Binder 16. Gunnison study. Cost estimates

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COLORADO

WATER RESOURCES

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POWER DEVELOPMENT AUTHORllY

Logan Tower Bldg. - Suite 620. 1580 Logan Street, Denver, Colorado 80203 303/830-1550

March 30, 1990

The Honorable Jeanne Faatz House of Representatives State Capitol

Denver, Colorado 80203

RE: Cost Estimates for Arkansas River Siphon Dear Representative Faotz:

As you requested in ycur letter of January 31, 1990, we have reviewed the infom.ation available regarding the cost estimates for the Arkansas River siphon made by the Authority's consultants for the Upper Gunnison Study, and by WRC Engineering, Inc. dated September 15, 1989, for the Union Park Project Proponents. Our review included discussions with the Authority's engineering consultants and with representatives of WRC. The conments in the attached memorandum surrrnarize our review of these cost estimates.

WRC and the Authority's consultants used different procedures for these estimates: WRC estimated costs of pipe fabrication and construction, while the Authority's consultant estimated the total weight of steel in the siphon and then used a unit cost per pound of steel to determine construction costs. Both of these approaches are valid if properly applied. Both also yield results that are appropriate for a reconnaissance level review, but that have "confidence" levels of only about plus or minus 25% - that is, the costs are expected to vary from 75% to 125% of the figure presented. Further, because the cost estiw4tes are derived only from reconnaissance level review - that is, without field work or actual preliminary design - the actual costs could vary even more widely than 25% if, for example, rrore significant difficulties of terrain or construction are revealed during field surveys or preliminary design work.

There are two areas where the cost assllllptions in the two estimates diverge significantly. The first area is the strength and associated weight of pipe required, and the second area involves initial design and construction assumptions. With respect to the pipe strength and weight, the WRC estimate assumes higher strength and lower weight, with consequent lower cost of construction, than the Authority estimate. It is our view that WRC may have underestimated the required weight of pipe and therefore have underestimated the tota 1 construct ion costs, while the Authority's consultants may have overestimated the pipe weight •

The Honorable Jeanne Faatz March 30, 1990

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With respect to the initial design and construction assunptions, we believe that li.'RC may have further underestimated the total costs by failing to take account of the true construction costs of building such a long pipe over such difficult terrain. On the other hand, the unit cost per pound of steel used by the Authority consultant appears to be on the low side, effectively counterbalancing the apparent overestimate of the weight of steel in the siphon. Accordingly, the Authority is still comfortable with the costs presented in its reconnaissance level analysis of the Arkansas River pipeline. We are confident that the cost estimate is not four

times too high, as charged by WRC.

The cost estimate prepared by the Authority's consultant appears to be

consistent with the purpose for which it was prepared and at the level of effort expected of the consultant. Without a significant amount of additional effort and significant additional costs, involving field work and preliminary design of the entire pipeline, a cost estimate at a more detailed, reliable level of analysis cannot be obtained. Because the cost of obtaining such a cost estimate is very high (in the range of $50,000 to $100,000) we do not believe that it is appropriate for the Authority to pursue this particular cost estimate further. Furthermore, in

recent discussions with \..'RC Engineering v.-e have learned that the proponents of the

Union Park Project have reduced the desi<;n discharge for the siphon fran the 500 c. f.s. used in the Authority study to less than 300 c. f.s., effectively making both the WRC and the Authority consultant's cost estimates irrelevant.

As we indicated in the final report on the Upper Gunnison Study, our cost

estimates did not preclude any of the three transmountain projects reviewed fran further consideration. In fact, our estimating procedure indicated that all three projects are worthy of further evaluation.

\~e hope this letter and attached memorandum answers your concerns. If you would like to discuss it further, please call and I would be happy to set up a mutually convenient meeting time.

DLL/gdf

Attachment: As stated

Sincerely,

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Daniel L. Law, P.E.

Acting Executive Director

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Siphon Cost Estimates for Union Park Project

As you requested, I have reviewed the information available regarding the two cost estimates for the Arkansas River Siphon which is a component of the Union Park Project. The purpose of this review was to evaluate to the extent possible the wide difference between these two cost estimates: one made for the Authority's Upper Gunnison Study, and the other made by WRC Engineering, Inc., dated September 15, 1989 for the Union Park

Project proponents.

1. Estimating Procedures.

The Authority's consultants and WRC used wholly different estimating procedures. Properly applied, either method is

appropriate for reconnaissance-level cost estimates such as those prepared for the Authority's Upper Gunnison Study.

