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SR 01-23-2018 3C City Council Report City Council Meeting: January 23, 2018 Agenda Item: 3.C 1 of 9 To: Mayor and City Council From: Susan Cline, Director, Public Works, Civil Engineering Subject: Award Construction Contracts for Water Infrastructure Reliability Improvement Project Recommended Action Staff recommends that the City Council: 1. Award Bid #SP2429 to Sully-Miller Contracting Company, a California-based company, for construction services for the Water Infrastructure Reliability Improvement Project, an Environmental Protection Agency (EPA) grant-funded project (Grant No. XP-00T79601 and XP-96945401); 2. Authorize the City Manager to negotiate and execute a contract with Sully-Miller Contracting Company in an amount not to exceed $2,785,300 (including a 15% contingency); 3. Award RFP #2429 to Willdan Engineering, a California-based company, for construction management and inspection services; 4. Authorize the City Manager to negotiate and execute an agreement with Willdan Engineering in an amount not to exceed $219,791 (including a 10% contingency); 5. Authorize the Director of Public Works to issue any necessary change orders to complete additional work within contract authority. Executive Summary To maintain safe and reliable water delivery to Santa Monica homes and businesses, the Water Division routinely replaces the oldest water mains that are nearing the end of their useful lives. The Water Infrastructure Reliability Improvement Project would replace approximately 4,755 linear feet of water distribution pipelines on Ocean Park Boulevard, 17th Street, Ocean Avenue, Ashland Avenue and Grant Street. Staff identified the pipelines for replacement from a long-term replacement and maintenance plan based on service records, condition, capacity demands, and age. On October 26, 2017, the City issued a Notice Inviting Bids for construction services. Staff recommends Sully-Miller Contracting Company as the best bidder for the Water Infrastructure Reliability Improvement Project for an amount not to exceed $2,785,300 2 of 9 (including a 15% contingency). Additionally, on November 2, 2017, the City issued a Request for Proposals for construction management and inspection services for this project. Staff recommends Willdan Engineering to provide construction management and inspection services for this project in an amount not to exceed $219,791 (including a 10% contingency). Background In 2006, the U.S. Environmental Protection Agency (EPA) awarded a $529,900 reimbursable grant (Grant Number XP-96945401) to the City of Santa Monica, with $460,700 in matching City funds for a total of $990,600. On September 12, 2006, the City Council accepted the grant funds (Grant Number XP- 96945401) from the EPA for the Santa Monica Water Infrastructure Reliability Improvement Project (Attachment A). In January 2012, the EPA awarded another grant to the City for the Santa Monica Wat er Infrastructure Reliability Improvement Project (Grant Number XP-00T79601) which included $848,000 in reimbursable grant funding and $693,818 in local match funds for a total of $1,541,818 On June 14, 2016, the City accepted the grant funds (Grant Number XP-00T79601) for the Santa Monica Water Infrastructure Reliability Improvement Project (Attachment B) and awarded a Professional Services Agreement to Cannon Corporation to provide engineering design services, develop construction documents and provide engineering support during the construction phase of the Water Infrastructure Reliability Improvement Project. The remaining balance of these grants in the amount of $965,803 will be used to offset some of the $3,005,091 in project costs. The table below summarizes the grant funds, local matches and the expenditures for each. Grant Amount Local Match Amount Balance Grant No. XP-96945401 $529,900 $460,700 $990,600 Expenditure ($412,097) ($348,677) ($760,774) 3 of 9 Grant No. XP-00T79601 $848,000 $693,818 $1,541,818 Expenditure ($0) ($0) ($0) Remaining Balance $965,803 $805,841 $1,771,644 To date, the City has spent $348,677 of the $460,700 local match funds and $412,097 of the $529,900 Grant Fund Number XP-96945401. The remaining balances of the grant funds and local match funds for this grant are $117,803 and $112,023, respectively, and both of these balances were rolled over to fund the Water Infrastructure Reliability Project. Both grants were made pursuant to the Federal Water Resources Development Act and titled Water Infrastructure – Santa Monica Reliability Improvement Project. Initially, the project comprised both a potable and recycled reservoir. Discussion The City operates and maintains a 205-mile (1,082,400 linear feet) network of water distribution mains with pipeline sizes ranging from 6 to 36 inches. The City’s water system serves over 93,000 residential and business customers, providing approximately 12 million gallons of water per day. The water distribution system consists of transmission main lines, distribution main lines, service laterals, water meters, valves, and fire hydrants. Over time , the useful life of all these components diminish due to aging, soil conditions, and corrosion buildups. To ensure the continuous delivery of an adequate, high quality and reliable supply of water to customers, the City takes a proactive approach in identifying and replacing pipelines that are approaching the end of their useful lives. In 2011, the Water Resources Division developed the Five-Year Capital Improvement Program Business Case Evaluations Study Report to identify and prioritize the replacement of aged cast iron water mains (Attachment C). The study focused on the oldest cast iron pipe installations built prior to the 1970s. The study provides the estimated cost and 4 of 9 likelihood of potential water main breaks while making recommendations to replace and upgrade the aged water mains throughout the city. In July 2017, the City hired JD7 Technologies to conduct a video inspection an d pipeline condition assessment for potable water mains while in service and under full pressure. JD7 Technologies performed the video inspection on pipeline segments identified by City staff in the Business Case Evaluation Study Report as potential candidates for replacement. This video inspection of pipeline condition assessment was a subsequent effort to confirm that the segments previously identified by City staff for replacement are indeed the most vulnerable pipelines in the system. Staff also reviewe d maintenance records to identify the most problematic areas where unexpected low water pressure occurs. Using the information gathered from the Business Case Evaluation Study Report, Video Inspection and Pipeline Condition Assessment Report, and the City’s maintenance records, staff selected the following segments for replacement and upgrades:  Ocean Park Boulevard - from 14th Street to 18th Street  17th Street - from Pearl Street to Ocean Park Boulevard  Ocean Avenue - from Pico Boulevard to Bay Street  Ashland Avenue - from 3rd Street to 4th Street  Grant Street - from Lincoln Boulevard to 6th Street Environmental Analysis The project is statutorily exempt from the provisions of the California Environmental Quality Act (CEQA) pursuant to Section 21080.21 of CEQA, which exempts pipelines of less than one mile. In addition, Section 15302 (Class 2 -Replacement/Reconstruction) of the CEQA Guidelines provides exemption for a class of projects involving the replacement/reconstruction of existing facilities, including the replacement of existing utility systems involving negligible or no expansion of capacity. The project would replace existing water mains that are aging and inadequate. Two of the new water mains will be moderately upsized, but would not represe nt a substantial increase in 5 of 9 capacity. In addition, none of the exceptions specified in Section 15300.2 of CEQA Guidelines would apply that would preclude the use of this CEQA exemption – the project site is not located in a sensitive environment, the project will not have a significant effect on the environment, the project would not damage scenic resources, the project would not be located on a hazardous waste site, and the project would not cause a change to a historical resource. California Coastal Commission De Minimis Waiver On January 31, 2017, the California Coastal Commission issued a Notice of “Permit Exemption/No Permit Required” (Commission Reference Number: 5-17-0035-X), allowing for development of the project as described. Contractor Selection – Construction On October 26, 2017, the City published Notices Inviting Bids for the Water Infrastructure Reliability Improvement Project in accordance with City specifications. The bid was posted on the City’s online bidding site, and notice s were advertised in the Santa Monica Daily Press in accordance with the City Charter and Municipal Code provisions. A total of 67 vendors downloaded the bid and 3 bids were received and publicly opened on November 30, 2017. Bid results are as follows: Bidder Bid Amount Sully-Miller Contracting Company $2,422,000 AMPCO Contracting, Inc. $2,493,525 Colich & Sons $3,248,175 Bids were evaluated based on the criteria in SMMC 2.24.072, including price, previous experience, ability to deliver, quality of product, and compliance with City specifications. Staff recommends Sully-Miller Contracting Company, the lowest bidder, as the best bidder based on price, quality of services offered and experience with similar projects. Sully-Miller Contracting Company provided four references for recently completed projects, and a number of ongoing projects. All references contacted reported that the work performed by Sully-Miller Contracting Company was completed in a timely and 6 of 9 cost-effective manner while maintaining consistent quality. The Contractors State License Board also verified that the contractor and subcontractors’ licenses are current, active and in good standing. Consultant Selection - Construction Management/Inspection On November 2, 2017, the City issued a Request for Proposals (RFP) for construction management and inspection services for the Water Infrastructure Reliability Improvement Project. The RFP was posted on the City’s online bidding site, and notices were advertised in the Santa Monica Daily Press in accordance with the City Charter and Municipal Code provisions. Forty firms downloaded the RFP. The following seven consulting firms submitted proposals: Berg & Associates Inc., CivilSource, GK & Associates, KOA Corporation, SA Associates, Wallace & Associates, and Willdan Engineering. Responses to the RFP were evaluated by a selection panel of staff from the Civil Engineering Division. The EPA’s guidelines for professional services require that services agreement be awarded based on demonstrated competence and professional qualifications. Evaluation was based on the following selection criteria: experience, references, proposed project work plan, proposed project team, creativity, demonstrated technical competence and understanding of the project scope. Based on this criteria and criteria in SMMC 2.24.073, staff recommends Willdan Engineering as the best qualified firm to provide construction management and inspection services, for an amount not to exceed $219,791 (including 10% contingency). Willdan Engineering demonstrated extensive knowledge and experience with similar projects in the cities of Santa Monica, Downey and Pomona. Through past projects, Willdan Engineering also demonstrated its ability to offer experienced construction management and inspection teams that can conduct high quality construction management and inspection at competitive hourly rates. Services provided by Willdan Engineering would include construction management, continuous inspection of the contractor’s work, verification and management of field changes and unforeseen conditions, monitoring and mitigating impacts resulting from 7 of 9 construction activities, attending the contractor’s safety meetings, attending periodic progress meetings, keeping records of all necessary inspection documentation relevant to the work performed during construction and conducting public outreach. Public Outreach Public outreach during construction of this project would be provided by Willdan Engineering, the City’s construction management consultant. Weekly updates on the City’s “Know Before You Go” (aka KBUG) website and Monday editions of the Santa Monica Daily Press would be provided. In addition, updates regarding the project would be provided on the City’s social media network. Properties impacted by the project would receive two construction notices. The first general notice would be mailed to properties adjacent to the proposed work site two weeks prior to the start of construction. Two days prior to the start of construction, a second notice would be subsequently hand-delivered to each adjacent property with detailed information regarding the planned construction activity, potential impacts, and contact information. The notices would be prepared by Public Works staff and Willdan Engineering and would be distributed by the contractor (Sully-Miller). A project-specific outreach campaign, including one-on-one coordination with impacted businesses on Ocean Park Boulevard and Ocean Avenue, would commence prior to the start of construction and continue throughout the project. Construction Timeline Staff anticipates that construction would begin in March 2018 and would be completed by January 2019. To mitigate traffic impacts in the areas of Ocean Park Boulevard between 14th and 18th streets and Ocean Avenue south of Pico Boulevard, construction would be completed at nighttime from 8 p.m. to 6 a.m. Monday to Friday and on Saturdays as needed. Staff anticipates no more than three weeks of after - hours work. Nighttime work would help alleviate lane closures and traffic impacts 8 of 9 during the day, thus mitigating impacts to residents and commuters traveling to and from Santa Monica College and John Adams Middle School. Financial Impacts and Budget Actions The contract to be awarded to Sully-Miller Contracting Company is for an amount not to exceed $2,785,300 (including a 15% contingency). Funds are available in the FY 2017- 18 Capital Improvement Program budget in the following accounts: Account Number Account Name Amount C200609.589000 Water System Improvement $ 117,803 C209196.589000 EPA Water Main Replacement $ 848,000 C250609.589000 Water System Improvement $ 112,023 C259196.589000 EPA Water Main Replacement $ 693,818 C250136.589000 City Match Fund Water System Improvement $1,013,656 TOTAL $2,785,300 The contract to be awarded to Willdan Engineering is for an amount not to exceed $219,791 (including a 10% contingency). Funds are available in the FY 2017-18 Capital Improvement Program budget in account C250136.589000 (Water Funds). The City will be reimbursed for the remaining $965,803 EPA grant balance. Prepared By: Tom Shahbazi, Civil Engineer Approved Forwarded to Council Attachments: A. September 12, 2006 Staff Report B. June 14, 2016 Staff Report C. City of Santa Monica 5yr CIP Business Cases 9 of 9 D. Oaks Initiative Disclosure Form - Willdan Engineering E. Oaks Initiative - Sully Miller Contracting Company City Council Report City Council Meeting: June 14, 2016 Agenda Item: 3.D 1 of 5 To: Mayor and City Council From: Martin Pastucha, Director, Public Works, Civil Engineering Subject: Award Professional Service Agreement (PSA) for Annual Water Infrastructure Reliability Improvement Project Recommended Action Staff recommends that the City Council: 1. Award RFP# SP2429 to Cannon Corporation, a California-based company to provide engineering design services, develop construction documents and provide engineering support during the construction of the Water Infrastructure Reliability Improvement Project; 2. Authorize the City Manager to negotiate and execute a professional services agreement with Cannon Corporation in an amount not to exceed $86,135 (includes a 15% contingency). 