Contract language that could save desal project
Ed Mitchell
Monterey Herald
09/23/2011
Quick fixes can convert the existing desalination water purchase agreement from a one-sided contract into a fair one for Peninsula ratepayers so needed water is delivered by 2016.
But to achieve a workable, long-lasting contract, the current partners must delete the clauses that gave them sole governance, all the benefits, no cost controls, no risks and assigned ownership of the $300 million desalination plant to the Marina Coast Water District (MCWD).
Within a month, motivated parties striving to cooperate can easily change 5percent of the contract clauses in the 89-page agreement. Let's consider four sample rewordings that split work tasks, benefits, risks and controls between desalination partners at a more equitable cost-benefit to the ratepayer.
1. Governance: The partnership shall be composed of four partners, including a Peninsula partner, MCWD, Monterey County and Cal Am. The Peninsula partner shall represent the ratepayers and shall have three votes on the governance council. The other partners shall have one vote each. The Peninsula partner is composed of two mayors and the chairman of the Monterey Peninsula Water Management District, each having one vote.
2. Ownership: Cal Am ratepayers shall pay for the new desalination infrastructure at a rate approved by the Public Utilities Commission. The water management district shall own the desalination plant. Marina's district, the MCWD, shall design, construct, test, operate and maintain the desalination plant in exchange for reduced water charges during the first 12 years of the agreement. MCWD shall cost share any construction overrun beyond 7 percent of the governing partner's approved-to-build cost estimate or beyond the operation and maintenance cost estimate. MCWD shall pay 15 percent of all overruns.
The water management district shall audit the financial performance of the desalination plant's design, construction, test and operations and maintenance not less than once every three years. The district has sole authority to select which firm performs the audit, which must be publicly reported within 15 days of completion.
3. Costs: MCWD shall conduct a 30-day open competition of program management providers. Sixty days after the competition begins, the district shall provide the governing partners its summary evaluation of each provider. The district shall also conduct a 60-day open competition of desalination technology providers. Ninety days after the technology provider competition begins, the district shall provide the governing partners its summary evaluation of each provider. By majority vote, the governing partners shall select the winning providers based upon best value to the public, with risk and management experience able to outweigh lowest cost.
MCWD's evaluation of desalination technology providers shall rate their approach against the following factors: total build and test costs, estimated five-year operation and maintenance cost, months until first 1,000 acre-feet of desalinated water are to be produced, past experience delivering desalination technology, technology maturity, cost/schedule overrun risks, and in-county hires during the first five years.
