Bid Dispute on SAWS’ Vista Ridge Integration Project Could Prove Costly

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A portion of the Vista Ridge project site in the Northside of San Antonio.

Scott Ball / Rivard Report

A portion of the Vista Ridge pipeline project site on the North Side of San Antonio.

San Antonio Water System faces another hurdle for its Vista Ridge pipeline, one that could leave its customers on the hook for hundreds of thousands of dollars per day in water the utility can’t receive.

At its September meeting Tuesday, the SAWS board of trustees voted to approve three construction contracts totaling nearly $70 million as part of its Central Water Integration Pipeline. That’s the name SAWS has given to improvements necessary to begin accepting water from Vista Ridge in 2020.

The board awarded the largest of the three contracts, worth more than $48 million, to Guy F. Atkinson Construction. Atkinson is a Colorado-based subsidiary of commercial and civil contracting giant Clark Construction.

Now, the lowest bidder for the job plans to challenge SAWS’ decision in court.

A joint venture between Oscar Renda Contracting and Southland Contracting submitted a bid for the same job for a little more than $31.4 million – $16.6 million less than Atkinson’s bid. Both Oscar Renda and Southland are owned by Roanoke, Texas-based Southland Holdings.

Before the vote, the companies’ lawyer, Allen Wilson, told SAWS board members that the lawsuit could delay construction by 12 to 18 months if a judge were to grant an injunction in the case.

“Unfortunately, with the award coming today on … this contract, my client is going to be left with no other options than to file a lawsuit,” Wilson told the SAWS board.

In a followup interview after the meeting, Wilson and Southland Holdings partner Rudy Renda cited the huge difference in price between their bid and the bid that SAWS accepted. Renda called it “unprecedented in this part of the world.”

Three other companies submitted bids on the project worth $32.5 million, $45.5 million, and $54.5 million. An estimate by SAWS engineers put the project’s cost at $39.8 million.

“We feel we have provided the best-value bid for this project,” said Wilson, an attorney with construction law firm Sanderford & Carroll. “A critical factor to deciding to file a lawsuit or pursue a claim is feeling confident that the bid package meets the bid requirements set by SAWS and that the bid package does provide the best value.”

SAWS used a procurement procedure that allows it to focus on qualifications and the tight schedule –  not just the price tag – in awarding the contract, SAWS Director of Engineering Alissa Lockett Lockett said. The technical term is a request for competitive sealed proposals.

“We were able to use more than just price as the evaluation criteria,” she said. “Most of the weighting was focused on technical evaluation of similar prior experience, the team, past experience, the project approach, the schedule, and also the resources.”

If the lawsuit delays the project significantly, SAWS could have to pay $220,000 per day for water it cannot receive, SAWS President and CEO Robert Puente  said.

“That water [will cost] us $220,000 per day, and we have to pay for it, period, whether we’re ready for it or not,” Puente said.

By January 2020, according to the Vista Ridge contract, the pipeline’s builder is supposed to begin delivering water to the pipeline endpoint in northern San Antonio. By that time, SAWS also is obligated to have finished upgrading its pipes, pumps, and storage tanks to receive the water. SAWS would have to start paying for the water in April 2020.

That puts contractors on a tight schedule to build the Central Water Integration Pipeline, Lockett explained.

The construction dispute is not the first issue SAWS has faced over Vista Ridge, a roughly 140-mile steel pipeline 4½ feet in diameter that will deliver water to San Antonio from prolific aquifers below Burleson and Milam counties.

The question of who bears the risk for Vista Ridge if the project fails has long been a focal point in the public debate over the controversial project.

During a series of public meetings and hearings over the past few years, Puente and other SAWS officials have repeatedly said that the Vista Ridge contract shields SAWS customers from risk if the private firms building the pipeline fail to deliver. SAWS must only pay for the water that shows up in 2020.

What’s often been left out of the discussion, at least publicly, is the risk that SAWS customers bear from the Central Water Integration Pipeline, the SAWS portion of the project.

Asked about this on Tuesday, Puente said, “It’s a risk just like every other project is at risk.”

“It’s a very manageable risk,” he said. “It’s not something that is totally outside of what we do on a day-to-day basis.”

Puente also said that he conveyed this risk to Council members “every chance I got.”

Capable of annually delivering up to 50,000 acre-feet, or 16.3 billion gallons, Vista Ridge will be the municipally owned water and sewer utility’s most ambitious supply project yet and the largest water transfer in Texas history.

The pipeline suffered a serious setback in late 2015. That’s when the over-extended Spanish energy and water conglomerate Abengoa, which SAWS selected in 2014 to build the pipeline, began bankruptcy proceedings.

SAWS officials at first denied Abengoa’s bankruptcy would affect Vista Ridge, then scrambled behind the scenes to use Abengoa’s misfortunes to their advantage. SAWS was able to lock the price of Vista Ridge water into a lower rate than expected, along with other concessions.

In 2016, Kansas City-based Garney Construction took an 80 percent controlling stake in the project, though Abengoa still retains 20 percent of its ownership. Since then, construction has been completed on a significant portion of the pipeline’s route.

The portion of Central Water Integration Pipeline job awarded to Atkinson will connect Vista Ridge to an existing pipeline through Hollywood Park and Hill Country Village. It involves “the most complicated tunnel project we’ve ever done,” Lockett said.

Lockett said SAWS did not accept the Renda-Southland venture’s bid for two reasons: a construction schedule that did not meet an “intermediate milestone” by a certain deadline and plans to use one tunnel-boring machine drilling in one direction, rather than two drilling at the same time.

However, Renda told the Rivard Report that his bid did include a proposal to use two drilling machines simultaneously. He acknowledged submitting an alternative construction schedule but said they would have been able to finish the project on time.