3. Authorize the City Manager to accept a ll grant renewals for grant (Grant No. XP- 96945401). 4. Authorize the City Manager to accept a grant (Grant No. XP-00T79601) awarded in the amount of $848,000 from the U.S. Environmental Protection Agency (EPA) for the Santa Monica Water Reliability Infrastructure Improvement project, a nd to accept all grant renewals. 5. Authorize the City Manager to execute all necessary documents to accept the grant and all grant renewals. 6. Authorize budget changes as outlined in the Financial Impacts & Budget Actions section of this report. Executive Summary The Water Infrastructure Reliability Improvement Project would replace approximately 3,820 lineal feet of water distribution pipelines at various locations in the City to ensure an adequate and reliable supply of water to customers. This project is based on a long- term replacement and maintenance plan for water mains based on age, condition and capacity demands. Staff recommends Cannon Corporation to provide engineering design services, develop construction documents and provide engineering support during the construction phase of the project for an amount not to exceed $86,135. Background On September 12, 2006 (Attachment A) the City accepted grant funds for the Santa 2 of 5 Monica Water Reliability Infrastructure Improvement Project from the United States Environmental Protection Agency (EPA), comprised of $529,900 in reimbursable grant funding and $460,700 in matching City funds for a total of $990,600 (Grant Number XP - 96945401). To date, the city has spent $348,677 of the $460,700 local match funds. In January 2012, the EPA awarded another grant to the City for the Santa Monica Water Reliability Infrastructure Improvement Project, comprised of $848,000 in reimbursable grant funding and $693,818 in matching city funds for a total of $1,541,818 (Grant Number XP-00T79601). These grants were made pursuant to the Federal Water Resources Development Act and titled Water Infrastructure – Santa Monica Reliability Improvement Project. Initially, the project comprised both a potable and recycled reservoir. In 2 007, the City Council retained a consulting engineering firm to conduct a feasibility study, a preliminary design report, CEQA/NEPA documents, financing alternatives, public outreach, project management services and design build documents for the drinking water storage facility. Construction cost estimates for the project proved prohibitive (exceeding $30 million). Subsequently, the size of the reservoirs was reduced; ultimately the project was reduced to a single 1 million gallon recycled water reservoir. Even then the projected cost of the project was financially infeasible. In order to avoid the lapsing of the available grants, staff from the Water Resources Division worked with EPA to revise the work plan and requested the remaining grant funds be used toward the replacement of the existing water mains in the City. In October 2015, the City received EPA’s approval to repurpose the grant funds for the replacement of the existing water mains throughout the City and to extend the project period end date. Discussion The City operates and maintains a 205 mile network of water distribution mains with pipeline sizes ranging from 4 to 36 inches. The City’s water system serves over 86,000 residential and business customers providing 12 million gallons of water per day. In order to achieve the City’s ongoing commitment to supplying safe and clean water to all 3 of 5 its residents and businesses, and preserve the water quality and efficiency going forward, the Water Resources Division in 2011 developed a business case evaluation study to identify and prioritize the aged cast iron water mains. The study focuses on the oldest cast iron pipe installations built prior to the 1970s. The study provides cost and probabilities of potential water main breaks while making recommendations to replace and upgrade the aged water mains throughout the city. Staff also reviewed maintenance records to identify the most problematic areas where unexpected low water pressure occurs. Low pressure in the old cast iron pipes is typically caused by rust build up, restricting water flow which affects the water quality as well. Based on this information, a list of priority water distribution system improvements was produced to implement the replacement and upgrade of water mains at the following locations, for a total of approximately 3,820 linear feet of water main; Ocean Park Blvd. - from 14th Street to 18th Street 17th Street - from Pearl Street to Ocean Park Blvd. Ocean Avenue - from Pico Blvd. to Bay Street Ashland Avenue- from 3rd Street to 4th Street Consultant Selection On April 8, 2016, the City issued a Request for Proposal (RFP) for engineering design services, construction documentation, and engineering support services during the construction phase of the Water Infrastructure Reliability Improvement Project. The RFP was posted on the City’s online bidding site, and notices were advertised in the Santa Monica Daily Press in accordance with City Charter and Municipal Code Provision. 59 vendors downloaded the RFP and six firms responded (California Watershed Engineers, Cannon Consulting, CivilSource Corporation, KPFF Consulting Engineers, Quantum Consulting, Inc., and Willdan Engineering). Responses to the RFP were reviewed by a selection panel of staff from Water Resources and Civil Engineering. Evaluation was based on the following selection criteria: experience, references, work 4 of 5 plans, project team, creativity, technical competence and understanding of the project’s scope. Staff then ranked all six firm from 1 to 6. Based on this criteria and criteria in SMMC 2.24.073, staff recommends Cannon Corporation as the best qualified firm to provide engineering design services, for an amount not to exceed $86,135. Cannon Corporation demonstrated extensive knowledge and experience with similar projects in urban and coastal municipalities, including the cities of Manhattan Beach, Beverly Hills, Glendale, and Golden State Water Company. Cannon Corporation also demonstrated through past projects its ability to offer experienced design teams that can complete project designs in an expeditious manner and at competitive hourly rates. After completion of the design work, staff will prepare the bidding document, advertise the project in City’s on-line bidding site, select a contractor, and prepare a staff report to award the contract. The anticipated timeline for the design phase of the project is approximately 6 months (early August 2016 to late January 2017). The second phase of the project is the construction phase which will take approximately 4-6 months after award of the contract by the City Council. Financial Impacts and Budget Actions Award of a $848,000 grant from the U.S. Environmental Protection Agency (EPA) for the Santa Monica Water Reliability Infrastructure Improvement project requires the following FY 2015-16 budget changes: 1. Establish revenue budget at account 20671.403951 in the amount of $848,000. 2. Appropriate $848,000 to account C209196.589000 to reflect receipt of the Water Infrastructure – Santa Monica Water Infrastructure grant. 3. Move $693,818 from account C250136.589000 to account C259196.589000 in FY2016-17 to fund the local match obligation. Renewal of the $529,900 grant U.S. Environmental Protection Agency (EPA) for the Santa Monica Water Reliability Infrastructure Improvement project requires the following FY 2015-16 budget changes: 1. Move $112,023 from account C250136.589000 to C250609.589000 to fund the remaining local match obligation. The professional services agreement to be awarded to Cannon Corporation is for an 5 of 5 amount not to exceed $86,135 (includes a 15% contingency). Funds are available in the FY 2015-16 Capital Improvement Program budget in account C250136.589000. Prepared By: Tom Shahbazi, Civil Engineer Approved Forwarded to Council Attachments: A. September 12, 2006 Staff Report City of Santa Monica Water Resources Division Five Year Capital Improvement Program Business Case Evaluations October 2011 8614014 City of Santa Monica Water Resources Division Five Year Capital Improvement Program Business Case Evaluations Contents Executive Summary 1 California Incline Water Main 2 Northwest Quadrant Water Mains 9 Pier Water Mains 17 Southeast Quadrant Water Mains 25 Southwest Quadrant Water Mains – Ocean Front 32 Southwest Quadrant Water Mains – Inland 40 Northeast Quadrant Water Mains – Broadway 48 Northeast Quadrant Water Mains – City Forces 55 Northeast Quadrant Water Mains – Wilshire 62 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Five Year Capital Improvement Program Summary This five year capital improvement program (CIP) contains business case evaluations for nine projects or variations of projects. The appropriate business case evaluation documents are contained in the following pages. Below is a summary of the projects proposed, their recommended options, and the budget requirements for the recommended options. Refer to each project’s business case evaluation for details about the project background and details. Requested project budget for next 5 years Project Title Option FY12-13 FY13-14 FY14-15 FY15-16 FY16-17 Project Total California Incline Water Main Replace $200,000 $300,000 $0 $0 $0 $500,000 Northwest Quadrant Water Mains Replace $0 $0 $0 $0 $717,000 $717,000 Pier Water Mains Status Quo $1,000* $1,020* $1,040* $1,061* $1,082* $5,203* Southeast Quadrant Water Mains Replace $900,000 $900,000 $900,000 $900,000 $900,000 $4,500,000 Southwest Quadrant Water Mains – Ocean Front Replace $0 $0 $2,100,000 $0 $0 $2,100,000 Southwest Quadrant Water Mains – Inland Replace $0 $0 $0 $1,044,900 $0 $1,044,900 Northeast Quadrant Water Mains – Broadway Replace $0 $1,500,000 $0 $0 $0 $1,500,000 Northeast Quadrant Water Mains – City Forces Replace $52,500 $240,000 $191,250 $0 $0 $483,750 Northeast Quadrant Water Mains – Wilshire Replace $0 $0 $0 $600,000 $0 $600,000 Total $1,153,500 $2,941,020 $3,191,250 $3,192,290 $1,618,082 $11,450,853 *FUNDED OUT OF O&M BUDGET City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Project Title: California Incline Water Main Replacement Project Description: Approximately 1,700 feet of 12-inch diameter cast iron water main pipe along the California Incline is nearing the end of its estimated useful life. For this reason, this segment of pipe has a high probability of failure, which may cause property damage and social repercussions in the surrounding area. WRD would like to take advantage of the opportunity to replace the main line at the same time as an imminent project that will restore the incline and the bluffs. Budget Year(s): FY 12-13 Sponsor: Gary Welling Date: 03/09/2011 BUSINESS CASE SUMMARY Recommended Project Option and Description Include key capital cost and timings Replace the water main with 12-inch diameter ductile iron pipe during the reconstruction of the surrounding bluffs. This will reduce the business risk exposure by more than $6 million dollars. Key Project Facts of Recommended Option (terms defined in Glossary at back) CLR BRE Years to 100% Failure Decision Year Capital Investment Annualized O&M Costs Economic Annual Value N/A $6,704,455 3 2012 $506,000 $0 $5,200 OBJECTIVES Failure Mode: Capacity Level of Service Financial Efficiency Physical Mortality Issue / Problem to be addressed: The existing cast iron pipe has an estimated install year of 1900 and is assumed at risk of structural collapse, however, no physical inspection of the pipe has occurred. A pipe failure in this area would cause flooding for local homes and a possible landslide. Water would flow down the incline and onto Pacific Coast Highway, causing safety hazards to traffic and beach-goers. Known Alternatives: 1. Status Quo / Base Line – This alternative involves continuing to monitor all segments and to test for adequate fire-flow pressures. 2. Replace the asset using a contractor. Key Project Considerations: 1. The consequence of failure on this project is extremely high due to the location of the asset and the areas and property it would affect. 2 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation 2. The current condition of asset is not known. The probability of failure for this asset is based on knowledge of similar assets. A condition assessment of a buried water main was not considered due to the difficulty and cost to do so. 3. The timing of the project will coincide with planned work on the bluffs surrounding the asset. This project’s timing gives an opportunity for an asset upgrade without added outreach with neighborhood groups and other entities. Since work will be completed at the same time as another project the City can reduce costs. 