HomeMy WebLinkAbout04.b. Receive information on Capital Improvement Business Case Evaluations Page 1 of 25
Item 4.b.
CENTRAL SAN
October 29, 2019
TO: ENGINEERING AND OPERATIONS COMMITTEE
FROM: BRYAN MCGLOIN, MANAGEMENT ANALYST
NITIN GOEL, ASSET MANAGEMENT SENIOR ENGINEER
REVIEWED BY: DANEA GEMMELL, PLANNING AND DEVELOPMENT SERVICES DIVISION
MANAGER
EDGAR J. LOPEZ, CAPITAL PROJECTS DIVISION MANAGER
JEAN-MARC PETIT, DIRECTOR OF ENGINEERING AND TECHNICAL
SERVICES
ROGER S. BAILEY, GENERAL MANAGER
SUBJECT: RECEIVE INFORMATION ON CAPITAL IMPROVEMENT BUSINESS CASE
EVALUATIONS
See attached memo and presentation.
Strategic Plan re-In
GOAL THREE: Be a Fiscally Sound and Effective Water Sector Utility
Strategy 2- Manage costs
ATTACHMENTS:
1. Approach to Business Case Evaluations Memorandum
2. Presentation
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Attachment 1
CENTRAL CONTRA COSTA
SANITARY DISTRICT
October 29, 2019
TO: ENGINEERING & OPERATIONS COMMITTEE
VIA: ROGER S. BAILEY, GENERAL MANAGER
FROM: JEAN-MARC PETIT, DIRECTOR OF ENGINEERING AND TECHNICAL
SERVICES
DANEA GEMMELL, PLANNING AND DEVELOPMENT SERVICES
DIVISION MANAGER
EDGAR J. LOPEZ, CAPITAL PROJECTS DIVISION MANAGER
NITIN GOEL, ASSET MANAGEMENT SENIOR ENGINEER
BRIAN MCGLOIN, MANAGEMENT ANALYSIT
SUBJECT: CENTRAL SAN'S APPROACH TO BUSINESS CASE EVALUATIONS
INTRODUCTION
Wastewater collection, conveyance, and treatment is an infrastructure-intense industry
and Central San's operation is no exception. As the value of Central San's wastewater
collection and treatment infrastructure reaches into the multibillion-dollar range, it is the
responsibility of the Central San Board of Directors, executives, management and staff
to safeguard this ratepayer investment by operating, maintaining, repairing, and/or
replacing these assets in a strategic and cost-effective manner. One of the key ways
staff ensures this approach in the development of Central San projects is by the use of
a business case evaluation (BCE). BCEs apply to Central San projects regardless of the
implementation approach (e.g. traditional design-bid-build, design-build, public-private
partnership, etc.).
BACKGROUN[
BCE is a rigorous method for evaluating alternatives that is applied at most levels of
alternatives analysis: from decisions between major project alternatives to selection of
the types and numbers of assets used in a preferred alternative. In most cases, a BCE
considers all aspects of asset ownership, including levels of service, capital costs, and
operations and maintenance (O&M) costs. It also incorporates non-cost factors to
ensure the most appropriate alternatives are selected and the selection process is well
documented.
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template for BCE
The nature, size, and complexity of each BCE will vary, and thus the BCE development
and documentation process should be structured to respond to these variations in
facilitating decisions for project alternatives, processes or equipment options, which can
range from a few million to tens of millions of dollars in life cycle costs (LCC). The
documentation also needs to facilitate the review process through a structure which
progressively moves from the summary information to a more detailed background
analysis. The template to accommodate these objectives has the following elements:
1. Technical Memorandum (TM): A TM often precedes the BCE and is very
helpful on large or complex analyses and documents alternatives containing
fatal flaws that are not evaluated in the BCE. The TM presents detailed
alternative descriptions and evaluations, and provides exhibits, analyses, and
supporting data justifying the conclusions and findings included in the BCE.
TMs can be attached as appendices to the BCE document and thus keep the
BCE succinct and more comprehensible.
2. BCE Documentation: BCE documentation includes the economic, non-
economic, and sensitivity analyses for the alternatives considered as potential
solutions to the "problem" being addressed. Screened alternatives are
presented in a summary form. BCE-based conclusions and findings are
delineated.
3. BCE: The BCE provides staff with the ability to better understand how findings
were determined, as well as make updates in the future if conditions change.
