Sunday, August 31, 2014
YOLO COUNTY NEWS
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Agency GM fields council questions on DBO bidding process

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From page A1 | July 05, 2013 |

With concerns circling in the community regarding the implications of having only one contractor bid on the Woodland-Davis Clean Water Agency surface water project, the City Council Tuesday hosted Dennis Diemer, agency general manager, to publicly answer some questions.

Two weeks ago, CDM Smith — the contractor that agency officials had to talk back into the process once already — informed Diemer that they’d be dropping out of the race permanently, as they could not meet the technical requirements set by the agency.

CDM’s departure left only CH2M Hill to submit a final proposal for the project because Veolia Water North America dropped out of the running late last year when they could not keep key personnel and resources together to piece together a competitive proposal themselves.

Agency and city officials long have trumpeted that the competitive bidding process within the design-build-operate procurement method — design-build-operate means one entire contracting team designs, constructs and operates the project for a specified amount of time — ultimately would shave millions of dollars off the project’s overall cost.

But with only one team remaining in the competition, council members took the opportunity Tuesday — after Diemer gave a presentation on the overall status of the project — to ask how the agency could still secure a competitive bid.

“First of all, we’ve set a very high bar in terms of the state of the art technology that we are requiring, the treatment plant performance requirements that we’ve set and the maximum price guarantee,” Diemer explained.

“If the proposal that we receive from CH2M Hill meets all three of those very stringent requirements, I think by definition we’re going to have a very competitive price that meets all of the agency’s requirements.”

The maximum price guarantee sets the overall cost of the project at $151.5 million.

Additionally, Diemer explained that because the winning contractor must competitively bid the work that’s performed by subcontractors — which makes up about 70 percent of construction — the competition for the project is actually still ongoing.

“They’re required to show us those bids, they’re required to explain to us why they picked the bids that they picked and in addition to that they’re going to open their books on the remaining portion of (the project work),” Diemer said.

Diemer later was asked by Councilman Lucas Frerichs about what would happen if the bid for the project comes in higher than the maximum price guarantee.

“We’ll have some decisions to make,” Diemer said.”At that point we’ll have to decide whether we want to re-engage in another design-build-operate procurement process (or another method).

“(But) shifting to an alternative procurement methodology at this point will take time and be expensive. … It’s something we hope doesn’t happen, but we will wait and see what we get from CH2M Hill on July 30.”

CH2M Hill is scheduled to submit its final priced proposal to the water agency on that date. If it meets all of the RFP requirements, the agency board could award the project to the firm in October.

Councilman Brett Lee wondered, however, what would happen if the project is submitted under the maximum price, but then CH2M Hill experiences cost overruns during construction.

“There are essentially no allowances in the contract (for overruns),” Diemer said. “Any issues or problems that they encounter in the design, operation and construction, they’re to bear those costs and those risks.”

But Diemer did elaborate on several exceptions, including unforeseen soil conditions and that if the price for raw materials exceeds their cost index by a certain amount, there would be an adjustment in cost to the agency.

Lee, then, would ask his colleagues whether they should pick a number above the maximum price guarantee that they would not be willing to accept a bid higher than, if CH2M submitted a proposal above the price guarantee.

But Mayor Joe Krovoza said that he believes CH2M Hill will produce a bid that meets the agency’s requirements.

“My expectation is that they’re going to come in at $151 (million, or lower) or we’re going to reject the bid, period.” Krovoza said.

CH2M Hill, meanwhile, has been involved in some controversy of late and council members were interested in the agency’s position on the matter.

The Colorado-based firm recently admitted to time card fraud after billing the federal government for work its employees did not perform on a project in Washington State to clean out and close down an old nuclear facility.

“It’s definitely a serious charge and one that the agency shouldn’t dismiss or take lightly,” Diemer said. “However, I think it’s important that we keep it in perspective: CH2M Hill is an international company, they have annual revenues of over $6.1 billion, they have 30,000 employees and almost 24,000 active contracts.

“So this is a problem they’ve encountered, but I don’t think it’s reflective of their reputation or the success that they’ve had on all of the other contracts they’re involved in world-wide.”

— Reach Tom Sakash at tsakash@davisenterprise.net or 530-747-8057. Follow him on Twitter at @TomSakash

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Tom Sakash

Tom Sakash covers the city beat for The Davis Enterprise. Reach him at tsakash@davisenterprise.net, (530) 747-8057 or @TomSakash.
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