Sewerage scheme to be fast tracked
1 Dec 10
Editor’s note: The following are extracts from Shoalhaven City Council Business papers.
In breaking news an official Heads of agreement has been signed between the Council and the selected land owner.
The Kangaroo Valley Sewerage Scheme has progressed to a critical stage where Council has to expedite the next phase of works quickly if it is to meet the SCA (funding) deadline of June 2012.
Since negotiations commenced with the owner of Site C1 in January 2010 a number of activities have been running concurrently in an attempt to secure a site for the Scheme facilities and to obtain approval to proceed to design and construction phase.
Along with the above-mentioned works, staff have been considering procurement options to place Council in the best position to achieve the scheme deadline and to allow the best value outcomes within the current constraints.
The current Scheme estimate is $18 million which comprises the following.
* Preliminary Works (Strategy, EIS, Community Consultation, Geotech, Survey, Option Development, Value Management, and Project Management - $1,650,000
* Tender documentation – $166,000
* Design and Construction - $13,565,000
* Land Matters - $800,000
* Scheme Contingency – $1,800,000
Council has expended approximately $1.15 million on the Kangaroo Valley Sewerage Scheme thus far.
There has been a reluctance to make further large expenditure commitments until the Scheme risks were considered manageable.
According to the project program, the construction of the Scheme will take a minimum 12 months. When projecting the program back from the deadline (based on SCA funding sunset of June 2012) this means that construction needs to commence by June 2011, approximately 8 months from now.
The design component is expected to take four months, therefore needs to commence by March 2011.
To achieve this Council would need to resolve the award of a design and construct contract at its February 2011 Ordinary Meeting which only leaves the next three months from now to prepare tender documents, tender, evaluate tenders and prepare a tender evaluation report. This period includes the industry Christmas closedown period.
As demonstrated above, if Council is to have any chance of achieving this program it must commence preparation of tender documentation as soon as possible, on the assumption that the Scheme will be Approved and a Heads of Agreement will be signed in the very near future. Work must also commence on the access road design in order to achieve road construction.
Background
The Kangaroo Valley Sewerage Scheme has been in progress for many years, from a Strategy Study completed in 1998 through to an Options Development Report in 2006 and Scheme EIS in 2008.
The EIS assessed the preferred Site at that time (Site D3) and the Scheme was subsequently approved by the determining authorities in December 2008.
Negotiations then proceeded with the land owner in an attempt to develop a Heads of Agreement. These negotiations ran for the following 12 months and included additional water balance studies for an alternative cropping regime and investigations for a supplementary water supply.
These negotiations ended on 24 December 2009 when the land owner advised Council he was no longer interested in scheme participation.
The breakdown of these negotiations essentially set the Scheme back two years (the preparation of the EIS and Heads of Agreement negotiations and resume new negotiations).
At that point in time the Scheme appeared to be in extreme doubt.
Council, at its Ordinary Meeting on 21 December 2009, resolved that staff investigate all options available to expedite the timely completion of the Scheme. This resolution was a result of the protracted negotiation process and was just prior to the owner of Site D3 declaring no further interest.
As a result of this resolution staff investigated three options and reported the outcomes to Council at its Ordinary Meeting in February 2010. The investigations included meetings in January 2010 with potential participating land owners. These meetings resulted in only one land owner being particularly interested in Scheme participation and negotiations have been concentrated around this owner.
Council resolved at its February 2010 (in Confidential) meeting to negotiate the purchase of part of the subject land and pursue a signed Heads of Agreement.
Ongoing negotiations were held with the land owner regarding the area of land to be acquired for the treatment facility/reclaimed water storage.
A formal valuation was sought from Walsh and Monaghan for the subject land to be acquired and this was the start point for negotiating the acquisition. As a result of a progress update report to Council to its March 2010 (in Confidential) Ordinary Meeting, Council resolved to investigate the option of acquiring the land for both the treatment facility and irrigation area. The intent of this resolution was to investigate an alternative to address concerns of Council relating to risk to sustainability of the scheme in the event that unforeseen circumstances are realised.
This was identified in a risk workshop held on 18 March 2010 in which a number of existing scheme management arrangements were investigated.
A further valuation was obtained for this scenario and negotiations were held with the land owner on this basis. The land owner advised staff at a meeting on 19 May 2010 that they did not wish to proceed with the acquisition of the irrigation land. It appeared at that time the only way the scheme would proceed was based on a model similar to REMS.
The risk to sustainability identified by Council would be overcome by the creation of an easement for the construction of a future pipeline, if necessary. Staff negotiated this risk management alternative with the land owner and it was agreed.
