Where was the emergency storage and how did the cost per acre-foot relate to instead super sizing the San Vicente Dam project for this storage? Director Brammell also asked if the $136 million presented was net or gross revenue. Mr. Chamberlain explained the $136 million was gross revenue. Net revenue benefits were approximately $43 million. Mr. Economides confirmed, per an agreement with the City of San Diego, that the Water Authority would have 20,000 acre-feet of emergency storage in Lake Hodges. The cost would be approximately $7,500 per acre-foot. With respect to super sizing San Vicente, there was a maximum height for the dam that made sense economically and the cost comparison to Lake Hodges would be higher. Comparing to Olivenhain Reservoir, the cost was $9,000 per acre-foot.
Director Lewinger asked about the Lake Hodges budget history and if the numbers presented reflected the current low bid, would the payback period be extended and was there any relationship regarding the lack of bidders and the fact that the project had a PLA? Mr. Economides stated that the report reflected the current budget and the increase necessary to accommodate the current low bid. Approximately an additional $30 million would be required to fund the ESP and approximately $10 million would be required to fund the pumped storage portion of the project. The payback period would be a little less than 11 years. The market conditions and activity in the construction industry was affecting the number of bidders. There was reticence by some in the contracting community to bid PLA jobs; however, is one of many things impacting the market.
A brief discussion clarifying the various agreements with SDG&E, City of San Diego and the allocations for north county water agencies ensued.
Mr. Hentschke explained the criteria and legal alternatives for rejecting low-bids.
Mr. Economides presented the bid results and pointed out key elements that assisted staff determining that the bids were reasonably priced. Mr. Economides then introduced Mr. Aasserude to discuss the details regarding the differences between the design engineer’s estimate and the actual bid price. Mr. Aasserude introduced Mr. Tolaney who discussed MWH’s estimating process and causes for the significant differences between their construction cost estimate and Archer Western’s low bid, as well as the measures they had taken and would be taking to improve their estimating process to ensure this would not be repeated.
Following several questions from the Committee and Board regarding the fees paid to MWH, environmental issues, permit requirements, site requirements and the other causes for the underestimate, and discussion with the contractor Archer Western regarding potential value-engineering, it was determined that further clarification and information would be required at the upcoming February 23 rd Committee meeting.
Mr. Steele presented on the alternatives for project implementation which included further dialogue with the Committee, as well as the low-bid contractor, Archer Western, regarding the potential for value engineering on the project.
Director Ferguson moved to approve and Director Johnson seconded staff’s recommendation, but upon further questions and discussions, both withdrew and deferred the motion until the clarifications and requested information was received by the Committee and until the regular Board meeting scheduled for February 23 rd.
ADJOURNMENT
There being no further business before the Committee, Chair Knutson adjourned the meeting at 3:06 p.m.
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William Knutson, Chair
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