When this article written by City Hall watcher and commentator R.D. Stevens came our way, we thought it was something the whole community needed to read. The topic – our City's inability to manage major Public Works projects – is especially timely, with the Administration and Council majority poised to issue another controversial bond on August 27th, and the Winslow Way Streetscape funding debate far from settled.
Published with the author's permission.
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A Nice Place on Puget Sound
Imagine that you and some friends and relatives have a nice place on Puget Sound. You’ve lived there for a number of years, and one day your hired property man tells you the sewage treatment system needs repairs and that he’s worried that the State won’t relicense it the next time around. He estimates the cost of the upgrades at $4300. You tell him to go ahead with the design.
The following year he estimates the cost at $9500, not including $750 for design. A year after that, he tells you the engineers are still designing, they’ve only completed 30 percent of the design, and they now need about twice as much to finish.
Yet another year goes by while your man and the engineers go off to re-design the project. He comes back to you for more money, again for design, and this time including construction management services as well, something you thought he was going to take care of. You feel like you have no choice but to sign for more work.
Five years into the project, he tells you the cost is now over $14,000. You’re not done yet, you know you will be paying more, and you wonder how things got so out of control. Then you realize you were never really in control in the first place.
Multiply by A Thousand
Multiply this by a factor of a thousand and you have the story of our City’s wastewater treatment plant at the base of Wing Point. This is the largest project in the City’s history it is still not done. What started out as a $4.5 million project is now projected to cost $14.3 million.
Based on industry averages for similar projects, it appears that the Administration has overspent on engineering by about $750,000 to $1 million. And because of delays along the way, inflation in construction costs probably added another $750,000 to $1 million. All told, the cost of bad management is probably $1.5 to $2.0 million.
What Went Wrong?
My statements here are based on facts gleaned from the Administration’s response to my public records request for cost estimates and public meeting notes. ( I have included a concise history of the project at the end of this article). What is most surprising is the almost total lack of written management reporting from the Public Works Department to elected officials. There are many Power Point presentations put together by the consultants, mostly focused on the technical aspects of the project, but these do not include all the costs – like their own fees.
It appears that few Council members have known what the total cost will be, for the numbers they have quoted were for construction costs only, and have not included engineering – a sizable expense. Nonetheless, once the project was well underway, and after Public Works had entered into detailed design, some Council members did manage to at least raise the question, “Is this the right project?”
The Administration seems to lack the skills to track variances in time and budget on major projects. Daniel Smith and Gayle Seyl, two citizens working independently, and each with backgrounds in forensic accounting and fraud investigation, have made separate public records requests for reports containing this sort of information, and have yet to obtain them. Council member Kim Brackett has made similar requests on capital projects and staff has told her that they would get back to her in six months. These reports are the basic information that any supervisor or board needs to exercise oversight and control, and our Council does not get them.
There are many similarities here between the management of this project and the management of the Heery work on Winslow Tomorrow. The Public Works department has been in charge of both projects. Both involved contracts with large engineering firms. On both, Public Works moved ahead on detailed design without first fully exploring the alternatives and making Council fully aware of the details of these options. And on both projects, much of the money spent on professional engineers went into meetings that might have been avoided if the Public Works had taken the time to clearly outline and get policy support for project parameters before engaging in detailed design.
Making It Better
In situations like this Joe Honick, a City Hall watcher and concerned citizen, always wants to know how we can improve things.
First, there are basic questions of staff openness and trust. The solution to these problems is obvious.
Second, we need basic accounting and management reporting – the stuff of professionalism. This includes comprehensive and concise written reports that explain the rationale for a project, and the real options for carrying it out, including the costs, benefit, risks, time and degree of difficulty of each. These reports would give our elected officials the information they (and not staff) need to decide which options are best. These reports should include a clear statement of all of the costs, and not seek to lessen the perception of these by revealing only those directly for construction. It is amazing how, on major projects, and changes to these projects, the Council is willing to accept information just hours or minutes before Council meetings (or get no advance written information at all) and will then make quick decisions, all based on a sense of urgency conveyed by staff and the Mayor.
