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Consultants back privatization of water plant

June 3, 2013

WOONSOCKET — Independent consultants hired by the Budget Commission delivered what amounted to an unqualified endorsement Monday of Mayor Leo T. Fontaine’s controversial plan to privatize a proposed water treatment plant, calling it the best possible deal for ratepayers.
Consultant Bruce Tobey said a new plant would cost $51.6 million if one company were hired to design, build and operate the facility for 20 years. That’s about $28.4 million less than it would cost if the city built and ran the plant “the traditional way,” meaning it would be designed by one firm, built by another and operated by city workers.
Tobey, a former mayor of Gloucester, Mass., was hired as part of a consulting team affiliated with the Providence law firm of Pannone Lopes Devereaux & West. He called the 13-page report rigorously vetted, “data driven” and informed by some “deeply schooled” experts in procurement of municipal utilities.
Privatization is sometimes referred to in engineering circles as design-build-operate, or DBO, while the traditional method is design-bid-build, or DBB.
“It is the conclusion of PLDW that the DBO delivery operation is the most advantageous project delivery strategy for the city to employ,” the report says. “Over a 20-year-term, the most cost-efficient strategy is to proceed with a DBO.”
But Tobey’s recommendations were immediately attacked by many of the same interests who have been criticizing the DBO plan for months. The detractors included members of Council 94, the labor union that represents more than two dozen workers at the existing Hamman Water Treatment Plant, members of the City Council and James Cournoyer, a private citizen who was chairman of the ad hoc water facilities siting board.
Commissioner Peder Schaefer, who was a strong proponent of hiring a consultant, also seemed skeptical of the findings. When Shaefer suggested that the lion’s share of the savings would come from personnel cuts, Tobey replied, “Lower labor is some of it.” But much of the benefit would be the result of what Tobey called “efficiencies of consolidated planning.”
A single-contract DBO means the same company that designs the plant already knows what the folks who are going to operate it need, he said. The design team can ferret out many operational “redundancies” that a general contractor building for an unknown operator might include simply to account for the widest range of contingencies.
The city also saves by shedding the risk associated with changes in work orders, legal claims over mishandled work and regulatory burdens. In multiple contract situations, the institutional reflex is to pass the buck when something goes wrong.
“The problem when you have multiple-team approach and there are problems, the blame goes this way,” said Tobey, gesturing toward a colleague sitting next to him. “They’re pointing to each other.”
One common theme among detractors is that in order to cut costs so dramatically on design and construction, the DBO option must eke those savings out of quality. Since the designers will only be under contract to operate the plant for 20 years, why, the opponents argued, should they build a plant to last any longer? After all, when their contract’s up, the city’s ratepayers will be left to clean up the mess.
“I can’t help but think it’s going to come out of the longevity of the plant,” said Cournoyer. “If we build a plant and we think about a life cycle of 20 years, we have failed.”
At one point Tobey explained the efficiencies of single-contract DBO by saying, “The team that’s gotta live with it is here from the get-go.” But Councilman Dan Gendron rebuked Tobey.
“The people that build it are not the people who have to live with it. It’s the people of Woonsocket are the ones that are going to have to live with it,” he said. “If this is such a way to go why don’t we go with a 50-year DBO?”
John Burns, the staff representative for Council 94, said the report seemed slanted.
“We’re concerned, number one, that the report is geared toward, ‘Let’s have a DBO,’” he said.
Ironically, Fontaine was the only member of the commission who was absent from yesterday’s meeting in Harris Hall. so there was no reaction from the biggest proponent of DBO on the panel.
Council President John Ward, however, observed that the privatization of the plant does not necessarily run counter to the interests of personnel. When the wastewater plant was privatized many years ago, labor issues were successfully dealt with in the collective bargaining process.
Ward said privatization has been good for wastewater ratepayers. If the city had abandoned the plant and hooked into lines controlled by the Narragansett Bay Commission, chances are sewer taxes would be 150 percent higher than they are now. Likewise, he supports privatization of water because he believes it’s the best deal for ratepayers.
As for the longevity of the plant, Tobey said after the public presentation that the notion that a plant resulting from DBO procurement won’t last as long as a traditional plant is a myth. The 20-year cost analysis is no different than a homeowner would employ to figure out monthly payments based on a 30-year mortgage. It doesn’t mean the buyer is building a cheap house to dump on the next guy after the note is paid off.
“It has nothing to do with the longevity of the plant,” he said. “That’s one of the real red herrings that’s out there.”
Tobey says DBO is also the quickest way to get a new plant up and running, and the construction window is one of the main reasons why replacing the 50-year-old Hamman Water Treatment Plant has taken on such an air of urgency.
The state Department of Environmental Management has ordered the city to replace the antiquated plant by May 2016, a deadline that the regulators have repeatedly relaxed in view of the city’s dire fiscal constraints.
DEM says the city must build a replacement for the existing plant primarily to eliminate a practice of unloading a sludge-like material known as filter backwash into the Blackstone River. The backwash is essentially a concentrated form of naturally occurring components of raw reservoir water that is removed during the purification process, but DEM says the stuff is harmful to fish and other creatures that populate the Blackstone.
The Fontaine administration has long argued that spending money to repair the existing plant would be a case of throwing good money after bad, because the city’s consulting engineers, Camp Dresser & McKee, say the plant is approaching the end of its existing lifespan. But the project has been stalled since Jan. 27, when Public Works Director Sheila McGauvran asked the commission for permission to begin the procurement process based on the DBO model. The panel refused, opting to study the issue before moving forward.
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