ITEM:		ACTION ITEMS
12.	RECEIVE REPORT ON ENGINEERING CONSULTING STUDY TO EVALUATE DESALINATION PROJECT ALTERNATIVES, AND CONSIDER SUGGESTION OF DIRECTOR POTTER TO TERMINATE CONTRACT, IF APPROPRIATE
Meeting Date:			May 15, 2006	Budgeted:	Yes
From:			David A. Berger,	Program/	1-2-1.C
			General Manager	Line Item No.:
Prepared By:			Andrew Bell	Cost Estimate:	$60,000
General Counsel Approval: N/A
Committee Recommendation: N/A
CEQA Compliance: N/A

SUMMARY: At the February 23, 2006 Board meeting the Board approved a contract with Bookman-Edmonston/GEI Consultants (B-E/GEI) to prepare a comparison of three major seawater desalination projects proposed for the Monterey Peninsula area: the Coastal Water Project proposed by California American Water (Cal-Am); the Monterey Bay Regional Desalination Project proposed by the Pajaro/Sunny Mesa Community Services District (Pajaro/Sunny Mesa); and the 7.5 million-gallon-per-day project in Sand City most recently evaluated by MPWMD in 2003 and early 2004. The results of this evaluation are scheduled to be presented to the Board and the public at a workshop on June 29, 2006.

At the April 17, 2006 Board meeting, after hearing a staff report on the status of information received as of that date from Cal-Am and Pajaro/Sunny Mesa, Director Potter requested that the Board review progress on the B-E/GEI study at a future meeting and suggested that the Board consider whether the District’s contract with B-E/GEI should be terminated due to the lack of available information on the Pajaro/Sunny Mesa CSD project. Following the April 17, 2006 Board meeting, District staff contacted B-E/GEI and Pajaro/Sunny Mesa representatives to determine whether additional information will be provided by Pajaro/Sunny Mesa, and in the case complete information is not provided, whether it would be more prudent to continue the study or to end it.

Although detailed cost information has yet to be provided by Pajaro/Sunny Mesa, other information they have provided will allow a comparison of other aspects of the three projects. District staff believes that it will be informative and useful to the Board and the Public to allow B-E/GEI to complete their study based on the information currently available.

RECOMMENDATION: Staff recommends that Bookman-Edmonston/GEI Consultants be allowed to complete the evaluation of the three desalination projects. Although it may not be possible for the District’s consultants to compare the Pajaro/Sunny Mesa project with the other two projects in terms of cost, there is adequate information available to the District and its consultants to make an independent evaluation and comparison of other aspects of the Pajaro/Sunny Mesa project, including the adequacy of the plant design and the reasonableness of the environmental review and permitting process that is anticipated by Pajaro/Sunny Mesa.

BACKGROUND: As part of the MPWMD 2005-2006 Strategic Plan adopted by the Board at its October 18, 2005 meeting, the Board directed staff to hold a series of public workshops dealing with several aspects of water supply augmentation. One of the workshops is titled “Water Projects Cost and Timeline Analysis.” The purpose of this workshop is to present information on the major potential water supply projects being proposed for the Monterey Peninsula and surrounding areas. The results of the B-E/GEI evaluation of seawater desalination projects are intended to be a part of the presentation to the Board and the public at the Board workshop scheduled for June 29, 2006.

In order to have the information available to the District’s consultants, letters were sent to Pajaro/Sunny Mesa and Cal-Am in December 2005 requesting that they provide information they had available regarding design, permitting, estimated costs, and timelines for their proposed projects. The December 22, 2005 letter to Joe Rosa, General Manager of Pajaro/Sunny Mesa, is attached as Exhibit 12-A, and the December 22, 2005 letter to Steven Leonard, Cal-Am’s General Manager, is attached as Exhibit 12-B. A response letter from Joe Rosa dated January 23, 2006 is attached as Exhibit 12-C. Because the item to approve the consultant contract was postponed from the January 26, 2006 meeting to the February 23, 2006 meeting, a second letter requesting information on the Pajaro/Sunny Mesa CSD project was sent to Mr. Rosa (Exhibit 12-D). The requested information has been received from Cal-Am and their consultants, but to date only a part of the requested information has been received from Pajaro/Sunny Mesa and their consultants.

In addition to the letter exchanges, a number of telephone calls were made and e-mails sent to Pajaro/Sunny Mesa representatives. As an example of the minimal detail provided by Pajaro/Sunny Mesa representatives, Exhibit 12-E is the chapter titled “Project Costs” in the Conceptual Design Report for the Pajaro/Sunny Mesa project transmitted via e-mail by Peter MacLaggan of Poseidon Resources Corporation, partners in the Pajaro/Sunny Mesa project, on April 18, 2006. Table 7, Project Capital Costs Initial Estimate, consists of 18 categories of project cost components, but there is a single cost figure, Total Capital Costs, $130,000.000. No annual costs for operation, maintenance, and repair of the project are provided in the report. Some other documents previously received from Pajaro/Sunny Mesa contain estimated capital costs broken down into categories, and this document provides information as to the estimated amounts of energy, chemicals, and labor required for the project, but no single document contains a full picture of the estimated project costs.

In contrast, for both the seawater desalination portion of Cal-Am’s Coastal Water Project and the 7.5 million-gallon-per-day MPWMD desalination project in Sand City, detailed capital and annual costs are available in published reports. In addition, for these two projects, preliminary designs and layouts of project facilities are available. There is little similar detail available for the Pajaro/Sunny Mesa project.

