A new water treatment facility that will deliver clean water to Wichita, Kansas, and the surrounding region for decades to come serves as an illustration of how collaborative project delivery through a two-step progressive design-build process can keep costs reined in even with a demanding schedule, a worldwide pandemic, labor shortages, record inflation, cost escalation and general uncertainty.
When it begins operations in early 2025, the Northwest Water Facility’s $500 million price tag will stand as the single largest capital investment in Wichita’s history. While it is a substantial sum, it nonetheless represents a big win for the city. Not only does it represent significant savings over early budget projections, the schedule discipline maintained over the duration of this multiyear project will result in an estimated $93 million in interest and cost escalation savings for water ratepayers. These savings have been calculated by the EPA, based on the combination of early cost certainty and a 1.17% interest rate that was obtained under a federal financing program for municipal infrastructure improvements.
Critical Milestones
Delivering water at an affordable cost could be considered one of the most pressing responsibilities of any municipality. Yet, the costs of replacing aging systems needed to deliver clean and safe water often exceed the means of many communities. By 2018, those pressures were building for the city of Wichita.
Early in 2018, Wichita officials turned to Burns & McDonnell for a study to evaluate the current state of the city’s water infrastructure, including the city’s existing 80-year-old treatment plant. The study was finalized in May 2018 and confirmed that the plant was at the end of its useful life.
With that conclusion in hand, a budget for a new treatment facility began to be developed. Based on a conceptual design representing approximately 5% of the total engineering that would be required, a $524 million budget was set as a not-to-exceed design-plus-capital cost ceiling.
For the balance of 2018, crucial milestones were set for project development, including a formal procurement process by the city of Wichita to select a contractor to serve as design-builder for the project. The process concluded in February 2019 with the selection of Wichita Water Partners, a joint venture partnership of Burns & McDonnell and Alberici to begin the Phase 1 preliminary design and preconstruction for the project. More than 77% of all contracted dollars have stayed local to Wichita and more than 12% of contracted dollars have gone to emerging, disadvantaged, minority-owned and/or woman-owned businesses.
The city’s procurement process had left an extremely compressed timeline to comply with a series of tasks that had to be completed during Phase 1, with a hard milestone of Oct. 31, 2019, the deadline to apply for federal funding available under the Water Infrastructure Finance and Innovation Act (WIFIA). Administered by the EPA, the program provides low-interest loans for up to 49% of the total budgeted cost of water facilities.
With a hard budget cap of $524 million, the team set to work identifying savings that could reduce the project costs to be submitted for WIFIA funding while meeting the hard budget established more than one year earlier. The collaboration and communication enabled by the design-build process was critical at this juncture as over 20 value engineering and optimization innovations were vetted for positive cost and schedule impact. These value engineering elements saved the city approximately $14 million when compared to the initial budget and scope, including an additional $10 million when the city elected to work with Evergy to self-perform design and construction of an electrical substation that would serve the new treatment plant.
All these savings rolled up to a final Phase 2 contract price of $494.2 million for the final design and construction of the new facility.
Tight Schedule
With a final contract value approved and other requirements met, the WIFIA application was submitted on time and was approved by early November 2019.
If that deadline had not been met, the WIFIA process would have started over, resulting in a delay of at least one year. Because interest rates were extremely low in late 2019, the city was able to lock in substantial interest cost savings over the life of the loan. Had the city been forced to wait until late 2020 to reapply, the interest rates under the WIFIA program would have been at least a percentage point higher.
WIFIA loans must be coupled with other funding mechanisms, and in Wichita’s case that meant applying for funding through the Kansas State Revolving Fund (SRF). This source of funding represented approximately 48% of the project costs, with the remaining amount of funding coming through local revenues.
Both loan applications were successful, thanks to the fact that the project was shovel ready by the time documents were submitted as a result of the progressive design-build approach. This cost and schedule certainty was particularly important in securing the Kansas SRF funding, because draws against the loan must be done annually from funding allocated for that year by the Kansas Legislature. The city and the design-builder worked collaboratively to quickly develop a detailed schedule of values for the project and create cash flow projections based on a detailed design and construction schedule. These actions provided accurate costs measured over time. The resulting evaluation demonstrated that the monthly capital costs by the city and the cash flow necessary for the design-builder could be synchronized and support the SRF’s funding limitations, while still meeting the schedule demands of the project for successful completion.
Added Complications
With financing checked off the list, the next big milestone was to complete site preparation and other steps so construction could commence no later than February 2020. The start date was a key requirement under WIFIA because payments are deferred for five years from the date of loan approval.
As a further complication, COVID was emerging as a global pandemic by February 2020, just as construction teams were mobilizing to the site. Given that the price and schedule were set, the project team utilized the full flexibility of the progressive design-build process by right-sizing design flows and prioritizing deliverables to support the various strategies needed to successfully navigate supply chain disruption, escalation and labor shortages. Working with the state’s regulatory agency, the team was able to break down the work packages through collaboration with the various regulatory agencies over design deliverables that were necessary to secure permit approvals within time frames that would not hold up construction.
Material and equipment costs were also carefully evaluated. Thanks to close collaboration and communication with the city, decisions were made to procure longer-lead-time items to minimize risk of delays in an already tight schedule.
This proactive procurement strategy was a key to success in staying on schedule and within the fixed price established for the contract. Because several key parts of the treatment facility required high-dollar equipment that would take significant time to manufacture and ship, those items were specified and ordered early. Once they arrived on-site, they were stored in a temporary warehouse built specifically for process-related equipment. Proper protected storage on the project site allows required maintenance to be performed until commissioning, startup and handover of the equipment to the owner, an event that starts the two-year warranty period.
Wants and Needs
The collaboration enabled by the progressive design-build process enabled the project team to accommodate several design adjustments to add significant redundancy to certain operational areas. Even with those adjustments, budget discipline was maintained, due to cost offsets achieved through a more economical design of less critical plant features.
Some of those savings were realized through the types of material selected. For example, some of the large piping within the plant called for installation of more expensive ductile iron pipe (DIP), but careful review of the design showed that some sections could be respecified for steel pipe, reducing the delay impact of the fabrication process of DIP. The steel fabricator also qualified as an Emerging Business Enterprise (EBE) under the City of Wichita program, thus expanding the EBE program to new vendors and growing the local capabilities of the program.
Right on Target
By the third quarter of 2024, the project had hit all schedule milestones and stood at about 98.5% completion. Meeting schedule milestones on this highly complex, four-year construction project is a noteworthy accomplishment, particularly because hiccups (i.e., unexpected issues) are commonplace. Thanks to the ability to stage elements of the project with adequate procurement lead times and schedule flexibility resulting from close collaboration with the city and our partners, we have maintained schedule discipline for the entire project duration.
Following performance acceptance testing beginning this fall, the keys to the facility are set to be turned over to the city by April 2025. This complex and highly critical infrastructure improvement will then stand as an illustration of what can be achieved through the power of partnership.
Design-build project delivery resolves many persistent issues facing municipalities as they grapple with large capital investments needed to upgrade and replace aging infrastructure assets.
