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[1. MINUTES]
AUTHOR'S REGULAR MEETING HELD ON AUGUST 17TH, 2022.ARE THERE QUESTIONS OR DISCUSSION? HEARING NONE.
[a. Consider the election of officers for President, Vice President, and Secretary; and the appointment of an Assistant Secretary.]
NEXT ITEM OF BUSINESS WILL BE TO CONSIDER THE ELECTION OF OFFICERS FOR PRESIDENT, VICE PRESIDENT AND SECRETARY, AND THE APPOINTMENT OF AN ASSISTANT SECRETARY.SO, PRESIDENT, VICE PRESIDENT, SECRETARY AND ASSISTANT SECRETARY.
WELL, BRENDA, YOU SPEAKING AS A SLATE OR INDIVIDUAL? THAT'S RIGHT.
SO THAT WOULD BE THE CONSIDERATION.
DO WE WANT TO TAKE THIS AS A SLATE OF OFFICERS OR AS INDIVIDUAL OFFICES? GO FOR IT, JIMMY.
WELL, I WAS GONNA SAY, BRENDA, YOU'VE DONE SUCH A FINE JOB THAT I WOULD NOMINATE YOU AS PRESIDENT TO REMAIN AS PRESIDENT.
ALRIGHT, VICE PRESIDENT AND WHO IS OUR CURRENT VICE PRESIDENT? UH, THAT'S ME.
SO MIKE, UH, IF MIKE WOULD LIKE TO STAY ON AS VICE PRESIDENT AND, UH, I WOULD LIKE TO NOMINATE MIKE AND FRANK.
IS THAT YOUR MOTION? THAT'S MY MOTION.
WE HAVE A MOTION AND A SECOND.
UM, ALL THOSE IN FAVOR? SENATE? OH YES.
OH, AND PLEASE INCLUDE ANGELA AS THE, UH, ASSISTANT SECRETARY.
ALRIGHT, WE HAVE A MOTION AND A SECOND.
WELL, NO, I MADE THE MOTION SECOND.
[a. Receive a report on future expansion of BAWA East Surface Water Treatment Plant.]
WE GET TO THE REPORT SECTION AND WE WILL RECEIVE A REPORT ON FUTURE EXPANSION OF THE EUR WATER TREATMENT PLAN.SO, GOOD AFTERNOON, UH, MADAM PRESIDENT AND BOARD.
UH, I'D LIKE TO START FIRST WITH SOME INTRODUCTIONS.
UH, SINCE WE DO HAVE, UH, NEW BOARD MEMBERS.
I'M THE DIRECTOR OF PUBLIC WORKS AND ENGINEERING FOR THE CITY OF BAYTOWN AND THE BOWER, UH, PLANT MANAGER.
UM, TODAY WE ALSO HAVE WITH US, UH, REPRESENTATIVES FROM COROLLA ENGINEERING.
THEY ARE THE ONES WHO COMPLETED A PLANNING STUDY FOR THE, UH, EXPANSION OF BOW EAST.
SO WE HAVE, UH, MERE VICTOR AND PAUL WALKER.
SO, UM, THEY WILL HELP ME, UH, GIVE SOME OF THIS, UH, PRESENTATION THAT WE'LL TALK ABOUT TODAY.
SO, UH, THE AGENDA I HAVE FOR YOU IS, UH, TO FIRST LOOK AT SOME OF THE, UH, THE DRIVERS OF, YOU KNOW, WHY WE NEED TO EXPAND THE, THE BIO EAST PLANT.
UH, LOOK AT HOW WE GET WATER, UH, TO SUPPLY OUR, OUR PLANT.
AND THEN LOOK AT SOME OF THE OPTIONS WE HAVE FOR EXPANSION AND THE COST OF THOSE OPTIONS, THE, UH, DELIVERY METHODS.
AND THEN I'LL END WITH, UH, RECOMMENDATION THAT WE HAVE.
SO THIS FIRST SLIDE IS, UH, KIND OF BUSY, SO I'LL, UH, JUST TAKE SOME TIME TO WALK YOU THROUGH IT.
UM, WHAT IT LISTS IS A, ON YOUR HORIZONTAL AXIS, YOU'VE GOT, UH, THE YEARS LISTED THERE.
AND THEN ON YOUR VERTICAL AXIS, YOU'VE GOT THE, UH, MILLION GALLONS PER DAY OR, UH, MGD AS WE, UH, ABBREVIATE THOSE.
NOW, THE, UH, THERE'S TWO DIFFERENT, UH, BLUE LINES THAT YOU SEE THAT, UM, GO UP DIAGONALLY.
UM, THOSE REPRESENT THE, UM, THE DEMAND, UH, PROJECTIONS THAT WE HAVE FOR, YOU KNOW, FUTURE DEMANDS ON, UH, SUPPLYING WATER.
SO THERE'S TWO DIFFERENT LINES BECAUSE, UH, WE HAVE BOTH A, UH, A BASELINE PROJECTION AND A LOW GROWTH SCENARIO.
UH, THESE ARE BOTH TAKEN FROM THE CITY'S, UH, COMPREHENSIVE PLAN, AND IT JUST GIVES US KIND OF A BRACKET AS TO, YOU KNOW, WHAT OUR DEMAND WOULD LOOK LIKE IN THE FUTURE BECAUSE IT'S HARD TO, YOU KNOW, PREDICT EXACTLY WHAT GROWTH IS GONNA, UH, HAPPEN IN THE FUTURE.
UH, UM, AND, YOU KNOW, THAT, UH, KIND OF TELLS US WHEN WE NEED TO EXPAND THE PLANT.
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UM, SO LOOKING AT THE HORIZONTAL LINES, WE'VE GOT A, UM, KIND OF A, A RED LINE HERE.UH, I DON'T KNOW, I GUESS I CAN'T, UH, DRAW ON THIS ONE, BUT AT THE 32 MILLION GALLON PER DAY, UH, LINE THAT REPRESENTS OUR EXISTING, UH, CAPACITY.
AND OUR CAPACITY IS, UH, BOTH AT THE BIO MAIN PLANT, WHICH WE HAVE, UH, 26 MGD CAPACITY AND THE BIO EAST PLANT WHERE WE HAVE SIX MGD CAPACITY.
UM, NOW ONE THING I WANTED TO EXPLAIN ON THE DEMAND IS THAT, UH, OUR, UM, YOU KNOW, REQUIREMENT TO HAVE CAPACITY AT OUR PLANTS IS BROKEN INTO TWO COMPONENTS.
IT'S, UH, FROM BOTH, UH, FIXED CONTRACTS AND THEN ALSO FROM, UM, YOU KNOW, NUMBER OF CONNECTIONS.
AND SO WE HAVE, BOW HAS CERTAIN FIXED CONTRACTS AND THOSE, SO IF WE HAVE A CONTRACT FOR 3M GD, UM, THAT MEANS WE HAVE TO HAVE PLANT CAPACITY FOR 3M GD.
YOU KNOW, THERE'S NO LEEWAY IN THAT.
WE CAN'T, YOU KNOW, UH, HAVE A CONTRACT TO SUPPLY WATER IF WE DON'T HAVE THE CAPACITY.
SO THOSE, THOSE CONTRACTS ARE FIXED.
AND, UM, YOU KNOW, AS OUR CUSTOMERS WHO HAVE FIXED CONTRACTS, IF THEY NEED MORE WATER, THEN WE, YOU KNOW, NEGOTIATE A CONTRACT TO SUPPLY MORE WATER.
THE OTHER COMPONENT OF THE, UH, DEMAND IS, YOU KNOW, BASED ON THE NUMBER OF CONNECTIONS.
AND THE CITY OF BAYTOWN IS THE BIGGEST CUSTOMER OF BAWA.
AND, UH, SO THE CITY DOES NOT HAVE A FIXED CONTRACT, UH, SO MUCH.
IT'S BASED ON, UH, THE CITY'S REQUIREMENT FOR WATER IS BASED ON THE NUMBER OF CONNECTIONS.
AND THAT'S WHY YOU SEE DIFFERENT SCENARIOS FOR GROWTH.
IT'S, UH, IT'S BASED ON HOW FAST WE EXPECT THE CITY, UM, YOU KNOW, AND THE OTHER BIO CUSTOMERS TO GROW.
UH, SO JUST WANTED TO MAKE SURE YOU UNDERSTAND THE DIFFERENT COMPONENTS OF THE DEMAND AND THE REASONS WE HAVE TO HAVE CAPACITY.
DOES ANYBODY HAVE ANY QUESTIONS ON THAT? NOPE.
