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Home My WebLink About221-21 RESOLTUION113 West Mountain Street Fayetteville. AR 72701 (479) 575-8323 Resolution: 221-21 File Number: 2021-0663 CH2M HILL ENGINEERS, INC.: A RESOLUTION TO AUTHORIZE A PAYMENT TO CH2M HILL ENGINEERS, INC. IN THE AMOUNT OF $362,544.00 TO RECONCILE THE ACTUAL COSTS OF WASTEWATER TREATMENT OPERATIONS AND MAINTENANCE IN 2020 TO THE CONTRACT ESTIMATE, AND TO APPROVE A BUDGET ADJUSTMENT BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1: That the City Council of the City of Fayetteville, Arkansas hereby authorizes a payment to CH2M Hill Engineers, Inc. in the amount of $362,544.00 to reconcile the actual costs of wastewater treatment operations and maintenance in 2020 to the contract estimate. Section 2: That the City Council of the City of Fayetteville, Arkansas hereby approves a budget adjustment, a copy of which is attached to this Resolution. PASSED and APPROVED on 9/7/2021 Attest: �� " "A v • 1"� Kara Paxton, City Clerk Treasurer .; <��e•:�= Page 1 Printed on 918121 City of Fayetteville, Arkansas 113 West Mountain Street Fayetteville, AR 72701 (479)575-8323 Text File File Number: 2021-0663 Agenda Date: 9/7/2021 Version: 1 Status: Passed In Control: City Council Meetinq File Type: Resolution Agenda Number: A.10 CH2M HILL ENGINEERS, INC.: A RESOLUTION TO AUTHORIZE A PAYMENT TO CH2M HILL ENGINEERS, INC. IN THE AMOUNT OF $362,544.00 TO RECONCILE THE ACTUAL COSTS OF WASTEWATER TREATMENT OPERATIONS AND MAINTENANCE IN 2020 TO THE CONTRACT ESTIMATE, AND TO APPROVE A BUDGET ADJUSTMENT BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1: That the City Council of the City of Fayetteville, Arkansas hereby authorizes a payment to CH2M Hill Engineers, Inc. in the amount of $362,544.00 to reconcile the actual costs of wastewater treatment operations and maintenance in 2020 to the contract estimate. Section 2: That the City Council of the City of Fayetteville, Arkansas hereby approves a budget adjustment, a copy of which is attached to this Resolution. City of Fayetteville, Arkansas Page 1 Printed on 91812021 Tim Nyander Submitted By City of Fayetteville Staff Review Form 2021-0663 Legistar File ID 9/7/2021 City Council Meeting Date - Agenda Item Only N/A for Non -Agenda Item 8/19/2021 WASTEWATER TREATMENT (730) Submitted Date Division / Department Action Recommendation: Staff recommends approval to pay the 2020 Wastewater Treatment Plants Operations and Maintenance Budget's cost overrun of $362,544 and a budget adjustment. Budget Impact: 5400.730.XXXX-5328.00 Water and Sewer Account Number Fund N/A WWTP Contract PCP Operations Project Number Project Title Budgeted Item? Yes Current Budget $ 7,339,052.00 Funds Obligated $ 7,339,052.00 Current Balance $ - Does item have a cost? Yes Item Cost $ 362,544.00 Budget Adjustment Attached? Yes Budget Adjustment $ 362,544.00 Remaining Budget Purchase Order Number: Change Order Number: Original Contract Number: Comments: V20210527 Previous Ordinance or Resolution # Approval Date: CITY OF FAYETTEVILLE ARKANSAS MEETING OF SEPTEMBER 7, 2021 TO: Mayor and City Council THRU: Susan Norton, Chief of Staff FROM: Tim Nyander, Utilities Director DATE: August 19, 2021 CITY COUNCIL MEMO SUBJECT: FY2020 Cost Overrun on the Annual CH2M Hill Engineers, Inc., Operations and Maintenance Budget and Approval of a Budget Adjustment RECOMMENDATION: Staff recommends approval to pay the 2020 Wastewater Treatment Plants Operations and Maintenance Budget's overrun of $362,544 and a budget adjustment. BACKGROUND: In March 2021, the Utilities Director was informed by the Jacobs staff that the 2020 O&M contract between the City of Fayetteville and CH2M Hill Engineers was over budget by $435,857. City staff and Jacobs staff have been researching the details of the overrun and how it relates to the contract terms. The City staff was both surprised and disappointed by this information, because all budget numbers are tracked on a monthly basis. That tracking indicated an overbudget on labor costs, but it was offset by an underbudget in materials and expenses. This was believed to be the case up to the fourth quarter of 2020, where the contract was running in the black by approximately $7,500. There was no documentation submitted in the monthly reports that indicated funding issues with the 2020 budget. DISCUSSION: In nearly every year of the O&M agreement between the City and CH2M, the City has received a rebate check at the end of the year (See