“We presented a schedule that made more constructability sense,” Renda said. “If we wanted to make it more difficult on constructability, that milestone is easy to make, it just makes the construction more challenging.”

Renda and Wilson both stressed that they did not harbor any ill will towards SAWS or Atkinson, their competitor.

“[SAWS is] a good owner to us, and we’re a good relationship for them,” said Renda, who added that he has been working on these types of projects with for SAWS for 20 years.

Renda’s company is currently working on multiple sewer projects for SAWS, one that Renda says involves a tunneling job that he said is more complex than that of the Central Water Integration Pipeline.

“We have a long history of similar or much more challenging projects with successful client satisfaction and completion,” Renda said.

Wilson said they plan to file a petition in district court in Bexar County “as soon as practical” seeking to have SAWS award the contract to them.

14 thoughts on “Bid Dispute on SAWS’ Vista Ridge Integration Project Could Prove Costly

  1. “If the lawsuit delays the project significantly, SAWS could have to pay $220,000 per day for water it cannot receive, SAWS President and CEO Robert Puente said.”

    So what Puente is saying is he negotiated a bad deal with the water suppliers.

  2. Thank you Rivard Report and Brendon Gibbons!

    We in the “forced donor” communities of Bastrop, Lee, Milam and Burleson counties, deeply appreciate that many San Antonians still care about this and our aquifer, the Simsboro formation.

    I personally hope that San Antonio voters get their rights to petition in order, by passing Prop A. This could have given you the ability to force a public vote on this $3.4B crime against nature and SAWS ratepayers. The other Props, B & C, to get your city manager and city legal in check, are also urgently important.

    Keep up the great reporting!

  3. In other words, SAWS gave the project to who could personally benefit from the award and not to the most qualified low bidder. I’ve seen it done over and over again. Let’s hope SAWS will have to pay for their greed.

  4. How is it that these aquifers are “prolific?” Is water created by a mysterious process deep underground? The flow of 50,000 acre feet seems like a small river or large creek being drained from that area, so whose wells will stop producing and which waterways will have reduced flow or dry up altogether? I suspect this project goes beyond SAWS to banker’s offices in Dallas, Austin, and New York, with SAWS being merely a local point of corruption. Add to this the billions on roads and other infrastructure for northern Bexar County development and the pieces of a grand plan begin to take shape. I predict higher water bills, higher taxes, more cronyism, and lower environmental quality; and deterioration in the “donor” region.

  5. “…….the largest water transfer in Texas history……”
    Sigh….’Its Chinatown’ , without the sex and mayhem which is usually ubiquitous in South Texas. Pity. Somebody please do something about that. Then the San Antonio Express News might do their job and assign a reporter to cover this sordid story.

  6. Councilman Nirenberg, circa 2016: “Nirenberg said on Saturday after his State of the District address. “I am very uneasy about some of the things I’ve been hearing about risk tolerance.”

    The idea that SAWS could take over the project would be “unacceptable,” he said. “The risk is who’s left holding the bag if Vista Ridge fails. For me, and according to SAWS, it was not ever going to be the taxpayer. We’re not okay holding any of the bag. Not half the bag, not a quarter of the bag.”

    Or SAWS, also 2016:

    Another key part of the project, as it was presented to City Council, is that ratepayers will only pay for water that reaches San Antonio – all the risks would be on Abengoa or Garney if it takes over the contract as-is. That’s why the water would come at a premium price.

    If SAWS took over the project, Puente said, the project and the water would be cheaper, but San Antonio ratepayers would be stuck with the bills whether the pipeline is completed or whether water actually reaches their faucets.

    Some members of City Council have signaled that they would be extremely critical of assuming that risk. SAWS Chief Financial Officer Doug Evanson said taking over the project would be a nightmare in terms of finding the capital.

    “That is something that I am not at all interested in doing,” Evanson said.

    And finally, SAWS again said “No risk! No risk!” when Garney took over:
    “Garney’s contract with SAWS is essentially the “same deal” that the SAWS board and then City Council approved in 2014, said SAWS Vice President of Governmental Relations and Water Resources Donovan Burton.

    “One thing that really sticks out to me is how much of everything is the same,” Burton said. Most importantly, it retains the same “risk profile,” that is, if the project fails or if there is no water delivered to San Antonio from Burleson County through the pipeline, SAWS does not have to pay.”

    P.S. Don’t forget that SAWS Water Supply rates are scheduled to go up by around 45% in 2020, to pay for the “no-risk” Vista Ridge project.

  7. SAWS is spending $9M (23%) more than their own engineers estimate. I believe this fact alone communicates their incompetence to evaluate experience and assess risk. They could have taken the lowest bid and been 70 days late and still come out ahead.

  8. Why will a governmental agency select a high bidder and over pay such a large amount to an out of the state construction company?

    1. it wastes public funding and that is a breach of public trust by SAWS.
    2. Giving the project to an out of state contractor takes local jobs away and reduces local tax revenue.
    3. The extra $16.6 million can do a lot of good for the local community and instead SAWS gives it to an out of state contractor. Who do you think SAWS management is working for?

    This is a bad deal and someone in the media needs to report it and possibly becomes a national news for governmental waste.

  9. Sounds to me like someone is going to get a kickback for awarding this job to the high bidder rather than the lowest bidder. They are all qualified to build the project.

  10. This is absurd! Sounds like an inside deal to me! As a saws customer I personally don’t want to pay extra for the under the table deal that awards this job to the 48,000000.00 company! There is no reason not to award to lowest bidder who has proven track record! Corruption as usual….. way to go sAWS for thinking of your customers and community!

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