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Low bid for new MSD treatment plant $25 million over budget


Staff Reporter

The Metropolitan St. Louis Sewer District Board of Trustees is being urged to award a contract for a new sewage treatment plant to the lowest bidder — even though the company's bid is $25.5 million more than the district's budget for the facility.

Though the district's budget for construction of the Lower Meramec Wastewater Treatment Plan in Oakville is $55 million, a committee comprised of MSD staff and board members is recommending the full board approve a contract totaling $80,598,790 for the project.

The Goodwin Brothers Construction Co.'s bid of $80,598,790 for the project was the lowest submitted by five companies. The other bidders were: Alberici Constructors Inc., $84,199,710; BSI Constructors Inc., $91,300,000; KCI Construction Co., $86,433,840; and Paric, $91,275,687.

The bids were discussed last week during a meeting of the district's Program Management Committee, which is comprised of district staff and board members. At the end of the two-hour meeting, the committee recommended that the Board of Trustees accept the low bid.

The board will consider initial approval of the bid Sept. 11 and final approval Oct. 9.

Brian Hoelscher, assistant director of engineering, said that it was in the district's best interest not to rebid the project, but to accept the Goodwin Brothers' bid.

"We know right now that we feel we've got a competitive bid price for the product that we put out," Hoelscher said, "We know that the service and the features that we have in the plant right now are needed now and are needed 15 years ... That leads to the recommendation, all these factors considered the staff is recommending that we award the contract as bid to the low bidder."

One factor the Board of Trustees may consider in awarding a contract for the treatment plan is that the district is facing a December 2006 deadline to comply with environmental standards established Department of Natural Resources. If the district does not meet the deadline, it faces a fine of $10,000 per day.

The new wastewater treatment plant is one part of an estimated $190 million project that includes a wetlands educational center, a new pump station, sanitary sewer tunnel and other related projects. A $55 million budget for the new treatment plant had been established by the district and the MSD engineering department had formulated its own estimate of $61 million for the project.

However, based upon the bids submitted, the estimates by the district's sewer engineering department as well as ones received from its consultants — CH2M Hill and Jac-obs Facilities Inc. — were low.

Trustee Dee Joyce-Hayes had a number of concerns about the erroneous estimates.

"You set a goal based on some amorphous concept and then you come back and set an estimate based on a study," Joyce-Hayes said.

Hoelscher said, "$55 million was a conceptual number. We have program goals we have to do, such as, treatment odor; just all the factors that go in to a treatment plant and that's where the $55 million comes in — the conceptual plan as far as what do these kinds of things usually cost.''

Joyce-Hayes said, "It just startles me that the consultants and in-house engineers came up with a figure of 61 million and every contractor came back at 80 or above. What is going on here? It just doesn't make any sense.''

Hoelscher said that Jacobs Facilities took a look at the final estimate and believes that some of the material costs presented were not accurate.

"They formed their final estimate assuming a depressed construction market as opposed to a competitive construction market," Hoelscher said. "However; the result as far as end result ... they thought that estimate was low based on the market that actually existed at the time.''

Joyce-Hayes asked Hoelscher how much the district paid for the estimate.

Hoelscher said that the district paid Jacobs Facilities $30,000 to $40,000 for its part in the estimate and paid CH2M Hill about $6 million for its design services, which included the estimate in that total package.

"We paid them to come back and tell us that their original estimate was not thoroughly done and that's why they might have been off by $20 million," Joyce-Hayes said.

Trustee Bart Margiotta, chairman of the Program Management Committee, then asked representatives from CH2M Hill to address the panel and respond to members' questions.

Carey Brand, CH2M Hill managing officer, began by issuing a formal apology to the committee.

"Clearly you are distressed. As Brian (Hoelscher) has pointed out, there was a fairly substantial difference between the apparent low bid on the project and our estimate, and we are 100 percent fully aware that we have put you in an extremely uncomfortable position and for that reason, we wish to extend our sincere apologies for creating the circumstance," Brand said.

"Now having said that, part of the discussion we have been talking about was that our cost estimate was simply too aggressive and assumed far more local market conditions and pricing factors that we felt would work toward the district's advantage and materialize into a low bid.

"That's the competitive bid environment and we're prepared to discuss to some degree ... At this point we haven't studied in infinite detail specifically what the root cause, what the factors were ... to make the bid come in as low as it was," Brand said.

Brand explained that his company many have been wrong in trying too hard to meet the district where they wanted to be with regard to the budgeted amount for this project.

"We had an honest and a genuine desire on our part to produce a cost estimate figure that was closely aligned with the district's budgetary expectations for the project," Brand said.

"We understood that we were operating and trying to produce an estimate that would work. We have worked for several years with refining the design and trying to bring the estimate in line with that," Brand continued.

"We did make numerous calls to vendors, suppliers, contractors trying to get a sense for what the market position was, and the type of estimates we could get, we spent a considerable amount of time the last several months trying to refine that estimate.

"But again because of the mistake we've certainly created for the district the potential for a lot of negative publicity at a time that you can ill afford that. Honestly, we are extremely embarrassed. and very disappointed with ourselves.''

Brand said that his firm is working toward finding the specific problems of the mistake.

Joyce-Hayes firmly stated that the district is not interested in paying millions of dollars to consultants to tell the district what they want to hear.

"We get a lot of criticism at the district for hiring, spending a great deal — millions and millions of dollars on consultants," Joyce-Hayes said. "In my opinion we are not spending that money ... to get an estimate from a consultant that makes us happy ... and that's what I think if you boil this down based on what you said this morning, we got."

Tom Decker, CH2M Hill project manager, told the committee that CH2M Hill will continue its involvement in the project under their current contract and may even to do some work for free beyond that.

"We would like to see what direction comes out of this meeting, the direction that the district and the program committee want to head," Decker said. "Let me just say in a very broad sense, without getting into the specifics, that CH2M Hill will stand behind this design, if there are things beyond the scope of what our current contract calls for that the district initiates during the construction that will cause some re-engineering work to be done we will stand behind that work. We'll do it."

After being asked for clarification by Joyce-Hayes, Decker said CH2M Hill would perform some future design work without asking for further reimbursement.

Hoelscher said district staff looked at several options that they could consider to scale down the project, but that none were really feasible.

Joyce-Hayes said she couldn't understand why they could not eliminate the campus-like atmosphere that new treatment center is supposed to have.

"For example, this wonderful suburban-like campus that we're building because people don't want to have to look at a sewer treatment plant," Joyce-Hayes said. "I mean that's lovely, and I guess if I lived next door I would feel that way, you know, but we are building this for a region — not for the people who happened to build their houses next to a sewage treatment facility."

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