Printer-friendlyEmail to friend

The following article is presented by Great Lakes RCAP, the Great Lakes region's affiliate of the Rural Community Assistance Partnership. Great Lakes RCAP serves the states of Illinois, Indiana, Ohio, Kentucky, West Virginia, Michigan and Wisconsin.

Designing a Project: The Owner’s Role

Kristin Woodall, Great Lakes RCAP; based upon “Project Development - Design” coursework developed by Kurtis Strickland, Ohio RCAP

An engineer has been hired. The Preliminary Engineering Report is complete. A project schedule is in place. The planning for your project is done. What’s the next step in moving a project forward? The answer is Design.

Design is one of the three major phases involved in project development. Project design follows the planning phase and is implemented before the construction phase. A water or wastewater project is a big undertaking for communities. It is critical that the community continues to be aware of its responsibilities throughout the entire project.

As the owner of the project, it is your job to ensure that the design of the project meets your needs, is affordable to your customers, involves infrastructure that you can successfully operate and maintain, and is intended to exceed its useful life.

Before beginning the design, 10 important questions need to be asked:

1. Do we have financing approved to pay for engineering design?
2. Is there construction financing available to pay for the system we’re designing, or do we have a financing plan?
3. Have we coordinated with funding agencies to make sure our financing plan and grant expectations are realistic?
4. Can we afford what is being designed?
5. Will the state EPA approve and permit what is being designed?
6. Is there more growth or capacity being included in the design than funding agencies will allow?
7. Can we operate and maintain what is being designed?
8. Does the public understand what will be designed and why?
9. Is the land that needs to be acquired for the infrastructure available and affordable?
10. Can the system be constructed within the required time period?

Often times owners will need to acquire financing for the costs to design the project. To obtain the financing necessary the owner will need to have a sufficient revenue stream to pay back the loan. For existing systems current revenue needs to be adequate or an increase in user rates needs to be implemented to ensure adequate repayment. For new systems, a user charge system needs to be implemented or sponsorship from the county can be obtained.

Regardless of the source, it is important to note that there is a certain amount of risk when incurring costs for design without a clear commitment of funds for construction. However, this risk can be minimized by making sure that you have done all of your homework and questions (note the 10 questions above) have been answered to your satisfaction.

Community input during design is inherent in making sure that the design meets the community’s needs and abilities. It is also important to explain the need to implement user rates to the public as early as possible. This will help prevent unpleasant surprises that could delay the project.  The available financing for design projects varies from state to state. All resources need to be researched to determine the funding source terms and requirements to see which is the best option for your community needs.

Monitoring the engineer’s work, conducting periodic design review meetings and public meetings are the responsibility of the owner. The engineer’s cost estimate should be continually monitored to ensure the infrastructure is within the budget at the end of the design period. Review meetings should be held at 30, 60, and 90% completion levels. If you have an existing system, your operator should be utilized for technical opinions and knowledge. The owner of a start up system needs to involve the state’s primacy agency for technical expertise and guidance.

At the same time that design is taking place, the construction financing plan should be worked on. Often times water and wastewater projects are very costly and one funding source is not enough. It is typical for projects to be financed by a variety of federal and state agencies that have different fiscal years, accept applications at different times of the year, and make funds available for construction at different times as well.

Therefore, timing becomes a critical issue in funding your project and preparing for construction, and is something you will need to think through before beginning the application process. It is helpful to consult with RCAP or other organizations knowledgeable of financing sources in order to decide which funding program or programs best fit your project type. Once the design is complete, it is important to make any final adjustments in your financing strategy, which includes updating your sources and uses of funds (estimated project cost, itemized operation/maintenance costs, expected financing sources, loan terms and interest rates, annual debt payments, and average user costs).

Once the design is substantially completed the engineer will submit the permit-to-install application to your primacy agency, who charges a fee (typically estimated at .0065), which is a percentage of the total estimated project cost. The owner is responsible for this fee, which needs to be included within the total project cost to be financed. Review of the permit takes approximately 3-6 months. The primacy agency will typically have comments and may require changes. You need to make sure that your engineer consults you before making any recommended changes by the primacy agency to your plans and specifications.

After the design is complete and a construction financing plan is developed, the owner needs to hold a public meeting. The meeting’s agenda needs to include the following:

• Project Design – the engineer needs to attend, explain, and answer questions related to the capacity, operation and maintenance requirements, location of infrastructure, and how the project resolves the water or wastewater problem.
• Land acquisition, user agreements, and required easements – the owner needs to discuss and be prepared to answer questions related to these items (more detail will be provided on these items in our part 2 of our Design series within the next RCAP Connections newsletter).
• Project financing and customer costs – the owner should discuss the sources and uses of funds and be prepared to answer questions about project costs, financing, customer costs (i.e. hookup fees, assessments, and estimated user rate impact).
• Project schedule – the owner needs to provide an estimated schedule on when the project is expected to be completed, when financing is expected to be approved, when the project will be advertised to bid, when contracts will be signed, when construction will begin and end, and when customer connections will occur.

As the design progresses, the owner’s responsibilities continue.

Often times, the project will involve land acquisition by the owner for infrastructure such as pump stations, booster stations, treatment plants, or permanent easements for lines. For most water and sewer projects, land acquisition is considered an “involuntary acquisition” even if you have a willing seller. This is because local governments have the power of eminent domain, which allows you to take the property if necessary.