Attachment 1). Between 2007 and 2019 the average rebate was $123,165. In 2019, prior to the 2020 budget the City and CH2M made amendments to the contract that had been in place for so many years without change. The City requested that CH2M "sharpen their pencils" and provide a more tightly estimated cost for operating the plants in 2020. The City felt the estimates were too high, given that some rebates were as high as $500,000. Another change in the contract terms was the budget overages (See Attachment 2). In the previous contracts, if the actual expenditures exceed the total estimated annual expenditures by more than $20,000, specific approval to incur any additional costs must be obtained from the City in advance. Noting that this was a relatively low number in the current climate, that figure was changed from $20,000 to 5% of the total estimated budget. Mailing Address: 113 W. Mountain Street www.fayetteville-ar.gov Fayetteville, AR 72701 The budget ended up going over by 6%. There were miscues made by both the City staff as well as CH21VI staff. The City failed to incorporate a 5% contingency when presenting the 2020 budget to the City Council, and CH21VI did not seek prior approval from the City when it was known that the budget was going to be exceeded by more than 5%. There were 3 factors that contributed to the budget overrun: (1) the changing structure of the 2020 contract, as compared to previous contracts, without making the necessary financial adjustments to the contract, specifically failing to add a 5% contingency to the contract, (2) significant unanticipated labor and maintenance costs, specifically due to COVID (See Attachment 3).and on the biosolids operations (See Attachment 4) and (3) delays on receiving invoices on materials and supplies, and additional overtime due to COVID-19. Going forward, the Jacobs team has incorporated a forecasting tool to anticipate those costs that have not yet been invoiced at the time of the monthly reporting (See Attachment 5). This item was presented to the Water and Sewer Committee on July 13th, 2021. The Committee failed to forward it to the City Council because they had additional questions to be answered. City staff took their questions. At the August 10th Water & Sewer Committee, the staff brought the answers back to the committee. A key question was how much was spent on the thermal dryer in 2020 as compared to 2019. (See Attachment 6). If you remember, in the latter part of 2019 the City Council approved an Out -of -Scope Agreement with Jacobs where they could utilize AIT services for dryer repair without taking it to the City Council, even if the cost was over $10,000, the capital spending ceiling. (See Attachment 7). This resulted in zero dollars being spent on dryer repair in 2020. In comparison, in 2019 $243,913 was spent on dryer repair out of the City's capital funding. The Committee voted to forward the item to the City Council, and wanted two more pieces of information. They would like to see the contract (amount) history over the years (Attachment 8), and the legal ramifications were of not funding the overrun (Attachment 9). Additionally, since CH21VI did not report the 1 % overrun that occurred over the 5% amount, they have indicated they will absorb that cost of $73,313. BUDGET/STAFF IMPACT: Funds from the Water & Sewer Fund Balance will be utilized and moved to the Water & Sewer Fund — Wastewater Treatment Plant Budget to cover this 2020 cost overrun. Attachments: Attachment 1 - Rebate History Attachment 2 - Budget Overages Attachment 3 - COVID Related Overtime Costs Attachment 4 - Non -Labor Expenses Causing Overage Attachment 5- Forecasting Tool Attachment 6 - Dryer repair Costs 2014 thru 2021 Attachment 7 - BMS Dryer OOS Signed Attachment 8 - WWTP Contract History 2010-2021 Attachment 9 - City Attorney Legal Opinion ATTACHMENT 1 CH2M Hill O & M Contract Rebates Past 13 Years Year Amount 2007 $294,246.40 2008 $245,582.50 2009 $504,145.47 2010 $0.00 2011 $3,717.35 2012 $1,113.74 2013 $101,612.22 2014 $39,307.70 2015 $50,424.04 2016 $46,720.11 2017 $63,976.49 2018 $113,857.73 2019 $136,442.35 Average Rebate $123,165.08 ATTACHMENT 2 — BUDGET OVERAGES Previous Terms Should the actual expenditures exceed the total estimated annual expenditures by more than Twenty Thousand Dollars ($20,000), in any year of this Agreement, specific approval will be obtained from the City of Fayetteville prior to CH2M incurring additional costs. FY 2020 Revised Terms Should the