UM, THEN THE OTHER HORIZONTAL LINES YOU'LL SEE HERE, UH, JUST LOOKING AT THE SOLID LINES, YOU'VE GOT A GREEN LINE THERE AT, UM, LIKE, UH, 42 MGD AND THEN A, UH, A YELLOW LINE, UH, KIND OF AT THE, UM, 44.
SO THAT WOULD BE THE TWO SCENARIOS.
IF WE, UH, INCREASED OUR PLANT BY SIX MGD OR WE INCREASED OUR PLANT BY 12 MGD.
AND SO YOU CAN SEE ONCE WE START TO GET, ONCE THOSE BLUE LINES START TO TOUCH THE HORIZONTAL LINE OF EITHER, YOU KNOW, THE GREEN ONE OR, OR THE, THE ONE AT THE 44, THAT'S WHEN WE ARE REALLY OUT OF CAPACITY.
AND SO YOU SEE RIGHT NOW, YOU KNOW, IF WE'RE LOOKING INTO 2020, UH, OR LOOKING OUT IN THE NEAR FUTURE 2026 TO 2027, YOU SEE THAT UNDER OUR CURRENT CAPACITY WE'RE, UH, OR THAT WE'RE SCHEDULED TO RUN OUT OF CAPACITY SOON.
SO THAT'S KIND OF DRIVING THE NEED TO, UM, DO A PLANT EXPANSION.
UM, BUT THEN IF YOU KIND OF BRING THAT OUT TO LIKE, UH, 2040 IS ABOUT WHEN WE START TO TOUCH THAT EVEN UNDER THE, YOU KNOW, THE HIGHER GROWTH SCENARIO, THAT'S WHEN WE ARE PROJECTED TO RUN OUT OF CAPACITY.
IF WE EXPANDED IT BY SIX MGD, WE DIDN'T TAKE IT OUT TO, YOU KNOW, UH, TO WHERE IT WOULD REACH THE LINE ON THE 12 MGD EXPANSION, BUT IT WOULD BE MUCH FARTHER OUT IN THE FUTURE.
UM, AND THEN THE DASH LINES JUST REPRESENT 85% CAPACITY, UM, WHICH IS THE TIME WHEN YOU NEED TO START PLANNING FOR YOUR NEXT EXPANSION.
SO YOU CAN SEE WE'VE KIND OF ALREADY CROSSED OUR 85%, UH, CAPACITY OF OUR CURRENT PLANT.
SO THAT MEANS WE NEED TO BE PLANNING FOR OUR, OUR EXPANSION.
UM, SO I THINK THAT'S ALL I HAD ON THIS CHART.
SO CAN I ASK YOU A QUESTION? SURE.
SO DOES THIS TELL ME THAT WE TOTALLY BLEW OUR FORECAST, THE WATER DEMAND WHEN WE BUILT THE PLANT THAT WE'RE ALREADY HAVING TO COME BACK AGAIN AND, AND RE-UP IT THAT WE SHOULD HAVE JUST DONE IT MORE THAN 6 MILLION A DAY TO BEGIN WITH THAT IT, IT TELLS YOU THAT WE DIDN'T HAVE GOOD PLANNING FACTOR BACK THEN.
BECAUSE IF YOU LOOK AT THE GROWTH CHART, YOU SEE HOW STEEP THAT IS.
UH, A LOT OF THAT IS DRIVEN BY SOME CONTRACTS, UH, LIKE THE, THE NIAGARA BOTTLING PLANT TOOK 3M GD RIGHT OFF THE TOP OKAY.
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AS A CONTRACT.SO, SO THINGS YOU CAN'T, THE THINGS YOU CAN'T PREDICT, SO, RIGHT.
SO IF WE HAD ANOTHER NIAGARA COME IN, YOU KNOW, YOU WOULD SEE ANOTHER SPIKE IN THIS GROWTH CHART.
SO IT'S VERY HARD TO PREDICT THE FUTURE.
UM, YOU KNOW, AND PEOPLE DON'T TELL YOU, I'M GONNA NEED A, A, YOU KNOW, I'M GONNA BUILD A WATER PLANT IN 10 YEARS, UH, OR A BOTTLING PLANT IN 10 YEARS.
THEY SAY, I'M, I'M GONNA BUILD ONE AND I WANT TO NEXT YEAR, YOU KNOW,
UH, IT IT, IF WE HAD KNOWN, YOU KNOW, 10 YEARS AGO THAT THE GROWTH WOULD LOOK LIKE THAT, WE PROBABLY WOULD'VE BUILT A BIGGER PLANT.
AND WE, AND OUR PLANT, THERE WERE THREE EXPANSION BAYS ESSENTIALLY.
IS THAT CORRECT? AND THIS IS ONLY LOOKING AT TWO OF THEM, SO, CORRECT.
SO THE, THE PLANT IS, UH, INITIALLY BUILT AT SIX MGD.
UH, IT WAS PLANNED TO EXPAND IN SIX MGD INCREMENTS AND, UM, UP TO A TOTAL CAPACITY OF 24 MGD.
SO THAT, THAT'S THE ULTIMATE CAPACITY OF THE PLANT.
AND I, I'LL SHOW THAT HERE IN A MINUTE.
WE'LL LOOK AT, UM, KIND OF THE, THE TWO SCENARIOS OF THE SIX VERSUS 12.
ANY OTHER QUESTIONS ON THIS CHART? OKAY.
UH, SO THE OTHER THING I WANTED TO TALK ABOUT IS OUR, UH, RAW WATER CONTRACT.
UH, SO BWA BUYS RAW WATER FROM THE CITY OF HOUSTON, UH, THROUGH COASTAL WATER AUTHORITY CANALS.
AND, UM, SO BAWA HAS A CONTRACT TO BUY WATER FROM, UH, CITY OF HOUSTON AT EACH OF THE PLANTS.
AND CURRENTLY OUR CONTRACT IS STRUCTURED SO THAT WE HAVE TWO DIFFERENT TAKE POINTS, UH, ONE FOR EACH OF THE PLANT.
AND, UM, SO WE HAVE 20 MGD THAT WE CAN TAKE FOR, FOR THE MAIN PLANT AND THEN SIX MGD WE CAN TAKE FOR THE EAST PLANT.
NOW THE WAY THE, THAT CONTRACT IS STRUCTURED, WE DON'T, UM, YOU KNOW, UH, WE, WE DON'T HAVE TO BUY MORE CAPACITY UNTIL OUR AVERAGE USAGE GETS THAT HIGH.
AND RIGHT NOW OUR AVERAGE USAGE USAGE IS AROUND 14 MGD.
SO WE'VE GOT, IF YOU LOOK AT THE TOTAL, UH, 26 MGD OF, UM, YOU KNOW, WATER CONTRACT, WE HAVE ENOUGH WATER TO BUY FROM CITY OF HOUSTON.
THE PROBLEM IS IF WE EXPAND THE EAST PLANT, WE'RE GONNA NEED TO TAKE MORE AT THE EAST PLANT, MORE THAN SIX MGD.
AND SO THAT'S WHERE THE PROBLEM COMES IN.
UH, WE HAVE, UH, SENT AN APPLICATION TO CITY OF HOUSTON TO BASICALLY JUST ASK TO REMOVE THE TAKE POINT RESTRICTIONS, UH, SO THAT, YOU KNOW, 26 MGD IS PLENTY OF WATER FOR US, BUT WE NEED TO REMOVE THAT RESTRICTION OF SIX MGD AT THE EAST PLANT, ESPECIALLY IF WE'RE GONNA EXPAND IT.
UH, SO THAT, JUST TO LET YOU KNOW THAT WE'VE STARTED THAT PROCESS, IT COULD TAKE A WHILE, YOU KNOW, UM, BUT THAT, THAT'S SOMETHING THAT'LL BE REQUIRED TO EXPAND THE PLANT, IS TO MAKE SURE WE HAVE, YOU KNOW, THE WATER WE CAN PURCHASE OVER THERE.
DO, DO WE PERCEIVE THAT BEING A PROBLEM OR DO THEY WANNA SELL US? IT'S, WE CAN GET, IT'S, IT'S REALLY HARD TO TELL AT THIS POINT.
UM, WE HAVEN'T, UM, BEGUN NEGOTIATIONS WE'VE JUST SENT IN OUR REQUEST.
SO, UM, THERE, THERE HAS BEEN A LOT OF TURNOVER IN PERSONNEL AT, UH, CITY OF HOUSTON.
SO IT'S REALLY, UM, YOU KNOW, HARD TO TELL WHO WE'RE GONNA BE DEALING WITH AND WHAT THEIR APPROACH WILL BE.
