Agency BoardOctober 10, 2013

Agenda Item 7:DBO Service Contract for the Davis-Woodland Water Supply Project

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Discussion Topics

• Background

• CH2M HILL Proposal and Evaluation

• Service Contract

• Funding and Finance Plan

• Legal Authority

• Recommendation

• Project Cost Reductions

• Schedule

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Background

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Background• April 18, 2013: Addendum No. 1 to RFP

• 70% competitive pricing and 30% open book for self-performed work• Set maximum Design-Build Price and Net Present Value (NPV) price

ceilings Design-Build Price: Second 10% reduction in Engineer’s estimate NPV: 10% below Agency estimate

• June 20, 2013: Addendum No. 2 to RFP Revisions to accommodate Initial Concept Submittal suggestions

• July 15, 2013: Authorization from Board to negotiate with CH2M HILL and confirm competitive negotiation process

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CH2M HILL Proposal• Proposal received July 30th

• Proposal review and negotiation team:• Facilities Procurement Committee (FPC): Dennis Diemer, Diane

Phillips, Doug Baxter, Jim Yost, Jerry Gilbert, Rhodes Trussell, • Legal counsel: Richard Shanahan, Eric Petersen• Other team members: West Yost staff, Trussell Technologies, Frisch

Engineering, Lionakis, Karl Stinson, Jacobs Associates, Raftelis, TerraVerde

• Negotiation sessions and interaction with CH2M HILL• 6 FPC Meetings• 7 Meetings with CH2M HILL• Numerous conference calls and cost review meetings

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CH2M HILL Proposal Evaluation

TECHNICAL COMPLIANCE•RFP requirements:

– Proven technologies– Drinking water quality and delivery guarantees– Compliance with present and anticipated future drinking water

regulatory standards

•CH2M Hill’s proposal is technically compliant with the requirements in the RFP •Requirements are included in the Service Contract

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CH2M HILL Proposal Evaluation

PRICE•RFP maximum price ceilings:

• Capital: $151.5 million; Net Present Value: $234.1 million

•CH2M HILL negotiated final prices:• Capital: $141.2 million; Net Present Value: $231.2 million

•Amount under cap: • Capital: $10.3 million (7%)• Net Present Value: $2.9 million (1%)

•CH2M HILL compliant with 70% competitive pricing requirement•Agency completed open book review of self-performed work

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CH2M HILL Proposal Evaluation

NEGOTIATED PRICE•Additions in Revised Proposal

– $219,000 – welding of all joints in steel finished water pipelines– $235,000 – modifications to proposed administration building– $534,000 – increase in construction QA/QC by CH2M HILL– $90,000 – increase in ozone generator sizing– $418,000 – items not contained in original price proposal:

• chemicals for plant commissioning• construction surveyor• coatings on a tank• construction trailer for Agency staff

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CH2M HILL Proposal Evaluation

NEGOTIATED PRICE•Deductions in Revised Proposal

– (-$1,700,000) – construction and installation of electrical work

– (-$135,000) – engineering design services– (-$312,000) – concrete, dry wall, and earthwork

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CH2M HILL Proposal Evaluation

NEGOTIATED PRICE•Changes to Operating Costs

– Reduction in caustic unit cost

– Historically large variation in chemical prices• Group A Chemicals (pass-through): dose determined by Agency

• Group B Chemicals (included in Service Fee): dose determined by operator for efficient operation

– Updates to Repair & Replacement Charge (R&R Charge)• Increase filter media replacement frequency

• Moved from Service Fee to R&R Charge

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CH2M HILL Proposal EvaluationENERGY: Provisions and Requirements•Goal: promote energy efficiency and realize energy cost savings

• Energy Efficiency and Cost Savings Plan including off-peak energy use• Maintenance activities during off-peak periods

• Guaranteed Maximum Electricity Utilization (GMEU) and Guaranteed Maximum Electricity Demand (GMED)

• Included in NPV determination• CH2M HILL pays for energy use above the guaranteed maximums• Agency/CH2M HILL share of savings for electricity usage under the

guaranteed maximums•Annual review of actual electricity use vs. guaranteed maximums

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CH2M HILL Proposal EvaluationENERGY: CH2M HILL’s ENHANCEMENTS TO BENCHMARK PROJECT•Solids drying beds rather than mechanical dewatering