After the project is underway, Council should expect and ask for status reports on the larger projects, which should provide detail on which items are off budget or schedule, and why. These reports should be signed by the Public Works Director, and not his subordinates. The City of Bainbridge Island is small enough that he should know the details of major projects.
Learning from Past Mistakes
Four members of the City Council still want to press ahead next year with the replacement of utilities under Winslow Way. Here are the questions that Council members should raise now, before getting in another “herd and hustle” of rising costs:
- Do we know what all of the costs will be, including the final bill for engineering and construction management?
- Do we know who will be responsible for bringing the project in time and on budget, and what management reports they will submit along the way?
- Given the past history of spending and over-runs on the wastewater treatment plant and Winslow Tomorrow, does the senior staff of the Public Works Department have the skills to oversee this project?
- If the project goes over budget, how will we pay for it?
- What tasks will be done by engineers already on salary, and what will be contracted out?
Given the problems of the past, the operative words should be “Show me."
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Key Milestones in the Wastewater Treatment Plant
4/13/03 Esvelt Engineering estimates needed improvements at $4.368 million, including $.585 for initial UV work and $3.783 million for additional upgrades. These estimates include neither design nor construction management.
8/11/04 City signs $756,219 contract with Tetra Tech to prepare engineering drawings to 100% design level.
11/30/04 Public Works stages community workshop; neighbors complain that they were given only one day’s notice to attend, and that few received it. Power Point slides from presentation put cost of upgrades at $6.8 million, and make no mention that these costs do not include engineering.
8/5/05 Vanir Construction, a sub-contractor to Tetra Tech, estimates completion by 1/7/08, and construction costs alone at $9.6 million. Public Works memo to city council puts cost of Class A reclaimed water at $1.5 million (about the same or lower cost than is now being contemplated for simply extending the outfall farther into the Sound.)
7/25/05 City Finance Director Elray Konkel writes a citizen, “Current customers are protected today and (are) intended to be protected in the future by System Participation fees which are applied to new development… The current capacity of the plant is considered sufficient to accommodate the current and future growth within the boundaries of the Sewer district.”
11/05 City Council raises question of whether space constraints have significantly added to costs, asks “Is this the right project?”
11/14/05 Public Words director Randy Witt sends out emails asking for “bar napkin” level of detail on costs of alternative actions, and asks if the State Department of Ecology will allow the City to defer upgrades if the City instead brought water and biosolids to Class A levels. Tetra Tech writes Public Works, “There is no Ecology deadline for completing the improvements in the City’s engineering report”, and Lance Newcombe, then an engineer with the City, speculates that the City might have bought time for the upgrade work by having added UV treatment.
8/09/06 City caps work on current Tetra Tech contract at $730,000, noting that cost over-runs and design revisions had led to only 30% of the design being completed, even though 100% had been specified. City signs “Phase 2” contract with Tetra Tech for $690,300, bringing total contract with Tetra Tech to $1.42 million. Although the new contract is labeled “Phase 2”, it is essentially a re-write for design revisions and for work not completed in the first contract.
8/15/06 Public Works tells PWT subcommittee that construction will likely be completed in mid to late 2008.
1/19/07 Public Works estimates construction cost at $12.419 million.
2/14/07 City amends Tetra Tech contract for design revisions, increasing bringing total to $1.88 million through 2007 only. The proposed contract amendment would have brought the total to $2.32 million.
11/29/07 City rebids work for $9.051 million. Although Public Works claims that higher engineering costs helped lower the cost of the second bid, it is not clear if the higher engineering costs were truly attributable to the bidding, and if the bids came in lower because the second-round bidders knew the bid amounts from the first round or because the economy was visibly slowing.
2/27/08 City increases Tetra Tech contract by $207,366, bringing total amount paid and obligated to $2.08 million. Based on amount proposed but not signed for the first amendment, there will likely be a future amendments to this contract of at least $233,000, which would bring it to $2.320 million.
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