4. Adding additional tie-ins to the existing cast iron pipe is a possible problem that could arise in the future. If more tie-ins are required in this area, the existing cast iron pipe may not be structurally adequate for the additional tie-ins, consequently, changing the pipe material during this project would eliminate this issue. PROJECT BACKGROUND Existing Standards of Service: The current pipe delivers 75 to 85 PSI, which meets current levels of service. Knowledge of Existing Asset and/or Facility: The asset is a cast iron pipe assumed to have been installed around 1900. It has a design life of 80 years. This segment of water main has no break history that can be determined from Hansen data or staff knowledge. Current Demands (Capacity and Utilization): The current pipe is one of two providing potable water to the beachfront area. This pipe is required redundancy in the looped system and is needed to meet continuous water demand. Future Demands (Reliability): A new pipe replacement would extend the service life of this segment of the water system another 80-120 years. This will reduce the business risk exposure to the City for a failure in this pipe segment. The capacity of the pipe will not be increased and no future growth or increased demand will be accommodated as result of this project. 3 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation FAILURE MODE Prediction of Failure Mode (Reason for Project) Physical mortality. Based on the age and material of the pipe, it has a high probability of breaking, leaking, or other structural issues resulting in local flooding or property damage. Timing of Failure The cast iron pipe is about 110 years old, with an expected life of 80 years. The asset is assumed to have reached its imminent failure mode. Consequence of Failure if project not done The consequence of this pipe failing is calculated to be $20,316,500. This value is based on the triple bottom line factors of social, environmental, and economics. It is estimated that 10,000 tourists and commercial customers could be affected with the spilled water for 3 days and millions of dollars in damages to non-SMWRD assets and property could occur. OPTION ANALYSIS Summary of Each Option’s Key Points Asset Option Description 1. Status Quo / Base Line This option is the base case. It assumes that no changes are made to the ongoing operation and maintenance of the asset. 2. Operate Differently N/A 3. Maintain differently N/A 4. Repair N/A - Current pipe has no problems needing repair. 5. Refurbish / Rehabilitation N/A 6. Replace Replace all segments by contract. 7. Decommission N/A - Pipe is required redundancy of looped distribution system to beachfront area. 8. Non Asset Solutions N/A For each option listed above, see the completed tables below. 4 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Option 1 Summary of Key Points Analysis Area Comment Description: Status Quo Design Life: 3 Analysis Period: 3 Capital Requirements: $0 Operations Requirements: $1,530 Maintenance Requirements: $1,530 Business Risk Exposure $6,704,445 Overall Pros Overall Cons Risk is not significantly reduced. Option 2 Summary of Key Points Analysis Area Comment Description: Replace Design Life: 100 Analysis Period: 100 Capital Requirements: $506,000 Operations Requirements: $0 Maintenance Requirements: $0 Business Risk Exposure $203,165 Overall Pros Extended life of asset. Reduced probability of asset failure. Project can coincide with another project taking place. Overall Cons High capital costs. 5 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation LIFE CYCLE COSTING Paste table from LCC and BRE tools Life Cycle Cost Comparison: Business Risk Exposure Comparison: ASSUMPTIONS / COMMENTS For BRE, because there is no maintenance history, we assumed there will be two repairs per quadrant for the life of the assets, costing $10,000 for each repair. 6 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation RECOMMENDATION Description and justification of the recommended option considering options not chosen The recommended option is to replace the existing pipe with a 12-inch diameter ductile iron pipe during the reconstruction of the surrounding bluffs. This option will reduce the business risk exposure of this asset from over $6,000,000 to roughly $200,000. Utilizing the confirmed project to restore the bluffs in the area saves costs that WRD would otherwise have to incur such as traffic control and detours. Requested project budget for the term of the project FY12-13 FY13-14 FY14-15 FY15-16 FY16-17 Ongoing Revenue $200,000 $300,000 $0 $0 $0 Ongoing Operational Costs $0 $0 $0 $0 $0 Ongoing Maintenance Costs $200 $202 $208 $212 $216 Approval/Signatures Role Name Signature Date Sponsor Gary Welling Committee Water Resources Manager Gil M. Borboa ATTACHMENTS BRE analysis, LCC analysis, project images, AM terms glossary GLOSSARY Definitions of asset management terms used in this document. CLR (Confidence Level Rating) – A rating of how much confidence can be placed in decisions made about asset management. Value is determined using the provided CLR tool. N/A indicates the confidence level rating tool was not used in the project evaluation. LCC (Life-Cycle Cost) – The total cost of providing, owning, and maintaining an item or project throughout its life, or a predetermined evaluation period, including the costs of planning, design, acquisition, operations, maintenance, and disposal, less any disposal value. It enables investment and operational decisions to be made using appropriate evaluation criteria. Value is determined using the provided LCC tool. 7 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation BRE (Business Risk Exposure) – A dollar value representation of the potential impact of economic, financial or social loss or gain, physical damage or injury or delay on the achievement of project objectives, delivery goals or management effectiveness. Value is determined using the provided BRE tool. Consequence of Failure – The outcome of an event or situation expressed quantitatively as current dollars, being a loss, injury, disadvantage or gain. Failure Mode – A Description of the way a process, product, or service could fail to perform its desired function (performance target) as described by the needs and expectations of the external and/or internal customers. Years to 100% Failure – Number of years to occurrence of predicted failure mode. Decision Year – Anticipated year of project initiation, including any preliminary studies or design. Capital Investment – The total cost incurred by an organization in procuring additional or upgraded assets. Annualized O&M Costs – The cost of maintaining and operating an item or project, in escalated dollars, divided by the number of years in the project analysis period. Economic Annual Value – The sum of all projects costs (planning, capital, operations, maintenance, etc.), in escalated dollars, divided by the number of years in the project analysis period. 8 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Project Title: NW Quadrant Water Main Replacement Project Description: Approximately 400 linear feet of cast iron pipe installed in 1910’s and 1950’s, 1760 linear feet of cement lined, cast iron pipe installed in the 1920’s and 1960’s, and 230 linear feet of stainless steel pipe installed in the 1920’s are reaching the end of their useful lives. Some of these pipe segments are 6 inches in diameter, which is below the minimum city standard of 8 inch diameter. For this reason these pipe segments have a high probability of failure. WRD would like to take advantage of the opportunity to replace these main lines. Budget Year(s): FY 12-13 Sponsor: Gary Welling Date: 05/23/2011 BUSINESS CASE SUMMARY Recommended Project Option and Description Include key capital cost and timings The recommended option is to replace all segments by contractor. The pipes are believed to be in poor enough condition to warrant replacement and the added consideration of insufficient pipe diameter also warrants replacements. This option reduces the business risk exposure by 92%. Key Project Facts of Recommended Option (terms defined in Glossary at back) CLR BRE Years to 100% Failure Decision Year Capital Investment Annualized O&M Costs Economic Annual Value N/A $2,932 8 2016 $717,000 $0 $7,370 OBJECTIVES Failure Mode: Capacity Level of Service Financial Efficiency Physical Mortality Issue / Problem to be addressed: Water main lines in northwest quadrant of Santa Monica are reaching the end of their useful lives. Some of these pipes, installed in 1910s and 1920s, are facing a structural problem. Some other younger pipes are in need for replacement due to capacity issue. These 6 inch pipes do not meet the current minimum city standard of 8 inch diameter and do are unlikely to meet fire flow demand requirements. Failing to address these structural and capacity issues may cause service disruption to customer in this area of the city. Known Alternatives: 1. Status Quo / Base Line – This option involves continuing to monitor all segments and to test for adequate fire-flow pressures. 2. Replace the assets using a contractor, city forces, or a combination of both. 9 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Key Project Consideratio ns: 1. The consequence of failure on this project is relatively high due to the location of the asset and the areas and property it would affect. 2. The current condition of asset is not known. The probability of failure for this asset is based on knowledge of similar assets. A condition assessment of a buried water main was not considered due to the difficulty and cost to do so. 3. Some of these pipes are 6 inches in diameter, while the minimum city standard is 8 inch diameter. Therefore, there are capacity problems in addition to structural problems. PROJECT BACKGROUND Existing Standards of Service: The current pipe delivers 75 to 85 PSI, which meets current levels of service. Knowledge of Existing Asset and/or Facility: The assets are cast iron pipe, which have a design life of 60 years, cement lined cast iron pipe, which have a design life of 80 years, and stainless steel pipe, which has a design life of 120. The pipe segments have no break history that can be determined from Hansen data or staff knowledge. The current condition of the pipe segments is unknown. Current Demands (Capacity and Utilization): The current pipes provide potable water to northwest area of the City. These pipes serve commercial customers, including hotels and restaurants. Future Demands (Reliability): A new pipe replacement would extend the service life of this segment of the water system another 80-120 years. This will reduce the business risk exposure to the City for pipe failure. 10 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation FAILURE MODE Prediction of Failure Mode (Reason for Project) Physical mortality and Capacity. Based on the age and material of the pipes, it has a high probability of breaking, leaking, or other structural issues . In addition, some pipes have capacity issues due diameter less than the current minimum city standard of 8 inch diameter. The capacity failure is secondary to the physical mortality failure for this analysis. Timing of Failure The older pipes have physical mortality as the imminent failure mode and are expected to fail in approximately 8 years. The newer pipes have capacity as the imminent failure mode and are expected to in the next 10 years. Consequence of Failure if project not done The consequence of these pipes failing is calculated to be $293,200. This value is based on the triple bottom line factors of social, environmental, and economics. It is estimated that 1,000 residential and 1,100 tourists and commercial customers could be affected with the spilled water for 1 day. However, damages to non-SMWRD assets and property are expected to be minimal. OPTION ANALYSIS Summary of Each Option’s Key Points Asset Option Description 1. Status Quo / Base Line This option involves continued monitoring of all segments and testing for adequate fire-flow pressures. 2. Operate Differently N/A 3. Maintain differently N/A 4. Repair N/A 5. Refurbish / Rehabilitation N/A 6. Replace Three alternatives are considered:  Replace all segments by contractor.  Replace all segments by city forces.  Replace 1st Ct and California Ave with city forces, and Ocean Ave by contractor. 7. Decommission N/A 8. Non Asset Solutions N/A For each option listed above, see the completed tables below. 11 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Option 1 Summary of Key Points Analysis Area Comment Description: Status Quo - continued monitoring of all segments and testing for adequate fire-flow pressures Design Life: 8 Analysis Period: 8 Capital Requirements: $0 Operations Requirements: $4,292 Maintenance Requirements: $4,292 Business Risk Exposure $38,116 Overall Pros There are still a few years of remaining life. Overall Cons Risk is not significantly reduced. Option 2 Summary of Key Points Analysis Area Comment Description: Replace all segments by contract Design Life: 100 Analysis Period: 100 Capital Requirements: $717,000 Operations Requirements: $0 Maintenance Requirements: $0 Business Risk Exposure $2,932 Overall Pros Extends life of asset. Reduces probability of asset failure. Overall Cons High capital costs. 12 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Option 3 Summary of Key Points Analysis Area Comment Description: Replace all segments by city forces Design Life: 100 Analysis Period: 100 Capital Requirements: $358,500 Operations Requirements: $0 Maintenance Requirements: $0 Business Risk Exposure $2,932 Overall Pros Extends life of asset. Reduces probability of asset failure. Less capital cost than contractor replacement. Overall Cons City resources required to complete project. Option 4 Summary of Key Points Analysis Area Comment Description: Replace 1st Ct and California Ave with city forces, Ocean Ave by contractor Design Life: 100 Analysis Period: 100 Capital Requirements: $658,500 Operations Requirements: $0 Maintenance Requirements: $0 Business Risk Exposure $2,932 Overall Pros Extends life of asset. Reduces probability of asset failure. Overall Cons High capital costs. 