City Council approves bidder, PERC, for Wastewater Treatment Plant

April 18, 2008
Santa Paula City Council

The City Council squeaked past a court-mandated deadline when it selected the team to build the new wastewater treatment plant, rebuffing the recommendations of staff and consultants and instead selecting a company that costs $22 million more and has no experience with the technology selected by the Council.

By Peggy KellySanta Paula TimesThe City Council squeaked past a court-mandated deadline when it selected the team to build the new wastewater treatment plant, rebuffing the recommendations of staff and consultants and instead selecting a company that costs $22 million more and has no experience with the technology selected by the Council. The 3-2 Council vote came Tuesday, the second meeting held to award the contract for the new plant.The Council chose PERC - with offices in Costa Mesa and Arizona - for the DBOF (Design, Build, Operate & Finance) of the plant at a cost of close to $150 million over 30 years. Veolia Water, an international French company, had quoted $127 million for the DBOF contract, although they had offered a public private partnership with the city.Early on, Councilman Ray Luna thanked the previous and present Councils “for their hard work to coming for what I would call a historical moment... I know this has affected my life.” Luna also asked for clarification on PERC’s contractor Blois, whose role was noted as being “uncertain” by the staff report due to its status as “primarily a pipeline contractor with limited mechanical experience.”City Manager Wally Bobkiewicz noted that the “question was asked for both sides” and, although PERC had said they would act as the general contractor, the appearance of a Blois representative at the April 7 meeting clouded the issue. “Then Blois would be a sub-contractor,” said Luna.Larger issues were lack of financial risk to the city and technology experience, with Veolia the recommended leader on both issues. “My comment” is that DBOF was the model, and Mayor Bob Gonzales noted that it was his “belief of the process that vendors do all of that process” to allow an “apples to apples” comparison.Bobkiewicz said that both companies have the funds to do the job, but that the question is how the city would repay funding.Veolia Vice President Robert Ashfield noted that the company had also provided a private financing plan, which Veolia still stands behind, as they do the even more cost effective alternate private public financing plan. Veolia offered the lowest bid both in the initial best and final offer (BAFO), as well as being “significantly lower than competitors today.”Veolia also offers the “best purchase options for the city to date and all through the process,” a mutually agreeable termination clause requested by the city, and wide MBR technology experience. “It’s the best deal for ratepayers,” noted Ashfield.After more presentations, Gonzales noted that PERC had offered to shoulder an approximate $3 million expansion when needed for free, an apparently last minute offer that he invited Veolia to match.“I don’t think this is the time for 11th hour assurances,” said Councilman John Procter. “We don’t have time to verify this,” nor the time or inclination to negotiate.During Council discussion Luna noted that PERC also offered to provide an RV “dump station,” and his preference for the design offered by PERC. He noted that if the city had not stopped the project at the 60 percent design status - which the Council voted to do last year to embark on DBOF - then the city “could have done its own financing.”Charges for ratepayers was uppermost in Procter’s mind: “The bottom line for me really has to do with the ratepayers... proposed rates is where I find my decision leaning towards.” Offers of a free expansion sound good, but Procter added that, with demands for water conservation, the city might never be required to add capacity, even with a growing population.Vice Mayor Ralph Fernandez said he was “disappointed in staff,” as the two proposals were “substantially different.” Although Veolia’s financing proposal appears to have “substantial advantages,” the Council has shown a fear of risk, such as trying new technology.Now the Council is considering financial risk: “If we’re going to do that,” public private financing, “will PERC going to do the same thing?” an issue that Fernandez said would have to be negotiated. PERC’s concrete plant proposal has longevity as well as aesthetic advantages over Veolia’s “metal buildings,” and “I don’t want to gamble with ratepayers’ money,” he added.Ultimately, the impact on the people “comes down to dollars and cents,” said Councilman Dr. Gabino Aguirre. “The staff and consultants they have recommended three times that PERC is not the company to go with,” and staff was “trusted” to conduct the selection process supplemented by technical, legal and financial consultants.PERC’s lack of experience in MBR is an issue, and the vendors have returned with several best and final offers, each time with Veolia being superior. “Ultimately it comes down to how much a Santa Paula family is going to pay for service...” and Aguirre noted that Fernandez brought up the issue of technological risk, but “at this time we’re taking another risk if we go with someone who has no experience.”
Financing flexibility must also be considered, as “we will have the control over the dollars,” which is the best option for citizens. “There’s some concern with the design of the plant,” an issue that Aguirre urged the Council not to go “overboard on,” as citizens are more concerned with rates.Gonzales noted that he “had not heard Veolia make the same offer” to construct an expansion at no cost.Special WWTP Project Manager Cliff Finley said that the estimated $3 million for future expansion - which if needed would likely occur in 2020 to 2025, depending on growth - might not be needed, as membrane technology advances to allow more capacity. If such an expansion was required it would be financed by development, and “that was the philosophy” of not including future expansion in the request for proposals, as the city would not “want to buy something” the city might never use.After more discussion, Aguirre noted that the city had missed the court imposed 5 p.m. deadline. “We seem not to know what a final and best offer” is, “we fudged on and fudged on it... I would ask that we make a decision.”“The Council had since 2002” to make a decision, and the state will understand, said Gonzales, who noted that “for the longest time not much happened” on the issue and then “things were happening, but not a lot.” Gonzales went over different aspects of the proposals, awarding points to each vendor with PERC accumulating the most.“I’m concerned about the cost” to ratepayers, and Gonzales asked Bobkiewicz for a projection. The difference between the two bids is $22 million, and “again, I think we have tried to come up with the plan that makes the most sense for Santa Paula.”Cutting costs have always been a priority, including for a conventionally built plant that the Value Engineering report “stripped away almost $20 million” of the projected cost to about $58 million, including the contingency. “I doubt ratepayers sleeping at night” think about technical issues, but, he noted, rather are more concerned with savings.“People do care about a quality building,” said Luna.Fernandez said that PERC had offered to negotiate to match Veolia’s dollar amount, and “We need to have standards that are higher in everything we do,” building wise. Luna asked that the Council continue with the “PERC proposal as amended,” seconded by Fernandez.“I’m confused,” noted Procter, as Fernandez had addressed risk when it came to bonds in the public private financing proposal with Veolia, but now Fernandez is willing to take the risk with PERC.“Here’s a firm with a lot more experience and less cost to ratepayers, another with no experience and a higher cost to ratepayers,” added Procter. “I could not forgive myself for voting” with firms that offer proposals at the 11th hour.PERC has a financing safety valve with private financing that is less expensive then Veolia, said Fernandez, a comment that was corrected by Bobkiewicz, who noted that Veolia offered less expensive financing.The choice, said Aguirre, is between two companies, one without MBR experience that is more expensive and the other with experience offering cost savings. After the 3-2 vote to award the contract to PERC - with Aguirre and Procter casting the dissenting votes - Bobkiewicz noted that “My sense now is to get the third best and final offer... there is no final proposal on the table.”Fernandez asked when that might happen, and that he expects preliminary hearings on same. “I would like to know what that is,” he noted.“So would I,” said Bobkiewicz, who said that staff would work with PERC to present finalized figures as soon as possible.According to the financing plans presented at the meeting, by 2013 the average monthly bill for a single-family home will total $71, $7 more than with Veolia. Bills will average $120 by 2040, $50 more than with Veolia, according to the estimates.

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