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Agenda Item 7: DBO Service Contract for the Davis-Woodland Water Supply Project. Agency Board October 10, 2013. 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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Agency Board October 10, 2013

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Agency board october 10 2013

Agenda Item 7:

DBO Service Contract for the Davis-Woodland Water Supply Project

Agency Board

October 10, 2013


Discussion topics

Discussion Topics

  • Background

  • CH2M HILL Proposal and Evaluation

  • Service Contract

  • Funding and Finance Plan

  • Legal Authority

  • Recommendation

  • Project Cost Reductions

  • Schedule


Background

Background


Background1

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


Ch2m hill proposal

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


Ch2m hill proposal evaluation

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


Ch2m hill proposal evaluation1

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


  • Ch2m hill proposal evaluation2

    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


    Ch2m hill proposal evaluation3

    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


    Ch2m hill proposal evaluation4

    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


    Ch2m hill proposal evaluation5

    CH2M HILL Proposal Evaluation

    ENERGY: 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


    Ch2m hill proposal evaluation6

    CH2M HILL Proposal Evaluation

    ENERGY: 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


    Service contract

    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


  • Service contract1

    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


    Service contract2

    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


    Funding and finance plan

    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


    Legal authority

    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


    Legal authority1

    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


    Legal authority2

    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


    Recommendation

    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


    Project schedule milestones

    Project Schedule Milestones

    Updated: 9/12/13


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