HomeMy WebLinkAboutINS-11-007 - Homer Watson Pumping Station - Tender Award and Project Status UpdateREPORT TO:Community & Infrastructure Services Committee
DATE OF MEETING:
January 17, 2011
SUBMITTED BY: K. Grant Murphy, Director of Engineering Services
519-741-2410
PREPARED BY:
Binu J. Korah, Manager of Development Engineering
519-741-2974
Muhammad Memon, Design & Construction Engineer
519-741-2419
WARD(S) INVOLVED:
4
DATE OF REPORT:
January 4, 2011
REPORT NO.: INS 11-007
SUBJECT:
Homer Watson Pumping Station Tender Award and Project
Status Update – Tender # T10-094 – Addendum to INS10-
007
RECOMMENDATION:
That tender T10-094, Homer Watson Pumping Station Upgrade, be awarded to H.I.R.A.
Limited, St. Thomas, Ontario at their tendered price of $7,362,000 plus H.S.T. of $957,060,
for a total of $8,319,060; and further
That $4,525,000be allocated from the Development Charges Reserve and Sanitary Sewer
Utility to the Homer Watson Pumping Station Upgrade project account based on the
70/30 split established in the Development Charge Background studies.
BACKGROUND:
On December 13, 2010, city staff presented a report to the Community & Infrastructure Services
Committee regarding the tender award for upgrades to the Homer Watson Pumping Station to
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H.I.R.A. Limited of St. Thomas, Ontario. At this meeting and additionally at the December 20
Council meeting, several questions were raised regarding the award of this tender and options
for Council moving forward. This addendum report will provide more information to Council for
their consideration.
In February 2010, the City retained Associated Engineering consultants to complete the detailed
design of the preferred solution for the Homer Watson Pumping Station. This project involves
pump upgrades, washroom facilities and the construction of a one (1) hour emergency storage
tank in accordance with City’s engineering standards, Refer Appendix A, Site Plan Layout. The
detailed design was completed in July 2010 by Associated Engineering and the project was
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tendered by the City in August 2010 and closed on September 2, 2010. The tender bids
received by the City were significantly higher than the budgeted amount and for the City to
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proceed with the tender award additional funds would be required from the Development
Charges Reserve.
REPORT:
INS report 11-007 provides additional information about tender T10-094 based on inquiries and
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concerns raised at Committee on the December 13 2010 and are categorized into three (3)
topic areas:
1) Implications of Project Deferral
2) Funding Alternatives
3) Construction Estimates versus Bid Price
Implications of Project Deferral
1. What are the growth-related implications to the City of a lengthy deferral on this matter?
The Homer Watson Pumping Station was constructed in 1988 and the City obtained a certificate
of Approval (C of A) from Ministry of Environment (MOE) to upgrade the Homer Watson
pumping station up to a rated capacity of 309 l/sec to accommodate the developments within
the Doon Creek Subwatershed. This pumping station currently serves an area of 425 hectares
of land with approximately 1878 residential units and several commercial/industrial lands within
the catchment area. In 1998, the City completed Homer Watson (formerly Upper Doon) Sewage
Pumping Station Service Area Expansion Study and confirmed that this station should be
upgraded to handle the flow in accordance with the 1988 C of A approval from MOE.
On that basis, City draft approved several subdivisions from 1998 to 2009 in the anticipation that
the Homer Watson Pumping Station would be upgraded to accommodate all the developments
within this catchment area, including some portions of the Doon South community plan area,
primarily within Doon South Phase 1.
In 2009, the Doon South Sanitary Pumping Station and Forcemain Class Environmental
Assessment (Class EA) Study reaffirmed the need to upgrade the Homer Watson Pumping
Station to a rated capacity of 309 l/sec in order to provide wastewater servicing for a portion of
the Doon South Community Plan area. This project was included in the 2009 Development
Charges Background Study to be undertaken in 2010.
The station upgrades will service 870 units in the current draft-approved plans of subdivision,
30T-03203 (Hallman Construction), 30T-04204 (Doon Creek/LVH Developments), 30T-04208
(Hallman Aberdeen), 30T-04209 (Gubler) and 30T-92009 (Chalon Estates). These subdivisions
were granted draft approval by the City between 2005 and 2007, and were not appealed to the
Ontario Municipal Board. Further, the station will also service approximately 912 units
comprised of 30T-06203 and 30T-08203 (Activa Holdings, Dodge Drive), 30T-07203 (Hallman
Construction-Gorh Drive), 30T-07202 (about 46 units, Monarch Corporation), were approved by
the Ontario Municipal Board. Refer Appendix B, Homer Watson Pumping Station Catchment
Area Map.
