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Cost Reductions and Value Engineering
on the CCWA Project

In a time when all prices seem to be going up and the term "cost over-run" has become synonymous with government-run projects, it is refreshing to find that some projects can still be done for lower costs than expected. That is what has been accomplished on the Central Coast Water Authority's project to bring State Water Project water to San Luis Obispo and Santa Barbara Counties. The Central Coast Water Authority (CCWA) and its consultants have minimized costs in a number of ways to lower the overall cost of the CCWA project. In addition, CCWA worked with the California Department of Water Resources (DWR) to achieve savings on the portions of the project which were designed and constructed by the DWR.

CCWA used a number of techniques to achieve this goal. The first technique was simply to set a low cost goal. By setting the goal, a mark was established for all team members to work towards. Other techniques included initial cost reduction during preliminary design and value engineering of the final design.

During the initial planning and preliminary design of the project, CCWA focused on fundamental project features which would provide significant savings. These features included the use of the an existing pipeline to convey water from the Santa Ynez Valley to Lake Cachuma, and the use of Lake Cachuma and related facilities to convey water to the South Coast of Santa Barbara County. These two early decisions are estimated to have avoided approximately $12 million in initial project costs.

When the CCWA project was under design, opportunities for cost savings were examined. It was found that a number of things could be done to save money and still provide a quality project. Early in the design, the project had included a water storage tank near Vandenburg Village. This tank was called Tank 6. The design engineer, Montgomery Watson, examined the hydraulics and operation of the pipeline and determined that with careful attention to operational details, Tank 6 could be eliminated while still providing proper control of pipeline operations. Similarly, a variety of design details were adjusted to make the project less expensive. These details included the burial of minor blowoffs to eliminate expensive surface structures, adjustments in pipeline alignment to avoid expensive parcels of land, alternative pipe coatings to minimize the cost of the pipe, and the use of native material for backfill in certain places to avoid importing expensive materials. All together, these adjustments saved approximately $21 million.

During the final design of the water treatment plant at Polonio Pass, CCWA asked its construction management team CH2M Hill, to perform a formal value engineering evaluation of the plant. CH2M Hill reviewed all the plans and specifications and recommended changes to the design to save construction costs wherever reasonable. As a result of this exercise, CCWA saved $174,000. In addition, CCWA agreed with the construction contractor, Hensel Phelps, to share the savings on any value engineering suggestions during construction. Value engineering during construction is estimated to have saved $23,000 for CCWA.

During the design of the DWR portion of the pipeline, the financial justification for a proposed power plant in the vicinity of the city of San Luis Obispo was examined. As the costs of the power plant were refined, DWR determined the benefit/cost ratio of the power plant was less than one. CCWA immediately recognized that the plant had no financial justification and began working with DWR to eliminate the plant. As this process continued, it became clear that several proposed facilities could be eliminated if the power plant were eliminated. These proposed facilities included the power plant, the Casmalia Hills Pump Station, and Tank 4. (Tank 3 was also eliminated by DWR for reasons unrelated to elimination of the power plant). All of these facilities could be replaced with a higher pressure pipeline which conveys, thus allowing gravity flow of the water over 120 miles from the Polonio Pass Water Treatment Plant to CCWA's Santa Ynez Pumping facility without the need for intermediate tanks or pumping plants. Considerable cost savings of about $10 million were achieved by eliminating these facilities, even after the higher cost of the higher pressure pipeline was included.

In late 1994 it became clear that DWR engineering staff needed assistance to maintain the project schedule. CCWA offered to perform the design and construction of 28 miles of the DWR project, called Reaches 5B and 6, and Tank 5 on Vandenburg Air Force Base. After extensive discussions with DWR management, CCWA was assigned the design and construction responsibility for Reaches 5B and 6 and Tank 5. During the design of this portion of the project, CCWA took the lessons it had learned on its previous pipeline project and applied them to Reaches 5B and 6. Changes were made to the DWR concept design which simplified the construction of the project, eliminated or reduced the cost of a number of structures such as manholes and turnouts, and allowed the pipe manufacturers to provide the most cost effective pipe for the project. As a result of these changes, CCWA estimates that $20 million was saved.

As DWR neared completion of its design of the project, the final section to be designed was Reach 5A. In the spring and summer of 1995, CCWA worked with DWR to achieve cost savings on this reach which were similar to the savings achieved by CCWA on Reaches 5B and 6. This effort was successful, and it is estimated that $14 million was saved through design changes on Reach 5A.

In addition to the specific changes mentioned so far, there were a number of cost savings strategies such as adjusting the timing of bids to avoid conflicts with other large projects, packaging of the construction contracts to allow CCWA to obtain the lowest possible prices, partnering with construction contractors to minimize or eliminate claims, and optimizing environmental mitigation so that it could be performed in the most cost-effective manner. It is estimated that these strategies saved approximately $10 million for the project.


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