U.S. ENVIRONMENTAL PROTECTION AGENCY (EPA) & MAJOR PARTNERS'
LESSONS LEARNED FROM IMPLEMENTING EPA's PORTION OF THE
AMERICAN RECOVERY AND REINVESTMENT ACT:
FACTORS AFFECTING IMPLEMENTATION AND PROGRAM SUCCESS
COST ESTIMATING
SEPTEMBER 2013
EPA-100-K-13-009
PREPARED FOR
U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF THE CHIEF FINANCIAL OFFICER
WASHINGTON, DC
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ACKNOWLEDGEMENTS
This study could not have been possible without the help and cooperation of the many
U.S. Environmental Protection Agency (EPA) employees at Headquarters and Regional
offices who agreed to be interviewed, state staff and funding recipients who
participated in lively focus group sessions, and the many other EPA and state staff who
graciously provided answers to follow-up questions after the interviews and focus
groups were completed. The Science Applications International Corporation (SAIC) Team
appreciates the time given to share experiences beyond all the other audits and
questions. The recollections of those 'working in the trenches' during the intense period
of American Recovery and Reinvestment Act (ARRA) implementation were invaluable in
this study.
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TABLE OF CONTENTS
EXECUTIVE SUMMARY 1
PURPOSE 1
METHODOLOGY 1
FINDINGS 1
Clean Water and Drinking Water SRF programs 1
Super/and 2
RECOMMENDATION 3
SECTION 1. INTRODUCTION 5
1.1 PURPOSE/OBJECTIVES OF THIS STUDY 5
1.2 BACKGROUND 6
1.3 STUDY QUESTIONS 7
SECTION 2. METHODOLOGY 9
2.1 METHODOLOGY FOR CWSRF AND DWSRF PROGRAMS 9
2.1.1 Review Existing Documents 9
2.1.2 Select States and Conduct Focus Group Discussions and File Reviews 9
2.2 METHODOLOGY FOR THE SUPERFUND PROGRAM 10
2.2.1 REVIEW Existing Documents and INTERVIEW EPA Staff 11
2.2.2 CategorizeD Superfund Projects 11
Categorized By Completed Projects 11
Categorized by Type of Funding Mechanism 12
CategorizeD by Project Activity 12
2.3 STUDY LIMITATIONS 12
SECTIONS. FINDINGS 15
3.1 FINDINGS FOR CWSRF AND DWSRF PROGRAMS 20
3.1.1 Cost Estimating Approaches 20
3.1.2 Cost Estimating Timing 22
3.1.3 Cost Variance Factors 24
3.1.4 Project Scope Changes 27
3.1.5 Results/Impacts of Cost Changes 32
3.1.6 Summary of Lessons Learned/SAIC Observations on CWSRF and DWSRF Cost
Estimating 33
3.2 FINDINGS/OBSERVATIONS FOR THE SUPERFUND PROGRAM 35
3.2.1 Background 35
3.2.2 Cost Estimating Approaches 37
3.2.3 Cost Estimating Timing 38
3.2.4 Cost Variance Factors 38
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3.2.5 Project Scope Changes 39
Process to Address Work/Cost Changes 40
3.2.6 Results/Impacts of Cost Changes 40
3.2.7 Summary of Lessons Learned/SAIC Observations on Superfund Cost Estimating 41
3.3 RECOMMENDATION 41
REFERENCES 43
TABLE 1. STUDY QUESTIONS FOR COST ESTIMATING PRACTICES 7
TABLE 2. STATES SELECTED FOR Focus GROUPS 10
TABLES. REGIONS INTERVIEWED FOR SUPERFUND PROGRAM 11
TABLE4. COST ESTIMATING STUDY QUESTIONS WITH BIG PICTURE FINDINGS 15
TABLES. STATE CONTINGENCIES ALLOWED IN COST ESTIMATING 22
TABLE 6. TIMING OF COST ESTIMATE PREPARATION 23
TABLE 7. SUMMARY OF COST DEVIATIONS (FROM STATE-PROVIDED DATA) 24
TABLE 8. CASE STUDY LOCATION AND PROJECT DESCRIPTIONS 27
TABLE 9. CASE STUDY VALUES FOR PROJECT BIDS AND CHANGE ORDERS 29
TABLE 10. TYPE OF COST VARIANCE FACTORS IDENTIFIED FOR PROJECT CHANGE ORDERS 31
TABLE 11. NUMBER OF ARRA SUPERFUND PROJECTS AND FUNDING BY REGION 36
TABLE 12. COMPLETED REGION 8 ARRA-FUNDED SUPERFUND SITE FUNDING DETAILS 39
FIGURE 1. PERCENTAGE CHANGE IN PROJECT COST BY PROJECT TYPE 30
FIGURE 2. SUPERFUND PROCESS 35
APPENDIX 1: COMPLETED ARRA SUPERFUND PROJECTS BY REGION, FUNDING MECHANISM, AND PROJECT
ACTIVITY APPENDIX 1-1
APPENDIX 2: IOWA STATE Focus GROUP SUMMARY APPENDIX 2-1
APPENDIX 3: LOUISIANA STATE Focus GROUP SUMMARY APPENDIX 3-1
APPENDIX 4: MONTANA STATE Focus GROUP SUMMARY APPENDIX 4-1
APPENDIX 5: NEW YORK STATE Focus GROUP SUMMARY APPENDIX 5-1
APPENDIX 6: NORTH CAROLINA STATE Focus GROUP SUMMARY APPENDIX 6-1
APPENDIX 7: OKLAHOMA STATE Focus GROUP SUMMARY APPENDIX 7-1
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EXECUTIVE SUMMARY
PURPOSE
This study seeks to examine the methods used for estimating costs of Clean Water and Drinking Water
State Revolving Fund (CWSRF and DWSRF) and Superfund projects funded by the American Recovery and
Reinvestment Act (ARRA). This study compares estimated costs to final project costs, with the objectives
of capturing successful approaches, determining the factors that contributed to variations between
estimated costs and final project costs, and identifying lessons learned.
METHODOLOGY
EPA contracted with Science Applications International Corporation (SAIC), and its subcontractor Toeroek
Associates, Inc. to review both estimated and final costs of CWSRF, DWSRF and Superfund projects funded
by ARRA. SAIC used two different approaches to review cost estimates and compare them to final costs,
one for the CWSRF and DWSRF programs, and one for Superfund. One major reason for the different
approaches was that the SRFs are primarily state-managed with cost estimates performed by localities
and utilities using the grant funds for clean and waste water projects, while the Superfund sites were
primarily federally managed.
For the SRF programs, SAIC performed the following activities: reviewed existing studies and information
on cost estimates; conducted state focus groups and reviewed state files with project-specific data;
analyzed nine individual projects' field change orders to assess their impacts on costs and scope; and
analyzed the data obtained from the focus groups and file reviews.
For the Superfund program, SAIC reviewed existing studies and information on Superfund cost estimating;
collected additional information on completed Superfund projects; interviewed EPA Superfund staff; and
reviewed and analyzed collected information and interview results.
FINDINGS
Upon completion of this study, SAIC prepared several observations and noted lessons learned from the
cost estimating process for EPA's consideration for both SRF and Superfund projects.
CLEAN WATER AND DRINKING WATER SRF PROGRAMS
The ARRA funding program favored projects that replaced existing infrastructure. These
relatively routine projects minimized the likelihood of costs increasing beyond original estimates
and typically did not require significant environmental review. ARRA funds enabled much-needed
maintenance of wastewater and water infrastructure, which often are the largest capital assets
of many communities. An ample supply of qualified contractors and laborers for this type of work
led to an increase in the number of competitive bids, which lowered costs.
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Flexible scopes (e.g., replace aging pipelines in a generally defined area) allowed the quantity
of work to expand or shrink to match the estimated cost. The length of pipeline replaced or the
number of meters installed could be increased or decreased to fully utilize the funding available
without exceeding the funding amount.
Cost estimates for a project evolve over time and each successive cost estimate adds its own
value to the process. Accepted engineering practices are used to prepare cost estimates. These
practices are uniform from state to state. Estimates become more accurate with each iteration,
which provides useful information to the SRF programs. There is not some 'better' approach that
could be used to prepare cost estimates. The tight time constraints created by the one-year
deadline to be under contract often favored projects with more developed cost estimates.
States generally identified prevailing economic conditions as the most significant factor
contributing to variances from costs estimates. In the early part of the ARRA program,
commercial construction dropped off significantly because of difficulty in obtaining loans for
commercial and residential construction. This increased competition for municipal projects.
Grantees received many more bids for ARRA-funded projects than they had previously received
for similar projects. This increased competition reduced bid costs below earlier estimates.
States developed and implemented procedures to ensure ARRA loans closely matched
estimated project needs. The procedures implemented included: working with the grantees
during project development to enable a better understanding of project goals and contribute
their engineering experience in a collaborative manner; basing loan offers on project bid costs;
providing contingency amounts for construction to account for unforeseen circumstances; using
non-ARRA SRF funds for contingency amounts (money not used could be returned to the non-
ARRA SRF account); encouraging grantees with excess available funding to utilize the excess
money to improve the project (e.g., purchasing spare parts) while staying within allowable
expenditures; and prohibiting the use of ARRA funds to cover cost over-runs.
SUPERFUND
The program has one standard method for cost estimating but the accuracy of the bids is
dependent on variables such as the quality of data known about the site. Factors that improve
cost estimating include a better defined site with fewer unknowns, timing of the estimates
(prepared closer to commencing the project) and understanding the extent of contamination.
Less complex sites lead to more accurate cost estimates. Smaller and less complex sites or
activities (e.g., road building) are easier to cost and lead to more accurate cost estimates.
Advanced sites with existing activities lead to more accurate cost estimates. Even complex
sites with remediation underway lead to better cost estimates then those initially presented in
the Record of Decision (ROD). The extent of contamination is better understood by this point and
the contractors are experienced with the site.
Superfund adapted more easily to ARRA deadlines and influx of funds. TheSuperfund program
adapted more easily to the influx of ARRA funding because it had ongoing and shovel-ready
projects or projects that had been through the ROD process. This allowed for more accurate and
timely cost estimating.
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Existing contracting vehicles simplify award without changing scopes. The process to award
tasks was simplified as each Region had pre-existing remediation contracts/contractors in place,
ready and experienced with many of the sites or types of projects.
RECOMMENDATION
Provide forum for successful approaches. States in the focus group discussions described several
techniques used to minimize differences between cost estimates and final project costs. EPA could
provide a forum for sharing these techniques among states.
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SECTION 1. INTRODUCTION
In February of 2009, Congress passed the American Recovery and Reinvestment Act, aimed primarily at
making new jobs and saving old ones, stimulating economic activity and long-term growth, and fostering
accountability and transparency in government spending. Of the $787 billion authorized in the Recovery
Act, EPA was given $7.2 billion. EPA distributed the majority of its ARRA funds to states in grants and
contracts to support clean water and drinking water projects, diesel emissions reductions, leaking
underground storage tank cleanups, Brownfields development and Superfund cleanups. This was a
massive undertaking for EPA. The administration of the funds, which were to be injected into the
economy at an unprecedented pace, required that EPA develop or revise policies, processes and
automated information systems. In the fall of 2011, EPA tasked Science Applications International
Corporation (SAIC), and its subcontractor Toeroek Associates, Inc., to design and conduct a study to
examine several components of EPA's implementation of ARRA. The SAIC Team studied three
management topics - Cost Estimating processes, Funds Management processes, and Systems
enhancement and development. The Team also looked at three topics geared more towards outcomes
than management processes. These include the Green Project Reserve initiative, the use of ARRA funds to
spur Innovative Technologies, and the use of ARRA funds to Leverage Local Economic Benefits. After
completion of the research phase, the SAIC Team produced a series of six reports, each covering one of
the six topics noted above. The Team also prepared a separate overarching summary report with an
Executive Summary, containing highlights of each of the six reports, as well as a description of the goals
and methodology for the entire study.
1.1 PURPOSE/OBJECTIVES OF THIS STUDY
This report describes the results of a study that examined the methods used for estimating project costs
by funding recipients under ARRA and compared the estimated costs to final project costs. The objective
of this cost estimating study was to capture successful approaches and to understand the factors that
caused the variations in estimated costs. Because EPA provides grants based on estimated project costs,
it is important the Agency obtain cost estimates that will reflect as accurately as possible what the final
costs will be, and understand what factors may contribute to differences between estimated and final
project costs. This study endeavored to identify the factors that had the greatest impact on variances
between the cost estimate and final project cost. Broadly, the study attempted to answer the following:
Cost Estimating Approaches: What cost estimating approaches do funding recipients use for
developing project cost estimates, and why?
Cost Estimate Timing: What effect does the timing of the cost estimate have on the project
outcome?
Cost Variance Factors: What cost factors influence differences between initial cost estimates and
final costs?
Project Scope Changes: What changes were made to the contract after award but prior to
project completion as the result of scope changes such as field change orders?
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Results/Impacts of Cost Changes: What are the results and impacts of changes between initial
cost estimates and final costs?
Lessons Learned: What are the lessons learned in cost estimating practices?
1.2 BACKGROUND
The $7.2 billion from ARRA was the largest single investment of dollars in EPA's history and is almost twice
EPA's historical annual grants awards of approximately $4 billion each fiscal year. Congress passed ARRA
during a period of economic downturn and uncertainty. To rapidly stimulate the economy EPA faced tight
deadlines to obligate and expend ARRA funds. EPA's largest ARRA appropriations - $6 billion for Clean
Water and Drinking Water State Revolving Funds (CWSRFs and DWSRFs) - had to be put under contract by
funding recipients within one year of ARRA passage (i.e., by February 17, 2010). This one year under-
contract deadline was a great challenge to federal, state and local project CWSRF and DWSRF recipients
trying to estimate project costs, because the component costs (i.e., labor, materials and energy) were
fluctuating in a weak economy and the cost estimates had to be completed in the first year.
Approximately 91 percent of the ARRA funding of $7.2 billion received by EPA was for the Clean Water
State Revolving Fund (CWSRF) (approximately $4 billion), Drinking Water State Revolving Fund (DWSRF)
(approximately $2 billion), and Superfund programs ($600 million). Therefore, this study specifically
focused on these three programs - Clean Water, Drinking Water and Superfund.
Cost estimates for clean water (i.e., wastewater treatment) and drinking water projects are typically
based on past experience of the funding recipient, or others, in doing similar work. For example, a funding
recipient planning a pipeline replacement project may base the estimate on other pipeline replacement
work he or she has done. Adjustments can be made for differences in the length or size of the pipes in the
new project. Other adjustments may be made for increases in contractor costs due to inflation, land
acquisition, material cost increases, and associated costs such as insurance, engineering, contract
administration and construction supervision. A contingency allowance is typically provided to cover
unanticipated additional costs.
For Superfund projects, a cost estimate is developed for each remedial action alternative as part of the
Feasibility Study. When the preferred alternative is selected, the cost estimate is refined as the remedial
design is further developed. Costs of construction activities are typically estimated on an element-by-
element basis. Contractor markups such as overhead and profit are generally included in these cost
elements, rather than listed separately in the capital cost summary. Contractors also typically add a
contingency as a percentage to the total cost of construction activities. Professional/technical services are
typically estimated as a percentage of the total cost of construction activities plus contingency. Additional
background on the Superfund program is provided in Section 3.2 Findings/Observations for the Superfund
Program.
The intent of cost estimating is to have an estimate that accurately reflects what the final cost of the
project will be. Problems occur when final costs differ significantly from the original estimated cost. If the
actual costs end up higher than the original cost estimate, the funding recipient may require additional
funding, or in extreme cases, may not be able to complete the project. In other cases, the actual costs
may end up being lower than the estimated costs.
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1.3 STUDY QUESTIONS
SAIC included a set of study questions in a scoping document for the Cost Estimating study. These
questions are reproduced in Table 1. Table 1 contains overarching questions and more detailed questions
intended to help answer the larger questions. The questions relate to cost estimating approaches, cost
estimate timing, cost variance factors, and project scope changes for DWSRF and CWSRF projects as well
as Superfund projects.
TABLE 1. STUDY QUESTIONS FOR COST ESTIMATING PRACTICES
STUDY QUESTIONS
Cost Estimating Approaches: What
cost estimating approaches do
funding recipients use for
developing project cost estimates,
and why?
Focus AREAS
Cost Estimation Process
DETAILED STUDY QUESTIONS
What were the estimates based on? For
instance, standard construction tables, EPA
guidance, similar work done at the same site or
work done at other locations?
Why do the funding recipients use their
selected approaches versus other approaches?
What are the pros and cons of these
approaches as seen by the funding recipients?
Cost Estimate Timing: What effect
does the timing of the cost
estimate have on the project
outcome?
Cost Estimate Timing
What was project status when the Recovery
Act funding became available?
What projects used already-developed cost
estimates and applied for SRF funding?
What projects had to develop cost estimates to
apply for the Recovery Act funding?
Was the cost estimate prepared before or after
the project went for bid?
Cost Variance Factors: What cost
factors influence differences
between initial cost estimates and
final costs?
Causes for Variance
For projects with cost decreases or increases,
what factors influence these differences? For
example, did any of the following factors cause
cost differences?
Available contractor capacity
Contractor experience
Field change orders
Environmental factors (weather events)
Geographic locations
Material costs
Ongoing projects versus projects initiated
with ARRA funding
Project timeframe
Project category
Schedule changes
Time lapse between design completion
and construction start
Treatment site guidelines become more
stringent (e.g., change in cleanup
standards)
Unforeseen subsurface conditions.
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IDY QUESTI
IETAILED STUDY QUESTIO
Project Scope Changes: What
changes were made to the
originally funded project?
Scope Changes
What changes were made to the contract after
award but prior to project completion as the
result of scope changes and field change
orders?
Did project changes affect project costs?
Results/Impacts of Cost Changes:
What are the results and impacts
of changes between initial cost
estimates and final costs?
Cost Variance Impacts
What is the result if the final project cost is
higher than the initial funded estimate? Is:
Additional funding sought?
The scope of the project changed?
The project schedule extended?
For projects with no cost changes, how are
project scopes adjusted so that the initial cost
estimates or bids and final costs remain the
same? Do other attributes vary (e.g., fewer
feet of pipe installed, cubic feet of soil
removed, water meters installed, etc.)?
Lessons Learned: What are the
lessons learned in cost estimating
practices?
Ways to Improve Cost
Estimating Process
Do specific costing approaches lessen the
potential for cost growth during project
implementation?
Does the project timing lessen the potential for
cost growth during project implementation?
For example, for a project which already has
the cost estimate prepared when the funding
becomes available, is there less potential for
cost growth during project implementation?
Do project characteristics (e.g., project
category, project location) impact whether
there is cost growth or cost decreases?
What types of information does EPA need /
want upfront to better understand the
accuracy of the estimated costs of a project
and the potential for costs impacts?
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SECTION 2. METHODOLOGY
This section describes two major methodologies: one for the CWSRF and DWSRF programs (Section 2.1)
and one for the Superfund program (Section 2.2). Both methodologies are designed to analyze projects
for the purpose of identifying changes made to budgets and the reasons why such changes were made.
2.1 METHODOLOGY FOR CWSRF AND DWSRF PROGRAMS
The data collection methodology employed during the study consisted of these steps:
1. Reviewed existing documents and information.
2. Selected state(s) for focus group discussions.
3. Conducted state focus group discussions, reviewed state files for local project-specific cost data,
and reviewed a select number of local ARRA projects for cost estimating and cost variance data.
4. Analyzed the state focus group discussion and file review results to support the study objectives.
2.1.1 REVIEW EXISTING DOCUMENTS
SAIC obtained and reviewed existing documents and data related to cost estimating and cost information.
SAIC reviewed a full set of project-authorized budget data (accounting data including the regular non-
ARRA SRF funding over a period of time) to identify patterns or anomalies that informed the subsequent
interviews and analyses. In addition, SAIC reviewed EPA databases, published literature and other state
information sources to gain information on cost estimating practices and a better understanding of the
types of data available and where the data might be located (e.g., in Regional, state, or local funding
recipient files).
2.1.2 SELECT STATES AND CONDUCT FOCUS GROUP DISCUSSIONS AND
FILE REVIEWS
The states presented in Table 2 were selected for focus group discussions based on staff availability to
engage in discussions with SAIC on the topic. Staffs of several states initially considered for inclusion
because of the number and/or type of projects that were implemented within the state were unavailable
to meet with researchers.
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TABLE 2. STATES SELECTED FOR FOCUS GROUPS
^^^^^B
Iowa
Louisiana
Montana
New York
North Carolina
Oklahoma
NO. OF STATE N0.OFCWSRF
PARTICIPANTS
._ _ . PROJECTS
(FUNDING RECIPIENTS)
8(1)
4
8(2)
14
3(1)
11*(1)
47
53
31
80
56
32
No. OF DWSRF
32
28
34
29
74
24
*0ne person was unable to attend, but provided written comments.
Therefore, the findings in this study are based primarily on responses from a limited number of state
focus groups and are not necessarily representative of the entire population of states receiving ARRA
funds for their SRF programs.
State focus group discussions were combined with review of the files that the states maintain on each
project. In all states, this file review yielded insufficient information to answer the study's research
questions. Subsequent to the focus group discussions, several states provided the researchers with cost
information on ARRA-funded CWSRF and DWSRF projects that assisted in answering some of this study's
research questions.
2.2
METHODOLOGY FOR THE SUPERFUND PROGRAM
The data collection methodology employed during the study for the Superfund program consisted of
these steps:
1. Reviewed existing documents and information, and interviewed EPA staff.
2. Categorized Superfund projects.
3. Collected information on completed Superfund projects.
4. Reviewed and analyzed collected data and interview results.
The process for the Superfund study was similar to the SRF study, except that there were no focus group
discussions. The Superfund program is implemented primarily by the EPA Regions, thus the SAIC Team
sought information mainly from the Regions rather than states.
Please note that for the purposes of this study, the cost estimates being addressed are the cost estimates
prepared in response to work assignments that were issued with ARRA funding for specific tasks that
were part of individual site cleanup activities. The screening level cost estimates for the whole project
covered under the Record of Decision were not addressed in this study.
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2.2.1 REVIEWED EXISTING DOCUMENTS AND INTERVIEWED EPA STAFF
SAIC obtained and reviewed existing documents and data related to cost estimating and cost information
for the Superfund program. EPA maintains a website for each Superfund project. These websites contain
various documents as well as a project description, project timeframe, and the Remedial Project Manager
and other site contacts.
In addition, SAIC interviewed EPA Regional staff (numbers listed in Table 3) having expertise (i.e., Subject
Matter Experts or SMEs) regarding their understanding and knowledge of cost estimating practices in the
Superfund programs, any cost estimating study questions specific to Superfund projects, and availability
of information and data.
TABLE 3. REGIONS INTERVIEWED FOR SUPERFUND PROGRAM
Region 1
Region 2
Region 6
Region 8
Region 9
2**
OF SUPERFUND PROJECTS
:EIVING ARRA FUNDING
11
*This participant was originally interviewed for the Funds Management report but some of the information
obtained during the interview applied directly to the cost estimating process and was used in this report as well.
** One of the two Region 8 staff was not interviewed formally, but provided written information and
clarification on Region 8 projects.
2.2.2 CATEGORIZED SUPERFUND PROJECTS
CATEGORIZED BY COMPLETED PROJECTS
To inform the data collection process and EPA interviews, SAIC categorized completed Superfund projects
included in this study using information provided to SAIC by EPA's Office of the Chief Financial Officer
(OCFO) in a file titled SFStimulus Fund Plan - October 14 2011.pdf and from EPA's Superfund project
websites. A complete listing of completed Superfund projects by Region can be found in Appendix 1.
While some of the listed Superfund projects were ongoing and have not been removed from the National
Priorities List, the work funded by ARRA was deemed completed.
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CATEGORIZED BY TYPE OF FUNDING MECHANISM
Superfund projects are funded by four types of funding mechanisms as follows:
Cooperative Agreements (CAs) - Superfund Recovery Act remedial activities may be conducted
through cooperative agreements with states, tribes or political subdivisions.
Emergency and Rapid Response Services (ERRS) - ERRS contracts provide emergency, time-
critical removal, and quick remedial response cleanup services. These regionally-based contracts
provide cleanup personnel, equipment, and materials to contain, recover, or dispose of
hazardous substances, and analyze samples, and provide for site restoration.
Interagency Agreements (lAs) - Superfund remedial program activities conducted through lAs
are typically agreements with the U.S. Army Corps of Engineers (USAGE) for their support in the
acquisition and management of remedial contracts.
Remedial Action Contracts (RACs) -These contracts provide EPA Regional offices with technical
assistance and resources for remedial investigation and feasibility studies; engineering services
to design remedial actions; engineering evaluations and cost analyses for non-time critical
removal actions, including issuing and managing subcontracts for construction of the selected
remedy, and engineering services for construction oversight. Enforcement support is also
provided with the oversight of the remedial investigations/feasibility studies, remedial designs,
and remedial actions; negotiation support; and other technical assistance, including community
relations, sampling and analytical support, and pre-design investigations.
This study was limited to the cost estimates developed by contractors when EPA utilized Remedial Action
Contracts to conduct site cleanups. Emergency and Rapid Response contracts were not studied because
no ARRA funds were used for these efforts. Cost estimates used for utilizing ARRA funds for Cooperative
Agreements and Interagency Agreements also were not studied because of the difficulty in obtaining cost
estimate information from agencies outside EPA. The cost estimates developed by the EPA Remedial
Action Contractors in response to task orders under those contracts were the focus of SAIC's study.
CATEGORIZED BY PROJECT ACTIVITY
To inform the data collection process and EPA interviews, SAIC also categorized each project by the major
type of ARRA-funded activity. Project activities include soil excavation, groundwater treatment, hazardous
waste removal, and others, using information from EPA's Superfund project websites.
2.3 STUDY LIMITATIONS
SAIC was unable to acquire data and information related to cost estimating for each of the Superfund
projects that received ARRA funding. SAIC did not identify any ERRS projects that utilized ARRA funding.
Access to the cost estimating information for Cooperative Agreement or Interagency projects was
typically maintained by the agency with which EPA had the agreement. This complicated the process of
locating and obtaining access to data maintained by non-EPA entities. SAIC did collect limited Superfund
Remedial Action Contract project data from Region 8 and has included it in the analysis. However, SAIC's
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findings for the Superfund program primarily came from interviews of EPA program staff from several
Regions.