The following sections describe Central San's BCE procedure for developing balanced,
business case-based decisions on a variety of projects and alternatives evaluations.
Figure 1, on the following page, shows the process flow diagram for the BCE procedure
employed at Central San.
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3c: Preferred 4c:TBL+
Alternatives Approach
3a: 4a: 4b:O&M
Potential 3b: Project Cost 4d:
Alternatives Screening Cost Sensitivity
L Process Analysis
Step 1: Define Step 2: Step 3: Business
Project Driers Comprehensive Case Step 4: BCE Analysis
& State the Condition Alternatives
Need Assessment Development
Step 5: Pilot
Testing
(If Applicable)
Project Proceeds to
Pre-design Step 6:
Recommended
Alternative
6b: Present
to
Committee
6c: Present 6a: Present
to Board to Executive
Tea m
Triple Bottom Line Plus(TBL+)
Figure 1. Process Flow for BCE used for Central San Capital Projects
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BCE Initiation
Clear problem definition is the critical step that forms the basis for the BCE process
initiation. During the problem definition step, the problem drivers are identified, and the
problem goal statement is developed.
Goal Statement
The BCE goal statement is based on the drivers for the problem in question. This is
critical to clearly articulating the issues to be solved by Central San and is a guide to the
development of alternatives. More detailed drivers need to be identified when
considering ancillary systems or subsystems. The drivers for these analyses will be
based on the requirements of the problem they are addressing.
The goal statement should concisely describe the drivers for the facilities under
consideration. It should focus on the function that the asset(s) will perform rather than
the physical asset. A specific solution should not be identified in the goal statement. The
goal statement should narrow the focus of the work and allow for a wide range of
possible solutions.
Functional Requirements and Basis of Design
Key functional requirements for the proposed solution are outlined, and the proposed
performance and numerical criteria developed in the relevant TM(s) are summarized.
Potential constraints to meeting the objectives are identified.
Alternatives
Alternative development is a three-step process that identifies potential alternatives,
screens and shortlists potential alternatives, and then develops the selected alternatives
for the BCE analysis. The BCE includes summary information on the alternatives
considered as part of the evaluation process. A detailed discussion of all alternatives is
presented in the relevant TM, attached as an appendix to the BCE document. The goal
of the alternatives' development is to have three to five alternatives for the BCE,
including a "no project" alternative. Limiting the number of alternatives that are
considered in the BCE saves time and budget and allows the alternatives to be more
fully developed, which should minimize the need to reconsider the BCE as the design
advances. If at the end of the fatal flaw analysis too many alternatives are still under
consideration, a preliminary cost effectiveness analysis can be performed to select the
most viable.
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STEP 1: IDENTIFY PROJECT DRIVERS AND STATE THE NEED
Identifying the project's drivers and clearly stating the project's need(s) is a critical step
that forms the foundation of the BCE process. During development of Central San's
Comprehensive Wastewater Master Plan (CWMP), the following four key project drivers
were identified:
• Aging Infrastructure;
• Sustainability;
• Regulatory; and
• Capacity (hydraulic or process capacity, non-growth related).
These drivers represent issues and goals that provide direction to perform the BCE.
Recommendations from the CWMP were incorporated into Central San's Ten-Year
Capital Improvement Plan (CIP), which provides a prioritized list of future improvements
and ongoing renovations and forms the basis for Central San's Capital Improvement
Budget (CIB), which is updated annually. A capital projects summary sheet, in the CIB
book, lists the project drivers associated with each project.
STEP 2: PERFORM A COMPREHENSIVE CONDITION ASSESSMENT
Since Central San has been collecting and treating wastewater for over 70 years, many
of Central San's assets have been in operation for several decades. Most of the assets
in the treatment plant were constructed as part of Central San's secondary expansion
more than 40 years ago and some assets now require significant ongoing maintenance.
Aging infrastructure can often be a significant driver for capital projects, so before
proceeding with any type of renovation or a detailed BCE, Central San staff completes a
detailed condition assessment to determine an asset's condition and remaining useful
life and if improvements or replacement are needed. The information generated by the
comprehensive condition assessment is critical to developing meaningful alternatives to
consider as part of the BCE.
