Serious Allegations Against United Water and a Long and Troubled Track Record
Written by David Greenwald Tuesday, 18 October 2011 06:51
Violations, High Cost, Poor Performance Leads Eight Other Municipalities in the Last Decade to Prematurely Terminate Contract with United Water
The questions about one of the contractors under consideration, United Water, associated with the CDM "team," have been raised, both in public and by members of the Clean Water Agency.
As we reported previously, "The indictment charges the company with 25 counts of Clean Water Act violations and one count of conspiracy to defraud the U.S. Government by tampering with E. coli bacteria monitoring results."
As Stephen Souza from the Davis City Council pointed out, the charges are substantial and they create tremendous ethical and moral problems if they are true. He said that he is unsure that he wants to go through a process with a company which has done something that we may have to disqualify them for.
However, as others pointed out, an indictment is not a conviction. However, the question has clearly emerged as to what would happen if the CWA awarded the bid and then a year later they were convicted.
United Water may be a subsidiary part of the overall contract, but they themselves are the second-largest private operator of municipal water systems in the United States.
A report from the Food and Water Watch indicates that "Under the leadership of Suez [Suez Environnement], United Water has grown into the second-largest private operator of municipal water systems in the United States. However, because the company has had a large number of high-profile failures, in recent years, it has won few new contracts to operate city water systems."
"Poor performance has cost the company several of its largest contracts," the report continues.
They report: "Suez's flagship effort in the United States - a long-term contract with Atlanta, Georgia - ended 16 years early in 2003 after the city documented numerous problems from a large maintenance backlog to inadequate bill collection. After issuing 20 notices of noncompliance to United Water, the city of Milwaukee, Wisconsin, decided against keeping the company when its contract came up for renewal in 2007. Gloucester, Massachusetts, similarly ended its contract with the company after water quality violations in 2009."
The City and CWA are trying to keep the costs down, but the report from Food and Water Watch also cites costs as a concern.
They write: "Expensive service has cost United Water several other deals. From Gary, Indiana, to Fairfield-Suisun, California, cities across the country have ended contracts with the company, opting to run their water and sewer systems themselves. For these municipalities, public operation has saved money and improved services."
The Gary, Indiana charges are quite serious. They face a 26-count indictment, in which count one alleges that defendants were conspiring to "knowingly tamper with a monitoring method required to be maintained by the Clean Water Act, in violation of the Clean Water Act" and, in addition, were conspiring "[t]o defraud the United States Government, that is, to hamper, hinder, impede, impair, and obstruct by craft, treachery, deceit, and dishonest means the lawful and legitimate functions of the U.S. EPA in administering and enforcing federal laws and regulations."
In short, the indictment alleges that United Water conspired to "'tamper' with the required E. coli monitoring method by changing the levels of chlorine administered at the plant before and after taking samples for E. coli."
The remaining 25 counts represent 25 separate instances of tampering with a monitoring method that violated the law. They alleged to have been "knowingly tampering with a monitoring method required to be maintained under the Clean Water Act, by temporarily increasing the concentration of chlorine before taking E. coli compliance samples, and then decreasing it shortly after."
The Gary Sanitation District was issued a permit in both 1994 and 2006 in which they were permitted to "discharge treated effluent from its wastewater treatment plant into the Grand Calumet River, subject to effluent limitations, and so long as the monitoring methods in the permits were complied with."
The Sanitation district, like many publically owned treatment works, entered into a contract with United Water, under which "United Water agreed to operate and maintain GSD's treatment plant."
United Water said that "because, as the parties agree, it is not a crime to raise the level of chlorine added to the effluent and it is not a crime to take a grab sample, it cannot be a crime to raise the chlorine before taking the sample and lower it afterward unless it is alleged that the conduct was undertaken with consciousness of wrongdoing, in furtherance of, or to conceal other violations."
Their defense attorney further argued that chlorine was a legal method for disinfecting the wastewater.
Wrote the court in denying a motion to dismiss: "According to Defendants, the Indictment is insufficient because it alleges acts that in and of themselves are legal and does not also allege something more; namely, that the conduct was undertaken with consciousness of wrongdoing, in furtherance of, or to conceal other violations."
