In early February the Vanguard reported that CDM Smith and United Water had sent a letter to Jim Yost of the project engineering firm, West Yost Associates, informing them that they were withdrawing from the Davis Woodland Water Supply Design-Build-Operate (DBO) Project procurement process.
Six days later, after considerable behind-the-scenes work by project General Manager Dennis Diemer, they wrote to inform the general manager, “We remain interested in participating in the regional water supply project.”
Dennis Diemer in an email late on Thursday to the Vanguard reported, “The DBO competition has been narrowed to a single highly-qualified DBO team five weeks ahead of the anticipated schedule.”
The Vanguard has learned now that CDM Smith has “has determined that they are unable to correct deficiencies in their proposal necessary to comply with RFP requirements and have withdrawn from the competition.”
Mr. Diemer writes, “WDCWA will realize approximately $500,000 in savings as a result of the accelerated schedule, saved costs on consultant and staff time that would have been spent evaluating proposals from multiple bidders, and in avoided pre-design fees that would have been paid to bidders submitting a responsive, but not selected proposal.”
The $500,000 refers to a reimbursement fee for the expected $1 million to $1.5 million cost for submitting a bid.
Mr. Diemer notes, “CH2M Hill must still submit a responsive proposal meeting all of the Agency RFP technical, performance and cost requirements by the July 30, 2013 deadline. Once received and determined responsive, CH2M Hill will then enter into contract negotiations with WDCWA as the final step in ensuring that they will meet or exceed all requirements.”
He added, “WDCWA will continue to pursue additional cost savings opportunities and project enhancements during the negotiations.”
In their original letter to the JPA, CDM cited a number of concerns with the process.
First, they write, “RFP Requirements May Drive the Project Cost to Exceed WDCWA Budget: Examining the details of the benchmark project in documents released on December 21, 2012, we remain concerned that the DBO project may exceed the cost benchmark. Given the degree of public concern over rates, this raises a question as to the public acceptability of RFP-compliant proposed prices.”
Second, they argue, “Risk Allocation: Achieving Agency cost objectives will require WDCWA/company collaboration and risk sharing.”
“The overall contract terms and conditions remain problematic,” they write. “This seriously hinders the ability of the team to deliver the project when the cost benchmark has been reduced and does not reflect the cost of the commercial terms included in the RFP.”
They add, “The responses to our concerns/suggestions do not indicate that it is reasonable to expect that such collaboration and risk sharing will be achieved.”
Finally, they cite the development costs, in which they argue, “Proposal costs are high, not having been substantially reduced by the Agency’s final RFP, and cannot be justified in light of the above and other major uncertainties (contract validation and associated project viability; City of Davis participation, etc.).”
Dennis Diemer, in an email to City Manager Steve Pinkerton said, “CDM had sent the Agency a letter on 1/23/13 which stated that they were withdrawing from the DBO competition.”
He said, “We then contacted CDM and entered into discussions with them to better understand their issues and concerns.”
He continued, “Subsequently, on 1/29/13 CDM formally withdrew their 1/23/13 letter and provided a letter thanking the Agency for the opportunity to discuss their concerns, conveying their understanding that the Agency would be considering changes to the procurement process that may address their concerns, and confirming their interest in participating in the procurement process.”
Some industry leaders have noted that CH2M Hill has begun to dominate the DBO landscape, leading some of the firms to pull out of costly competitive bid processes that they feel ill-equipped to win.
Mr. Diemer believes that this situation will not harm the JPA or the DBO process
He believes that “the DBO process facilitated and achieved competition. The 2.5 year competitive process continually narrowed the field of qualified, competent DBO teams.”
He adds, “The DBO process has resulted in a final highly qualified bidder, five weeks ahead of the anticipated schedule.”
More importantly, he adds, “The Agency stood firm in its requirements and has implemented maximum price guarantees. The maximum guaranteed price for the project is 20% less than the Engineer’s Estimate.”
Competitive bidding will still be required for all subcontracted work, which amounts to about 70 percent of all work, he argued.
He reiterates that “WDCWA will save approximately $500,000 from consultant and staff costs from not having to review multiple proposals and from pre-design fees that will not have to be paid to responsive, non-selected proposers.”
And finally, he notes that “WDCWA has transferred appropriate project risks to the DBO Team and thus reduced overall project costs for both construction and operation while ensuring long-term water quality performance.”
Previously, Veolia had pulled out in late December.
