Sewer pipeline project flush with extra costs

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The board for the Pagosa Springs Sanitation and General Improvement District (PSSGID) passed two resolutions at last week’s meeting — one adopting its final budget for 2015 and the other authorizing its staff to apply for a grant from the Colorado Department of Public Health and the Environment (CDPHE).

While the PSSGID is technically a separate entity, its board of directors is made up of the mayor and all six town council members, and town staff does occasionally work on sanitation district issues. In fact, Town Manager Greg Schulte had to fill in for PSSGID Director Gene Tautges during the meeting because Tautges was busy at the time installing the sewer district’s new lift station near the Visitor Center parking lot.

Schulte first went over the budget, outlining where the $3,745,827 worth of revenue would come from — including a $935,000 loan from the Colorado Water and Power Authority — and detailing where $3,010,759 worth of expenditures would go.

He then began to discuss the new grant.

“The short version of this,” Schulte told the board, “is we are applying to essentially have the CDPHE help pay for the pipeline project. Because the pipeline is of the extent it is, we are going to have to dip into reserves in order to pay for the full amount of the project.”

Schulte explained that he had been in contact with a representative from CDPHE and had been encouraged to submit a grant application specifically for the purpose of covering some of the extra cost associated with the pipeline project.

“So what this ends up doing is it lessens our burden and lessens the amount of money that we have to go into reserves to pay for the project,” Schulte continued, “and really, at the end of the day, it allows us more flexibility by helping us to keep the reserves that we have, so we can use that for emergencies that might come up or for additional equipment.”

In the materials included in the board’s agenda packet, Schulte explained that the original plan, back in 2007, was to build a modern wastewater treatment plant to replace the town’s outdated sewer lagoons.

However, since then, the treatment plant idea was replaced with a new solution — building a forced main pipeline and two lift stations to convey the town’s wastewater up to the Pagosa Area Water and Sanitation District’s facility in the Vista neighborhood on the west side of town.

“The complexity of the project and funding sources have changed dramatically since 2007,” Schulte’s report stated, “and recently a program that offers potential grants to small communities has emerged.”

Schulte’s report went on to explain that the application is 28 pages long, will ask for $750,000 and will promise $150,000 from PSSGID reserves, thereby contributing a total of $900,000 in additional funds towards the pipeline project.

As it turns out, the pipeline project has cost the town more than originally promised for a number of reasons.

Change orders

Just over a year ago, on Dec. 2, 2013, the board voted to accept a bid from Hammerlund Construction Company for the project. Art Dilione, special projects manager for Bartlett & West, the company tasked with handling the bidding process for the town, sent a letter to David Mitchem and Gregg Mayo, the town manager at the time and special projects director for PAWSD, respectively.

The letter, dated Nov. 19, explained how the project was originally bid on Oct. 2, but all of those bids came in well above the engineer’s estimate as well as the project’s budget, so those original bids were rejected and the project was rebid on Nov. 12.

“Bartlett & West’s engineering estimate of probable construction cost was $9,182,528.60,” Dilione’s letter continued. “The low bidder for the rebid was Hammerlund Construction with a bid of $9,100,000 for all three projects. This is 1% under our estimate.”

However, according to a spreadsheet accompanying Dilione’s letter, the project consisted of three parts: force main 1 and pump station 1 (FM1-PS1), force main 2 and pump station 2 (FM2-PS2), and a water transmission main.

While the first two parts of the project concern the transfer of wastewater from PSSGID to PAWSD, the third part of the project deals with a pipe for potable water and is only the concern of PAWSD.

“Bartlett &West’s estimate for the Wastewater Conveyance portion was $6,578,905.55,” Dilione’s letter stated, “and Hammerlund’s bid was $6,853,000.00. This is within 4% of our estimate. The other bids ranged from slightly over $10.4 million to $12.5 million. Bartlett & West’s estimate for the Water Transmission Main was $2,603,623.06 while Hammerlund Construction bid $2,247,000, which is 14% under our estimate.”

In other words, by piggybacking its clean-water pipeline on top of the PSSGID sewer pipeline, PAWSD was able to save itself some money at the expense of the district.

Dilione’s letter concluded with an evaluation of Hammerlund’s ability to complete the project. “Their project listing indicates that they have performed similar work before and should be capable of constructing the Wastewater Conveyance Project. All of Hammerlund’s references we contacted indicated that Hammerlund was a good to very good contractor, good to work with, had no issues with them on their projects and would allow them to work on other projects. Based on the information provided and comments received, Hammerlund Construction appears to be capable of performing this work in a competent manner and we were not told of any reasons why they should not be awarded these projects.”

