Guest Column | November 28, 2016

Innovations Bring Southern Delivery System Online On Time And Under Budget

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Colorado Springs Utilities creates the modern-day blueprint for pipeline project delivery with the timely completion of the historic Southern Delivery System.

By John Fredell

In an era when many water projects are stalled in the permitting phase, water utility managers can learn from Colorado Springs Utilities (CSU), which in 2016 completed one of the largest recent water projects in the West both on time and $160 million under budget.

Getting the $825 million Southern Delivery System (SDS) water project to the finish line this year required a management philosophy that embraced innovation every step of the way. From value engineering to strategic procurement, concurrent permitting to proactive stakeholder engagement, the SDS team was creative and aggressive in keeping the project moving forward.

SDS is a regional project now serving four southern Colorado communities: Colorado Springs, the state’s second largest city, and the neighboring communities of Fountain, Security, and Pueblo West. Operating since April 2016, the project can deliver up to 50 MGD, piping water 50 miles uphill from Pueblo Reservoir.

While value engineering is not new to water infrastructure projects, few projects have embraced cradle-to-grave value engineering as thoroughly as SDS.

The components of SDS include a new connection to Pueblo Reservoir, 50 miles of mostly 66”-diameter pipe, three raw-water pump stations, a water treatment plant, and a finished water pump station. In a future second phase, the project can be expanded, when demand for water increases, and calls for building two reservoirs and expanding the capacity of the raw-water pump stations and the water treatment plant to deliver more than 100 MGD.

A Time-Sensitive Permitting Approach
Like most water infrastructure projects today, SDS required extensive permitting and approvals. For example, the Environmental Impact Statement (EIS), required under the National Environmental Policy Act (NEPA), took almost six years to complete. Additionally, hundreds of federal, state, and local permits were required before construction could begin. Remarkably, SDS was able to complete permitting and construction in 12 years.

That’s because, rather than taking a linear approach to permitting, acquiring one before embarking on the next, the SDS management team adopted a concurrent permitting strategy. The process to obtain critical permits, such as a complex controversial local land use permit and a 404 permit required under the Clean Water Act, started while the EIS was being finalized and prior to the issuance of the Record of Decision (ROD). By managing permitting through a rolling, concurrent timeline, SDS was able to begin construction only a year after its ROD was issued.

A Blended Management Team
CSU recognized early on that the complexity and size of the SDS project warranted a unique delivery approach. MWH Global, Inc. was selected to provide significant program management support in a number of areas where CSU did not have in-house expertise. The team of public and private sector employees was integrated and co-located in CSU offices.

Hiring an outside firm to support project management allowed CSU to bring expertise on board for the duration of the project. The team melded MWH’s globally experienced consultants, who had built very large infrastructure projects, with the CSU staff’s knowledge of the project, political considerations, and the needs of the partner communities. Additionally, MWH had no financial stake in changes to design or construction, so the firm’s engineers were empowered to link arms with their CSU counterparts to innovate to deliver best value projects, instead of hiring the entire team in-house and being forced to have layoffs at the completion of SDS.

A Unique Delivery Approach
CSU and MWH shared a common vision of achieving the best value for every portion of the project. To that end, they used the strategies of continuous value engineering, strategic procurement, and stakeholder outreach and engagement to succeed.

Construction components were divided at the onset of construction into more than 20 separate work packages to encourage local bidding and competitive pricing. With a project the size of SDS, only a handful of international companies could have completed the entire project, but project leadership committed to ensuring that at least 30 percent of the work went to local companies. Using local businesses facilitated competition and negotiation and ultimately cost savings. It also gave local communities a vested interest in seeing the project get funded and built.  

SDS leadership then set high expectations and stringent budget requirements for each work package. Design engineers were assigned a “design-to” monetary value, wherein designs had to meet specific performance criteria at a price 10 to 20 percent lower than conceptual design estimates. Value engineering ideas were then evaluated and documented at 30 percent, 60 percent, and 90 percent of design. If the contract involved competitive bidding and bids came in far below initial budgets, project managers deposited the difference in a management reserve account and expected the project to be built at the best-value bid plus 5 percent. If change requests came in over a limit, project managers had to justify the change before a committee that included the top managers. As a result, the program achieved a very low cumulative change order rate of 3.2 percent based on final construction.

Inside the new Edward W. Bailey Water Treatment Plant

Continuous Value Engineering
While value engineering is not new to water infrastructure projects, few projects have embraced cradle-to-grave value engineering as thoroughly as SDS. The team adopted a philosophy that “these are ratepayer dollars” and, therefore, examined every work package to carve out cost savings for customers. The project was launched by a value engineering workshop that included a multidisciplinary team that debated everything from the number of pump stations to the layout of the water treatment plant. Prior to the groundbreaking, the team reduced the cost of the project by $50 million. As SDS progressed, dozens of other money-saving innovations were identified. The most significant cost savings resulted from value engineering strategies used in planning and building the water treatment plant and raw-water pump stations.

