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HOW JEA SAVED MILLIONS ON A HIGH VOLUME PIPE BURSTING CONTRACT

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Following an EPA Administrative Order issued in 1996, JEA committed to spend 200 million for sewer repair projects in the city of Jacksonville. After comparing the performance and costs of repair techniques, pipe bursting was chosen as the preferred method.

As JEA began to bid the projects, it encountered unexpectedly high costs. Opening the bids to local competition did not lower the costs. Consequently, JEA began an investigation into ways to reduce the costs.

Specific tasks were assigned to JEA employees and to independent consultants. Black & Veatch was tasked with analyzing the potential for savings associated with a long-term/high volume contract.

Black & Veatch compared the costs of a short-term low volume (average of 17,000 feet of pipe) contract with those of a one-year contract, involving 200,000 feet of pipe. Potential sources of savings that were analyzed included administrative costs, travel/per diem expenses, materials, mobilization, and profit. An expected savings up to 18.5% was calculated, with more potential savings hidden in contractors profits. Based on the information provided by Black & Veatch, JEA developed a Pipe Bursting Business Plan which was used to estimate the actual costs to a pipe bursting contractor. The results of these combined efforts indicated that the current pricing was too high.

As part of preparation of the bid, JEA conducted a nationwide survey of pipe bursting contractors to determine their levels of experience and bonding capabilities. JEA decided to allow bids by joint ventures to increase the number of qualified bidders.

JEA then developed a bid package for bursting 150,000 feet of pipe per year for five years with one five-year renewable option. To help control the pricing, JEA fixed the price for items such as sidewalks, pavements, and curb and gutter replacement at an average cost based on previous bids. Then, by applying the estimated costs from the Business Plan, JEA inserted target prices for critical items, such as pipe bursting and service connections. Finally, it established a maximum total price of 16 million, which was slightly higher than the target price, to allow for flexibility.

Bids were opened on September 14, 2000. Two bids were received, both of which were below the maximum price. The winning bid was submitted by a joint venture between the two largest pipe-bursting contractors in the country. Their bid was approximately 109 per foot (all costs included) compared with an average cost of 137 per foot on previous projects, for a savings of 28 per foot, or 20.4 percent. For a 150,000 foot contract, this amounts to a savings of 4.2 million per year, not including savings in administrative costs. JEA considers the results to be very favorable.

The production goal for the contract has since been increased to 90 miles for the first year and 120 miles for the next four years, for a total potential savings in five years of 84.3 million.
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Document Type: Research Article

Publication date: 2001-01-01

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