[speaker not understood] a detailed report we present to this body and the public as well as in today's packet. what we've engaged this consortium to do is look at those two questions as part of two major review tasks. in our first task we determined overall whether or not the program would be on time, on budget. we drill down heavily into five major projects which constitute about $1.5 billion or about a third of the total program costs as a way of getting a more in-depth view overall of the program without having to look at every single project. our evaluation determined through the consulting firm [speaker not understood] that some programs will be on time and on budget and some will not. where we looked most heavily at the ones that will not be on time, on budget, two types of

projects come out as representative of why they will not come in on time and on budget. those ones are difficult sites, terrain physically is difficult to build in and hence it was not anticipated there were additional costs and time delays that are associated with it. another one is challenge of working in both a challenging site and the challenge of working with a difficult contract partner. the most important thing to come out of the study is the program, due to one project, calaveras dam replacement, will cause the overall dam to be late and will cause the overall program to be over budget. however, if you were to remove that project, that project due to its unique geologic circumstances were taken out of the total program, overall, all programs will be on time and on budget. that's good to know. it's interesting to know, it is

important to know. and it allows for staff and this commission to weigh more heavily where the areas of potential need to be paid in order to stay on time and on budget. >> on that point you raise the issue of a difficult contract partner. what does that mean? >> there are two other projects. the calaveras dam from oured r he understanding from independent review and also program staff ~ is that that partner is actually a good partner. they've had actually built relations, they've had a collaborative cooperative process in which they engage to change orders and the challenge s due to the difficult geological terrain. it is more difficult to build the dam on a site because of geological reasons. the other two factors which i can go into in more detail, were due to a partner that -- a contract partner -- and i think staff can go into it in more detail. from our understanding was

basically initiating a number of change orders that may or may not have been founded. and through that challenge of whatnot, requiring for additional information, requiring for additional attempts at trying to change what they can bill for, that made it difficult to actually solve the problem and try to figure out what the total overall budget. >> a difficult partner implies increasing the cost will not necessarily justify it. >> that depends whose perspective that is. the contractor will say that is actually quite fair. staff may see otherwise. we have an independent body are trying to look at it independently of whose perspective that is. >> on those two other projects where you have found difficult contract partners, ~ you have conclude that had staff was correct? >> we concluded that because it is a difficult partner relationship with the correcter, obviously it's going to be a challenge to get on time and on budget. >> so, how would you recommend dealing with these kinds of issues in the future? >> that's an interesting question.

we're taking the best practices from these types of studies and applying it to csip. wsip, we are towards the maturity stage of where these types are being completed. we can't swap out a partner. i think that would be very difficult. it would be actually mission uncritical to do so. it will actually jeopardize the o & r program to do so. i think what we can do is take -- if [speaker not understood] select the partner, this particular contract, maybe if they came in with the lowest bid, but made the low bid did not account for the fact there would be other challenges. but given the public bidding environment, that may be a challenge how we actually do that. nonetheless, i think the answer is we need to take those lessons and a reapply them especially since csip is fundamentally larger and more extensive program than wsip. >> can i add something? one of the things that we did really take in consideration, we did pre-qualification where we looked at, you know, claims

and things like that. although you identify, you know, a contractor that you feel through the pre-qualifications, they actually -- you entertain the most responsive -- responsible bid -- bidder and we do partnering, we do all these things. but it's not 100%. and i think we are experiencing a contractor that maybe financially had some incentives to try to maximize changes and stuff like that. and, so, that's why we have our staff to minimize it. so, i think those are the challenges that your -- partner that you're referring to. >> right. >> even when we looked at the actual change orders, vis-a-vis the contract tool bid, it's not like they try to double the contract bid. it's a percentage and it's a marginal percentage at that. and the base question, why have such a difficult relationship when actually the net value to either the contractor or the program cost is so minimal, it

may be helpful. that's a different type of challenge than, let's say, somebody that is brought in through purely contract terms. i think the contract language can be placed that will prevent a lot of spinning of the wheels here, quite frankly, to try to get what the contractor ultimately wants, which is a bit of money for the deal. getting back to the overall program, i think staff would give more detail about exactly where, when, and how build out program will be readjusted, given these project challenges. the actual detail report is given here. i can go into details of the report. i think the next question that is more germane is will there be additional anticipated deliberate costs aside from the actual capital costs from the overall program. when those costs are what we

call soft costs. [speaker not understood]. if you look at page 11 of the presentation, program deliberate costs are things you probably can imagine such as project management, environmental review design, these are up front that can lead into the overall delivery cost as the program -- as the project is not closed out. but it's the other overhead costs that can drive unanticipated out of budget costs. that's where staff is paying particular attention. and the fact the baseline for some projects have to be readjusted to accommodate some of these more challenging projects to looking at the soft costs as the area which we need to both contain if possible achieve savings. ~ and if possible that is an area we asked staff with help with the consultant to identify the areas where they can actually contain the cost and hopefully achieve some degree of savings against what