In telephone conversations with MPWMD District Engineer Andy Bell and at least one of the District’s consultants, Pajaro/Sunny Mesa representatives have expressed a reluctance to provide some of the details of their cost estimates and distribution system design. As an example of this concern, in an April 24, 2006 e-mail from Gerry Filteau of Separation Processes, Inc., subconsultant to B-E/GEI for this study, to Andy Bell, Mr. Filteau stated: “I received a call back from Peter MacLaggan this afternoon. He indicated a reluctance to provide further written detail on their project, especially the cost estimating. His concern is that many of the cost factors are not yet firmed up and subject to future negotiations (he cited power rate as an example). He feels making public statements on these factors may come back to haunt them, either in negotiations or from parties suggesting in the future they are not meeting targets. Peter indicated they are available to discuss the project face to face in Carlsbad or over the phone. It is not clear how much detail they would be making available verbally.” Subsequent to receiving this e-mail, MPWMD staff informed Poseidon and B-E/GEI representatives that the District is willing, in order for Poseidon representatives to share certain design and cost details of the Pajaro/Sunny Mesa Project with District consultants, for the information to be provided on a confidential basis, as long as our consultants are able to determine that there is a reasonable need for the information not to be divulged publicly.  District staff also made it clear that in order for our consultants to be able to make a judgment as to the adequacy and reasonableness of the information, our consultants will need to be allowed to review drawings and written project descriptions and cost estimates, not just receive oral briefings on the information.

District consultant Gerry Filteau has scheduled a May 10, 2006 meeting in his Carlsbad, California office with Poseidon’s Peter MacLaggan and Nikolai Voutchkov to discuss details of the Pajaro/Sunny Mesa project, including the design and estimated capital as well as annual operation and maintenance costs. Whatever additional information is provided during or as a result of this meeting will be described during the staff presentation of this item.

The lack of design and cost information currently available to the District and its consultants for the Pajaro/Sunny Mesa project precludes an “apples-to-apples” comparison with the other two projects in terms of cost. However, there is information available on other aspects of the project to allow independent evaluation and comparison with the other projects.

Pajaro/Sunny Mesa representatives have provided a significant amount of information on the project, including the existing Regional Water Quality Control Board permit for the National Refractories outfall, proposed to be used for the Pajaro/Sunny Mesa project, and applications to the RWQCB for renewal and change to the permit for both the pilot project and the permanent project. Another document provided to the District is a March 2006 application to the California Department of Water Resources for a Proposition 50 grant for construction of the pilot plant. These documents contain some of the information that has been requested by the District in order that the physical feasibility of the project can be evaluated, including descriptions of anticipated water quality of the intake, treated water, and brine discharge to the outfall, and schematic diagrams of proposed desalination processes and facilities.

The District’s consultants have sufficient information from Pajaro/Sunny Mesa that will allow an evaluation of the reasonableness of the design of the desalination plant portion of the project and of the environmental review and permitting process that is anticipated by Pajaro/Sunny Mesa. The main category of information currently lacking is adequate detail for estimated costs that would allow an independent review by the District’s consultants.

IMPACTS TO STAFF/RESOURCES: The not-to-exceed amount in the agreement with B-E/GEI to perform the evaluation of the three projects is $60,000. Through the end of April 2006, B-E/GEI has billed the District approximately $9,100, which does not include some of their subconsultants’ invoices. B-E/GEI estimates that as of May 15, 2006, the date of the Board meeting, they will have expended approximately $30,000. If the Board were to direct that the contract be terminated, the resulting savings could be as great as $30,000, though the contract provides that the consultant may continue to work and accrue costs for up to 30 days following notice of termination.. However, the bulk of the consultant work in collecting and analyzing project information under the contract will likely be completed by May 15, 2006 or soon thereafter. The contract schedule calls for the draft report to be submitted to the District on June 8, 2006 and the final report on June 21, 2006. Thus, there would likely be a savings of less than $30,000.

The agreement for professional services between the District and B-E/GEI contains the following provisions, in the event of termination:

SECTION IX

TERMINATION

MPWMD may terminate Consultant's services at any time by written notice to Consultant at least thirty (30) days prior to such termination. Upon receipt of written notice from MPWMD that this Agreement is terminated, Consultant shall submit an invoice for an amount which represents the value of services actually performed to the date of said notice for which he has not previously been compensated. Upon approval of this invoice by MPWMD, Consultant shall be paid from the sum found due after having applied the provisions of Section II, Paragraph (D) of this Agreement, "Late Performance Penalty," where applicable, and MPWMD shall have no further obligation to Consultant, monetarily or otherwise.

EXHIBITS

12-A December 22, 2005 letter from MPWMD to Pajaro/Sunny Mesa CSD

12-B December 22, 2005 letter from MPWMD to California American Water

12-C January 23, 2006 letter from Pajaro/Sunny Mesa CSD to MPWMD

12-D March 2, 2006 letter from MPWMD to Pajaro/Sunny Mesa CSD

12-E Chapter 4, Project Costs, in Conceptual Design Report, Monterey Bay Regional Desalination Project, Pajaro/Sunny Mesa Community Services District in Cooperation with Poseidon Resources Corporation, April 2006

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