Agency Board October 10, 2013 Agenda Item 7: DBO Service Contract for the Davis-Woodland Water Supply Project

2 Discussion Topics Background CH2M HILL Proposal and Evaluation Service Contract Funding and Finance Plan Legal Authority Recommendation Project Cost Reductions Schedule

3 Background

4 April 18, 2013: Addendum No. 1 to RFP 70% competitive pricing and 30% open book for self-performed work Set maximum Design-Build Price and Net Present Value (NPV) price ceilings Design-Build Price: Second 10% reduction in Engineers estimate NPV: 10% below Agency estimate June 20, 2013: Addendum No. 2 to RFP Revisions to accommodate Initial Concept Submittal suggestions July 15, 2013: Authorization from Board to negotiate with CH2M HILL and confirm competitive negotiation process

5 CH2M HILL Proposal Proposal received July 30 th Proposal review and negotiation team: Facilities Procurement Committee (FPC): Dennis Diemer, Diane Phillips, Doug Baxter, Jim Yost, Jerry Gilbert, Rhodes Trussell, Legal counsel: Richard Shanahan, Eric Petersen Other team members: West Yost staff, Trussell Technologies, Frisch Engineering, Lionakis, Karl Stinson, Jacobs Associates, Raftelis, TerraVerde Negotiation sessions and interaction with CH2M HILL 6 FPC Meetings 7 Meetings with CH2M HILL Numerous conference calls and cost review meetings

6 CH2M HILL Proposal Evaluation TECHNICAL COMPLIANCE RFP requirements: –Proven technologies –Drinking water quality and delivery guarantees –Compliance with present and anticipated future drinking water regulatory standards CH2M Hills proposal is technically compliant with the requirements in the RFP Requirements are included in the Service Contract

7 CH2M HILL Proposal Evaluation PRICE RFP maximum price ceilings: Capital: $151.5 million; Net Present Value: $234.1 million CH2M HILL negotiated final prices: Capital: $141.2 million; Net Present Value: $231.2 million Amount under cap: Capital: $10.3 million (7%) Net Present Value: $2.9 million (1%) CH2M HILL compliant with 70% competitive pricing requirement Agency completed open book review of self-performed work

8 CH2M HILL Proposal Evaluation NEGOTIATED PRICE Additions in Revised Proposal –$219,000 – welding of all joints in steel finished water pipelines –$235,000 – modifications to proposed administration building –$534,000 – increase in construction QA/QC by CH2M HILL –$90,000 – increase in ozone generator sizing –$418,000 – items not contained in original price proposal: chemicals for plant commissioning construction surveyor coatings on a tank construction trailer for Agency staff –

9 CH2M HILL Proposal Evaluation NEGOTIATED PRICE Deductions in Revised Proposal –(-$1,700,000) – construction and installation of electrical work –(-$135,000) – engineering design services –(-$312,000) – concrete, dry wall, and earthwork

10 CH2M HILL Proposal Evaluation NEGOTIATED PRICE Changes to Operating Costs –Reduction in caustic unit cost –Historically large variation in chemical prices Group A Chemicals (pass-through): dose determined by Agency Group B Chemicals (included in Service Fee): dose determined by operator for efficient operation –Updates to Repair & Replacement Charge (R&R Charge) Increase filter media replacement frequency Moved from Service Fee to R&R Charge

11 CH2M HILL Proposal Evaluation ENERGY: Provisions and Requirements Goal: promote energy efficiency and realize energy cost savings Energy Efficiency and Cost Savings Plan including off-peak energy use Maintenance activities during off-peak periods Guaranteed Maximum Electricity Utilization (GMEU) and Guaranteed Maximum Electricity Demand (GMED) Included in NPV determination CH2M HILL pays for energy use above the guaranteed maximums Agency/CH2M HILL share of savings for electricity usage under the guaranteed maximums Annual review of actual electricity use vs. guaranteed maximums

12 CH2M HILL Proposal Evaluation ENERGY: CH2M HILLs ENHANCEMENTS TO BENCHMARK PROJECT Solids drying beds rather than mechanical dewatering Taking advantage of WAPA power rates by increased pumping head at intake Ozone diffusion rather than side injection LEED equivalent Operations Building design Chlorine disinfection rather than UV Gravity filtration rather than membrane filtration Pipeline design based on lowest life cycle cost