Certain procedures need to be adhered to when purchasing land for a project, even if you have a willing seller. The owner may want to require legal services at this time.

Certain federal funding sources require that owners follow the Uniform Relocation Act (URA) when acquiring land and permanent easements. The URA stipulates how land can be acquired, what steps must be taken, and how land value is determined. 

Since you may be unsure which funding sources you intend to use at the time that land is being acquired or optioned, it is best to follow the procedures set out by the Act anytime you need to acquire property. It is important that the owner notify property owners prior to the time the actual land acquisition will occur and inform them of their rights under the URA, so the property owners are not surprised at this time.

The U.S. Department of Housing and Urban Development has published a handbook for the Act, which can be found at the following link:
http://www.hud.gov/offices/cpd/library/relocation/policyandguidance/handbook1378.cfm
 
As with land acquisition, homeowners need to be made aware of their rights under the URA regarding easements too. Owners should not delay in obtaining and recording necessary easements. Delays can cause future problems (i.e. construction delay and additional change orders).

The owner must use the easement form for the agency that is involved with financing the project. Some agencies don’t stipulate what easement form must be used, but others, such as USDA Rural Development, require that their easement form be used when they are involved with financing the project. The owner may require legal services at this time, but it is not always necessary. When it comes time (all easements need to be obtained well in advance of construction) for the owner to visit or meet with property owners to acquire easements, it should not be a surprise to property owners because they were informed of the need for easements during the public meeting that was held earlier regarding the project.

For projects involving utility lines, the owner should develop a right-of-way map and certify that all rights-of-way and land needed for the project have been obtained. This is more important for utility line projects, because lack of proper rights-of-way could lead to relocation of utility lines during construction and therefore project delays.  Not all funders require rights-of-ways to be mapped, but it is a good idea to ensure that these are secured prior to the start of construction.

User agreements are often required for utility projects because financing agencies often require assurance that a certain number of customers will connect when the service is provided so that debt repayment is assured.  This is particularly true for water systems, since connection is voluntary.  The owner should consult with the financing agency to determine if a user agreement is required. 

For new water systems, or existing water systems extending service to new users, having user agreements in place is just good business, even if not required by the funder.  The user agreement asks for a down payment from the prospective customer and shows their intent to connect to the system.  They are legally binding documents, and can protect you from making costly investments in infrastructure without having sufficient customers to be cost effective and allow debt repayment.

Sewer connection can be mandated if a sewer line is installed within 200 feet of a property; however, if some of your prospective users are outside your jurisdictional boundaries, it is important to discuss this mandatory hookup with your county governing body and the county health department, as they will need to enforce the provision. 
Permits are required for railroad crossings, stream crossings, wetland crossings, highway crossings, structures, electric, plumbing, etc. It is the responsibility of the owner to acquire all necessary permits for a water or sewer project.  The owner should consult with their engineer and make sure that permit acquisition is included in their scope of services.

Once all necessary acquisitions, easements, and permits are obtained, the community can then move forward and bid the project. Each state has specific laws that need to be adhered to when bidding a public project.

Typically, the owner includes the preparation of the bid packet and addendums (i.e. federal form updates, specification changes, etc.) as part of the engineer’s role. However, the owner needs to work with the engineer to ensure that all funder requirements (i.e. federal prevailing wages and necessary forms) are included within the packet.

Included in the bid document must be proper bonding requirements for each contractor. Each contractor must be bonded to a certain identified amount.  This requirement protects the owner in the event that the selected contractor declares bankruptcy or performs improper work.  The bonding company basically backs up the contractor’s word that the company will complete the work in the contract.

Once the bid packet is prepared an advertisement notifying potential bidders that the project is being bid is placed. The advertisement dates must follow the state regulations. While the engineer normally prepares the advertisement, the owner normally pays for the publishing cost. The advertisement notifies potential bidders about the project details and sets a deadline on when bids are to be received and a date and time on when they will be opened, which normally takes place at the owner’s office.

At the bid opening, the engineer typically opens each sealed bid and reads aloud the quote provided to conduct the work. This information is tabulated on a sheet and the bids are then taken by the engineer for review to ensure they were properly completed. The low bidder is recognized and the bid tabulation is sent to the owner and funding agencies. Contractor references need checked prior to award of the contract.

Once the bids are tabulated, the project engineer prepares a notice of award that is signed by the owner and reviewed by the owner’s attorney.  The notice of award is then sent to the contractor who submitted the low bid. 

It is important for the owner not to
issue notice of award prior to all funding being approved and environmental reports being completed for the project.  Issuance of the notice of award prematurely could result in the owner losing certain grants for the project.  The notice of award must be issued before the contractor’s bid period ends. If possible, it is best to wait until approval from all funding sources is obtained before advertising the bids.

Immediately preceding construction, the owner holds a preconstruction meeting, which is normally facilitated by the engineer. Items discussed at the pre-construction meeting include the responsibilities of the owner, contractor, engineer, resident project representative, and financing agencies.  It is also very important to have representatives from any utility company who has infrastructure in the project area to attend the meeting so that coordination with utilities can begin.