Additional limitations are noted with regard to this study:
Lack of an Information Collection Request (ICR) specific to this study. The SAIC Team's collection of data
from sources outside of EPA (such as state staff and funding recipients) was limited because there was no
Information Collection Request (ICR) for this study. The SAIC Team addressed this limitation through state
focus groups where a large number of state participants discussed their ARRA experience. The findings in
this study, therefore, are based on responses from focus groups and are not necessarily representative of
the entire population of states with ARRA projects.
Uncertainty introduced in the collection of subjective information. The interview and focus group
process introduces uncertainty through the collection of subjective information provided by individuals
relaying recollections/memories of activities conducted three years ago. The SAIC Team minimized the
impact of the variability of individual responses on the overall data collection and analysis effort by
conducting a large number of interviews and focus groups, and compiling and aggregating similar
responses to identify patterns and themes.
Limited data reviewed on Superfund process. SAIC had the opportunity to interview only a handful of
EPA Region Superfund staff regarding cost estimating. Additionally, this study had initially proposed file
reviews of ARRA-funded Superfund projects. Unfortunately, SAIC was unable to obtain files from Regional
staff and therefore unable to provide a quantitative analysis regarding cost estimating approaches and
results. Specifically, SAIC asked to view assumptions memos submitted with contractor cost estimates for
several of the ARRA-funded projects, but was unable to obtain access to them.
Lack of review by interviewee and focus group participants. This report summarizes the results of
interviews and group discussions in the focus groups. The interviewers took notes but did not tape record
the meetings. The findings in this report are based on comments from the participants but may not be the
exact or actual words used by the participants. The findings represent the compilation, aggregation and
summarization of one or multiple comments. Additionally, nothing in this report represents the official
views of the agencies or organizations from which the participants are affiliated. While the SAIC Team
contacted some states to seek clarifications on specific points after focus group meetings, there was no
comprehensive review of the report findings by all focus group participants. The degree to which the
report matches comments heard in focus groups or interviews cannot be quantitatively or qualitatively
measured.
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SECTION 3. FINDINGS
Sections 3.1 and 3.2 include the findings and observations for cost estimating in the CWSRF and DWSRF
programs and in the Superfund program, respectively. Each of these two sections is organized according
to the overarching questions for this study as follows:
Cost estimating approaches.
Cost estimating timing.
Cost variance factors .
Project scope changes.
Results/impacts of cost changes.
Lessons learned and SAIC observations.
The information source for findings for the CWSRF and DWSRF programs is the state focus groups with
the exception of project scope changes, for which SAIC conducted project-level analyses using detailed
cost data obtained from funding recipients. (The CWSRF and DWSRF state focus group summaries,
including data used for the findings, are included in Appendices 2 through 7.) The information source for
findings/observations for the Superfund program is based on the EPA Regional staff interviews.
The overall big picture findings for this study are summarized in the right-most column of Table 4, shown
below. The sections of the report following the table include a thorough discussion of the findings.
TABLE 4: COST ESTIMATING STUDY QUESTIONS WITH BIG PICTURE FINDINGS
Cost Estimating Approaches:
What cost estimating approaches do funding recipients use for developing project cost estimates and
why?
DETAILED STUDY QUESTIONS
BIG PICTURE FINDINGS
What were the estimates based on?
For instance, standard construction
tables, EPA guidance, similar work
done at the same site, or work done
at other locations?
Funding recipients used accepted engineering cost estimating
methods. The approach involves breaking down the project into
individual labor and material cost elements and then multiplying the
number of units times the unit cost. For example, the cost of concrete
is based on the number of cubic yards needed times the cost per cubic
yard of concrete. All cost elements are then summed to determine the
total project cost.
Unit costs can come from a variety of sources such as: RS Means, a
national database with up-to-date labor, materials, and overhead
costs; vendor quotes; historical cost data for similar work done at
other locations; state databases of bid costs for other projects in the
state; past experience at the project site; or the best professional
judgment of the engineer.
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Engineer/funding recipient goes through a process of
refining/improving the initial estimate. States described various
approaches used to work with the funding recipients to refine/improve
the initial cost estimate. These approaches included providing planning
assistance and implementing an iterative process for the funding
recipient or providing short-term financing for planning, design, and
early construction costs.
Why do the funding recipients use
their selected approaches versus
other approaches?
The basic cost estimating approach is a standard practice within the
engineering profession. Estimates done in this format are readily
reviewable by SRF engineers.
Grant recipients rely on their engineers or engineering consultants to
provide estimates based on standard engineering practice. They rely
on the experience of the engineers to understand prevailing costs and
identify the best available information to determine costs for their
projects.
What are the pros and cons of these
approaches as seen by the funding
recipients?
Because there is one accepted cost estimating approach accepted by
the engineering community, there are no identifiable pros and cons
associated with that approach.
OVERARCHING STUDY QUESTION - COST ESTIMATE TIMING
Cost Estimate Timing: What effect does the timing of the cost estimate have on the project outcome?
DETAILED STUDY QUESTIONS
BIG PICTURE FINDINGS
What was the project status when
the Recovery Act funding became
available?
State SRF programs used existing projects on their SRF lists as well as
newly proposed projects to distribute ARRA Funding. Many of the
projects on the existing SRF lists were not eligible due to not being
shovel-ready.
Some states used the ARRA program to specifically target small
communities that had not participated in existing SRF programs since
they lacked the matching funding for projects.
Public knowledge of the ARRA program before it became law
encouraged grantees to begin developing new project lists.
What projects used already
developed cost estimates and applied
for ARRA* SRF funding?
*ARRA was added to the original
detailed study question to clarify that
the question had always intended to
address ARRA funding requests.
What projects had to develop cost
estimates to apply for the Recovery
Act Funding?
CWSRF/DWSRF:
Project cost impacts related to project timing could not be
determined as states did not maintain or track in their files the data
needed to analytically compare the cost differences observed for
projects which already had cost estimates (prior to ARRA) to the
projects for which cost estimates had to be developed.
State assistance in refining cost estimates after applications were
submitted complicated the issue of pinpointing when the cost
estimates were developed.
Superfund
Superfund cost estimates were prepared by Remedial Action
Contractors after ARRA funds were received by EPA Regions. These
estimates were based on costs bid by the Remedial Action Contractors
prior to the ARRA program.
Was the cost estimate prepared
before or after the project went to
bid?
Based on focus group discussions at least some SRF projects had
already gone to bid when the application went to bid. I n these cases,
where there was a binding qualified contractor bid in hand at the time
the application was submitted, the cost estimate proved extremely
accurate.
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Discussion during the focus groups indicated that for SRF projects in
which the cost estimates were prepared before going to bid, the bids
were generally lower than the cost estimate due to prevailing
economic conditions.
Work Assignment or Task Order bids for Superfund projects done
under Remedial Action Contracts were done after EPA Regions
received ARRA funding allocations. This allowed work scopes to be
modified to match existing funding through an iterative process
between the EPA Remedial Program Manager (RPM) and the
contractor. This process resulted in accurate cost estimates.
OVERARCHING STUDY QUESTIONS - COST VARIANCE FACTORS
Cost Variance Factors:
What cost factors influence differences between initial cost estimates and final costs?
DETAILED STUDY QUESTION
For projects with cost decreases or
cost growth, what factors influence
these differences? For example, did
any of the following factors cause
cost differences?
Available contractor capacity
Contractor experience
Field change orders
Environmental factors (weather
events)
Geographic locations
Material costs
Ongoing projects versus
projects initiated with ARRA
funding
Project timeframe
Project category
Schedule changes
Time lapse between design
completion and construction
start
Treatment site guidelines
become more stringent (e.g.,
change in cleanup standards)
Unforeseen subsurface
conditions.
BIG PICTURE FINDINGS
CWSRF/DWSRF: State focus groups identified the following factors that
could impact project costs:
Recession impact on labor costs
Unstable material costs
Limited contractor availability
Buy American provisions
Davis-Bacon provisions
Project type (non-linear versus linear)
Weather.
Superfund: EPA interviewees identified the following factors that could
impact project costs:
Lower contractor administration and overhead costs
Increased labor and level of effort
Expedited (shortened) cleanup schedules
Weaker economy
Increased annual funding from ARRA
Davis Bacon provisions
Weather.
State focus groups and EPA interviewees did not identify other factors as
having an impact on cost differences. It should be noted that only a limited
number of States and projects could be examined in this study. Other states
or projects could have been impacted by additional factors.
OVERARCHING STUDY QUESTION - PROJECT SCOPE CHANGES
Project Scope Changes: What changes were made to the originally funded project?
DETAILED STUDY QUESTIONS
What changes were made to the
contract after award but prior to
project completion as the result of
field change orders?
BIG PICTURE FINDINGS
CWSRF/DWSRF: Seven of nine individual CWSRF, DWSRF, and Brownfields
ARRA-funded projects reviewed by SAIC had project scope changes
documented in field change orders. SAIC reviewed and categorized the field
changes for these nine projects, made after award but prior to project
completion, into the following types:
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New materials/equipment
Change in project scope
Site conditions/excavation
Labor
Did project changes affect project
costs?
Project changes affected project costs, both by sometimes decreasing
costs and sometimes increasing costs. SAIC cannot identify any
common factors in these project scope changes that specifically
increased or decreased the overall project costs.
Superfund: EPA interviewees noted minimal changes in Superfund
project scopes. One reason is that many of the sites had been studied
for years, which limited unanticipated conditions when the
construction began.
OVERARCHING STUDY QUESTION - RESULTS/IMPACTS OF COST CHANGES
Results/Impacts of Cost Changes: What are the results and impacts of changes between initial cost
estimates and final costs?
DETAILED STUDY QUESTIONS
BIG PICTURE FINDINGS
What is the result if the final project
cost is higher than the initial
promissory agreement?*
*"initial promissory agreement (the
amount of the loan) has been
substituted for "initial funded
estimate" for clarity. The meaning of
both phrases is the same.
Some State SRF programs had a provision that prohibited increases in
the amount of the loan agreement. If the amount of the loan were
exceeded the recipient would have to make up the difference with
non-SRF funding. Essentially all projects that SAIC reviewed in the
States studied had final costs equal to or less than the loan
agreement.
States (except New York) tracked only the amounts that were
charged against the loan agreement. The other States had no
documentation of non-loan expenditures on the projects.
However, in cases where the final costs were projected to be greater
than the loan amounts, states used various methods to address
increased project cost:
o Reduce the project scope (e.g., cutting back on project
components, taking out non-essentials) to align costs;
o Reduce the project cost by substituting lower-cost items and
materials;
o Seek other non-SRF/non-ARRA funding sources to cover the
cost difference; or
o Apply for a supplemental SRF loan (which would require going
through a new loan process). This last option was generally not
feasible within the tight ARRA timeframes.
For projects with no cost changes,
how are project scopes adjusted so
that the initial cost estimates or bids
and final costs remain the same? Do
other attributes vary (e.g., fewer feet
of pipe installed, cubic feet of soil
removed, water meters installed,
etc.)?
By keeping project scopes flexible for projects involving pipeline
replacement, meter installation, days of dredging, and cubic feet of
soil removed, the unit quantities could be increased or decreased to
match the funding amounts.
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OVERARCHING STUDY QUESTION - LESSONS LEARNED
Lessons Learned/Observations: What are the lessons learned/observations in cost estimating practices?
DETAILED STUDY QUESTIONS
BIG PICTURE FINDINGS
Do specific costing approaches lessen
the potential for cost growth during
project implementation?
Because all cost estimates were prepared using standard, accepted
engineering practices, there are no specific alternative approaches
that would lessen the potential for cost growth. The accuracy of the
information put into the standard cost estimate preparation will
greatly influence the accuracy of the result.
States developed and implemented procedures to ensure ARRA loans
closely matched estimated project needs. The procedures
implemented included:
o Working with grantees during project development to enable
better understanding of project goals and contribute their
engineering experience in a collaborative manner.
o Basing loan offers on project bid costs.
o Providing contingency amounts for construction for unforeseen
circumstances.
o Using non-ARRA SRF funds for contingency amounts.
o Encouraging grantees with excess available funding to use the
excess for project extras
o Prohibiting the use of ARRA funds to cover cost over-runs.
Does the project timing lessen the
potential for cost growth during
project implementation? For
example, for a project which already
has the cost estimate prepared when
the funding becomes available, is
there less potential for cost growth
during project implementation?
CWSRF/DWSRF:
Prevailing economic conditions (i.e., recession) was the most
significant factor in differences between cost estimates and final
project costs.
Most study group states addressed the timing issue by only granting
loans based on accepted bids costs.
Preliminary and final engineering estimates were used for planning
purposes to make decisions about how many projects could be
funded, and to what extent; however, actual loan amounts were not
based on these estimates.
Loan amounts based on the successful contractors bid submissions
effectively eliminated the potential for significant cost growth during
project implementation.
The use of appropriate contingency factors on construction funds
effectively eliminated the possibility of additional ARRA funding
being required.
Superfund:
EPA Remedial Action Contractors prepared cost estimates at the time
the ARRA funded work assignment was issued rather than rely on
estimates done at the time the Record of Decision was issued.
Estimates done by contractors already familiar with the site, aware
of current economic conditions for subcontractors, and with a
working knowledge of the unit costs at the site receiving ARRA funds
were usually accurate. Knowledge of working conditions at the site and
past experience doing equivalent work at the site reduced the
possibility of cost growth.
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Do project characteristics (e.g.,
project category, project location)
impact whether there is cost growth
or cost decreases?
Replacement or repair of existing drinking water or wastewater
infrastructure is a very standard project; contractors know what this
work will cost and can prepare very accurate estimates.
Projects where the quantity of output could be adjusted within the
scope (defined by SAIC as linear projects) could be adjusted to
prevent cost growth or cost decreases. These linear project categories
included pipeline replacements; meter installations; soil or sediment
removal; or contaminated groundwater treatment.
Projects where the scope was more rigid had a much greater
likelihood of cost increase or decrease. These project categories
included treatment plant expansions or modifications; pump/motor
replacements, and water storage tank additions or replacements.
Most focus groups agreed that complex projects were much likely to
have cost increases than less complex projects.
What types of information does EPA
need/want upfront to better
understand the accuracy of the
estimated costs of a project and the
potential for cost impacts?
It would be desirable for EPA to obtain final project total cost
information for EPA funded projects. The states studied, except New
York, only track the amount of the SRF loan expended, not total
project cost. Total project cost would include grant recipient funds
expended as well as funds received from non-EPA sources. This would
enable EPA to better understand the accuracy of project cost
estimates.
It is not clear to the study team that additional information provided
to EPA prior to project initiation would have benefited what were, in
SAIC's judgment, very effective and beneficial programs. SRF
programs are managed by the states. Based on the states studied, the
current programs effectively managed and distributed ARRA loans in a
timely, effective, and efficient manner. Cost over-runs were rare.
Superfund programs studies made use of existing contractors at the
sites that received ARRA funding. Existing contracting vehicles
simplified awards without changing scope.
3.1
FINDINGS FOR CWSRF AND DWSRF PROGRAMS
3.1.1 COST ESTIMATING APPROACHES
All funding recipients in focus group states used the same method to develop initial cost estimates (i.e., a
standard source of information such as RS Means, a national database with up-to-date labor, materials,
and overhead costs, or historical cost data for similar work done at other locations). After the initial cost
estimate was prepared, the engineer/funding recipient went through a process of refining/improving the
estimate. States participating in the focus groups described various approaches used with the funding
recipients to refine/improve the initial cost estimate.
State staff noted that states generally used engineering cost estimates to plan their loan disbursements,
but the project bid costs were used as the basis for the loan commitments. States used the funding
estimates to determine approximately how many projects they could fund, and generally prioritized the
projects. Loan commitments were made following project bidding, when actual project costs were better
defined. Bid costs represent a binding commitment by a contractor to complete the project for a fixed
cost and therefore bid costs represent a far more accurate picture of what a project will cost.
State staff discussed various approaches (described below) that they used to improve the accuracy of cost
estimates.
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Use of experienced engineers and standardized procedures provided more accurate cost estimates. The
majority of state staff noted that the engineers used by funding recipients were familiar with the majority
of types of projects funded by ARRA and were experienced with estimating costs, resulting in good,
accurate cost estimates. These engineers used standardized formats and electronic bidding tools to
prepare their cost estimates.
Historical information maintained in a state database provided current and local information to use in
developing cost estimates. Oklahoma (CWSRF program) and Montana reported that they maintain
databases with historical cost information that can be used to support current and future cost estimation
efforts. Upon award of contracts, the Oklahoma CWSRF staff enters all contract information into their
database. Montana Department of Environmental Quality maintains a database of bid tabs from the
preliminary engineering reports for all projects, and all engineers have access to the database.
Contractors can obtain and use standard estimates from these bid tabs for items such as pipe installation.
Planning assistance and iterative process facilitated more accurate cost estimates. Montana provided
$1.8 million in planning grants to develop preliminary engineering reports for projects. The objective of
the planning grant process (which Montana continues to follow post-ARRA) is to ensure that the project is
comprehensive and that problems are permanently addressed. As part of the planning grants, the
engineers assess entire projects and work with the communities to define problems and identify best
solutions. The SRF program coordinates the process and may assist the community in addressing other
compliance and environmental issues. The SRF may make suggestions about what needs to be done; this
helps the community be realistic in scoping and costing the project. This process results in better, more
robust and cost effective projects. The planning and costing phase for projects can take up to two years
based on factors such as regulation and policy changes or need for land acquisition. The process is
iterative; the project plans evolve over time (while the overall cost estimating method remains the same,
the inputs to the cost estimate become more detailed and refined over the course of the iterative
process). Once the community has finalized the design with plans and specifications and these have been
approved, the SRF loan is closed and funds are committed to the project.
Short-term financing approach resulted in accurate cost estimates. The state of New York used a unique
approach of utilizing short-term financing followed by long term financing which they felt contributed to
developing good cost estimates. Basically the New York State Environmental Facilities Corporation (EFC)
offers both CWSRF and DWSRF clients the opportunity to finance planning, design and early construction
costs through short-term financing programs. These are projects that have progressed into the planning
phase, but are not ready for long-term financing. This program allows applicants to develop very accurate
cost estimates before finalizing the long term project costs. Short term funding can be used for up to
three years, at which point the state will reevaluate whether a project can be converted to long term
financing. Short term funding would take a project through the design and bid phases, and into
construction.
Allowing contingency reserve in cost estimates minimized the risk of unanticipated cost increases. SAIC
observed that all of the focus group states allowed funding recipients to include a contingency in the cost
estimate, which is typically some percentage of the overall construction costs (shown in Table 5). The
purpose of the contingency is to provide dollars for additional unforeseen or unanticipated conditions in
the project that occur during project implementation. In many cases, the contingency reserve provided
for by the states allowed costs for individual items to increase while the project still remained within the
overall estimated construction costs. As a result, if comparing the total project dollars expended to the
September 2013 21
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original cost estimate, the overall project may have stayed within the original cost estimate amount, but
some project estimate cost elements may have changed.
If this contingency funding was not spent, it resulted in money being returned to the state (see also
section 3.1.5 on Results/Impacts of Cost Changes). When ARRA money was returned, it was quickly
reallocated to another project to meet the commitment of funds requirements in ARRA. Several states
participating in the focus groups noted that they used ARRA funding to fund projects, but provided
normal SRF funds to fund the contingency amount. Under this approach, if contingency money was not
spent it could simply be returned to the SRF pool without the need to immediately recommit the funds.
TABLE 5. STATE CONTINGENCIES ALLOWED IN COST ESTIMATING
Iowa
-
No requirement for or cap on contingency.
The only limit on contingency is that
communities do not want to borrow more
than absolutely necessary.
No requirement for or cap on contingency.
The only limit on contingency is that
communities do not want to borrow more
than absolutely necessary.
Louisiana
10 percent.
10 percent.
Montana
May include contingency of 5 to 10
percent, which may be funded through
local funds.
May include contingency of 5 to 10
percent, which may be funded through
local funds.
New York
10 percent of construction cost estimates
or 5 percent of bid amounts, whichever is
applicable at the time of application filing.
10 percent of construction cost estimates
or 5 percent of bid amounts, whichever is
applicable at the time of application filing.
North Carolina
15 percent in initial cost estimate; 10
percent of construction costs in final cost
estimate.
10 percent in initial cost estimate; 5
percent of construction costs in final cost
estimate.
Oklahoma
15 percent for projects under $1 million;
10 percent for projects $1 million and
over; no limit on projects that use unit
price for cost estimation.
10 percent in engineering report, but can
include 20 to 25 percent in individual line
items.
3.1.2 COST ESTIMATING TIMING
A summary of the project status (timing of projects) as discussed in the state focus groups related to costs
estimating is shown in Table 6. The information in this table shows whether the state funded existing
projects (i.e., Existing Project List), in which case the initial cost estimate had already been developed, or
solicited for new projects, in which case the cost estimates had not yet been developed.
September 2013
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TABLE 6. TIMING OF COST ESTIMATE PREPARATION
STATE
Iowa
Louisiana
Montana
New York
North
Carolina
Oklahoma
EXISTING PROJECTS
^^Q^^Q
2^z
^Bj^llMT^I^O^B
CWSRF DWSRF CWSRF DWSRF
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Intended Use Plan (IUP) updated quarterly, allowing
new projects to constantly enter the SRF program.
DWSRF solicited green projects because they had
not focused on that before.
Before ARRA, CWSRF did not have many projects on
its list; the projects were often either old or not
shovel-ready. CWSRF had already started soliciting
applicants before ARRA was passed, but still held a
separate solicitation for ARRA projects.
When ARRA was passed, DWSRF already had a long
list of applicants, but still solicited for additional
ARRA projects.
Montana knew that ARRA was imminent and thus
conducted a great deal of outreach with
communities to help them prepare for ARRA. Some
projects that received ARRA funds were new
projects that began just in the ARRA year, whereas
others were existing projects to which ARRA
funding was added as another phase; all the ARRA
funding was held as discrete for the particular
phase.
New York did not solicit for new DWSRF projects for
ARRA, using only the existing DWSRF project list.
Staff contacted each applicant and screened
thoroughly for readiness, making sure projects
really were shovel-ready.
Governor's office mandated two rounds of ARRA
funding in case communities were able to propose
new shovel ready projects.
Most of CWSRF's ARRA projects were off-the-shelf
existing projects, although some were very early in
the process at the time ARRA was passed. A few of
DWSRF's projects came from the existing lists, but
most were new.
Project cost impacts related to project timing could not be determined. State approaches for funding
projects involved use of existing projects with existing cost estimates, soliciting new projects for which
cost estimates had to be developed, and various iterations between existing and new projects. State data
were not available to analytically compare the cost differences observed for projects that already had cost
estimates to the projects for which cost estimates had to be developed for ARRA funding. Therefore, SAIC
could not respond to this question using state data.
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SAIC did obtain some anecdotal information from the Montana and New York CWSRF and DWSRF staff
regarding project timing. Montana staff stated that it was rare for projects to go over budget. However, if
projects did go over budget, it was often due to the long time lapse between planning and the start of the
project. Montana uses a variety of funding sources for projects, and this can take time to finalize.
Inflation factors can affect costs as the project funding comes together over several years. The timing of
land acquisition for environmental projects must also be taken into account. This is an iterative process
that requires flexibility and communication, and allows for a valuable contribution by SRF staff who
coordinate the effort, although the impact on final projects costs is difficult to quantify. Changes in project
cost (due to changing/refining inputs) occur over the course of this iterative process. New York State staff
reported that generally the first (i.e., earlier) projects under contract had lower bids than the later
projects because there were fewer contractors available for the later projects. As a result of the
competitive bidding process the lowest cost qualified contractors were utilized first. As the available
capacity of these contractors was exhausted, the remaining work went to higher cost contractors.
3.1.3 COST VARIANCE FACTORS
To review cost deviations between original estimates and final costs, the SAIC team obtained data from
five states that were part of the focus groups and analyzed the cost deviations for the CWSRF and DWSRF
projects in each state. A summary of the cost deviations for CWSRF and DWSRF projects is shown in
Table?.
TABLE 7. SUMMARY OF COST DEVIATIONS (FROM STATE-PROVIDED DATA)
Iowa
Louisiana
Montana
North Carolina
Oklahoma**
RANGE OF DEVIATIONS OF FINAL COSTS AVERAGE DEVIATION OF FINAL COST FROM
FROM PROMISSORY NOTE AMOUNTS* PROMISSORY NOTE AMOUNTS*
CWSRF
0 to -12%
Data not available
0 to -13%
0 to -33%
0 to -14%
DWSRF
0 to -15%
0 to -5%
0 to -22%
0 to -24%
2 to -17%
CWSRF
0%
Data not available
-2%
-5%
-2%
DWSRF
-1%
0%
-2%
-5%
-3%
*A positive number indicates the final cost was higher than the promissory note amount, while a negative
number indicates the final cost was lower than the promissory note amount.
**Excludesfour projects which had not been completed as of July 31, 2013, and for which final costs were thus
not available.
As can be seen in the table, generally across the focus group states, the cost deviations of the final project
costs from the promissory note amounts (based on the bid amounts) were negative, meaning that the
final costs were less than the bid amounts. The only exception was the DWSRF program in Oklahoma
which ranged from +2 to -17 percent. Similarly the average cost deviations for all of the states' CWSRF
and DWSRF projects were either 0 percent or a negative percent.
It should be noted that the Iowa participants stated that they did not track project costs above the loan
amounts, since such costs were not paid out of SRF funds. It is possible that other states also followed this
practice and thus the upper end of the range of cost deviations may be understated for some states in
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Table 7. However, the other focus group states either did not report any project cost over-runs or stated
that over-runs were rare, so the maximum cost deviations reported in Table 7 should be for the most part
accurate.
The state focus groups discussed several factors which may have impacted the final project costs
(summarized below). Some factors listed below may have resulted in project cost increases and some in
project cost decreases. However, no quantitative data were available to analyze which of the factors
discussed specifically resulted in final project cost decreases or increases.
Impact of the recession on labor costs: Several states noted that while the project cost estimates were
basically sound, funding recipients did not anticipate the impact that the recession was having on the
municipal construction market. Several states reported that the recession drove labor costs down as
many contractors had little or no work at the time ARRA passed. Iowa and Montana reported that there
was little construction occurring in their states and many contractors were out of work at the time.
Several Iowa contractors felt that without the municipal construction projects, there would have been no
construction projects.
North Carolina reported that, because material and labor costs were rapidly changing, it became risky to
estimate too low or too high. Pressure on contractors to replace lost private sector work pushed prices
down even further. Bidding was very competitive and 'cut-throat' among the construction contractors.
According to state staff, most contractors reduced labor rates and minimized profits; some may have cut
costs in half just to keep staff working.
