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Despite objections, Council OKs $15 million more for water plant

Friday, December 7, 2012 by Michael Kanin

Council Members Thursday grudgingly approved what may be the final $15 million appropriation for Water Treatment Plant 4, a project whose cost now could top out $374 million. The vote was unanimous.

 

The action came as some Council members remained adamant that they were not fully aware of the particulars involved in the type of construction deal, known as construction manager at risk, they approved for the facility in 2010. In particular, they said they were unaware that the $359 million construction cost quoted by city officials could increase.

 

“Had we done one big bid package instead of breaking it up into little pieces and trying to bid it based on the preliminary engineering at that early day two years ago, I’m convinced that the only responsible bid on MWH’s part would have been considerably in excess of $359 (million),” Council Member Bill Spelman said, referring to the project’s lead contractor, Broomfield, Colo.-based MWH Contractors.

 

In an incisive post-mortem, Spelman suggested that the approach used by Council and staff — multiple bid packages for the project — was the right way to go, if indeed things had proceeded as promised. “By breaking it in to pieces … we ended with a lower total cost than we would have had we done it that way,” Spelman continued. “I think we probably played it just exactly the way we should have, except the Council needed to know what the game was. And I did not know what the game was, I know at least a couple of us didn’t and I suspect most of us didn’t.”

 

Still, after the hearing, Spelman told In Fact Daily that misunderstandings over Water Treatment Plant 4 construction shouldn’t hold back future attempts at construction manager at-risk deals. Spelman argued that he and his colleagues would be better informed moving forward.

 

Council Member Laura Morrison agreed. “Any (construction manager at-risk deal) in the future will certainly involve a much more robust, informed discussion prior to approval,” she told In Fact Daily.

 

Austin Water Utility Director Greg Meszaros said Thursday there was no intent to mislead Council members. “It certainly wasn’t our intention to try to communicate that under no circumstance would the $359 (million) ever change,” Meszaros said.

 

Mayor Lee Leffingwell reminded his colleagues that, even with the $15 million overrun, the utility had managed to keep costs relatively within bounds.

 

However, some have questioned that figure. Consumer advocate Paul Robbins has suggested that the true additional cost is closer to $60 million, when various project cuts and contingency expenditures are figured in. But it is really too soon to be sure what the actual tally will be.

 

Meszaros said the project may not need the entire $15 million Council approved.

 

After the meeting Meszaros declined to directly answer whether the sensitive nature of the treatment plant had played in to the reception it has continued to receive over the past three years. “I think, you know, any kind of controversial big project is going to get attention. I think Plant 4 probably draws more than most projects,” he said.

 

City Manager Marc Ott, who took responsibility for project overruns, suggested that the conversation might be different the next time the city conducts a construction manager at-risk project. “I think one of the things we will do … is we’ll spend some time educating the Council about the intricacies of construction manager at-risk — that’s part of the process of helping them so they do ask good questions,” Ott told In Fact Daily.

 

Ott refuted an implication from Spelman that an unnamed former management employee had been relieved when he or she learned that Council would not ask about the solidity of the $359 million number. “Our approach to this wasn’t one where we were trying to do it in a way (that) would keep them from asking certain questions,” he said. “In fact, we were trying to put everything out there on the table. … We thought we had done a good job explaining the method that was being used. It just didn’t work out that way.”

 

Spelman, Morrison and Council Member Chris Riley had formed a block that consistently voted against funding for Water Treatment Plant 4 as it moved through the approval process. The trio’s objections included its necessity and its environmental impact.

 

With the election of Council Member Kathie Tovo some opponents hoped the plant would be put on hold. Tovo made the plant’s construction a campaign issue in her June 2011 election victory over pro-WTP4 incumbent Randi Shade. But this notion disappeared after it became clear that delaying the plant in mid-construction would have cost more than finishing it.

 

In May 2012, word emerged that the utility would need more money to complete the project (see In Fact Daily, May 24, 2012). Further trouble surfaced as it became clear that at least some in upper-level city management knew about the cost overruns as many as six months before they became public (see In Fact Daily, June 12, 2012).

 

It was all compounded in subsequent hearings in front of the Council’s Audit and Finance committee, where it became clear that the $359 million construction price tag was not guaranteed by the construction manager at-risk contract. “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 at the time.

 

“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.” (See In Fact Daily, Nov. 20, 2012).

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