CDM Withdraws from Water Project Bidding But is Coaxed Back

cdmThe Woodland-Davis water project was already dealing with one setback as Veolia withdrew from the bidding, and now the city has disclosed that on January 23, 2013 CDM and United Water 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.

After considerable discussion with Dennis Diemer, the project’s general manager, six days later they wrote to inform the general manager, “We remain interested in participating in the regional water supply project.”

The letter, sent on January 23, outlines a number of concerns.

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.”

However, this appears to be far from a resolved issue.

United Water President Paul Meyerhofer and Vice President Gary Albertson note in their January 29, 2013 letter, “We appreciated the opportunity to discuss with you the concerns of the United Water – CDM Inc. team regarding the WDCWA procurement process for the regional water supply project. We understand that the WDCWA is considering changes to the procurement process that may address our concerns.”

This suggests that the issues have not been fully resolved.

As Dennis Diemer explained, “The DBO process is a competitive negotiation process.  In my experience it is common for there to be ‘back and forth’ between the parties on a number of issues related to the project and/or the process.”

He added, “The Agency continues to believe that the DBO procurement method will produce the best project at the lowest cost for the Agency and the cities of Davis and Woodland.  Our efforts are focused on increasing the commitment of our two remaining teams and potentially creating an opportunity for one or both of the previously qualified teams (MWH/Keiwit/Veolia and Black&Veatch/Balfour Beatty/Southwest Water) to rejoin the process.”

“We will not consider changes to the process that place an unacceptable risk or uncertainty upon the Agency,” he said in his email.  “We will consider changes that maintain or improve our project’s cost, minimize impacts to schedule, and maintain competition.”

The biggest issue of concern may be this point: “We remain concerned that the DBO project may exceed the cost benchmark.”

Project opponents have consistently argued that the city has underestimated the costs of the project and this is the first indication from an outside source that they might be correct.

While Bob Dunning’s column on Friday focused on the fact that “for a few anxious days in early January, the Woodland-Davis Clean Water Agency was down to just one bidder for its massive surface water project after CDM Smith sent a letter announcing its intention to get out of Dodge.”

He writes, “Agency general manager Dennis Diemer admitted the existence of the letter of withdrawal and confirmed that CDM Smith had a number of serious concerns, several of which remain … he did, however, convince CDM to stay on board for the time being, and wasn’t willing to speculate just how difficult things might get if CDM ultimately decides not to participate in what is supposed to be a competitive bidding process …”

Mr. Dunning writes, “Should the voting public have been made aware of CDM’s concerns as we go to the polls in this era of supposed openness and transparency?”

He adds, “Not according to one elected city official who told me bluntly that ‘if the head of CDM tells me they are in, and you ask me if they have pulled out, I say “no.” I do not feel it’s appropriate to share all I know. I believe Davis may well be scaring away bidders, but I doubt the press cares much about that.’ “

All of that said, the biggest issue might be that the project might exceed the total cost projections, $113 million of which is Davis’ responsibility.

—David M. Greenwald reporting

About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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  1. rusty49

    “Project opponents have consistently argued that the city has over-estimated the costs of the project and this is the first indication from an outside source that they might be correct.”

    You may want to take another look at that sentence.

  2. Davis Enophile

    Before anybody freaks out about the photo to this article, its a photo of a wastewater treatment plant, not a drinking water treatment plant. They are not the same.

  3. JustSaying

    Thanks for clarifying, DE. The photo actually is left over from Steve Daubert’s project concept story yesterday, a straight line design from sewers to Davis water faucets.

  4. highbeam

    rusty, thanks, you were awake before me…but i saw it before i saw your comment…i can also see, however, that there have been allegations that these projected rates are TOO HIGH, so one could say that they ARE an overestimate – with the further allegation that they may even be increased. But within the context of this discussion,underestimate seems appropriate.

  5. rusty49

    Highbeam, the sentence right before that reads “The biggest issue of concern may be this point: We remain concerned that the DBO project may exceed the cost benchmark” so underestimate IS appropiate.

