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WTP4: What's $15 Million Among Friends?

One expects Council will be more vigilant the next time around

By Mike Kanin, Fri., Dec. 14, 2012

Mayor Lee Leffingwell, speaking at the WTP4 site in 2011, defended the project's $15 million overrun.
Mayor Lee Leffingwell, speaking at the WTP4 site in 2011, defended the project's $15 million overrun.
Photo by John Anderson

By the time Austin Water utility staff found themselves asking for an extra $15 million from a dais that included at least four frustrated Council members last Thursday morning, the massive Water Treatment Plant No. 4 project had been through multiple iterations and decades (that's decades) of debate. Along the way, it picked up multiple levels of opposition – from environmentalists, from fiscal conservatives, from neighborhood groups, from anti-growth Keep Austin Weirdos. By now, everything about the project is front-loaded with controversy. If there were ever a city infrastructure effort that was going to make a relatively small (percentage-wise, if you believe the city's numbers) cost overrun look like a true pitchforks-and-torches moment, this is it.

The history goes roughly like this: Way back in 1984, Austin voters approved bond money to pay for land for a new water treatment plant, but for various reasons, a series of City Councils deferred groundbreaking and even site selection. In the last decade, environmental concerns about the initial site chosen kept dirt from moving and – after a location move, much more debate over the need and the timing, and a very split series of Council votes – Council finally OK'd a $508 million dollar deal to build the thing, roughly $359 million of which was dedicated to construction ... in 2009. That's a full quarter century of hemmin' and hawin'.

The agreement approved by Council is called "Construction Manager at Risk," because it's supposed to shift portions of risk to the construction firm – MWH Con­struct­ors – and away from the city. Thurs­day morning, some Council members continued to suggest that they weren't quite clear – at least not when it counted – on what risk they were being insulated from. It's hard to blame them. AW staff and city management point to the fact that they never did quite say that the $359 million in construction costs were guaranteed – but they also never did quite say that they weren't. And that's on top of the fact that the phrase "guaranteed maximum price" was thrown around with some abandon. Council Member Bill Spelman summed up his colleagues' predicament. "I think we probably played it just exactly the way we should have," Spelman said of Coun­cil's approval of the Construction Man­ager at Risk contract, before adding a hefty caveat pointed at city management – "except the Council needed to know what the game was. And I did not know what the game was; I know at least a couple of us didn't, and I suspect most of us didn't."

After it became clear – perhaps, to city management, as many as six months before Council formally heard about it – that $359 million wouldn't do the trick, AW staff came back for the additional $15 million. They did so to a chorus of "I told you so"s from familiar advocates. Save Our Springs' Bill Bunch even got himself thrown out Thurs­day for yelling from the audience at Mayor Lee Leffingwell.

In response to the criticism, Leffingwell pointed to what he saw as a .8-3.3% cost overrun on the project, even after its $15 million price tag bump. That number, he suggested, is fairly impressive for a project this size. For the record, Council gadfly Paul Robbins has suggested that, given construction cutbacks – including an entire transmission main and a scaling-back of a pump station in the wake of news of the overrun – plus contingencies used, the true overrun cost is closer to $60 million. That's a 10-16% overage, a figure that is not so impressive. (Austin Water Director Greg Meszaros told Council that there were also unanticipated additional costs addressing neighborhood and environmental concerns.)

All together, it's enough to make observers wonder why all this had to happen to the one project that it positively couldn't happen to – in an episode that could have implications down the line. "Never, ever, ever relinquish Council oversight on a project," said Sierra Club vice chair Roy Waley, referring to the Construction Manager at Risk process.

After Thursday's meeting, Council Mem­bers Bill Spelman and Laura Morrison both told online In Fact Daily that this messy experience with the process shouldn't cloud the whole idea of Construction Man­ag­er at Risk as a viable option for some city infrastructure projects. And, indeed, at least one other construction effort – the new Central Library – is anticipated for such a contract. One would expect that Council members will be more vigilant the next time around.

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