Water District Deal for Pumps Draws Criticism : Utility costs: Agency acknowledges that it bought $1.3 million in equipment based on an error-filled report.

Directors of Orange County’s largest public water agency acknowledge using an error-filled staff report last summer to justify buying $1.3 million in pumps and valves from a Laguna Niguel company without seeking competitive bids.

Four of the company’s competitors said in recent interviews with The Times Orange County Edition that they could have provided the same equipment for at least $450,000 less. Two of the competitors fired off letters to the Orange County Water District last fall demanding to know why they were excluded.

“The award of purchase contracts of this magnitude . . . without the benefit of competitive market pricing would not appear to be in the interest of the district,” wrote Johann J. Leppitsch, president of KSB Inc., a West German pump manufacturer.

Created by an act of the state Legislature in 1933, the Fountain Valley-based district sells water wholesale from an underground storage basin to retail agencies in north and central Orange County. The retail agencies, in turn, supply water to homes and businesses.

Ultimately, the cost of the pump equipment will be borne by individual ratepayers through higher water bills, district officials acknowledge.

Officials decided last February that the pumps and valves were needed to speed the collection of storm water runoff that the district captures at Anaheim Lake and stockpiles underground.

Water district policy requires that competitive bids be sought for contracts worth more than $20,000--unless some kind of emergency exists. Even then, the district’s 10-member board must approve.

The board gave that approval June 21 by voting unanimously to purchase the equipment directly from Chemwest Inc., Southern California distributor of Flygt Corp. water pumps. The vote came after board members reviewed a staff report recommending the purchase.

There is no state law requiring that public agencies such as the Orange County Water District seek competitive bids when awarding contracts, but “good public policy” dictates that they do, said Thomas A. Papageorge, a Los Angeles County assistant district attorney who is an antitrust law consultant for the Orange County district attorney’s office.

“Competition benefits the consumer by lower prices and better quality,” Papageorge said.

Water district officials now acknowledge that the report contained errors. But they say the mistakes were few, inadvertent and inconsequential.

“We made a damn good decision,” said William R. Mills Jr., district general manager. “I’d do it again.”

Chemwest President Gerald E. Ehle, whose company has distributed Flygt products since 1985, praised the water district for its handling of the contract.

“I’m absolutely convinced personally that they have gone out of their way to make sure things are handled on a very professional and constructive basis,” Ehle said.

Ehle also denied that his competitors could have delivered the equipment for less than his company did.

“In my opinion, there’s no way that could happen,” Ehle said. “I feel somebody may have used you to try and attack Flygt Corp.”

Several water district board members said that when they voted on the contract they were unaware of the report errors but have since assured themselves that the Chemwest award was proper.

“The staff satisfied my concerns that everyone had been dealt with fairly,” said board member Donn Hall, a former mayor and councilman in Costa Mesa.

Added board member Philip L. Anthony: “We really did look at it (after the competitors’ complaints). I think the original justification (to make the purchase) was reasonable.”

Board President Lawrence P. Kraemer said that he also checked with staff members about the errors in the report and that they acknowledged “a couple of discrepancies.”

“I think we did the right thing,” Kraemer said. “My conscience is clear.”

In a recent interview, Mills said the Chemwest contract qualified as an emergency purchase for two reasons:

* A bidding process would have taken too long, Mills said. The pumps needed to be obtained by November so they could be installed in time for the winter rains. Because it can take as long as five months for large pumps to be manufactured and shipped, he said, there was no time to conduct a bidding procedure that sometimes takes up to two months.

Several Chemwest competitors contend that they could have met the five-month manufacturing time and that the bidding process could have taken as little as two weeks.

* Mills also said the staff report concluded that no other company made submersible pumps as good as the Flygt models distributed by Chemwest.

However, Patrick Couch, managing director of the Submersible Wastewater Pump Assn. in Chicago, said in a recent interview that as many as 10 Flygt competitors build pumps that are rated the same in performance and horsepower.

“They’re all doing the same kind of work,” Couch said. “There’s not a whole lot of differences.”

Mills acknowledges that the district may have paid more for the pumps and valves by not using competitive bids, but he adds that getting the equipment in place sooner will enable it to capture more runoff and eventually offset any price difference.

“So what if we did pay a little more money,” Mills said. “We have the opportunity to gain . . . in savings.”

The three-page staff report advocating Chemwest’s contract advised that the board should consider only a Flygt pump because the Orange County Sanitation District--based in the same office building as the water district headquarters--had recently bought two Flygt pumps and intended to make them standard equipment throughout the sanitation district.

Officials at the sanitation district say, however, that they bought only one Flygt pump nearly two years ago, that it is not in service because it is incompatible with existing equipment and that they have no plans to buy any more.

When that contradiction was pointed out to Mills in a recent interview, he turned to Assistant General Manager John M. Chaufty and asked him to explain. Chaufty, who wrote the report, responded: “I’m not exactly sure how that got into the agenda submittal (report).”

The report also stated that Flygt pumps are supplied to “over 95%” of the world’s large municipal submersible pump users.

“I wish it were like that,” said Kent Friedl, U.S. sales manager for Flygt, which is headquartered in Sweden. “It’s not even 50%.”

Water district officials said they got the 95% figure from Chemwest. However, Chemwest President Ehle said: “I don’t know where the 95% figure came from.” Ehle said the figure should be 86%, for the U.S. market only.

The report also stated that comparable pumps could not be obtained from any other manufacturer serving the area and that Flygt pumps had a number of exclusive features.

But representatives of KSB Inc., Aurora-Hydromatic Pumps Co., ABS Pumps of Connecticut and Ebarra International Corp. of Japan say their companies make pumps that contain the same features.

When one competitor complained about the district’s selection of Flygt, Chaufty wrote a reply letter stating that the district’s engineering consultant had also investigated products offered by two other companies--M&W; Pump Corp. and Griffin (MAC Division) Pumps. However, neither company makes submersible pumps.

And, while the district declined to open the contract to competing manufacturers, officials solicited price proposals from two Flygt distributors in addition to Chemwest.

The other distributors declined to participate, however, because Chemwest has an exclusive contract with Flygt to sell products in Southern California.

The contract with Chemwest called for two district engineers to travel to Sweden to witness factory testing of the pumps. On Oct. 7, Kirby Brill, a district engineer, and Constanino M. Senon, a consulting engineer, accompanied Chemwest’s president on the trip, and all of their expenses were paid by Flygt, according to Orange County Water District records. The wives of Senon and Ehle also went along but at their own expense, district officials said.

“This was strictly a business trip,” said Hans Norlander, a Flygt operations manager who helped organize the trip.

A former Flygt district manager, however, said that Flygt often uses trips to the Swedish plant as a marketing technique.

“They take them (clients) out to discos, they go to the finest restaurants,” said Arlie Green, a former Flygt Midwestern district manager who is now a manager for the competing Aurora-Hydromatic Pumps in Aurora, Ill.

Senon and Brill declined to comment.