was originally the budget. those areas of opportunity have been identified. they are in the process of being implemented. what with rbac would do over the next 6 and 12 months is to dive deeply into those key areas that drive the majority of savings that are needed in order to bring in into alignment where the adjusted baseline of the budget will be. and we anticipate to actually go through into that. and with all the additional consulting help, to be able to bring back an answer to both the puc, the board, as well as the public around the areas of whether or not we will indeed have these costs contained and the savings achieved that are being identified by staff currently. we make a number of recommendations. i think we will continue to make recommendations to staff. i think we have a very good rbac and staff have a good working relationship where when

challenging questions are presented, staff are quite forthright and quite forthcoming in how they present those answers and we've made a number of suggestions around where we can contain the cost, ensure accuracy around the budget, and where the baseline will be. and more importantly, be able to fulfill our own site responsibilities per proposition. so, therefore, i think that we'll come back to this body again either [speaker not understood] annual report or sooner if this body deems it necessary so that we can report where [speaker not understood] baseline has been adjusted, how accurate we are, and on time and on budget with the new baseline, and also with the additional anticipated costs will be contained as anticipateded. >> any questions? i just want to thank you, mr. chairman, for your hard work and please relay our gratitude to the other members of the committee ~ for authorize work. >> thank you. >> appreciate that very much. >> thank you.

>> public comments on the revenue bond oversight committee annual report and audit findings? there being none, we'll move to the consent calendar. are there any items that members want to remove? there being none, yes, mr. poe. there are a number of items. he wants to speak on five items. >> on the consent calendar, it's 10 a, c and d. actually, it's just a general comment that pervades some of the other items. i've spoken before about environmental review with respect to the environmental review of those three items. and i believe elements of 11 and 12. there is reference in the cover page about the determination of environmental review, but there's no attachment and the resolutions make general reference without, in some cases -- well, there is data in

one case, but not the city planning file number. when i try and chase down the environmental review documents it proves very difficult. as the board of supervisors is considering both the wiener and kim legislation to change chapter 31 of the admin code, i think it would be good for us to get ahead of that and to either list as attachments those documents where they're short, or at a minimum, to include the city planning item number and information where someone can find those determinations. i just think it pulls together the environmental review aspect of these projects. i'm not suggesting that the staff has done anything wrong. i just think that this is a piece that [speaker not understood] group can deal with. this really wasn't with respect to the fundamental calendar items. >> so, you've communicated those concerns to members of the staff? >> i have started to. arena is not here so i can't communicate that to her.

i can certainly talk to [speaker not understood] and see that that -- and michael to see that that happens. >> mr. carlin, mr. cruz? >> yes, mr. carlin, mr. cruz. >> for the record, make sure we know who we're talking about. >> i appreciate that, president torres. >> all right. any other questions? >> thank you. >> we'll see you back in a minute. any further public comments? commissioner? >> i have a question, i don't want to remove it, 10 a. . >> 10 a. ~ i just want to understand the nature of that project. i do know we are doing some pilots, community garden pilots, and i'm not sure who should answer [speaker not understood]. is this going to be something that we're really -- as part of our pilot process, to activate public land for public purpose? is there going to be sort of a documenting and monitoring of this program and project and how did it come about? >> good afternoon, [speaker not understood], real estate director. this project came to my attention from the mayor's office, which is sponsoring a

revitalization of ocean and phelan avenue. it's called the project is called the ocean-phelan loop. ~ so, it's a revitalization of different store front and the community garden was actually in place when i was hired. so, i went out and inspected it and it's a very small group of people with a very small plot of land, 4,000 square feet. it corrects an area, i don't want to use the word light, but could use some scenery. so, we decided to grant the permit. but this is not part of what [speaker not understood]. >> great. i'm all for it. >> so, when are they going there? >> [speaker not understood]. >> when? >> yes, i haven't been out there in a year. >> i thought it was sustainable food products, but no. >> are they edibles, are they for sale? >> i can get back to you on that. i think they're just