STEP 3: DEVELOP BUSINESS CASE ALTERNATIVES
Business case alternatives development is a three-step process that identifies potential
alternatives, screens the potential alternatives, and develops final alternatives for
consideration in the BCE analysis.
a. Identify Potential Alternatives
The goal of this step is to identify all potential scenarios and/or technologies that
can meet the project's need(s). Large and/or complex projects typically involve a
broader group of stakeholders that can have a preference for one alternative
over another; therefore, to develop an inclusive and defendable BCE, various
potential alternatives are identified at this stage.
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b. Screen the Potential Alternatives
The potential alternatives identified above are subjected to a fatal flaws analysis
and screening process, which leads to a short list of preferred alternatives for
more detailed development and analysis. Fatal flaw analysis considers the ability
of potential alternatives to meet the project drivers and the project constraints.
The alternatives are considered to be fatally flawed if they do not resolve the
problem statement or if they meet any of the fatal flaw criteria. The failing
alternatives are then removed from further evaluation. Examples of fatal flaw
criteria employed to evaluate technologies for future treatment requirements
during the CWMP include:
1. Is the technology proven/scalable to meet liquid, solids, and air regulations?
2. Does the technology fit within site constraints?
3. Does the technology maximize use of existing facilities?
c. Develop Preferred Alternatives
Alternatives that survive the fatal flaws analysis and screening process become
the preferred alternatives, which are then developed in more detail to refine the
evaluation process. There are typically three to five preferred alternatives used
for the BCE, including a "status quo — do nothing" alternative. Limiting the
number of viable alternatives considered in the BCE allows the alternatives to be
more fully developed, which helps minimize the need to reconsider the BCE as
the project's design advances.
STEP 4: PERFORM BCE ANALYSIS
The analysis step of the BCE process compares the preferred alternatives against each
other and provides the basis for selecting a recommended alternative. The analysis is
based on the present worth LCC analysis, a.k.a.; net present value (NPV) and non-
quantifiable factors. The LCC analyses for the preferred alternatives are performed and
include project costs, annual O&M costs, and estimated refurbishment costs during the
life of the assets, all presented in terms of NPV. NPV is usually based on a 20-year life
cycle, but on some alternatives, they can be extended to 30-years or even 50-years on
rare occasions. A brief description of the elements included in the project costs, annual
O&M costs, and estimated refurbishment costs during the life of the assets is shown
below.
a. Project Costs
Project costs are the actual anticipated costs to Central San for the
implementation of each alternative and include planning, design, construction,
start-up, testing, spare parts, and end-of-life disposal cost. These costs are
updated routinely as the projects move through their various phases and
increasingly accurate information becomes available. During the CWMP, a TM
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(G-3) was prepared entitled "Basis of Cost Estimates". This TM developed levels
of cost estimating accuracy for projects, cost estimating guidelines for capital,
O&M, and present worth LCC analysis. The purpose of the TM was to have a
consistent method to estimate cost and calculate NPV when comparing
alternatives.
b. O&M Costs
The checklist of activities considered for O&M cost estimates includes the
following:
• Labor cost for planning, design, and O&M
• Electricity, chemicals, materials, supplies and equipment
• Major periodic overhaul and component replacements
c. Triple Bottom Line Plus (TBL+) Approach and Other Indirect Costs
In addition to using a conventional economic analysis for evaluation of
alternatives, the following key factors are also used as part of the BCE process:
technical performance, NPV, and anticipated life remaining.
The triple bottom line (TBL) is a framework with three elements: 1) social; 2)
environmental; and 3) financial. Some organizations have adopted the TBL
framework to evaluate their performance in a broader perspective to create
greater customer value.
The objective of the TBL+ approach is to maximize the benefits of the project to
the community as a whole for new processes such as nutrient removal,
evaluating possible new methods for solids handling, energy production, etc.
TBL+ is a proven approach that weighs three areas of cost and benefit: financial,
social, and environmental. In addition, the category of technical/functional was
added to address the requirement that all project alternatives must be technically
sound, which includes the requirements to meet minimum industry performance
standards, fit within the site constraints, and be compatible with existing facilities
and treatment processes. Central San staff has presented the TBL+ approach to
the Board during the formation of the CWMP in June 2016.