Impact of contractor availability: Contrary to the previous finding (Impact of the recession on labor
rates), some states reported that limited contractor availability impacted project costs. Louisiana stated
that the existing contractor base for the DWSRF program was overwhelmed by the speed and volume of
work under ARRA, and that this caused some project delays as a result of limited availability. Louisiana's
CWSRF program staff said that their contractors were not necessarily overwhelmed, but that costs may
have increased slightly due to reduced contractor availability. New York reported that the early ARRA
projects to get under contract generally had lower bids than the later projects because there were fewer
contractors available for the later projects, so there was less competition for driving low bids.
Contractor Bankruptcy
In Montana some contractors and subcontractors bid so low that they went bankrupt during the
middle of a projectthere was so much competition for work that contractors were submitting
bare-bones bids. Quality may also have been an issue with these inexperienced contractors. For
many of the ARRA-funded projects, the funding recipients received more than 100 bids, where in
the past they usually received far fewer bids.
Impact of unstable material costs: States also reported that, during the ARRA time frame, material costs
were unstable. North Carolina reported that steel and concrete were expensive before 2009 due to the
Chinese demand, thus making the costs unstable. North Carolina staff then stated that in 2009, material
costs were significantly reduced due to the recession. Iowa reported that they saw a dramatic decrease in
the price of steel as a result of the recession. Sometimes the material costs followed a 'tulip' pattern of
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spiking, then dropping, then spiking again. Oklahoma reported that they were still seeing high bids at the
beginning of ARRA due to increased costs resulting from the effects of Hurricanes Ike and Katrina.
Impact of the Buy American provisions: Several states reported that Buy American requirements
contributed to differences between the cost estimates and the final project costs. Contractors and
engineers did not budget time in their cost estimates and bids for Buy American research and verification,
but then had to spend significant time on these efforts once the projects were underway. Iowa stated that
Buy American sometimes resulted in changes of materials, which increased costs and required change
orders; however, Iowa state staff did note that overall the bids were still lower than cost estimates.
Oklahoma reported that there were often project delays due to having to wait on American-made
products, sometimes up to four to six months.
Buy American provisions created additional challenges for contractors
States identified various issues with the requirement to utilize American-made products:
Difficult to find, resulting in increased costs due to scarcity of product
Some products were of lower quality and resulted in operational problems (e.g., flow
meters)
Contractors did not have established relationships with the suppliers so it took more time
and effort to procure materials.
The need to obtain certification that products were American made added complexity to the
procurement process.
Impact of the Federal Labor Standards (Davis-Bacon Act) provisions: Most states participating in the
focus groups did not note any issues or impacts on costs due to Davis-Bacon. Iowa state staff reported
that Davis-Bacon was not really an issue to the communities, as it was already a pretty common
requirement. Louisiana DWSRF program required all funding recipients to hire a Davis-Bacon
administrator (an engineering consultant) to handle Davis-Bacon requirements; Louisiana CWSRF program
did not require recipients to have a Davis-Bacon Administrator, but funded the position if the recipient did
have one. Oklahoma was the only state to report that Davis-Bacon had actually caused problems due to
wage rates changing very frequently, sometimes several times during the planning process. When the
project finally got to construction, the state had to do change orders to cover the wage rate variances.
Oklahoma also reported that Davis-Bacon wage rates had doubled or tripled in rural areas since ARRA
started. The new rates appeared to be based solely on union wage rates. Before ARRA, wage rates were
based on a mix of union and non-union rates and thus were lower.
Impact of non-linear project type: North Carolina representatives discussed the effect of linear versus
non-linear projects on costs. Linear projects are projects which are bid in terms of feet of pipe ordered, or
number of water meters installed. For these types of projects, there is a fixed cost per foot or per water
meter (i.e., a unit cost). Many of the state's SRF projects were linear, and project quantities (e.g., feet of
pipe ordered) could be varied within the scope of work. Therefore, adding more feet of pipe increased
cost by a known amount (based on the unit cost). If a funding recipient found that their costs were
decreasing or increasing compared to the bid amount for a linear project, the funding recipient could
September 2013 26
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adjust the project scope to match the available funding. Non-linear projects (e.g., treatment plant
upgrades) are less straightforward to cost as there are many more items to include in the bid. However,
North Carolina funding recipients were encouraged to use unspent funds from non-linear projects to
purchase related project items such as emergency generators or spare parts. This allowed the project
scope to change in order to use the available funding.
3.1.4 PROJECT SCOPE CHANGES
As part of this study, SAIC obtained and analyzed detailed project expenditure data for nine ARRA-funded
projects in the DWSRF, CWSRF and the Brownfields programs to answer questions about project scope
changes. The purpose of these analyses was to identify and categorize the types of changes occurring
during project construction (i.e., factors) which impacted project costs using change order data for
individual projects.
Table 8 provides a list of the selected case studies along with their locations and brief project descriptions.
The Brownfields project, although not classified as an SRF project, was included because it involved a
technology to manage storm water and therefore was similar to funded SRF projects.
TABLE 8. CASE STUDY LOCATION AND PROJECT DESCRIPTIONS
PROJECT NAME
PROJECT DESCRIPTION
Drinking Water State Revolving Fund Projects
West End Drinking Water
Reservoir
Amsterdam Drinking Water
Treatment Plant Upgrades
Athens Drinking Water
Distribution System
Improvement
Pine Bluffs Meter Installation
Hagerstown,
Maryland
Amsterdam,
New York
Athens, Ohio
Pine Bluffs,
Wyoming
Partially replace 11 million gallon leaky, uncovered storage
reservoir with 6.8 million gallon storage tank.
Implement multiple equipment upgrades to existing
conventional filtration plant to address drinking water violations
for disinfection byproducts and lead.
Replace frequently failing distribution main line and upgrade
related pump and electrical system.
Replace failing manual meters with radio signal meters, add
meters to unmetered service lines, and move meter positions to
connect with main line to enhance leak detection.
Clean Water State Revolving Fund Projects
Town of Cape Charles
Wastewater Treatment Plant
Upgrades
City of Hedrick Wastewater
Treatment Plant Upgrade
Grant County Sanitary Sewer
Cape Charles,
Virginia
Hedrick, Iowa
Grant County,
Retrofit existing wastewater treatment facility with advanced
treatment to reduce nitrogen and phosphorus concentrations in
discharge and also provide water suitable for non-potable reuse
(e.g., irrigation).
Construct new treatment plant to reduce ammonia discharges to
meet new permit limits, rehabilitate and increase lift station
capacity to prevent overflows during storm events, and replace
conventional sludge drying bed with a reed bed.
Extend sewer service lines to new areas including a campground
with an aging treatment plant and a mobile home park with a
September 2013
27
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PROJECT NAM'
District Extension Project
Kentucky
PROJECT DESCRIPTION
failing treatment plant.
Santa Cruz County Reduction
of Nonpoint Source Sediment
and Pesticide Pollution
Santa Cruz
County,
California
Implement roadside integrated vegetation management plan to
reduce pesticide application, mowing, and presence of invasive
species.
Brownfields Project
St. Paul Port Authority
Beacon Bluff Assessment and
Cleanup
St. Paul,
Minnesota
Conduct site assessment and cleanup activities for former 3M
production facilities and surrounding acreage and install 'next
generation' regional stormwater infiltration basin to treat runoff
from neighboring areas.
SAIC obtained expenditure breakdowns for the nine ARRA-funded projects in the form of contractor
billing statements. The billing statements included line item accounts of the original bid items and their
bid values, as well as line item accounts (in most cases) of the change order items and their values. From
these billing statements, SAIC calculated the total project bid and change order values shown in Table 9
below. The change order impacts ranged from a decrease of 15.3 percent from the initial project bid value
to an increase of 13.8 percent. Of the nine projects, change orders reflect net cost increases for four
projects and net cost decreases for three projects. Data for two projects (i.e., the stormwater project in
Santa Cruz, California and the Brownfields project in St. Paul, Minnesota) did not include change orders.
Both of these projects primarily involved expenditures for services, which may be less likely to incur cost
changes than the seven construction-related projects.
September 2013
28
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TABLE 9. CASE STUDY VALUES FOR PROJECT BIDS AND CHANGE ORDERS
PROJECT NAME
PROJECT TYPE
TOTAL PROJECT BID
CHANGE ORDERS
TOTAL VALUE (1)
PERCENTAGE OF
BID VALUE
Drinking Water State Revolving Fund Projects.25
West End (Maryland)
Storage
$5,456,540
-$237,943
-4.4%
Amsterdam (New York)
Treatment
$10,162,097
$949,344
9.3%
Athens (Ohio)
Piping
$777,441
$44,067
5.7%
Pine Bluffs (Wyoming)
Metering
$1,344,847
-$205,487
-15.3%
Clean Water State Revolving Fund Projects
Cape Charles (Virginia)
Treatment
$14,737,000
$425,491
2.9%
Hedrick(lowa)
Treatment
$3,370,423
-$6,442
-0.2%
Grant County (Kentucky)
Piping
$1,347,098
$185,361
13.8%
Santa Cruz (California)
Stormwater
$839,700
$0
0%
Brownfields Project
St. Paul (Minnesota)
Redevelopment
$2,593,400
$0
0%
(1) The values for some projects are interim values and final change order amount may differ at project
completion.
Figure 1 illustrates the change order impacts by project type. Three projects involved design and
installation of treatment and three primarily involved installations of water piping or storage structures.
Both of these project types had net cost increases or decreases, although net increases were more
frequent. The variability of the impact that change orders had on project costs appears to diminish as
project size increases. Change order impacts for the four smaller projects range from -15.3 to + 13.8
percent, while the range for the five larger projects is from -4.4 percent to +9.3 percent.
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FIGURE 1. PERCENTAGE CHANGE IN PROJECT COST BY PROJECT TYPE
Piping _ Treatment Meters _ Landscape
-15.3%
0.2% 0.0% 0.0%
Table 10 provides a list of change order categories and identifies which projects had change orders that
fell into each category. SAIC assigned categories to the change orders based on the descriptions provided
in the contractors' project expenditure breakdowns as follows:
The new materials/equipment category includes change orders that increased the quantity of
items that were in the original bid, substituted like items for items in the original bid, or called for
the use of alternate materials for items in the original bid.
The change in scope category includes all change orders for the revision and/or modification of
bid items/plans and revisions/modifications at the site that were not in the bid items/plans. It
also includes all upgrades for items not in the original bid plan and changes in the size or capacity
of items in the original bid.
The site conditions/excavation category encompasses all 'ground work' including excavation,
additional road work, additional paving and gravel work, and additional foundation work.
The labor category was assigned to all change orders that were clearly labor-related (e.g., repair,
install).
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TABLE 10. TYPE OF COST VARIANCE FACTORS IDENTIFIED FOR
PROJECT CHANGE ORDERS
CHANGE
COST VARIANCE _
PROJECT TYPE ORDER
FACTORS
NEW CHANGE
MATERIALS/ IN
vnnunnsii
Drinking Water State Revolving Fund Projects
West End (Hagerstown,
Maryland)
Amsterdam (New York)
Athens (Ohio)
Pine Bluffs (Wyoming)
Storage
Treatment
Piping
Metering
-4.4%
9.3%
5.7%
-15.3%
+ /-
+
+ /-
CONDITIONS/
EXCAVATION
LABOR
+ /-
+
+
+
+
+ /-
+
+
+
Clean Water State Revolving Fund Projects
Cape Charles (Virginia)
Hedrick(lowa)
Grant County
(Kentucky)
Santa Cruz (California)
Treatment
Treatment
Piping
Stormwater
2.9%
-0.2%
13.8%
0%
+ /-
+ /-
+
+ /-
+
+
+
+
+ /-
-
No change orders
Brownfields Project
St. Paul (Minnesota)
Redevelopment
0%
No change orders
Note: A blank cell indicates that the data do not include a change order in that category.
+ indicates that project had at least one change order in that category that increased overall project cost
- indicates that project had at least one change order in that category that decreased overall project cost
+/- indicates that the projects had change orders that increased project costs for some changes and decreased
project costs for other changes.
Seven of the nine case studies had identifiable change orders. The data sets for Santa Cruz and St. Paul did
not include change orders. Symbols in Table 10 identify whether change orders increased or decreased
project costs. A "+" symbol denotes that the project had at least one change order in that category that
increased the overall cost of the project. Likewise, a "-"symbol denotes that the project had at least one
change order that decreased the overall cost of the project.
No identified commonalities between project scope changes that increased or decreased the overall
project costs. Based on the limited number of projects used in this study, SAIC could not identify any
commonalities or trends related to the factors that increased or decreased the final costs. Although the
majority of change orders increased the costs of the projects, there were many change orders that
decreased the final project costs. One observation is that the vast majority of the change orders that
resulted in cost reductions appeared to fall into the new materials/equipment category and are likely
attributable to reductions in the price of bid items and the use of less expensive like items and materials
for bid items.
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3.1.5 RESULTS/IMPACTS OF COST CHANGES
Most focus group states reported that final project costs tended to come in close to the initial cost
estimates and/or bid amounts for which the loans were awarded. However, this was not always the case,
and final project costs for some projects came in below or above the loan amount. States reported that,
where there were cost variances, often the final project cost came in below the loan amount. If costs
changed before the loan was locked in (for example, if a more detailed cost estimate or the bid amount
came in different from the initial cost estimate), this generally did not pose a problem, as states still had
flexibility to deal with the changes. Funds could be shifted around, project scope and details could be
adjusted, and additional engineering or environmental review could even be performed if necessary.
Once the loan was locked in, focus group states noted they had much less flexibility to address changes in
costs. If the final cost came in lower than the loan amount, the state would often reduce the non-ARRA
(base SRF) portion of the funds accordingly. Since ARRA funds were always expended first, this generally
did not have an impact on the ARRA funding. One exception was New York, which essentially
overcommitted ARRA funds to ensure that all of the funds would be expended. New York offered
applicants space on a waiting list for ARRA funds and, if projects came in under bid, released the left-over
money and transferred it to projects on this list. Oklahoma also stated that some of their projects were
not able to use all of the ARRA money and as a result CWSRF had to redistribute some ARRA funds.
States identified options for projects where the final costs had the potential to be greater than the loan
amounts. Several states reported they generally allowed funding recipients the following four options:
Reduce the project scope (e.g., cut back on project components, take out non-essentials) to bring
the cost into line.
Reduce the project cost by substituting lower-cost items and materials.
Find other non-SRF/non-ARRA funding sources to cover the cost difference.
Apply for a supplemental SRF loan (which would require going through a whole new loan
process); this last option was generally not feasible within the tight ARRA timeframes.
The Louisiana CWSRF staff reported supplementing approximately six projects with funds from their
administrative fee fund, which they had been banking for several years. Montana sometimes employed a
fifth option which involved dividing the project into phases.
New requirements and changing guidance required re-evaluation of costs and impacted project
schedules. New York state staff reported schedule impacts due to the need to evaluate potential cost
effects of new requirements and changing guidance. The SRF programs were often revising project
budgets because of changing guidance from EPA, making it difficult to determine how much funding to
allocate into the loans. In addition, the issuance of new requirements forced the state to re-evaluate the
cost effects of the new requirements, bringing the project/loan approval process to a halt. Whenever
there were questions on how to proceed with a project mid-stream, the State Environmental Facilities
Corporation froze the disbursements, which compounded the funding recipients' worries, and potentially
created tension with their best clients. As a result, the additional requirements and changing guidance
prevented them from disbursing funds quickly, which delayed economic and environmental benefits to
communities.
September 2013 32
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States also discussed approaches that they implemented to ensure that there were no impacts to final
costs or that the impacts of changes to final costs were minimized (described herein).
States developed and implemented procedures to ensure that ARRA loans closely matched estimated
project needs. For the majority of projects, state staff participating in the focus groups noted the ARRA
loans exactly matched final project amounts. Where there was a difference between loan amounts and
funds expended (see Table 5 above), the amounts returned to the states were typically less than five
percent of the original loan amount. In no cases did the funding recipients go back to the state to request
additional ARRA funding to complete the project. State ARRA funding rules often prohibited such
requests. Projects could under-run, but not over-run ARRA funding.
States often provided a 'package' of loans to a funding recipient. Such a package might include an ARRA
loan with principal forgiveness; an ARRA loan with a minimal interest requirement (e.g., 0.75 percent); an
ARRA loan with a more traditional interest rate; a traditional SRF loan; or a loan from another non-SRF
funding source. Because of these multiple components, it was sometimes difficult or impossible to track
final project expenditures. For the most part, states in the focus groups only tracked spending of the
amounts provided by their SRF program, including ARRA funding. In these cases, funding from other
sources or grantee spending was not tracked by the state. However, in these cases ARRA funding
components were often the lowest interest rate loans in the package. This ensured that ARRA funds were
drawn down first and in their entirety, prior to utilizing other loan amounts. It also resulted in non-ARRA
monies being used to adjust for any cost variances.
States encouraged funding recipients to use all the ARRA funds that were given them. When funds
remained at the completion of fixed scope projects, funding recipients were encouraged to purchase
additional items such as emergency generators or additional spare parts to avoid returning ARRA funds to
the states.
3.1.6 SUMMARY OF LESSONS LEARNED/SAIC OBSERVATIONS ON CWSRF AND
DWSRF COST ESTIMATING
SAIC prepared the following observations from the information and data collected for this study. These
lessons learned/SAIC observations are provided to EPA to use when similar situations arise in which EPA
receives a significant amount of funding which must be allocated and expended in a short timeframe.
The ARRA funding program favored projects that replaced existing infrastructure. These
relatively routine projects minimized the likelihood of costs increasing beyond those originally
estimated. Wastewater and water infrastructure are the largest capital assets of many
communities; ARRA funding enabled much-needed maintenance of these important assets.
Replacing water or sewer pipes or pumps, or even installing water meters, typically do not
require any significant environmental review. So called non-dig pipeline replacement methods
use existing right-of-way and produce minimal surface disturbance and noise. Pump
replacement inside existing structures has essentially no impact on the environment, other than
to reduce power consumption. Not surprisingly in the focus group states the majority of the 520
projects done with ARRA funding involved existing infrastructure replacement. Some states
reported they did not consider any project that had not been through the environmental review
process for ARRA funding because of the time constraints the state had to meet. Replacement
projects generally avoided the need for extensive environmental review, and minimized the
September 2013 33
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likelihood that unexpected conditions would be encountered during construction. The ample
number of available and qualified contractors and laborers meant that competitive bidding
provided a good value on infrastructure replacement projects.
Flexible scopes (e.g., replace aging pipelines in a generally defined area) allowed the quantity
of work to match the estimated cost. These types of projects allowed the flexibility to reduce
expenditures to meet funding, or to add work to expend all of the funds. Projects involving
pipeline replacement or water meter installation allowed for project scopes to be written in
more general terms. The flexibility in scope allowed the feet of pipeline replaced, or the number
of meters installed, to be increased or decreased to fully utilize the funding available without
exceeding the funding amount.
Cost estimates for a project evolve over time. Each successive cost estimate adds its own value
to the process. Accepted engineering practices are used to prepare cost estimates. These
practices are uniform from state to state. Estimates evolve (become more accurate) over time;
each iteration provides useful information to the SRF programs. There is not some "better"
approach that could be used to prepare cost estimates. The tight time constraints created by the
1-year deadline to be under contract often favored projects with more advanced cost estimates.
Preliminary cost estimates are used in the planning phase to compare project alternatives, and
evaluate project financial feasibility. These are often order of magnitude costs estimates. The
states can use these estimates to develop funding plans, and may use the preliminary estimates
to provide funding to carry the project through design, but not construction. During the design
phase the cost estimates become significantly more refined. State engineers may work with a
grantee throughout this process to assist in making the project viable and affordable. The
project will be bid by prospective contractors at this point. Each contractor prepares his or her
own cost estimate. These estimates are even more precise because the contractors know their
own labor costs, and the profit margin they are willing to accept for the project. The accepted
bid is used as the basis for determining the amount of loan funding that will be provided. Even
though the bid costs are considered very accurate a contingency amount is added to the
construction cost to account for unforeseen circumstances.
States generally identified prevailing economic conditions as the most significant factor
contributing to variances from costs estimates. In the early part of the ARRA program
commercial construction dropped off significantly because of difficulty in obtaining loans for
commercial and residential construction. This increased competition for municipal projects.
Grantees received many more bids for ARRA funded projects than they had previously. This
increased competition reduced bid costs below earlier estimates. Some states reported
anecdotally that in the later stages of the program costs increased because the volume of ARRA
spending reduced available contractor capacity.
States developed and implemented procedures to ensure ARRA loans closely matched
estimated project needs. The procedures implemented included:
o Working with the grantees during project development to enable a better
understanding of project goals and contribute their engineering experience in a
collaborative manner.
o Basing loan offers on project bid costs.
o Providing contingency amounts for construction to account for unforeseen
circumstances.
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Using non-ARRA SRF funds for contingency amounts. If some of the contingency money
was not used it could be returned to the non-ARRA SRF account.
Encouraging grantees with excess available funding to utilize the excess money to
improve the project (e.g., purchasing spare parts) while staying within allowable
expenditures.
Prohibiting the use of ARRA funds to cover cost over-
runs.
FIGURE 2. SUPERFUND PROCESS
SAIC identified 520 completed SRF projects in the focus group states
that used ARRA funding. None of the focus groups were able to recall
any projects where the ARRA funded budget had been exceeded.
3.2 FINDINGS/OBSERVATIONS FOR THE SUPERFUND
PROGRAM
As mentioned in Section 1.2 Background, the Recovery Act provided
$600 million for Superfund remedial activities. ARRA funds were used
to start new cleanup projects, or to accelerate cleanups at projects
already underway. SAIC interviewed several EPA staff from four
Regions who managed Superfund programs funded by ARRA. SAIC's
findings are based primarily on these few but insightful interviews. The
EPA staff interviewed were able to provide specific information on
contracts EPA managed. These included Remedial Action Contracts
where activities are performed by EPA contractors directly for EPA. For
these contracts, cost estimates were prepared for and handled by EPA.
Other ARRA funding was put into Cooperative Agreements which were
managed by states and tribes and Interagency Agreements where the
activities were managed by the U.S. Army Corps of Engineers (USAGE).
For CAs and lAs, cost estimates were managed by the implementing
agency.
3.2.1 BACKGROUND
Figure 2 to the right shows the steps in the Superfund cleanup process.
Cost estimates are developed at different stages of the Superfund
process. Cost estimates developed during the Feasibility Study (FS) are
primarily for the purpose of comparing remedial alternatives during the
remedy selection process, not for establishing project budgets. At the
FS stage, the design for the remedial action project is still conceptual,
not detailed, and the cost estimate is considered to be 'order-of-
magnitude.' This is analogous to the engineering cost estimate
developed for the SRF application process. The subsequent cost
estimate included in the Record of Decision (ROD) reflects any changes
to the remedial alternative that occurs during the remedy selection
process as a result of new information or public comment. This is
somewhat analogous to the iterative process in the SRF process
PA/SI:
Preliminary Assessment/
Site Inspection
NPL Listing:
National Priorities List
Site Listing Process
RI/FS:
Remedial Investigation/
Feasibility Study
Cost
Estimating
Process
September 2013
35
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between state SRF personnel and the loan applicant. It allows for alternative actions to be compared and
allows for public input, but is still only a screening level rather than detailed cost estimate. The screening-
level cost estimate included in the ROD is not the focus of SAIC's study.
This study focused on the cost estimates used to provide ARRA funding to specific tasks that were part of
individual site cleanup activities. The majority of Superfund sites are separated into Operable Units for
which separate activities are undertaken as part of a Superfund site cleanup. ARRA funds were used for
specific activities within Superfund sites. More specifically, the study was limited to the cost estimates
developed by contractors when EPA utilized Remedial Action Contracts to conduct site cleanup.
Emergency and Rapid Response contracts were not studied because no ARRA funds were used for these
efforts. Cost estimates used for utilizing ARRA funds for Cooperative Agreements and Interagency
Agreements were not studied because of the difficulty in obtaining cost estimate information from
agencies outside EPA. The cost estimates developed by the EPA Remedial Action Contractors in response
to task orders under those contracts (the RD/RA phase in the diagram above) is the focus of SAIC's study.
For ARRA, EPA HQ and the Regions worked together to select 51 projects for Recovery Act funding. Table
11 below shows the number of projects and funding for each Region. About half the projects were new
projects in the sense that they had been through the RI/FS and perhaps had received a ROD and were
awaiting funding. See Appendix 1 for a complete list of the ARRA-funded Superfund projects.
TABLE 11: NUMBER OF ARRA SUPERFUND PROJECTS AND FUNDING BY REGION
^^^^^^^^^^^^B
Region 1
Region 2
Region 3
Region 4
Region 5
Region 6
Region 7
Region 8
Region 9
Region 10
Total
NUMBEROF
5
11
4
7
4
3
4
7
3
3
51
TOTAL ARRA FUNDING
FOR REGION
$73,800,000
$175,300,000
$16,100,000
$28,416,493
$50,970,000
$45,700,000
$54,700,000
$66,210,000
$24,200,000
$25,000,000
$560,396,493
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3.2.2 COST ESTIMATING APPROACHES
EPA Regional staff described the Superfund project cost estimating approach as follows.
The basis for the cost estimates in both SRF and Superfund programs can include a variety of sources,
including cost curves, generic unit costs, vendor information, standard cost estimating guides, historical
cost data, and estimates for similar projects. Upon receipt of ARRA funds, the Regional Superfund staff
issued task orders or work assignments for the projects identified to be funded by ARRA to the Remedial
Action Contractor (s) for that Region. A few EPA Regional staff noted that the cost estimates after the ROD
are nearly 90 percent accurate because the contractors are experienced with the particular type of site
and contaminants and the majority of the contaminants and issues are known at this point in the process.
As for other ARRA-funded projects, the cost estimate submitted in response to the task order is based on
standard engineering calculations, data tables, and cost estimating programs. For the EPA Region 6
Garland Creosoting project, the contractor used "RS Means" to develop the design and construction cost
estimate, but other cost estimating methods are available. EPA requires that an industry-accepted cost
estimating method be used for the project.
This represents a distinct difference in process between the state SRF Programs and the EPA Superfund
program. The SRF programs give grant recipients the ability to solicit cost estimates (bids) from whatever
contractor they choose. Numerous contractors can compete for the specific project, and the contract is
usually awarded to the contractor providing the lowest bid if that contractor is judged to be qualified.
Each contractor does his or her own estimate of what the project costs and bids accordingly. This project
specific competition ideally results in the lowest cost to the funding recipient. Under the Superfund
program, Remedial Actions Contractors are selected under a process in which they estimate the costs of
conducting generic cleanup activities. These cost estimates (bids) are non-site or project specific. EPA
then issues multi-year contracts to the lowest bidders. These generic contracts allow EPA to issue tasks for
specific activities under these contracts.