While United Water hides behind their claim that there was no base violation that they were covering up, the fact remains that they continued to break these laws for years, even as they had been advised as early as 2003 that their process was "a recipe for disaster."
Prosecutors point out that they cannot claim that they did not know their actions were illegal because they "were put on actual notice that their tampering with the E. coli monitoring was not acceptable."
"Defendants here should have known that it was not only illegal but obviously unethical to boost chlorine levels when E. coli samples were taken," the Federal Government argued.
The Food and Water Watch report details the events in Atlanta which began in 1999, the largest water privatization efforts in US history, "a $428 million deal that United Water promised would cut Atlanta's water costs in half."
Except, of course, that it did not. Suez Environnement would purchase United Water in mid-2000.
"Only 18 months into the contract, in August 2002, the city was so dissatisfied with United Water's poor performance that it threatened to terminate the contract if the company didn't make marked improvements within 90 days," they reported.
There were all sorts of problems, stemming in part from dramatic staff cuts.
"The city accused United Water of submitting bills for work it didn't do - even having its Atlanta staff work on other contracts and trying to win new contracts. The company also refused to release certain billing records."
A corruption scandal then broke out:
"Scandal broke two months later when former Mayor Bill Campbell, who had signed the original deal, announced he had never signed documents authorizing $80 million in extra payments that United Water had requested. After a lengthy probe, Campbell was charged in 2004 with multiple federal corruption charges, including accepting $12,900 from United Water to pay for a trip to Paris with a friend, and taking United Water's $6,900 campaign contribution at a time he was not eligible for re-election. At Campbell's trial in early 2006, it was suggested that one of Campbell's top aides may have forged the letters."
Ultimately, it was not corruption that doomed United Water, it was their own performance, as they only saved half of the money anticipated, amassed a huge backlog, and the city would terminate the contract just four years into a 20-year deal.
The report goes on to suggest that Camden, New Jersey, had similar programs after transferring control of its water and sewer systems to United Water.
"In 2009, 10 years into the 20-year, $178 million deal, the New Jersey State Comptroller's Office issued a scathing audit of company's Camden operations. It found that inadequate contract supervision and the company's poor performance cost the city millions of dollars and potentially jeopardized the health and safety of its residents," the report alleges.
The audit exposed a number of serious issues (you can read more about it here - see page 8)
The bottom line was this: "Although the company disputed many of the audit's findings, the city agreed with every recommendation. At the end of 2009, Camden requested $29 million from United Water for poor performance, unauthorized payments and credits for capital projects conducted by the city. In January 2010, the company responded by suing Camden alleging the city owed it $6 million in back payments. Camden faces a potentially lengthy court battle."
Other problems cited by the report include, "Billions of gallons of raw and partially treated sewage poured into Lake Michigan and local streams after United Water took over Milwaukee's sewers in 1998. Many of the spills were blamed on heavy rains, but others were the fault of employees and malfunctioning equipment."
Gloucester, Massachusetts: "United Water lost its contract in Gloucester, Massachusetts, in 2009, after bacterial contamination left residents and businesses boiling their drinking water, some for 20 days."
The report adds: "The city blamed much of the problem on United Water's failure to take remedial action. State officials revealed that at the time of the water contamination crisis, United Water's primary water operator for the city's treatment plant lacked the proper certification. Gloucester's mayor indicated that this violated the terms of United Water's contract with the city."
We have to question just how much the staff at the CWA did background on United Water - after all, in the DBO arrangement, United Water would figure to provide the critical operation part and yet, as this report indicates, United Water has had problems that have resulted in the loss, in eight of nine cited problems.
And while it is true they have merely been indicted in Gary, Indiana, the facts make it look pretty grim and their track record elsewhere suggests a pattern of problems.
The irony is that the CWA and its staff did not have to look very far to find problems.
After all, they only have to look down I-80 to Fairfield-Suisun Sewer District, which in January 2008 unanimously voted to bring its system in-house and cancel its contract with United Water.