As some of the qualitative aspects of TBL+ analysis can be subjective, while
performing this approach for any major projects, Central San staff is not adding a
dollar value to the intangibles, such as public relations or Central San's image in
the community, operator preference (internal process and employees), or social
impacts such as potential for loss of business, and/or noise. Instead, the social
and environmental parameters will be ranked using a point system (+1, 0, -1).
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d. Sensitivity (Uncertainty) Analysis
Generally speaking, a sensitivity analysis is a method to test "what-if"
scenarios of the NPV analysis by varying certain parameters. In a typical
sensitivity analysis, the value of an input variable that is potentially uncertain
is changed, while all the other project variables are held constant, and the
amount of change in results is noted. The same process is repeated for other
input variables that are considered uncertain. Finally, the variables chosen
can be ranked according to the effect of their variability on the NPV results.
The parameters that are typically varied in a sensitivity analysis are:
• Discount and Inflation (Escalation) Rates — The discount rate is important
in comparing O&M costs to capital costs. Inflation and escalation rates
typically have the most impact on the results of the sensitivity analysis. It
should be noted that inflation rates sensitivity is typically assigned to
construction cost estimates.
• Risk Levels — The probability of an uncertain event occurring can impact
the total LCC of a project. Similarly, risk levels can vary between
alternatives and the use of a risk premium can provide more realistic
financial comparisons between alternatives.
• Cost Estimates — This investigates whether the outcome of the NPV
analysis is subject to change based on conservatism and/or optimism in
developing cost estimates for capital, O&M, or other specific types of
costs. Costs can be adjusted lower or higher (i.e., halved or doubled) as
may be appropriate.
STEP 5: CONDUCT PILOT TESTING (OPTIONAL)
While performing BCEs, the Project Team (Consultant, Project Manager, Project
Engineer, Division Manager, and a member of the Executive Team) may recommend
pilot testing to validate design criteria and optimize the design of the recommended
alternative. For example, the CWMP recommended pilot testing new air pollution control
processes that would address upcoming air emission regulations. Through careful
planning and creative problem solving, Central San successfully completed a Wet
Scrubber Pilot over an accelerated 11-month timeline in 2017. By investing in this pilot,
Central San will save over $14 million of capital investment by postponing or avoiding
construction of certain air pollution models and scrubber water treatment facilities, which
were originally envisioned as part of the Solids Handling Facilities Improvement Project.
The pilot testing results can then be utilized to refine the BCE analysis, as shown in
Figure 1.
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STEP 6: RECOMMEND A PREFERRED ALTERNATIVE
The selection of the preferred alternative is based on the total LCC in NPV (in today's
dollars) and ranking of non-quantifiable factors. The Project Team evaluates all results
of the TBL+ evaluation to reach consensus on the preferred alternative. The conclusion
of the BCE must provide justification for a recommended alternative, which
demonstrates how the recommended solution provides the best overall value for Central
San ratepayers and the community when considering level of service, economic factors,
risk, and intangible factors.
After the Project Team finalizes the recommended alternative, the Project Team
presents it to the Executive Team. After incorporating the recommendations of the
Executive Team, the Project Team prepares a position paper and presents the
recommended alternative to the Engineering & Operations (E&O) or Real Estate,
Environmental & Planning (REEP) Committee. After incorporating the recommendations
of the E&O or REEP Committee, the Project Team refines the position paper and
presents the recommended alternative to the Board.
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Attachment 2
NMI,' .
I BUSINESS CASE EVALUATION
CENTRAL SAN PROCESS
Bryan McGloin, Management Analyst
Danea Gemmell, Planning and Development Services Division Manager
Jean-Marc Petit, Director of Engineering and Technical Services
` Engineering and Operations Committee Meeting
October 29, 2019
WHY CONDUCT A BUSINESS CASE
EVALUATION (BCE)?
• BCE is a process to evaluate solutions to a need/problem and
determine how best to address this need considering financial,
environmental, and social impacts. It is a multi-step process
intended to maximize objective over subjective assessment of
project alternatives.
• Evaluate economic(cost)and non-economic variables
• Consider consistent factors across multiple project alternatives
• Normalize values to allow for combination and comparison
• Although a BCE will often be highly quantitative, its ultimate
purpose is to support a business judgment decision on a
proposed project.