BUT THEY HAVE, THEY HAVE THE CAPACITY TO GIVE IT TO US OR SELL IT TO US.
UM, I DON'T KNOW SPECIFICALLY THE REASONS FOR RESTRICTING IT PER LOCATION.
UM, I, I'VE BEEN TOLD THERE MIGHT BE ISSUES WITH THAT CANAL HAVING CAPACITY IN THE CAP CANAL WHERE WE TAKE IT FROM THE EAST PLANT, BUT WE NEED TO GET INTO, YOU KNOW, MORE DETAILED DISCUSSIONS WITH THE CITY OF HOUSTON TO FIND OUT.
SO I'M, WHAT MY HOPE IS THAT WE CAN JUST REMOVE THE TAKE POINT RESTRICTION AND LEAVE OUR OVERALL CONTRACT AT 26 AND, YOU KNOW, THAT WOULD BE THE BEST CASE SCENARIO.
SO THAT'S WHAT, THAT'S WHAT WE'LL, UH, TRY FOR.
UM, SO NOW I WANT TO JUST GO OVER SOME OF THE EXPANSION OPTIONS AND, UM, THIS IS KIND OF A OVERVIEW OF THE PLANT AND, UM, AS, UH, YOU ALLUDED TO, UH, THE PLANT WAS BUILT WITH, YOU KNOW, EXPANSION IN MINE IN SIX MGD INCREMENTS.
UM, SO THE, UH, SCENARIO TO EXPAND BY SIX MG D IS SHOWN IN RED.
AND THEN, UH, THE COMPONENTS WE WOULD NEED TO EXPAND FOR 12 MGD ARE SHOWN IN BLUE.
UM, SOME COMPONENTS ARE SIZED FOR A 12
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MGD PLANT.SO IF YOU LOOK AT THE LOWER, UH, RIGHT HAND CORNER, THAT'S THE FOUR BAY THE CANAL IS RUNNING, YOU KNOW, UM, NORTH AND SOUTH THERE WHERE WE TAKE THE WATER, IT GOES INTO THE, UH, FOUR BAY.
SO UNDER THE SIX MGD OPTION, WE DO NOT HAVE TO BUILD A NEW FOUR BAY.
BUT IF WE GO TO A 12 MGD EXPANSION, THEN THAT BLEW, YOU KNOW, RECTANGLE UNDER THAT WOULD BE A NEW FOUR BAY THAT WE WOULD HAVE TO CONSTRUCT.
SO ALL THESE, UM, DIFFERENT COMPONENTS AND THE DIFFERENT, UH, EXPANSION OPTIONS WENT INTO CREATING COST ESTIMATES FOR EACH OPTION.
AND THAT'S WHAT I'LL, UH, BRING UP NEXT.
UH, SO COROLLO LOOKED AT THE, UM, THE BIO EAST PLANT, UM, KIND OF BID ITEMS THAT, THAT WERE DONE IN THE PLANT THAT WAS JUST CONSTRUCTED LAST YEAR AND TOOK THOSE BID ITEMS AND BASICALLY APPLIED, YOU KNOW, IN ESCALATION FACTORS FOR, UH, YOU KNOW, INFLATION AND OTHER, UH, THINGS THAT ARE IN THE MARKET RIGHT NOW TO TRY TO COME UP WITH A COST ESTIMATE FOR WHAT IT WOULD COST TODAY TO BUILD, YOU KNOW, BOTH A SIX MGD PLANT, UH, EXPANSION AND A 12 MGD EXPANSION.
AND YOU CAN SEE THE, UH, TOTAL FOR THE SIX MGD EXPANSION IS JUST OVER 60 MILLION.
THE 12 MGD EXPANSION WOULD BE, UH, ABOUT 137 MILLION.
UM, AND THESE ARE VERY ROUGH ESTIMATES.
I WOULD SAY THE, YOU KNOW, THE, THE PRICE, UH, ENVIRONMENT WE'RE IN PRICES CHANGE VERY RAPIDLY, SO IT'S HARD TO GET, YOU KNOW, A, A REALLY GOOD ESTIMATE.
BUT, UM, I THINK THESE ARE THE BEST WE CAN DO RIGHT NOW.
DO, DO YOU FEEL THESE ARE ON THE HIGH SIDE, LOOKS LIKE YOU GOT SOME FAT, I WOULD NOT SAY ON THE HIGH SIDE BECAUSE THAT THE PLANT, THE WHOLE PLANT, INCLUDING THE LAND AND THE ROADS AND FENCES AND, AND ALL THE INFRASTRUCTURE MM-HMM
WAS JUST A LITTLE BIT OVER THAT.
AND JUST, AND WE HAVE SEEN TO ADD A FEW LITTLE THINGS ON YOUR MAP, RIGHT, IS GONNA BE A DOUBLING ALMOST.
IT, IT WILL, UM, YOU KNOW, THIS ENVIRONMENT WE'RE IN, WE SEE THINGS THAT INCREASE 30 TO 50%, YOU KNOW, IN A YEAR.
UH, AND, AND I COULD MAYBE LET PAUL COME UP AND, AND TALK ABOUT WHAT HE'S SEEN IN THE, YOU KNOW, UH, PRICE ENVIRONMENT.
YEAH, THAT'S A GREAT QUESTION.
AND THE MARKET RIGHT NOW IS JUST REALLY UNCERTAIN.
THERE'S JUST A LOT OF COMMODITY PRICE PRESSURES, UM, FROM ANYTHING FROM STEEL TO CONCRETE TO DIRT AND FUEL.
AND YEAR OVER YEAR, WE'RE JUST SEEING, LIKE FRANK MENTIONED, ANYWHERE FROM 30 TO 50% ON SOME OF THOSE COMMODITIES AS WELL AS LABOR TOO.
THERE'S, YOU KNOW, HERE IN TEXAS WE HAVE THE LUXURY OF A GOOD ECONOMY AND A LOT OF THOSE SKILLED LABOR WANT TO GO WORK FOR, YOU KNOW, LNG FACILITIES, ET CETERA, THAT ARE BEING BUILT.
SO THERE'S A LOT OF PRESSURE ON THE LABOR MARKET AS WELL.
SO THE UNFORTUNATE REALITY IS RIGHT NOW WE'RE JUST IN A PRICE ESCALATION ENVIRONMENT THAT WE'RE ANTICIPATING, WE'LL PLATEAU ASSUME, BUT WE'RE JUST NOT QUITE THERE.
SO IT'S LED TO SOME PRETTY DRAMATIC PRICE INCREASES.
AND OF COURSE, WE'LL, WE'LL, WE'LL KNOW MORE WHEN WE GO OUT, FORBID, RIGHT? CORRECT.
UH, ANY OTHER QUESTIONS ABOUT THE PRICE? NO.
UH, SO SHOULD HAVE KEPT PAUL UP HERE.
UH, I'M GONNA LET HIM TALK ABOUT, UH, DELIVERY OPTIONS AND YES, THANKS FRANK.
UM, AND SO I'LL JUST SPEND A FEW MINUTES HERE TALKING ABOUT SOME DIFFERENT OPTIONS THAT WE LOOKED AT AS PART OF THE PLANNING IN TEXAS.
THE STATUTE 2269 ALLOWS FOR A VARIETY OF OPTIONS.
AND IF YOU CAN THINK OF THOSE AS BOOKENDS, AND ON ONE END OF THE BOOK SHELF WOULD BE DESIGN BID BUILD, WHICH IS KIND OF THE CONVENTIONAL MODEL BY WHICH YOU'VE DELIVERED MOST OF YOUR PROJECTS.
AND ON THE OTHER END OF THE BOOKSHELF WOULD BE THE FIXED PRICE DESIGN BUILD.
AND THEN THERE'S A VARIETY OF HYBRID MODELS IN BETWEEN.
AND THE WAY YOU EVALUATE THOSE MODELS IS REALLY FROM A PERSPECTIVE OF SCHEDULE, CONTROL, COST, AND RISK.
SO WITH RESPECT TO SCHEDULE, AS YOU GO TOWARDS A DESIGN BUILD, UH, FIXED PRICE MODEL, YOU HAVE THE OPPORTUNITY TO REALLY DELIVER THINGS MUCH QUICKER BECAUSE THERE'S ONE ENTITY, YOU'RE GONNA TURN IT OVER TO THEM AT ABOUT A 20% DESIGN AND THEY'RE GONNA TAKE IT FROM THERE, AND THEN YOU STEP BACK, AND THEN AT THE END OF THAT PROJECT, YOU GET THAT.