plants. [multiple voices] >> or just garden. i think it's just a garden. >> decorative element for the area. >> yes, decorative element. >> great, thank you. >> you're welcome. >> any other question on any item on the consent calendar? >> i'd like to move the calendar. >> thank you. second? would be grateful, second. all those in favor signify by saying aye. >> aye. >> all those opposed? motion carried. all right. we're on to the regular business and i'd like to ask mr. cruz and -- to come forward on item 11. >> item 11 is a public hearing: discussion and possible action to approve the project-level scope, schedule and budget of the march 2013 revised water system improvement program and direct staff to send a notice of change report to the california joint legislative audit committee, the california department of public health and the california seismic safety commission in compliance with california assembly bills 1823 and 2437, and authorize the general manager to seek board of supervisors' approval for the re-appropriation of existing funds as needed and the supplemental appropriation of $54,927,412 in new funding. >> right, ms. labonte, i think you're part of this presentation as well. >> yes. ~ mr. >> ladies and gentlemen, [speaker not understood]. by way of introduction i'd like to take [inaudible] and actually acknowledge the people that have worked on the wsip

program. taking your advice, mr. president, i'd like to toot our own horn on this particular program. >> good. >> programmatically, we're over 70% through the program. as the oversight committee report stated, if we take out one of the programs or one of the projects within the program that had an unforeseen underground site condition, one of the most challenging types of projects to do which is an earth ban, the entire program would be under budget, having spent over 70% to that point. and that i think is a tribute to mr. kelly's leadership when he held my position and mr. labonte's direction as a program director. ~ having said that, we have completed negotiations on the calaveras dam change order with the contractor. so, we've completed the negotiations on the hard dollar costs associated with that change. and based on that, we believe it is an appropriate time to come back, update you on where we stand and put forward for your consideration for revision to the overall programmatic budget and schedule.

given what we know, given the fact that we've completed negotiations, we were actually making specific recommendations on how to move forward with the program in its completion from a budgetary and schedule perspective. it has been suggested that we should present options to you, colluding the option of doing nothing. at this point it is our recommendation that we have enough information to layout a course of action to present to you for your consideration today at the end of which obviously, if you have any questions, we can go into more detail. but the detailed presentations will be made by ms. labonte. and if you have any questions for either of us when she's done, we'll be here. >> thank you. ~ >> good afternoon, commissioner -- let me switch. does this one work? yes, okay. i'll be closer to the computer here. so, this is a public hearing for the consideration of revisions to the water system improvement program. and as a whole, these revisions

are referred to as the march 2013 revised wsip. your packet today includes several documents that support our request to revise the program, and also included in the commission packet is a letter from bawsca dated april 17th, which includes comments on our proposed wsip provisions. so, why is it that we have to revise the program? it is not unusual for a program of this complexity to go through revisions periodically. as project moves through the various phases of pre-construction and then into construction, new information becomes available and new challenges are also oftentimes encountered in the field. revisions to our schedule and budgets then need to be done to incorporate this latest knowledge understanding and analysis. these revisions also allow us to

identify some of the project savings that can be used to compensate for project overruns. and despite the fact that we have identified a number of savings on several projects, the current approved wsip budget is inadequate. so, with revisions to that budget must be made so we can secure the funding required to complete all our projects. the california water code also requires that we seek your approval for schedule revisions when schedule delays cannot mitigate it. so, doing nothing about our budget shortfalls means that at some point eventually we would run out of funding and would have to stop some of our projects in the middle of construction. in our view, this is an irresponsible approach as abandoning projects during construction could expose us to liabilities associated with early termination of construction contract. also, given the fact that we only have three projects in

pre-construction, we have very limited options of cutting projects before they transition into construction. this is also an option that we believe is undesirable. keep in mind that if we were to do nothing or cut any projects, we will no longer be able to achieve the los goals that were established for the system. now, the proposed revisions that are before you today are the culmination of the two-month comprehensive review of all our active projects. that assessment involves active participations from all our project teams. many of the infrastructure division top managers as well as aecom, our program construction management consultant. the assessment to a great extent focuses on three kia expect of the programs, construction costs, delivery costs, and project schedules. all our project managers were required to justify all proposed revisions and final review meetings that were

attended by key members of the wsip management team including myself. as mentioned, the progress has been made on the program to date, especially in recent year. as a whole, the program is not 72% complete based on expenditures to date and this is a percent completion that is measured against the proposed budget if we were to measure against the lower current budget that is in completion with the over 75%. we have completed construction on 60 of the wsip 82 projects and records of our monthly man-hours she we past the peak of construction this past august. only three projects remain in construction. two of those are water supply project and one is a seismic reliability projects. now, the next three slides, we provide a snapshot of what has been accomplished in the

program over in recent years. starting with our treatment projects, construction has been completed and all the projects that are highlighted in blue and construction has yet to start or is ongoing on the projects highlighted in green. so, you can see here that we have completed construction on two of the four treatment projects and with construction being now 98% complete of the slope plant, before long we will only have remaining work at the harry tracy water treatment plant. construction has been completed on four of our six storage projects, as indicated here, the calaveras dam project is now 39% complete. ~ the regional groundwater storage project is one of the three projects remaining in pre-construction and it is now in the later stage of design and environmental review. [speaker not understood] progress has also been made on all our transmission projects as indicated by the amount of

