The Los Angeles Department of Water and Power is about violated the MOU agreement with the by giving away millions dollars of rate payers funds without any notification to us. Luckily, the Daily News is covering this while the LA Times remains... silent.
DWP crews costly choice
But in-house teams a 'must'
BY KERRY CAVANAUGH, Staff Writer
LA Daily News
Article Last Updated:04/16/2007 10:44:56 PM PDT
The cost of upgrading Los Angeles' aging water system soared by tens of millions of dollars after some of the work was shifted from private contractors to DWP construction crews, the Daily News has learned.
A review by the Department of Water and Power found that using union crews to install trunk lines roughly doubled both the cost and the length of time it would have taken private workers to complete the project.
In one example cited, a private contractor bid $6.2 million to install a 42-inch pipeline beneath Burbank Boulevard and White Oak Avenue, a project estimated to take 250 days. When the union objected, the project was turned over to DWP crews, who completed the work in 439 days at a cost of $13.8 million.
"Experience indicates that contractors can complete trunk-line projects on a substantially shorter time period than in-house forces," Water System Chief Operating Officer James McDaniel wrote in a memo to General Manager Ronald Deaton.
"This is important both to completing these important water quality improvement/security related projects and minimizing disruption to communities."
Despite the cost overruns - and complaints from some employees about waste and inefficiency - the Board of Water and Power Commissioners is poised today to approve hiring a 20-member crew for a third trunk-line project.
It's actually part of a compromise with the International Brotherhood of Electrical Workers, Local 18 - the politically powerful union that represents most of the DWP employees and has challenged the utility's effort to hire private contractors for trunk-line work.
As part of the settlement, the DWP will hire a third, 20-person trunk-line crew, and the IBEW has agreed not to challenge private contracts for 13 upcoming trunk-line projects.
"The settlement agreement clears way for the department to enter into a number of contracts for essential trunk-line construction work," board President David Nahai said. "At the same time, we have to remember that we need to have in-house capability, as well.
"At the end of the day you can't just continue contracting out."
Can't win everything
The 13 future projects will cost ratepayers an estimated $737 million, officials said, but could have cost as much as $1.3 billion had DWP employees done the work.
"Am I totally happy? No! However, it's a great beginning to correct a totally unacceptable situation," said DWP Commissioner Nick Patsaouras.
"It's good for ratepayers. (We) cannot win everything off the bat. It takes time to correct ingrained problems in a bureaucracy."
Local 18 representatives did not return calls Monday.
But the union has previously challenged the DWP's cost comparisons, saying they grossly overstate the expense of work done by IBEW crews.
And IBEW leaders have also criticized the DWP board for hiring private contractors for maintenance and emergency work.
Older than 1940
The DWP maintains more than 280 miles of trunk lines and 7,200 main lines that transport water to 670,000 homes, apartments and businesses in Los Angeles. About half of the trunk lines - massive pipes that carry water to the smaller main lines - were built before 1940.
Last year, Mayor Antonio Villaraigosa and the City Council raised water rates 5.5 percent over a two-year period. The increased revenue is supposed to cover costs for some of the infrastructure improvements.
But the utility hasn't initiated any trunk-line projects since 2004 because of the stalemate with the IBEW over who would do the work.
"The board is in the process of reviewing the issue," said Parita Shah, a spokeswoman for the mayor. "And while we do not want to prejudice its decision, we have requested the board and department ensure that the department has adequate internal capacity to provide reliable water service to Angelenos."
The DWP used to hire private contractors for major pipeline projects, but its construction budget was slashed in 1999 as the agency prepared for energy deregulation. The union then asked that its DWP members be allowed to install water pipelines instead.
The department instructed two teams, called Integrated Support Services crews, to install the Roscoe Boulevard trunk line and a recycled-water pipeline in the Harbor area.
But the price tag was two to three times higher than it would have been for an outside contractor to do the work, and inspectors said the quality wasn't as good.
In early 2000, utility employees raised concerns about the high cost of using Integrated Support Services crews.
An internal e-mail sent in March 2000 said private contractors are specialists in pipeline construction and have a financial incentive to finish faster so they can move to the next contract.
"A contractor is much more motivated and skilled in keeping costs down (than is) a group of civil servants," the memo said.
Union can challenge
In 2002, an audit by the Barrington-Wellesley Group found that the DWP was paying more for trunk-line construction using its own crews and recommended forming a committee of water-division managers and the IBEW to compare costs.
A staff report showed that DWP crews cost 161 percent to 221 percent more than if outside contractors had handled the job. They also noted that the DWP had assigned 31 employees to install the Parthenia trunk line while a contractor had just 13 working on the Hollywood-Stone Canyon trunk line.
Since 2003, the IBEW has pushed for a third trunk-line crew to handle the work. Under its contract, the IBEW can challenge contracts of any outside work that could be done by DWP employees.
In 2004, DWP managers and the union discussed a compromise that would permit outside contracts for trunk-line projects with some perks for the union - such as granting "substantial" overtime, records show.
Still, there was no agreement. Efforts to move forward on new trunk-line projects stalled, and staffers warned that delays were threatening the city's ability to meet water-quality deadlines.
The city must remove or cover all open reservoirs, and part of that work will include major construction projects such as building tanks and large pipelines.
That's why DWP board members are eager to settle the labor stalemate.
"This provides an opportunity to move ahead aggressively without objections to essential contracts," Nahai said.
Nahai said the decision was a reasonable response to valid union concerns about the need for more in-house staffers.
"We see it at every turn with power outages, with the problems last summer (with the heat wave), that you have to have in-house capabilities with emergency and maintenance issues," Nahai said.
Projected trunk line costs
Project, Private contractor, DWP
Burbank/White Oak, $6.2 million, $13.8 million
Magnolia, $19.5 million, $34.3 million
Parthenia, $37.6 million, $67.1 million