Why? For one thing, independent consultants hired by the district discovered that it could reduce operational costs by 10 to 15 percent while at the same time offering employees better benefits.
The DBO process is supposed to save money, but this company seems to work against such goals.
The report finds: "The district would achieve these savings by removing overhead costs associated with the company's profits, which were expected to be as much as 20 percent of the value of the contract."
Our concern now is that the CWA failed to do proper diligence in researching this company prior to a heavy investigation in a RFQ process.
Bob Clarke and Mayor Joe Krovoza had told the Vanguard previously that the CWA would invest as much as $25,000 in each bidder to work toward a final bid.
While a second company, Veolia, has its own set of concerns, the Vanguard is very concerned that the CWA may be undergoing a less than fully competitive bid process if United Water poses the kind of risk that this report would indicate.
The report concludes: "Private operation of municipal water and sewer systems often forces consumers to pay more for worse service."
More importantly, just as the Vanguard has questioned the need for private companies, this report argues that their findings suggest that private water services as a whole "often forces consumers to pay more for worse service."
They conclude: "Across the United States - from Fairfield, California, to Houston, Texas, to Gary, Indiana - cities have found that public operation is a better deal for residents. They have reclaimed their water systems, canceling contracts with United Water, to reduce costs and improve services."
In the face of such findings, are we going to lock ourselves into a lengthy contract with such a company, when research is suggesting that when "private interests control water resources, water rates often skyrocket and services deteriorate?"
The Vanguard urges the City of Davis and the CWA to re-think their policies.
---David M. Greenwald reporting
How did the CWA, our staff etc allow United's bid/interest to get this far in the process? Did they not know of this info? Who brought it forwrd? I remember Nancy Price first bringing it to my attention on this blog.
For us to spend 250K evaluating their bid seems outrageous given these allegations. What did the first cut invovle, not checking references?
They conclude: "Across the United States - from Fairfield, California, to Houston, Texas, to Gary, Indiana - cities have found that public operation is a better deal for residents. They have reclaimed their water systems, canceling contracts with United Water, to reduce costs and improve services."
In the face of such findings we are going to lock ourselves into a lengthy contract with such a company when research is suggesting that when "private interests control water resources, water rates often skyrocket and services deteriorate."
The Vanguard urges the City of Davis and the CWA to re-think their policies.
I'm not sure what you mean by "re-think their policies"? What specific policies are you referring to?
I do find the track record of United Water to be troubling. IMO, they should be eliminated from the list posthaste, as too problematic, based on what I am reading here. If other information comes forward that disputes the record thus far, that is another matter...
It should also be noted however, that cities that have gone to public operation, did so only AFTER their projects were built and run by private organizations. Which brings up the question as to whether the city should have a private entity design/build/operate for an initial period, then reconsider the issue at the end of a briefer contract period. In other words, the contract to DBO should be short enough to make it clear to any company hired that 1) the city will be closely monitoring its performance; 2) if the performance is lacking, then public operation is a very real possibility if performance does not meet established benchmarks; 3) the contract is not so long that there would be any need for significant litigation costs to flip to public operation. I am no expert in the "water world", so I honestly don't know if what I have suggested is practicable, but it would seem on its face to be a common sense approach.
David, today you wrote:
"The questions about one of the contractors, United Water, associated with the CH2M Hill "team" have been raised both in public and by members of the Clean Water Agency."
Yesterday you wrote:
"Veolia has its Palestinian entanglements, and United Water, a subcontractor under CDM, with its ethical violations and indictments in Gary, Indiana."
So which is it?
From your previous post:
The big disadvantage is that we have to choose between CDM Constructors, CH2M Hill and Veolia Water.
And that is where the trouble begins. Veolia has its Palestinian entanglements, and United Water, a subcontractor under CDM, with its ethical violations and indictments in Gary, Indiana.
From this post:
The questions about one of the contractors, United Water, associated with the CH2M Hill "team" have been raised both in public and by members of the Clean Water Agency.