Seven other companies also submitted bids at the time — Smithco ($10,428,640.50 total for all three parts), Velocity ($10,429,524.10), Crossfire ($10,433,199.60), K. R. Serdferger ($11,339,664), RMS ($11,635,100.50), Spiess ($12,319,523) and AUI ($12,500,667.30). Only four companies had submitted bids the first time.

“When this project was presented to the board originally,” board member David Schanzenbaker said, “it was sold on the basis of it being cheaper than a wastewater treatment plant. I looked back at some old minutes and 4.7 million dollars was the worst-case scenario at the end of 2011. Now, when we get our construction bid, it’s 6.85 million? It doesn’t sound to me like it is going to be any cheaper than a treatment plant.”

Then, when the project started earlier this year, the board heard a report that, as Hammerlund began to dig the trench for the pipeline, it was encountering much less rock than it had originally anticipated and there was a possibility of some cost savings.

However, as the project continued, the board was instead presented with several change orders and the corresponding requests for additional payments.

When Schulte gave the board an update on the sewer pipeline at last week’s meeting, board member Clint Alley asked specifically about change orders for which the contractor has submitted requests for extra payments.

“There have been, I think, about seven change orders,” Schulte explained, “and there have been negotiations on basically all of those but two. There are still two that are outstanding that we haven’t reached (an agreement on), and both of those are above the ten-thousand-dollar threshold, so you may be seeing those at some juncture, unless we can come to some sort of agreement or resolution. The other ones have been settled, if you will, for ten thousand or less.”

Overtime pay

Another issue that has come up lately is the amount of overtime pay Mayo has charged the district for the work he has done this year as the lead project representative.

In 2012, Mayo billed the town $3,425 for 124.5 hours. This was simple straight time and came out to $27.51 per hour. In 2013, Mayo billed the town $1,898.94 for 68.5 hours. Again, this was straight time and came out to approximately the same hourly wage.

In 2014, however, Mayo billed the town for $9,824.52 to compensate him for straight time, plus $5,649.01 for 135.5 hours worth of overtime pay. In other words, $41.69 per hour.

In October, when the town was presented the latest request for payment from Mayo, Schanzenbaker asked if the intergovernmental agreement between PSSGID and PAWSD required the payment of overtime.

“No,” Tautges replied. “The contract does. It essentially says times for construction that are approved are basically business hours on Monday through Friday. Quite often, on a project of this size, there are reasons we don’t want to do certain things when school’s in session, or something like that.”

For certain segments of the project, the trench did have to go through solid rock, and in those cases, blasting was required.

“The short answer is, ‘No,’” Tautges concluded, “there’s nothing in there that stipulates overtime. There is some need for weekend work, or once you start to pour concrete, and you want to be done at three or four, but you’re not done until seven, those kinds of things happen.”

Easements

Town Clerk April Hessman provided SUN staff with a detailed ledger of every financial transaction by the town in relation to the sewer pipeline construction project, dating back to Dec. 31, 2011.

This document shows that in 2012 the town spent a total of $82,750.86, in 2013 it spent $218,505.67 and in 2014 it had spent $1,639,972.23 as of Nov. 7, for a total of $1,941,228.76.

A closer examination of each line for 2014 revealed that the Colorado Timber Ridge Home Owners Association was paid $467.50, Colorado Cattleman’s Land Trust was paid $1,500, Fred and Elizabeth Martinez were paid $4,500 and Juanita Quintana was paid $21,000.

Hessman also sent the contracts for each easement the town had to negotiate for the pipeline. Besides those mentioned above, the town also received donated easements from Alpine Cascade, Archuleta School District and the Town of Pagosa Springs.

One of the change orders for which the town had to pay Hammerlund involved moving the original course of the pipeline so that it crossed the Quintana property instead of Steve Graham’s property because Mayo and Mitchem were unable to successfully negotiate an easement with Graham, despite a threat to take the Grahams to court and use eminent domain to force the issue.

Besides paying some of the landowners for the easements themselves, Hessman’s ledger also details several transactions with the Colorado Land Title Company and Collins, Cockrel & Cole.

Bob Cole is the town’s attorney, and a separate document revealed the town paid Cole’s firm $3,359 in 2011, $17,820 in 2013 and $59,555 in 2014, for a total of $80,734 in legal fees related to the pipeline project.

When asked to break down the legal fees further and explain exactly what the town was billed for, Schulte explained that such information is protected by attorney-client privilege.