actual expenditures exceed the total estimated annual expenditures by more than five percent (5%) in any year of this Agreement, approval will be obtained from the City of Fayetteville. ATTACHMENT 3 - LABOR - OVERTIME OVERAGES Category Admin Biosolids Lab Maintenance Operations SCADA Regional Support 2020 Overtime Costs Budget Actual Variance $5,234 $1,070 $4,164 $26,793 $48,695 ($21,902) $7,713 $8,892 ($1,179) $20,596 $19,064 $1,532 $20,138 $31,292 ($11,154) $7,439 $40,987 ($33,548) $1,270 $5,214 ($3,944) ($66,031) Overtime expenses increased due to COVID related quarantines of employees. Existing Staff was tasked for filling in for absent employees, increasing the overtime costs. ATTACHMENT 4 - NON -LABOR EXPENSES CAUSING OVERAGE Unplanned Costs for the Thermal Dryer Breakdown AIT Services Motion Industries Waste Management Budget Actuals Variance $0 $56,675 ($56,675) $0 $28,370 ($281370) $24,996 $268,247 ($243,251) ($328,296) ATTACHMENT 5 - FORECASTING TOOL FORECASTING FOR EXPENSES Jun-21 WRRF MGMT WRRF EAST OPERATIONS FROG WRRFWESTOPERATIONS PRO6 WRRF LAB &IPP PROG WRRFLIFTSTATION MAINT PROG WRRF BIOSOLIDS MGMT GRANDTOTAL Actuals Forecast Variance 107,494.55 109,019.15 1,524.60 Actuals Forecast Variance 587,041.97 707,949.00 120,907.03 Actuals Forecast Variance 189,936.55 213,079.61 23,143.06 Actuals Forecast Variance 47,285.47 56,199.42 8,913.95 Actuals Forecast Variance 139,929.47 142,449.86 2,520.39 Actuals Foremost Variance 226,384.91 264,104.47 37,719.56 Actuals Forecast Total forecast amount through May 1,298,072.92 1,492,801.51 194,728.59 Budget 1 Forecast 1 1 Budget 1 Foreca 1 Budget I Forecast Variance Budget Forecast Variance Budget Forecast Variance Budget Foremost Variance Budget Forecast Forecasted YTD Variance 126,217.00 109,019.15 (17,197.85) 639,651.50 707,949.00 68,297.50 173,698.00 213,079.61 39,381.61 60,558.00 56,199.42 (4,358.58) 208,371.50 142,449.86 (65,921.64) 276,940.50 264,104.47 (12,836.03) 1,485,436.50 1,492,801.51 1 7,365.01 ATTACHMENT 6 - Dryer Expenses DATE COST SERVICE 9/2/2014 $48,300 Repair parts for thermal dryer 3/1/2016 $72,546 Repair parts for thermal dryer 2/5/2019 $137,918 Repair parts and repair services for thermal dryer 4/2/2019 $47,745 Replace auger & scrubber on thermal dryer 6/4/2019 $58,250 Repair parts for thermal dryer 7/6/2021 $23,550 I Replace solids blender on thermal dryer $243,913 Capital Expenditures in 2019 $0 Due to OOS Agreement no capital expenditures in 2020 Jacobs June 18, 2020 Mr. Tim Nyander City of Fayetteville 113 West Mountain Street Fayetteville, AR 72701 Subject: Out of Scope Letter Agreement- BMS Dryer Subcontract Dear Mr. Nyander In order to facilitate the expedited repair of the thermal dryer at the Biosolids Management Site, the City of Fayetteville (the "City") has requested for CH2M HILL Engineers, Inc. ("CH2M") to perform certain services which are ancillary to the services provided by CH2M to the City under the terms of the Agreement for Operations and Maintenance Services dated December 15, 2009 (the "Agreement") between the parties. The additional Out of Scope services will be performed as set forth below: What is being provided: Capital Expenditures (as defined in Section B.2 of the Agreement) related to the Thermal Dryer Repairs at Biosolids Management site, more specifically allowing CH2M to perform or subcontract performance of repairs to the dryer in excess of $10,000 directly. When it is being provided: The Services will be provided upon approval of this Out of Scope Letter Agreement by the City's Utility Director and continue through December 31, 2020. Price of services: The cost of services under this Out of Scope Letter Agreement shall be in accordance with Section D.2.3 of the Agreement, as it has subsequently been amended.. Payment terms: Invoices shall be paid in accordance with D.2.4 of Amendment 11 to the Agreement dated December 5, 2019. Page 2 of 2 All other terms and conditions of the Agreement, as it has subsequently been amended, between CH2M and The City of Fayetteville remain in full force and effect. If these terms are agreeable to you, please sign both copies of this letter. We will return one fully executed original for your files. CH2M appreciates the opportunity to provide these additional services to the City of Fayetteville. Sincerely, Greg eeks Both parties indicate their approval of the above -described services by their signature below. Authorized CH2M: Name: Steve Carpenter Title: Manager of Projects Date: 06/18/2020 