Both programs utilize competition to achieve the lowest costs, but at a different point in time. In the SRF
programs the competition is for a specific project, and only for the duration of that project. Competition
for Remedial Action Contracts takes place every few years, and the results are used for multiple projects.
The SRF process allows grant recipients to control the contractor selection for their specific project. The
labor intensive preparation of bid specifications and bid (binding cost estimate) evaluations is limited to
their project. In the Superfund process, competition occurs only once for a multi-year period during which
many specific tasks to address multiple cleanup sites may be issued. The administrative burden of
reviewing multiple bids for each issued task is reduced, and EPA has to deal with one contractor only to
reach a mutually agreeable task award.
To initiate project implementation, the EPA remedial project manager (RPM)/task order manager
prepares the statement of work (SOW) which goes to the contractor; the EPA RPM also prepares an
independent government cost estimate (IGCE). The RPM uses a spreadsheet with built-in contractors'
labor. EPA requires a cost assumptions memo (prepared for each task) that details how the contractor
developed the cost estimate. The assumptions memo is very specific (e.g., includes details such as the
depth and location of wells). The contractor includes a narrative describing the different types of labor
(e.g. project engineer, junior engineer) required for the project. The contractor submits this with the
workplan. SAIC asked to view assumptions memos for several of the ARRA-funded projects, but was
unable to obtain access to them. EPA compares the contractor's cost estimate to EPA's IGCE and identifies
September 2013 37
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differences. EPA maintains a paper trail on their review of the cost estimate (i.e., technical evaluation
memo). EPA's guideline is that the contractor's cost estimate and IGCE should be within +/- 20 percent. If
the differences between the two estimates are greater than this amount a meeting between the RPM and
contractor is held to resolve the difference. Adjustments to the scope may be needed to accomplish this
reconciliation.
3.2.3 COST ESTIMATING TIMING
All Superfund projects funded by ARRA required a specific cost estimate and work plan in order for the
work selected to receive the ARRA funding, because the ARRA funding had to be accounted for separately
from other funds. There may have been some earlier cost estimates prepared for certain projects, but it is
likely that for most projects a new cost estimate would be needed to respond to the task order. As a
result, cost estimates should have reflected labor rates and costs in effect at the time of task order
funding. This would have resulted in more accurate cost estimates as opposed to estimates prepared
prior to the recession.
For example, In Region 1, five Superfund sites received ARRA funding. Three awards were new
construction starts, and two were for existing construction. At one site, EPA had to seek a design and new
cost estimate during ARRA (during the recession) which led to lower, more economical rates. Region 1
noted it could not really re-bid others, but was able to reduce long-term costs because the schedules
were expedited.
With regard to the impact of timing of the cost on the project outcome, generally EPA staff and funding
recipients noted that the project outcomes did not differ depending on when the project was costed. If
the bids came in lower than previously estimated in the ROD estimates, normally due to the economy,
sometimes the funding was used to increase the level of effort to expedite the schedules or transferred to
another ARRA site within the Region. More of this is discussed in the next section.
3.2.4 COST VARIANCE FACTORS
As noted earlier, for the purposes of this report, the initial cost estimate is assumed to be that provided to
EPA by the contractor in response to the task order or work assignment issuance. From the interviews,
SAIC heard anecdotally the following factors that influenced differences between initial cost estimates
and final costs. The SAIC Team inferred that the majority of differences between the final cost and original
cost estimates were lower overall. Unfortunately, SAIC was unable to obtain data from the Superfund
files as had initially been anticipated. The following factors affected final costs:
Lower contractor administration and overhead costs due to shortened project schedules
Expedited (shortened) cleanup schedules
Weaker economy reduced construction costs.
For many of the existing sites that received an influx of funds from ARRA, EPA saw the rate of contractor
spending for labor increased (overall) because more level of effort was sourced with the additional ARRA
funding for a shorter term. ARRA funds had to be obligated and expended within shortened deadline. As
a result, this shortened the schedule for cleanup. For example, the schedule for the Summitville site (EPA
Region 8) was expedited and work finished sooner. The level of effort increased, but it was offset by a
September 2013 38
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decreased overhead from reducing the time needed to lease equipment. Some sites in Region 8 finished
three to four years sooner, with about $1.5M in savings overall from the estimated budgets. Much of the
cost savings were in the area of contractor administration, as some contracts in Region 8 went from five
years to two years. There were also savings from the saved inflation expenses, leased equipment (as
mentioned before) and electrical savings from construction trailers.
With regard to the additional ARRA Davis-Bacon provision, the Regional staff interviewed did not note any
particular examples of where these provisions were factors leading to cost variances. This may be because
many of the RAC contractors were already familiar with Davis-Bacon requirements. Also, since Superfund
involves more remediation than construction, SAIC heard from the funds management focus group
participants that Buy American did not apply to many Superfund activities.
3.2.5 PROJECT SCOPE CHANGES
Based on the interviews, Regional Superfund managers noted that there were minimal changes of scope
to the originally funded project. For Region 8, the majority of changes related to expediting the schedules.
Table 12 below presents the cost differentiation for the Region 8 sites including the de-obligation
amounts as the costs came in lower than originally estimated. For Region 9, the ARRA-funded portion of
the Sulphur Bank Mine site was a very narrowly scoped project (i.e., the scope was final design and
construction of a paved road). Many of the existing sites had been well studied by the time they were
funded, limiting the unknowns once construction began. For Region 9, even though there were some
complexities related to this work including addressing endangered species and archeological sites, the
basic construction was very conventional and buffered any small scope changes that occurred.
TABLE 12. COMPLETED REGION 8 ARRA-FUNDED SUPERFUND
SITE FUNDING DETAILS
Summitville Mine ARRA
RRA AWARD
$17 M
FINAL ARRA EXPENDED
AMOUNT OR AMOUNT
TO DATE
(ROUNDED;
$16.95 M
DE-OBLIGATION
AMOUNT
$40.5 K
ARRA Arsenic Trioxide
Remedial Design
Remedial Action
$1.238 M
$8.45 M
$1.203 M
$6.25 M
$34.9 K
$2.2 M
Expedited
schedules
CO Central City/
Clear Creek
Remedial Action
Remedial Design
$2.16M
$1.4 M
$2.15M
$1.396 M
$5.6 K
$400
Expedited
schedules
*Not all unexpended funds were de-obligated.
An example of cost change, but limited scope change, was the Region 6 Garland Creosoting project. EPA
used the "Remedial Action (RA) Reserve" line item of 15 percent of total costs for the Garland site
because of an extended period of bad weather. Because the contractor could not work during this
weather, he asked for an equitable adjustment for lost profit during downtime. This equitable adjustment
was covered by the RA reserve.
September 2013
39
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Process to Address Work/Cost Changes
The contractor completes and submits a "Field Change Form" when he encounters unexpected conditions
on the site. For example, in the Texarkana project (EPA Region 6), the contractor found concrete pads that
had to be removed (not included the original estimate), which required a change in project scope. The
field change form describes work being changed and the reason for the change; the contractor also states
that the change does not modify the period of performance or cost estimate. These field changes are paid
out of the Remedial Action (RA) Reserve line. Region 6 staff can also make a period of performance
change if necessary
The changes are eventually put in as a task order modification by the EPA Contracting Officer. Region 6
noted that the modifications most likely need to be renegotiated if the increased costs exceed the 15
percent RA Reserve amount. However, the Region 6 staff person had not encountered this situation. The
Garland project, which finished in August 2011, included 11 field change orders, which is about the
average for that type of project. However, it was one of the wettest and coldest winters in many years,
suggesting that weather has an impact on costs and schedules. As noted above, Region 6 experienced cost
changes due to weather. Region 6 also noted that if changes increase the total costs to a number greater
than the original cost estimate, they will go through the following process:
1. RPM develops the scope and IGCE
2. EPA's Contracting Officer sends the scope to the contractor
3. EPA receives revised cost estimate, revised workplan and assumptions memo from the
contractor
4. EPA approves or rejects.
The decision depends on whether EPA can secure additional funds to cover the change order or must
decrease the scope of another part of the project to offset the increase. If funds are not available, then
the project is usually de-scoped, but will remain within budget. Region 6 staff indicated that another way
to explain this is that the project is authorized to spend up to 85 percent of obligated funds on project
initiation. As things change, field change orders may be approved up to the remaining 15 percent
contingency. If something changes that result in exceeding the 15 percent contingency, the scope will be
changed to show this and the contractor has to submit a new workplan.
3.2.6 RESULTS/IMPACTS OF COST CHANGES
ARRA Funds Expedited Project Schedules Resulting in Cost Savings. In general, for Regions 1, 6, 8, and 9,
there were minimal impacts to the projects that resulted in cost differences. Where the Regions
experienced cost savings, they either transferred the funds to another ARRA funded Superfund site within
their Region in collaboration with HQ or the funds were sent back to the US Treasury. Region 8 returned
approximately $1M to the Treasury.
ARRA Funds Facilitated Early Closure (Completed Work) at Superfund Sites. Another result of this
Recovery Act funding influx was the closure (i.e., work completed) of many sites. For Region 8, five of the
seven funded sites were closed and completed ahead of schedule. Most of those are in the process or
have already signed maintenance manuals/agreements or long-term remedial action phase agreements
with the State.
September 2013 40
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For the Ten Mile Creek Superfund project in Region 8, the project is near complete (98 percent) and as of
this writing costs are at only 91 percent of budget. EPA Regional staff noted the subcontractor costs were
coming in lower than what was originally anticipated, but cannot pinpoint the exact explanation for this.
3.2.7 SUMMARY OF LESSONS LEARNED/SAIC OBSERVATIONS ON SUPERFUND COST
ESTIMATING
SAIC prepared the following observations from the information and data collected for this study. These
lessons learned/SAIC observations are provided to EPA to use when similar situations arise in which EPA
receives a significant amount of funding which must be allocated and expended in a short timeframe.
One standard method for cost estimating. SAIC observed, based on the information collected
through the interviews and data collected through websites, that contractors generally follow
industry-wide accepted cost estimating methods. However, the accuracy of the bids is
dependent on variables such as the quality of data known about the site. Factors that improve
cost estimating include a better defined site with fewer unknowns, timing of the estimates
(prepared closer to commencing the project) and understanding the full extent of contamination.
Less complex sites lead to more accurate cost estimates. As noted above, the smaller and less
complex sites or activity (e.g., road building) were easier to cost and led to a more accurate cost
estimate.
Advanced sites with existing activities lead to more accurate cost estimates. Even complex
sites with remediation underway also led to better cost estimates than those initially presented
in the ROD as the extent of contamination is better understood by this point and the contractors
are experienced with the site.
Superfund adapted more easily to ARRA deadlines and influx of funds. SAIC observed that the
Superfund program adapted more easily to the influx of ARRA funding because it had ongoing
and shovel-ready projects or projects that had been through the ROD process. This allowed for
more accurate and timely cost estimating.
Existing contracting vehicles simplify award without changing scopes. The process to award
tasks was simplified as each Region had pre-existing RAC contracts/contractors in place, ready
and experienced with many of the sites or types of projects.
3.3 RECOMMENDATION
Provide forum for successful approaches. States in the focus group discussions described several
techniques used to minimize differences between cost estimates and final project costs. EPA could
provide a forum for sharing these techniques among states.
September 2013 41
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September 2013 42
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EPA. A Guide to Developing and Documenting Cost Estimates During the Feasibility Study. EPA 540-R-OO-
002 OSWER 9355.0-75 www.epa.gov/superfund July 2000.
EPA. Initial Guidance for Implementing the Superfund Remedial Program Provisions of the American
Reinvestment and Recovery Act of 2009. OSWER Directive #9360.0-46. June 5, 2009.
September 2013
43
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September 2013 44
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APPENDIX 1: COMPLETED ARRA SUPERFUND PROJECTS BY REGION, FUNDING
MECHANISM, AND PROJECT ACTIVITY
-------
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COMPLETED ARRA FUNDED SUPERFUND PROJECTS BY REGION AND PROJECT ACTIVITY
Region
Site Name
ELIZABETH MINE
HATHEWAY & PATTERSON
NEW BEDFORD HARBOR
OTTATIANDGOSS
SILRESIM CHEMICAL
CORPORATION
CORNELL-DUBILIER
ELECTRONICS
EMMELL'S SEPTIC LANDFILL
HORSESHOE ROAD
IMPERIAL OIL COMF
LAWRENCE AVIATION
INDUSTRIES, INC.
MONITOR DEVICES, INC.
OLD ROOSEVELT FIELD
PRICE LANDFILL
ROEBLING STEEL COMPANY
VINELAND CHEMICAL
COMPANY
WELSBACH/GENERAL GAS
MANTLE CO.
ATLANTIC WOOD INDUSTRIES
CROSSLEY FARM
HAVERTOWN PCP
STANDARD CHLORINE OF
DELAWARE, INC.
BRUNSWICK WOOD
PRESERVING
ESCAMBIAWOOD
PENSACOLA
GMH ELECTRONICS
SIGMON'S SEPTIC TANK
SERVICE
TOWER CHEMICAL
UNITED METALS, INC.
New Start or
Ongoing
Project
New Start
New Start
Ongoing
Ongoing
New Start
Ongoing
New Start
Ongoing
New Start
Ongoing
New Start
New Start
New Start
Ongoing
New Start
New Start
Ongoing
Ongoing
Ongoing
New Start
New Start
New Start
^^^^^i
New Start
Major Project Activity
Funded by ARRA
Removal of surface an
ground water
Hazardous waste disposal
Dredging and water
treatment
In-situ chemical oxidation
treatment
Soil removal and vapor
treatment
Soil treatment
Soil treatment
Soil treatment
Soil treatment
Groundwater treatment
Groundwater treatment
Groundwater treatment
Groundwater treatment
Contaminated sediment
removal and dredging
Sediment treatment
Soil treatment
"
"
'
Soil treatment, excavation
and dredging
Groundwater treatment
facility construction
Soil excavation and
groundwater treatment
Hazardous waste disposal
and groundwater treatment
Containment cap
construction
Containment cap
construction
Water line construction
Soil excavation and
treatment
Soil excavation and offsite
disposal
Soil excavation and
treatment
September 2013
Appendix 1-1
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Region
Site Name
WOOLFOLK
CONTINENTAL STEEL CORP.
JACOBSVILLESOIL
CONTAMINATON
OUTBOARD MARINE CORP.
SOUTH MINNEAPOLIS SOIL
CONTAMINATION
GARLAND CREOSOTING
GRANTS CHLORINATED
TAR CREEK
CHEROKEE COUNTY
MADISON COUNTY MINES
OMAHA LEAD
ORONGO-DUENWEG MINING
BELT
ARSENIC TRIOXIDE SITE
BOUNTIFUL
CENTRAL CITY, CLEAR CREEK
EUREKA MILLS
GILT EDGE
SUMMITVILLE MINE
UPPERTENMILE CREEK
MINING AREA
FRONTIER FERTILIZER
New Start or
Ongoing
Project
Ongoing
Ongoing
New Start
New Start
New Start
New Start
New Start
Ongoing and
New Start
Ongoing
Ongoing
Ongoing
Ongoing
Ongoing
New Start
Ongoing
New Start
Ongoing and
New Start
Ongoing
Major Project Activity
Funded byARRA
Soil excavation and
treatment
Not specified/multiple
activities
Clean up and restoration of
residential homes
Demolition, soil excavation,
hazardous waste disposal
Clean up and restoration of
residential homes
Groundwater treatment
Construction of
groundwater treatment
remedy
Voluntary relocation efforts
of area residents
Mine waste excavation,
consolidation, capping, and
re-vegetation
Soil excavation,
replacement, and disposal
Soil treatment
,
Design ($1,800,000);
Groundwater treatment
($12,000,000)
Installation of groundwater
extraction and monitoring
wells, and construction of a
water treatment system
Multiple activities
($2,160,000)/ Design water
treatment plant
($1,400,000)
Not specified/multiple
activities
Grout unlined portions of
the clean-water ditches and
repair/replace existing
liners
Construction of water
treatment plant
Soil excavation
Construction of an in-place
September 2013
Appendix 1-2
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Region
Site Name
New Start or
Ongoing
Project
SULPHUR BANK MERCURY
MINE
BUNKER HILL
COMMENCEMENT
BAY/RUSTON
WYCKOFF-EAGLE HARBOR
Ongoing
New Start
Ongoing
New Start
Ongoing
Major Project Activity
Funded byARRA
ERH system to treat
pesticide-contaminated soi
and groundwater
Dredge, treat and dispose
of heavy metal-
contaminated sediment
State and community
involvement (working with
the EIC)
Expedite residential cleanup
program
Not specified/multiple
activities
Soil and groundwater
treatment
September 2013
Appendix 1-3
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September 2013 Appendix 1-4
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APPENDIX 2: IOWA STATE FOCUS GROUP SUMMARY
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COST ESTIMATION IN IOWA'S SRF PROGRAMS
SRF PROGRAM OVERVIEW
In Iowa, both the Clean Water State Revolving Fund (CWSRF) and the Drinking Water State Revolving Fund
(DWSRF) programs are administered by the Iowa Department of Natural Resources (IDNR). Table IA -1
compares characteristics of the CWSRF and DWSRF programs.
TABLE IA - 1. CHARACTERISTICS OF ARRA IMPLEMENTATION IN lA'S CLEAN WATER
STATE REVOLVING FUND AND DRINKING WATER STATE REVOLVING FUND PROGRAMS
CWSRF
Administered by Iowa Department of Natural
Resources (IDNR).
Applicant first submits a facility plan, as well as an
application for inclusion in the Intended Use Plan
(IUP). Documents include a cost estimate developed
and certified by a licensed professional engineer with
engineering, design, construction, administration and
legal costs, plus a contingency.
No requirement for or cap on contingency. The only
limit on contingency is that communities do not want
to borrow more than absolutely necessary.
Cost estimate goes into the IUP for planning purposes,
but loan is not awarded at this point.
Once listed on IUP, applicant is eligible to apply for SRF
loan; all applicants who are on the IUP and meet the
loan requirements receive SRF funds.
No formal loan commitment letter sent to applicant;
SRF waits until applicant goes to bid, then closes loan
agreement based on winning bid.
SRF engineer determines what is approvable and what
is not approvable for a loan; in addition to doing
engineering reviews of projects, SRF also does
environmental reviews for their applicants.
To select which projects received ARRA funds, looked
at project readiness, environmental priority (although
this was a lower factor than normal due to the tight
timelines of ARRA), and developed criteria to rate
disadvantaged communities. Used utility rates to help
determine whether communities were disadvantaged:
smaller, more disadvantaged communities had higher
utility rates because they had fewer people paying in.
Tried to spread money out and reach as many
communities as possible. Funded 47 CWSRF projects.
Gave out 50% of ARRA funds as principal forgiveness.
DWSRF
Administered by Iowa Department of Natural
Resources (IDNR).
Applicant first submits a preliminary engineering
report, as well as an application for inclusion in the
Intended Use Plan (IUP). Documents include a cost
estimate developed and certified by a licensed
professional engineer with engineering, design,
construction, administration and legal costs, plus a
contingency.
No requirement for or cap on contingency. The only
limit on contingency is that communities do not want
to borrow more than absolutely necessary.
Cost estimate goes into the IUP for planning purposes,
but loan is not awarded at this point.
Once listed on IUP, applicant is eligible to apply for SRF
loan; all applicants who are on the IUP and meet the
loan requirements receive SRF funds.
No formal loan commitment letter sent to applicant;
SRF waits until applicant goes to bid, then closes loan
agreement based on winning bid.
SRF engineer determines what is approvable and what
is not approvable for a loan; in addition to doing
engineering reviews of projects, SRF also does
environmental reviews for their applicants.
To select which projects received ARRA funds, looked
at project readiness, environmental priority (although
this was a lower factor than normal due to the tight
timelines of ARRA), and developed criteria to rate
disadvantaged communities. Used utility rates to help
determine whether communities were disadvantaged:
smaller, more disadvantaged communities had higher
utility rates because they had fewer people paying in.
Tried to spread money out and reach as many
communities as possible. Funded 32 DWSRF projects.
Gave out 50% of ARRA funds as principal forgiveness.
September 2013
Appendix 2-7
-------
CWSRF
Each project received 20-40% of their funding as ARRA
funds principal forgiveness, with a cap for principal
forgiveness of $1 million on green projects and $2
million on infrastructure projects. Projects funded with
a mix of ARRA funds in the form of principal
forgiveness, ARRA funds in the form of loans (3%
interest rate), and base program funds in the form of
loans (3% interest rate). Used mix-and-match
approach with some projects receiving funds from all
three sources and some receiving funds from just two
of the sources. Allowed SRF to leverage ARRA money
to do much more work, resulting in a total of roughly
$150 million in projects (between CW and DW SRF)
being funded with a mix of ARRA and non-ARRA funds.
Did not take the 4% of ARRA funds set aside for
administration; used 100% of ARRA funds for projects,
not for administration.
DWSRF
Each project received 20-40% of their funding as ARRA
funds principal forgiveness, with a cap for principal
forgiveness of $1 million on green projects and $2
million on infrastructure projects. Projects funded with
a mix of ARRA funds in the form of principal
forgiveness, ARRA funds in the form of loans (3%
interest rate), and base program funds in the form of
loans (3% interest rate). Used mix-and-match
approach with some projects receiving funds from all
three sources and some receiving funds from just two
of the sources. Allowed SRF to leverage ARRA money
to do much more work, resulting in a total of roughly
$150 million in projects (between CW and DW SRF)
being funded with a mix of ARRA and non-ARRA funds.
Took ARRA funds set aside for administration several
years after the fact.
IDNR already had their infrastructure projects identified before ARRA came out; they update their IUP
quarterly, which allows new projects to constantly come into the SRF program.
ARRA allowed the SRF programs to reach smaller communities than they had traditionally. For DWSRF and
CWSRF infrastructure projects, principal forgiveness was given only to the smaller, poorer communities.
Larger communities that were not given principal forgiveness did not lose interest in the SRF programs
because they could still get loans at lower interest rates than market rates. They used base program
funds, not ARRA funds. Larger communities generally had more options than smaller communities
because they were aware of other funding sources.
Factors Affecting Cost Estimates
IDNR noted that most projects had bids (on which the loans were based) come in below the original cost
estimates. Staff saw a dramatic change in prices downward after the economic crashfor example, steel
prices were down. In addition, bids generally came in lower than the cost estimates because there was so
little construction going on in the state at the time. Before 2008 and 2009, cost estimates were going up
rapidly due to escalating steel prices. After that, costs decreased dramatically.
The final project costs tended to be very close to the bid amounts on which the loans were awarded. If
the recipient spent less than the full amount of the loan, SRF would sometimes receive requests from the
recipient to do more. Such requests could be approved, but would not be at the top of SRF's priority list
and, thus, SRF tried to discourage such requests. In addition, any additions to the project would have to
be within the scope of the original project; e.g., if a sewer project that covered four blocks came in under
the loan amount, the recipient could not add another two blocks because that would be outside the scope
of the original project. However, most often, if a project's final cost came in lower than the bid amount,
SRF reduced the non-ARRA (base SRF) portion of funds. About half of SRF's loans released loan funds at
the end of the project; in such cases, SRF then recalculated amortization.
September 2013
Appendix 2-8
-------
If the recipient went above their loan amount, they did not receive additional funds. Instead, they had to
either find other funding sources or go back to SRF for a supplemental loan, which would require going
through a whole new loan process. IDNR did issue change orders, but only up to the amount of the
original loan; change orders could not increase the loan amount, which was still capped. SRF tried to
encourage applicants to think of such contingencies early in the loan process, so that SRF could do any
additional environmental review that might be necessary at the beginning of the project. They could be
flexible about the project scope before the loan agreement was signed, but much less so afterwards.
IDNR said that their SRF programs are mature programs. Any time EPA adds new requirements that don't
apply to other programs and agencies, it makes SRF less desirable to communities. SRF said that the fewer
strings attached to the loan, the better; after all, it's just a loan, and SRF doesn't want to be non-
competitive. IDNR treats SRF basically as a business; they try to meet the applicant's schedule. EPA HQ
recognized Iowa as a model state for the SRF program, and plans to use them as a template in future.
The impact in Iowa is illustrated in the following data provided by IDNR for the Clean Water program.
Table IA - 2 shows the requested project funding based on preliminary engineering estimates, the
promissory note agreement (loan amount) based on bid costs plus 10 percent of construction costs, and
the final expended loan amount (actual project cost) for Clean Water projects.
The final project costs for CWSRF projects ranged from 12 percent lower than to equal to the promissory
note (loan) amounts, with the average being 1 percent lower than the loan amounts; the final project
costs equaled the promissory note amounts for 45 of the 47 projects. Table IA - 2. Iowa Clean Water
Program ARRA Funding
BORROWER
PROMISSORY NOTE
(Bio COSTS PLUS
UP TO 10%
PROJECT
DEVIATION OF
FINAL COST FROM
PROMISSORY NOTE
% CHANGE
PROMISSORY
JMIHUMM
City of Ankeny
City of Baxter
City of Baxter
City of Boone
City of Boyden
City of Cascade
City of Chariton
City of Charles City
City of Council Bluffs
City of Council Bluffs
City of Delhi
City of Donahue
$4,544,000
$1,279,000
$2,825,000
$1,016,000
$116,000
$181,000
$1,008,000
$2,871,000
$361,000
$918,000
$1,517,000
$970,000
$4,544,000
$1,279,000
$2,825,000
$1,016,000
$116,000
$181,000
$1,008,000
$2,871,000
$361,000
$918,000
$1,517,000
$970,000
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
September 2013
Appendix 2-9
-------
BORROWER
OMISSORY NOTE
(Bio COSTS PLUS
UP TO 10%
PROJECT
. INAL COST FROM
PROMISSORY NOTE
PROMISSORY
CONTINGENCY) AMOUNT
City of Dubuque
City of Dyersville
City of Elgin
City of Elkader
City of Emmetsburg
City of Garner
City of Garwin
City of Hed rick
City of Hed rick
City of Keokuk
City of Knoxville
City of Leon
City of Little Rock
City of Low Moor
City of Macedonia
City of Maharishi
Vedic City
City of Maquoketa
City of Milton
City of New Hartford
City of Newton
City of Osage
City of Ottumwa
City of Pleasantville
Pocahontas County
DD#65
City of Princeton
City of Rock Valley
City of Sac City
City of Saint Charles
City of Sioux Rapids
$2,139,000
$1,488,000
$1,007,000
$4,107,000
$1,410,000
$4,235,000
$1,167,000
$303,000
$2,261,000
$4,264,000
$3,926,000
$5,723,000
$236,000
$338,000
$527,000
$1,117,000
$150,000
$491,000
$473,000
$684,000
$572,000
$7,426,000
$476,000
$1,368,000
$1,244,000
$5,895,000
$6,793,000
$1,584,000
$553,000
$2,139,000
$1,488,000
$1,007,000
$4,107,000
$1,274,000
$4,235,000
$1,167,000
$303,000
$2,261,000
$4,264,000
$3,926,000
$5,723,000
$236,000
$338,000
$527,000
$1,117,000
$150,000
$491,000
$473,000
$605,000
$572,000
$7,426,000
$476,000
$1,368,000
$1,244,000
$5,895,000
$6,793,000
$1,584,000
$553,000
$0
$0
$0
$0
-$136,000
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
-$79,000
$0
$0
$0
$0
$0
$0
$0
$0
$0
NOTE AMOUNT
0%
0%
0%
0%
-10%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
-12%
0%
0%
0%
0%
0%
0%
0%
0%
0%
September 2013
Appendix 2-10
-------
BORROWER
City of Spencer
OMISSORY NOTE
(Bio COSTS PLUS
UP TO 10%
CONTINGENCY)
$2,000,000
PROJECT
$2,000,000
. INAL COST FROM
PROMISSORY NOTE
AMOUN
$0
PROMISSORY
E AMOUNT
City of Stockton
$267,000
$267,000
$0
0%
City of Stuart
$1,323,000
$1,323,000
$0
0%
City of Sutherland
$1,313,000
$1,313,000
$0
0%
City of Toledo
$3,871,000
$3,871,000
$0
0%
City of Urbana
$5,393,000
$5,393,000
$0
The impact in Iowa is illustrated in the following data provided by IDNR for the Drinking Water program.
