November 21, 2010 - Bend Bulletin - Critics: Conflict in Bend water study

Nov 22, 2010

November 21, 2010 - Bend Bulletin - Critics: Conflict in Bend water study

Critics: Conflict in Bend water study

Firm hired to estimate cost could make millions more from upgrades

By Nick Grube / The Bulletin
Published: November 21. 2010 4:00AM PST

On Nov. 3, as city councilors prepared to make a potentially historic decision to approve one of Bend’s largest-ever infrastructure projects — one that could cost up to $73 million — John Maxwell stood before them to defend his company.

Maxwell works for HDR Engineering Inc., the firm hired by the city to design a massive upgrade to the Bridge Creek water system that provides half of Bend’s annual water supply.

That project includes replacing about 10 miles of aging pipelines, building a state-of-the-art treatment facility to meet federal clean-water mandates and possibly installing a hydropower plant to generate green energy.

In particular, Maxwell was concerned about the perception that HDR, an international engineering firm with nearly 8,000 employees, had a financially vested interest when preparing a recently released study, which found the city would save more than $400 million over 50 years if it overhauled the Bridge Creek system rather than switch to an all-well-based system to pump groundwater.

That study had been criticized by some, including local attorney Bill Buchanan and Old Mill developer Bill Smith, who thought the numbers in the comparison were flawed and believed a move toward groundwater would be much cheaper.

The study also came to a different financial conclusion than one performed by another engineering firm, Brown and Caldwell, the year before that found the 50-year cost difference between surface water and groundwater to be about $250 million.

When Maxwell, who works out of HDR’s Olympia, Wash., office, addressed the concerns that his firm had something to gain from doing the study, his answer was simple. It did.

“Yes, we do have a personal interest in this,” Maxwell told the councilors and other city officials. “You are our client.”

What he did not say is how much HDR stood to gain from the City Council moving forward with the Bridge Creek project.

HDR’s contract with the city is worth more than $1.6 million to provide preliminary design work through the end of 2010. But also in that contract is a table with estimates for how much the firm could be paid should the city decide to keep HDR through the rest of the project.

Under that scenario, estimates for how much HDR would be paid range between $13 million and $18.2 million.

While City Manager Eric King said those numbers are simply estimates and not a guarantee that HDR will be awarded those contracts, Buchanan and Smith say that’s enough reason to question the objectivity of the engineering firm’s comparison of surface water and groundwater.

“We’ll never know whether the motivation affected their analysis,” Buchanan said. “And that way it (would have made) sense to use an independent analysis.”

Buchanan came up with his own analysis of surface water and groundwater that he says shows that it is cheaper to switch to an all-well system. And Buchanan says the well system could be done for under $10 million on the front end.

Though he tried to persuade councilors to delay making a decision on the surface water project until he had a chance to share his analysis with city officials and other stakeholders from the business and conservation community, they voted 6 to 1 to proceed.

King discounts Buchanan’s analysis, saying it was prepared by an attorney and not someone with an engineering degree or a background in water systems.

The reason the city had HDR perform the cost comparison, King said, was because the City Council asked for one. Since the firm was already doing the design work at the time, he said, it would be quicker and easier because they were already under contract and familiar with the project.

“This sort of notion that HDR is beholden to surface water and they’re biased is ridiculous,” King said. “That’s what we contracted with them to do.”

The city paid HDR an additional $50,000 to perform its cost comparison of surface water and groundwater. King said the reason for the approximate $200 million difference between the conclusions in HDR’s study and the one Brown and Caldwell did in 2009 is that there was more detail included in the newer analysis.

While the 2009 study overestimated the potential revenues from hydropower to the tune of about $1 million a year — something that would have significantly trimmed that $250 million difference with groundwater — King said Brown and Caldwell also underestimated the costs of adding additional wells to the system.

Had there not been “huge margins” in the estimated long-term costs between surface water and groundwater, King said, the city probably would have paid for an independent analysis. He added that although the councilors voted Nov. 3 to move forward with the surface water project, they essentially made their decision to proceed with the overhaul last year.

“It just seems sort of odd that all of a sudden — that as we get into the project — that these questions are being asked, when a year ago it was a different firm that was looking at all these alternatives,” King said. “People are now questioning the groundwater. Where were these people a year ago?”

On Dec. 1, city councilors are scheduled to make some decisions about the surface water project that will affect the overall cost of the project. Some of the options they will consider include what sort of treatment system they want to install and whether to add the hydropower component.

Depending on what councilors decide, the estimated impact to water customers could be between a 37.5 and 45.5 percent increase in their monthly bills over the next five years.

Representatives from HDR Engineering Inc., including Maxwell, were unavailable for comment Friday.

Nick Grube can be reached at 541-633-2160 or at ngrube@bendbulletin.com.

Published Daily in Bend Oregon by Western Communications, Inc. © 2010

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