13 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation LIFE CYCLE COSTING Paste table from LCC and BRE tools Life Cycle Cost Comparison: Option Number Option description Status Option Analysis Period Capital ($) Annual Operations ($) Annual Mtce ($) PV of Benefits ($) PV of Costs minus Benefits ($) Adjusted Annual PV of Costs minus Benefits ($) Total BRE Reduction Benefit / Cost Ratio 1 Status Quo Analyze 8 - 1,073 1,073 0 8,000 1,000 0 0.0 2 Replace all segments by contract Analyze 100 717,000 - 0 0 737,000 7,370 35,184 0.0 3 Replace all segments by city forces Analyze 100 358,500 - 0 0 368,500 3,685 35,184 0.1 4 Replace 1st Ct and California Ave with city forces, and Ocean Ave by contractor Analyze 100 658,500 - 0 0 678,500 6,785 35,184 0 Business Risk Exposure Comparison: PoFA BREA Total Business Risk Reduction (BREB - BREA) 1 Status Quo 8 Years 13%No Backup 100%13.00%$38,116 $0 2 Replace all segments by contract 100 Years 1%No Backup 100%1.00%$2,932 $35,184 3 Replace all segments by city forces 100 Years 1%No Backup 100%1.00%$2,932 $35,184 4 Replace 1st Ct and California Ave with city forces, and Ocean Ave by contractor 100 Years 1%No Backup 100%1.00%$2,932 $35,184 Project Option Years to Expected Failure Redundancy ASSUMPTIONS / COMMENTS For BRE, we assumed that for no maintenance history, there is one repair per quadrant per year. $10,000 for each repair. 14 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation RECOMMENDATION Description and justification of the recommended option considering options not chosen The recommended option is to replace all segments by contractor. This option delivers the highest quality construction, but at the highest capital costs. The pipes are believed to be in poor enough condition to warrant replacement and the added consideration of insufficient pipe diameter also warrants replacements. The City does not have the available forces to complete this project in appropriate time. The capital savings are insignificant replace part of the pipes by City forces and part by contractor. This option also reduces the business risk exposure of this asset from over $38,000 to roughly $3,000. Requested project budget for the term of the project FY12-13 FY13-14 FY14-15 FY15-16 FY16-17 Ongoing Revenue $0 $0 $0 $0 $717,000 Ongoing Operational Costs $0 $0 $0 $0 $0 Ongoing Maintenance Costs $0 $0 $0 $0 $0 Approval/Signatures Role Name Signature Date Sponsor Gary Welling Committee Water Resources Manager Gil M. Borboa ATTACHMENTS BRE analysis, LCC analysis, project images, AM terms glossary GLOSSARY Definitions of asset management terms used in this document. CLR (Confidence Level Rating) – A rating of how much confidence can be placed in decisions made about asset management. Value is determined using the provided CLR tool. N/A indicates the confidence level rating tool was not used in the project evaluation . LCC (Life-Cycle Cost) – The total cost of providing, owning, and maintaining an item or project throughout its life, or a predetermined evaluation period, including the costs of planning, design, acquisition, operations, maintenance, and disposal, less any disposal value. It enables investment and operational decisions to be made using appropriate evaluation criteria. Value is determined using the provided LCC tool. 15 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation BRE (Business Risk Exposure) – A dollar value representation of the potential impact of economic, financial or social loss or gain, physical damage or injury or delay on the achievement of project objectives, delivery goals or management effectiveness. Value is determined using the provided BRE tool. Consequence of Failure – The outcome of an event or situation expressed quantitatively as current dollars, being a loss, injury, disadvantage or gain. Failure Mode – A Description of the way a process, product, or service could fail to perform its desired function (performance target) as described by the needs and expectations of the external and/or internal customers. Years to 100% Failure – Number of years to occurrence of predicted failure mode. Decision Year – Anticipated year of project initiation, including any preliminary studies or design. Capital Investment – The total cost incurred by an organization in procuring additional or upgraded assets. Annualized O&M Costs – The cost of maintaining and operating an item or project, in escalated dollars, divided by the number of years in the project analysis period. Economic Annual Value – The sum of all projects costs (planning, capital, operations, maintenance, etc.), in escalated dollars, divided by the number of years in the project analysis period. 16 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Project Title: Pier Water Main Project Description: The Water Resources Division wishes to eliminate any health risk due to algae growth in the fiberglass pipe that delivers potable water to the pier. Budget Year(s): FY 12-13 Sponsor: Gary Welling Date: 05/02/2011 BUSINESS CASE SUMMARY Recommended Project Option and Description Include key capital cost and timings Continue to monitor the pipe for algae growth, pipe condition, and water quality to ensure no health risks are present. The current amount of algae is not causing any degradation of water quality. Key Project Facts of Recommended Option (terms defined in Glossary at back) CLR BRE Years to 100% Failure Decision Year Capital Investment Annualized O&M Costs Economic Annual Value N/A $138,180 50 2014 $0 $1,692 $1,000 OBJECTIVES Failure Mode: Capacity Level of Service Financial Efficiency Physical Mortality Issue / Problem to be addressed: The Santa Monica pier houses 2,635 feet of 8 inch fiberglass pipe for potable water distribution. Due to exposure to the environment, primarily direct sunlight, the fiberglass pipe material is prone to algae growth on its interior walls. The algae growth inside the pipe degrades the quality of water and could cause harm if consumed by the public . Known Alternatives: 1. Status Quo / Base Line – This alternative involves continuing to monitor water quality and test for unsafe drinking water quality. 2. Do nothing – Stop all maintenance on the pipe. 3. Replace the pipe using a contractor. 4. Coat the existing pipe to reduce exposure to the environment and direct sunlight. Key Project Considerations: 1. Safety and health are the main concern of this project. The problem does not currently affect public health, but if left untreated, the problem could cause harm to people who drink the water. 2. Cost to replace the main and the associated impact to the pier and public. Replacing the pipe is expensive due to its location and water outages on the pier are costly to the businesses on the pier. 17 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation PROJECT BACKGROUND Existing Standards of Service: The current pipe delivers 85 to 95 PSI, which meets current levels of service. Knowledge of Existing Asset and/or Facility: The asset is over 2,000 feet of fiberglass pipe assumed to have been installed in 1965. It has a design life of 80 years. Algae is present on the interior walls of portions of pipe. Current Demands (Capacity and Utilization): The current pipe is the only one providing potable water to the pier. This pipe is required to provide water to the pier, the public, restaurants, and businesses. Future Demands (Reliability): The capacity of the pipe will not be increased and no future growth or increased demand will be accommodated as result of this project. FAILURE MODE Prediction of Failure Mode (Reason for Project) Level of service. The existing pipe is prone to algae growth on the interior wall due to exposure to the environment. The water it delivers, when too much algae is present, will not meet water quality standards. This pipe will fail to meet level of service to deliver water that meets water quality standards. Timing of Failure The growth of algae is currently present in the pipe, however, at this time the water is not below drinking water quality. The exact algae concentration that will produce unsafe water quality is unknown, but it is expected within the next 50 years. Consequence of Failure if project not done The consequence of this pipe failing is calculated to be $6,909,000. This value is based on the triple bottom line factors of social, environmental, and economics. It is estimated that 1,000 people will be affected with moderate health issues, 10,000 tourists will be affected by a day of water loss, and $400,000 worth of economic impact will result from legal costs, public image, and fines. 18 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation OPTION ANALYSIS Summary of Each Option’s Key Points Asset Option Description 1. Status Quo / Base Line The base case. It assumes that no changes are made to the ongoing operation and maintenance of the asset. 2. Do Nothing Do nothing to the pipe. 3. Operate Differently N/A 4. Maintain differently N/A 5. Repair N/A 6. Refurbish / Rehabilitation Coating the pipe will extend the time to failure. 7. Replace Replace all segments by contract. 8. Decommission N/A 9. Non Asset Solutions N/A For each option listed above, see the completed tables below. Option 1 Summary of Key Points Analysis Area Comment Description: Status Quo Design Life: 3 Analysis Period: 50 Capital Requirements: $0 Operations Requirements: $0 Maintenance Requirements: $84,579 Business Risk Exposure $138,180 Overall Pros Overall Cons Public health will eventually be affected. 19 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Option 2 Summary of Key Points Analysis Area Comment Description: Do Nothing Design Life: 3 Analysis Period: 3 Capital Requirements: $0 Operations Requirements: $0 Maintenance Requirements: $0 Business Risk Exposure $2,279,970 Overall Pros No capital costs. Overall Cons Pipe is not monitored or maintained. Option 3 Summary of Key Points Analysis Area Comment Description: Refurbish / Rehabilitation Design Life: 3 Analysis Period: 20 Capital Requirements: $225,000 Operations Requirements: $0 Maintenance Requirements: $0 Business Risk Exposure $345,450 Overall Pros Coating pipe will not disrupt water delivery. Low capital costs. Overall Cons Pipe needs to be re-coated and re-inspected periodically. Does not eliminate algae from pipe. 20 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Option 4 Summary of Key Points Analysis Area Comment Description: Replace Design Life: 3 Analysis Period: 100 Capital Requirements: $450,000 Operations Requirements: $252,708 Maintenance Requirements: $0 Business Risk Exposure $69,090 Overall Pros Eliminates algae from pipe. No maintenance costs. Pipe install year makes it candidate for replacement based on age. Overall Cons High capital costs. Disrupts water delivery to pier. 21 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation LIFE CYCLE COSTING Paste table from LCC and BRE tools Life Cycle Cost Comparison: Option description Status Option Analysis Period Capital ($) Annual Operations ($) Annual Mtce ($) PV of Benefits ($) PV of Costs minus Benefits ($) Adjusted Annual PV of Costs minus Benefits ($) Total BRE Reduction Benefit / Cost Ratio Do Nothing Analyze 3 - - 0 0 0 0 0 Status Quo Analyze 50 - 1,692 1,692 0 50,000 1,000 2,141,790 42.8 Coating Analyze 20 225,000 - 0 0 225,000 11,250 1,934,520 9 Replace Analyze 100 450,000 252,708 0 0 636,850 6,369 2,210,880 3.5 Business Risk Exposure Comparison: PoFA BREA Total Business Risk Reduction (BREB - BREA) 1 Do Nothing 3 Years 33%No Backup 100%33.00%$2,279,970 $0 2 Do Nothing 50 Years 2%No Backup 100%2.00%$138,180 $2,141,790 3 Status Quo 100 Years 1%No Backup 100%1.00%$69,090 $2,210,880 4 Replace 20 Years 5%No Backup 100%5.00%$345,450 $1,934,520 Project Option Years to Expected Failure Redundancy ASSUMPTIONS / COMMENTS Actual pipe installation date is not known. Installation year of 1901 is assumed based on oldest known pipe in the map grid. 22 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation RECOMMENDATION Description and justification of the recommended option considering options not chosen The recommended option for the fiberglass pipe on the pier is to continue to monitor the pipe for algae growth, pipe condition, and water quality to ensure not health risks are present. The current amount of algae is not causing any degradation of water quality. The cost to coat or replace the pipe is too large to consider them as options. Until health or pipe condition are a known problem, the pipe is acceptable in its current operating state. Requested project budget for the term of the project FY12-13 FY13-14 FY14-15 FY15-16 FY16-17 Ongoing Revenue $0 $0 $0 $0 $0 Ongoing Operational Costs $0 $0 $0 $0 $0 Ongoing Maintenance Costs $1,000 $1,020 $1,040 $1,061 $1,082 Approval/Signatures Role Name Signature Date Sponsor Gary Welling Committee Water Resources Manager Gil M. Borboa ATTACHMENTS BRE analysis, LCC analysis, project images, AM terms glossary GLOSSARY Definitions of asset management terms used in this document. CLR (Confidence Level Rating) – A rating of how much confidence can be placed in decisions made about asset management. Value is determined using the provided CLR tool. N/A indicates the confidence level rating tool was not used in the project evaluation . LCC (Life-Cycle Cost) – The total cost of providing, owning, and maintaining an item or project throughout its life, or a predetermined evaluation period, including the costs of planning, design, acquisition, operations, maintenance, and disposal, less any disposal value. It enables investment and operational decisions to be made using appropriate evaluation criteria. Value is determined using the provided LCC tool. 23 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation BRE (Business Risk Exposure) – A dollar value representation of the potential impact of economic, financial or social loss or gain, physical damage or injury or delay on the achievement of project objectives, delivery goals or management effectiveness. Value is determined using the provided BRE tool. Consequence of Failure – The outcome of an event or situation expressed quantitatively as current dollars, being a loss, injury, disadvantage or gain. Failure Mode – A Description of the way a process, product, or service could fail to perform its desired function (performance target) as described by the needs and expectations of the external and/or internal customers. Years to 100% Failure – Number of years to occurrence of predicted failure mode. Decision Year – Anticipated year of project initiation, including any preliminary studies or design. Capital Investment – The total cost incurred by an organization in procuring additional or upgraded assets. Annualized O&M Costs – The cost of maintaining and operating an item or project, in escalated dollars, divided by the number of years in the project analysis period. Economic Annual Value – The sum of all projects costs (planning, capital, operations, maintenance, etc.), in escalated dollars, divided by the number of years in the project analysis period. 