Firm Fights DWP Critics on Project in Owens Valley

Targeted by an audit and facing the potential loss of a city contract, the engineering firm CH2M HILL on Tuesday challenged criticism by Los Angeles Department of Water and Power board members about the expensive Owens Valley dust-reduction project.

Days after the DWP issued a new request for bids on the project management contract held by CH2M HILL, an executive with the firm wrote to DWP board President Mary Nichols defending the project as a success and saying cost increases have been dictated by air quality regulators, not contractors.

“The contentions and controversy surrounding financial issues has obscured a critical fact -- that this project has been by every technical and environmental standard a tremendous success for the city of Los Angeles and the citizens of California,” wrote Jack Baylis, a senior vice president for the company. “With two-thirds of the dust-reduction project complete, there has been a 70% reduction in the number of days when dust levels exceed federal limits.”

Much of the project has involved diverting water back to dry areas of the valley.

Although Baylis said his firm “will fully support and will cooperate with the performance audit over the next several months,” he contended that officials have perpetuated “egregious misconceptions” about the project and its cost, which officials estimate is now at $415 million and may exceed $500 million.

The DWP board voted to seek new bids on the project based on concerns about cost and the concern of some board members that it is a conflict of interest to have the same company that designed the project also serve as project manager.

Board members, including Nichols, said Baylis’ letter did not dissuade them from seeking new bids and an audit of CH2M HILL’s work.

“There are some statements in there that have to be checked out, but even if they are true, we are looking at the context of the overall project, which has escalated dramatically in cost,” Nichols said.

Board member Nick Patsaouras said an audit is justified to help the board understand how CH2M HILL’s original $500,000 contract has grown to $90 million in billings.

John Corsi, a spokesman for the firm, said the original contract was to identify the dust problem caused by the DWP taking water from the Owens Valley for decades. The follow-up contracts were for designing the solution and overseeing its implementation.

Baylis said it has been implied at public hearings that CH2M HILL has received all of the more than $400 million spent, when it got only $90 million, with the rest paid to construction contractors and others working on the project.

In addition, Baylis said about $25 million of the money received by his firm has been passed on to minority and women-owned subcontractors.

He also disputed the claim of city officials that the project has grown in cost from an original estimate of $120 million when it began in 1998. That assertion has been made repeatedly by city officials, including in a motion by council members Bernard C. Parks, Janice Hahn and Alex Padilla in November calling for the audit.

“DWP’s general manager originally informed council that the dust mitigation program would cost no more than $120 million,” the three said.

Baylis said that an original estimate in 1997 by the Great Basin Air Pollution Control District put the cost of the project at $91 million, but that it was not an engineering cost estimate.

“The estimate also did not include specific project elements that were necessary to adequately suppress dust within the prescribed time periods,” Baylis wrote.

Instead, he cited a 1997 estimate of $313 million to $440 million validated by Parsons Engineering, an independent firm and competitor to CH2M HILL.

“Additionally, the total costs were driven by compliance to the agreements between Great Basin Air Pollution Control District and the city, and further by directives by Great Basin, not by CH2M HILL,” Baylis wrote.

Patsaouras and Nichols said some of the added cost might be the responsibility of the DWP, not the contractor, but they thought there was value in reevaluating the whole project.

Patsaouras said Tuesday that CH2M HILL can compete for the contract, but that the board wants to get a fresh look at which services are available and for how much.