To: Honorable Mayor and Members of Town Council
From: Mark Marlowe, P.E., Director of Castle Rock Water
Title
Update: Change Order to Contract with Layne Christensen Company
Body
________________________________________________________________________________
Executive Summary
The purpose of this memo is to update Town Council on a change order to the services agreement with Layne Christensen Company (Layne) for the construction of two new Denver Basin wells that will supply water to the Founders Water Treatment Plant, Resolution 2017-006. This is a follow up to previous updates provided to Council on September 19 and October 17, 2017. This is an important piece of an overall project to increase water supply from the Founders Treatment Plant.
During the drilling of the Arapahoe Aquifer Well, Layne lost circulation of drilling fluids (“drilling mud”) five times. After the fifth lost circulation event it was decided to abandon a portion of the bottom of the pilot hole and complete the well as a Denver Aquifer Well. Additional services were completed during the lost circulation events that were outside of the contract, but were needed to save the well. Lost circulation was attributed to unforeseen conditions and the contract allows for additional compensation if unforeseen conditions cause additional expenses to be incurred. Two independent water well experts reviewed the data collected during drilling and each arrived at the same conclusion independently: the contractor did not deviate from the contract requirements and the lost circulation was attributed to unforeseen conditions. This is an inherent risk in drilling any well as we cannot see exactly what lies below ground.
The original contract amount is $1,740,384 and a ten percent contingency also was authorized for a total drilling project budget of $1,914,422. The additional costs due to unforeseen conditions amount to $396,375.60. One change order was previously issued in the amount of $10,489.50 for additional sound barrier to mitigate noise to the surrounding community, leaving $163,548.50 in contingency. There will be an additional cost of $14,020 associated with equipping the well and the pitless adapter changing from 10-inches to 12-inches. Because of the unforeseen conditions, CR Water will revise the drilling specifications and re-bid the drilling of the second well. By removing the drilling of the Arapahoe well from the scope and budget coupled with the additional expenses due to unforeseen conditions, the new total project cost is $1,619,720.10, so no additional authorization is needed at this time. The change order form documenting the changes to the contract with Layne is attached as Attachment A and a copy of Resolution 2017-006 is included as Attachment B.
The cost for this well project is being fronted by the Town, but Dominion Water and Sanitation District (Dominion) will reimburse the Town for 100 percent of the project costs. Council approved the Water Service Intergovernmental Agreement (IGA) with Dominion Water and Sanitation District (Dominion) on September 20, 2016 for shared use of infrastructure. As part of the Water Service IGA, Dominion will be paying the Town for all costs associated with the design and construction of the Founders Well Facility infrastructure and conversion of two existing wells at the Ray Waterman Regional Water Treatment Center to ASR (aquifer storage and recovery) as part of the Infrastructure Fee. The initial payment Dominion will make to the Town is $3 million. If costs for the infrastructure exceed $3 million, Dominion will pay the excess. Costs under $3 million for the overall project will result in a refund. The costs for this work have been reviewed with Dominion and they are comfortable with them.
History of Past Town Council, Boards & Commissions, or Other Discussions
On October 25, 2017, the Castle Rock Water Commission recommended to present this change order to Town Council.
On September 19, 2017, Council unanimously approved Resolution No. 2017-07, an agreement with T. Lowell Construction, Inc. for the construction of the Founders Well Facility Infrastructure Project.
On January 3, 2017, Council unanimously approved Resolution No. 2017-006, an agreement with Layne Christensen Company for the Construction of the Founders Wells CR-226 and CR-227 for total project cost $1,914,422.
On December 7, 2016, the Castle Rock Water Commission (formerly known as Utilities Commission) unanimously approved to take the construction services contract for the Founders Wells CR-226 and CR-227 to Town Council for approval.
Discussion
Based on the Water Resources Supply Demand Model, the high population growth trend in Castle Rock, the last two summer water demand seasons, and our recent intergovernmental agreement with Dominion, additional water supply is needed to keep pace with increased water demands.
