Inflation and mitigation commitments affect Brightwater cost trend

Rising inflation, higher global commodities prices and mitigation commitments have prompted King County's Wastewater Treatment Division to revise cost trends for the Brightwater wastewater treatment system project.

Though the numbers are still preliminary, the December 2005 cost trend for the Brightwater project is now at $1.62 billion, up $138 million, or 9.3 percent, from the 2004 estimate of $1.48 billion. More definitive numbers are expected after most major construction contract bids are received in 2006.

"Brightwater is a long-term investment in regional infrastructure that will serve our growing population, allow economic growth, and protect public health and the environment for decades to come," said Don Theiler, director of King County's Wastewater Treatment Division.

"It is undoubtedly the most complex major capital project we have undertaken since West Point and South Plant were built in the 1960s. With a project of this magnitude, many factors can affect cost trends."

According to Construction Cost Index figures, high inflation rates over the past two years have had a ripple effect on commodities prices, labor costs, and construction market conditions, affecting major construction projects in the U.S. and abroad. Construction commodity prices and inflation were largely driven by a construction boom in China, the conflict in Iraq, higher crude oil prices and hurricane damage in the southeastern United States.

On the Brightwater project, inflation has accounted for $61 million, or 45 percent, of the overall cost trend increase.

The county's mitigation obligations also affected the cost trend. King County earmarked an additional $50.5 million over the original $88 million mitigation budget. This increase was largely the result of a mitigation agreement made late last year with Snohomish County.

Investments in mitigation helped settle litigation, enabling King County to obtain permits needed to start Brightwater construction in 2006 and avoid costly project delays, missed construction seasons, and additional inflation costs down the road.

Other factors affecting the Brightwater cost trend include treatment plant design refinements and increases to sales tax and allied costs.

"King County's Wastewater Treatment Division remains committed to ensuring that ratepayers get the best return for their investment in our programs and services," Theiler said.

"Over the past three years, division staff has worked to offset cost increases during a period of extraordinarily high inflation. Value engineering reviews and design refinements have saved more than $190 million on Brightwater project costs."

Additionally, the division will continue to work closely with an independent oversight management consultant hired by the King County Council to monitor the Brightwater project scope, schedule, and budget.

Theiler also pointed to the division's Productivity Initiative, an innovative program that incorporates private sector business practices into public project delivery. The Productivity Initiative program encourages increased accountability and efficiency, and a more collaborative working environment between labor and management. The initiative and other practices have saved sewer ratepayers more than $25 million over the last five years.

The county is continuing to assess over the next few months how the updated cost trend may affect sewer rates.
King County's Wastewater Treatment Division protects public health and water quality by serving 17 cities, 17 local sewer utilities and more than 1.4 million residents in King, Snohomish and Pierce counties. Formerly called Metro, the regional clean-water agency now operated by King County has been preventing water pollution for 40 years.