  6. highbeam

    JS, i believe that indicates that a number of people do not trust the city’s figures, and fear that the city is padding the numbers and then will waste any excess dollars…coupled with a fear that the project (for perhaps a variety of reasons) will cost even more than the city is asking for, and the rates will be even higher (at which point we would be committed to the project)

  7. JustSaying

    I think the observation means there’s a fear that the city is lowballing the cost estimates just to get it going, then will have to amend the contract down the road to some outrageous cost while, at the same time, charging that the project costs too much to begin with. I don’t doubt that any of these other guesses could be more correct than mine.

    Interesting that David leaves us with such a mystery to solve. What could he possibly have meant?

    But the bigger picture: Having been involved with large contracts, I know that these discussions with bidders and potential bidders are part of the process. As long as they don’t favor one over others, there’s nothing untoward going on.

    There’s also no reason to keep any secrets, so I’d like to know who this secret “elected official” is who Dunning quotes. As Dunning notes, the person was technically correct (contrary to Michael Harrington’s nasty contention). Wonder if he/she was inadvisedly blowing off steam about the way Dunning and some others are “reporting” on the project?

    On the other hand, apparently it took very little time to resolve the concerns a month ago. Did the company officially pull out or threaten to? How long was the “considerable discussion”? What were the concerns that got resolved enough to keep CMD in the running? Do we have a copy of the original letter as well as the later one? Links please.

  8. David M. Greenwald

    JS: I simply wrote over-estimated rather than under-estimated.

    I have a copy of both letters, though I have pretty much quoted their entirety here.

  9. Don Shor

    Letter #1: [url][/url]
    Letter #2: [url][/url]

  10. highbeam

    JS, agreed, and that is what i am hearing expressed, also (regarding mistrust of the rates)… and that was partly what i was suggesting when i said i thought there was was also a fear that these rates are not as high as they may end up being (that the projected rates, high as some may feel they are, may actually be a low estimate)

  11. wesley506

    I agree with JS. The city low balled the cost so as not to scare off all Davisites. Contractors would have probably put in a low ball bid anyway just to get the job, knowing full well once it is started they could come back with claims of some unforeseen problem that requires additional funding. It seems at this point that the city has made it clear to the contractor that cost-overruns will be covered by the city if they will just at least stay in the bidding game. I think most people will agree that the project will be built at significantly more that anyone anticipated, and rates will thus be significantly higher than expected.
    With really sky-high water rates, Davisites will then be politely told their options are to 1)shut up and pay up, 2)approve Covell Village and several other large subdivisions so that the costs can be spread over a much larger number of households, or 3)vote for yet another parcel tax increase to pay for the baby. Option #2 will be the choice of the majority

  12. wesley506

    Whether they are called Covell Village, Nirvana Estates, Blissfull Gardens, or Harmony Hills is irrelevant. The point is that the option of spreading the costs over a much larger number of households by approving significant growth of Davis will become increasingly palatable

  13. Rifkin

    DG: [i]”JS: I simply wrote over-estimated rather than under-estimated.”[/i]

    It would not make much sense to find that contract bidders would be pulling out if the promoters had [i]overestimated[/i] the project’s costs. It seems very likely that, if the promoters have underestimated the total bill, that could be discouraging bidders, who don’t believe there is any profit in it for them to get involved.

    The real shame is that so much of the cost is skilled labor, and the California Democratic Party has been corrupted by the skilled labor unions. The end result is that low- and middle-income consumers are forced to pay much more than a competitive price for water, in order to feather bed highly paid plumbers, pipefitters, electricians, carpenters and others who have corruptly purchased electoral power.

    Not only do these union workers make 2 to 3 times a competitive compensation; but they also work very slowly due to cumbersome union rules (required by state law) which prohibit productive effort.