Table IA - 3 shows the requested project funding based on preliminary engineering estimates, the
promissory note agreement (loan amount) based on bid costs plus up to 10 percent of construction costs,
and the final expended loan amount (actual project cost) for Clean Water projects.
The final project costs for DWSRF projects ranged from 15 percent lower than to equal to the promissory
note (loan) amounts, with the average being 1 percent lower than the loan amounts; the final project
costs equaled the promissory note amounts for 29 of the 32 projects.
TABLE IA - 3. IOWA DRINKING WATER PROGRAM ARRA FUNDING
BORROWER
ROMISSORY NOTE
(BID COSTS PLUS
UP TO 10%
CHANGE
PROJECT
FINAL COST FROM
PROMISSORY NOTE
PROMISSORY
Baxter Energy
Efficiency Project
Boone
Energy/Water
Efficiency Project
Burlington Drinking
Water Project
Central Iowa Water
Association Water
Efficiency Project
Charles City Water
Efficiency Project
Crawfordsville
Drinking Water
Project
De Soto Drinking
Water Project
CONTINGENCY)
$340,000
$250,000
$2,966,000
$3,946,000
$504,000
$407,000
$1,087,000
$340,000
$250,000
$2,966,000
$3,946,000
$504,000
$407,000
$1,087,000
AM°UNT AMOUNT
$0
$0
$0
$0
$0
$0
$0
0%
0%
0%
0%
0%
0%
0%
September 2013
Appendix 2-11
-------
BORROWER
PROMISSORY NOTE
(Bio COSTS PLUS
PROJECT
FINAL COST FROM
CHANGE
PROMISSORY
Denison Water
Efficiency Project
Dubuque Water
Efficiency Project
Eldon Drinking
Water Project
Eldora Drinking
Water Project
Fairfax Water
Efficiency Project
Floyd Drinking
Water Project
Fort Madison
Drinking Water
Project
Hartley Drinking
Water Project
Hubbard Drinking
Water Project
Hudson Water
Efficiency Project
Keokuk Drinking
Water Project
Keosauqua Drinking
Water Project
Ladora Water
Efficiency Project
Lamoni Drinking
Water Project
Laurens Drinking
Water Project
Muscatine Energy
Efficiency Project
North English Water
Efficiency Project
Rathbun Regional
Water Drinking
Water Project
Renwick Drinking
Water Project
UK IU J.U70
CONTINGENCY)
$537,000
$8,676,000
$550,000
$300,000
$174,000
$400,000
$11,672,000
$2,600,000
$828,000
$229,000
$5,380,000
$500,000
$74,000
$487,000
$1,154,000
$466,000
$103,000
$4,644,000
$1,130,000
COST
$537,000
$8,676,000
$550,000
$300,000
$153,000
$399,000
$11,672,000
$2,600,000
$703,000
$229,000
$5,380,000
$500,000
$74,000
$487,000
$1,154,000
$466,000
$103,000
$4,644,000
$1,130,000
rKuiviibbUKY rvuit
AMOUNT
$0
$0
$0
$0
-$21,000
-$1,000
$0
$0
-$125,000
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
NOTE
AMOUNT
0%
0%
0%
0%
-12%
0%
0%
0%
-15%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
September 2013
Appendix 2-12
-------
BORROWER
PROMISSORY NOTE
(Bio COSTS PLUS
PROJECT
FINAL COST FROM
CHANGE
PROMISSORY
Salix Drinking Water
Project
Sergeant Bluff
Drinking Water
Project
Stratford Drinking
Water Project
Tama Drinking
Water Project
Urbandale Water
Efficiency Project
Wyoming Drinking
Water Project
UK IU J.U70
CONTINGENCY)
$418,000
$5,989,000
$775,000
$1,191,000
$1,671,000
$785,000
COST
$418,000
$5,989,000
$775,000
$1,191,000
$1,671,000
$785,000
rKuiviibbUKY rvuit
AMOUNT
$0
$0
$0
$0
$0
$0
Average
NOTE
AMOUNT
0%
0%
0%
0%
0%
0%
-1%
The accuracy reflected in the small differences between the promissory note amounts (which reflect the
initial cost estimates or bid costs) and final project costs for both CWSRF and DWSRF projects is
attributable to five primary factors:
1. The engineers preparing cost estimates were familiar with the majority of types of ARRA-funded
projects and were seasoned at estimating costs.
2. The engineers used standardized formats and electronic bidding tools to prepare their cost
estimates.
3. Bid costs are typically fixed price bids. They represent a commitment by the winning contractor
to complete the project with the available funding. Bid costs are binding for a short duration,
typically 90 days. Thus they most closely represent current labor and materials costs.
4. Many of the projects were "linear" in that project quantities (e.g., linear feet of pipe replaced or
number of water meters installed) could be varied within the scope of work. As a result, projects
could be adjusted to match the available funding.
5. For "non-linear" projects (e.g., treatment plant upgrades) loan recipients were encouraged to
use unspent funds to purchase related project items such as emergency generators or spare
parts. This allowed the project scope to utilize available funding.
September 2013
Appendix 2-13
-------
Clean Water Loan Program web page, Iowa Department of Natural Resources web site,
http://www. iowasrf. com/program/clean water 1 oan_program/.
Drinking Water Loan Program web page, Iowa Department of Environmental Quality web site,
http://www.iowasrf.com/program/drinking_water_loan_program/.
Memorandum re Focus Group Meeting with Iowa Department of Natural Resources, Des Moines, IA, April
4, 2013.
September 2013
Appendix 2-14
-------
APPENDIX 3: LOUISIANA STATE FOCUS GROUP SUMMARY
-------
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-------
COST ESTIMATION IN LOUISIANA'S SRF PROGRAMS
SRF PROGRAM OVERVIEW
In Louisiana, the Clean Water State Revolving Fund (CWSRF) is administered by the Louisiana Department
of Environmental Quality (LDEQ), while the Drinking Water State Revolving Fund (DWSRF) is administered
by the Louisiana Department of Health and Hospitals (LDHH). Table LA- 1 compares characteristics of the
CWSRF and DWSRF programs.
TABLE LA - 1. CHARACTERISTICS OF ARRA IMPLEMENTATION IN LA'S CLEAN WATER
STATE REVOLVING FUND AND DRINKING WATER STATE REVOLVING
FUND PROGRAMS
CWSRF
Administered by the Louisiana Department of
Environmental Quality.
Applicant submits application with cost estimate,
including engineering, design, construction, inspection
and legal costs.
Contingency is 10%.
Application may or may not include engineering report.
Upon approval of the application, CWSRF allocates funds
to the project equal to the applicant's cost estimate.
The project and the funds allocation are then added to
the State's Intended Use Plan (IUP).
For the most part, CWSRF allocated ARRA funds to
recipients equal to what they requested in the cost
estimates in their applications.
If bids came in higher than the cost estimate, Change
Orders were sometimes used to adjust the project scope.
In selecting projects to fund, CWSRF's base priority
ranking system does not consider income, geographic
location (other than stream impairments), nor whether
the project is shovel ready.
DWSRF
Administered by the Louisiana Department of Health and
Hospitals.
Applicant submits application with cost estimate,
including engineering, design, construction, inspection
and legal costs.
Contingency is 10%.
Upon approval of the application, CWSRF allocates funds
to the project equal to the applicant's cost estimate.
The project and the funds allocation are then added to
the State's Intended Use Plan (IUP).
For the most part, DWSRF allocated ARRA funds to
recipients equal to what they requested in the cost
estimates in their applications.
September 2013
Appendix 3-17
-------
For ARRA, CWSRF revised their priority ranking system.
They wanted to make sure the projects could be
completed within the tight timeframes involved; thus,
they cut anything that was not shovel ready1. They also
wanted to give priority to disadvantaged communities
that could not normally afford to borrow from the
program, so they looked at different variablesmedian
income of the community, geographic location, need, age
of system, stream impairments, etc. They also tried to
distribute funds to as wide a geographic area around the
state as possible. Finally, they looked at the cost of the
project, trying to maximize work product with available
funds. In the end, CWSRF distributed $43 million of
ARRA funds across 53 projects, located in 45 of the
state's 60 parishes.
For ARRA, DWSRF eliminated projects if they did not
meet a categorical exclusion, as they would take too long
otherwise. In some cases, they worked with the
applicants to carve out a piece of a larger project that
would meet categorical exclusion so that they could fund
these smaller pieces. They also used internal deadlines to
decrease the number of projects. They funded 28
projects, with 12 consultants who were new to the
program; only three projects on their list were not
funded.
CWSRF allocated all ARRA funds as principal forgiveness
and did not keep any funds for administration.
DWSRF gave away only a little more than half of their
ARRA funds in the form of principal forgiveness. DWSRF
allocated funds to projects as a combination of ARRA and
non-ARRA (base program) funds in the form of grants
and loans, with 30% (up to a maximum of $1 million) in
the form of principal forgivenessthe balances were
loaned. The grant/loan combinations made accounting
easier when projects came in under budget, as they
could shift funds as needed.
In 2008, before ARRA was passed, CWSRF did not have
many projects on their list; the projects they did have
were mostly either old or not shovel-ready. They had
already started soliciting applicants before ARRA came
out, to speed up the program. When ARRA was passed,
CWSRF held a separate solicitation for ARRA projects.
When ARRA came out, DWSRF already had a long list of
applicants, but they still solicited for additional ARRA
projects. DWSRF also had to decrease the number of
applicants who would receive funds, but not by as many
as CWSRF did.
CWSRF
With ARRA, CWSRF followed Congress's recommendation and changed their focus to allocate ARRA funds
to recipients who could not otherwise afford grantsrural areas, small, poor and disadvantaged
communities. They received 284 applicants. Many of these were new applicants and new engineering
firms that were not familiar with the program requirements. As a result, CWSRF had to walk them through
each step of the application process.
Almost all of CWSRF's projects were line, pump, collection system or treatment plant rehabilitations. The
average value of projects was approximately $750 thousand - $1 million. The largest project, the West
Monroe green project, was funded at $4.5 million; the smallest project was roughly $100,000.
1 For purposes of ARRA, CWSRF defined shovel ready as: (a) projects qualifying for categorical exclusion
from NEPA (to avoid delays associated with NEPA); (b) projects having 100% plans and specifications
already prepared; or (c) easy projects such as replacing lift station pumps, which could be planned and
completed quickly, even if 100% plans and specifications were not already prepared.
September 2013
Appendix 3-18
-------
CWSRF did not use multiple funding sources for projects in most cases. However, the West Monroe
wastewater recycling facility was jointly funded with DWSRF and received $4.75 million ARRA funds in
principal forgiveness, plus a $1.2 million loan from their base program funds. In addition, CWSRF did not
require local funding matches.
DWSRF
DWSRF awarded roughly $27 million in ARRA funds, with $315,000 kept for administration; approximately
$19 million was awarded in the form of principal forgiveness.
Factors Affecting Cost Estimates
CWSRF
CWSRF received a broad spectrum of cost estimates from applicants. When project bids came in, some hit
the mark, while others came in high or low compared to the application cost estimates, with
approximately equal numbers being too high and too low and overall averaging roughly on the mark. Out
of the total $43 million ARRA award amount, they only went over by $385,722.
For projects where the bid came in under the cost estimate, recipients spent the entire award amount by
finding other uses for the excess funds, such as through the purchase of smaller items like generators.
CWSRF encouraged this, as they did not want to take back money; fortunately, their loan documents were
generally written to be broad in scope, which gave them flexibility for spending the excess funds.
CWSRF representatives in the focus group said that for projects where the bid came in over the cost
estimate, this was generally due to either poor bids, field adjustments or unforeseen problems; for
example, CWSRF said their contractors were somewhat overwhelmed by the speed and volume of work
under ARRA, and that costs may have increased slightly due to availability issues. CWSRF was sometimes
able to accommodate the increase by using other funds; otherwise, they had to issue change orders to
reduce the project scope. CWSRF supplemented approximately six projects with funds from their
administrative fee fund, which they had been banking for several years.
DWSRF
DWSRF reported that most project bids were equal to the cost estimate; a few were slightly under, but
none were over. When the project bids were below the cost estimate, the organization purchased small
items like generators to spend the rest of the money, similar to the CWSRF program. DWSRF said the
existing contractor base was overwhelmed to some degree and that this caused some project delays due
to availability issues.
The impact on the DWSRF program in Louisiana is illustrated in the following data provided by LDEQ.
Table LA - 2 shows the base promissory note agreement (loan amount) (excluding contingency), loan
contingency, and total promissory note agreement (loan amount) based on estimated costs plus
contingency for Drinking Water projects. Data on the initial grantee estimated costs were not available for
Louisiana's DWSRF program; however, DWSRF has stated that these cost estimates were used to
determine, and thus are close to, the loan amounts.
The final project costs for DWSRF projects ranged from 5% lower than to equal to the promissory note
(loan) amounts, with the average being equal to the loan amounts; the final project costs equaled the
September 2013 Appendix 3-19
-------
promissory note amounts for 23 of the 28 projects. The accuracy reflected in the small differences
between the promissory note amounts (which reflect the initial cost estimates or bid costs) and final
project costs is attributable to five primary factors:
1. The engineers preparing cost estimates were familiar with the majority of types of ARRA-funded
projects and were seasoned at estimating costs.
2. The engineers used standardized formats and electronic bidding tools to prepare their cost
estimates.
3. Bid costs are typically fixed price bids. They represent a commitment by the winning contractor
to complete the project with the available funding. Bid costs are binding for a short duration,
typically 90 days. Thus they most closely represent current labor and materials costs.
4. Many of the projects were "linear" in that project quantities (e.g., linear feet of pipe replaced or
number of water meters installed) could be varied within the scope of work. As a result, projects
could be adjusted to match the available funding.
5. For "non-linear" projects (e.g., treatment plant upgrades) loan recipients were encouraged to
use unspent funds to purchase related project items such as emergency generators or spare
parts. This allowed the recipients to utilize available funding.
TABLE LA - 2. LOUISIANA DRINKING WATER PROGRAM ARRA FUNDING
BORROWER
Ascension Consolidated
Utilities District
TOTAL PROMISSORY NOT
AGREEMENT (ESTIMAT
COSTS PLUS 10%
CONSTRUCTION
CONTINGENCY PLUS
OTHER COSTS*)
EVIATION OF
FINAL Co
DWSRF FINAL
PROJECT COST
$1,000,000
PROMISSORY
NOTE
AMOUNT
$1,000,000
$0
PROMISSORY
AMOUNT
0%
Bayou Des Cannes Water
System
$2,222,520
$2,222,520
$0
Buckeye Water District #50
$1,142,000
$1,142,000
$0
0%
Calcasieu Parish WWD #8
$641,000
$641,000
$0
City of Alexandria
$4,390,000
$4,390,000
$0
City of Baker
$4,200,000
$4,200,000
$0
0%
City of Blanchard
$3,657,000
$3,657,000
$0
0%
City of Bogalusa
$5,000,000
$5,000,000
$0
City of Franklin
$2,705,000
$2,705,000
$0
0%
City of Mansfield
$4,120,000
$4,120,000
$0
0%
City of Morgan City
$3,984,000
$3,984,000
$0
City of Natchitoches
$5,000,000
$5,000,000
$0
City of Ruston
$3,334,000
$3,334,000
$0
0%
City of Shreveport
$11,000,000
$10,692,302
-$307,698
-3%
City of Thibodaux
$6,400,000
$6,400,000
$0
CityofVillePlatte
$4,050,000
$4,050,000
$0
0%
September 2013
Appendix 3-20
-------
BORROWER
CityofWestlake
IL PROMISSORY NOT
AGREEMENT (ESTIMATPr
COSTS PLUS 10%
CONSTRUCTION
CONTINGENCY PLUS
OTHER COSTS*'
$2,900,000
$2,900,000
AL COST
AMOUNT
% CHANGE
PROMISSORY
AMOUNT
$o
0%
Desoto Parish WWD #1
$2,360,000
$2,360,000
$0
East Allen Parish WWD
$1,285,000
$1,285,000
$0
Gardner Community Water
Association
$1,410,000
$1,333,946
-$76,054
-5%
lbervilleWWD#2
$3,250,000
$3,206,142
-$43,858
-1%
Kolin Ruby-Wise Water
District 11A
$550,000
$550,000
$0
0%
New Orleans Sewerage &
Water Board
$3,400,000
$3,400,000
$0
0%
Savoy Swords Water System
$886,000
$870,481
-$15,519
-2%
Southwest Allen Parish
Waterworks
$995,000
$995,000
$0
Town of Pollock
$530,000
$530,000
$0
0%
Town of Walker
$520,000
$520,000
$0
United Water System
$952,000
$940,895
-$11,105
-1%
Average
0%
*0ther costs include legal fees, administrative and engineering fees, inspection fees, etc.
Louisiana Department of Environmental Quality web site, Clean Water State Revolving Fund page,
http://www.deq.louisiana.gov/portal/DIVISIONS/FinancialServices/CleanWaterStateRevolvingFund.as
fiX.
Louisiana Department of Health and Hospitals web site, Drinking Water Revolving Loan Fund page,
http://new.dhh.louisiana.goV/index.cfm/page/431/n/285.
Memorandum re Focus Group Meeting with Louisiana Department of Environmental Quality, Baton
Rouge, LA, March 15, 2013.
September 2013
Appendix 3-21
-------
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September 2013 Appendix 3-22
-------
APPENDIX 4: MONTANA STATE FOCUS GROUP SUMMARY
-------
This page intentionally blank.
-------
COST ESTIMATION IN MONTANA'S SRF PROGRAMS
PROGRAM OVERVIEW
In Montana, the technical and programmatic elements of both the Clean Water State Revolving Fund
(CWSRF) program (aka, the Water Pollution Control State Revolving Fund program) and the Drinking
Water State Revolving Fund (DWSRF) program are administered by the Montana Department of
Environmental Quality (MDEQ). The Department of Natural Resources and Conservation (DNRC) issues
the State's general obligation bonds and makes loans to the project borrowers. Cooperatively, DEQ and
DNRC administer the State Revolving Fund Loan Programs. Table NC-1 compares characteristics of the
CWSRF and DWSRF programs.
TABLE MT - 1. CHARACTERISTICS OF ARRA IMPLEMENTATION IN MT'S CLEAN WATER
STATE REVOLVING FUND AND DRINKING WATER STATE REVOLVING
FUND PROGRAMS
CWSRF
DWSRF
Technical and programmatic elements administered by
Montana Department of Environmental Quality (MDEQ).
Technical and programmatic elements administered by
Montana Department of Environmental Quality (MDEQ).
General obligation bonds and loans administered by
Montana Department of Natural Resources and
Conservation.
General obligation bonds and loans administered by
Montana Department of Natural Resources and
Conservation.
Applicant for funding from SRF program submits
application to request inclusion on the Priority List and in
the Intended Use Plan (IUP). Application includes rough
cost estimate based on two-page questionnaire,
including engineering, construction, legal and
administrative costs; at this stage, applicant may not
even have an engineer on the project.
Applicant for funding from SRF program submits
application to request inclusion on the Priority List and in
the Intended Use Plan (IUP). Application includes rough
cost estimate based on two-page questionnaire,
including engineering, construction, legal and
administrative costs; at this stage, applicant may not
even have an engineer on the project.
Annual IUP process begins in May or June to identify
projects which may need SRF funding in the upcoming
year; list is completed by July 1st. Ranking on Priority List
is based on water quality and/or public health impacts
and financial needs. Project remains on List until it has
been completed, regardless of funding source(s) used to
finance project.
Annual IUP process begins in May or June to identify
projects which may need SRF funding in the upcoming
year; list is completed by July 1st. Ranking on Priority List
is based on water quality and/or public health impacts
and financial needs. Project remains on List until it has
been completed, regardless of funding source(s) used to
finance project.
Once applicant listed on IUP, it is eligible to apply for an
SRF loan. Loans are typically offered on a first-come, first-
served basis until demand exceeds available
funds. However, lower ranked projects may be funded
before higher ranked projects if higher ranked project is
not ready to proceed, as long as the funds are available.
Generally, Montana has enough money to fund all
projects. Some projects stay at the top of the IUP for
several years because city does not take action to move
forward.
Once applicant listed on IUP, it is eligible to apply for an
SRF loan. Loans are typically offered on a first-come,
first-served basis until demand exceeds available
funds. However, lower ranked projects may be funded
before higher ranked projects if higher ranked project is
not ready to proceed, as long as the funds are available.
Generally, Montana has enough money to fund all
projects. Some projects stay at the top of the IUP for
several years because city does not take action to move
forward.
September 2013
Appendix 4-1
-------
CWSRF
To request SRF loan funding, the applicant submits a
"Uniform Application Supplement;" these applications
are accepted year-round and the IUP is updated three to
four times per year, depending on when communities
submit projects.
DWSRF
To request SRF loan funding, the applicant submits a
"Uniform Application Supplement;" these applications
are accepted year-round and the IUP is updated three to
four times per year, depending on when communities
submit projects.
After application is submitted, applicant hires engineer to
develop Preliminary Engineering Report (PER), which
includes a more detailed cost estimate. This cost
estimate may include contingency (usually 5-10%),
which may be funded through local funds. Montana also
gives out planning grants to support development of the
PER. Montana provided $1.8 million in planning grants
for preliminary engineering reports to assess entire
project and work with community to define problems
and identify best solutions. The objective of planning
grants is to ensure that the project is comprehensive and
"fixes" any problems for the long term; this also gives
them better projects. Communities have to apply for
planning grants, which may come from DEQ or from
other agencies.
After application is submitted, applicant hires engineer to
develop Preliminary Engineering Report (PER), which
includes a more detailed cost estimate. This cost
estimate may include contingency (usually 5-10%),
which may be funded through local funds. Montana also
gives out planning grants to support development of the
PER. Montana provided $1.8 million in planning grants
for preliminary engineering reports to assess entire
project and work with community to define problems
and identify best solutions. The objective of planning
grants is to ensure that the project is comprehensive and
"fixes" any problems for the long term; this also gives
them better projects. Communities have to apply for
planning grants, which may come from DEQ or from
other agencies.
At this stage of planning, anomalies are identified and
the design is adjusted before the final design is
developed. SRF coordinates this process and may assist
the community to address other issues, such as
compliance and environmental issues. SRF may make
suggestions about what needs to be completed; tries to
look at complete picture including compliance status,
and works with communities to adjust user rates and
charges.
At this stage of planning, anomalies are identified and
the design is adjusted before the final design is
developed. SRF coordinates this process and may assist
the community to address other issues, such as
compliance and environmental issues. SRF may make
suggestions about what needs to be completed; tries to
look at complete picture including compliance status,
and works with communities to adjust user rates and
charges.
The planning and costing phase for construction projects
can typically take up to two years, based on factors such
as regulation and policy changes or need for land
acquisition. Thus, it becomes an iterative process where
project plans and costs develop and change over time.
SRF coordinates conference calls with applicants to
ensure schedules are met, scopes are defined, user rates
and charges practices are included in plan, and to
perform technical reviews. Funding for land purchases, if
necessary, may come from another agency. The applicant
may need to lease land or obtain right-of-way. All these
planning activities occur simultaneously. Often an
environmental document is needed, so SRF ensures that
all agencies that would be involved are included from
outset. Any other funding agencies that may be involved
are also included on these calls.
The planning and costing phase for construction projects
can typically take up to two years, based on factors such
as regulation and policy changes or need for land
acquisition. Thus, it becomes an iterative process where
project plans and costs develop and change over time.
SRF coordinates conference calls with applicants to
ensure schedules are met, scopes are defined, user rates
and charges practices are included in plan, and to
perform technical reviews. Funding for land purchases, if
necessary, may come from another agency. The
applicant may need to lease land or obtain right-of-way.
All these planning activities occur simultaneously. Often
an environmental document is needed, so SRF ensures
that all agencies that would be involved are included
from outset. Any other funding agencies that may be
involved are also included on these calls.
Once the final design (including plans and specifications)
and final cost estimate have been developed and
approved, the loan is closed and funds are committed to
project. The SRF loan program cooperates with other
Montana funding programs to ensure project funding is
available when it is needed. The recipient then advertises
for construction bids.
Once the final design (including plans and specifications)
and final cost estimate have been developed and
approved, the loan is closed and funds are committed to
project. The SRF loan program cooperates with other
Montana funding programs to ensure project funding is
available when it is needed. The recipient then advertises
for construction bids.
September 2013
Appendix 4-2
-------
CWSRF
To meet obligation criteria, SRF used ARRA funds only on
"shovel ready" projects which had already been through
pre-design and engineering costing. Projects that were
not shovel ready would have taken too long to
coordinate within short ARRA timeframes; cities had to
use base funds for such projects. This may have
conflicted with some of base program criteria for funding
priority. For example, tight ARRA time frame meant that
projects had to be ready to go, whereas other projects
might have had a greater need but weren't ready to go.