Thus, in making its September, 1989 estimate, WRC provided the basic assumptions from the Authority Study to a steel pipe fabricator and a construction company. The pipe fabricator estimated the cost of pipe delivered at or near the construction site, while the construction company estimated the cost per foot to install the siphon. In contrast, the Authority's consultant estimated (1) the total weight of steel in the siphon; and (2) the unit cost per pound of steel pipe to construct the siphon. Both the WRC and Authority estimates added 25% for contingencies. In addition, the Authority added 15% for engineering and ad~inistra-tion. Although WRC stated that i t had added 15% for these items, the actual addition was only 12%.

2. Welded Steel Pipe.

The WRC estimate assumed a higher strength steel (generally 52 ksi minimum yield stress) than did the Authority's estimate (27 ksi minimum yield stress). Using such higher strength steel results in a total weight of steel pipe for the WRC estimate (34.5 _

x 106 _{lbs.) which is significantly below the total weight estimated}

for the Authority ( 67. 05 x 106 lbs.). However, by using such a

high yield stress for the steel pipe, WRC also decreased the

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fabrication and construction costs where the pipe is subjected to

unusual stresses. In view of the length of the pipeline, the

terrain to be covered by this pipeline, and the possibility of

expanding soils and other stresses on the pipe, the minimum yield stress employed by WRC is, in my opinion, an absolute upper limit

for this level of study. Utilizing such high strength steel may

be inappropriate for the pipeline proposed and result in a cost estimate which is too low.

On the other hand, the minimum yield stress employed by the

Authority's consultant appears low for today's construction

standards, and may have resulted in some over-estimation of the pipeline weight and consequent cost.

3. Construction Costs.

WRC used construction costs for the pipeline as follows: $125

per linear foot for 38,500 feet of 72" pipe and $175 per linear

foot for 25,800 feet of twin 56" pipes. WRC assumed transmountain

valley cut/cover construction with minimal existing improvements

along the right-of-way. Since this pipeline would traverse

considerable mountain terrain, the edge of a town, and the Arkansas River, I believe that these assumptions are inappropriate for this

project and result in significant underestimates of the cost of

construction.

The Authority used a unit cost of constructed pipeline of

$1.75 per pound of steel in the pipeline. When compared with unit

costs developed by the United States Bureau of Reclamation's

engineering and research center in the 1970's for use at this level

of study, the $1.75 per pound appears to be too low. However, I

believe that this low value for unit cost of constructed pipeline

counterbalances the apparently high estimation of the weight of

steel discussed above.

4 • Purpose of the Cost Estimate and Confidence Level.

The WRC cost estimate was made to verify a previous cost

estimate for the siphon made by Ebasco. WRC is the engineering

consultant for Arapahoe County, the new owner and proponent of the

Union Park Project. Ebasco is an engineering consultant for the

previous owner and proponent of the Union Park Project.

The cost estimates of the Union Park Project, the Collegiate

Range Project, and the Taylor Park Project were included in the

Authority's study to provide a uniform basis of comparison of three

proposed projects to transport water to the South Platte River

Basin for use in the Denver metropolitan area. In the Authority's

study, the siphon under discussion constituted 28% of the cost of

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the Union Park Project.

construction costs as $721,000,000.

The study estimated the Union Park Project $591,000,000 and the capital costs as Both the WRC and Authority consultant cost estimates con

-stitute reconnaissance level work. They are not based on field work or preliminary design (WRC has stated that i t has examined the terrain west of the Arkansas River, but i t has not made surveys or other detailed study). Generally, the "confidence level" for such cost estimates is plus or minus 25% -- that is, one would expect

the actual construction cost to fall within a range of 75% to 125%

of the cost estimate. Further, a more detailed level of analysis

could result in subsequent cost estimates which fall outside this

75% to 125% range, particularly if field work reveals greater difficulty of terrain, or, alternatively, easier construction. With respect to a project such as this, which involves potentially difficult hydraulics, pipe sizing, and alignment to achieve gravity flow of 500 c.f.s., I believe that preliminary design of the entire

system, from reservoir to reservoir, would likely be needed to

obtain any significant refinement of the cost estimates. Moreover,

the possibility that such refinement of the cost estimates for this

project would vary the costs more than 25% cannot be discounted. 5 • Adequacy of the WRC Cost Estimate.

After having reviewed the WRC cost estimate for the Arkansas River siphon, I believe that some aspects of pipeline construction have been overlooked, and some misinterpretation has been made of

the Authority's calculation files. In particular, I believe that

all costs were not included from initial reconnaissance study

through project start-up. I do not believe that reasonable

assumptions were made regarding the difficulty of terrain or

existing manmade and natural obstructions along the right-of-way.

I am not confident that the WRC cost estimate reflects adequate

design pressures to deliver the design discharge of 500 c.f.s., or

adequate head losses to design the pipeline diameter.