)Z
INTRODUCTION
1
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CURRENT BCE
PROCESS AT CENTRAL SAN
1. Evaluate specific project needs and drivers
2. Conduct an in-depth evaluation of existing asset condition
assessment and determination of remaining life
3. Evaluate whether to keep and maintain the existing assets,
replace in-kind, and/or replace with new technology
4. Conduct pilot testing of preferred technology when appropriate to
validate design criteria and risk(if needed)
5. Evaluate current and possible future regulatory drivers that would
impact the project and identified solutions
6. Preliminary investigation as needed (geotechnical, survey,
permitting, environmental, etc.)
7. Prepare design alternatives based on prior information
8. Prepare capital expenditure (CapEx)for each alternative
9. Evaluate operations and maintenance (O&M)for each alternative
10.Prepare pros and cons for each alternative
11.Prepare 30-year net present value (NPV) (life cycle cost(LCC)
analysis)for each alternative
12.Present BCE to Executive Team
3
BACKG'•
BCE AT
CENTRAL SAN
• BCE conducted to date on major projects
• Comprehensive Wastewater Master Plan
• Headworks Screenings Upgrade, District Project (DP) 7327
• Solids Handling Facility Improvements, DP 7348
• Pump Station Upgrades, Phase 1, DP 8436
• Filter Plant and Clearwell Improvements - Phase 1A, DP 7361
• Influent Pump Electrical Improvements, DP 7328
• BCE on upcoming major projects
• Pump Station Upgrades, Phase 2, DP 8457
• Steam and Aeration Blower Systems Renovations, DP 7349
4
BACKGROUND
2
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BCE EXAMPLE 1 :
COMPREHENSIVE WASTEWATER
MASTER PLAN USING TBL+
igU1pLRLi{RwAnu�S ce[t05µn"RwtiivEs
°r'��a»am..We x iYLem div'�•.N.teuKs..•�t.y�rdted
pmtex Rv bxlegtul dnrkn nma�l pe Lf arnWficd Bed inwwredn[�A
�W x��tgrn+e0 amm[rd4i?'�Irelre
rers Ataifd iAiiwrvrd'Kkdxedr. �•AE anatret.e
sjea�.�w eroro wa�.aareee rw
were P'x^a m.x�r.i�.mK.re.��ww rw �'"'="ear�r�aaw�e
edd nxrntrerc Gwexwa[stwti eik kO k.iefiney av,deb[d�wt�ticnW l�AWytiw
rs.-rr�rsmm Rewee auAe�ewYn lwwesM�ule W w d
N[anWrcl3 IFASt kF•AO:cmrcrt nrt.ntN lUeg[ •wnawi
o m[gned had film rarcedaxLA�[e n:,rNadd
rt-atm retrcrymryxw wdr
i•�rc«.r ■Er�
n
u m :
rwv>v...r•�Triple Bottom Line Plus(TBL+)
EXAMPLE CENTRALSAN
BCE EXAMPLE 2: HEADWORKS
SCREENINGS UPGRADE (DP 7327)
Screen Technology Qualitative Comparison Preliminary Assessment of Convoyance Options
—RECOMMENDED RECOIdMUME❑
IMF
�wt+a lvwuh f / ! �•
rdeMemw • a� •• �. ya___..
ra tre
.v..w r !r • .. .r .. sc.�a[rE v r ..
Idp.t�nora ♦ ! J
Npm{rar. pFp�1r .. ..
Disposal Bin Comparison
Ei'n EB a 4E�E0.RE0
EXAMPLE CENTRALSAN
II�Yq �
�0.
3
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BCE EXAMPLE 3: SOLIDS HANDLING
FACILITY IMPROVEMENTS (DP 7348)
X0000000000000000000000000000
., •6 .6 y .3 .1!
�,,;;,,,���w r e r e e v e r .i v v w . r . .i v e r a .i a .i y .1 .1 •1 0
x�.��N ,� •i e e .i -, .i n .i w e e .s .i e e .i -, e e .s •. ., •. iG ,y +2 +7 .,5
>a�4M,an1.•v a e e e l i s A w i w i w w e
h,,,m.,,;•,��" n o v o n , n •, n R v o •> e v o e , n , o v v o w .x .2 .x .10
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•.per Ir'�Crth•b.N•.•.i M•w uIM1lt,,..l.