•Taking advantage of WAPA power rates by increased pumping head at intake

•Ozone diffusion rather than side injection

•LEED equivalent Operations Building design

•Chlorine disinfection rather than UV

•Gravity filtration rather than membrane filtration

•Pipeline design based on lowest life cycle cost

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Service Contract• Design criteria and drawings from Proposal incorporated

into Service Contract• Key provisions of Service Contract:– Performance-Based Contract– 15-year operations period with a 5-year option to extend the term– Fixed Price for Operations at four defined flow rates– Partial Company Financing (10% of design-build price)– Operation Period Performance Guarantees (water treatment, water

delivery, production efficiency, and environmental)– Payments into a Maintenance, Repair and Replacement Fund– Provisions for Uncontrollable Circumstances– Acceptance Test must be passed before Operations period & payments

begin– Provisions for facilities to be returned to Agency with predetermined

remaining Service Life

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Service Contract

• Key provisions of Service Contract: – Accommodation for future Ammonia addition (Chloramination)– Geotechnical and Subsurface Site Conditions risk allocation– Agency to secure/maintain necessary water rights– Company operates Raw Water Intake common and Agency facilities– Supplemental Facilities Site available for solids drying beds– Legal Protections:

• Termination Rights of Agency and CH2M HILL• Dispute Resolution Procedures• Security- Performance, Payment and Operations Bonds; Parent Company

Guaranty; Insurance; Indemnification• Subcontractors and Key Personnel must be pre-approved• Contract cannot be assigned by CH2M HILL

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Service Contract

OPTIONAL: ADDITIONAL WOODLAND STORAGE•2.0 million gallons of storage and 4,000 gpm of pumping capacity for an amount not-to-exceed $3.5 million•Upon completion of design, actual price presented for open-book review by Agency•Agency, in consultation with Woodland, will have option of selecting or rejecting this addition•Decision to be made promptly after Contract execution•Woodland will pay full cost of this addition

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Funding and Finance Plan

• Agency is relying on cities to fund the project• Applying for low-interest SRF loan to fund DB Price

– Agency submitted application for $211 million to SWRCB– Woodland submitted application for $143 million to

CDPH

• Woodland financing plan: $38M interim financing + authorization for $155m long-term water revenue bonds

• Davis financing plan: $16M interim financing + rates in place to fund long-term financing

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Legal Authority• CA Government Code Section 5956

– Authorizes Agency contract with CH2M HILL to study, plan, design, construct, develop, finance, maintain, rebuild, improve, repair, or operate a fee-producing water supply, treatment and distribution Project

– Requires water system user fee revenue to be dedicated to payment of CH2M HILL

– Requires competitive negotiation process– Requires contract to incorporate CA prevailing wage law and

other public works related requirements in CA Labor Code– Authorizes Agency to use private infrastructure financing as

supplemental revenue source

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Legal Authority• California Environmental Quality Act (CEQA)

– City of Davis was lead agency under CEQA before formation of Agency– City of Davis prepared and certified EIR for the Project and approved

the Project (October 2007)– Since its formation in 2009, the Agency has been lead agency under

CEQA– Agency has approved four addenda to the EIR between 2011 and 2012

• Service Contract is consistent with Project as approved in 2007 final EIR and later CEQA addenda

• No additional environmental review is required under CEQA relating to the approval and performance of the Service Contract

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Legal Authority

• Waiver of State Grant Funding requirement– City Council Design/Construction Authorization contingent on

$16.7M State Grant for Joint Intake– State Grant Funding of $10M secured; work continues for $6.7M– City Councils authorized Agency Board to waive State Grant

Funding Condition– Waiver included in Recommended Resolution

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Recommendation

Adopt Resolution approving Service Contract with CH2M HILL in the amount of $141.2M for design and construction of Capital Facilities plus Operations-phase Payments for a 15 Year Period

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Task Completion By

Issuance of Final RFP for DBO Contract December 2012

Approval of Project Final Engineering and Construction by Each City

March 2013

Authorization to Proceed with Bond Financing by Each City Sept/Oct 2013

Award of DBO Service Contract October 2013

Complete 100% Design for Joint Intake Facility November 2013

Advertise for Construction of Joint Intake Facility December 2013

Obtain Remaining Environmental Permits January 2014

Award of Joint Intake Facility Construction Contract February 2014

Joint Intake Construction and Testing Completion April 2016

DWWSP Acceptance Testing Completion September 2016

Updated: 9/12/13

Project Schedule Milestones