The SDS water treatment plant carried the highest price tag of any project component, with an original cost estimate of approximately $190 million. Early in planning the water treatment plant, the plant’s operators were consulted on the design. The team expressed concerns about the size and layout of the campus, citing multiple buildings as costly to construct and operate. These concerns were taken into account in later iterations of the design, reducing the number of buildings and the plant’s overall footprint.

Value engineering was also integrated into the water treatment plant procurement process. Contractors bidding on the work were directed to include comprehensive value engineering concepts within their technical proposals. As a result of further creative ideas generated during this process, the construction costs for the water treatment plant were reduced, and the project was completed at $124.6 million, a 34 percent savings from the initial estimates. The cost savings never came at the expense of water quality or capacity, which met requirements throughout the duration of project construction.

The SDS management team used a similar approach in building the three raw-water pump stations. Changing from horizontal to vertical pumps allowed for shrinking the physical footprint of the pump stations and, in combination with other progressive ideas, reduced the estimated costs by $24 million.

When it came time to procure the pumps themselves, the SDS team wanted machines that struck the best balance between capital costs and life-cycle operating costs. Manufacturers were requested to estimate operating costs given the SDS project conditions for 30 years, and their estimates, as well as projected electricity costs, helped determine which pumps provided the best value. In addition, the selected pump manufacturer had to meet or exceed efficiency projections or face a dollar reduction in their contract. Interestingly, all pumps exceeded those benchmarks.

Strategic Stakeholder Engagement
In addition to advancing value engineering to a whole new level, SDS gave stakeholder engagement as high a priority as the technical, legal, and permitting aspects of the project. Opposition and negative public relations issues can create costly construction delays and derail the project’s goal of an on-time, under-budget delivery. While many project managers believe they make stakeholder relations a priority, rarely do they give this function the strategic importance it deserves.

Miles of large pipe set for installation

Before the first shovel of dirt was turned, the SDS communications team spent significant time educating the public on why the project was needed, how local communities would benefit, and how impacts would be mitigated. The communications team branded the project with the tagline “Water for Generations” and gave it a unique logo and project-specific website, which emphasized the benefit customers would derive from the project now and into the future. The website also provided detailed financial information, which included a monthly report that tracked spending against the approved budget.

When it came to crossing private lands, the team conducted considerable outreach to affected property owners to ensure they were listened to and informed. While several SDS permits dictated requirements about communications and outreach, project leadership committed to going above and beyond requirements to better inform nearby stakeholders. The pipeline crossed more than 270 parcels, which included homes, ranches, and government-owned land.

An innovative public involvement approach was tailored to meet the needs of individual property and business owners. Two property owner liaisons worked closely with residents and business owners and were available 24/7 to discuss and resolve concerns in a timely manner. House visits and a staffed hotline gave residents access to a project team member around the clock.

To keep people apprised of every step of this part of SDS construction, letters and door hangers were used to notify all affected neighbors living within 1,000 feet of construction about upcoming activities. Established construction update pages on the website, e-newsletters, fliers, printed newsletters, and other communications tools were used to inform businesses, schools, and homeowners of construction activities.

Through this proactive approach, successful relationships were built and maintained with business and property owners, even in neighborhoods that were heavily impacted by construction. SDS avoided any delays in construction due to public complaints or organized opposition.

Innovations at each stage of the SDS process led this critical project to completion, and the timing could not have been better. Just months prior to completion, project partner Pueblo West encountered a break in the single pipe that delivered water to its 11,000 households and businesses. SDS was able to deliver water early to the community, for the second time, and avert a water emergency. Then, within months after SDS went online, partners Security Water District and the City of Fountain had to eliminate their use of well water due to exceedances to an Environmental Protection Agency Health Advisory for perfluorinated chemicals (PFCs). With SDS infrastructure in place and the ability to transport more surface water, these water providers were able to deliver clean water to their communities. SDS has already proven its worth in less than six months of operation.

Very few infrastructure projects come in on time and under budget. SDS did both. SDS puts Colorado Springs and its partner communities in a strong position to support population growth and prepare for drought and improves their systems’ reliability. While SDS faced its share of challenges, the project has been a very good return on investment and a resounding success.

About The Author

John Fredell has served as the program director for the Southern Delivery System (SDS) since September 2007. In that role, he is responsible for planning, permitting, and construction of the SDS, a major water delivery system that will bring water from the Arkansas River to Colorado Springs and its project partners. John has been with Colorado Springs Utilities since 1993 and has been closely involved with SDS development since 2002. He holds a Bachelor of Science degree in finance from Oklahoma State University with a minor in economics, as well as a Juris Doctorate from the University of Oklahoma.