SO A LOT OF ABILITY TO REALLY HAVE A FIXED OR A QUICKER SCHEDULE.
UM, WITH RESPECT TO DESIGN CONTROL THOUGH, YOU GIVE THAT UP UNDER A DESIGN BID BUILD, YOU HIRE YOUR DESIGNER, YOU WORK WITH THEM THROUGH THE PROCESS, YOU THEN BID THAT OUT.
YOU HAVE FULL CONTROL OVER THE DESIGN DURING THAT PROCESS.
SO THAT'S YOUR MOST CONTROL WOULD BE ON THE MORE CONVENTIONAL SIDE THERE.
FROM A COST PERSPECTIVE, UM, WHAT WE REALLY WANNA FOCUS ON IS COST CERTAINTY.
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IN A REALLY CHALLENGING MARKET RIGHT NOW.AND SO TO HAVE THE ABILITY TO HAVE A DESIGNER AND A CONSTRUCTOR WORK TOGETHER EARLY ON TO PRICE THINGS OUT GIVES YOU MORE CERTAINTY.
SO UNDER DESIGN, BID BUILD, CLEARLY YOU HAVE NO CERTAINTY.
YOU'RE HAVE YOUR DESIGNER, YOUR ENGINEERS DESIGNING IT, YOU BID IT OUT AND HOPE FOR THE BEST.
AT THAT POINT, YOU KNOW THE COST, BUT THEN YOU REALLY DON'T KNOW THE COST UNTIL YOU FINISH, BECAUSE OFTENTIMES THERE'S CHANGE ORDERS.
SO UNDER THAT, IT, IT REALLY LENDS ITSELF MORE TOWARDS THE, UM, ALTERNATIVE MODEL, MORE OF A DESIGN BUILD, CMAR, ET CETERA, TO GIVE YOU EARLIER PRICE CERTAINTY ON THE PROJECT.
AND THEN WITH RESPECT TO RISK, THAT REALLY DEPENDS ON HOW YOU STRUCTURE THE PROJECT.
THERE'S JUST A LOT OF DIFFERENT RISKS.
YOU KNOW, AS YOU CAN IMAGINE, DELIVERING CAPITAL PROJECTS, YOU'VE SEEN A LOT OF THESE, I'M SURE, IN YOUR ROLES AS BOARD MEMBERS.
SO FOR INSTANCE, ON A DESIGN BID BUILD, TRADITIONAL, YOU CAN CONTROL SOME OF THAT RISK BY PRE-QUALIFYING CONTRACTORS, MAYBE LOOKING MORE AT A, YOU KNOW, CSP TYPE SELECTION, ET CETERA.
UM, THERE'S JUST A WHOLE VARIETY OF THINGS TO CONSIDER.
SO AT THE END OF THE DAY, YOU KNOW, AND WE'LL TALK A LITTLE BIT MORE ABOUT THIS AS WE GO, BUT RISK CAN GO EITHER WAY.
SO AGAIN, THOSE ARE THE BOOK ENDS, AND IN THE MIDDLE THERE'S HYBRIDS.
AND IN TODAY'S MARKET, IN THE WATER MARKET, YOU SEE A LOT OF PROJECTS DELIVERED AS DESIGN BID BUILD, BUT ALSO WITH A CMAR CONSTRUCTION MANAGER AT RISK.
AND THEN PROGRESSIVE DESIGN BUILD, THAT'S HOW THE HOUSTON PROJECT IS BEING DELIVERED, OF WHICH I'M WORKING ON RIGHT NOW.
WE'LL TALK ABOUT THOSE THREE MODELS JUST 'CAUSE THEY'RE THE MOST TRADITIONAL, OR, YOU KNOW, THE MOST COMMON ONES BEING USED BOTH IN THE MARKETPLACE NATIONALLY AS WELL IN TEXAS RIGHT NOW.
SO WE'LL START WITH DESIGN, BID, BUILD, AND, UM, JUST A SIMPLE GRAPHIC THERE.
AT THE END OF THE DAY, BAWA ENDS UP CONTRACTING WITH, SEPARATELY WITH A DESIGNER AND A CONTRACTOR.
AND THOSE RELATIONSHIPS YOU BUILD AND, YOU KNOW, THE WORKING RELATIONSHIPS ARE THROUGH THOSE CONTRACTS, AND THEY'RE SEPARATELY.
SO THERE'S NO JOINT, UM, RELATIONSHIP OR CONTRACTUAL RELATIONSHIP BETWEEN YOUR DESIGNER AND THE CONTRACTOR.
THEY END UP COMING TOGETHER DURING CONSTRUCTION, WORKING THROUGH ISSUES VIA THE RFI PROCESS, CLAIMS PROCESS, ET CETERA.
SO THAT'S JUST AN EASY WAY TO THINK OF THAT.
YOU HIRE YOUR DESIGNER AT THE BEGINNING OF DESIGN, YOU HIRE YOUR CONTRACTOR AT THE END OF DESIGN, AND THEN YOU HAVE THEM WORK TOGETHER THROUGH SEPARATE CONTRACTS, THROUGH THE BALANCE OF CONSTRUCTION, CONSTRUCTION MANAGER AT RISK.
UM, THAT'S A LITTLE BIT DIFFERENT IN THAT YOU STILL HIRE A DESIGNER AT THE BEGINNING OF DESIGN.
THEY DESIGN YOUR PROJECT, BUT THEN YOU HIRE A CONTRACT TEAM, UH, TYPICALLY LED BY CONTRACTORS, SOMETIMES WITH AN ENGINEER INVOLVED ANYWHERE BETWEEN 30 AND 60% OF YOUR DESIGN COMPLETION.
THE EARLIER YOU BRING THEM ON, THE MORE OPPORTUNITY THERE IS TO COLLABORATE WITH YOUR DESIGNER, HAVE THEM PROVIDE INPUT TO YOUR PROCESS, GIVE YOU SOME INDICATION OF WHAT THE PRICING'S GONNA BE, ALLOW YOU TO MAKE SOME DECISIONS ALONG THAT WAY.
AND THEN YOU ENTER INTO A GMP OR A GUARANTEED MAXIMUM PRICE WITH THAT CMAR AT THE END OF DESIGN, OR MAYBE A LITTLE BIT SOONER, MAYBE IT'S 60%, PERHAPS 90.
AND THEN YOU MOVE FORWARD WITH THAT, UM, FIRM AS WELL AS YOUR DESIGNER.
AND THROUGH THAT, YOU'VE ESTABLISHED A RANGE RELATIONSHIP BETWEEN THE TWO.
SO THEY DEVELOP A, A MEANS OF WORKING WITH EACH OTHER, COLLABORATING ON THE SCOPE, SCHEDULE COSTS, ET CETERA, UNTIL THE GMP IS ISSUED.
UM, BUT IT'S NOT A CONTRACTUAL RELATIONSHIP, IT'S JUST A WORKING RELATIONSHIP THAT YOU DEVELOP.
BUT TYPICALLY IT ENDS UP WITH A, YOU KNOW, SOMETHING THAT'S GOING TO BETTER MANAGE THE OUTCOME OF THE PROJECT WITH RESPECT TO CLAIMS ON A DESIGN BID BUILD OPPORTUNITY FOR CLAIMS HERE, YOUR OPPORTUNITY FOR CLAIMS GOES WAY DOWN BECAUSE OF THAT RELATIONSHIP, THOSE PRE-CONSTRUCTION SERVICES PROVIDED BY THE CMAR ALONG THE WAY.
AND THEN THERE'S PROGRESSIVE DESIGN BUILD, AND THERE YOU SEE, YOU HAVE ONE ENTITY TO WORK WITH.
YOU HAVE, UM, ONE CONTRACTUAL AND ONE WORKING RELATIONSHIP.
IT'S OFTENTIMES REFERRED TO AS A SINGLE THROAT TO CHOKE.
YOU LOOK AT TO THAT COMBINED TEAM OF THE DESIGNER AND THE CONSTRUCTOR TO DELIVER EVERYTHING AS WELL AS, UM, DESIGN IT, ET CETERA.
SO AT THE END OF THE DAY, IF SOMETHING GOES WRONG, THEY CAN'T DO THIS, IT'S, WELL, YOU GUYS DESIGNED IT AND YOU CONSTRUCTED IT, SO THEREFORE YOU OWN FULL RESPONSIBILITY FOR, YOU KNOW, ANY GAPS, ET CETERA.
SO, AND AGAIN, THERE YOU ALSO NEGOTIATE A GUARANTEED MAXIMUM PRICE IN THEIR PROGRESSIVE, UH, MODEL.