blue on this slide. all these completed projects have already added significant delivery to the seismic and delivery reliability of our system. five transmission projects with significant seismic delivery reliability -- seismic reliability objectives remain, and you can see here on this slide our two ongoing tunnel projects are the only two remaining segments needed to complete the new life line being built around the bay. and the new tunnel there is 79% complete, while the bay tunnel is slightly further ahead at 81% complete. so, shown here is a high-level summary of the changes proposed as part of the march 2013 revised wsip. major scope changes are proposed on two projects. the scope changes on the calaveras projects are due to the deferring geological conditions discovered in mid

2012, while a different and simpler design concept is being proposed for the alameda creek recapture projects. >> is this different from what you presented before? in terms of revisions? >> no. this is more dash on calaveras, commissioner, this is going to be more the final numbers. >> you drilled down to the final numbers? ~ >> exactly. what i briefed you on previously was what [speaker not understood], but now we have negotiated the numbers. so, these are more solid numbers. >> thank you. >> okay. so, on the second bullet there, we have -- you have actually already approved that vegetation restoration of wsip construction site project in october. so, in reality we do not have any project addition as part of this program revision. we are proposing a revised program completion date of april 11, 2019, that represents an eight-month extension over

an approved current wsip schedule. and we are also proposing new program -- revised program budget of 4.64 billion, which will present a 54.9 million dollar or 1.2% increase over the current budget. now, what' important here is that none of these proposed revisions will result in a reduction to the level of service goals to be achieved through the wsip. however, they will result in a delay of when these goals will be fully achieved. although we are proposing to extend the program until april 2019, only two projects will extend past july 2016. and this is why we are committing to phase out all program resources by mid 2016, and allow these two remaining projects to be completed independently. the completion date for the calaveras m project is the same as what you adopted in january

of this year -- woops, excuse me. and although the new design concept for the alameda creek recapture project is simpler and will result in less intoews i have improvements within the creek, the implement station schedule will be longer because it will likely require a pilot study to be completed prior to the start of planning and design. the schedule of that project, which includes a total extension of 33 months, is now controlling the overall wsip schedule. the schedule of that project is tied to the calaveras dam schedule because the intent of the recapture project is to recapture flows from the calaveras dam and these flows cannot be released until certain improvements are being completed as part of the calaveras dam project. we have asked the project team, by the way, to try to accelerate this recapture project and look at different options to do so.

the program level budget changes proposed -- before i go there, sorry. on the schedule delays, there is also other schedule delays of significance and they're shown here. and by the way, this slide is slightly different than the one that is in your packet. the 12-month delay on the san joaquin pipeline system is due to outstanding claims on one of the three projects issued as part of this project. the nine-month delay on the san antonio pipeline back up is due to the extension of the deesign phase that include several [speaker not understood] that impacted the environmental review. ~ the eight-month delay of the csa transmission upgrade project is due to very challenging conditions encountered in the field, including some different site conditions associated with very complex under water work on that project.

and finally, the five-month delay on the seismic upgrade on bdl 3 and 4 is to avoid conflict with other projects being bid at the same time. and also delays for the relocation of conflicting utilities that has to be done by the union sanitary district. now, here is a program-level budget -- level change proposed as part of the march 2013 revise wsip. the second column shows the current approved budget, while the third column shows our proposed budget. the proposed budget for regional project has an increase of 76.3 million. this is partially offset by 21.4 million decrease in the budget for the local projects. overall, our proposed budget is 54.9 million over the current

approved wsip budget. now, we have told you already that some savings are forecasted at a number of projects and they will help compensate for overruns. what you see here are the largest cost savings and the largest cost increases. the new design concept for alameda creek involves a much simpler physical, extensive physical improvements so we were able to realize $21 million in saving there. the low number of change orders and the amount of progress made on the bay tunnel has allowed us to redistribute some of the contingency available on that project. so, we have $20 million there. a recent low bid on the beta vision pipeline 3 and 4 also allowed us to save $13 million on that project. and we have also -- have been able to cut significantly our program management costs by phasing out consultants and

city staff more quickly. looking at increases, of course, $88 million in the increases for calaveras is due to the different deferring geologic condition, also the need to replenish the contingency fund for that project. i mentioned the field challenges associated with the underwater work with the csa transmission upgrade project that has resulted in increases of 29 million. the $50 million increase on the regional groundwater project includes increases in both the delivery and construction costs . and finally, a better definition of the major elements of the peninsula pipeline project has led to the $11.5 million increase. the project cost now is based on a 65% estimate whereas before it was based on a much more preliminary estimate.