U.S. Mayor Article

Best Practice: Lynn (MA) Water/Wastewater Innovation Saves Ratepayers Hundreds of Millions
City First in Nation to Use Design-Build-Operate Approach to Procurement of Service

May 28, 2001

Lynn (MA) Mayor Patrick McManus has always understood how hard it is to get people to focus on water and sewer pipes that aren't broken — and how quickly they focus when the subject turns to water and sewer rate increases.

In November 1995, when Lynn's Water and Sewer Commissioner announced a 53 percent increase in rates for the year, the Mayor and City Council President knew that the time had come for a serious re-evaluation of the City's approach to the contracting of its water and sewer operations, and a serious look ahead at long-term needs. By 1999, when a 10-year forecast saw Lynn's water rates quadrupling — growing from $600 to $2,400 annually — Mayor McManus was prepared to turn the situation around.

The CSO Challenge

In 1990 the City and the Lynn Water and Sewer Commission (LWSC) entered into a federal consent decree for the first phase of a combined sewer overflow (CSO) project. The decree required the City to reduce overflows of its combined sewer and storm water system into Lynn Harbor — events caused by heavy rains and show thaws — to no more than four per year. The original plan called for carving a 1.5 mile tunnel, 10 feet in diameter, through bedrock, and the construction of a five-million-gallon storage tank. The estimated cost at that time for the design, construction, debt service and maintenance involved in the project totaled approximately $275 million.

When the 53 percent rate hike was announced late in 1995, the Mayor and other officials began exploring options with operators, contractors, consultants, engineers, organized labor, environmental groups and the Urban Water Council at the U.S. Conference of Mayors. This produced a plan to expand the tunnel to accommodate five million gallons of overflow, thereby eliminating the need to build the storage tank. Discussions with the Environmental Protection Agency then produced an agreement that the City would meet a higher standard for combined sewer overflows — 2.5 per year — and would be allowed to keep the money saved through the new plan.

As discussions continued, however, questions arose regarding the wisdom of the storage approach to the problem, and EPA and the Massachusetts Department of Environmental Protection agreed to allow consideration of a new design/build/operate (DBO) standards-based approach along with more traditional ones. A special act of the State legislature was required in order for Lynn to pursue a DBO procurement, as existing State procurement laws did not permit it.

The Design/Build/Operate Solution

The City issued two requests for DBO proposals, one for a CSO contract, the other for a 20-year operation and maintenance contract for the wastewater treatment plant (which was already privately operated under five-year contracts). The RFPs — the first in the nation to use the standards-based DBO approach — were independent of one another and were issued separately, and contractors had the option of bidding on one or both.

The winning CSO contractor, U.S. Filter, proposed an innovative approach: combining the existing storm water runoff system and the existing sewer system for use as a single system for storm water, thereby reducing the possibility of floods in the City, and building a new sewerage collection system. This contributed to a lower overall project cost, as the smaller size of sewerage pipes in comparison to storm water pipes translated into significant savings for the system as a whole. The proposal also assured that Lynn's overflows would be completely reduced, bringing the City into full compliance with the Clean Water Act.

The winning contractor for the operation and maintenance of the wastewater treatment plant, Aqua Alliance, proposed retooling the plant and using new equipment to produce a cost much lower than had been projected by the City. Existing employees of the plant received a 20-year job guarantee.

DBO's Dramatic Cost Savings

The standards-based approach to the procurement of Lynn's water and sewer project required contractors to compete against one another in design, construction and price, to guarantee that standards would be met, and to guarantee their proposed price. Prior to issuing the RFP for the water and sewer project, the City of Lynn had determined that the cost of full compliance with the Clean Water Act and the federal consent decree using the existing system would be $450 million. As a result of using the standards-based approach to procure a DBO project, U.S. Filter's winning bid on the CSO project was $48 million — less than 11 percent of this projected compliance cost. Aqua Alliance's winning bid on the treatment plant, $110 million, was just 55 percent of the 20-year cost that had been projected.

With savings of this magnitude, a City can afford to meet a lot of its resource needs in other areas. Using just 20 percent of its projected 20-year savings, Lynn has been able to get construction underway on three new high schools, a new police station and a new government center. It is also renovating 20 parks and will be replacing the entire Fire Department fleet.

Mayor McManus wants Lynn's standards-based DBO approach to serve as a model to be followed by other communities to avoid unnecessary spending on water and wastewater systems. "The savings will free up capital for education, public safety and other quality of life investments that make a city a great place to raise a family," says McManus.

Additional information is available from Harry MacCabe in the Office of the Mayor at (781) 598-4000.

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