Authorized City of Fayetteville, Arkansas: Date: 9 - -% - Z i 5328.00 - WWTP Contract PCP Operations (2010-2021) Net Before Net After Year Actual Rebate Electric Electric Electric 2010 Actual Amount 6,858,886 - 6,858,886 1,000,000 5,858,886 2011 Actual Amount 6,765,224 (3,717) 6,761,507 1,000,000 5,761,507 2012 Actual Amount 6,656,934 (1,114) 6,655,820 1,036,580 5,619,240 2013 Actual Amount 7,224,875 (101,612) 7,123,263 875,580 6,247,683 2014 Actual Amount 7,441,429 (39,308) 7,402,121 1,148,303 6,253,818 2015 Actual Amount 7,731,966 (50,424) 7,681,542 1,040,751 6,640,791 2016 Actual Amount 7,872,235 (46,720) 7,825,515 1,072,627 6,752,887 2017 Actual Amount 7,807,468 (63,976) 7,743,491 1,150,250 6,593,241 2018 Actual Amount 7,938,833 (113,858) 7,824,975 1,194,972 6,630,003 2019 Actual Amount 6,981,332 (136,442) 6,844,890 - 6,844,890 2020 Actual Amount 7,250,876 - 7,250,876 - 7,250,876 2021 Amended Budget 7,339,052 - 7,339,052 - 7,339,052 2022 Projected 7,672,713 - 7,672,713 - 7,672,713 Estimated $7,672,713. With that, please add a 5% contingency of $383,635. G:\Divs\Water & Sewer Accounting\Agenda Packet Information\DRAFT\090721 CH2M Hill Engineers, Inc. - 2020 Cost Overrun\Attachment 8 - WWTP Contract History 2010-2021 DEPARTMENTAL CORRESPONDENCE ,r4� OFFICE. OF THE CITY ATTORNEY TO: CC: FROM: DATE: RE: Kit Williams Water and Sewer Committee City Attorney Blake Pennington Paul Becker, Chief Financial Officer Assistant City Attorney Tim Nyander, Utilities Director �\ — Judi Batker �( J Paralegal Blake Pennington, Assistant City Attom� August 18, 2021 Payment for CH2M/Jacobs Cost Overruns Paul informed me this week that the Water and Sewer Committee is discussing cost overruns in wastewater treatment operations for the 2020 contract year. The City's 2020 contract with CH2M Hill Engineers, Inc. (aka Jacobs) requires the City to make monthly payments based on an annual Base Fee. Appendix D of the contract (attached) makes it clear that the Base Fee represents CH2M's estimate for the cost of services to be provided to the City based on the scope of services agreed upon for that year. Section 4.3 of the Contract further states that CHUM "will provide a monthly report... reflecting estimated to actual cost" and that a "year end reconciliation shall be performed following CH2M HILUs annual audit and shall be submitted within ninety (90) calendar days of the end of the contract year. Any difference due to City of Fayetteville or CH2M HILL will be paid within thirty (30) calendar days of the annual reconciliation completion." Appendix D also states that "if the actual expenditures exceed the total estimated annual expenditures by more than five percent (5%) in any year of this Agreement, approval will be obtained from the City of Fayetteville." Unless we are disputing the invoices or the reconciliation submitted by CH2M, the City will need to pay them for the actual costs of services even if it exceeds the Base Fee. In the future, staff might consider recommending a 5% project contingency, which would allow for administrative approval of a change order up to that amount. If cost overruns are more than 5% above the Base Fee, staff will have to bring an item to the City Council for approval. City of Fayetteville, Arkansas - Budget Adjustment Form (Legistar) Budget Year Division Adjustment Number /Org2 WASTEWATER TREATMENT (730) 2021 Requestor: Cheryl Partain BUDGET ADJUSTMENT DESCRIPTION / JUSTIFICATION: A budget adjustment is needed for the Waste Water Treatment Plant operational budget to cover the cost overrun for 2020 for the CH21VI Hill Contract. Water & Sewer fund balance monies will be utilized to cover this 2020 cost overrun. COUNCIL DATE: LEGISTAR FILE ID#: 9/7/2021 2021-0663 HoRy 3lac� V20/2021 1:10 PM Budget Director TYPE: JOURNAL #: Date D - (City Council) RESOLUTION/ORDINANCE GLDATE: I CHKD/POSTED: 9/7/2021 TOTAL Account Number 362,544 362,544 Increase / (Decrease) Expense Revenue Proiect.Sub# Project Sub.Detl AT v.20210601 Account Name 5400.730.5100-5328.00 16,608 - EX WWTP Contract - PCP Operations 5400.730.5110-5328.00 5400.730.5120-5328.00 243,553 - 46,682 - EX EX WWTP Contract - PCP Operations WWTP Contract - PCP Operations 5400.730.5130-5328.00 5400.730.5140-5328.00 4,982 - 50,719 - EX EX WWTP Contract - PCP Operations WWTP Contract - PCP Operations 5400.720.4000-4999.99 - 362,544 RE Use Fund Balance - Current K\Budget Adjustments\2021_Budget\City Council\09-07-2021\2021-0663 BA CH2MHill contract 2020 overrunAsm 1 of 1