Cost of John Wayne Airport generator soared as project morphed

How the budget for John Wayne Airport’s new electricity and air conditioning generator nearly tripled — from $11 million to $31 million — apparently is not a case of misconduct or frivolous spending.

Rather, it illustrates how major construction projects often morph.

“The most likely culprit is that the project is so complex and there are so many unknowns,” said Allan Hauck, head of the construction management department at Cal Poly San Luis Obispo.

When airport officials started planning to produce their own electricity and air conditioning in the early 2000s, they didn’t account for replacing much of the aging existing equipment. Nor had they planned on building a freestanding structure to house the plant.

“The project is much bigger today than it was in 2004,” said airport spokeswoman Jenny Wedge.

The $11-million core of the project was a new “co-generation” plant, a system that would both produce electricity by internal combustion and capture the excess energy to create cool water for air conditioning.

Financial consultants told airport officials that they would save more than $1.25 million annually in electricity costs and that the savings would pay for the equipment within eight years. That same payback schedule is true today — for the co-generation portion alone.

But there is an additional $20 million in other equipment, design and building costs.

The county Board of Supervisors approved the airport’s request to buy the four massive, gas-fired generators in 2004 for $2.6 million, before the plant’s design was finished. The idea was to lock in lower pricing and get a jump on the lengthy permitting process.

But by the time contractors started up the engines in late 2010, the county had to spend more than $1 million to refurbish the generators, which needed lubrication and had to be modified to meet new air-quality standards.

The plant’s ultimate combination of machinery had started to take shape about 2006. Airport Director Alan Murphy, Deputy Airport Director of Facilities Larry Serafini and engineers from Irvine-based Popov Engineers decided to scrap the existing electrical and air conditioning plant, replace all the equipment and combine it with the new co-generation system.

They would have to build a new Southern California Edison substation to provide about 5% of the airport electricity and to back up the airport’s generators.

All that work added about $5 million to the bottom line.

Popov first considered installing the co-generation system near the Edison substation. But as the engineers progressed, they decided to build a separate building, Serafini said. That would add $5 million.

The estimate was up to $20 million in 2006.

Construction costs were on the rise then. Steel, fuel and labor costs were climbing about 10% a year.

When the airport issued a request for construction bids, the estimates were so far over budget — one came in at $30 million and another at $34 million — that the county was forced to shelve the project. When officials went back to the drawing board in 2008, they asked Popov to redesign the project inside a new parking structure.

Such major changes aren’t unusual in complicated construction projects, said Hauck of Cal Poly San Luis Obispo. “In the design process, there are lots of dead-ends,” he said.

Serafini and Murphy analyzed how much they would save, compared that to lost revenue from fewer parking spaces and decided to build the plant on its own after all.

With their old plans in hand, airport officials decided to find a company that could essentially redesign the utility plant and build it, with the hope that the contractor could find ways to be efficient and save money.

Before the project was put out to bid again in late 2008, a revised cost-estimate pegged the plant’s cost at $20 million to $26.5 million.

The winning bid from West Coast Air Conditioning Co., based near San Diego, came in at $25.2 million. The company finished the project in December.

“We did some duplicative work,” Murphy said. “But in the end I think we definitely ended up with a better project and a less expensive project.”

mike.reicher@latimes.com