Now you have United Water as a subsidiary of CH2M Hill. Which is it?
Soda:
"How did the CWA, our staff etc allow United's bid/interest to get this far in the process? Did they not know of this info? Who brought it forwrd? I remember Nancy Price first bringing it to my attention on this blog.
For us to spend 250K evaluating their bid seems outrageous given these allegations. What did the first cut invovle, not checking references?"
It makes one wonder what else has been overlooked. We need to do the referendum and step back. This project needs more vetting.
One down, two to go. Next, I want to know who the heck found these companies and got us involved with them??
Dear CC: It's not too late to repeal the ordinance, and start over. Study our current system and see how long we can make it last? Senior staff told me that the basic fiscal and technical feasibility study has never been done.
Rusty 49 "...It makes one wonder what else has been overlooked. We need to do the referendum and step back. This project needs more vetting."
Both the Project AND the process* need more vetting!. In particular, the DCC's rush to approve the final Project in December of 2010, needs a good dose of "sunlight".
___________
*The Davis City Council approved the Project the week before Christmas 2010 when everyone was busy, unaware, or away! Those approving the Project did not provide any explanation why the critically needed Project water right offer was available from the developer ONLY in December of 2010. Finally, December 2010 was also the last month that Councilman Saylor was available to approve the Project.
Steve Hayes: oh, so you are saying that the project itself was approved when everyone else was away for the holidays, and now the rate hikes were done over the summer and completed days before everyone came back for the academic year? And the rate increases are going to drop into people's mail boxes for payment days before the public has to vote on the school parcel tax renewals? Doesn't anyone at City Hall have a calendar, and some motivation to try and protect good public process and our children's education?
Stop the madness. Sign the petition. Send a message to the Davis CC, the Woodland CC, and the JPA that we are not going to put up with it anymore.
WHo are these hourly paid consultants the City and JPA hired that gave us the likes of United Water? Is it too late to demand return of our money for what is objectively terrible service?
Is the Yolo County Grand Jury interested in how our public money is being spent on staff and consultants recommending United Water?
Seriously, when this thing is handled either by repeal or at the June ballot box, I think the CC should convene something like a "Truth Commission," with subpoena power, and investigate how the heck we got into this mess. I remember the City Attorney telling the CC once that it could set up a Commission with the power to issue subpoeanes and take sworn testimony from witnesses.
The waste of over $300,000 on paid PR consultants is only the tip of the iceberg. Add to that the consultant and staff resources devoted to bringing us the likes of United Water, indicted on felonies in Indiana last year, and our friendly local highly-paid staff and consultants did not tell us???? With help from Nancy Price, why did the Davis Vanguard have to be the one to out UW and not our very own staff and consultants who are supposed to be working for US, the taxpayers?
David,
There was a 2000-2010 Davis wetlands selenium chart posted by Mr. Pryor about a week ago. He didn't post a link to the study and I can't find it anywhere. I've asked him on here for the link but so far no answer that I've seen. Do you know where that study came from and can you supply the link? Thank You
So we now have the Clean Water JPA vetting three potential contractors for a multi-million dollar Design/Build/Operate contract, two of whom are dead on arrival. Sounds suspiciously like somebody's attempt to circumvent the competitive bid process and hand over the job to CH2M Hill. Has anybody looked into who the recipients of political contributions made by this contractor are? Just follow the money!
I also have concerns about Veolia.
There are major controversies around Veolia Water's operations of water projects.
According to the New York Times, Veolia Water has been actively involved in contributing to local elections, presumably to influence the outcome favorably to Veolia contracts in Marin County.
http://www.nytimes.com/2009/12...nted=print
Here is an excerpt:
For its part, Veolia said it had spent $32,000 backing candidates supporting the contract in the recent board election; two won.---New York Times
Also, there has been a lot of community controversy around Veolia's handling of other water contracts. Here are some citizen activist websites laying out the charges.
David, you might want to follow up on some of these and see if there is merit.
http://www.novatoflow.org/shame.html
www.novatoflow.org/richmond.html
http://www.novatoflow.org/environment.html
There are concerns about two of the three bidders that have been apparent for some time. I brought this up at council before the last CCJPA meeting.
