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Despite worries over process, Council braces to pay more for WTP4

Tuesday, November 20, 2012 by Michael Kanin

Austin City Council members and officials with the Austin Water Utility publicly acknowledged Monday an increasingly apparent fact: More money is needed to complete the city’s controversial Water Treatment Plant 4.

 

The Council has approved construction contracts totaling $359 million to build the water treatment plant, but the amount was not a hard cap, a fact that Council members were not aware of when they approved the Construction Manager At-Risk agreement for the project more than three years ago.

 

Now, it appears Council will have little choice when the utility brings forward a request for roughly $15 million more to complete the plant at their Dec. 6 meeting. “In my opinion we have taken all of the appropriate steps that we can to value-engineer and/or reduce scope,” utility director Greg Meszaros told members of the Council’s Audit and Finance Committee on Monday. “Additional steps would result in a plant that did not meet its original design goals.”

 

Despite the careful wording of his statement, Meszaros did offer specifics about what the city would lose if it opted to force the utility to make further cuts to the project. “We would endanger, potentially, the environment by making cuts that reduce our flexibility to respond to environmental concerns,” he said. “We would have a project that did not work.”

 

After three decades of debate, those on the council in August 2009 approved the award of a Construction Manager At-Risk contract to MWH Constructors Inc. (see In Fact Daily, Aug. 7, 2009). As the utility and MWH began to build the facility, officials brought construction packages forward one at a time. The utility received approval on a series of successive 4-3 votes. Council Members Bill Spelman, Laura Morrison, and Chris Riley consistently voted against the project.

 

Then, in November 2010, Council members – on another 4-3 vote – agreed to fund what they thought was about $300 million in remaining construction costs for the facility. Then-Assistant City Manager Rudy Garza told Council Members that the authorization would allow for more flexibility in bidding contracts. Utility director Greg Meszaros suggested it might even save money. (See In Fact Daily, Nov. 19, 2010.)

 

The following spring, the election of Council Member Kathie Tovo – who defeated plant-supporter Randi Shade in 2011 – gave WTP4 opponents brief hope that the project might be cancelled. But after a city audit affirmed a third-party study that suggested cancellation at that point would prove more costly than actually completing the project, construction continued. (See In Fact Daily, Sept. 22, 2011.)

 

Word first surfaced about the cost overruns in May, when Meszaros told members of the Council’s Audit and Finance Committee that Austin Water could need another appropriation to complete plant construction. That kicked off a flurry of project cuts, and deeper questions about the nature of the Construction Manager At-Risk contract that the city had signed with MWH. (See In Fact Daily, Sept. 12, 2012.) Generally, a Construction Manager At-Risk agreement is a method that entails a commitment by the construction manager to deliver the project within a guaranteed maximum price.

 

At Monday’s meeting, Spelman first commended Meszaros for being “straight with us” before adding, “None of us thought to ask the question, ‘Is that $359 (million) guaranteed?’ because I think that was implicit in all of our understanding of what was going on: $359 million is a guaranteed price. That’s what (Construction Manager At-Risk) is doing for us,” Spelman said.

 

“Of course, it wasn’t doing that for us, and because we didn’t ask you that explicit question, you and other city staff who were present at the meeting did not give us that answer.”

 

Later, Spelman told In Fact Daily: “It was like we were playing a game (with the Council assuming the $359 million was the maximum for the project and the utility knowing otherwise.) We shouldn’t be playing games. That’s how we end up where we are now.”

 

Morrison and Mayor Pro Tem Sheryl Cole – the only member of the Audit and Finance Committee to consistently vote for the plant – joined the chorus. “One of the disturbing things for me was that when I voted for this contract I thought ($359 million) was the number,” Cole said.

 

Committee members, who seem to have all but accepted the fact that they will probably have to vote to approve the additional appropriation, looked to Meszaros and other city staffers for lessons to learn from the WTP4 budget overshot. Morrison put this question directly to Meszaros.

 

Meszaros responded: “We traditionally would never go and ask the Council to set a number when we are just after preliminary engineering.”

 

The discussion came on top of another salvo from environmental and consumer activists who have argued against plant – for both economic and environmental reasons – from the beginning. In a press release sent before the meeting, officials with the Austin branch of the Sierra Club, Clean Water Action, Environment Texas and Save Our Springs Alliance offered the city a bit of “I told you so.”

 

They put the overruns at closer to $60 million than the $15 million put forward by the utility. To get there, they also included nearly $44 million in what they called “decreased value” costs, associated with scope trimming performed by the utility in an attempt to get plant costs down to the $359 million magic number.

 

Meszaros told In Fact Daily that he disagreed with that characterization. Morrison, however, seemed to be on board. “The full picture of the WTP4 contract is now being painted. The construction contract, which is the lion’s share of the half billion dollar cost, is almost 20 % over budget, so far,” she offered in a statement via email.

 

“I consistently voted against it because we’d identified that WTP4 was unneeded at this time, and it brought huge risks,” Morrison continued. “All along, the contract sounded too good to be true and now we’re finding out that it was.”

 

After the hearing, Meszaros said that the $359 million number came from an estimate that came down in what historians may one day refer to as the late-early period of debate over the plant; in the wake of a switch in sites away from a more environmentally sensitive site in the same region as the current plot of land near FM 2222 and RM 620. “When we switched to that site, our engineer performed an early engineering estimate,” Meszaros said.

 

When asked why the utility had gone forward with such a preliminary look, Meszaros echoed what he told Council members: the utility had wanted to get their construction manager into the design process early, and that there was value to such an approach.

 

Spelman told In Fact Daily that the extra $15 million the utility plans to request should be the final limit. “(Meszaros) believes that he’s not going to need the entire $15 million … and he’s probably right.” But he added that “if it’s going to beyond this point, we need to know right now.”

 

Spelman also commented about the Construction Manager At-Risk process. “The primary value of the CMAR process is not the guaranteed maximum price. It’s that the constructor and the designer work together.” He specifically pointed to the Jollyville Main, the water transmission line that will go from the plant to the Jollyville reservoir. He said he believes that the decision to tunnel under the Glen Rose formation averted possible negative impact on the Jollyville plateau salamander, among other environmental issues. Although the Jollyville salamander has not yet been listed as endangered, the U.S. Fish & Wildlife Service has proposed it for listing under the Endangered Species Act.

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