Estimates Put Gallatin’s Water Treatment Plant in Jeopardy

Construction of a proposed water treatment plant for the City of Gallatin is in question after bids were opened on March 3. Three bids were submitted – the lowest an unanticipated $1.3 million more than approved funding allows.

Those involved in the project are not necessarily questioning the costs as bid. Rather, dismay focuses on engineering plans which proved so inaccurate as to jeopardize the project. All three bids submitted for the project were 30% or more above the construction costs estimated by the engineering firm of Snyder & Associates, St. Joseph.

Funding lined up for the project was predicated on the erroneous engineering projections. Voters approved $3.5 million in bonds to finance the bulk of the project. The USDA approved a loan of $3,296,000 for working capital, financed by the bond.

Additional approved funding was from the USDA in the form of a $819,490 grant; from the state through a CDBG grant of $500,000; and from the City of Gallatin for “in-kind” services worth $3,000. Thus, available funding totals $4,618,490 for the project.

But officials were jolted when the following bids were opened on March 3:

Irvinbilt, Chillicothe $5,909,300

KAT Excavation, Bates City $6,342,785

Foley Co., Kansas City $6,599,000

The difference between the lowest bid and the engineer’s anticipated cost is $1.9 million. If all funding sources were optimized (primarily involving the entire bonding capacity), the shortfall could drop to $1.3 million – but, obviously, the entire project is now in limbo.

Monday night Andy Macias, P.E., of Snyder & Associates of St. Joseph, met with Gallatin’s board of aldermen. Mr. Macias was unable to explain exactly why engineering cost estimates were so extremely off target. After considerable discussion, Aldermen Dan Lockridge put the question on everyone’s mind bluntly: “Does this kill the project?”

Although circumstances following the unexpectedly high contruction bids scream for exact details, Mr. Macias admitted he had no precise explanation. He did point to at least three contributing factors which cumulatively impacted the current circumstances:

Time Frame. The original plans were initiated in 2010 and prices change during that time span.

Site Excavation. The original intent was to locate the new plant next to the existing one. But when relocation became necessary, the amount of rock evident on the site north of the existing plant may have caused additional excavation cost. Macais was not able to identify to what extent at Monday’s meeting, however, since construction bids are usually submitted as one lump sum. Site preparation, for instance, was not itemized in the bids submitted.

Economic Realities. Costs for water and wastewater projects are increasing because there are fewer competing construction firms interested in this work. According to Macias, bids on streets, highways, and bridges remain quite competitive but the national recession weathered during the past decade have forced some contractors normally involved in this size of project out of business. Macias also notes labor rates have increased during the past five years.

Phil Tate, a consultant acting as city administrator for Gallatin aldermen, questioned why the final plans bid on a water treatment plant capable of producing 700 gallons per minute (gpm). He noted that the application for CDBG funding specified a 500 gpm capacity. Currently, Gallatin’s treatment plant produces 350 gpm.

Ensuing discussion revealed more confusion about desired output. Officials agreed upon the target of producing 400,000 gallons of treated water per day. But achieving that rate as defined by gallons per minute impacts plant designs. Presently, Gallatin must operate its plant about 22 hours each day to meet its demand for treated water.

“We designed a new plant to achieve 400,000 gallons per day while operating the plant within a 9- to 10-hour workday. It is not in the city’s best interest to continue operating its water treatment plant where so many hours could involve overtime labor.

At one point, Lance Rains of Green Hills Regional Council of Governments, noted that five different PERs were “going around” while the project was en route to bid. Thus, there was confusion about defining the targeted output.

“You need the plant to produce at least 400 gpm,” Mr. Macias told aldermen. “Going from 700 gpm to 500 gpm might cut as much as 10% of the costs – but that’s not enough to cover the shortfall between approved funding and the actual bid. The cost of installation is about the same; you may save some dollars downsizing different parts but you’re not going to save what’s needed to be saved to make plans work.”

“We’re going to make this right,” Mr. Macias said. “It’s going to cost us quite a bit of money.”

“We probably designed a ‘Silverado’ when we should have proposed a work truck,” Macias said by way of an analogy. “Bids coming in so extremely over what we anticipated was a surprise. Just last fall we had bids come in just over 4% above our estimates for a large sewer project in St. Joseph. But to realize a difference between our estimates and the actual bids on this project of this magnitude …it’s a jaw dropper!”

Mr. Macias said the future of the water treatment plant will probably involve construction cutbacks from what was originally proposed as well as more money. To lower construction costs, construction plans must be changed.

Macias pushed to schedule a “work session” with Gallatin aldermen within the week. But significant changes to plans already approved may require different permits, thus delays. Time frame becomes an immediate concern since government grant and loan funding are already at normal limits for the project first suggested in 2010.

Stan Wolfe of the USDA attended Monday night’s board meeting. He commented that the time involved leading up to the recent bid opening here was considered usual, “but typically funding agencies want to expend the monies approved for any project within a 5-year frame.”

The USDA Rural Development approved funding for the Gallatin water treatment plant in May, 2011. With that in place, the state followed with CDBG funding approved in April, 2012.

Gallatin aldermen are not interested in asking voters to increase the bond limit. No additional grants or loans are anticipated from the USDA for the project.

Lance Rains, a Green Hills Regional Planning Commission associate, told aldermen Monday night that the CDBG money provided by the state is already at its $500,000 limit. Moreover, state officials usually close out CDBG funds within a 3-year time frame which, for this project, would be next month. Any further requests for grant funding, Mr. Rains said, would be fruitless.

Any other creative application of public money (i.e. the state’s Revolving Fund) comes in the form of a loan with interest – not a solution to address the project’s circumstances.

While much about the proposed construction project is unknown, Gallatin officials know repairs must now be made on the treatment plant currently in use. Usual water filter replacement was not done last year in anticipation of new plant construction. Filter materials have been bought for one of the two filters in use but there is expense in rebuilding the filters and replacing washback valves. City Utility Manager Mark Morey intends to present cost estimates to the aldermen at the next board meeting set for 4 p.m. Wednesday, March 18, at the community building in Dockery Park.