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City of East Providence Wastewater System DBO Procurement

City of East Providence Wastewater System DBO Procurement. January 19, 2010 City Council Presentation. Agenda. Project Background Overview of DBO Process Status and Schedule Proposal Evaluation Financial Results Overview. City Advisors.

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City of East Providence Wastewater System DBO Procurement

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  1. City of East ProvidenceWastewater System DBO Procurement January 19, 2010 City Council Presentation

  2. Agenda • Project Background • Overview of DBO Process • Status and Schedule • Proposal Evaluation • Financial Results Overview

  3. City Advisors • Malcolm Pirnie, Inc. – owner’s agent and technical/financial assistance • Susan Landon, PE, BCEE • John Mastracchio, PE • Burns & Levinson LLP – legal advisors • Sean Coffey, Esq. • Richard Coen, Esq.

  4. Background • Consent Order between East Providence and RIDEM signed April 2007 • Consent Order required certain actions: • WWTP to meet RIPDES permit for effluent total nitrogen (TN) limits • Prepare a Facility Plan to address capital improvement requirements to meet TN limits • Reduce collection system overflows with new pump station capacity • Draft Facility Plan submitted December 2007 • RIDEM approved Facility Plan in March 2009

  5. Facility Plan Summary • WWTP capital improvements • Biological nitrogen removal system • Electrical and instrumentation upgrades • Odor control upgrades • New Watchemoket Pump Station & related forcemains and sewers • four new small pump stations • Pump station upgrade work to provide reliability

  6. Facility Plan Cost Estimate History • $65.86 million Facility Plan revised estimate • Updated collection system costs • Excludes Watchemoket Pump Station storage tank • Excludes Waterfront Development Costs • $52.5* million Actual cost based on the lowest evaluated DBO bid • $13.3 million savings realized with DBO Contractor *Potential additional reduction of $6.85M depending on feasibility of Plant and Collection System alternatives

  7. Consent Order Schedule • Facility Plan approval sets certain dates • March 1, 2010: submit application for Order of Approval to RIDEM (final design) • September 1, 2012: Plant construction work completion and initiation of operation • August 2013: Watchemoket Cove Pump Station and associated piping constructed and operational

  8. Design-Build-Operate Procurement Benefits • Competition on “D” and “O” not just “B” • One company provides for aggregation of services under one full service contract • Cost savings • Optimized balance between capital and operating costs • Full innovation risk transfer /single-source responsibility • Rate stabilization – fixed and predictable short and long term costs • City maintains ownership and sets rates

  9. DBO Agreement Scope • 10 yr term for WWTP and Collection System operations & management plus 10 yr renewal at City option • Industrial Pretreatment Program management • Design, permitting, construction and acceptance testing of capital improvements • WWTP improvements • New Watchemoket Cove Pump Station and related pipes and pump stations • Existing employees offered employment at comparable compensation

  10. Traditional Risk if City Does the Project

  11. Shifting of Risk with DBO Contractor

  12. Security for Performance • Operations: Company provides O&M performance bond • Letter of credit required if Guarantor rating drops below City threshold • Construction: Performance bond and payment bond • Guarantor: Parent company will guarantee all of the Company’s obligations up to a determined liability limit • Minimum insurance must be retained

  13. Procurement Schedule • RFP issued May 5, 2009 • Two Proposals submitted Sept. 30, 2009 • United Water • Veolia Water • Negotiations: Dec 2 to Jan 15, 2010 • January 19, 2010 – Agreement presented to Council for approval and Project award • Feb 17, 2010 Deadline for ARRA Funding – DBO Agreement must be awarded and executed

  14. Proposal Evaluation • Evaluation Team composed of City staff supported by City’s advisors • Both Proposers highly qualified; financially strong; and experienced to perform the required contract services • Both Proposers demonstrated a technically sound approach to the required contract scope: • implementing the Plant and Collection System Design/Build Work • Operation, maintenance and management of the wastewater system

  15. Recommendation • Evaluation Team recommended United Water for negotiating a final Agreement • United Water proposal provides significant greater total project savings and benefits to the City • Alternative cost savings approach to meet nitrogen limits • New equipment not in Facility Plan to increase efficiency of operations • Robust repair and replacement plan

  16. Proposal Cost Comparison(millions of dollars) 1 Baseline reflects City CIP for Facility Plan costs and other related capital projects 2 Proposed/current O&M cost plus increase following completion of capital work

  17. Financial Impact Assessment • The financial impact of several scenarios were compared • Baseline Scenario – Includes the City’s capital program based on the Wastewater Facility Plan, and the City continues to operate wastewater system facilities. • DBO Scenario – Includes the capital and O&M costs associated with the DBO procurement and the DBO contractor operates the wastewater system facilities • NBC Scenario – Consists of NBC taking over the City facilities and WWTP capital program, and City customers paying NBC rates.

  18. Baseline Scenario • City procures capital projects using a traditional design, bid, build approach • $65.8 million in capital costs (2010-2013) • $10 million (15%) Funded with ARRA Capitalization Grant with $1.5 million principal forgiveness, interest rate of 2.5% over 20 years. • $40 million (60%) Funded with RICWF loans at 4.5% interest over 20 years. • $16 million (25%) Funded with municipal bonds at 6.5% interest over 20 years. • Barrington pays its share (~20%) of O&M costs and Plant improvements

  19. DBO Scenarios • City procures capital projects under the DBO approach and DBO contractor operates and maintains the WWTP and collection system. • $52.5 million in capital costs (2010-2013), corresponding to $13 million savings (20%) over Baseline • $10 million (20%) Funded with ARRA Capitalization Grant with $1.5 million principal forgiveness, interest rate of 2.5% over 20 years. • $28 million (55%) Funded with RICWF loans at 4.5% interest over 20 years. • $13 million (25%) Funded with municipal bonds at 7.0% interest over 30 years (wrap around). • Barrington pays its share (~20%) of O&M costs and Plant improvements

  20. Comparison of Scenarios(Typical Annual Sewer Bill Impact1,2) 1Rate impacts should be considered preliminary estimates. They are based on numerous cost, customer base, and financing assumptions that are subject to change. 2Annual bill based on 70,000 gallons or 97.6 ccf of consumption per year. 3Source: 2008 Narragansett Bay Commission Residential Sewer User Survey.

  21. E. Providence (DBO) vs. NBC Sewer Bill Comparison

  22. City of East ProvidenceWastewater System DBO Procurement QUESTIONS?

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