However, some of these projects never would have
moved forward without ARRA.
DWSRF
To meet obligation criteria, SRF used ARRA funds only on
"shovel ready" projects which had already been through
pre-design and engineering costing. Projects that were
not shovel ready would have taken too long to
coordinate within short ARRA timeframes; cities had to
use base funds for such projects. This may have
conflicted with some of base program criteria for funding
priority. For example, tight ARRA time frame meant that
projects had to be ready to go, whereas other projects
might have had a greater need but weren't ready to go.
However, some of these projects never would have
moved forward without ARRA.
The state wanted to spread ARRA funds around as much
as possible, so decided on a $750,000 ARRA cap per
project, in form of either principal forgiveness or loans.
This provided enough funding to be useful to each
project, but still spread monies out to as many localities
as possible and encouraged "new client" localities to
apply for loans/grants from state and other agencies to
become familiar with the process. SRF also wanted a
good distribution among types of funding recipients.
State wanted to spread ARRA funds around as much as
possible, so decided on a $750,000 ARRA cap per project,
in form of either principal forgiveness or loans. This
provided enough funding to be useful to each project,
but still spread monies out to as many localities as
possible and encouraged "new client" localities to apply
for loans/grants from state and other agencies to
become familiar with the process. SRF also wanted a
good distribution among types of funding recipients.
In addition, Montana used ARRA stimulus, especially in
form of principal forgiveness, as an opportunity to
encourage many small communities to upgrade and fix
water systems and come into compliance. Many
communities would never have been able to do this
without ARRA. Recipients used ARRA money first, before
any other funding sources. Recipients used ARRA
principal forgiveness grant funds first, then loans so that
ARRA funds were expended within required timeframes.
In addition, Montana used ARRA stimulus, especially in
form of principal forgiveness, as an opportunity to
encourage many small communities to upgrade and fix
water systems and come into compliance. Many
communities would never have been able to do this
without ARRA. Recipients used ARRA money first, before
any other funding sources. Recipients used ARRA
principal forgiveness grant funds first, then loans so that
ARRA funds were expended within required timeframes.
Montana had advanced notification that ARRA was coming and thus conducted a great deal of outreach
with communities and projects to help them prepare for ARRA. Some projects that received ARRA funds
were new projects that began just in the ARRA year, whereas others were existing projects to which ARRA
funding was added as another phase; all the funding was held as discrete for the particular phase.
The majority of SRF projects in Montana are funded by several agencies, with caps to grants from the
various agencies. For SRF loans, the cap is typically $1.3 million or $1.5 million. Projects are phased so that
the grant needed fit the available funding. Before ARRA, SRF funding awarded was about $30 million per
year. ARRA added $38 million. This enabled the state to give out more grants, as opposed to larger grants.
ARRA enabled the state to put together funding packages for much larger projects, using funds from other
sources to leverage the ARRA funds. Cities were able to do more because of the extra money available,
expanding the scope of projects to meet the available funding, such as by adding water meters to existing
projects with the extra funding.
September 2013
Appendix 4-3
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Factors Affecting Cost Estimation
The contractors in Montana have a great deal of experience with SRF projects, so their bids tend to be
realistic. However, if bids come in lower than expected, then SRF can do more in the community. Before
project closeout, if there were under-runs, SRF assessed the project's needs and could potentially add
more to the project (such as buying more main replacement) or perhaps allow purchase of a back-up
generator or other piece of equipment that would best service the locality's needs with regards to the
specific project. If the entire funded amount was not spent, the loan amount could also be reduced by
that much.
SRF found it rare for projects to go over budget. If projects did go over budget, it was often due to the
long time lapse between planning and the start of the project. Montana uses a variety of funding sources
for projects, and this can take time to pull together. Inflation factors can affect costs as the project
funding comes together over several years. So planning cannot address a lot of issues. In addition, there is
often not enough funding to do all the planning. For instance, land acquisition cannot be included in the
planning process. Also, much of the environmental work needs to be done after the planning process; the
several involved federal and state agencies all have different agendas. The logistics of when the
environmental work and land acquisition can happen also have to be taken into account. This is an
iterative process that needs flexibility and communication, and is somewhat of an art. Changes in project
cost occur over the course of this iterative process, and this needs to be explained to the public upfront.
In addition, the overall cost of SRF projects in Montana has been going up due to the need to meet new
treatment standards for nutrient removal. It used to be that $2-3 million was a big wastewater project;
now that is a small amount. Other factors, such as oil and gas development which creates demand for
additional wastewater treatment, may also contribute to increasing costs.
In addition, unknowns can result in additional costs. Competition, the biggest unknown, can have a huge
impact on the market. During high growth times, unit costs went way up, resulting in underestimation of
final project costs. During the recession and ARRA, though, final project costs generally came in under the
estimates due to intense competition among the contractors. To account for potential changes in costs
over the course of the project, the applicant could choose to go with a conservative higher cost estimate,
but this can have a downside: the community may decide not to move forward when the project is so
expensive. The project can also lose credibility if the initial cost seems too high.
In those few cases where the final project costs did come in above the loan amounts, the state could
usually cover the costs using other non-ARRA funding sources. Alternatively, a decision could be made to
phase the project, cut back on project components and/or take out non-essential items.
SRF stated that the ARRA stimulus greatly helped Montana. Without ARRA, some large wastewater
projects under enforcement would not have been able to get projects done. The smaller communities
also could not have afforded a loan or even the cost of mobilization of a construction project. Montana
has many low income areas and many projects sat on the shelf for years until ARRA came along; many of
the smaller towns had not seen a major construction project in twenty years. O&M labor and power costs
also make it difficult for smaller communities to deal with wastewater treatment. In addition, many small
rural communities don't have full time public works directors, clerks, mayors, etc. These roles are
considered their "second jobs" alongside their other full-time jobs. Therefore, they are not dedicated to
particular systems and programs, were not familiar with the SRF programs and practices and had to be
trained to receive the ARRA funding.
September 2013 Appendix 4-4
-------
SRF worked hard to educate the communities on how to submit applications, ensure rates and charges
are in place, address health and safety with regards to construction projects, and coordinate and hold
public meetings and liability training sessions. Many rural communities had not had rate increases or any
drinking water construction projects for over 20 years, and thus were unaware of the process. For
example, SRF consulted with the localities and encouraged one locality to buy out a deteriorating trailer
park complex, as a result of which the locality became a water and sewer district and could apply for SRF
loans to install and update the systems.
ARRA also aided the Montana contractor community. Due to the recession, many contractors were out of
work at the time; ARRA funding provided work for both existing and new contractors. During the ARRA
timeframe, when the recession was at its peak, many contractors underbid (mostly by cutting out profits)
on projects to get the job and keep crews busy. Both the state and contractors claim that ARRA saved
many contractors from bankruptcy. However, some contractors and subcontractors bid so low that they
went bankrupt during the middle of a projectthere was so much competition for work that contractors
were submitting bare-bones bids. This may also have served to undercut project quality. Many of the
ARRA projects received over 100 bids, whereas in the past, projects may have received around ten bids.
This increase in the number of bids required more review and response on the part of DEQ and DNRC.
The state made an effort to spread contracting dollars to not just the biggest and most well-known
contractors. They even provided contracts to former 'developers' who were out of work. However, this
caused more management issues for SRF when localities used contractors (many from the residential or
commercial development side) who were not used to the SRF contracts program, as SRF had to educate
and train these contractors with regards to the process, administrative paperwork, etc. Quality may also
have been an issue with these inexperienced contractors.
Another benefit that Montana's SRF program has seen as a result of ARRA, is that they are seeing repeat
business. Localities that benefitted from ARRA and learned how to apply for SRF funding are now coming
back for more funding for additional projects.
The impact in Montana is illustrated in the following data provided by MDEQ for CWSRF projects. Table
MT - 2 shows the promissory note agreement (loan amount) based on estimated costs plus contingency
and final project costs for Clean Water projects. Data on the grantee estimated costs were not available
for Montana's CWSRF program; however, CWSRF has stated that final grantee cost estimates are what
were used to determine, and thus are close to, the loan amounts.
The final project costs for CWSRF projects ranged from 13 percent lower than to equal to the promissory
note (loan) amounts, with the average being 2 percent lower than the loan amounts; the final project
costs equaled the promissory note amounts for 24 of the 31 projects.
September 2013 Appendix 4-5
-------
TABLE MT - 2. MONTANA CLEAN WATER PROJECTS ARRA FUNDING
Billings, City of
Bozeman, City of
Butte/Silver Bow Co.
Columbia Falls, City of
Conrad, City of
Deer Lodge, City of
Dutton, Town of
East Helena, City of
Fairfield, Town of
Glendive, City of
Great Falls, City of
Hamilton, City of
Hardin, City of
Helena, City of
Laurel, City of
Lewis & Clark County Law Academy
Lewistown, City of
Livingston, City of
Lockwood WSD
Missoula County - WYD
Missoula, City of (Rattlesnake)
Plains, Town of
Sacred Lodge, City of
Ronan, City of
Shelby, City of
St. Regis WSD
Townsend, City of
Virginia City, Town of
Whitefish, City of
Winifred, Town of
Wisdom WSD
1 OTAL r ROMISSORY
NOTE AGREEMENT
(ESTIMATED COSTS PLUS
CONSTRUCTION
CONTINGENCY)
$750,000
$750,000
$750,000
$750,000
$750,000
$750,000
$750,000
$324,350
$641,000
$61,000
$750,000
$750,000
$750,000
$750,000
$750,000
$750,000
$379,900
$750,000
$750,000
$750,000
$750,000
$502,000
$511,186
$294,800
$750,000
$103,100
$750,000
$388,000
$128,000
$559,400
$326,800
CWSRF
FINAL
PROJECT
COST
$750,000
$750,000
$750,000
$750,000
$750,000
$750,000
$750,000
$324,350
$641,000
$61,000
$700,516
$750,000
$750,000
$750,000
$750,000
$750,000
$359,059
$750,000
$750,000
$750,000
$750,000
$443,290
$492,043
$294,800
$750,000
$103,100
$749,529
$375,837
$114,911
$559,400
$282,880
DEVIATION OF
% CHANGE
FINAL COST
FROM
FROM
PROMISSORY
PROMISSORY
NOTE
NOTE
AMOUNT
AMOUNT
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
-$49,484
$0
$0
$0
$0
$0
-$20,841
$0
$0
$0
$0
-$58,710
-$19,143
$0
$0
$0
-$471
-$12,163
-$13,089
$0
-$43,920
Average
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
-7%
0%
0%
0%
0%
0%
-5%
0%
0%
0%
0%
-12%
-4%
0%
0%
0%
0%
-3%
-10%
0%
-13%
-2%
September 2013
Appendix 4-6
-------
The impact in Montana is illustrated in the following data provided by MDEQ for Drinking Water projects.
Table MT - 3 shows the promissory note agreement (loan amount) based on estimated costs plus
contingency and final project costs for Drinking Water projects. Data on the grantee estimated costs were
not available for Montana's DWSRF program; however, DWSRF has stated that the final grantee cost
estimates are what were used to determine, and thus are close to, the loan amounts.
The final project costs for DWSRF projects ranged from 22 percent lower than to equal to the promissory
note (loan) amounts, with the average being 2 percent lower than the loan amounts; the final project
costs equaled the promissory note amounts for 29 of the 35 projects.
TABLE MT - 3. MONTANA DRINKING WATER PROGRAM ARRA FUNDING
Belgrade, City of
Billings III, City of
Black Eagle WSD
Butte/Silver Bow Co.
Chester, Town of
Columbus, Town of
Cut Bank, City of
Elk Meadows WD
Essex WSD
Fort Benton, City of
Glendive, City of
Great Falls, City of
Havre, City of
Helena, City of
Homestead Acres
Jette Meadows WSD
Kevin, Town of
Lewis & Clark County
Manhattan, Town of
Miles City, City of
Missoula County
Mountain Water Company
Pablo WSD
Poison, City of
TOTAL PROMISSORY NOTE
AGREEMENT (ESTIMATED
COSTS PLUS
CONSTRUCTION
CONTINGENCY)
$750,000
$750,000
$225,000
$750,000
$448,000
$750,000
$750,000
$750,000
$357,246
$631,000
$357,000
$750,000
$350,000
$750,000
$393,997
$750,000
$680,000
$46,000
$230,000
$750,000
$572,400
$750,000
$750,000
$750,000
DWSRF FINAL FlNALC°ST
FROM PROMISSORY
PROJECT COST
PROMISSORY NOTE
NOTE AMOUNT AMOUNT
$750,000
$750,000
$225,000
$715,530
$448,000
$750,000
$750,000
$750,000
$357,246
$630,019
$357,000
$630,019
$350,000
$750,000
$393,997
$750,000
$680,000
$46,000
$230,000
$750,000
$487,679
$750,000
$750,000
$750,000
$0
$0
$0
-$34,470
$0
$0
$0
$0
$0
-$981
$0
-$119,981
$0
$0
$0
$0
$0
$0
$0
$0
-$84,721
$0
$0
$0
0%
0%
0%
-5%
0%
0%
0%
0%
0%
0%
0%
-16%
0%
0%
0%
0%
0%
0%
0%
0%
-15%
0%
0%
0%
September 2013
Appendix 4-7
-------
BORROWER
Seeley Lake W&S District
TOTAL PROMISSORY N
AGREEMENT (ESTIMATED
COSTS PLUS
CONSTRUCTION
CONTINGENCY)
DWSRF Fl
PROJECT COST
IEVIATION OF
PROMISSO.
% CHANGE
$750,000
NOTE AMOUNT AMOUNT
$750,000
$0
Shelby
$750,000
$750,000
$0
0%
Superior, Town of
$298,000
$298,000
$0
0%
Three Forks, City of
$170,000
$170,000
$0
Troy, Town of
$500,000
$500,000
$0
0%
University of Montana
$750,000
$750,000
$0
Upper/Lower River Rd WSD
$500,000
$500,000
$0
0%
Virginia City, Town of
$430,000
$425,749
-$4,251
-1%
Virginia City, Town of, I
$48,000
$37,450
-$10,550
-22%
Whitefish, City of
$270,000
$270,000
$0
Wilderness Plateau WSD
$263,000
$263,000
$0
Average
-2%
The accuracy reflected in the small differences between the promissory note amounts (which reflect the
initial cost estimates or bid costs) and final project costs for both CWSRF and DWSRF projects is
attributable to six primary factors:
1. The engineers preparing cost estimates were familiar with the majority of types of ARRA-funded
projects and were seasoned at estimating costs. Cost estimating for Drinking Water and Clean
Water projects is not new, and the Montana community is close-knit. The contractors are well-
known and experienced; there are 12 to 15 engineering firms that the state works with regularly
on Drinking Water and Clean Water projects. These companies have a great deal of experience in
the state and are thus able to develop thorough and accurate planning documents. Montana
uses their planning grants to assist localities in hiring an engineer for design and cost estimates,
to ensure they submit a robust application. They then work with the community to figure out
how to get the work done with the available funds, for instance, by building only a metal building
instead of a brick building, cutting out nonessential elements or phasing projects.
2. The engineers used standardized formats and electronic bidding tools to prepare their cost
estimates. SRF stated that the PERs are the real key to realistic cost estimates. SRF keeps all the
bid tabs for all the projects they have ever had, and all engineers have access to them, so they
can be very precise in developing their cost estimates. For example, contractors will generally use
standard estimates (bid tabs) for items such as pipe installation. They can add some contingency
if they think there might be difficult issues; however, SRF has never encountered a big issue that
caused major project cost differences. Partly this is due to good communication between the
state and the consultants.
3. Montana SRF avoids cost variances and minimizes cost over-runs by looking realistically at
project scope. The PER is their best estimate at the planning stage. When the PER comes in, the
state reviews the applicant's plans and costs, discusses the project with the community and helps
September 2013
Appendix 4-8
-------
them become more realistic. The state believes their understanding of community finances helps
them develop more realistic cost estimates, and know what the community will be able to afford;
they may decide to phase the project if the cost is high. This is followed by pre-design. At this
stage, there is enough funding in the project to do more environmental and land acquisition
planning. If the site has to be changed, the environmental planning also has to be changed. This
is an iterative process. In addition, the scope may need to change by the time of the final design
to meet the funding limit, but if it does, the process starts over. In the end, though, projects
generally meet their cost estimates because the projects can be downsized if needed or lower
cost items can be substituted.
4. Bid costs are typically fixed price bids. They represent a commitment by the winning contractor
to complete the project with the available funding. Bid costs are binding for a short duration,
typically 90 days. Thus they most closely represent current labor and materials costs.
5. Many of the projects were "linear" in that project quantities (e.g., linear feet of pipe replaced or
number of water meters installed) could be varied within the scope of work. As a result, projects
could be adjusted to match the available funding.
6. For "non-linear" projects (e.g., treatment plant upgrades) loan recipients were encouraged to
use unspent funds to purchase related project items such as emergency generators or spare
parts. This allowed the project scope to utilize available funding.
Montana State Revolving Fund Programs web page, Montana Department of Environmental Quality web
site, http://www.deq.mt.gov/wqinfo/srf/default.mcpx.
Water Pollution Control State Revolving Fund Loans web page, Montana Department of Environmental
Quality web site, http://www.deq.mt.gov/wqinfo/srf/WPCSRF/default.mcpx.
Drinking Water State Revolving Fund web page, Montana Department of Environmental Quality web site,
http://www.deq.mt.gov/wqinfo/srf/DWSRF/default.mcpx.
October 25 Meeting Notes from Focus Group Meeting with Montana Department of Environmental
Quality, Rapid City, MT, October 25, 2012.
25Oct 2012 MT Focus Group, Documentation of Focus Group, Cost Estimating and Green Project Reserve,
September 2013 Appendix 4-9
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September 2013 Appendix 4-10
-------
APPENDIX 5: NEW YORK STATE FOCUS GROUP SUMMARY
-------
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-------
COST ESTIMATION IN NEW YORK'S SRF PROGRAMS
CWSRF AND DWSRF
Program Overview
Under ARRA, New York received the largest total Clean Water State Revolving Fund (CWSRF) and Drinking
Water State Revolving Fund (DWSRF) allotment of any state, at $524 million. Approximately $435 million
was provided to the CWSRF, and $86 million for the DWSRF (New York State Environmental Facilities
Corporation, 2011).
In New York, the CWSRF is administered jointly by the New York State Environmental Facilities
Corporation (EFC) and the New York State Department of Environmental Conservation (DEC), while the
DWSRF is administered jointly by the EFC and the New York State Department of Health (DOH). The EFC is
a public benefit corporation formed to provide low-cost capital and expert technical assistance for
environmental projects in New York State. EFC administers the financial aspects of the CWSRF and
DWSRF. Applications for CWSRF and DWSRF financing are submitted to EFC, the financing is obtained
through EFC, and repayments are made to EFC. DOH manages the technical review for DWSRF projects.
For the DWSRF, DEC and DOH accepts pre-application forms and technical reports; scores, ranks, and lists
projects on the IUP; and reviews technical documents for both the pre-application and the complete
application.
The New York State EFC offers both CWSRF and DWSRF clients the opportunity to finance planning, design
and early construction costs through short-term financing programs. These are projects that have
progressed into the planning phase, but are not ready for long-term financing. This program allows
applicants to develop very accurate cost estimates before finalizing the long-term project costs. Short-
term funding can be used for up to three years, at which point the state will reevaluate whether a project
can be converted to long-term financing. Short-term funding would take a project through bid and into
construction (SAIC, 2013).
The CWSRF program provides low-interest rate financing terms to eligible recipient entities for projects
that reduce, eliminate or prevent water pollution. The New York State Department of Environmental
Conservation (DEC) administers the program. As the financings are repaid, the money becomes available
for new projects and the funds continue to revolve. The CWSRF provides up to a 50% interest rate
subsidy, which saves communities money on interest costs.
The DWSRF program provides low-interest rate financing terms, as well as hardship grants for publicly and
privately owned community water system projects that provide safe, affordable drinking water. The
program is administered by EFC and the New York State Department of Health (DOH). Like the CWSRF, as
the financings are repaid, the money becomes available for new projects. The DWSRF provides a 33%%
interest rate subsidy, which saves communities money on interest costs.
SRF program capitalization grants are issued from USEPA to New York State, for which the State is
required to provide 20 percent in matching funds. New York State distributes these federal and state
moneys to DEC and DOH to administer the programs. DEC and DOH in turn distribute these moneys to EFC
to provide financial assistance to eligible recipients. EFC invests the federal and state capitalization grant
moneys and uses interest earnings on these and other funds to subsidize by one-third or one-half the
September 2013 Appendix 5-1
-------
interest on the financings it provides. Financial assistance under the SRF program may be provided
directly from the grant funds, from the proceeds from the issuance of bonds, repayments and/or interest
earnings (New York State Environmental Facilities Corporation, 2011).
Project listing is the first step to obtaining financing through either SRF. The project applicant submits
appropriate SRF Project Listing Forms that provide the information necessary for EFC staff to accurately
score the project and list it on the Annual Project Priority List (PPL) as required by state regulations. The
eligible project costs to be listed are based on documented values from engineering reports, plans and
specifications, bid awards, etc. EFC staff rate projects and include eligible projects in a draft IUP. The
amount of any outside grants, loans or subsidies must be subtracted from the submitted request; thus,
the requested amount for a project is not necessarily the full anticipated cost of the project. Attachment 1
provides an example of the level of costing information sought from applicants for both the DWSRF and
the CWSRF (New York State Environmental Facilities Corporation, 2013).
The submittal of an acceptable project schedule is a prerequisite to being listed in the IUP. The schedule
must demonstrate that all necessary items required for financing of the project will be completed in time
to enable project financing within the effective period of the IUP. The IUP shows the estimated SRF long-
term financing amount needed for each project within the effective period of the IUP, and it is expected
that the financing requested in any application will not exceed that amount. The amount shown on the
IUP and requested in the application includes all eligible costs for which financing will be requested,
including: planning, design, construction, project inspection, equipment, force account, legal, fiscal, bond
counsel, contingencies and estimated issuance costs. Awarded grants from third-party sources are not
included in the project financing amount. No more than the amount shown on the IUP can be financed in
the current fiscal period unless funds are available or become available through project cost reductions,
by-passing, or new funding sources. If the application amount exceeds the funds available, part or all of
the project financing may have to be postponed.
New York's CWSRF regulations require that at least 3 percent of the funds available be used in each
NYSDEC Region, with Regions 5 and 6 combined.
Table NY -1 compares characteristics of the CWSRF and DWSRF programs.
September 2013 Appendix 5-2
-------
TABLE NY - 1. CHARACTERISTICS OF ARRA IMPLEMENTATION IN NY'S CLEAN WATER STATE
REVOLVING FUND AND DRINKING WATER STATE REVOLVING FUND PROGRAMS
CWSRF
Administered by New York State
Environmental Facilities Corporation (EFC) and the New
York State Department of Environmental Conservation
(DEC)
Uses Project Listing Form, with cost estimate budget
(includes blanks for engineering, equipment land
acquisition, contingencies, workforce, administration
and legal costs, and issuance costs).
Provides up to a 50 percent interest rate subsidy.
Solicited new projects in addition to those already on the
IUP list.
Cost estimate goes into Intended Use Plan (IUP) for
planning purposes.
DWSRF
Administered by New York State
Environmental Facilities Corporation (EFC) and the New
York State Department of Health (DOH)
Uses Project Listing Form, with cost estimate budget
(includes blanks for engineering, equipment land
acquisition, contingencies, workforce, administration
and legal costs, and issuance costs).
Provides a 33>3 percent interest rate subsidy.
Did not solicit new projects; used the existing IUP list.
Cost estimate goes into IUP for planning purposes.
During the focus group, state SRF staff provided two lists of projects funded by ARRA. The first list (Table
NY-2) includes projects that were converted to long term projects using ARRA funds (both drinking water
and clean water projects are included in the list). Table NY-3 consists of a list of completed Green
Innovations Grants Program (GIGP) projects funded by ARRA. EFC worked with the New York State Energy
Research and Development Authority (NYSERDA) to identify those features of the ARRA eligible projects
that met the Green Project Reserve (GPR) requirements. In addition, EFC sought new projects that met
the definition of GPR as part of GIGP. The GIGP received requests for over $280 million for various CWSRF
eligible projects (New York State Environmental Facilities Corporation, 2009).
Most New York ARRA-funded projects also received funding from other sources. ARRA funding was often
applied for to cover only a specific part of a project, rather than an entire project. In addition, the state's
practice was to transfer money from projects with bids that came in under the estimate to other projects
waiting in line. In effect, this practice over-committed ARRA funds to ensure that all the ARRA funds
would be spent. The state then offered the funding to projects on a "B" list for ARRA funds. For these
reasons, it is not possible to readily compare the initially estimated cost of a project with the final cost of
the project.
September 2013
Appendix 5-3
-------
TABLE NY-2: ARRA ROLL REPORT - SRF BASE PROJECTS CONVERTED TO
LONG TERM
, _ . .. .. Short-Term Long-Term T . . . .
Initial IUP Application 8 Total Project
Community Funding Funding .
Amount Amount Amount
Amount Amount
Albion
Briarcliff Manor
Brookhaven
Caneadea
Granville
Middletown
Niagara Falls
Public Water
Authority
Owasco
Patchogue
Pittsburgh
Richfield Springs
Richland
Rutland
Schodack
Weedsport
Total
$2,600,000
$18,799,238
$10,400,000
$4,000,000
$1,600,000
$33,703,400
$5,500,000
$2,160,000
$3,500,000
$5,166,225
$875,000
$11,960,000
$3,000,000
$1,100,000
$4,259,000
$108,622,863
$3,569,738
$28,277,800
$10,358,145
$7,661,000
$1,300,000
$30,949,519
$10,500,129
$1,595,673
$5,509,850
$5,300,000
$5,400,000
$11,960,000
$2,763,250
$954,382
$6,145,000
$132,244,486
$2,415,914
$17,380,476
$10,150,490
$6,881,170
$1,274,890
$27,317,343
$10,941,906
$1,677,563
$8,800,396
$4,673,299
$5,570,650
$10,383,003
$4,299,000
$827,657
$5,198,756
$117,792,512
$1,133,561
$8,933,163
$5,090,138
$3,418,316
$154,879
$10,682,105
$6,111,412
$896,507
$3,839,087
$2,351,952
$1,269,173
$4,959,204
$2,386,437
$430,170
$2,145,121
$53,801,225
$2,427,261
$18,167,216
$11,326,065
$7,569,311
$1,346,033
$27,773,156
$11,630,213
$1,717,708
$10,990,955
$4,872,817
$5,663,378
$10,536,315
$5,669,844
$843,931
$5,198,756
$125,732,959
* Numbers are rounded to the nearest dollar. Totals were calculated and then rounded to the nearest dollar.