7
EXAMPLE CENTRALSAN
BCE EXAMPLE 4: PUMP STATION
UPGRADES, PHASE 2 (DP 8457)
Jvble 36.Mvl.by Pump Smriem dlrnmmes-ddvun rvges vnd Oisvdvvmvges
Mdrby Pw,p Sm n-IlrermrMe[onp.wisvnMvvtr
• • tle eryxell pnp WWlAtlOMPNNPEIER
airy Slao.n ,y xc ry ccs y • �skry x=runs x,m�_ress': RIA1p9iAipx
• nn Wed M1TIX! PII MPSTATIOH
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• �u�rve sik..wFb OW Ca] ® � .
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s . K��,��a�,���e �;�,� �,� • `lir ii+
4
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BCE EXAMPLE 5: FILTER PLANT & CLEARWELL
IMPROVEMENTS - PHASE 1A (DP 7361)
Alternative RWS-1: Alternative RWS-21 Alternative RWS-3: Alternative RWS-4: Alternative RWS-S�
..Repair Existing Upgrade Existing Install new Above Gracle Repurpose the existing
zime (.as.(:as. Forebays into R cycled "Do Nothing"
11 Clearwell Storage Tanks for Storage e'
Alternative) Water Storage Tanks
Least CapEx option Provides two active Provides newstorage an Maximizes use of existing No CapEx required at this
storage cells and designed specifically to store infrastructure time
additional operational water.Can be isolated for cleaning
flexibility and are covered.Protects the
recycledwater from dust,birds,
Pros and sunlight,maintaining water
quality.Eliminates migratory birds
congregation over the Clearwell,
which has c used a problem with
both degradation of water quality
and an increased hazard for the
art
This option would Clearwell cells have a None Requires repumping with This option would require
require implementing poorandlow Cf higher head and energy cost implementing RW5-2orRWS-
RW5-2 or RW5-3 in the efficiency factor.In order 3in thefuture-dincrease
future which would end to have redundancy,both risk offailure forthe
up increasing the total cells should be upgraded. Clearwell and reliability fthe
CARS cost for implementing Requires seismic upgrade Recycled Water Supply
this alternative by about of divider wall.Requires
construction of a 1 MG
steel storage tank for
construction sequencing
California Division of
Safety of Dams Hazard YES YES NO NO YES
Safety Required
Viable but not
recommended
Staff Recommendation Alternative Recomm
Recycled Water Storage(RWS)
9
EXAMPLE CENTRAL SAN
BCE EXAMPLE 5: NEW REW STORAGE
TANK COST COMPARISON
Use Existing
Clearwell 2-220'x 110'x 2-150'Diam. 2-150'Diam. NSA 1-230'Diam. 2-130'x 130'
(6 MG each) 15'SWD x30'H x30'H x30'H(a) x30'H
Storage Volume(MG) 12 5.4 6 6 6 6 6
Est Construction Cost $15,600,000 $13,400,000 11 $12,600,000 $17,600,000 $0 $19,100,000 $20,700,000
PW-Future Cost $5,600.00 0 $5,300.000 900 000 LO $16.500.000 LO LO
Total Li=M,V, $21,200,000 $18,700,000 13 500000 $17,600,000 $16,500,000 $19,100,000 $20,700,000
(a) In, der wall to provide two 3.0 MG chambers
:)20 9$This cost would be higher due to inflation
c) Requires anew CWPSat$9.7 M and higher lift which is more energy intensive
MillionGallonsWorth(MGpw) Recommending Alternative RWS-3
Present Worth Depth
(
Side Water Depth(SWD)
10
EXAMPLE CENTRAL SAN
5
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BCE EXAMPLE 6: INFLUENT PUMP
ELECTRICAL IMPROVEMENTS (DP 7328)
Alternative Cost Evaluation
Iselaf GeFes 5 5 5 5 5 5 5
Lariesump Pumps i3 Ss SS Ss 53 SS
New WP 2 m=m SSSSSS
sueei ornesbaMWW iiiiii $15 SSSS
I Me—d a@ b"fing suppm[
Flame
com 'ua snan5 SiSiii
nwtar enciowres i3iS5S SsSSSS SSf SSSS
FKAC modification iiiiii Siiiii iii 5355
New sm—Mrs pumps Sii iii 5
New I.e Purn
RelacaLeepump S S S 5
sucrunanaolShcer(epipinE i S iiia iii 51
moan.r
`11
EXAMPLE CENTRALSAN
RECOMMENDED BCE APPROACH FOR
FUTURE CENTRAL SAN PROJECTS
IL-tt
,-= ) I
6
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RECOMMENDED BCE APPROACH FOR
FUTURE CENTRAL SAN PROJECTS
1. Define problem: identify goals and project driver(s)
2. Determine project functional requirements and required levels
of service; assess current condition