24 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Project Title: SE Quadrant Water Main Replacement Project Description: Approximately 3 miles of water main installed in the 1920’s and 1940’s are reaching the end of their useful lives. Some of the pipeline segments are 6 inches in diameter with a questionable fire-flow. The minimum city standard is 8 inches so some adjustments need to be made. WRD would like to take advantage of the opportunity to replace these water main lines. Budget Year(s): FY 12-13 Sponsor: Gary Welling Date: 05/15/2011 BUSINESS CASE SUMMARY Recommended Project Option and Description Include key capital cost and timings Aggressively monitor the condition of the aging pipes in this area and replace the ones in poor condition. Taking coupons out of pipes to monitor the condition of the assets will help determine the best time to replace the assets. Additionally, SMWRD will begin to put aside $900,000 per year for each of the next 5 years in preparation for the capital costs needed to replace these pipes. Key Project Facts of Recommended Option (terms defined in Glossary at back) CLR BRE Years to 100% Failure Decision Year Capital Investment Annualized O&M Costs Economic Annual Value N/A $37,550 10 2020 $0 $1,095 $1,000 OBJECTIVES Failure Mode: Capacity Level of Service Financial Efficiency Physical Mortality Issue / Problem to be addressed: Approximately 14,600 feet (2.76 miles) of water main installed in the 1920’s and 1940’s are reaching the end of their useful lives. Some of the pipeline segments are 6 inches in diameter with a questionable fire-flow. The minimum city standard is 8 inches so some adjustments need to be made. 25 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Known Alternatives: 1. Aggressive monitoring of all segments and replace segments as needed. 2. Replace all segments as a form of precautionary maintenance. 3. Replace 6-inch segments only and aggressive monitoring of other segments. 4. Do Nothing. Although considered an alternative, it is not a viable city option. It will not be considered in the analysis. 5. Trenchless replacement of all segments. Although considered an alternative, it is not a viable city option. It will not be considered in the analysis. 6. Rehabilitate 12-inch segments only. Not a viable option for 6 and 8-inch segments since they would not meet current City standards. This will not be considered because of the age of pipe segments. Key Project Considerations: 1. Monitoring options rely on the ability to track pipe condition with coupons. PROJECT BACKGROUND Existing Standards of Service: The southeastern quadrant of San Monica contains a mixture of commercial and residential properties. The current pipes deliver 75 to 85 PSI, which meets current levels of service. Knowledge of Existing Asset and/or Facility: The assets are a mixture of CIP and stainless steel water mains of 6, 8, and 12-inch diameters totaling 14,583 feet (2.76 miles). Pipe installations range from 1924 to 2004, pipe conditions are currently unknown, and pipe break histories are infrequent. Current Demands (Capacity and Utilization): The pipes are spread throughout the distribution system, providing potable water to commercial and residential properties. They meet current customer demand; however, they do not meet current fire flow requirements. Future Demands (Reliability): All 6-inch pipes will be upgraded to 8-inch when replaced to accommodate for future growth in the area and to provide the necessary fire flow requirements of the area. 26 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation FAILURE MODE Prediction of Failure Mode (Reason for Project) Physical mortality. The majority of the pipes were installed in the 1924 and reaching their design life. Timing of Failure Design life of the pipes is 80-100 years. The oldest pipes are 87 years old. Failure is expected within 10 years. Consequence of Failure if project not done The consequence of this pipe failing is calculated to be $375,500. This value is based on the triple bottom line factors of social, environmental, and economics. It is estimated that 100 customers would be without water, electricity, and telecommunications for a day and $200,000 worth of damage to non-SMWRD assets and $100,000 worth of bad publicity due to a major water break. OPTION ANALYSIS Summary of Each Option’s Key Points Asset Option Description 1. Status Quo / Base Line Aggressively monitor segments and repair / replace as needed. 2. Operate Differently N/A 3. Maintain differently N/A 4. Repair N/A 5. Refurbish / Rehabilitation N/A 6. Replace Replace all segments by contract. 7. Decommission N/A 8. Non Asset Solutions N/A For each option listed above, see the completed tables below. 27 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Option 1 Summaries of Key Points (one for each option) Analysis Area Comment Description: Status Quo –Aggressively monitor segments and repair / replace as needed. Design Life: 10 Analysis Period: 10 Capital Requirements: $0 Operations Requirements: $0 Maintenance Requirements: $10,950 Business Risk Exposure $37,550 Overall Pros Overall Cons No indication of when mains might break. High costs to repair / replace pipe after break occurs. Option 2 Summaries of Key Points (one for each option) Analysis Area Comment Description: Replace Design Life: 100 Analysis Period: 100 Capital Requirements: $4,500,000 Operations Requirements: $0 Maintenance Requirements: $0 Business Risk Exposure $3,755 Overall Pros Proactive replacement of pipes eliminates risk of unexpected pipe failure. Overall Cons High capital costs. Pipes may not be in poor condition and may not need replacing unless condition assessment is done. 28 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation LIFE CYCLE COSTING Paste table from LCC and BRE tools Life Cycle Cost Comparison: Option Number Option description Status Option Analysis Period Capital ($) Annual Operations ($) Annual Mtce ($) PV of Benefits ($) PV of Costs minus Benefits ($) Adjusted Annual PV of Costs minus Benefits ($) Total BRE Reduction Benefit / Cost Ratio 1 Status Quo Analyze 10 - 1,095 1,095 0 10,000 1,000 0 0.0 2 Replace Analyze 100 4,500,000 - 0 0 4,520,000 45,200 33,795 0.0 Business Risk Exposure Comparison: PoFA BREA Total Business Risk Reduction (BREB - BREA) 1 Status Quo 10 Years 10%No Backup 100%10.00%$37,550 $0 2 Replace 100 Years 1%No Backup 100%1.00%$3,755 $33,795 Project Option Years to Expected Failure Redundancy ASSUMPTIONS / COMMENTS For BRE, we assumed that for no maintenance history, there is one repair per quadrant per year. $10,000 for each repair. 29 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation RECOMMENDATION Description and justification of the recommended option considering options not chosen The recommended option is to aggressively monitor the condition of the aging pipes in this area and replace the ones in poor condition. This option reduced the capital costs of replacing all the pipes in the area over a certain age. Since not all the pipe installation dates are known, some newer pipes might be replaced unnecessarily. Taking coupons out of pipes to monitor the condition of the assets will help determine the best time to replace the assets. Additionally, SMWRD will begin to put aside $900,000 per year for each of the next 5 years in preparation of the capital costs needed to replace the pipes in this area. These funds will be used to pay for pipe replacements during or after this 5 year period. Requested project budget for the term of the project FY12-13 FY13-14 FY14-15 FY15-16 FY16-17 Ongoing Revenue $900,000 $900,000 $900,000 $900,000 $900.000 Ongoing Operational Costs $0 $0 $0 $0 $0 Ongoing Maintenance Costs $1,000 $1,020 $1,040 $1,061 $1,082 Approval/Signatures Role Name Signature Date Sponsor Gary Welling Committee Water Resources Manager Gil M. Borboa ATTACHMENTS BRE analysis, LCC analysis, project images, AM terms glossary GLOSSARY Definitions of asset management terms used in this document. CLR (Confidence Level Rating) – A rating of how much confidence can be placed in decisions made about asset management. Value is determined using the provided CLR tool. N/A indicates the confidence level rating tool was not used in the project evaluation. LCC (Life-Cycle Cost) – The total cost of providing, owning, and maintaining an item or project throughout its life, or a predetermined evaluation period, including the costs of planning, design, acquisition, operations, maintenance, and disposal, less any disposal value. It enables investment and operational decisions to be made using appropriate evaluation criteria. Value is determined using the provided LCC tool. 30 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation BRE (Business Risk Exposure) – A dollar value representation of the potential impact of economic, financial or social loss or gain, physical damage or injury or delay on the achievement of project objectives, delivery goals or management effectiveness. Value is determined using the provided BRE tool. Consequence of Failure – The outcome of an event or situation expressed quantitatively as current dollars, being a loss, injury, disadvantage or gain. Failure Mode – A Description of the way a process, product, or service could fail to perform its desired function (performance target) as described by the needs and expectations of the external and/or internal customers. Years to 100% Failure – Number of years to occurrence of predicted failure mode. Decision Year – Anticipated year of project initiation, including any preliminary studies or design. Capital Investment – The total cost incurred by an organization in procuring additional or upgraded assets. Annualized O&M Costs – The cost of maintaining and operating an item or project, in escalated dollars, divided by the number of years in the project analysis period. Economic Annual Value – The sum of all projects costs (planning, capital, operations, maintenance, etc.), in escalated dollars, divided by the number of years in the project analysis period. 31 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Project Title: SW Quadrant Water Main Replacement - Ocean Front Project Description: Cast iron water main lines, totalling 7,000 feet, installed in the 1900’s and 1950’s are reaching the end of their useful lives. Some of the p ipeline segments are 6 inch diameter and don’t meet current fire flow demand. WRD would like to take advantage of the opportunity to replace these main lines. Budget Year(s): FY 12-13 Sponsor: Gary Welling Date: 05/23/2011 BUSINESS CASE SUMMARY Recommended Project Option and Description Include key capital cost and timings The recommended option is to replace all segments. This option reduces the business risk exposure of this asset from over $518,463 to roughly $15,711. It also extends asset service life to another 100 years. Key Project Facts of Recommended Option (terms defined in Glossary at back) CLR BRE Years to 100% Failure Decision Year Capital Investment Annualized O&M Costs Economic Annual Value N/A $15,711 3 2013 $2,100,000 $0 $210,200 OBJECTIVES Failure Mode: Capacity Level of Service Financial Efficiency Physical Mortality Issue / Problem to be addressed: Cast iron water main lines along the oceanfront in the southwest quadrant of Santa Monica are reaching the end of their useful lives. Approximately 7,000 feet (1.3 miles) of pipe, installed in 1900’s and 1950’s, is facing structural problems. Failing to address these structural issues may cause service disruptions to customers and possible spills onto the beach. Known Alternatives: 1. Status quo - Continue to monitor all segments and perform fire-flow testing. 2. Replace all segments. 32 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Key Project Considerations: 1. The consequence of failure on this project is relatively high due to the location of the asset and the areas and property it would affect. 2. The current condition of asset is not known. The probability of failure for this asset is based on knowledge of similar assets. A condition assessment of a buried water main was not considered due to the difficulty and cost to do so. 3. Some of the pipes are 6 inch diameter, while the minimum city standard is 8 inch diameter. Therefore, there are capacity problems in addition to structural problems. 4. Scheduling conflicts might occur. CEQA could add additional 3 months to project schedule. Also, no work permitted between Memorial Day and Labor Day (summer season). PROJECT BACKGROUND Existing Standards of Service: The current pipe delivers 75 to 85 PSI, which meets current levels of service. Knowledge of Existing Asset and/or Facility: The asset is a cast iron pipe. It has a design life of 80 years. These segments of water main have no break history that can be determined from Hansen data or staff knowledge. The current conditions of the pipe segments are unknown. Current Demands (Capacity and Utilization): The current pipes provide potable water to southwest area of the City. These pipes serve commercial customers, including hotels and restaurants near the beach. Future Demands (Reliability): A new pipe replacement would extend the service life of this segment of the water system another 80-120 years. This will reduce the business risk exposure to the City for pipe failure. 