September 2013
Appendix 5-4
-------
TABLE NY-3: COMPLETED GIGP PROJECTS
Estimated Total
C=_ltv
Amherst
Bard College
Bath Electric, Gas and Water
Systems
Beacon
Chemung
Cooperstown
Dutchess County WWA
Glens Falls
Greenwood Lake
Greenwood Lake
Hoosick Falls
Jasper
Johnstown
La Grange
Lindenhurst Library
Millbrook
New York State Office of Parks,
Recreation and Historic
Preservation
Oakfield
Ogdensburg
Orleans
Port Byron
Richland
Roeliff Jansen Community Library
Rome
Roxbury
Sharon Springs
Speculator
Tioga Soil and Water
Tonawanda
Troy
Westchester
Wurtsboro
Total
Requested Amount
$151,200
$1,777,050
$1,749,600
$233,100
$821,527
$886,500
$61,692
$1,334,134
$13,514
$596,250
$100,350
$117,000
$4,895,000
$405,900
$333,900
$144,000
$598,500
$86,850
$1,089,360
$367,650
$107,705
$585,000
$320,000
$250,000
$384,500
$203,148
$12,503
$736,132
$342,000
$450,000
$234,000
$201,438
$19,589,502
ARRA Award Project Cost
Amount (including other
funding sources)
$127,577
$1,590,825
$437,400
$233,100
$747,823
$368,887
$61,692
$1,334,134
$17,339
$405,837
$84,364
$170,325
$6,044,132
$365,309
$191,632
$196,650
$539,917
$135,000
$1,019,302
$208,078
$104,262
$585,000
$320,000
$246,683
$347,267
$203,148
$10,933
$736,131
$231,201
$450,000
$184,294
$201,438
$17,899,680
$143,697
$1,928,583
$486,000
$259,000
$956,310
$416,829
$76,441
$5,573,978
$20,530
$464,400
$103,238
$189,380
$10,922,450
$507,970
$220,124
$220,950
$648,000
$150,000
$1,347,391
$231,198
$169,036
$976,400
$435,324
$287,845
$385,852
$247,950
$12,148
$857,108
$287,700
$501,970
$211,711
$557,338
$29,796,851
* Numbers are rounded to the nearest dollar. Totals were calculated and then rounded to the nearest dollar.
September 2013
Appendix 5-5
-------
Factors Affecting Cost Estimates
The major factor identified by the SRF staffs that contributed to developing good cost estimates is the
opportunity to finance planning, design and early construction costs through short-term financing
programs. Short-term financing allows applicants to develop very accurate cost estimates before finalizing
the long term project costs. Short-term funding can be used for up to three years, at which point the state
will reevaluate whether a project can be converted to long-term financing. Short-term funding would take
a project through bid and into construction (SAIC, 2013).
For ARRA, the SRF programs were dealing with two diametrically opposing forces when it came to cost
estimation: speed and additional requirements. Every time new requirements came out, it forced them to
back up and reevaluate costs. Things were happening at breakneck speed, but would then come to a
screeching halt as the effects of new requirements were evaluated. Whenever there were questions on
how to proceed with a project mid-stream, EFC would freeze the disbursements, which compounded the
sub-recipients' worries, and potentially created tension with their best clients, but they saw no other way
to handle it. As a result, the additional requirements prevented them from disbursing funds quickly, which
reduced cash flow in the impacted communities.
In addition, many of the estimates for high tech items were way off, because technology is hard to
estimate. For example, the contractor might estimate $5000 for a technology, while the final cost would
end up being only $250, and then the community was disappointed when they did not get the full $5000.
The SRF programs were often revising project budgets on almost a daily basis based on the changing
guidance from EPA, making it hard to figure out how much funding to grant. Unforeseen things happened
during construction and affected the budget, sometimes after the February 17, 2010 deadline. These
circumstances required a lot of back and forth with EPA to fix the issue.
If projects came in under bid, the SRF programs often took the left-over money from those projects and
transferred it to other projects waiting in line. They essentially over-committed ARRA funds so they could
make sure that they would expend it all. They offered applicants space on a "B" list for ARRA funds, and
told these applicants that they had to start getting ARRA-ready if they wanted to get this money.
Generally, the early projects to get under contract had lower bids than the later projects, because there
were fewer contractors available for the later projects, so they could charge more. This should be taken
into account if ARRA were to be repeated in future.
The SRF programs reported that one of the positive outcomes from ARRA is that they have had repeat
ARRA clients come back with offers for new projects that they claim they can do quickly and at lower costs
due to their prior experience with dealing with ARRA. Also as a result of ARRA, projects are now actually
becoming 'shovel-ready' prior to asking for money.
On the downside of ARRA, the SRF programs said they had one client say they wished they had never
taken the ARRA grant, even though it was a 90 percent grant program; the rules just changed too many
times or were never clear enough. They also had one client contractor (for a GIGP grant) that submitted a
price increase due to the burdens imposed by ARRA. In addition, the SRF programs are starting to see
projects turn away from their programs, as some of the more sophisticated communities can obtain
private loans with many less strings attached. The current rate environment is providing the opportunity
for more private financing.
September 2013 Appendix 5-6
-------
If ARRA were to be repeated in the future, the SRF programs said they would consider funding fewer
projects at higher amounts; the effort involved in dealing with all of the requirements for so many
projects as they did under ARRA was overly cumbersome. In addition, the SRF programs felt that the best
way to get money out to recipients quickly is with less regulation. They could understand needing the
regulations for new programs, but the CWSRF and DWSRF programs are already successful, well-
established programs, and they really did not need all of these extra ARRA regulations in place.
Findings
1. New York's practice of offering short term loans to help develop the project results in better cost
forecasting and more accurate long term project cost estimates. SRF staff believes this method
contributed greatly to accurate ARRA cost estimates.
2. To ensure that all ARRA funding would be utilized, the state often took money from projects that
came in under the bid and transferred it to other projects waiting in line for funding.
3. The state's funding practices make it difficult to compare initial cost estimates with final project
costs.
4. SRF staff stated that former ARRA recipients have returned with offers for new projects that they
claim they can do quickly and at lower costs due to their prior experience with dealing with
ARRA.
5. As a result of ARRA, recipients now come to the state with projects that are actually shovel-ready
prior to asking for money.
New York State Environmental Facilities Corporation. (2009, December). FINAL AMENDMENT NO. 4
CLEANWATER STATE REVOLVING FUND FFY2009 INTENDED USE PLAN. Retrieved from
http://www.nysefc.org/Default.aspx?TablD=76&fid=306#dltop
New York State Environmental Facilities Corporation. (2011). Annual Report 2010-2011 (Public Authorities
Law Compliance Report). Retrieved from http://www.nysefc.org/DocumentCentral.aspxftdltop
New York State Environmental Facilities Corporation. (2013). Clean Water State Revolving Fund
Application Form (Municipal). Retrieved from
http://www.nysefc.org/Default.aspx?TablD=76&fid=295#dltop
SAIC. (2013, January 15). New York Focus Group Notes taken at meeting with New York State
Environmental Facilities Corp. Albany.
September 2013 Appendix 5-7
-------
ATTACHMENT 1
Project Budget and Construction Costs from CWSRF Municipal Application Form
IV. PROJECT BUDGET AND CONSTRUCTION COSTS
A. TOTAL PROJECT BUDGET FOR CWSRF PROJECTS
Please add line items to the budget as needed. Refer to the Instructions for an explanation of the need to
submit signed contracts or agreements prior to release of CWSRF disbursements. If you have additional
questions, please either call EFC or refer to the Intended Use Plan.
^^g
1. Total Construction
Costs
2. Engineering Costs
(Firm Name and Date)
3. Other Expenses
a) Local Counsel
b) Bond Counsel
c) Work Force
- Technical
- Administrative
d) Fiscal Services
e) Net Interest
f) Miscellaneous
(please describe)
. _ INELIGIBLE COSTS AND/OR COSTS TO BE
TOTAL PROJECT COSTS _ _ ,.,,.
PAID BY SOURCES OTHER THAN CWSRF
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
September 2013
Appendix 5-8
-------
4. Equipment
5. Land Acquisition
6. Contingencies
7. Subtotal - Project Costs
8. Less: Other Sources
9. Subtotal - Project Costs
to be Financed
10 Issuance Costs
a) Direct Expenses 1
b) State Bond Issuance
Charge 2
11 SUBTOTAL Issuance
Costs (sum of lO.a & b)
12 TOTAL
(sum of Project Costs
and Issuance Costs
Subtotals; 9&11)
1. Direct Expenses (10 a) equal 1.0% of Subtotal - Project Costs to be Financed (9).
September 2013
Appendix 5-9
-------
This page intentionally blank.
September 2013 Appendix 5-10
-------
APPENDIX 6: NORTH CAROLINA STATE FOCUS GROUP SUMMARY
-------
This page intentionally blank
-------
COST ESTIMATION IN NORTH CAROLINA'S SRF PROGRAMS
CWSRF AND DWSRF
Program Overview
In North Carolina, both the Clean Water State Revolving Fund (CWSRF) and the Drinking Water State
Revolving Fund (DWSRF) programs are administered by the North Carolina Department of Environment
and Natural Resources (NCDENR). An applicant for funding from one of the SRF programs must first
submit an application for a grant/loan. Table NC -1 compares characteristics of the CWSRF and DWSRF
programs.
TABLE NC - 1. CHARACTERISTICS OF ARRA IMPLEMENTATION IN NC'S CLEAN WATER
STATE REVOLVING FUND AND DRINKING WATER STATE REVOLVING FUND PROGRAMS
CWSRF
Administered by Division of Water Quality, Infrastructure
Section.
Uses Common Application Form, with cost estimate
budget (includes blanks for engineering, design,
construction, permitting, land surveying, easement
preparation, administration and legal costs, and
contingency).
Contingency is 15 percent in initial cost estimate.
Contingency is 10 percent of construction costs in final
cost estimate.
Engineering report NOT required with application;
required later IF project approved for funding.
All applications must be received by March 1st of every
year.
Notice of Intent to Fund letter sent within 30 days of
receipt of application; applicants then conduct next three
steps: engineering report submittal, permitting and plans
and specifications submittal, (eventually) contracting
information submittal.
Cost estimate goes into Intended Use Plan (IUP) for
planning purposes.
After engineering report and plans and specifications
have been approved, and project bids have been
received, program awards loan.
Established a cap of $3 million ARRA funds per project.
DWSRF
Administered by Division of Water Resources, Public
Water Supply Section.
Uses Common Application Form, with cost estimate
budget (includes blanks for engineering, design,
construction, permitting, land surveying, easement
preparation, administration and legal costs, and
contingency).
Contingency capped at 10 percent in initial cost estimate.
Contingency is 5 percent of construction costs in final
cost estimate.
Preliminary engineering report required with application.
Applications are accepted year-round; applications
received as of September 30th each year are considered
for awards.
Cost estimate goes into IUP for planning purposes.
After engineering report and plans and specifications
have been approved, and project bids have been
received, program awards loan.
Established a cap of $3 million on consolidation projects
and $1.5 million on non-consolidation projects..
During ARRA, the North Carolina SRF programs received more loan applications than they could fund with
ARRA money. As a result, SRF allocated ARRA funds to the top 25 to 30 percent of applicants, based on
September 2013
Appendix 6-1
-------
ranking/prioritization criteria contained in the application appendices and shovel readiness. Whether or
not projects required environment reviews was also a factor in the decision-making, as environmental
reviews could delay the shovel-readiness of projects.
The state Governor's office wanted to ensure that ARRA funding was dispersed as far and wide as
possible, to municipalities throughout the state. To this end, the Governor's office mandated that DNR's
SRF programs conduct two rounds of funding, so that some funds would be reserved in case localities
were able to coordinate additional shovel ready projects at a later date;. North Carolina was the only state
to do this. The first round of funding allocations occurred in April 2009 and the second round in June
2009. Roughly two-thirds of the funding was allocated in the first round, with the remainder allocated in
the second round. DNR stated that this was not the best approach since it delayed getting projects into an
already tight timeline, and that they would not separate the funding if they had it to do over again. ARRA
added about $70 million to North Carolina's SRF programs.
Both SRF programs waived the closing fees for all projects. Principal forgiveness enabled small localities to
participate in the SRF program, particularly during a recession when many projects of lower priority were
being shelved; it allowed disadvantaged communities to upgrade their systems (e.g., extend sewerage to
un-sewered areas). ARRA also enabled North Carolina to fund larger and smaller projects than normal.
Factors Affecting Cost Estimates
The engineers used by the recipients were familiar with the majority of types of projects funded by ARRA
and were seasoned at estimating costs, resulting in very good cost estimates. They used standardized
formats and electronic bidding tools to prepare their cost estimates. While the estimates were basically
sound, they did not anticipate the impact that the recession was having on the municipal construction
market. During the ARRA time frame, material and labor costs were unstable. Steel and concrete were
expensive due to the Chinese demand, thus making the costs unstable (pre-2009). The costs followed a
"tulip" pattern of spiking, then dropping then spiking again. With the onset of the recession private sector
construction, particularly in the housing sector, essentially dried up. In 2009, materials costs were
significantly reduced, as were labor costs. It thus became risky to estimate too low or too high, and
bidding competition pushed prices down even further. Bidding was very competitive and "cut-throat"
among the construction contractors. According to state employees interviewed, most contractors
reduced labor rates and minimized profits; some may have cut costs in half just to keep staff working.
The impact in North Carolina is illustrated in the following data provided by NCDENR. Table NC-2 shows
the requested project funding based on preliminary engineering estimates, the promissory note
agreement (loan amount) based on bid costs plus 10 percent of construction costs, and the final
expended loan amount (actual project cost) for Clean Water projects. Note that for some projects,
grantee estimates and bid costs were the same. The SAIC Team assumes that for these projects bid costs
had already been received at the time the application was submitted. (State staff interviewed indicated
that some applications already reflected project bid costs.) There were 17 such projects. The remaining
37 projects all had bid costs lower than the original estimated project cost. As shown in Table NC-2, those
project loans ranged from 2 percent to 46 percent below the original project estimates, with the average
project coming in 16 percent lower than the original estimate. Table NC-2 also shows that project final
costs ranged from 0 percent to 33 percent under budget. No project experienced a budget over-run. The
average project came in 4.6 percent under budget.
September 2013 Appendix 6-2
-------
TABLE NC-2. NORTH CAROLINA CLEAN WATER PROGRAM ARRA FUNDING
Asheville, City of
Black Mountain, Town of
Bryson City, Town of
Buncombe County MSD
Burgaw, Town of
Burlington, City
Carolina Beach, Town of
Carolina Beach, Town of
Caswell Beach, Town of
Chadbourne, Town of
Charlotte, City of
Charlotte, City of
Charlotte, City of
Columbus, Town of
Conover, City of
Cove City, Town of
Dover, Town of
Eden, City of
Fayetteville, City of
Fayetteville, City of
Gastonia, Town of
$454,500
$412,840
$166,524
$1,029,600
$4,000,000
$65,000
$1,000,000
$2,300,000
$3,000,000
$1,212,491
$2,194,900
$577,555
$1,346,382
$280,600
$1,727,025
$1,250,000
$1,100,000
$714,303
$557,000
$600,000
$308,532
PROMISSORY NOTE
AGREEMENT (BID
COSTS PLUS 10%
CONSTRUCTION
CONTINGENCY)
$263,403
$384,385
$166,524
$707,346
$4,000,000
$65,000
$822,515
$1,686,234
$3,000,000
$959,555
$1,570,740
$316,442
$778,081
$160,162
$1,727,025
$723,503
$1,004,457
$714,303
$500,095
$539,261
$185,466
DEVIATION OF
PROMISSORY
NOTE FROM
ORIGINAL
ESTIMATE
-$191,097
-$28,455
$0
-$322,254
$0
$0
-$177,485
-$613,766
$0
-$252,936
-$624,160
-$261,113
-$568,301
-$120,438
$0
-$526,497
-$95,543
$0
-$56,905
-$60,739
-$123,066
ESTIMATE
-42%
-7%
0%
-31%
0%
0%
-18%
-27%
0%
-21%
-28%
-45%
-42%
-43%
0%
-42%
-9%
0%
-10%
-10%
-40%
SPREADSHEET)
$258,764
$377,085
$166,524
$672,980
$4,000,000
$65,000
$822,515
$1,642,245
$3,000,000
$902,483
$1,570,740
$296,546
$778,081
$150,146
$1,727,025
$482,748
$915,876
$624,973
$464,503
$536,692
$159,077
UtVIHMUlM Ul-
FlNAL COST FROM
PROMISSORY NOTE
AMOUNT
-$4,639
-$7,300
$0
-$34,366
$0
$0
$0
-$43,989
$0
-$57,072
$0
-$19,896
$0
-$10,016
$0
-$240,755
-$88,581
-$89,330
-$35,592
-$2,569
-$26,389
% CHANGE
FROM
PROMISSORY
NOTE AMOUNT
-2%
-2%
0%
-5%
0%
0%
0%
-3%
0%
-6%
0%
-6%
0%
-6%
0%
-33%
-9%
-13%
-7%
0%
-14%
September 2013
Appendix 6-3
-------
Graham, City of
Hertford, Town of
Hickory, City of
High Point, City of
Highlands, Town of
Highlands, Town of
Kure Beach, Town of
Lake Lure, Town of
Liberty, Town of
Marion, City of
Mebane, City of
Mecklenburg County
Moore County
Morehead City, Town of
Murphy, Town of
Pitt County
Pittsboro, Town of
Raleigh, City of
Raleigh, City of
Rhodhiss, Town of
Rich Square, Town of
Roxboro, City of
Scotland Neck, Town of
COST
$1,000,000
$854,187
$1,938,000
$1,798,500
$746,517
$3,000,000
$619,442
$3,000,000
$300,000
$2,601,364
$230,000
$2,576,000
$3,000,000
$2,100,000
$771,500
$1,802,264
$2,634,800
$1,526,640
$465,735
$188,764
$1,728,180
$465,548
$1,534,250
PROMISSORY NOTE
.
AGREEMENT (DID
CONSTRUCTION
CONTINGENCY)
$791,792
$765,025
$1,938,000
$1,367,134
$746,517
$2,790,143
$526,541
$2,559,588
$255,674
$2,601,364
$192,225
$2,576,000
$3,000,000
$1,290,000
$737,800
$1,802,264
$2,492,740
$1,251,388
$279,517
$184,627
$1,411,787
$363,434
$1,181,256
PROMISSORY
ORIGINAL
ESTIMATE
-$208,208
-$89,162
$0
-$431,366
$0
-$209,857
-$92,901
-$440,412
-$44,326
$0
-$37,775
$0
$0
-$810,000
-$33,700
$0
-$142,060
-$275,252
-$186,218
-$4,137
-$316,393
-$102,114
-$352,994
ORIGINAL
ESTIMATE
-21%
-10%
0%
-24%
0%
-7%
-15%
-15%
-15%
0%
-16%
0%
0%
-39%
-4%
0%
-5%
-18%
-40%
-2%
-18%
-22%
-23%
(FROM STATE
SPREADSHEET)
$791,792
$751,816
$1,602,291
$1,307,509
$746,517
$2,304,251
$432,660
$2,559,588
$242,569
$2,503,073
$192,225
$2,493,625
$2,924,850
$1,290,000
$665,366
$1,733,441
$2,432,170
$1,138,022
$279,517
$182,801
$1,362,488
$346,511
$1,078,651
jVJffAl|l*j£l*j^H
BiTTf^T^fSMiaiWHi
PROMISSORY NOTE
AMOUNT
$0
-$13,209
-$335,709
-$59,625
$0
-$485,892
-$93,881
$0
-$13,105
-$98,291
$0
-$82,375
-$75,150
$0
-$72,434
-$68,823
-$60,570
-$113,366
$0
-$1,826
-$49,299
-$16,923
-$102,605
% CHANGE
FROM
PROMISSORY
NOTE AMOUNT
0%
-2%
-17%
-4%
0%
-17%
-18%
0%
-5%
-4%
0%
-3%
-3%
0%
-10%
-4%
-2%
-9%
0%
-1%
-3%
-5%
-9%
September 2013
Appendix 6-4
-------
BORROWER
Selma, Town of
JOMISSORY I
$180,000
AGREEMENT (Bio
COSTS PLUS 10%
CONSTRUCTION
CONTINGENCY)
$180,000
PROMISSi
NOTE FRO
ORIGINAL
ESTIMATE
CHANGE
ORIGINAL (FROM STATE PROMISSORY NOTE PROMISSORY
ESTIMATE SPREADSHEET) AMOUNT NOTE AMOUNT
$0
0%
$180,000
$0
0%
Southport, City of
$2,618,000
$1,404,695
-$1,213,305
-46%
$1,404,695
$0
0%
Spindale, Town of
$791,941
$791,941
$0
$791,941
$0
0%
Taylorsville, Town of
$1,017,923
$1,017,923
$0
0%
$1,010,301
-$7,622
-1%
Trinity, City of
$3,000,000
$2,403,400
-$596,600
-20%
$2,102,823
-$300,577
-13%
Troutman, Town of
$237,595
$237,595
$0
0%
$237,595
$0
0%
Tuckaseigee Water & Sewer
Authority
$3,000,000
$3,000,000
$0
0%
$3,000,000
$0
0%
Watauga County
$580,000
$423,760
-$156,240
-27%
$390,860
-$32,900
-8%
Wilson, City of
$1,396,006
$1,187,539
-$208,467
-15%
$1,134,318
-$53,221
-4%
Youngsville, Town of
$919,280
$558,194
-$361,086
-39%
$549,172
-$9,022
-2%
Average
-16%
Data from Clean Water projects completed thru 10/30/2012.
September 2013
Appendix 6-5
-------
The Drinking Water program had similar results, although data on the requested project funding was not
available. Table NC-3 shows the promissory note agreement (loan amount) based on bid costs plus 10
percent of construction costs. The table compares these costs with the final expended loan amount for
Drinking Water projects. The average under-run for drinking water projects was 4.6 percent, and ranged
from 0 percent to 24 percent. This resulted in a total of $2,284,587 being returned to the state. These
funds were used to fund additional projects. DWSRF representatives said that they did not recall any cost
over-runs for ARRA projects.
TABLE NC-3. NORTH CAROLINA DRINKING WATER PROGRAM ARRA FUNDING
Town of Green Level
Town of Linden
Town of Louisburg
Village of Alamance
Johnston County
Town of Blowing Rock
Greeneville Utilities Commission
Roanoke Rapids SD
South Granville W&S Authority
Town of Franklinton
Town of Littleton
Catawba County
Town of Cramerton
Town of Surf City
Onslow W&S Authority
Stanly County
Town of Maysville
Town of Ramseur
Clay County
Town of Andrews
Town of Murphy
Town of Montreal
Maggie Valley SD
Mitchell County
Town of Graham
Town of Gibsonville
Bessemer City
Greenville Utilities Commission
K.IMINARY BUDGET DIFFERENCE
OAN APPROVAL (EXCESS
GRANTED) BUDGET)
$1,890,360
$321,850
$512,036
$579,963
$3,000,000
$2,000,262
$2,942,152
$181,126
$206,670
$311,204
$161,316
$3,000,000
$495,227
$83,792
$496,100
$196,818
$355,000
$258,786
$1,073,289
$715,326
$713,721
$220,901
$768,588
$1,569,263
$160,996
$146,536
$95,374
$48,982
$1,854,154
$308,854
$390,040
$511,940
$3,000,000
$1,512,960
$2,942,152
$166,025
$188,692
$293,558
$144,578
$3,000,000
$479,851
$76,599
$496,100
$196,818
$355,000
$230,004
$1,073,289
$688,428
$658,325
$220,901
$748,913
$1,488,383
$146,861
$122,596
$87,278
$44,782
$36,206
$12,996
$121,996
$68,023
$0
$487,302
$0
$15,101
$17,978
$17,646
$16,738
$0
$15,376
$7,193
$0
$0
$0
$28,782
$0
$26,898
$55,396
$0
$19,675
$80,880
$14,135
$23,940
$8,096
$4,200
% UNDER
BUDGET
2%
4%
24%
12%
0%
24%
0%
8%
9%
6%
10%
0%
3%
9%
0%
0%
0%
11%
0%
4%
8%
0%
3%
5%
9%
16%
8%
9%
September 2013
Appendix 6-6
-------
County of Perquimans
Reigelwood Sanitary District
Town of Tarboro
City of Sanford
Town of Elizabeth City
City of Burlington
Town of Elon
Town of Spring Lake
Town of Warsaw
Northwestern Wayne Sanitary
District
Eastern Wayne Sanitary District
Southwestern Wayne Sanitary
District
Northwest Wayne Sanitary District
Goldston Gulf Sanitary District
Town of Farmville
Town of Pollocksville
City of Asheville
Onslow Water and Sewer
Authority
Town of Holly Springs
Fork Township Sanitary District
Belfast-Patetown
Southeastern Wayne Sanitary
District
Town of Columbia
Greene County
Warren County
Town of Kill Devil Hills
City of Clinton
City of Winston Salem
Town of Taylorsville
Rhonda
Energy United Water Corporation
Town of Sawmills
Town of Rutherford College
PRELIMINARY BUDGET
$3,000,000
$100,255
$325,000
$1,807,166
$2,366,255
$141,286
$326,004
$70,298
$1,815,000
$381,575
$418,775
$492,000
$689,000
$474,123
$3,000,000
$200,080
$412,996
$520,694
$73,980
$532,155
$548,192
$470,150
$557,000
$3,000,000
$371,030
$112,522
$304,031
$16,078
$204,000
$1,428,807
$856,826
$235,226
$155,142
rr
$2,795,220
$100,255
$293,530
$1,807,166
$2,366,255
$129,711
$290,283
$70,298
$1,815,000
$364,359
$333,446
$399,190
$568,028
$456,867
$3,000,000
$163,304
$396,388
$484,092
$67,067
$463,348
$496,646
$426,651
$491,401
$3,000,000
$365,142
$112,522
$285,699
$15,278
$202,933
$1,257,666
$856,826
$235,226
$155,142
RERENCE
% UNDER
KCESS
. BUDGET
$204,780
$0
$31,470
$0
$0
$11,575
$35,721
$0
$0
$17,216
$85,329
$92,810
$120,972
$17,256
$0
$36,776
$16,608
$36,602
$6,913
$68,807
$51,546
$43,499
$65,599
$0
£C QOO
£0,000
$0
$18,332
$800
$1,067
$171,141
$0
$0
$0
7%
0%
10%
0%
0%
8%
11%
0%
0%
5%
20%
19%
18%
4%
0%
18%
4%
7%
9%
13%
9%
9%
12%
0%
2%
0%
6%
5%
1%
12%
0%
0%
0%
September 2013
Appendix 6-7
-------
Burke County
LIMINARY BUDGET
.OAN APPRO''"
GRANTED
FINAL P
$512,929
$485,358
ERENCE
% UNDER
BUDGET
$27,571
5%
Town of Thomasville
$125,604
$118,709
$6,895
5%
City of Rocky Mount
$526,584
$495,727
$30,857
6%
Town of Montreal
$315,836
$315,836
$0
0%
Total
$49,392,237
$47,107,650
Average
6%
Total Excess
$2,284,587
Data from Drinking Water projects completed thru 10/30/2012.