One of the reasons given for not phasing in this project is the "good bidding environment". But if there is only one bidder not embroiled in controversy, then what good is a bidding environment?
I did bring up this point as well.
What is Mike Harrington harping about now? Conspiracies, everywhere. Mike, it would help if you were not so vague and stated your concerns more clearly and directly and drop the "sky is falling" paranoia. I'm sure the RFP went out and these were the companies who submitted proposals. The staff do not have a right to reject them if they meet the standards of the RFP. Is it your wish that staff have the power to pick and choose which bids are submitted to the City Council? The proposals are submitted to the Council and then there is a discussion, including public comment. This is local governance.
Based on Mike's actions today and that of his employees over the weekend (eg the disturbance at Target), the signature count must be pretty close. By the time they weed out all the non-compliant and double signatures, maybe the referendum idea will prove to have been nothing more than a waste of money for Mike's unnamed benefactors.
And maybe a waste of time.
I recently upgraded my cell phone service to include unlimited texting for several phones. It cost me around $30/month, but I looked at it as something I just had to have. I compare that with the increase cost to purchase cleaner water - around $30 a month and my first inclination is to question why I should be asked to do this and if this is something that is really necessary..... I'm wondering if I really have my priorities straight here. It's something to think about.
Ryan KellyFirst off, both river water and groundwater are "clean". By common usage, groundwater is "cleaner" than river water; it is less earth or soil in it. Both are safe to drink; both have constituents in them that people can be concerned about. It is more likely that river water will suffer rapid contamination than groundwater, for obvious reasons.
I think you are seriously underestimating the cost. We don't even have biddable specs yet; we are going to have to operate and maintain two separate systems, and we don't know what are interest rates are going to be.
Hopefully the technical advisory committee will help us figure out the true costs as we get firmer numbers. Hopefully we can keep our options open as we learn more about the total regulatory and fiscal implications.
@ Sue Greenwald said: I also have concerns about Veolia.
There are major controversies around Veolia Water's operations of water projects. David, you might want to follow up on some of these and see if there is merit.
I agree with Sue. David, here are some more sources of info on Veolia. Perhaps you could do an equivalent review on Vanguard of their record:
http://www.scribd.com/mobile/d...3anms19dar
http://www.citizen.org/documen...racity.pdf
www.citizen.org/documents/waves.pdf
@rusty49:There was a 2000-2010 Davis wetlands selenium chart posted by Mr. Pryor about a week ago. He didn't post a link to the study and I can't find it anywhere. I've asked him on here for the link but so far no answer that I've seen. Do you know where that study came from and can you supply the link?
I'd be interested in seeing the data for the study as well. The graph that Mr. Pryor included in his article was difficult to interpret. It grouped all birds eggs and all invertebrates together. "Bird eggs" suggests that there is varying composition of exactly which bird species are being represented from year-to-year in the data. Same thing for a category as broad as "invertebrates". How is one to know how much of the variation in the data from year to year is being caused by the fact that each point in graph may be measuring a unique entity that is not strictly comparable from year-to-year? For example, one year the eggs might be mostly mallards, another year they might be mostly coots, another year they might be mostly killdeer, another year they might be mostly stilts, etc., etc. knowing these kinds of details makes a huge difference when trying to tease out the existence or absence of time trends in the data.
Let's try that again ...
http://i2.cdn.turner.com/money...market.jpg
Voter2012: Fascinating. Thanks to the referendum and the nearly 5000 registered voters who have signed it, and the nearly 5000 property owners who protested under Prop 218 the huge rate hikes, I am confident that Davis will never, ever approve loss of its legal and political and operational control of this essential public utility.
This project was a Trojan Horse that had been set up year after year using small Prop 218 rate hikes, sort of death by a thousand cuts. Nearly always a split CC vote, but the project moved ahead anyway because the rate hikes were not enough in the go-go years to get people excited.
Finally, the voters are going to get to vote on the merits of these huge rate hikes.