Further, in my opinion, inadequate allowance for a reconnais-sance level study has been made in the WRC cost estimate for a series of cost items, including: length of pipeline; right-of-way; clearing and reclamation of the right-of-way; reconstruction of roads along the right-of-way; thrust blocks; tied joints; external l oads (particularly where blasting requires minimum cover); gully crossings; strengtheners; rock excavating and disposal; blow-off's; air release outlets; manholes; cathodic protection; Arkansas River crossing; field cost of elbows and short lengths required in mountain terrain; minor road and utility crossings and relocations; major highway crossings; EIS and mitigation measures; some wintertime construction (to reduce the

-overall capital cost of the project); testing; start-up; pipe

transport from fabricator's delivery points; transitions; hydraulic

conditions under various operating conditions; design stress; and engineering, legal and administrative costs.

Overall, I believe that the WRC cost estimate is probably significantly below actual cost.

6. Adequacy of Authority Cost Estimate.

After reviewing the Authority consultant's work in preparing

the cost estimate for the Arkansas River siphon, I believe that

that cost estimate is reasonable for a reconnaissance level of

analysis. In particular, I believe that the cost factors not taken into account in the WRC cost estimate are adequately addressed in

the estimating methodology employed by the Authority, since that

methodology relates to per pound construction costs developed by reference to historical costs assembled by the BuRec. While i t is possible that the strength of steel used in the pipeline has resulted in a high estimation of the weight of pipe, that high

estimate appears to have been counter-balanced by the use of a

lower unit cost per pound of pipe construction costs than that

developed by indexing the BuRec figures. Further, I have made my

own "back-of-the-envelope" cost estimates using the United States

Bureau of Reclamation pipeline estimating procedures referred to

above. By varying assumptions such as strength of steel, I arrive

at cost estimates for the siphon which vary from $125,000,000 to

more than the $168,000,000 estimate previously made by the Authority's consultants.

In sum, the Authority's cost estimate is reasonable for this

study; in any event, i t is not four times too high.

7. Final Comments.

My review of the cost estimates prepared by the Authority's

consultant and WRC Engineering for the steel pipeline portion of

the Arkansas River siphon component of the Union Park Project

included discussions with engineers who work with the consultants

that prepared the Authority's cost estimate. I also discussed this

matter with WRC. As noted above, I think that the Authority's cost

estimate is a reasonable reconnaissance-level estimate that

fulfills the purposes for which i t was intended. I think that the

WRC cost estimate is likely low, even for this level of analysis,

because of its failure to take into account a significant number

of factors.

However, refining the cost estimate for the Arkansas River

siphon to a point where one could reduce the lik~ly variation in

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cost (e.g. to within, say, 10% of the actual cost as opposed to at

least 25% for reconnaissance level of analysis) would essentially

require a pre- feasibility level cost estimate. That would in turn

involve significant field work, as well as preliminary design of

the entire system from reservoir to reservoir. Such an undertaking

would be extremely expensive -- probably in the range of $50,000

to $100,000 -- and is, I believe, unjustified at this time .

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Mr. Ralph L. Kerr, P.E.

Colorado Water Resources and Power Development Authority 1580 Logan Street, Suite 620 Denver, Colorado 80203

June 5, 1990

WAC File: 1662/22

Dear Skip:

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Enclosed please find information provided to us by The Industrial Company

(TIC). This information is related to costs of large size pipelines and wall

thickness greater than 0.5 inches. Also, a Xerox copy of TIC brochure is

enclosed for your files.

As you can see TIC believes, and we concur, that their cost estimate of

the Union Park Project/Arkansas Valley Siphon is very realistic. If you have any questions related to this material, please call.

.,I ASA/kad Enclosures cc: Mr. Dan Law Mr. Robert Krassa Mr. Paul Zilis CONSULTING ENGINEERS

Very truly yours,

WAC ENGINEERING, INC.

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President

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fnhJu~rial Company

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• May 18, 1990 _{G;;•:o: :-:.(;; ~!-·i: .. i: ;;~~ .. Jurcss}

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W.R.C. Engineering

1660 South Albion Street

Suite 500

Denver, CO 80222

Attention: M.A. Samad, P.H.D., P.E.

Project Engineer

Reference: Union Park Project

Dear Sir:

Arkansas Valley Siphon

Preliminary Budget Estimate

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My apologies for not responding to your request for further

estimating information for this project. We have been very busy

with estimating work.

Enclosed you will find a tabulation of bids for a project we were

recently awarded. As you can see from a review of the bids, our

estimate was competitive.

The material costs for this 84" and 90" pipe with wall thickness

in the range of .48" through .613" were approximately $230.00 to

$270.00 per LF. Installation costs for the major portion of the

work was in the range of $135.00/LF to $180.00/LF.

For further information regarding this project please contact

Steve Foellmi at:

Black & Veatch Engineers

211 E. Highland #305

Phoenix, AZ 85016

Phone : ( 602) 381-4400

Also enclosed for your information is a brochure describing The

Industrial Company, Inc. and our various operations.

INC.

DK:aks