The accuracy reflected in the small differences between bid costs and final project costs is attributable to
five primary factors:
1. The engineers preparing cost estimates were familiar with the majority of types of ARRA-funded
projects and were seasoned at estimating costs.
2. The engineers used standardized formats and electronic bidding tools to prepare their cost
estimates.
3. Bid costs are typically fixed price bids. They represent a commitment by the winning contractor
to complete the project with the available funding. Bid costs are binding for a short duration,
typically 90 days. Thus they most closely represent current labor and materials costs.
4. Many of the projects were "linear" in that project quantities (e.g., linear feet of pipe replaced or
number of water meters installed) could be varied within the scope of work. As a result, projects
could be adjusted to match the available funding.
5. For "non-linear" projects (e.g., treatment plant upgrades) loan recipients were encouraged to
use unspent funds to purchase related project items such as emergency generators or spare
parts. This allowed the project scope to utilize available funding.
Clean Water State Revolving Fund web page, North Carolina Department of Environment and Natural Resources web
site, http://portal.ncdenr.org/web/wq/ifs/fap/cwsrf.
Drinking Water State Revolving Fund web page, North Carolina Department of Environment and Natural Resources
web site, http://www.ncwater.org/pws/srf/Pages/dwsrf program.htm.
North Carolina Focus Group Notes, taken at focus group meeting with North Carolina Department of Environment
and Natural Resources, Raleigh, NC, Novembers, 2012.
September 2013
Appendix 6-8
-------
APPENDIX 7: OKLAHOMA STATE FOCUS GROUP SUMMARY
-------
This page intentionally blank
-------
COST ESTIMATION IN OKLAHOMA'S SRF PROGRAMS
SRF PROGRAM OVERVIEW
In Oklahoma, the Clean Water State Revolving Fund (CWSRF) program is administered by the Oklahoma
Water Resources Board (OWRB), while the Drinking Water State Revolving Fund (DWSRF) program is
administered by the Oklahoma Department of Environmental Quality (ODEQ). Table OK -1 compares
characteristics of the CWSRF and DWSRF programs.
TABLE OK - 1. CHARACTERISTICS OF ARRA IMPLEMENTATION IN OK CLEAN WATER
STATE REVOLVING FUND AND DRINKING WATER STATE REVOLVING
FUND PROGRAMS
CWSRF
Administered by the Oklahoma Water Resources Board
(OWRB).
Applicant submits application with engineering report,
including cost estimate of engineering, design,
construction, inspection and legal costs.
Contingency is 15% for projects under $1 million, or 10%
for projects over $1 million, consistent with the
Oklahoma Competitive Bidding Act (OCBA); applies to all
stages of cost estimating.
For projects that use unit price for cost estimation, OCBA
does not set any limit on contingency; contingencies for
these types of projects can be large to address possible
scope changes or change orders.
Cost estimate goes into Intended Use Plan (IUP) for
planning purposes.
After engineering report has been approved, program
takes project to OWRB for loan approval (binding
commitment); no letter of binding commitment.
Applicant submits plans and specifications (after loan
approval) and advertises for bids.
After winning bid determined, loan is closed, locking in
dollar value of project.
Once the contract is awarded, program enters contract
information into database to support future cost
estimation.
DWSRF
Administered by the Oklahoma Department of
Environmental Quality (ODEQ).
Applicant submits application with engineering report,
including cost estimate of engineering, design,
construction, inspection and legal costs.
Contingency in the engineering report is 10%
contingency, but there can also be 20-25% padding on
individual line items.
Cost estimate goes into Intended Use Plan (IUP) for
planning purposes.
Applicant submits construction plans and specifications,
along with a refined cost estimate.
After plans and specifications have been approved,
program takes the project to the ODEQ's Board for loan
approval (aka, binding commitment); applicant receives
letter of binding commitment.
Applicant prepares final cost estimate with 5%
contingency and advertises for bids.
After winning bid determined, loan is closed, locking in
dollar value of project.
September 2013
Appendix 7-1
-------
CWSRF
Funded projects on a first-come, first-served basis
whoever was ready first was funded until ARRA funds ran
out.
DWSRF
Imposed internal deadline for projects to receive ARRA
funds: had to be shovel ready by June 16, 2009; shovel
ready defined as project being ready to go to ODEQ
Board for binding commitment (i.e., project had an
approved engineering report and approved plans and
specifications).
Combined ARRA funds with non-ARRA funds to leverage
volume of projects that could be supported.
Combined ARRA funds with non-ARRA funds to leverage
volume of projects that could be supported; ARRA funds
given in the form of principal forgiveness upfront.
A few projects were 100% ARRA-funded, mostly
creative/special/non-traditional projectsgreen roofs,
rain gardens, stream bank restoration and studies of
introducing supersaturated oxygen into lakesthat could
be tied back to the CWA
CWSRF
Most of CWSRF's ARRA projects were off-the-shelf existing projects, although some were very early in the
process at the time ARRA was passed. To solicit new projects, CWSRF held a large meeting, invited
potential applicants in and provided information on the ARRA grant process. For those who were ready to
proceed, they then held additional meetings and provided additional information. CWSRF funded all of
their 33 projects with ARRA funds.
DWSRF
A few of DWSRF's projects came from their existing lists, but most were new projects. The state contacted
everyone on its Project Priority List (PPL) and IUP lists and held public meetings with all entities to provide
information and solicit new projects. They then continued to meet with the applicants throughout the
process. DWSRF also invited all the communities from their PPL to group meetings, at which they met
with each of the communities individually by moving from table to table in a "speed dating" sort of
arrangement. This helped to determine which communities could and could not make it through the
grants process in time to meet ARRA deadlines. For example, if the community required a vote to approve
spending money on improvements, that eliminated the community because the process would take too
long.
If projects did not use all of their non-ARRA money, any unused funds were de-obligated. DWSRF did not
track whether grant recipients used their own money in addition to DWSRF grant money, but said that
funding recipients generally kept any local money used for projects separate from ARRA money to avoid
the additional requirements from ARRA.
September 2013
Appendix 7-2
-------
DWSRF provided assistance to small recipients of ARRA grants that otherwise would have found it difficult
to meet the ARRA requirements, including:
Showing recipients how to set up their files,
Identifying the forms to use and how to fill out the applications,
Walking them through the entire process,
Providing training and setting up a database to track jobs, and
Conducting Davis-Bacon interviews and all reporting for these recipients.
They used the 4% of ARRA funds set aside for administration for these efforts.
DWSRF had not done subsidies or principal forgiveness prior to ARRA (other than through their interest
rates, which were lower than market rates), as this was not required before ARRA. Subsidies are now
mandatory for DWSRF and currently they are focusing subsidies on regionalization projects, which are
typically being offered 40 to 50 percent subsidies. The state is reaching the capacity of the program to
give out subsidies and leverage money. Providing subsidies to help leverage projects takes money away
from the program and hurts the program's ability to be self-supporting through repayment of revolving
loans.
Factors Affecting Cost Estimates
CWSRF
CWSRF stated that most of the project bids came in under the original cost estimate. CWSRF was
generally able to address these differences by reducing the non-ARRA funds for the project. However,
some projects were not able to use all of the ARRA money and as a result CWSRF had to redistribute some
ARRA funds.
CWSRF did have a few projects where the bids came in over the original cost estimate, but this was not a
result of ARRA requirements. In one case, Guymon, the overage was due to an engineering error. In
another case, Perkins, when the bid came in over the cost estimate, the contractor had to redo the bid
using value engineering. In general, if the bids came in high, the applicants had the following three
choices:
1. Go back to the Board for approval of the additional amount
2. Do a reassessment using value engineering or
3. Fund the additional amount with other funding sources (e.g., rural development grants, local
funds).
A citizen complaint was filed on the Perkins, OK project, claiming that ARRA was costing money and
increasing the cost of the project. Several resulting studies showed that ARRA did not increase the cost of
the project.
September 2013 Appendix 7-3
-------
The impact on the CWSRF program in Oklahoma is illustrated in the following data provided by OWRB.
Table OK - 2 shows the promissory note agreement (loan amount) based on the cost estimate plus 10
percent or 15 percent contingency plus other costs , and the final expended loan amount (actual project
cost) for CWSRF projects.
As shown in Table OK-2, project final costs ranged from 0 percent to 14 percent under budget. No project
experienced a budget overrun; or if it did, the overrun was covered by other funding sources besides
CWSRF. The average project came in 2 percent under budget.
2 Other costs include bond counsel, local counsel, financial advisor, engineering, inspections, planning and
environmental.
September 2013 Appendix 7-4
-------
TABLE OK - 2. OKLAHOMA CLEAN WATER PROGRAM ARRA FUNDING
Adair Municipal Authority
Ardmore Public Works Authority
Central Oklahoma Master Conservancy District - Phase 1
Central Oklahoma Master Conservancy District- Phase II
Collinsville Municipal Authority
Del City Municipal Services Authority
Duncan Public Utilities Authority
El Reno Municipal Authority
Grand Lake Public Works Authority
Grove Municipal Services Authority
Guymon Utilities Authority
Harrah Public Works Authority
Henryetta Municipal Authority
Lawton Water Authority
Moore Public Works Authority
Muskogee Municipal Authority
Mustang Improvement Authority
Norman Utilities Authority
Oklahoma City Water Utilities Trust
Oklahoma Conservation Commission/OSU
Oklahoma Conservation Commission/OU
PROMISSORY NOTE AGREEMENT
(ESTIMATED COSTS PLUS 10% OR
15% CONSTRUCTION CONTINGENCY
PLUS OTHER COSTS*)
$1,400,000
$1,090,000
$369,520
$1,131,765
$550,000
$1,190,000
$340,000
$205,000
$992,500
$1,900,000
$1,335,000
$1,930,000
$3,650,000
$12,270,000
$3,943,482
$1,435,000
$6,590,000
$7,640,000
$9,469,451
$2,000,000
$86,500
DEVIATION OF
FINAL PAID % CHANGE
._ FINAL PAID
AMOUNT (FROM . FROM
K AMOUNT FROM
ATE PROMISSORY
. PROMISSORY
DSHEET) . NOTE AMOUNT
NOTE AMOUNT
$1,386,907
$1,055,077
$369,520
$1,107,117
$550,000
$1,188,293
$320,436
$204,493
$992,500
$1,900,000
$1,331,310
$1,930,000
$3,312,815
$11,652,406
$3,943,482
$1,435,000
$6,266,994
$7,597,330
$8,167,735
$2,000,000
$86,500
-$13,093
-$34,923
$0
-$24,648
$0
-$1,707
-$19,564
-$507
$0
$0
-$3,690
$0
-$337,185
-$617,594
$0
$0
-$323,006
-$42,670
-$1,301,716
$0
$0
-1%
-3%
0%
-2%
0%
-0.1%
-6%
-0.2%
0%
0%
-0.3%
0%
-9%
-5%
0%
0%
-5%
-1%
-14%
0%
0%
September 2013
Appendix 6-5
-------
BORROWER
Oklahoma Conservation Commission
.MISSORY NOTE AGREEMENT
(ESTIMATED COSTS PLUS 10% OR AMOUNT (F
15% CONSTRUCTION CONTINGENT
PLUS OTHER COSTS*)
$2,000,000
READSHEET)
$2,000,000
INAL PAID
PROMIS
NOTE AMOUNT
Yo CHANGE
ROMISSORY
NOTE AMOUNT
$0
Owasso Public Works Authority
$1,785,000
$1,785,000
$0
0%
Pawnee Public Works Authority
$1,275,000
$1,245,496
-$29,504
-2%
Perkins Public Works Authority
$7,225,000
$7,225,000
$0
Piedmont Municipal Authority
$2,515,000
$2,417,572
-$97,428
-4%
Ponca City Utility Authority
$575,000
$567,296
-$7,704
-1%
Sperry Utility Services Authority
$390,000
$390,000
$0
0%
Stillwater Utilities Authority
$1,875,000
$1,875,000
$0
Sulphur Municipal Authority
$10,200,000
$10,200,000
$0
0%
Tulsa City-County Library System
$202,800
$202,800
$0
0%
Tulsa Metropolitan Utility Authority (TMUA)
$7,350,000
$7,347,966
-$2,035
-0.03%
Walters Public Works Authority
$1,326,407
$1,250,809
-$75,598
-6%
Average
-2%
'"Other Costs" include bond counsel, local counsel, financial advisor, engineering, inspections, planning and environmental.
September 2013
Appendix 6-6
-------
DWSRF
At the beginning of ARRA, DWSRF was still seeing high bid estimates due to increased costs resulting from
the lingering effects of Hurricanes Ike and Katrina; however, during ARRA, costs came down due to the
economic collapse. DWSRF stated that, as a result, all of their projects came in with bids lower than the
original cost estimates. Thus, while DWSRF initially had 23 projects that received ARRA funds, they were
able to fund one additional project for a total of 24 projects funded with ARRA funds. This proved to be
too large a workload for the Board to address at the same time, so they ended up spreading the projects
over 4 months for Board approval.
ARRA brought in some new grant applicants for DWSRF. Oklahoma City and Tulsa, the two largest cities in
Oklahoma, borrowed money from DWSRF for the first time. ARRA also allowed projects to be completed
which would not have been done otherwise. Examples include McCurtain 8, which was on the shelf
before ARRA due to cost, and installation of Automatic Meter Readers. DWSRF had a contentious case
with one applicant that wanted to use performance-based contracting and thus use a non-bid contract.
Non-bid contracts are allowed for energy, but do not fit with DWSRF projects.
For the DWSRF program, detailed data were available on bid and other costs. Tables
OK- 3 and OK- 4 show the data for the DWSRF program. Table OK-3 shows the requested project
funding based on preliminary construction cost estimates (including 10% contingency), construction bid
amount, loan contingency, other costs, and the total bid amount. Table OK - 4 shows the amount of the
promissory note agreement (loan amount) based on the estimate plus 5% contingency plus other costs
, and the final expended loan amount (actual project cost) for DWSRF projects.
Table OK - 3 shows that the amount of contingency in the bids ranged from 0 percent to 7 percent of the
construction bid amount, with the average (and most frequent at 17 of 24 projects) contingency being 5
percent. Other costs3 in the bids ranged from 0 percent to 24 percent of the construction bid amount,
with the average being 11 percent. Other costs were 10 percent or less for 10 of the 24 projects; only one
project had other costs exceeding 20 percent of the construction bid amount. Construction bid amounts
ranged from 35 percent lower than to 20 percent higher than the preliminary construction cost estimate,
with the average being 16 percent lower than the preliminary construction cost estimate and only 2 of the
24 projects having construction bids that were higher than the preliminary cost estimate. SAIC notes that
one of the two projects with higher construction bids, McCurtain Co. RWD #8 was an pre-existing project
taken off the shelf for ARRA, and thus the greater time length between the preliminary cost estimate and
the construction bid may be a factor in the 20% higher construction bid. The other project with a higher
construction bid, Stillwater (II), had a construction bid which was only 3% higher than the preliminary cost
estimate, which still indicates good agreement with the preliminary cost estimate.
Total bid amounts (including contingency and other costs) ranged from 23 percent lower than to 41
percent higher than the preliminary construction cost estimate, with the average total bid being 3 percent
lower than the construction cost estimate, indicating that contingency and other costs were largely offset
by the lower construction bid costs.
3 Other costs include bond counsel, local counsel, financial advisor, engineering, inspections, planning and
environmental.
September 2013 Appendix 6-7
-------
Table OK-4 shows that promissory note amounts ranged from 22 percent lower than to 41 percent
higher than the preliminary construction cost estimates, with the average being 3 percent lower than the
preliminary construction cost estimate. Promissory note amounts ranged from 24 percent lower than to
25 percent higher than the total bid amounts, with the average being 1 percent lower than the total bid
amount. Promissory note amounts were higher than the preliminary cost estimates for only 4 of the 24
projects and higher than the total bid amount for only 8 of the 24 projects, and were within + 10 percent
of the preliminary cost estimates for 18 of the 24 projects and within +10 percent of the total bid amounts
for 20 of the 24 projects, indicating that the promissory note amounts largely were in line with both the
preliminary cost estimates and the total bid amounts.
Final construction costs ranged from 31 percent lower than to 10 percent higher than construction bid
amounts, with the average being equal to the construction bid amount; final construction costs for only 3
projects exceeded the construction bid amount plus contingency. Final project costs ranged from 17
percent lower than to 2 percent higher than the promissory note amounts, with the average being 3
percent lower than the promissory note amount. Final project costs were within +10 percent of the
promissory note amounts for 18 out of 20 projects, and were higher than the promissory note amounts
for only 3 of 20 projects (and those 3 exceed the promissory note amount by only 1 percent to 2 percent).
4 Final project costs are not available for four projects which had not been completed by 7/31/13.
September 2013 Appendix 6-8
-------
TABLE OK - 3. OKLAHOMA DRINKING WATER PROGRAM ARRA FUNDING
Borrower
Bartlesville (IV)
Estimated Cost
(Plus 10%
Conting
andOt
Costs*)
Construction
$9,820,000
mount Contingency
Other
Costs*
Total Bid
Amount
$6,335,159
$317,341
$967,292
of
Construction
Bid
Costs* of
Constructio
$7,619,792
5%
Differential
of Total Bid
Amount
from
Grantee
Estimated
from Grantee
Estimated
15%
-$2,200,208
-22%
Bixby (I)
$2,400,000
$1,894,510
$94,990
$170,000
$2,159,500
5%
9%
-$240,500
-10%
Bryan Co. RWD #2 {
$382,000
$319,623
$18,345
$52,132
$390,100
6%
16%
$8,100
2%
Duncan (IV)
$11,398,390
$10,327,726
$516,374
$319,450
$11,163,550
5%
3%
-$234,840
-2%
Elk City
$8,825,000
$7,282,698
$358,165
$1,101,859
$8,742,722
5%
15%
-$82,278
-1%
Enid I
$8,349,414
$7,673,635
$383,682
$353,659
$8,410,975
5%
5%
$61,561
1%
Frederick I
$4,500,000
$3,903,506
$204,994
$369,916
$4,478,416
5%
9%
-$21,584
-0.5%
Guymon I
$1,300,000
$1,048,136
$52,406
$128,202
$1,228,744
5%
12%
-$71,256
-5%
Healdton
$1,244,995
$1,035,005
$44,390
$165,100
$1,244,495
4%
16%
-$500
-0.04%
Henryetta*
$10,366,525
$8,031,791
$403,620
$1,051,050
$9,486,460
5%
13%
-$880,065
Lawton I
$4,700,000
$4,079,187
$203,960
$441,353
$4,724,500
5%
11%
$24,500
1%
Logan Co. RWD #2
$920,000
$749,896
$29,295
$112,285
$891,476
4%
15%
-$28,524
-3%
Mayes Co. RWD #3
$976,000
$768,729
$36,671
$92,600
$898,000
5%
12%
-$78,000
-8%
McCurtain Co. RWD #8
$5,000,000
$6,009,700
$402,932
$650,553
$7,063,185
7%
11%
$2,063,185
41%
Newcastle I
$2,325,235
$1,547,159
$107,788
$213,900
$1,868,847
7%
14%
-$456,388
-20%
Norman (I)
$15,766,010
$12,982,643
$612,507
$2,435,190
$16,030,340
5%
19%
$264,331
2%
Oklahoma City (I)
$7,634,177
$7,634,177
$363,532
$0
$7,997,709
5%
0%
$363,532
5%
Ponca City
$2,990,000
$2,433,914
$125,956
$399,010
$2,958,880
5%
16%
-$31,120
-1%
September 2013
Appendix 6-9
-------
Borrower
Rogers Co. RWD #7
Estimated Cost
(p|..r ino/_
Conting
and Other
osts*)
$759,000
$589,995
$29,000
Other
Costs*
Contin
$139,504
$758,499
Costs* of
Constructio
from
Grantee
from Grantee
Estimated
Cost
5%
24%
-$501
-0.07%
Sand Springs*
$5,630,000
$4,088,515
$261,179
$144,750
$4,494,444
6%
4%
-$1,135,556
-20%
Stillwater(ll)*
$10,541,825
$10,905,352
$527,116
$604,019
$12,036,487
5%
6%
$1,494,662
14%
Tulsa
$6,670,000
$4,476,528
$0
$634,339
$5,110,867
14%
-$1,559,133
-23%
Wagoner (I)
$1,186,395
$999,750
$18,822
$103,679
$1,122,250
2%
10%
-$64,145
-5%
Washington Co. RWD
#3**
$17,394,645
$15,839,295
$791,465
$768,145
$17,398,905
5%
5%
$4,260
-0.02%
Average
5%
11%
-3%
* "Other Costs" include bond counsel, local counsel, financial advisor, engineering, inspections, planning and environmental information document (BID).
** Projects not completed as of 7/31/13 - costs shown are through 7/9/13.
September 2013
Appendix 6-10
-------
TABLE OK - 4. OKLAHOMA DRINKING WATER PROGRAM ARRA FUNDING
Borrower
Promissory
Note
Agreement
(Estimated
Costs Plus 5%
i^^^^^Q
Promissory
Bartlesville (IV)
Bixby (1)
Bryan Co. RWD #2 (III)
Duncan (IV)
Elk City
Enid(l)
Frederick (1)
Guymon (II)
Healdton
Henryetta**
Lawton (III)
Logan Co. RWD #2
Mayes Co. RWD #3
McCurtain Co. RWD #8
Newcastle (1)
Norman (1)
Oklahoma City (1)
Construction
Contingency
Plus Other
Costs**)
$7,620,000
$2,160,000
$382,000
$11,245,000
$8,825,000
$8,345,000
$4,500,000
$1,255,000
$1,075,000
$9,500,000
$4,725,000
$920,000
$900,000
$7,038,410
$1,946,368
$14,000,000
$7,634,177
BJBI
-$2,200,000
-$240,000
$0
-$153,390
$0
-$4,414
$0
-$45,000
-$169,995
-$866,525
$25,000
$0
-$76,000
$2,038,410
-$378,866.99
-$1,766,009.50
$0
Estimate
-22%
-10%
0%
-1%
0%
0%
0%
-3%
-14%
-8%
1%
0%
-8%
41%
-16%
-11%
0%
Promissory
Note
-$208
-$500
$8,100
-$81,450
-$82,278
$65,975
-$21,584
-$26,256
$169,495
-$13,540
-$500
-$28,523.97
-$2,000
$24,775.30
-$77,521,17
$2,030,340
$363,532.25
Total Bid
0%
0%
2%
-1%
-1%
1%
0%
-2%
14%
0%
0%
-3%
0%
0%
-4%
13%
5%
$6,574,046
$1,933,398
$317,637
$10,327,726
$7,517,779
$6,901,645
$4,101,146
$1,072,126
$865,010
$8,122,740
$4,283,147
$749,896
$813,331
$6,260,888
$1,547,159
$12,602,833
$7,412,339
^^^^^^^^
$7,483,088
$2,006,122
$382,000
$11,245,000
$8,686,856
$7,255,804
$4,500,000
$1,270,000
$1,016,423
$9,118,731
$4,800,000
$880,346
$893,543
$5,817,366
$1,838,580
$13,820,904
$7,412,339
N
-$136,912
-$153,87
$0
$0
-$138,144
-$1,089,196
$0
-$15,000
$58,577
NA**
-$75,000
-$39,654
$6,457
$1,221,044
$107,788
-$179,096
$221,838
-2%
-7%
0%
0%
-2%
-13%
0%
1%
-5%
NA**
2%
-4%
-1%
-17%
-6%
-1%
-3%
September 2013
Appendix 6-11
-------
Borrower
Ponca City
Agreement
(Estim
Costs Plus 5%
Construction
Deviation of
% Change
Promissory Tota
Note Amount Amour
from Original .° Promi
Estimate
timate No
$2,990,000
Deviation of %
El Bid Change
it from from
issory Total Bid
Note Amount
Final DWSRF Final
Construction Project Cost
$0
0%
-$31,120
-1%
$2,474,455
Deviatio
Final (
from
Promiss'
$2,801,057
$188,943
-6%
Rogers Co. RWD #7
$759,000
$0
0%
-$500.85
0%
$618,197
$741,711
$17,289
-2%
Sand Springs**
$5,630,000
$0
0%
-$1,135,556.43
-25%
$3,246,082
$3,391,332
NA**
NA**
Stillwater(ll)*
$11,645,000
$1,103,174.52
10%
$391,487.63
3%
$10,917,084
NA*
NA*
Tulsa
$5,225,000
-$1,445,000
-22%
-$114,132.96
-2%
$4,782,881
$5,225,000
$0
0%
Wagoner (I)
$1,218,368
$31,972.97
-3%
-$96,118.17
-9%
$1,097,427
$1,233,446
-$15,078
1%
Washington Co. RWD
#3**
$17,394,645
$0
0%
$4,259.68
0%
$16,626,000
$17,394,645
NA**
NA**
Average
-3%
-1%
3%
* "Other Costs" include bond counsel, local counsel, financial advisor, engineering, inspections, planning and environmental information document (BID).
** Projects not completed as of 7/31/13 - costs shown are through 7/9/13.
September 2013
Appendix 6-12
-------
Clean Water State Revolving Fund Loans web page, Oklahoma Water Resources Board web site,
http ://www. owrb. ok.gov/fmancing/loan/cwsrfloans.php.
Drinking Water State Revolving Fund web page, Oklahoma Department of Environmental Quality web site,
https://www.deq.state.ok.us/wqdnew/dwsrf/index.html.
Memorandum re Focus Group Meeting with Oklahoma Department of Environmental Quality, Oklahoma
City, OK, February
September 2013
Appendix 6-13
-------
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September 2013 Appendix 6-14
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