WE'LL SHOW THAT HERE, UH, VISUALLY HERE IN A SECOND, KIND OF HOW HOUSTON DO IT.
AND I DON'T KNOW IF MAYBE, AND THEN BY THE WAY, AT THE END I'LL, I'LL CIRCLE BACK AND, UH, KIND OF COMPARE EACH AGAINST EACH OTHER.
SO PLEASE ASK ANY QUESTIONS AS WE GO AND THAT MIGHT BE A GOOD OPPORTUNITY TO DO SO AT THE END.
WELL, FRANK, WHERE WERE WE IN ORIGINALLY? WHICH, WHICH MODEL DID WE USE ORIGINALLY? WE USED, UH, DESIGN BID BUILD.
UH, SO BAWA OR THE CITY HAVE NOT USED DESIGN BUILD YET.
UH, THE CITY, UM, IS CURRENTLY USING CMAR ON THE, UH, PUBLIC SAFETY BUILDING.
UH, SO THE CITY IS ACTUALLY NOT LARGE ENOUGH IN POPULATION TO USE DESIGN BUILD, UM, 'CAUSE IT HAS, YOU HAVE TO HAVE AT LEAST A HUNDRED THOUSAND POPULATION.
UH, BOWA, HOWEVER, HAS A SERVICE AREA OF A HUNDRED THOUSAND.
SO, UH, BOW CAN USE DESIGN BUILD.
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YEAH.AND SO JUST TO FINISH FLESHING THIS OUT, YOU TYPICALLY SELECT THAT PROGRESSIVE DESIGN BUILD TEAM.
AGAIN, A DESIGNER ENGINEER PLUS A CONTRACTOR AT ABOUT ONE TO 5% COMPLETION.
THEN YOU THEN WORK WITH THEM TO DEVELOP THE SCOPE, SCHEDULE PRICE THROUGH, YOU KNOW, 60 OR 90% COMPLETION OF DESIGN.
AND THEN YOU NEGOTIATE A GUARANTEED MAXIMUM PRICE.
IF YOU CAN COME TO TERMS WITH THEM, THEN YOU PROCEED INTO CONSTRUCTION.
YOU DO HAVE THE OPTION IF YOU CAN'T COME TO TERMS AT THAT POINT WHERE YOU COULD TAKE THAT PACKAGE OF DESIGN THAT YOU'VE PAID FOR, AND THEN YOU COULD GO OUT ON THE STREET AND HIRE ANOTHER CONTRACTOR.
SO THAT'S A, THAT'S A WAY TO KEEP THIS TEAM HONEST IN THAT THEY KNOW THAT YOU HAVE THE OPTION TO OFF RAMP AT THE END OF THE DAY IF YOU DON'T LIKE THE WAY THINGS ARE GOING.
JUST SOMETHING TO KEEP IN MIND.
THIS SHOWS THE, THE HOUSTON PROJECT.
SO THE NORTHEAST WATER PURIFICATION PLANT EXPANSION, WHICH IS A $2 BILLION PROJECT THE CITY OF HOUSTON AND FOUR AUTHORITIES ARE CURRENTLY ENGAGED ON.
AND IT JUST SHOWS, UM, KIND OF THE TIMELINE OF HOW THESE THINGS WORK.
SO GOING FROM LEFT TO RIGHT, AND IN OUR CASE, WE HAD SEVERAL YEARS OF PLANNING JUST GIVEN THE, YOU KNOW, MAGNITUDE OF THE PROJECT.
AND ONCE THE DECISION WAS MADE TO MOVE WITH THE PROGRESSIVE DESIGN BUILD, THEY THEN WENT OUT FOR PROCUREMENT, WENT OUT FOR AN RFQ AND AN RFP, ENDED UP SELECTING A DESIGN BUILD TEAM, WHICH IS CALLED THE HOUSTON WATERWORKS TEAM.
AND THEN IN THE PRELIMINARY SERVICES PHASE THERE, UM, WHICH IS THE NEXT PHASE, WE THEN WORKED COLLABORATIVELY WITH THAT TEAM, THE OWNER'S ADVISOR.
WE SERVED THE CITY IN THAT, UH, CAPACITY, THE CITY.
AND WE GO THROUGH DESIGN DECISIONS.
AND SO WE, WE GET TO 30% AND THEY'D GIVE US A DESIGN AND WE'D SAY, WELL, WE'D REALLY LIKE TO CHANGE THIS, YOU KNOW, SCOPE HERE, OR WHAT WOULD BE THAT COST CONTINUAL COST MODELING, CONTINUED SCHEDULING UPDATE THROUGH THAT.
WORKED THROUGH 30 TO 60 TO A HUNDRED PERCENT, ALMOST A HUNDRED PERCENT.
AND THEN NEGOTIATED THE GUARANTEED MAXIMUM PRICE.
IN THIS CASE, THE CITY LIKED THE GUARANTEED MAXIMUM PRICE ENTERED INTO CONTRACT WITH HWT TO MOVE FORWARD INTO CONSTRUCTION.
THE OTHER ADVANTAGE OF THIS MODEL, UM, IS TO ALLOW FOR SOME EARLY WORK PACKAGES.
AND ONE OF THE THINGS WE DID IN HOUSTON WAS WE PROCURED, YOU KNOW, ALMOST $150 MILLION WORTH OF EQUIPMENT EARLY ON.
AND, UM, WE GOT LUCKY ACTUALLY BECAUSE, UM, SOON AFTER WE PROCURED A LOT OF THAT EQUIPMENT, COVID HIT, AND A LOT OF THOSE COMPONENTS AND MATERIALS WE'D PROCURED, WE ALREADY HAD POSSESSION OF, RATHER THAN HAVE TO GET DELAYED BY COVID, BE SUBJECT TO SOME OF THE MARKET CONDITIONS WE'RE TALKING ABOUT NOW.
SO THAT'S AN ADVANTAGE TO ANY PROGRESSIVE DESIGN BUILD IS ABILITY TO DO SOME OF THAT WORK EARLY AND NEGOTIATE IT AND GET IT IN HAND, UH, SOONER RATHER THAN LATER.
UM, AND YOU THEN END DURING CONSTRUCTION AFTER THE GUARANTEED MAXIMUM PRICE.
AND AT THAT POINT IT'S JUST, YOU KNOW, MAKING SURE THAT THEY DELIVER ON THEIR PROMISES AS TO WHAT THEY, UM, AND YOU AGREED TO DURING THE COLLABORATIVE DESIGN PHASE, GO THROUGH CONSTRUCTION.
IN OUR CASE, WE HAVE A TRANSITION SERVICES BECAUSE WE HAVE A, A, UH, A PERFORMANCE GUARANTEE.
SO AT THE END OF THE DAY WHEN THIS PROJECT'S DONE, THE DESIGN BUILDER, HOUSTON WATERWORKS OWES THE CITY OF HOUSTON AND ITS PARTNERS A GUARANTEE THAT IT'S GONNA MEET THE PERFORMANCE REQUIREMENTS.
SO AGAIN, IT JUST KIND OF SHOWS CONCEPTUALLY HOW THIS PROCESS WORKS.
AND REALLY THE HEART OF IT IS THIS HINGE POINT, THE GUARANTEED MAXIMUM PRICE.
AGAIN, YOU DESIGN COLLABORATIVELY BEFORE, IF YOU COME TO TERMS LIKE IT, YOU MOVE FORWARD WITH THAT TEAM.
IF NOT, YOU TAKE THAT DESIGN OUT TO THE MARKET AND BID IT OUT UNDER AN ALTERNATIVE APPROACH.
SO IF WE WERE TO COMPARE THOSE THREE METHODS I JUST DISCUSSED, UM, HERE'S, HERE'S KIND OF A WAY TO DO THAT.
AND THIS IS, IF YOU'VE EVER SEEN CONSUMER REPORTS, IS THIS KIND OF LEAST PARTIALLY BEST MEETS.
SO JUST WE'LL GO ACROSS EACH OF THE ROWS HERE.
SO, EARLY COST CERTAINTY, AGAIN, UNDER DESIGN BID BUILD, YOU DON'T KNOW UNTIL YOU OPEN BIDS AND THEN YOU REALLY DON'T KNOW UNTIL THE END OF THE PROJECT.
'CAUSE OFTENTIMES THERE'S CLAIMS THAT RESULT FROM UNFORESEEN CONDITIONS THAT YOU HAVE TO PAY OUT.
SO AT LEAST MEETS UNDER THE CMAR AND THE PROGRESSIVE, THEY BOTH MEET IT, UM, BASED ON THAT COLLABORATIVE DEVELOPMENT THAT I TALKED ABOUT.