During the construction of the Arapahoe Aquifer well with a target depth of 2,400 feet, Layne experienced five separate lost circulation events. The lost circulations events were deemed to be caused by unforeseen conditions. While unforeseen conditions are uncommon, they can happen in the Denver Basin Aquifers. Unforeseen conditions are defined as “…any subsurface or latent physical conditions at the site or in any existing structure differing materially from those indicated or referred to in the Contract Documents.” On June 1, 2017, Layne notified Castle Rock Water staff that they believed they were experiencing unforeseen conditions and recommended abandoning a portion of the pilot hole and completing the Denver Aquifer well with a target depth of 1,860 feet. Because time was of the essence, the well was completed in the Denver Aquifer using the material onsite that was intended for the Arapahoe Aquifer well. This meant that the Denver Aquifer well would be a larger diameter well than originally designed resulting in slightly more costs than originally planned. Layne successfully completed the Denver Aquifer well in this borehole, but there were significant additional costs. The contract provided a detailed change order.
Castle Rock Water staff completed a detailed review of information provided concerning the change order request by Layne. The change order request and the backup information is included as Attachment A. Staff reviewed the following information provided by Layne:
1. Receipts for hard rock drilling for surface casing.
2. Documentation for water watching for Nuclear Magnetic Resonance logging. The subcontractor was not readily available and crew needed to insure that the borehole was not losing drilling fluid.
3. Wireline services receipts for stuck drill pipe.
4. Documentation concerning labor, equipment, and fuel during lost circulation events.
5. Receipts for materials used during lost circulation events.
6. Cost calculations for additional pilot hole drilled.
7. Receipts for bentonite and cement seals required for abandoning the lower portion of the pilot hole.
8. Cost calculations for additional mechanical development of the Denver well.
9. Receipts for additional fluid disposal associated with the lost circulation events.
10. Receipts for extended monthly rental of the sound walls.
11. Documentation of steel casing price escalation. The suppliers cost increased.
12. Cost calculations in materials for 10-inches to 12-inches well completion.
13. Cost calculations to purchase remaining 12-inches stainless steel screen casing onsite.
14. Third party review comments and recommendations.
Staff concluded during the initial part of the review that an independent third party review was needed to help determine the cause of lost circulation and determine an appropriate cost sharing. Layne and Castle Rock Water agreed upon two respected parties: Marvin Glotfelty with Clear Creek Associates and Gary Simpson with N and S Services. Both third party reviewers indicated that unforeseen conditions did exist and helped with identifying the appropriate and fair cost sharing. Layne and CR Water further agreed to split the costs for these two consultants. The total cost for third party review was $6,268.
Layne’s original change order request was for $618,826.53. Through the detailed review, Castle Rock staff were able to reduce the change order to $396,375.60, a difference of $231,366.90. The following table shows the breakdown of the above items and final change order costs.
|
Part |
Item |
Subtotal |
|
1 |
Hard Rock Drilling |
$15,160.00 |
|
2 |
NMR Logging |
$0.00 |
|
3 |
Wireline Services |
$0.00 |
|
4 |
Lost Circulation Labor, Equipment, and Fuel |
$109,064.78 |
|
5 |
Lost Circulation Materials |
$58,868.25 |
|
6 |
Additional Pilot Hole Footage |
$26,000.00 |
|
7 |
Borehole Abandonment |
$16,768.57 |
|
8 |
Additional Mechanical Development |
$5,344.00 |
|
9 |
Additional Fluids Disposal |
$89,334.00 |
|
10 |
Additional Monthly Sound Wall Rental |
$19,656.00 |
|
11 |
Steel Casing Escalation |
$0.00 |
|
12 |
10” to 12” Well Adjustment |
$36,774.00 |
|
13 |
12” Stainless Steel Wire Wrap Screen Onsite |
$22,540.00 |
|
14 |
3rd Party Review |
-$3,134.00 |
|
TOTAL |
$396,375.60 |
Because of the unforeseen conditions issue, CR Water will revise the drilling specifications to include a loss circulation clause, modifications to the well design, and incorporation of newer technologies. A new contract will be brought back to Council for approval once bids are received, which is expected in early 2018.
Budget Impact
The net impact to the project budget with this change order is a reduction in costs of $120,663.90.
The engineering estimate to drill the Arapahoe well with the revised contract approach is $625,000. Ultimately, this means the total project costs are likely to exceed the original contract amount and approved contingency by at least $330,298.10. Depending on bids, staff will bring a new contract to Council for consideration and identify the total additional funding required to complete the project.
Attachments
Attachment A: Change Order
Attachment B: Resolution 2017-006