13 Service Contract Design criteria and drawings from Proposal incorporated into Service Contract Key provisions of Service Contract: –Performance-Based Contract –15-year operations period with a 5-year option to extend the term –Fixed Price for Operations at four defined flow rates –Partial Company Financing (10% of design-build price) –Operation Period Performance Guarantees (water treatment, water delivery, production efficiency, and environmental) –Payments into a Maintenance, Repair and Replacement Fund –Provisions for Uncontrollable Circumstances –Acceptance Test must be passed before Operations period & payments begin –Provisions for facilities to be returned to Agency with predetermined remaining Service Life

14 Service Contract Key provisions of Service Contract: –Accommodation for future Ammonia addition (Chloramination) –Geotechnical and Subsurface Site Conditions risk allocation –Agency to secure/maintain necessary water rights –Company operates Raw Water Intake common and Agency facilities –Supplemental Facilities Site available for solids drying beds –Legal Protections: Termination Rights of Agency and CH2M HILL Dispute Resolution Procedures Security- Performance, Payment and Operations Bonds; Parent Company Guaranty; Insurance; Indemnification Subcontractors and Key Personnel must be pre-approved Contract cannot be assigned by CH2M HILL

15 Service Contract OPTIONAL: ADDITIONAL WOODLAND STORAGE 2.0 million gallons of storage and 4,000 gpm of pumping capacity for an amount not-to-exceed $3.5 million Upon completion of design, actual price presented for open-book review by Agency Agency, in consultation with Woodland, will have option of selecting or rejecting this addition Decision to be made promptly after Contract execution Woodland will pay full cost of this addition

16 Funding and Finance Plan Agency is relying on cities to fund the project Applying for low-interest SRF loan to fund DB Price –Agency submitted application for $211 million to SWRCB –Woodland submitted application for $143 million to CDPH Woodland financing plan: $38M interim financing + authorization for $155m long-term water revenue bonds Davis financing plan: $16M interim financing + rates in place to fund long-term financing

17 Legal Authority CA Government Code Section 5956 –Authorizes Agency contract with CH2M HILL to study, plan, design, construct, develop, finance, maintain, rebuild, improve, repair, or operate a fee-producing water supply, treatment and distribution Project –Requires water system user fee revenue to be dedicated to payment of CH2M HILL –Requires competitive negotiation process –Requires contract to incorporate CA prevailing wage law and other public works related requirements in CA Labor Code –Authorizes Agency to use private infrastructure financing as supplemental revenue source

18 Legal Authority California Environmental Quality Act (CEQA) –City of Davis was lead agency under CEQA before formation of Agency –City of Davis prepared and certified EIR for the Project and approved the Project (October 2007) –Since its formation in 2009, the Agency has been lead agency under CEQA –Agency has approved four addenda to the EIR between 2011 and 2012 Service Contract is consistent with Project as approved in 2007 final EIR and later CEQA addenda No additional environmental review is required under CEQA relating to the approval and performance of the Service Contract

19 Legal Authority Waiver of State Grant Funding requirement –City Council Design/Construction Authorization contingent on $16.7M State Grant for Joint Intake –State Grant Funding of $10M secured; work continues for $6.7M –City Councils authorized Agency Board to waive State Grant Funding Condition –Waiver included in Recommended Resolution

20 Recommendation Adopt Resolution approving Service Contract with CH2M HILL in the amount of $141.2M for design and construction of Capital Facilities plus Operations-phase Payments for a 15 Year Period

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22 TaskCompletion By Issuance of Final RFP for DBO ContractDecember 2012 Approval of Project Final Engineering and Construction by Each City March 2013 Authorization to Proceed with Bond Financing by Each City Sept/Oct 2013 Award of DBO Service ContractOctober 2013 Complete 100% Design for Joint Intake FacilityNovember 2013 Advertise for Construction of Joint Intake FacilityDecember 2013 Obtain Remaining Environmental PermitsJanuary 2014 Award of Joint Intake Facility Construction ContractFebruary 2014 Joint Intake Construction and Testing CompletionApril 2016 DWWSP Acceptance Testing Completion September 2016 Updated: 9/12/13 Project Schedule Milestones