33 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation FAILURE MODE Prediction of Failure Mode (Reason for Project) Physical mortality: Based on the age and material of the pipes, it has a high probability of breaking, leaking, or other structural issues. Timing of Failure The age of the cast iron pipes range from 60 to 110 years old, with an expected life of 80 years. The older pipes have physical mortality as the imminent failure mode and are expected to fail in approximately 5 years. Consequence of Failure if project not done The consequence of this pipe failing is calculated to be $1,571,100. This value is based on the triple bottom line factors of social, environmental, and economics. It is estimated that 1,000 commercial customers could be affected by water, electricity and telecommunication service disruption for 1 day. A $1,000,000 worth of damage to non-SMWRD assets and property is expected if a failure occurs. OPTION ANALYSIS Summary of Each Option’s Key Points Asset Option Description 1. Status Quo / Base Line This option involves continued monitoring of all segments and testing for adequate fire-flow pressures. 2. Operate Differently N/A 3. Maintain differently N/A 4. Repair N/A 5. Refurbish / Rehabilitation N/A 6. Replace Replace all segments by contract. 7. Decommission N/A 8. Non Asset Solutions N/A For each option listed above, see the completed tables below. 34 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Option 1 Summary of Key Points Analysis Area Comment Description: Status Quo - This option involves continued monitoring of all segments and testing for adequate fire-flow pressures. Design Life: 3 Analysis Period: 3 Capital Requirements: $0 Operations Requirements: $1,530 Maintenance Requirements: $1,530 Business Risk Exposure $518,463 Overall Pros Overall Cons Risk is not significantly reduced. Option 2 Summary of Key Points Analysis Area Comment Description: Replace Design Life: 100 Analysis Period: 100 Capital Requirements: $2,100,000 Operations Requirements: $0 Maintenance Requirements: $0 Business Risk Exposure $15,711 Overall Pros Extended life of asset. Reduced probability of asset failure. Overall Cons High capital costs. 35 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation LIFE CYCLE COSTING Paste table from LCC and BRE tools Life Cycle Cost Comparison: Business Risk Exposure Comparison: ASSUMPTIONS / COMMENTS For BRE, we assumed that for no maintenance history, there is one repair per quadrant per year. $10,000 for each repair. 36 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation RECOMMENDATION Description and justification of the recommended option considering options not chosen The recommended option is to replace all segments. This option reduces the business risk exposure of this asset from over $518,463 to roughly $15,711. It also extends asset service life to another 100 years. Requested project budget for the term of the project FY12-13 FY13-14 FY14-15 FY15-16 FY16-17 Ongoing Revenue $0 $0 $2,100,000 $0 $0 Ongoing Operational Costs $0 $0 $0 $0 $0 Ongoing Maintenance Costs $0 $0 $0 $0 $0 Approval/Signatures Role Name Signature Date Sponsor Gary Welling Committee Water Resources Manager Gil M. Borboa ATTACHMENTS BRE analysis, LCC analysis, project images, AM terms glossary GLOSSARY Definitions of asset management terms used in this document. CLR (Confidence Level Rating) – A rating of how much confidence can be placed in decisions made about asset management. Value is determined using the provided CLR tool. N/A indicates the confidence level rating tool was not used in the project evaluation. LCC (Life-Cycle Cost) – The total cost of providing, owning, and maintaining an item or project throughout its life, or a predetermined evaluation period, including the costs of planning, design, acquisition, operations, maintenance, and disposal, less any disposal value. It enables investment and operational decisions to be made using appropriate evaluation criteria. Value is determined using the provided LCC tool. BRE (Business Risk Exposure) – A dollar value representation of the potential impact of economic, financial or social loss or gain, physical damage or injury or delay on the achievement of project objectives, delivery goals or management effectiveness. Value is determined using the provided BRE tool. 37 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Consequence of Failure – The outcome of an event or situation expressed quantitatively as current dollars, being a loss, injury, disadvantage or gain. Failure Mode – A Description of the way a process, product, or service could fail to perform its desired function (performance target) as described by the needs and expectations of the external and/or internal customers. Years to 100% Failure – Number of years to occurrence of predicted failure mode. Decision Year – Anticipated year of project initiation, including any preliminary studies or design. Capital Investment – The total cost incurred by an organization in procuring additional or upgraded assets. Annualized O&M Costs – The cost of maintaining and operating an item or project, in escalated dollars, divided by the number of years in the project analysis period. Economic Annual Value – The sum of all projects costs (planning, capital, operations, maintenance, etc.), in escalated dollars, divided by the number of years in the project analysis period. 38 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation 39 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Project Title: SW Quadrant Water Main Replacement - Inland Project Description: Cast iron water main lines, totalling 3,483 feet, installed in the 1900’s and 1950’s are reaching the end of their useful lives. Some of the p ipeline segments are 6 inch diameter and don’t meet current fire flow demand. WRD would like to take advantage of the opportunity to replace these main lines. Budget Year(s): FY 12-13 Sponsor: Gary Welling Date: 05/23/2011 BUSINESS CASE SUMMARY Recommended Project Option and Description Include key capital cost and timings The recommended option is to replace all segments. This option reduces the business risk exposure of this asset from over $135,100 to roughly $6,755. It also extends asset service life to another 100 years. Key Project Facts of Recommended Option (terms defined in Glossary at back) CLR BRE Years to 100% Failure Decision Year Capital Investment Annualized O&M Costs Economic Annual Value N/A $6,755 5 2014 $1,044,900 $0 $10,649 OBJECTIVES Failure Mode: Capacity Level of Service Financial Efficiency Physical Mortality Issue / Problem to be addressed: Cast iron water main lines in inland portion of the southwest quadrant of Santa Monica are reaching the end of their useful lives. The 3,483 feet (.7 miles) of pipe, installed in 1900’s and 1950’s, is facing structural problems. Failing to address these issues may cause service disruptions to customers in this area of the city. Known Alternatives: 1. Status quo - Continue to monitor all segments and perform fire-flow testing. 2. Replace all segments. Key Project Considerations: 1. The consequence of failure on this project is relatively high due to the location of the asset and the areas and property it would affect. 2. The current condition of asset is not known. The probability of failure for this asset is based on knowledge of similar assets. A condition assessment of a buried water main was not considered due to the difficulty and cost to do so. 40 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation PROJECT BACKGROUND Existing Standards of Service: The current pipe delivers 75 to 85 PSI, which meets current levels of service. Knowledge of Existing Asset and/or Facility: The asset is a cast iron pipe. It has a design life of 80 years. These segments of water main have no break history that can be determined from Hansen data or staff knowledge. The current conditions of the pipe segments are unknown. Current Demands (Capacity and Utilization): The current pipes provide potable water to southwest area of the City. These pipes serve commercial customers, including hotels and restaurants. Future Demands (Reliability): A new pipe replacement would extend the service life of this segment of the water system another 80-120 years. This will reduce the business risk exposure to the City for pipe failure. 41 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation FAILURE MODE Prediction of Failure Mode (Reason for Project) Physical mortality: Based on the age and material of the pipes, it has a high probability of breaking, leaking, or other structural issues. Timing of Failure The age of the cast iron pipes range from 60 to 110 years old, with an expected life of 80 years. The older pipes have physical mortality as the imminent failure mode and are expected to fail in approximately 5 years. Consequence of Failure if project not done The consequence of this pipe failing is calculated to be $675,500. This value is based on the triple bottom line factors of social, environmental, and economics. It is estimated that 100 commercial customers could be affected by water, electricity and telecommunication service disruption for 1 day. An estimated $500,000 worth of damage to non-SMWRD assets and property is expected if a failure occurs. OPTION ANALYSIS Summary of Each Option’s Key Points Asset Option Description 1. Status Quo / Base Line This option involves continued monitoring of all segments and testing for adequate fire-flow pressures. 2. Operate Differently N/A 3. Maintain differently N/A 4. Repair N/A 5. Refurbish / Rehabilitation N/A 6. Replace Replace all segments by contract. 7. Decommission N/A 8. Non Asset Solutions N/A For each option listed above, see the completed tables below. 42 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Option 1 Summary of Key Points Analysis Area Comment Description: Status Quo - This option involves continued monitoring of all segments and testing for adequate fire-flow pressures. Design Life: 5 Analysis Period: 5 Capital Requirements: $0 Operations Requirements: $2,602 Maintenance Requirements: $2,602 Business Risk Exposure $135,100 Overall Pros Overall Cons Risk is not significantly reduced. Option 2 Summary of Key Points Analysis Area Comment Description: Replace Design Life: 100 Analysis Period: 100 Capital Requirements: $1,044,900 Operations Requirements: $0 Maintenance Requirements: $0 Business Risk Exposure $6,755 Overall Pros Extends life of asset. Reduces probability of asset failure. Overall Cons High capital costs. 43 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation LIFE CYCLE COSTING Paste table from LCC and BRE tools Life Cycle Cost Comparison: Business Risk Exposure Comparison: ASSUMPTIONS / COMMENTS For BRE, we assumed that for no maintenance history, there is one repair per quadrant per year. $10,000 for each repair. 44 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation RECOMMENDATION Description and justification of the recommended option considering options not chosen The recommended option is to replace all segments. This option reduces the business risk exposure of this asset from over $135,100 to roughly $6,755. It also extends asset service life to another 100 years. Requested project budget for the term of the project FY12-13 FY13-14 FY14-15 FY15-16 FY16-17 Ongoing Revenue $0 $0 $0 $1,044,900 $0 Ongoing Operational Costs $0 $0 $0 $0 $0 Ongoing Maintenance Costs $0 $0 $0 $0 $0 Approval/Signatures Role Name Signature Date Sponsor Gary Welling Committee Water Resources Manager Gil M. Borboa ATTACHMENTS BRE analysis, LCC analysis, project images, AM terms glossary GLOSSARY Definitions of asset management terms used in this document. CLR (Confidence Level Rating) – A rating of how much confidence can be placed in decisions made about asset management. Value is determined using the provided CLR tool. N/A indicates the confidence level rating tool was not used in the project evaluation . LCC (Life-Cycle Cost) – The total cost of providing, owning, and maintaining an item or project throughout its life, or a predetermined evaluation period, including the costs of planning, design, acquisition, operations, maintenance, and disposal, less any disposal value. It enables investment and operational decisions to be made using appropriate evaluation criteria. Value is determined using the provided LCC tool. BRE (Business Risk Exposure) – A dollar value representation of the potential impact of economic, financial or social loss or gain, physical damage or injury or delay on the achievement of project objectives, delivery goals or management effectiveness. Value is determined using the provided BRE tool. 45 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Consequence of Failure – The outcome of an event or situation expressed quantitatively as current dollars, being a loss, injury, disadvantage or gain. Failure Mode – A Description of the way a process, product, or service could fail to perform its desired function (performance target) as described by the needs and expectations of the external and/or internal customers. Years to 100% Failure – Number of years to occurrence of predicted failure mode. Decision Year – Anticipated year of project initiation, including any preliminary studies or design. Capital Investment – The total cost incurred by an organization in procuring additional or upgraded assets. Annualized O&M Costs – The cost of maintaining and operating an item or project, in escalated dollars, divided by the number of years in the project analysis period. Economic Annual Value – The sum of all projects costs (planning, capital, operations, maintenance, etc.), in escalated dollars, divided by the number of years in the project analysis period. 