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CITY OF COOS BAY CITY COUNCIL
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| | | | | | | | This item was previously discussed at Joint URA/Council Worksession on 12/22/2020 |
| | | | | | | | | | | | MEETING DATE
January 5, 2021 | AGENDA ITEM NUMBER
10. |
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| | | | | | | | | | TO:
| Mayor Benetti and City Councilors
| | | | FROM:
| Jim Hossley, Public Works and Community Development Director
| | | | THROUGH:
| Rodger Craddock, City Manager
| | | | ISSUE: | Discussion Regarding Next Steps for Jacobs’ Wastewater System Operations and Maintenance Contract Amendment 4 | |
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| | | | | | | | | | SUMMARY:
In order to determine the next steps for the operations, maintenance, and management (O&M) of the City’s sewer system, Council requested, at the December 22, 2020 work session, staff provide costs for three options: 1) Hybrid Option – Jacobs perform O&M of treatment plants and pump stations ($2,322,849) and the City self perform O&M of the collection system ($712,002) for a total cost to the City of $3,034,851, 2) Jacobs Option – Jacobs perform O&M of the entire sewer system (including collections) for a total cost of $2,423,085, and 3) City Option – City self perform O&M of the entire sewer system (collections, treatment plant, and pump station) for a total cost that ranges from $2,509,813 to $2,687,599. Each of these options is discussed in more detail below. | |
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| | | | | | | | | | ACTION REQUESTED:
If it pleases Council, discuss the options and provide staff with direction. | |
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| | | | | | | | | | BACKGROUND:
At this time, per the direction from Council at the December 1, 2020 Council meeting, staff is implementing the transition to self-perform the operations, maintenance, and management (O&M) of the wastewater collection system. At the December 22, 2020 Work Session, Council discussed options for the next step as it relates to the O&M of the sewer system. Council requested staff investigate costs for three options: 1) Hybrid Option – Jacobs perform O&M of treatment plants and pump stations and the city self perform O&M of the collection system, 2) Jacobs Option – Jacobs perform O&M of the entire sewer system (including collections), and 3) City Option – city self perform O&M of the entire sewer system (collections, treatment plant, and pump station.
Staff has worked with Jacobs on obtaining costs for Options 1 and 2. Jacobs has stated they could further reduce their cost for the Hybrid Option if city Vacuum Trucks could be available for emergencies and/or scheduled activities. They have further stated they will honor the 11% management fee for the remainder of the contract. Currently the contract is for a 10-year term and Fiscal Year Ending 2022 (Amendment 4) is year 5 of the contract term. Therefore, including FYE 2022, there are 6 more years that the 11% management fee would be honored.
The Hybrid Option involves the city only self performing the collections portion of the sewer system in FYE 2022 and continue with Jacobs for O&M of the treatment plants and pump stations. City staff has determined a budget of $712,002 will be needed to self-perform the O&M of the collections system. Jacobs is proposing to reduce their overall contract by $91,000 which will put Amendment 4 (fiscal year ending 2022) at $2,322,849. This option has a total cost of $3,034,851. While Jacobs did offer to negotiate their Amendment 4 further, it does not appear this option is cost effective.
The Jacobs Option assumes they will continue to perform O&M services of the entire sewer system including collections, treatment plants, and pump stations. This option has a total cost of $2,423,085 and assumes 17 full time employees.
The City Option involves the city terminating the Jacobs' contract and self-performing O&M services for the entire sewer system. The option has a cost range of $2,509,813 to $2,687,599. The reason a range was provided for the City Option is because it is unknown at what step each employee will brought in at. The high range assumes the top step but this has not been common practice therefore, for a more realistic comparison, staff utilized a step 4 salary structure for the entire 17 full time employees (exempt employees have 6 steps and non-exempt employees have 7 steps).
It is true that Jacobs appears to be the lesser of the two but there are other considerations that should also be factored. Having a contract operator, regardless of who that is, will always pose transparency problems. The contract operator has a company to answer to and often times this is what drives their decision making process, rather than considering what is best for the city. There has also been deferred maintenance on our system. Much of the maintenance cannot be ignored anymore as it has serious impacts to the system and the cost to repair this now, as opposed to performing routine maintenance over the life of the project, is significantly more. An example of this is the recently submitted Jacobs’ fiscal year ending 2022 list of projects. These projects are deemed necessary by Jacobs in order to meet permit and keep up the system, contractually this list is due every year to the City. Staff uses this list to budget Fund 3. The projects on the list are each greater than $10K, as this would fall under their repair budget, and less than a capital improvement project. This year Jacobs is proposing over $1M in projects and staff has never seen a budget this high proposed by Jacobs. When reviewing the list of projects, many of them can be attributed to deferred maintenance. These projects include broken and failing pipes on the headworks and primary clarifier at plant 1, portions of plant 1 administration building roof in “disrepair”, hypochlorite building at plant 1 needs door and window replacement with a full pluming overhaul, and replacement of failed pumps (these pumps have been down for numerous years unbeknownst to city staff) are just a few examples.
While there are other reasons, the deferred maintenance compounded with the fact that Jacobs has difficulty retaining staff at all levels are reason enough to consider this private-public partnership is no longer working to the benefit of the city. While initially, it appears the operations and maintenance costs may be more than if managed by the city, there are other costs that are difficult to calculate that may compensate for the increased self perform costs: vested interest by city in-house staff, money stays in Coos Bay, city has full access to their records at all times, and decisions can be made with city’s, not a corporation’s, best interest in mind.
Next Steps – Staff has discussed this extensively, and while staff acknowledges Jacobs has made significant improvements, staff is frustrated the city has had to get to this point (multiple times) in order for the improvements to happen. The city has had to take drastic measures to make Jacobs perform their contractual obligation (performed third party audits at the city’s expense, issued several notice of breach letters, hired consultants to prepare transitions plans and explore the city’s options, and lastly self perform the collections O&M because Jacobs’ service has been so poor). While staff understands the immense challenge associated with self performing both the collections and operations O&M, staff wants to assure Council if they decide to self-perform the O&M of the entire asset, staff is up to the challenge, and feel strongly they have the right resources and support in-house, and have external consultants currently in place to make this transition successful. | |
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| | | | | | | | | | BUDGET IMPLICATIONS:
Budget numbers have been provided above.
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