3. Determine potential alternatives to achieve functional
requirements and levels of service
4. Conduct alternatives analysis:
a. Economic analysis (Quantitative)
b. Non-economic analysis (Qualitative)
5. Conduct pilot testing to validate recommended alternative (if
needed or applicable)
6. Review results of analysis and recommend an alternative
a. Prepare recommendations for Executive Review
b. Present recommendations to Committee
c. Present to the Board
13
RECOMMENDED APPROACH CENTRALSAN
RECOMMENDED BCE APPROACH FOR FUTURE
CENTRAL SAN PROJECTS
3c:Preferred 4c:TBL+
Alternatives Approach
3a: 4a: 4b:O&M
Potential Bb: Project Cost 4d:
Alternatives Screening Cost Sensitivity
Process Analysis
Step 1:Define Step 2: Step 3:Business
Project Drivers Comprehensive Case Step 4:BCE Analysis
&State the Condition Alternatives
Need Assessment Development
Step 5:Pilot
Testing ----
(If Applicable)
Project Proceeds to
Pre-design Step 6:
�� Recommended
Alternative
66:Present
to
Committee
6c:Present 6a:Present
to Board to Executive
Team
RECOMMENDED APPROACH CENTRALSAN
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Page 18 of 25
GOALS/EXPECTED RESULTS OF
RECOMMENDED BCE PROCESS
IMPLEMENTATION
The recommended process will:
• Standardize consideration and presentation of alternatives
analysis results across projects
• Increase transparency into the alternative selection process
• Ensure that non-cost factors are included in the alternatives
analysis when applicable
• Formalize Central San review of alternatives analyses
conducted by outside consultants
• Require consideration and documentation of alternative
selection criteria and results
AML,
GOALS CENTRALSAN
QUESTIONS?
x116
CENTRALSAN
8
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Page 19 of 25
ADDITIONAL INFORMATION
X17
PROPOSED STANDARD BCE PROCESS FLOW
Step 2-Functional Analysis
R Fff
Condition Step 4b-
Assessment Non-
-10� Economic
' Analsis
Determine
s:a
Alternatives
Key BCE Elements:
1.Define Problem:Goals and Project Driver(s)
2.Functional Requirements&Condition Assessment
3.Determine Potential Alternatives
4.Analysis of Potential Alternatives
a. Economic =
b. Non-economic
C. Summary of Cost-Benefit(C/B)Index
Analysis
5.Pilot Test as Applicable
6.Recommendations Project Proceeds to Preliminary Design
a. Present Recommendations
b. Proceed to Design RECOMMENDEDAV`18
-• I
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Page 20 of 25
STEP 1
DEFINE PROBLEM:
IDENTIFY GOALS AND PROJECT DRIVER(S)
• Why is the project required? What do we hope to achieve by
executing the project?
• What driver is generating the need?
• Aging Infrastructure
• Capacity
• Regulatory
• Sustainability
`19
RECOMMENDED APPROACH CENTRALSAN
STEP 2
DETERMINE FUNCTIONAL REQUIREMENTS
AND LEVELS OF SERVICE; CONDUCT
CONDITION ASSESSMENT
• What function needs to be addressed?
• Why is this function needed?
• What ways can we meet this need?
• What are impacts to the public?
• Levels of service typically specified in design criteria (e.g.
max/min/average flow, height, depth, power levels, etc.)
• What is current functionality?
RECOMMENDED APPROACH
10
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Page 21 of 25
STEP 3
DETERMINE POTENTIAL ALTERNATIVES
• Create an inventory of ideas that could be considered as
possible solutions
• Discard any alternatives considered to have "fatal flaws" (e.g.
negative impacts on health, safety, environment; cannot fit
within available site space; constructability/scalability issues;
length of project schedule; etc.)
• Viable alternatives summarized as follows:
• Alternative 0: "Status Quo/Maintain Existing Functionality"
• Note that"Status Quo"does not imply"No Cost".There could be
additional costs required to maintain systems with outdated
technologies, ongoing repair concerns, expensive replacement
parts, need for enhanced monitoring, etc.