46 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation 47 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Project Title: NE Quadrant Water Main Replacement – Broadway Project Description: Cast iron water main lines, approximately 5,000 feet installed in the 1920’s and 1950’s, are reaching the end of their useful lives. WRD would like to take advantage of the opportunity to replace these main lines. Budget Year(s): FY 12-13 Sponsor: Gary Welling Date: 05/23/2011 BUSINESS CASE SUMMARY Recommended Project Option and Description Include key capital cost and timings The recommended option is to replace all segments. This option reduces the business risk exposure of this asset from over $2,032,400 to roughly $203,240. It also extends asset service life to another 100 years. Key Project Facts of Recommended Option (terms defined in Glossary at back) CLR BRE Years to 100% Failure Decision Year Capital Investment Annualized O&M Costs Economic Annual Value N/A $203,240 10 2013 $1,500,000 $0 $1,829,160 OBJECTIVES Failure Mode: Capacity Level of Service Financial Efficiency Physical Mortality Issue / Problem to be addressed: Cast iron water main lines along Broadway in the northeast quadrant of Santa Monica are reaching the end of their useful lives. Approximately 5,000 feet (1 mile) of pipe, installed in 1920’s and 1950’s, is facing structural problems. Failing to address these structural issues may cause service disruptions to customers in this area of the city. Known Alternatives: 1. Status quo - Continue to monitor all segments and perform fire-flow testing. 2. Replace all segments. Key Project Considerations: 1. The consequence of failure on this project is relatively high due to the location of the asset and the areas and property it would affect. 2. The current condition of asset is not known. The probability of failure for this asset is based on knowledge of similar assets. A condition assessment of a buried water main was not considered due to the difficulty and cost to do so. 48 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation 3. Some of the pipes are 6 inch diameter, while the minimum city standard is 8 inch diameter. Therefore, there are capacity problems in addition to structural problems. PROJECT BACKGROUND Existing Standards of Service: The current pipe delivers 75 to 85 PSI, which meets current levels of service. Knowledge of Existing Asset and/or Facility: The asset is a cast iron pipe. It has a design life of 80 years. These segments of water main have no break history that can be determined from Hansen data or staff knowledge. The current conditions of the pipe segments are unknown. Current Demands (Capacity and Utilization): The current pipes provide potable water to northeast area of the City. These pipes serve commercial customers, including hotels, shops, and restaurants along Broadway. Future Demands (Reliability): A new pipe replacement would extend the service life of this segment of the water system another 80-120 years. This will reduce the business risk exposure to the City for pipe failure. 49 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation FAILURE MODE Prediction of Failure Mode (Reason for Project) Physical mortality. Based on the age and material of the pipes, it has a high probability of breaking, leaking, or other structural issues. Timing of Failure The age of the cast iron pipes range from 60 to 90 years old, with an expected life of 80 years. The pipes have physical mortality as the imminent failure mode and are expected to fail in approximately 10 years. Consequence of Failure if project not done The consequence of this pipe failing is calculated to be $20,324,000. This value is based on the triple bottom line factors of social, environmental, and economics. It is estimated that 10,000 commercial customers could be affected by water spilled for 1 day and electricity and telecommunication service disruption for 3 days. Due to its location, a $10,000,000 worth of damage to non-SMWRD assets and property is expected if a failure occurs. OPTION ANALYSIS Summary of Each Option’s Key Points Asset Option Description 1. Status Quo / Base Line This option involves continued monitoring of all segments. 2. Operate Differently N/A 3. Maintain differently N/A 4. Repair N/A 5. Refurbish / Rehabilitation N/A 6. Replace Replace all segments by contractor. 7. Decommission N/A 8. Non Asset Solutions N/A For each option listed above, see the completed tables below. 50 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Option 1 Summary of Key Points Analysis Area Comment Description: Status Quo - This option involves continued monitoring of all segments. Design Life: 10 Analysis Period: 10 Capital Requirements: $0 Operations Requirements: $5,475 Maintenance Requirements: $5,475 Business Risk Exposure $2,032,400 Overall Pros Overall Cons Risk is not significantly reduced. Option 2 Summary of Key Points Analysis Area Comment Description: Replace Design Life: 100 Analysis Period: 100 Capital Requirements: $1,500,000 Operations Requirements: $0 Maintenance Requirements: $0 Business Risk Exposure $203,240 Overall Pros Extends life of asset. Reduces probability of asset failure. Overall Cons High capital costs. 51 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation LIFE CYCLE COSTING Paste table from LCC and BRE tools Life Cycle Cost Comparison: Option Number Option description Status Option Analysis Period Capital ($) Annual Operations ($) Annual Mtce ($) PV of Benefits ($) PV of Costs minus Benefits ($) Adjusted Annual PV of Costs minus Benefits ($) Total BRE Reduction Benefit / Cost Ratio 1 Status Quo Analyze 10 - 1,095 1,095 0 10,000 1,000 0 0.0 2 Replace Analyze 100 1,500,000 - 0 0 1,520,000 15,200 1,829,160 1.2 Business Risk Exposure Comparison: PoFA BREA Total Business Risk Reduction (BREB - BREA) 1 Status Quo 10 Years 10%No Backup 100%10.00%$2,032,400 $0 2 Replace 100 Years 1%No Backup 100%1.00%$203,240 $1,829,160 Project Option Years to Expected Failure Redundancy ASSUMPTIONS / COMMENTS For BRE, we assumed that for no maintenance history, there is one repair per quadrant per year. $10,000 for each repair. 52 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation RECOMMENDATION Description and justification of the recommended option considering options not chosen The recommended option is to replace all segments. This option reduces the business risk exposure of this asset from over $2,032,400 to roughly $203,240. It also extends asset service life to another 100 years. Requested project budget for the term of the project FY12-13 FY13-14 FY14-15 FY15-16 FY16-17 Ongoing Revenue $0 $1,500,000 $0 $0 $0 Ongoing Operational Costs $0 $0 $0 $0 $0 Ongoing Maintenance Costs $0 $0 $0 $0 $0 Approval/Signatures Role Name Signature Date Sponsor Gary Welling Committee Water Resources Manager Gil M. Borboa ATTACHMENTS BRE analysis, LCC analysis, project images, AM terms glossary GLOSSARY Definitions of asset management terms used in this document. CLR (Confidence Level Rating) – A rating of how much confidence can be placed in decisions made about asset management. Value is determined using the provided CLR tool. N/A indicates the confidence level rating tool was not used in the project evaluation. LCC (Life-Cycle Cost) – The total cost of providing, owning, and maintaining an item or project throughout its life, or a predetermined evaluation period, including the costs of planning, design, acquisition, operations, maintenance, and disposal, less any disposal value. It enables investment and operational decisions to be made using appropriate evaluation criteria. Value is determined using the provided LCC tool. BRE (Business Risk Exposure) – A dollar value representation of the potential impact of economic, financial or social loss or gain, physical damage or injury or delay on the achievement of project objectives, delivery goals or management effectiveness. Value is determined using the provided BRE tool. 53 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Consequence of Failure – The outcome of an event or situation expressed quantitatively as current dollars, being a loss, injury, disadvantage or gain. Failure Mode – A Description of the way a process, product, or service could fail to perform its desired function (performance target) as described by the needs and expectations of the external and/or internal customers. Years to 100% Failure – Number of years to occurrence of predicted failure mode. Decision Year – Anticipated year of project initiation, including any preliminary studies or design. Capital Investment – The total cost incurred by an organization in procuring additional or upgraded assets. Annualized O&M Costs – The cost of maintaining and operating an item or project, in escalated dollars, divided by the number of years in the project analysis period. Economic Annual Value – The sum of all projects costs (planning, capital, operations, maintenance, etc.), in escalated dollars, divided by the number of years in the project analysis period. 54 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Project Title: NE Quadrant Water Main Replacement – City Forces Project Description: Six segments of cast iron water main lines, varying in length (approximately 3,500 feet) and installed in the 1920’s and 1950’s, are reaching the end of their useful lives. WRD would like to take advantage of the opportunity to replace these main lines. Budget Year(s): FY 12-13 Sponsor: Gary Welling Date: 05/23/2011 BUSINESS CASE SUMMARY Recommended Project Option and Description Include key capital cost and timings The recommended option is to replace all segments with city forces. This option reduces the business risk exposure of this asset from over $2,440,800 to roughly $24,408. It also extends asset service life to another 100 years. Key Project Facts of Recommended Option (terms defined in Glossary at back) CLR BRE Years to 100% Failure Decision Year Capital Investment Annualized O&M Costs Economic Annual Value N/A $24,408 6 2012 $581,250 $0 $6,413 OBJECTIVES Failure Mode: Capacity Level of Service Financial Efficiency Physical Mortality Issue / Problem to be addressed: Cast iron water main lines in various locations of the northeast quadrant of Santa Monica (listed below) are reaching the end of their useful lives. These pipes are facing structural issues and failing to address these structural issues may cause service disruptions to customers in this area of the city. The locations and lengths of these pipes are:  Santa Monica Place South from 26th St to Harvard Ct – approximately 1000 feet installed in 1920s.  20th Ct from Arizona to Wilshire – approximately 650 feet installed in 1950s.  Euclid Ct from California to Wilshire – approximately 600 feet installed in 1920s.  14th St from California to Washington – approximately 675 feet installed in 1920s.  Montana from 15th Ct to 17th S – approximately 600 feet installed in 1920s.  Idaho from 23rd Ct to 24th Ct – approximately 350 feet installed in 1920s. 55 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Known Alternatives: 1. Status quo - Continue to monitor all segments and perform fire-flow testing. 2. Replace all segments with city forces. Key Project Considerations: 1. The consequence of failure on this project is relatively high due to the location of the asset and the areas and property it would affect. 2. The current condition of asset is not known. The probability of failure for this asset is based on knowledge of similar assets. A condition assessment of a buried water main was not considered due to the difficulty and cost to do so. 3. Some of the pipes are 6 inch diameter, while the minimum city standard is 8 inch diameter. Therefore, there are capacity problems in addition to structural problems. PROJECT BACKGROUND Existing Standards of Service: The current pipes deliver PSIs, which meet current levels of service. Knowledge of Existing Asset and/or Facility: The assets are cast iron pipes. They have a design life of 80 years. These segments of water main have no break history that can be determined from Hansen data or staff knowledge. The current conditions of the pipe segments are unknown. Current Demands (Capacity and Utilization): The current pipes provide potable water to northeast area of the City. These pipes serve commercial and residential customers. Future Demands (Reliability): New pipe replacements would extend the service life of these segments of the water system another 80-120 years. This will reduce the business risk exposure to the City for pipe failure. 56 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation FAILURE MODE Prediction of Failure Mode (Reason for Project) Physical mortality. Based on the age and material of the pipes, it has a high probability of breaking, leaking, or other structural issues. Timing of Failure The age of the cast iron pipes range from 60 to 90 years old, with an expected life of 80 years. The pipes have physical mortality as the imminent failure mode and are expected to fail in approximately 6 years. Consequence of Failure if project not done The consequence of this pipe failing is calculated to be $2,440,800. This value is based on the triple bottom line factors of social, environmental, and economics. It is estimated that 100 commercial customers could be affected by road closures for 1 day. Due to the location, $2,000,000 worth of damage to non-SMWRD property and $300,000 worth of legal fees is expected if a failure occurs. OPTION ANALYSIS Summary of Each Option’s Key Points Asset Option Description 1. Status Quo / Base Line This option involves continued monitoring of all segments. 2. Operate Differently N/A 3. Maintain differently N/A 4. Repair N/A 5. Refurbish / Rehabilitation N/A 6. Replace Replace all segments by city forces. 7. Decommission N/A 8. Non Asset Solutions N/A For each option listed above, see the completed tables below. 57 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Option 1 Summary of Key Points Analysis Area Comment Description: Status Quo - This option involves continued monitoring of all segments. Design Life: 10 Analysis Period: 10 Capital Requirements: $0 Operations Requirements: $5,475 Maintenance Requirements: $5,475 Business Risk Exposure $407,614 Overall Pros Overall Cons Risk is not significantly reduced. Option 2 Summary of Key Points Analysis Area Comment Description: Replace all segments with city forces Design Life: 100 Analysis Period: 100 Capital Requirements: $581,250 Operations Requirements: $0 Maintenance Requirements: $0 Business Risk Exposure $24,408 Overall Pros Extended life of asset. Reduced probability of asset failure. Overall Cons High capital costs. 