In a letter dated December 12, 2012, Sean Haghighi, Vice President of Veolia Water North America, wrote to Jim Yost, “As a follow up to our earlier discussions, this letter is to confirm the Veolia Water Team’s (Veolia Water West Operating Services, Inc., Kiewit Infrastructure West Co. and MWH Americas, Inc.) withdrawal from the Woodland-Davis Clean Water Agency design/build/operate (DBO) procurement.”
Mr. Haghighi continues, “Our team sincerely appreciates the opportunity to participate in this procurement over the course of the past two years and we wish the communities of Woodland and Davis complete success with this important project.”
The JPA made the decision not to add a fourth firm, Balfour Beatty, to the bidding process.
—David M. Greenwald reporting
Is this really that much of a surprise? They already tried to pull out once. What a sweet spot to be in, the only bidder on a multi-million dollar project.
too late for Balfour I assume? I remember watching the JPA mtg where that was hotly contested.
What do we know about CH2MHill?
serious damage control here by diemer but it’s clear the dbo has blown up on the jpa and we are all about to pay the price.
DP, I agree, lipstick on a pig.
1) How is only getting one final bid and design proposal a good thing? Congratulations, you save $500K now, but are paying millions more later in fixing design flaws that might have been identified through multiple proposals.
2) So you put a maximum cost on the project that the contractor must adhere to, great. So you either get shoddy work when the costs overrun or an incomplete project.
Having a company pull out altogether for not even being able to submit a proposal that meets the RFP requirements and cost maximums might just mean those are incompatible and unreasonable goals.
It’s not too late to pull back and take a time out. Don’t sign contracts, and don’t buy those bonds, yet.
When competent bidders drop out, and we get down to only one or two, then rest assured that the remaining bidders are more likely to end up being problem operators.
This is the problem with left-leaning communities trying to do business. They demonize profit and perch on some lofty and irrational sense of social and moral superiority over private enterprise. They dig and whittle-away at the business relationship until there is not enough left to motivate a good company to want to be a partner. Then they are left with the dogs that wag their tails and say and do all the things that make left-leaning communities feel better about themselves… until later when we are the beneficiaries of the lower-end services of a bottom-feeding contractor that does things on the cheap.
I wonder though… is this the intended outcome from those calling the shots in our government? The conflict of interest is that many of the decision-makers in government, and the political-left in general, want all the public works jobs to be public-sector and union. So, what better way to get there then to push for the cheapest contracts and then leverage the crises of the inevitable poor service that will result.
Certainly price is an important criteria, but a quality RFP and selection process should target ultimate value. And the assessment of value should include an agreement that maintains the financial health and viability of the enterprise that wins the contract. The relationship needs to be a partnership where each cares about the needs of the other.
Liberals seem to shoot themselves in the foot on a regular basis because they politicize business dealings. Look at Halliburton as an example. The left demonized that company to the point that it became politically toxic, even as it was the only capable operator for many of the services the government required.
This news is not good. It is not a good sign that we only have one operator interested in our business. To me, this says our expectations are out of line with business reality.
How it begins (the Christmas Coup of 2010) is how it ends-a mess!
[quote]This is the problem with left-leaning communities trying to do business. They demonize profit and perch on some lofty and irrational sense of social and moral superiority over private enterprise.[/quote]
I don’t think the residents or politicians in Woodland would consider themselves a “left-leaning community” with any of the characteristics you just listed.
[quote]It’s not too late to pull back and take a time out.[/quote]
Yes it is.
[quote]What do we know about CH2MHill?[/quote]
[url]http://en.wikipedia.org/wiki/CH2M_Hill[/url]
A good overview on the state of the industry, DBOs, and the hurdles they present. [url]http://www.globalwaterintel.com/archive/11/5/general/o-completes-circle.html[/url]
[i]I don’t think the residents or politicians in Woodland would consider themselves a “left-leaning community” with any of the characteristics you just listed. [/i]
I’m not talking about the citizens, I am talking about the government employees making the decisions. And, these people in Woodland need to partner with our people in Davis, do they not?
Don, why is it too late to take a pause?
I wonder what CDM Smith was told to keep them aroung the first time they tried to pull out?
[quote]I’m not talking about the citizeI am talking about the government employees making the decisions. And, these people in Woodland need to partner with our people in Davis, do they not?[/quote]
WDCWA Board
Dr. Bill Marble, Chair
Member, Woodland City Council
Joe Krovoza, Vice-Chair
Member, Davis City Council
Brett Lee, Director
Member, Davis City Council
Skip Davies, Director
Member, Woodland City Council
Sid England, Director*
UC Davis
Don Saylor, Director*
Supervisor, Yolo County
*Participating Agency, Non-Voting Member
So, which of those do you think are “demonizing profit” and driving away competing firms? The fact is there is a small number of firms capable and willing to bid on DBO contracts, and it costs a lot of money to prepare and submit the bid. Do you have some evidence that it was ideological considerations that caused the second firm to drop out? I think you’re just taking a cheap shot at liberals in general on this, with no evidence and no basis for your comments.
