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Staff looks to cut costs as Ott puts firm cap on WTP 4 construction

Monday, July 2, 2012 by Michael Kanin

Austin City Manager Marc Ott has placed a hard cap on construction costs associated with the city’s controversial Water Treatment Plant 4 project. The cap – which would hold expenditures directly associated with building the plant at or very near the $359 million budgeted for construction – might offer some relief from the criticism leveled at city officials after it became apparent that the Austin Water Utility might have to ask Austin City Council members for more money.


However, after discussing the situation with several sources familiar with the plant and its construction, In Fact Daily has learned that such a cap could, ultimately, prove unwise.


To keep costs in the $359 million neighborhood – the total amount Council has already authorized for construction – utility officials are considering the elimination of the Medium Service Pumping Station associated with the project. That action could expose the utility to critical situations down the line.


When asked for a comment on possible elimination of the pump station, Austin Water Utility Director Greg Meszaros said, “We’re still evaluating the various risks and trade-offs as we would reach our $359 million goal. It’s going to impact a lot of areas. Medium Service pumping has not been bid yet, so that is a logical area for us to look at.


He added that the eliminating the pumping station was suggested during a value engineering review the utility performed about 18 months ago. “We looked real hard at scaling back medium service pumping so we’re going back to some of that value engineering analysis and revisiting that and weighing the risks and options.”


A source close to the project said there was considerable concern about cutting out the station. If there is an emergency, such as contamination or a catastrophic fire where a lot of water is needed very fast, without the pump station, AWU would not have the ability to push the water as quickly as needed.


According to Meszaros, though the new water plant will rely heavily on gravity to move water around, the medium service pumping station would play a key role “as our system would grow, as we need to move Plant 4 water around the system, (and) as we would want to take other parts of our system and repair them in the future.” For example, utility officials have long talked about shutting down the Davis Treatment Plant for repairs once WTP 4 is operating.


“You can’t move the water every where you want simply by gravity,” he continued. “There’s limits to how far gravity can push the water into our system. So that’s where you need to energize the water and that’s where medium service pumping would come in, where you provide additional boost to water.”


Assistant City Manager Robert Goode, who is the immediate management supervisor over the water utility and its treatment plant project, confirmed for In Fact Daily that the pumping station was one of several possibilities for project cuts. He added that the utility may also opt to delay the construction of the pumping station to save on the immediate investment.


As of Friday afternoon, Goode noted that no firm decision had been made about what to cut from the project.


The city chose to employ a relatively new construction approach to build the plant. Under that process, known as Construction Manager at Risk, the utility hired a firm – a leading water industry contractor called MWH – to oversee the contracting for the entire project.


According to the city’s contract with MWH, the company broke plant construction into a series of bid packages, which were supposed to hew closely to a preset budget. As construction got underway, however, and conditions warranted the rethinking of certain portions of the project – including a redesign of a set of shafts forced by environmental concerns — project costs began to push into contingency funds and it became clear that they might have to return to council for additional dollars. Although emails obtained by In Fact Daily show that top city officials were aware of the situation as early as December 2011, they chose not to inform Council until late May.


Meszaros finally told Council members — to no small amount of surprise — about plant financial concerns at a May 23 meeting of their Audit and Finance committee. Ott had issued an email the previous evening expressing his worry about heading back to Council for additional Water Treatment Plant funds, and hinting at the idea that he hadn’t heard about the situation until that night.


That resulted in some consternation that was compounded when Council members began to see the issue as one of a cost-overrun to the tune of roughly $24 million. On the heels of council frustration, and in an environment where some community activists were not inclined to trust the Water Utility, Ott delivered his memo instructing utility officials to keep construction costs at roughly $359 million.


I have directed my team to continue to aggressively manage all aspects of the project with the specific goal to reduce costs such that further construction authorization is not required,” he wrote to Mayor Lee Leffingwell and the rest of the City Council on June 15. “Simply said, I have told the team to complete the work within the current authorization (emphasis Ott’s) and I expect that they will be successful in doing that.”


Meszaros and the utility have maintained, since before Ott’s memo, that the total costs associated with the Water Treatment Plant will remain in the neighborhood of their $508 million budget, even with potential overruns.


As of the most recent utility presentation on plant construction progress, the Medium Service Pump Station is part of a construction package that is estimated to come in at nearly $21 million. That figure is roughly $9.6 million more than budget.


American Water Works Association spokesperson Greg Kail told In Fact Daily that water systems are “capital intensive” propositions. “There are costs associated with building the plants and maintaining the necessary level of treatment and maintaining the distribution system,” he continued.


Kail could not specifically discuss anything directly related to Austin’s Water Treatment Plant 4 project.

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