SO AS YOU GO THROUGH MAKE DESIGN DECISIONS WITH THAT TEAM, YOU'RE GETTING CONTINUAL COST MODEL UPDATES AND DECIDING, OKAY, THIS IS WHAT IT'S GONNA COST.
ARE WE OKAY WITH THAT? OR DO WE WANT TO DE SCOPE, YOU KNOW, DO WE WANT TO ADD THIS COMPONENT IN, ET CETERA.
SO BETTER AND EARLIER, COST CERTAINTY, SCHEDULE FLEXIBILITY.
THERE'S REALLY NO FLEXIBILITY UNDER DESIGN TO BUILD ONCE YOU ENTER INTO RELATIONSHIP WITH THAT CONTRACTOR.
IF THINGS RUN AWRY DURING THAT, YOU'RE STUCK WITH THAT CONTRACTOR AND THEIR APPROACH DURING THAT.
WITH CMAR AND PROGRESSIVE, AS I SHOWED EARLIER, YOU CAN START SOME OF THE WORK EARLIER, GAIN SOME SCHEDULE ADVANTAGE TO THAT AND GIVE YOURSELF MORE CERTAINTY THAT YOU'RE GONNA HIT YOUR DEADLINE WHEN YOU THINK AND WANT TO HIT IT.
UH, RELATIVE TO DESIGN CONTROL, YOU KNOW, AGAIN, DESIGN, BID BUILD, YOU'RE MAKING ALL THE DECISIONS.
YOU HAVE FULL CONTROL UNDER A CMAR, YOU ALSO HAVE FULL CONTROL BECAUSE YOU'RE SEPARATELY CONTRACTING WITH YOUR DESIGNER.
YOU CAN DIRECT THEM TO GO LEFT OR RIGHT OR WHATEVER.
UNDER PROGRESSIVE, YOU HAVE SOME DESIGN CONTROL AND INPUT.
HOWEVER, YOU'RE HIRING ONE TEAM TO DO BOTH.
SO YOU, YOU'VE GIVEN UP A LITTLE BIT OF THAT CONTROL, YOU KNOW, WITH THE TRADE OFF THAT YOU NOW HAVE SOME BETTER
[00:30:01]
COST CERTAINTY AND SCHEDULE CERTAINTY.UM, WITH RESPECT TO RISK ALLOCATION, UM, LOTS OF THINGS YOU CONSIDER THERE.
BUT RELATED TO A CONTRACT RISK PERSPECTIVE, UNDER A DESIGN BID BUILD, YOU HAVE TWO SEPARATE ENTITIES, TWO SEPARATE CONTRACTS.
IF THERE'S GAPS IN YOUR DESIGN, YOU OWN THAT RISK.
SO IT'S, IT'S THE LEAST, YOU KNOW, IT'S THE HIGHEST RISK, UM, POSITION TO BE IN FROM AN OWNER'S PERSPECTIVE.
UNDER CMAR, YOU CAN MITIGATE SOME OF THAT BY HAVING THE CMAR INVOLVED EARLY, THEY CAN, YOU KNOW, POINT OUT THE GAPS, HELP YOU DEVELOP THE DOCUMENTS BETTER.
AND SO YOU'RE MITIGATING THAT RISK.
BUT REALLY FROM A CONTRACT PERSPECTIVE, THAT ONE THROAT TO CHOKE, YOU HAVE YOUR LEAST RISK.
YOU'VE SHOVED MOST, WELL THAT'S NOT A GOOD WAY TO PUT IT, BUT YOU'VE ALLOCATED MOST OF THE RISK TO THE DESIGN BUILD TEAM.
AND SO YOU'RE IN A BETTER POSITION OF BEING ABLE TO NOT OWN UNFORESEEN RISKS THAT COULD DEVELOP ALONG THE WAY.
AND THEN LASTLY, WITH RESPECT TO QUALITY.
I MEAN OBVIOUSLY AT THE END OF THE DAY, WE WANT TO BUILD A QUALITY PROJECT AND YOU CAN GET THAT UNDER DESIGN BID BUILD, BUT AGAIN, IT DEPENDS ON WHO YOU HIRE AS A CONTRACTOR.
THERE'S A LOT OF HORROR STORIES OUT THERE ABOUT PROJECTS WHERE A CONTRACTOR THAT'S DONE SUPERMARKETS GETS INTO THE WATER BUSINESS AND ALL OF A SUDDEN THEY GET THE JOB AND WELL THEN YOUR HYDRAULIC CONCRETE IS GO WELL.
SO REALLY, YOU KNOW, NOT TO DISPARAGE ALL CONTRACTORS 'CAUSE THERE'S A LOT OF GOOD CONTRACTORS TOO, BUT YOU'RE KIND OF ROLLING THE DICE SOMETIMES UNDER DESIGN BID BUILD SCENARIO UNDER BOTH THE CMAR AND PROGRESSIVE, YOU END UP HIRING ON THE BASIS OF QUALIFICATIONS PLUS PRICE IN THOSE INSTANCES.
SO YOU REALLY GET TO DETERMINE, UM, IS THIS A CONTRACT TEAM THAT HAS DONE A LOT OF THIS, IT'S PROVEN THEMSELVES THAT WE CAN TRUST TO DELIVER IT SO YOU HAVE A BETTER, UM, YOU KNOW, OUTCOME FOR A HIGHER QUALITY PROJECT UNDER THOSE TWO SCENARIOS.
SO REALLY QUICK FLY BY ON THOSE DIFFERENT METHODS.
HAPPY TO ANSWER ANY QUESTIONS BEFORE I TURN IT BACK TO FRANK.
I HAVE A QUESTION YOU WERE TALKING ABOUT FOR PROGRESSIVE DESIGN BUILD, IF YOU GET TO A CERTAIN POINT AND YOU FEEL LIKE YOU DON'T WANNA CONTINUE, YOU CAN TAKE THAT DESIGN AND BID IT OUT, IS THEN, THEN WOULD YOU BE FALLING UNDER THE DESIGN BID BUILD ESSENTIALLY? YEAH.
SO AT THAT POINT YOU'D HAVE TO MAKE A DECISION HOW YOU WOULD WANT TO PROCEED.
TYPICALLY, IT'S NOT DONE OFTEN, BUT THERE ARE EXAMPLES IN THE MARKET.
FOR INSTANCE, IN DENVER THERE WAS A PROJECT THAT WAS DONE AND THEY, THEY TOOK IT BACK AND THEN THEY WENT OUT UNDER DESIGN BID BUILD.
SO MORE TRADITIONAL, THERE'S ALSO OPTIONS WHERE YOU COULD GO OUT WITH A CSP OR A CMAR, HOWEVER YOU WANT TO DO IT, BUT TYPICALLY WHAT YOU WOULD DO IS PROBABLY TAKE OUT A DESIGN BID BUILD AS A SHORT STORY.
SO, UH, JUST KIND OF WRAP IT UP, OUR, UH, RECOMMENDATIONS ARE, UM, THREEFOLD.
UH, FIRST IS THE SIZE OF THE PLANT, UM, BASED ON THE FACT THAT A SIX MGD EXPANSION WOULD, UM, MOST LIKELY GIVE US 15 YEARS OF SERVICE.
UM, WE DON'T FEEL LIKE GOING TO A 12 MGD EXPANSION IS REALLY, UM, YOU KNOW, UH, BENEFICIAL AT THIS POINT.
IT WOULD KIND OF NOT MATCH, YOU KNOW, THE COST TO THE, TO THE, UH, GENERATIONAL RATE PAYERS.
SO IT'S KIND OF, YOU KNOW, PUTTING TOO MUCH OF THE COST BURDEN ON TODAY'S RATE PAYERS VERSUS THOSE WHO WOULD BE COMING ON IN 15 YEARS AND, YOU KNOW, AND THEN YOU WOULD HAVE, YOU KNOW, BASICALLY A LOT OF EXCESS CAPACITY THERE FOR 15 YEARS, WHICH IS, YOU KNOW, TOO LONG.
SO, UM, SO FOR THOSE REASONS, UM, WE RECOMMEND A SIX MGD EXPANSION.
AND THAT GETS US TO 38 TOTAL, RIGHT? UH, TOTAL, YES, YES, CORRECT.
38, WHICH, WHICH IS, IF I'M HEARING YOU RIGHT, THAT TAKES US GOOD TO 2035.
UH, IT SHOULD BE GOOD UNTIL 2040.
SO IF WE GO BACK TO THE DEMAND AND, AND, AND IT ALL DEPENDS ON WHAT DEMAND HAPPENS IN THE FUTURE.