Following further negotiations regarding the acquisition Council resolved at its Ordinary Meeting (in Confidential) in June 2010 to make a formal offer for the purchase of part of Lot 54 DP788146 and associated easements.
With the above taken into consideration, Council was then in a position to finalise a Draft Heads of Agreement for consideration by the land owner. The draft was prepared with the assistance of Council’s Legal Services Manager and forwarded to the land owner for consideration on 29 July 2010.
One of the main issues raised related to access to the treatment facility and the potential impact on the surrounding land owners (that use the existing right of way).
The owners are generally agreeable with the acquisition and negotiations are on-going.
Discussions have also been held (25 October 2010) with regard to early access to the site for design and construction because of the access issues. This was generally agreed as well.
Running concurrently with all the above was the environmental assessment for the Scheme alterations. These studies were required to supplement the original EIS prepared for the original proposal at Site D3.
Consultant GHD was engaged in June 2010 to undertake a Review of Environmental Factors. These studies addressed issues specific to site C1.
A Draft REF was submitted in September 2010 and has been reviewed by staff.
Given all the above, the scheme has now progressed to a stage where some certainty exists with regard to the scope of works and staging requirements. A Procurement Workshop was therefore held on 8 October 2010 to determine the best procurement strategy.
The aim of the workshop was to review the scheme risks and determine the most appropriate work packages to deliver the Scheme within the tight timeframe.
Key Issues:
Council has undertaken extensive studies and negotiations over the past 8 months, as outlined above. These works have left the Scheme in a vulnerable position with regard to SCA funding and Council resolution is sought to proceed as quickly as possible.
The key issues for the Scheme moving forward are as follows.
REF Finalisation and Scheme Approval
The Scheme, as currently proposed, is not Approved.
As discussed previously a Draft REF has been prepared and feedback provided to the consultant.
No major issues have been identified in the REF and all issues can be overcome by applying the appropriate mitigation measures. It is recommended that the REF be placed on public exhibition for a period of three weeks and accept submissions for a further two weeks.
A full copy of the REF will be available for Councillor’s information.
Barring any major issues emanating from the exhibition, Council would then seek concurrence from the Determining Authorities to Approve the Scheme. A separate report would then be provided to Council should the Determining Authorities concur.
Neighbouring Land Owner Negotiations
Neighbouring land owners have had reservations with regard to a number of Scheme aspects, particularly with regard to the aesthetics of the proposed treatment facility and access to the facility. These owners have been kept up to date with progress by way of Newsletters and meetings.
Staff offered to escort these land owners to an operating MBR Plant at Pennant Hills Golf Club. The Plant has a similar capacity to that proposed for Kangaroo Valley and is housed in a farm type shed. Three land owners attended with Shoalhaven Water staff in October and indicated they were suitably impressed.
It is now envisaged that all issues the surrounding land owners had have now been overcome and it is anticipated they would not oppose the proposed Scheme.
It should be acknowledged that Mr Chittick has also undertaken much consultation with the surrounding land owners, and this has been greatly appreciated. His commitment to the scheme has been a key component of the progress made to date.
RECOMMENDATION
Recommended that
a) The Review of Environmental Factors (REF) be placed on public exhibition for a period of three weeks and accept submissions for a further two weeks.
b) In accordance with Section 55(3) of the Local Government Act, due to the extenuating Circumstances (being the time constraint on the Scheme completion), the tender process will not be used for the preparation of tender documentation for the access road construction and pressure sewer system / MBR Plant / Reclaimed Water Storage design and construction.
Community Strategic Plan:
1.6 Sustainable Water Supply and Sewerage Services Providing Responsible Community Returns.
1.6.1
Delivery Program:
1.6.1.6
Options and Implications:
Council needs to decide how it wishes to proceed in relation to the Kangaroo Valley Sewerage Scheme. At this point in time:
1. Council may resolve not to proceed with the Scheme due to the risk associated with funding.
Implications: Based on consultation undertaken, the majority of the community appear to be supportive of the Scheme and the abandonment of the scheme at this stage is not recommended. The current site for the treatment facility was the top ranked site from the Option Development phase. Should the Scheme be abandoned now, a future opportunity may not arise at this site. It should also be highlighted that this is realistically the last available site and option for the scheme under the subsidy funding agreements.
2. Council can still proceed with the scheme planning and therefore needs to decide how it wishes to proceed on 2 points – the exhibition of the REF and the next tender/design documentation phase.