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The Homer Watson Pumping Station will also service future development on vacant lands and
meet intensification targets within the catchment area. The station services primarily Priority “A”
lands in Kitchener as defined by the Kitchener Growth Management Plan. Priority “A”
development applications and initiatives are given highest priority, and when there is a
competing interest for time/resources with other ranking, this priority will prevail.
The existing Homer Watson sewage pumping station cannot handle additional flows related to
future development in the catchment area and as such all pending development in this area will
cease if the upgrades are deferred any longer. Staff do not recommend that the upgrades to
Homer Watson Pumping Station be deferred on this basis.
2. What are the operational implications to the City of a lengthy deferral on this matter?
In accordance with City of Kitchener Design Standards and Procedures Manual for Wastewater
Pumping Station (2006), pumping stations are required to accommodate one (1) hour of
emergency storage. This provides sufficient time for operations staff to identify the problem,
resolve the issue or set-up a by-pass to downstream sewers in order to properly discharge the
sewage.
The Homer Watson Pumping Station does not meet the City’s current standards for emergency
storage. The station has no storage tank to handle emergency situations related to an electrical
power failure leading to sewage backing up in the station. There is a limited time that City staff
can respond to this type of failure and resolve the problem. There is a potential risk that if the
station were to fail in this manner, that untreated sewage could overflow into the Schneider
Creek causing damage to the environment and posing an environmental liability for the City,
which would include fines and other legal penalties from the Ministry of Environment. Staff
recommend that the upgrades to Homer Watson Pumping Station proceed on this basis.
3. Can other projects be deferred to accommodate the increase in costs for this project?
Yes. Several projects are proposed to be deferred in order to reduce the City’s debt load to
finance new development in the City. These project deferrals are based upon the relative priority
in the Kitchener Growth Management Plan.
The City transferred $1.1m from the existing project, Doon South Sewage facility
account to the Development Charge (DC) reserve to reduce the deficit.
Doon South sewage facility project is proposed to be deferred from 2011 and 2013 to
2019 as it is servicing lands that are rated as a priority C. This project was supposed to
receive $7.041M in 2013 (now deferred to 2019 as per 2011 budget forecast).
New Dundee Road sewage facility project has been deferred from 2014 to 2019 as it is
servicing lands that are rated at a priority C. This project was supposed to receive
$7.777M in 2014 (now deferred to 2019 as per 2011 budget forecast).
Middle Strasburg trunk sewer project has been deferred from 2013 to 2019 as it is
servicing lands that are rated at a priority “C” and “D”. This project was supposed to
receive $2.165M in 2013, $2.208M in 2014, $2.252M in 2015, and $3.529M in 2016
(now deferred to 2019 as per 2011 budget forecast).
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Several projects, in addition to those noted above, are proposed to be deferred in the 2011
capital forecast. These deferrals were made to accommodate this additional cost, and to ensure
that the projects within capital forecast corresponded with expected growth in the City.
This results in a reduction in the expected deficit within the Developments Charges (DC)
Reserve Fund. Proposed changes/deferrals from the previous year’s capital forecast have
resulted in a reduction of DC funded expenditures of $7.9 million in 2011, with an overall
reduction in DC funded expenditures between 2011 and 2019 of $44 Million. With these
extensive deferrals, the Developments Charges (DC) Reserve Fund is still expected to be in a
deficit position of $2.5 million by the end of 2011. Staff recommend that the upgrades to Homer
Watson Pumping Station should proceed on this basis.
Funding Alternatives
1. Would a “credit for services” agreement be appropriate for this project?
Typically, a “credit for services” agreement is entered into when a substantial advancement is
required by a developer in order to service their lands, and this would be driven by a sound
business rationale (i.e. market driven). The City could enter into a “credit for services”
agreement with a developer seeking an advancement of a project that is identified in the City’s
10 year capital forecast and is addressing priority A or B lands within the City, in accordance
with the Kitchener Growth Management Plan. The developer would receive credits on a portion
of the development charges paid at a specified time.
In this case, there is no likelihood of an agreement in such a short time span as there are four
(4) land owners that are affected by the pumping station upgrades and it would add to the
complexity of the agreement. This will require significant staff resources from Finance, Legal,
Planning and Engineering in order to initiate this process due to various development interests.