58 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation LIFE CYCLE COSTING Paste table from LCC and BRE tools Life Cycle Cost Comparison: Option Number Option description Status Option Analysis Period Capital ($) Annual Operations ($) Annual Mtce ($) PV of Benefits ($) PV of Costs minus Benefits ($) Adjusted Annual PV of Costs minus Benefits ($) Total BRE Reduction Benefit / Cost Ratio 1 Status Quo Analyze 10 - 1,095 1,095 0 10,000 1,000 0 0.0 2 Replace • Santa Monica Place South from 26th St to Harvard Ct Analyze 100 150,000 - 0 0 160,000 1,600 383,206 2.4 3 Replace • 20th Ct from Arizona to Wilshire Analyze 100 97,500 - 0 0 107,500 1,075 383,206 3.6 4 Replace • Euclid Ct from California to Wilshire Analyze 100 90,000 - 0 0 100,000 1,000 383,206 4 5 Replace • 14th St from California to Washington Analyze 100 101,250 - 0 0 111,250 1,113 383,206 3.4 6 Replace • Montana from 15th Ct to 17th St Analyze 100 90,000 - 0 0 100,000 1,000 383,206 3.8 7 Replace • Idaho from 23rd Ct to 24th Ct Analyze 100 52,500 - - 0 62,500 625 383,206 6.1 *The Options in the table do not represent alternatives. This evaluation treats the replacement of all assets as one alternative to Status Quo. The individual segments were separated in the Life Cycle Cost Comparison in order to price each replacement separately and in the appropriate year. Business Risk Exposure Comparison: PoFA BREA Total Business Risk Reduction (BREB - BREA) 1 Status Quo 6 Years 17%No Backup 100%16.70%$407,614 $0 2 Replace • Santa Monica Place South from 26th St to Harvard Ct 100 Years 1%No Backup 100%1.00%$24,408 $383,206 3 Replace • 20th Ct from Arizona to Wilshire 100 Years 1%No Backup 100%1.00%$24,408 $383,206 4 Replace • Euclid Ct from California to Wilshire 100 Years 1%No Backup 100%1.00%$24,408 $383,206 5 Replace • 14th St from California to Washington 100 Years 1%No Backup 100%1.00%$24,408 $383,206 6 Replace • Montana from 15th Ct to 17th St 100 Years 1%No Backup 100%1.00%$24,408 $383,206 7 Replace • Idaho from 23rd Ct to 24th Ct 100 Years 1%No Backup 100%1%$24,408 $383,206 Project Option Years to Expected Failure Redundancy 59 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation ASSUMPTIONS / COMMENTS For BRE, we assumed that for no maintenance history, there is one repair per quadrant per year. $10,000 for each repair. RECOMMENDATION Description and justification of the recommended option considering options not chosen The recommended option is to replace all segments with city forces. This option reduces the business risk exposure of this asset from over $2,440,800 to roughly $24,408. It also extends asset service life to another 100 years. Requested project budget for the term of the project FY12-13 FY13-14 FY14-15 FY15-16 FY16-17 Ongoing Revenue $52,500 $240,000 $191,250 $0 $0 Ongoing Operational Costs $0 $0 $0 $0 $0 Ongoing Maintenance Costs $0 $0 $0 $0 $0 Approval/Signatures Role Name Signature Date Sponsor Gary Welling Committee Water Resources Manager Gil M. Borboa ATTACHMENTS BRE analysis, LCC analysis, project images, AM terms glossary GLOSSARY Definitions of asset management terms used in this document. CLR (Confidence Level Rating) – A rating of how much confidence can be placed in decisions made about asset management. Value is determined using the provided CLR tool. N/A indicates the confidence level rating tool was not used in the project evaluation. LCC (Life-Cycle Cost) – The total cost of providing, owning, and maintaining an item or project throughout its life, or a predetermined evaluation period, including the costs of planning, design, acquisition, operations, maintenance, and disposal, less any disposal value. It enables investment and operational decisions to be made using appropriate evaluation criteria. Value is determined using the provided LCC tool. 60 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation BRE (Business Risk Exposure) – A dollar value representation of the potential impact of economic, financial or social loss or gain, physical damage or injury or delay on the achievement of project objectives, delivery goals or management effectiveness. Value is determined using the provided BRE tool. Consequence of Failure – The outcome of an event or situation expressed quantitatively as current dollars, being a loss, injury, disadvantage or gain. Failure Mode – A Description of the way a process, product, or service could fail to perform its desired function (performance target) as described by the needs and expectations of the external and/or internal customers. Years to 100% Failure – Number of years to occurrence of predicted failure mode. Decision Year – Anticipated year of project initiation, including any preliminary studies or design. Capital Investment – The total cost incurred by an organization in procuring additional or upgraded assets. Annualized O&M Costs – The cost of maintaining and operating an item or project, in escalated dollars, divided by the number of years in the project analysis period. Economic Annual Value – The sum of all projects costs (planning, capital, operations, maintenance, etc.), in escalated dollars, divided by the number of years in the project analysis period. 61 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Project Title: NE Quadrant Water Main Replacement – Wilshire Project Description: Cast iron water main lines, approximately 2,000 feet installed in the 1950’s, are reaching the end of their useful lives. WRD would like to take advantage of the opportunit y to replace these main lines. Budget Year(s): FY 12-13 Sponsor: Gary Welling Date: 05/23/2011 BUSINESS CASE SUMMARY Recommended Project Option and Description Include key capital cost and timings The recommended option is to replace the pipes. This option reduces the business risk exposure from over $300,000 to roughly $23,000. It also extends asset service life to another 100 years . Key Project Facts of Recommended Option (terms defined in Glossary at back) CLR BRE Years to 100% Failure Decision Year Capital Investment Annualized O&M Costs Economic Annual Value N/A $23,590 8 2015 $600,000 $0 $6,200 OBJECTIVES Failure Mode: Capacity Level of Service Financial Efficiency Physical Mortality Issue / Problem to be addressed: Cast iron water main lines along Wilshire in the northeast quadrant of Santa Monica are reaching the end of their useful lives. Approximately 2,000 feet (0.4 mile) of pipe, installed in 1950’s, is facing structural problems. Failing to address these structural issues may cause service disruptions to customers in this area of the city. Known Alternatives: 1. Status quo - Continue to monitor all segments and perform fire-flow testing. 2. Replace all segments. Key Project Considerations: 1. The consequence of failure on this project is relatively high due to the location of the asset and the areas and property it would affect. 2. The current condition of asset is not known. The probability of failure for this asset is based on knowledge of similar assets. A condition assessment of a buried water main was not considered due to the difficulty and cost to do so. 62 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation 3. Some of the pipes are 6 inch diameter, while the minimum city standard is 8 inch di ameter. Therefore, there are capacity problems in addition to structural problems. PROJECT BACKGROUND Existing Standards of Service: The current pipe delivers 115 to 125 PSI, which meets current levels of service. Knowledge of Existing Asset and/or Facility: The asset is a cast iron pipe. It has a design life of 80 years. These segments of water main have no break history that can be determined from Hansen data or staff knowledge. The current conditions of the pipe segments are unknown. Current Demands (Capacity and Utilization): The current pipes provide potable water to northeast area of the City. These pipes serve commercial customers, including hotels, shops, and restaurants along Wilshire. Future Demands (Reliability): A new pipe replacement would extend the service life of this segment of the water system another 80-120 years. This will reduce the business risk exposure to the City for pipe failure. 63 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation FAILURE MODE Prediction of Failure Mode (Reason for Project) Physical mortality: Based on the age and material of the pipes, it has a high probability of breaking, leaking, or other structural issues. Timing of Failure The age of the cast iron pipes are roughly 60 years old, with an expected life of 80 years. The pipes have physical mortality as the imminent failure mode and are expected to fail in approximately 8 years. Consequence of Failure if project not done The consequence of this pipe failing is calculated to be $2,359,000. This value is based on the triple bottom line factors of social, environmental, and economics. It is estimated that 1000 commercial customers could be affected by road closure for 1 day. A $2,000,000 worth of damage to non- SMWRD assets and property is expected if a failure occurs. OPTION ANALYSIS Summary of Each Option’s Key Points Asset Option Description 1. Status Quo / Base Line This option involves continued monitoring of all segments. 2. Operate Differently N/A 3. Maintain differently N/A 4. Repair N/A 5. Refurbish / Rehabilitation N/A 6. Replace Replace all segments by contractor. 7. Decommission N/A 8. Non Asset Solutions N/A For each option listed above, see the completed tables below. 64 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Option 1 Summary of Key Points Analysis Area Comment Description: Status Quo - This option involves continued monitoring of all segments. Design Life: 8 Analysis Period: 8 Capital Requirements: $0 Operations Requirements: $4,292 Maintenance Requirements: $4,292 Business Risk Exposure $306,670 Overall Pros Overall Cons Risk is not significantly reduced. Option 2 Summary of Key Points Analysis Area Comment Description: Replace Design Life: 100 Analysis Period: 100 Capital Requirements: $600,000 Operations Requirements: $0 Maintenance Requirements: $0 Business Risk Exposure $23,590 Overall Pros Extends life of asset. Reduces probability of asset failure. Overall Cons High capital costs. 65 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation LIFE CYCLE COSTING Paste table from LCC and BRE tools Life Cycle Cost Comparison: Option description Status Option Analysis Period Capital ($) Annual Operations ($) Annual Mtce ($) PV of Benefits ($) PV of Costs minus Benefits ($) Adjusted Annual PV of Costs minus Benefits ($) Total BRE Reduction Benefit / Cost Ratio Status Quo Analyze 8 - 1,073 1,073 0 8,000 1,000 0 0.0 Replace Analyze 100 600,000 - 0 0 620,000 6,200 283,080 0.5 Business Risk Exposure Comparison: PoFA BREA Total Business Risk Reduction (BREB - BREA) 1 Status Quo 8 Years 13%No Backup 100%13.00%$306,670 $0 2 Replace 100 Years 1%No Backup 100%1.00%$23,590 $283,080 Project Option Years to Expected Failure Redundancy ASSUMPTIONS / COMMENTS For BRE, we assumed that for no maintenance history, there is one repair per quadrant per year. $10,000 for each repair. 66 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation RECOMMENDATION Description and justification of the recommended option considering options not chosen The recommended option is to replace the pipes. This option reduces the business risk exposure from over $300,000 to roughly $23,000. It also extends asset service life to another 100 years . Requested project budget for the term of the project FY12-13 FY13-14 FY14-15 FY15-16 FY16-17 Ongoing Revenue $0 $0 $0 $600,000 $0 Ongoing Operational Costs $0 $0 $0 $0 $0 Ongoing Maintenance Costs $0 $0 $0 $0 $0 Approval/Signatures Role Name Signature Date Sponsor Gary Welling Committee Water Resources Manager Gil M. Borboa ATTACHMENTS BRE analysis, LCC analysis, project images, AM terms glossary GLOSSARY Definitions of asset management terms used in this document. CLR (Confidence Level Rating) – A rating of how much confidence can be placed in decisions made about asset management. Value is determined using the provided CLR tool. N/A indicates the confidence level rating tool was not used in the project evaluation. LCC (Life-Cycle Cost) – The total cost of providing, owning, and maintaining an item or project throughout its life, or a predetermined evaluation period, including the costs of planning, design, acquisition, operations, maintenance, and disposal, less any disposal value. It enables investment and operational decisions to be made using appropriate evaluation criteria. Value is determined using the provided LCC tool. BRE (Business Risk Exposure) – A dollar value representation of the potential impact of economic, financial or social loss or gain, physical damage or injury or delay on the achievement of project objectives, delivery goals or management effectiveness. Value is determined using the provided BRE tool. Consequence of Failure – The outcome of an event or situation expressed quantitatively as current dollars, being a loss, injury, disadvantage or gain. 67 City of Santa Monica Water Resources Division Capital Improvement Program Business Case Evaluation Failure Mode – A Description of the way a process, product, or service could fail to perform its desired function (performance target) as described by the needs and expectations of the external and/or internal customers. Years to 100% Failure – Number of years to occurrence of predicted failure mode. Decision Year – Anticipated year of project initiation, including any preliminary studies or design. Capital Investment – The total cost incurred by an organization in procuring additional or upgraded assets. Annualized O&M Costs – The cost of maintaining and operating an item or project, in escalated dollars, divided by the number of years in the project analysis period. Economic Annual Value – The sum of all projects costs (planning, capital, operations, maintenance, etc.), in escalated dollars, divided by the number of years in the project analysis period. 68 8614014 City of Santa Monica Water Resources Division Five Year Capital Improvement Program Business Case Evaluations GHD Inc. 16451 Scientific Way Irvine, CA 92618 T: 1 949 250 0501 F: 1 949 250 0541 E: irvmail@ghd.com © GHD Inc. 2011 This document may only be used for the purpose for which it was commissioned and in accordance with the Terms of Engagement for the commission. Unauthorized use of this document in any form whatsoever is prohibited. Document Status Rev No.Author Reviewer Approved for Issue Name Signature Name Signature Date REFERENCE: Contract No. 10608 (CCS) & Agreement No. 10609 (CCS)