Don or anyone: I would really like to know why the City cannot take a pause on this for now?
The whole process and mantra from Saylor, Souza, the JPA was we need three bidders to be sure we get the best price and process and quality. Then down to two …. and now one.
I just dont understand the rush, especially in light of the remaining bidder clearly having us by the … big toe … and vulnerable to whatever they want to offer.
Don,
Staff play a big role in facilitating decisions.
I have plenty of experience working in the private sector, and as a consultant working with state agencies, for writing RFPs and facilitating the decision process to award a contract. The public sector process was always MUCH more difficult because of politics and political agendas. I had to constantly remind the stakeholders and decision makers that their requirements had to match reality. But those with an agenda to undermine the success of the project didn’t care that the requirements did not match reality. Others had their social justice hat screwed on so tightly that their requirements chased away the candidates that could have easily met the business-only requirements.
If there only a small number of firms willing and capable to bid on DBO contracts, then that is a sign that our FRP process and/or the contract requirements are out of touch with reality.
I don’t like the idea of a single bidder at all, but for the record here are some facts that will help keep the dialogue about this latest development from straying into fantasy.
[i]1) When Veolia pulled out of the bidding process, the JPA contacted Beatty Balfour to ask them to join the process as a third bidder, but Beatty Balfour informed the JPA that their original operating partner was no longer available to reform a bidding team, and therefore they did not have the resources needed to rejoin the procurement process.
2) CH2MHill is the firm that successfully designed, built and operates the two DBO WTFs in Seattle. The design of those plants was created in large part Jerry Gilbert in his role as “procurement advisor,” a role he has also filled during the preliminary design of the WDCWA plant. Further, CH2MHill is the firm that successfully designed, built and operates the DBO WTF in San Diego, which is also a Jerry Gilbert guided design.
3) The nature of the DBO process puts the bidding firm at risk for the kinds of workmanship and design flaws that fildogg has expressed concern about.
4) Because of 2) above, CH2MHill was always at a significant competitive advantage in this procurement process. The only way they wouldn’t have been at such an advantage is if they don’t learn from their past experience. I sincerely don’t think that is the case for CH2MHill.
5) FWIW, the City of Seattle employee who oversees the two Seattle DBO facilities is a UCD grad. As part of my due diligence as a WAC member I spoke to him at length about the workmanship, professionalism and cost-effectiveness of CH2MHill’s involvement with Seattle’s two projects. He informed me that Seattle was quite pleased with the work that CH2MHill had done for, and continued to do for Seattle. He also indicated that the City had conducted an exhaustive analysis in the recent past of whether it was cost effective for the City to convert either of the plants to public operation. Their analysis was that such a conversion would not be cost effective, because the costs of operation would be virtually identical, but public operation would effectively void the long-term design and build warrantees that exist under the terms of the current DBO contract.[/i]
Hopefully the above will be useful additions to each of our individual thought processes about this procurement.
[i]He also indicated that the City had conducted an exhaustive analysis in the recent past of whether it was cost effective for the City to convert either of the plants to public operation. Their analysis was that such a conversion would not be cost effective, because the costs of operation would be virtually identical, but public operation would effectively void the long-term design and build warrantees that exist under the terms of the current DBO contract. [/i]
This is a fundamental point in favor of contracting for service. It is the same for private business. Another fundamental reason is competency, and if the service is strategic or operational.
You won’t find many companies running their own cafeteria, or cleaning their own buildings. Many of them outsource the majority of their IT and some even outsource their HR.
You can write a contract that allows you to fire a private contractor for material failure to perform. If the service is run by the government, we just have to accept the problems as our new normal, and those failing to perform will just scream that they don’t receive enough funding as an excuse, and the politicians getting their pockets stuffed by the public sector labor unions will join in and raise taxes to send them more funding… and the cycle continues into perpetuity… until we completely run out of other-people’s money.
So, what is a good soldier of public-sector unionized labor to do about this clear failure to compete with private providers? Well, they work to make the RFP process so cumbersome and costly as to prevent many from even attempting to win the business. Those that do go for the job often have to economize their delivery to make up for the high cost for developing a compliant proposal. In other cases the bottom-feeders are the only party to the table because the good operators can find more profitable alternatives.
