Management of Brightwater Treatment Plant Engineering Services Contract Amendments

The design of the Brightwater treatment plant is a particularly complex project that has been managed by a highly experienced and diligent project manager and team. However, WTD’s management of the final design contract amendments and associated change notices did not fully comply with countywide policies and internal WTD procedures. In addition, the contract executed for the final design phase did not contain provisions to control project costs consistent with industry standards. The implementation of the preconstruction services contract also did not maximize opportunities to control costs consistent with industry best practices. As a result, WTD did not ensure that the county received the most cost-effective design engineering services for the Brightwater treatment plant.

Design costs exceeded the initial contract amount of $41.5 million by approximately $13.4 million (32.3 percent). The 32.3 percent figure exceeded the 10 percent contingency for contract amendments estimated by WTD based on industry standards. The treatment plant costs were also ”higher than [costs] for comparable project and industry norms” according to R.W. Beck, the County Council’s Brightwater Oversight Management Consultant. The Oversight Management Consultant’s conclusion was based upon a comparative analysis of the design costs for the Brightwater treatment plant and two other wastewater treatment plants, as well as the firm’s extensive management and consulting experience within the wastewater industry. However, the Oversight Management Consultant recently advised that specific industry benchmarks were unavailable to measure the cost performance of design services more precisely due to the complexity of the design and unique contracting methods (e.g., General Contractor/Construction Manager) selected for the Brightwater Project.

WTD’s practice of amending the treatment plant design contract to provide engineering services for non-treatment plant work also contributed to higher design costs. For example, conveyance, mitigation, and marine outfall facilities were performed under and charged to the treatment plant engineering services contract. This practice makes it difficult to track project costs as well as to measure and report actual project cost performance to elected officials, who will ultimately be held accountable for the Brightwater Project.

Extensive and costly design additions and modifications contributed to the higher design costs. Many of these design changes resulted from complex design elements, siting a Greenfield treatment plant (e.g., initiating the project from scratch) in an urban area located outside of King County, extensive community and public involvement and appeals processes, and multi-jurisdictional permitting and mitigation requirements. Comprehensive value engineering processes and redesigns also added $17 million to the treatment plant design cost, but resulted in the identification of potential construction cost reductions of $86 million. However, the design changes also led to a 10-month delay of the scheduled completion of the treatment plant final design.

WTD could improve its contract amendment practices by adhering to countywide contracting policies designed to ensure the cost-effectiveness of capital projects, its internal procurement procedures, and best practices for capital project management. County policies could also be strengthened and agency compliance improved by adopting recognized industry best practices.

WTD project managers should adhere to all county policies and procedures for managing capital project contracts and contract amendments. Particular attention should be paid to approval authority and review requirements for contract amendments with cost estimates that exceed $150,000 and/or 10 percent of the original contract value. In addition, the management of the Department of Natural Resources and Parks should ensure that work on contractual design additions or revisions to the original scope of work does not proceed without fully executed and authorized contract amendments.

WTD should also collaborate with the Procurement and Contract Services Section on strengthening county policy to include recognized industry best practices, and on potential adjustments or limited exceptions to county policy that are appropriate for large-scale, complex capital projects to ensure timely project performance. For example, limited delegation of authority provisions would be beneficial in ensuring proper oversight while maintaining the critical project schedule. In addition, county guidelines should be developed for the use of unique contracting methods to maximize opportunities to design and construct capital projects cost-effectively.

Our audit focused on the management of amendments for the Brightwater treatment plant professional engineering services contract. We assessed WTD’s compliance with county contracting policies, overseen by the central Procurement and Contract Services Section, and industry best practices. In addition, we reviewed the cost-effectiveness of WTD’s contracting methods for treatment plant design engineering and preconstruction services, and identified potential opportunities for improvement.