• Alternative 1 —n:Additional potential scenarios/actions
`21
RECOMMENDED APPROACH
STEP 4A
ALTERNATIVES ANALYSIS:
ECONOMIC/QUANTITATIVE
• Capital Costs • Other Potential Factors
• Planning/Design • Legal Costs/Fines
• Construction • Inflation
• Equipment • Financing Costs
• Disposal Costs • Other Factors
• O&M Costs (Existing and
New)
• Labor
• Supplies and Materials
• Utilities
• Overhead
• Costs determined on a 30-year NPV basis )zz
RECOMMENDED APPROACH
11
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Page 22 of 25
STEP 4A/B
EXAMPLE OF ECONOMIC/QUANTITATIVE
ANALYSIS
30-year NPV results:
■ '
Capital Cost $1,895,000 $2,600,000
O&M Cost $33,100,000 $33,250,000
Other Cost $250,000 $300,000
• I 1 $35,245,0001 1 $36,150,000
23
RECOMMENDED APPROACH CENTRALSAN
STEP 4C
ALTERNATIVES ANALYSIS
NON-ECONOMIC/QUALITATIVE FOR TBL+
Criteria can include:
• Current/Future Technological Compatibility
• Environmental/Health Impacts
• Spills/overflows and related cleanup costs
• Service disruption
• Social Impacts ("Community Costs")
• Inconvenience due to traffic and other disruptions
• Sensory impacts (noise, odor, visual, disturbed property)
• Reputational issues, including loss of goodwill
• Social justice
M 24
RECOMMENDED APPROACH
12
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Page 23 of 25
STEP 4D
REVIEW RESULTS OF ANALYSIS
• Each alternative is normalized for comparison using a weighted
cost-benefit index, as used by the U.S.Army (U.S.Army Cost
Benefit Analysis Guide)
• Staff assesses each alternative and makes a recommendation
for each:
• Recommended
• Viable but not recommended
• Not viable/Not recommended
25
RECOMMENDED APPROACH
STEP 4D
DEVELOPING A NORMALIZED SCORE
FOR EACH NON-ECONOMIC FACTOR
How important the
criteria is to the project
Normalized (weight)
Score X
The alternative's score
at meeting the criteria
(score)
26
RECOMMENDED APPROACH
13
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Page 24 of 25
STEP 4
EXAMPLE OF OVERALL ANALYSIS
Total Cost Preferable to have:
=Cost-Benefit Index . Lower cost
Benefit Score . Higher benefit
Total Cost $35,245,000 $36,150,000
Benefit Score 0.69 0.76
`27
RECOMMENDED APPROACH
STEP 4
EXAMPLE OF OVERALL ANALYSIS
Lower cost-benefit index=preferred alternative
0.8 $53,000,000
0.7 Cost-gerye ft/n $51,000,000
dex
0.5 $49,000,000
$47,000,000
ro 0.5
$45,000,000 w
0.4 c
c $43,000,000 m
a
m 0.3 Alternative $41,000,000 0
Benefit Scores
0.2
$39,000,000
0.1 $37,000,000
0.0 $35,000,000
Alternative 1 Alternative 2
—Criteria 1 —Criteria 2 Criteria 3 —Criteria 4 —Criteria 5 tCost-Benefit Index
28
RECOMMENDED APPROACH
14
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Page 25 of 25
STEP 5
CONDUCT PILOT TESTING IF APPLICABLE
• Staff to conduct a pilot test to validate design assumptions or
proof of concept or determine design criteria for the proposed
alternative ahead of starting the design.
• Example of pilot tests that have been conducted at Central San
over the past five years include:
• Centrifuges:Andritz and GEA
• Solids Screenings: Huber
• Zeolite Anammox
• Furnace scrubber pilot with EnviroCare
• Filter Column testing
• Hydrothermal Processing of Wastewater Solids (HYPOWERS)with
Water Research Foundation and Department of Energy
29
RECOMMENDED '•'
STEP 6
PREPARE AND PRESENT
RECOMMENDATIONS
• Staff recommendation reviewed by Executive Team; preferred
project selected from among the alternatives reviewed or
returned for additional analysis
• Selected project presented to relevant Committee for
recommendation to Board
• Recommended project presented to Board for action/approval
RECOMMENDED
'•
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