In regards to the REF Council can:
3. Resolve not to exhibit the REF as it is not required by legislation.
Implications: The local community have taken a strong interest in the scheme and may feel that Council is bypassing their interests.
The proposed exhibition of the REF would only delay the scheme if the recommended concurrent activities proposed in this report were not undertaken.
4. Place the Review of Environmental Factors (REF) on public exhibition for a set period and accept submissions for a set period.
In regards to the tender/design documentation phase Council can:
5. Resolve to procure the tender document preparation by open tender.
Implications: As discussed in the report the tender process would take a number of months and would further jeopardise Council’s ability to deliver the Scheme by the current deadline of June 2012.
6. Fast track the documentation preparation phase by not calling tenders and resolve this in open Council, with reasons.
Report Details:
# A labelled plan has been provided as an attachment which shows the existing right of way and the scheme components referred to in this report.
Background:
Scheme Procurement
The Scheme procurement was considered at a procurement workshop on 8 October 2010. The aim of the workshop was to review the scheme risks and determine the most appropriate work packages to deliver the Scheme within the tight timeframe.
The Scheme comprises the following works:
In order to achieve the Scheme deadline the procurement workshop determined that the access road needs to be designed and constructed prior to commencement of construction of the treatment facility and reclaimed water storage. It also determined that the pressure sewer system, transfer main, treatment facility and reclaimed water storage be tendered in one design and construction package.
Given the project complexities and time constraint, it is essential that tenders be called very soon after Scheme Approval. Prior to calling tenders, significant tender documentation preparation is required and it is recommended that this be commenced prior to Approval. The only way this can be achieved is to make a direct engagement.
Traditionally Council has sought a single proposal from NSW Public Works (formerly Department of Commerce) for the large subsidised schemes.
As previously discussed, GHD have been involved in the scheme through the original EIS phase and the recent REF (including the access road concept). They have developed a high level of knowledge of the Scheme and its issues and sensitivities. Their performance with the REF preparation was particularly high, producing the draft within strict time constraints and within budget.
GHD have an office in Nowra and have a large and diverse employee base to draw from. It is therefore recommended to engage GHD to prepare the following:
• Tender documentation for the access road construction.
• Tender documentation for the major design and construct contract (including pressure sewer, treatment facility and reclaimed water storage)
This documentation ideally would have been prepared prior to now through a tendered process. Given the uncertainties, complexities and risks associated with so many aspects of the Scheme it was not previously possible to develop a clearly defined scope of work.
GHD were requested to provide an estimate to undertake these works. The estimate provided was $166,000. This is subject to detailed review, however it is considered reasonable given the technical nature of the project.
To date Project Management of the Scheme has been undertaken by NSW Public Works and more recently by Shoalhaven Water staff. This role can be maintained internally until the Scheme is formally Approved.
Resourcing Implications – Financial, Assets, Workforce:
As mentioned in the report, the viability of the Kangaroo Valley Sewerage Scheme depends on funding from SCA and the State Government (through NSW Office of Water).
The funding from SCA under its Accelerated Sewerage Program has a sunset clause of 30 June 2012 applied to it. This will place great pressure on resources to achieve the deadline. Further reports will be provided to council regarding contracting strategies to achieve this outcome. The Scheme currently has a high enough priority to receive funding under the Country Towns Water Supply and Sewerage Program. Council, under this program, is required to fund pre-construction costs until such time that it receives approval to call tenders for design and construction. Sufficient funds have been allocated in the 2010/11 budget to cover these costs.
prior to commencement of construction of the treatment facility.
Community, Environment (ESD), Economic and Governance Impact:
The report outlines the extensive consultation undertaken with key stakeholders.
Further consultation will be undertaken as part of the public exhibition and submissions from the REF. Negotiations are still to be finalised with regard to the Heads of Agreement and access to the treatment facility site. Conclusion:
Shoalhaven Water staff have been undertaking a number of concurrent activities over the past ten months since the owner of Site D3 indicated he no longer wished to participate in the scheme.
Negotiations with a new landowner (Site C1) are advanced and negotiations are continuing with owners of neighbouring properties with regard to access to the Scheme treatment facility.
An environmental assessment has been undertaken on the new Site C1 as a supplement to the original EIS. The REF indicates that there are no significant impacts and suggests mitigation measures to counter all impacts. It is recommended that Council publicly exhibit the REF for three weeks and receive submissions for a further two weeks.
In order for Council to achieve the Scheme completion deadline of 30 June 2012 it is recommended that the engagement of GHD for the preparation of tender documentation be undertaken without tendering.