SO IF YOU LOOK AT THE DARK BLUE LINE YEAH.
UM, WHERE IT, YOU KNOW, COMES UP TO THE GREEN HORIZONTAL LINE IS, YOU KNOW, UH, SO THE GREEN HORIZONTAL LINE IS THE OKAY, UH, SIX MGD EXPANSION.
AND SO IT DOESN'T COME IN CONTACT WITH THAT UNTIL ABOUT 2040.
UM, SO WE RECOMMEND THE SIX MGD EXPANSION RATHER THAN THE 12.
UH, THE SECOND RECOMMENDATION IS THE DELIVERY METHOD.
WE RECOMMEND PROGRESSIVE DESIGN BUILD, UH, A LOT OF THE, UM, YOU KNOW, BENEFITS THAT PAUL WENT THROUGH, UH, HAVING ONE FIRM TO GO TO, UM, WHERE, YOU KNOW, WE DON'T, AND, AND WE SAW THIS UNDER OUR, YOU KNOW, ORIGINAL PLANT WAS THAT THERE WAS ISSUES
[00:35:01]
AND UH, YOU KNOW, THE ENGINEER AND CONTRACTOR ARE BOTH SAYING, OKAY, IT'S NOT MY ISSUE.AND, UH, THAT WAS A LOT OF PROBLEMS. AND THAT, AND THAT IS TYPICAL OF THE DESIGN BID BUILD.
NOW, DO YOU THINK THAT CMAR WOULD NOT HAVE THAT? UM, SO WITH THE CMAR, YOU STILL HAVE TWO CONTRACTS, UM, BUT THE, THE CONTRACTOR IS INVOLVED EARLIER AND GIVES INPUT INTO THE DESIGN, ALTHOUGH THERE'S STILL TWO SEPARATE ENTITIES, BUT YOU'RE CONSTANTLY GOING AND, AND REBIDDING THE JOBS FOR THE, THE CONTRACTOR WITH CMAR, CORRECT? THEY, THEY DO ISSUE PACKAGES AND AND BID THEM OUT.
IS THAT, IS THAT US DOING THAT OR IS THAT THE ENGINEER? THE, THE, THE CMAR WOULD DO THAT? YEAH, BECAUSE ONE OF THE THINGS I NOTICED WITH THE LAST COMPANY WE HIRED, YOU KNOW, THEY CAME IN, SAID, WE CAN DO IT ALL, BUT THEY WENT OUT AND GOT CONTRACTORS TO DO A LOT OF THEIR STUFF.
THEY DIDN'T EVEN DO ALL THEIR OWN ENGINEERING.
AND, AND SO ANYTIME I'VE LEARNED WHEN YOU PAY SOMEONE AND THEY'RE PAYING SOMEONE, THERE'S MARKUP ON THIS GUY THAT YOU WOULDN'T HAVE IF YOU JUST WENT TO HIM DIRECTLY.
NOW, FROM YOUR STANDPOINT, IT MAY BE A LOT EASIER TO GIVE IT TO ONE GUY AND LET HIM DO IT ALL, BUT ARE YOU TALKING ABOUT IT OUT UNDER DESIGN BUILD? YEAH, UNDER THIS PROGRESSIVE DESIGN.
SO WHAT, WHAT I LIKE UNDER DESIGN BUILD IS THAT THERE'S ONLY, THERE'S NO FINGER POINTING AS TO WHEN THERE'S AN ISSUE AS TO WHOSE PROBLEM IT IS.
IT YOU HAVE ONE CONTRACT WITH A, UH, BOTH THE ENGINEER AND THE CONTRACTOR AND THEY'VE TEAMED UP TOGETHER.
SO, UH, THEY ARE TWO ENTITIES THAT AGREE THEY CAN WORK TOGETHER AND, YOU KNOW, AND IT'S, WE CHOOSE THEM, THE TEAM BASED ON QUALIFICATION.
SO WE CAN PICK THE BEST TEAM UP FRONT OF BOTH THE CONTRACTOR AND THE ENGINEER.
UM, YOU KNOW, TO ME THAT'S THE BETTER SCENARIO IS BEING ABLE TO PICK YOUR TEAM BASED ON THEIR QUALIFICATIONS AND KNOWING THAT THEY'RE THE BEST TEAM AND THEN HAVING ONE TEAM WHERE THEY'RE GONNA WORK TOGETHER.
UH, WELL WITH SMAR, YOU PICK THEM SEPARATELY AND THEY'RE KIND OF FORCED TOGETHER, SO THEY DON'T NECESSARILY HAVE A WORKING RELATIONSHIP AND YOU KNOW, UH, IT'S JUST BETTER WHEN THEY COME TOGETHER AS A TEAM FIRST PRESENT THEMSELVES AS A TEAM AND WE PICK THE BEST TEAM.
UH, SO THAT IS ONE THING, UH, YOU KNOW, THE RISK IS, IS LOWER.
UH, WE SAW, LIKE I SAY, THERE'S PRICE RISK WITH DESIGN BID BUILD AS WELL, YOU KNOW, ESPECIALLY IN TODAY'S MARKET AS YOU, THERE'S SO MUCH UNCERTAINTY.
I, I THINK, YOU KNOW, THE RISK, LIKE I SAY, WE, WE'VE SEEN SOME BIDS COME IN DOUBLE THE ESTIMATES WITHIN TWO YEARS.
SO TWO YEARS AGO I HAD AN ESTIMATE OF A PROJECT THAT WAS IN DESIGN, IT GOES TO BID, IT'S LIKE DOUBLE, UH, THERE'S A LOT OF RISK THERE.
UM, AND I, I WOULD LIKE TO DEFER SOME OF THAT RISK TO THE TEAM.
UM, OVERALL, I JUST, I THINK IT'S A, A BETTER, YOU KNOW, UH, DELIVERY METHOD FOR THIS SCENARIO.
SO, SO CONSIDERING OUR RECESSION CONTINUES, I JUST RAISED INTEREST RATES AGAIN TODAY, AND PRICES POTENTIALLY CAN GO DOWN.
THERE'S GONNA BE MORE WORK AVAILABLE PEOPLE MM-HMM
'CAUSE THERE'RE GONNA BE MORE PEOPLE OUTTA JOBS.
AND WITH, WITH THIS PBB WILL, WILL YOU REAP THE BENEFIT OF LOWER COSTS AS THE PRO PROJECT GOES ON? OR ARE YOU LOCKED IN THAT, HEY, THIS IS WHAT WE SAID WE'RE GONNA DO IT AT, WE WE CAN CHOOSE, YOU KNOW, WHAT, YOU KNOW WHAT I'M SAYING? THAT'S, THAT WOULD BE A CONCERN THAT, HEY, WE'RE, WE'RE AT THE HIGH OF THE MARKETS ALL TIME.
SO WE, WE CHOOSE IN TWO YEARS NO TELLING WHAT IT'S GONNA BE.
WE, WE CAN CHOOSE WHEN WE LOCK IN THAT PRICE.
SO YOU CAN LOCK IN A PRICE, IT BECOMES YOUR GUARANTEED MAXIMUM PRICE AND YOU CHOOSE WHEN TO LOCK IT IN.
IF YOU, IF YOU DO IT EARLY IN THE DESIGN PROCESS, THEN YOU KNOW YOU'RE PUTTING MORE OF THE RISK ON THE DESIGN BUILD TEAM.
UH, OR IF YOU THINK THAT WE'RE GOING INTO A RECESSION, PRICES MAY COME DOWN.
WE MAY MAY WANNA WAIT A WHILE AND LOCK IN THAT PRICE LATER, BUT WE HAVE THAT CHOICE.
UM, AND, BUT I CAN TELL YOU THE HOUSTON MARKET IS NOT IN A RECESSION AND THINGS, THERE ARE SO MANY LARGE PROJECTS.
UM, I MEAN, IF YOU JUST LOOK AT BAYTOWN WITH THE PLANTS HERE, YOU KNOW, EXXON, UH, CHEVRON, ALL DOING LARGE EXPANSIONS, UM, I DON'T SEE THIS AREA SLOWING DOWN ANYTIME.
AND, AND, AND AS PAUL SAID, YOU KNOW, YOU HAVE PREMIUMS PAID FOR LABOR AND MATERIALS.
MY SON WORKS FOR A COMPANY THAT THEY DO A LOT OF PROJECTS AND WHILE THEY'VE GOT A FEW BIG PROJECTS GOING ON, THERE'S NOT A LOT OF SMALL PROJECTS
[00:40:01]
GOING ON AT THESE PLANTS.THEY'RE CUTTING OUT ALL THE LITTLE STUFF AT THESE PLANTS.