    On a related water note … drinking water is very good for your health. What you should never do is drink sugary sodas … or even worse, [b]never drink diet sodas. They will give you diabetes and kill you ([url][/url])[/b] and they will make you even fatter than sugary sodas will. Ever seen a fit person drinking Diet Coke?

  14. wesley506

    After high school I worked 3,000 feet down in an underground gold mine in the Black Hills of South Dakota as a non-union miner. South Dakota is a right-to work state and some of my co-workers were union and some were not. My supervisors knew I was non-union and as a result I was often sent to work in very dangerous areas. When I brought up extremely unsafe work conditions, I was basically told to shut up and do the job. My union co-workers on the other hand got the union involved and as a result their work areas were made safe before the work continued. Without union efforts there would be no workplace safety regulations.
    I have also been an administrator who has had to negotiate with unions about working conditions, and problem employees and have seen the abusive side of union employees.
    A simplistic view that unions are the root of all evil and inefficiency in this country is incredibly naive.

  15. DT Businessman

    “I think most people will agree that the project will be built at significantly more that anyone anticipated, and rates will thus be significantly higher than expected.”

    Of course No On I is arguing the exact opposite on the West Sac option. The JPA costs are underestimated and the West Sac costs are overestimated. Are the folks in West Sac so much smarter than the folks in Davis?

    -Michael Bisch

  16. Don Shor

    Hey, my grandfather managed that gold mine.

    [i]Amazing how some people can’t believe the possibility that future development will be pushed as a way to soften the blow of the high rates.[/i]

    Of course. And they’ll get about as much traction with that argument as they did with similar arguments before. Covell Village and Wild Horse Ranch demonstrate that the voters of Davis think hard about development and are very conservative, in the true sense of the word, when it comes to peripheral housing.

  17. davisite2

    “Of course No On I is arguing the exact opposite on the West Sac option. The JPA costs are underestimated and the West Sac costs are overestimated. Are the folks in West Sac so much smarter than the folks in Davis?”

    The underestimation of the JPA project and the high OPENING offer of West Sac both make perfect sense, in spite of DT Busnessman’s cynicsm. The underestimation was crafted to get JPA project past voter resistance and the overestimation of the West Sac plan is again in line with the Council/staff’s efforts to “kill” that option. The most recent higher West Sac first-offer,as far as we know, was summarily rejected by Council and we have no evidence of vigorous and sincere back and forth multiple Davis counteroffer responses.

  18. davisite2

    “Amazing how, more than 8 years after it was rejected by the voters, people are still using Covell Village as the bogeyman.”

    The Yes on Measure X Covell Village campaign and the current Yes on I campaign are remarkably similar in their tactics. Let me count the ways:
    “sky is falling” scare tactics, threats of serious penalties and fines which on close inspection are either absent or highly unlikely, Council Majority claims that the issues has been studied to death and needs no more time for fact gathering and analysis, A conjured “deadline” that was brought to bear on the Planning Commission(CV) and WAC(Measure I)in an attempt to cut off any further fact gathering. The Davis Planning Commission, unlike the WAC, refused to accept this pressure and voted NO on CV. Campaign responses attempting to neutralize opposition arguments which were insincere or never given any binding legal framework that would prevent these “changes” from being abandoned at some future date.
    On reflexion, it would not surprise me to learn that the same Sacramento firm that managed the Yes on X campaign is now managing the Yes on I campaign with the same old tired play-book.

  19. Will Arnold

    I am the campaign manager for Yes on Measure I. I was born and raised in Davis. I was not involved at all in Measure X, one way or another. I am not a part of any Sacramento firm.

  20. davisite2

    “I am the campaign manager for Yes on Measure I. I was born and raised in Davis. I was not involved at all in Measure X, one way or another. I am not a part of any Sacramento firm.

    While I understand that you hold the title of “campaign manager”, are you telling us that there ae no paid “consultants” who are working on the Yes o I campaign? The NO on I campaign is totally run by Davis voters who do the work and contribute what they can towards literature printing and mailing costs.

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