Staff do not recommend that a “credit for service” agreement be pursued with developers
affected by this project.
2. Does the City impose area specific development charges?
The City development charges are the same throughout all the suburban growth areas of
Kitchener. There are no area specific development charges. Staff do not recommend that an
“area specific” development charge be initiated, as this would require a re-vamping of the
current Development Charge by-Law.
Construction Estimates versus Bid Price
1. Why is the cost of the project almost double that of what is shown in the City’s capital
budget?
Certain technical analysis cannot be performed early in the planning phases of a project, when
preliminary investigations are undertaken and professional judgement is used to compare
various project alternatives. As more detailed engineering information is acquired, then the
confidence level of the cost estimates is enhanced. As a normal practice for large and complex
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projects, city staff instruct engineering consultants to complete pre-tender cost estimate as part
of the detailed design phase.
In February 2010, Council approved the capital budget for the Homer Watson SPS of $4.0M
(HST not included). In May 2010, staff received a pre-tender cost estimate of $8.03M (HST not
included) as part of the detailed design phase of this project from Associated Engineering. On
September 2nd, 2010, tender bids were received by the City, with the lowest bid being $7.36M
from H.I.R.A Limited (HST not included). A summary of estimated costs at various stages of
project cycle are identified in Table 1.
Table 1 – Estimated Costs at Various Project Stages
DescriptionDateValue
Approved Capital ForecastFebruary 2010 $4,000,000
Pre-tender Cost EstimateMay 2010 $8,027,396
Lowest Tender PriceAugust 2010 $7,362,000
The main cost differences between the 2010 capital forecast estimate and tender value are
summarized in Table 2 (please refer to report INS 10-007 for additional details on each item).
Table 2 – Significant Items Affecting the Cost between Preliminary Estimate & Detailed Design
Item # Description Value
1Secant pile wall methodology to construct the $1,200,000
emergency storage tank
2Upgrade electrical equipment at the station to meet the $650,000
current standards.
3Water service connection to station to meet site plan $250,000
requirements.
4Mechanical Upgrade requirements $149,000
5Provisional items to address any unforeseen works and $500,000
de-watering issues
6Contingencies$250,000
7Material handling cost due to site constraints $300,000
In summary, the lowest bid value is 8.3% less than the Associated Engineering’s pre-tender
cost estimate and the bid is in conformance with what was being anticipated at the pre-tender
stage of this project. As such, staff recommend that the upgrades to Homer Watson Pumping
Station should proceed on this basis.
2. What are the implications of re-tendering?
The bidding process is in accordance with the City‘s Purchasing Policy. Fifteen (15) potential
bidders picked up the tender documents and three (3) tenders were received by the City for this
project. The low bidder is competent to complete the work and is able to perform the work
according to the specifications of the tender. The proposed contractor, H.I.R.A, has extensive
experience in pumping station and emergency storage tank construction. Also, their
subcontractor also has extensive experience in secant pile installation and other electrical and
mechanical work.
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Staff are not recommending that the works for the Homer Watson Pumping Station be re-
tendered on the following basis:
The project would have to be re-scoped which would not necessarily address the need for
neither emergency storage nor stand-by power at the station.
Additional consulting engineering fees and other costs associated with City staff effort would
be incurred.
There will be a further delay of at least 4 months in addition to the already delayed period of
4 months from the original schedule.
There is a potential for higher construction costs for this project in the future and there is no
guarantee that the contract will be awarded to a well experienced contractor, as it is low bid
award process.
There is potential for legal action by the low bidder to recover lost profit on the contract and
other damages.
ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN:
The Homer Watson sanitary pumping station project is aligned with the City of Kitchener
strategic plan; refer to strategic plan document, community priorities – Development sections 1
& 3. Further, this project is also one of the priority projects identified in the Kitchener Growth
Management Plan as it provides service to lands identified as Priority A.
FINANCIAL IMPLICATIONS:
Funding will be provided from Internal Order # 11364 – Homer Watson Pumping Station
Upgrades. A detailed Financial Report is attached as an Appendix B to report INS10-007. In
order to award this tender there is a need to transfer $4,525,000from the Development Charge
Reserve Fund and Sanitary Utility based on a 70/30 split (growth-related / benefit to existing)
established in the Development Charge Background Study (2009). There are no financial
implications to the City’s tax levy.
COMMUNITY ENGAGEMENT:
Not applicable.
ACKNOWLEDGED BY:
Pauline Houston, Deputy CAO
Infrastructure Services Department
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