It is good to hear from Matt that CH2MHill was some good references. In general it is a very bad sign when only one candidate remains. For example, if CH2MHill fails… apparently there will be no other options… except the city taking over operations. That would make those public-sector labor soldiers very happy indeed.
One thing I would do… include incentives for CH2MHill to perform, and for having to help transition operations to another provider if they fail to perform.
Amazing that you somehow manage to turn this into a diatribe against public employees, staff, and (of course) unions.
I’m guessing that if you contacted Dennis Diemer, he could provide you with a copy of the RFP. I’m guessing there are “incentives for CH2MHill to perform” already in any RFP and subsequent contract.
[quote]For example, if CH2MHill fails… apparently there will be no other options… except the city taking over operations. That would make those public-sector labor soldiers very happy indeed. [/quote]
Matt can address this better, but the bid being solicited is for DBO. If they fail in some manner, I’m guessing it would be possible to put out a bid for private operation, and there are other companies that could bid on that.
Why are you unable to discuss these issues without making hostile comments about public employees and unions?
[i]Why are you unable to discuss these issues without making hostile comments about public employees and unions?[/i]
Why are you so sensitive to complaints about public employee unions and so quick to label my fact-backed points as hostility or something personal? It seems that you see unions and public sector employees as belonging to some protected class.
I don’t have any problem with people in general. My problem is with systems. I think that adequate accountabilities, incentives and controls are lacking in the vast majority of public-sector (e.g. government-run business) because of the system. I blame the nature of the beast, but I see unions as acerbating the flaws in the system… and largely exploiting the system for their gain at the expense of the general public.
You and any other voter that tends to vote Democrat have a conflict of interest with public-sector labor since it supports Democrat politicians and causes. Personally, I don’t have a problem supporting any business, private or public, that does a good job. A good job is defined as delivering quality service at a competitive cost. My interests are non-political in that if government would do a better job at any enterprise, I would be 100% supportive of it taking control.
[quote]Why are you so sensitive to complaints about public employee unions and so quick to label my fact-backed points as hostility or something personal?[/quote]
Because you are overtly, aggressively hostile to unions, you denigrate public workers, you have stated before that you have a specific prejudice against people who are in unions (I could find the quote for you if I chose to bother, if you happen to deny this). Because you bring up unions when they are irrelevant to the topic at hand, such as this thread. Because you constantly tie together unions, liberals, and public employees as being at the root of problems, even when it’s irrelevant to the topic at hand, as with this thread. And because you have the unmitigated gall to call your tirades “fact-based” when they are, in fact, just prejudice on your part.
As I’ve said many times before, I’m actually ambivalent about unions and pretty much neither a supporter nor an opponent of public employee unions. But here’s the thing: they have literally nothing whatsoever to do with this topic. Yet you inject your prejudice again, and then throw out the old, tired “protected class” canard.
The issue here is the RFP for the design, build, and operation of the water system. Somehow you’ve tried, once again, to turn this into some sort of political point. Blaming liberals for the withdrawal of one firm from the bidding process? Give me a break.
[i]Because you are overtly, aggressively hostile to unions,[/I]
Your opinion, not mine.
[I]you denigrate public workers[/I]
Prove it. You cannot, because I do not. That is unless you want to treat them as some protected class and generalize my points into your political-correctness domain of narrow thinking.
[I]you have stated before that you have a specific prejudice against people who are in unions[/i]
I have a specific prejudice against unions Don. This is sort of like your ilk having a prejudice against Halliburton… so are you also prejudice against all the employees of Halliburton? Maybe you are. But I am not of employees of the government. Again Don, it is the system.
And there is a connection with public-sector unionized labor, politics and contracting. I know it is an inconvenient truth for you. It is very common for RFP requirements to be stacked in ways that favor the Democrats’ political darlings. It is also very common for other political agendas to be inserted into the RFP. For example, the requirement for the bidder to be woman-owned or minority-owned. For they bidder to meet certain environmental wacko requirements, etc., etc., etc. Much of this stuff will have absolutely nothing to do with the capability of the bidder, but it will sure make it difficult or impossible to attract bids.
I will review the RFP this weekend to locate examples. I’m sure they exist.
Again, Don or anyone: Why can’t the City just take a pause here, don’t sign contracts or sell bonds, and see how to proceed with a public process?
Going to one bidder is fundamentally a change of course from everything the public was told for years and years.
They can if they are willing to go ahead without WOodland, but they’ve already made the decision to go ahead with Woodland.