SO, WELL WITH THE, THE, FOR THE, THE CITY, WE'VE, YOU KNOW, WE'VE SEEN VERY MUCH, UH, INCREASING PRICES ON OUR BIDS AND, YOU KNOW, THERE'S NO INDICATION THAT IT'S, UH, SLOWING DOWN ANYTIME SOON.
QUESTION ON THE, ON THE, UH, PROJECTED PROBABLE PRO PROJECT COST PAGE WHERE WE GOT 61.6 MILLION FOR THE SIX MGD, DOES THAT CHANGE BASED ON WHICH OF THE DELIVERY METHODS WE CHOOSE? UM, THAT'S, I MEAN, IT, LIKE I SAY, YOU CAN'T TELL THE FUTURE
THIS IS JUST THE ESTIMATE FOR OKAY, FOR, FOR RIGHT NOW.
AND, AND THERE YOU CAN SEE THERE'S A 25% CONTINGENCY BUILT IN.
IN, IN THIS MARKET IS VERY HARD TO, TO SAY THAT.
AND, AND I DON'T WANT TO GIVE YOU A FALSE IMPRESSION THAT YEAH, WE'RE GONNA DELIVER THIS FOR $61.6 MILLION.
YOU SAW ON THE, THE BOW EAST PLANT THAT WE ALREADY CONSTRUCTED, THE ESTIMATES STARTED AT WHAT, 2020 5 MILLION WE ENDED UP, YOU KNOW, NORTH OF 50.
I'M JUST TELLING YOU, THESE ARE ESTIMATES RIGHT NOW AND, YOU KNOW, RESPECTIVE OF WHAT DELIVERY METHOD WE USE, THIS IS THE BALLPARK GUESSTIMATE.
UM, SO FOR THOSE REASONS, UH, WE RECOMMEND, YOU KNOW, THE PROGRESSIVE, UH, DESIGN BUILD METHOD.
AND AS FAR AS TIMING GOES, UH, YOU SAW THAT, YOU KNOW, WE REALLY NEED TO HAVE A PLANT WITHIN, YOU KNOW, THE NEXT FIVE YEARS OR SO.
SO, UH, THE TIMING OF IT KIND OF DICTATES THAT USING AN ALTERNATE METHOD LIKE DESIGN BUILD OR SEA MAR WOULD, WOULD HELP US.
AND IF WE GET A, YOU KNOW, HIGH VOLUME USER COME IN AND WANT, YOU KNOW, UH, WATER, THERE'VE BEEN INTEREST, UH, I WOULD SAY COMING INTO, UH, THE CITY OF PEOPLE WANTING TO DEVELOP AND HIGH VOLUME WATER USAGE, UM, YOU KNOW, OUR CAPACITY COULD RUN OUT SOONER THAN FIVE YEARS.
SO, UH, TO ME IT'S PRUDENT TO START THAT EXPANSION, YOU KNOW, VERY SOON.
SO I WOULD RECOMMEND WE, UH, START ISSUING, YOU KNOW, THE REQUEST FOR QUALIFICATIONS EARLY AND FY 23, UH, AND UNDER PROGRESSIVE DESIGN BUILD, WE WOULD HAVE TWO, UH, REQUESTS FOR QUALIFICATIONS, ONE FOR THE TEAM, AND THEN ANOTHER FOR AN OWNER'S ADVISOR.
SO THEY WOULD HELP US, UM, KIND OF BE A CHECK ON THE DESIGN BUILD TEAM TO MAKE SURE WE'RE GETTING WHAT WE WANT, UM, FINANCIALLY ARE WE IN A POSITION? SO, UM, THIS BAWA HAS, UH, WE'RE COMFORTABLE AND AND FINANCE IS NOT HERE.
I'M, I'M SORRY, WE COULD BRING THEM IN, UH, NEXT MEETING AND TALK ABOUT, YOU KNOW, HOW DO WE PAY FOR IT? UH, I BELIEVE WE'RE FAIRLY COMFORTABLE WITH BOW'S ABILITY TO BOND FOR THE 50, $60 MILLION RANGE.
UH, BEYOND THAT, I, I'M NOT SURE THAT WE HAVE THE BONDING CAPACITY RIGHT NOW FOR, YOU KNOW, THE A HUNDRED AND, UH, WHATEVER, 36 MILLION.
SO WE'LL, WE'LL BRING IN FINANCE NEXT TIME AND TALK ABOUT, YOU KNOW, THE, THE BONDING CAPACITY AND HOW WE PAY FOR THIS.
TO ME, IT'S, TO ME, IT'S ALL GOOD.
'CAUSE WE'RE, WE'RE GROWING, UM, WE'RE CREATING JOBS OUT THERE AND WE'VE GOTTA, WE GOTTA PROVIDE THE WATER FOR THEIR NEEDS, RIGHT? WE, WE DON'T WANNA BE IN A SITUATION WHERE, YOU KNOW, WE HAVE TO SAY, WELL, WE CAN'T ALLOW A DEVELOPMENT BECAUSE WE DON'T HAVE WATER CAPACITY.
UH, SO THAT IS REALLY THE END OF THE PRESENTATION.
IF YOU HAVE ANY OTHER QUESTIONS.
UH, I, I THINK WE'VE GRILLED HIM PRETTY GOOD ALREADY.
I, I JUST HAVE ONE QUESTION, BUT IT DOESN'T HAVE TO DO WITH THIS DIRECTLY.
YOU KNOW, THE CITY OF HOUSTON CONTRACT, I THINK THERE'S A 3% INCREASE IN PRICE EVERY YEAR, BUT CAN'T GENERALLY REMEMBER IF THAT'S TIED TO SOME TYPE OF INFLATION INDEX.
SO I'M WONDERING IF IT'S ONLY GONNA GO UP 3% WITH INFLATION BEING AS HIGH AS NOW, OR IS IT GONNA GO UP MORE THAN THAT? AND I KNOW THE FINANCE GUY SHOULD BE IN THERE FOR THAT.
AND, AND SORRY, I DIDN'T INTRODUCE THE REST OF THE STAFF.
WE HAVE, UH, STERLING BEAVER HERE.
HE'S THE ASSISTANT DIRECTOR FOR, UH, PUBLIC WORKS FOR UTILITIES, AND WE HAVE, UH, MICHAEL GAY WHO'S THE, UH,
[00:45:01]
BIO SUPERINTENDENT.SO I'LL LET STERLING ANSWER THAT.
UM, SO YEAH, TO YOUR POINT, WE HAVE HISTORICALLY SEEN AROUND A 3% INCREASE.
UM, THE LAST RATE INCREASE WE RECEIVED FROM THE CITY OF HOUSTON SAID THAT THEY WERE GONNA LEAVE IT AT A FLAT RATE FOR LIKE TWO OR THREE YEARS.
UM, BUT THEN SIX MONTHS LATER THEY INCREASED THE RATE.
SO TO OUR BEST GUESS OR ESTIMATE, I WOULD ANTICIPATE WE WILL CONTINUE TO SEE RATE INCREASES.
BUT, UM, ALL, ALL I WOULD SAY IT'S, IT'S UNCERTAIN OR, OR UNCONFIRMED.
SO, AND I THINK THE CONTRACT SAID MINIMUM 3% AND IT'S CAN ONLY GO UP FROM THERE.
WELL, IT'S TYPICALLY IT'S GONNA BE BETWEEN TWO AND 3%.
SO THEY MAY DO 2.8%, YOU KNOW, OR, OR SOMETHING LIKE THAT.
BUT YEAH, THERE, THERE HAS BEEN A, A UPWARD TREND CONSISTENTLY, YOU KNOW, OVER THE PAST SEVERAL YEARS.
THEY HAVEN'T MISSED A YEAR OR, OR SKIPPED A BEAT.
ANY OTHER QUESTIONS OR DISCUSSION? NOPE.
[a. The next Baytown Area Water Authority meeting is scheduled for Wednesday, October 19, 2022, at 4:30 p.m., in the Council Chamber located at City Hall, 2401 Market Street, Baytown, Texas 77520. ]
THAT BRINGS US TO THE MANAGER'S REPORT.I DON'T HAVE ANYTHING EXCEPT THAT OUR NEXT MEETING IS OCTOBER 19TH AT FOUR 30.
THANK Y'ALL FOR HAVING ME HERE.
AS 19TH AS THERE'S NO, UH, FURTHER BUSINESS TO COME, UH, ON THIS AGENDA.
I WOULD ENTERTAIN A MOTION TO ADJOURN.