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OID Weighs Cost Cuts

POSTED January 18, 2011 3:07 p.m.

In a recent memo to the Oakdale Irrigation District Board of Directors published in the agenda of the Jan. 18 regular meeting, General Manager Steve Knell noted that OID capital construction will be put on hold for the next two to three years. That move is due to the absence of revenue from Tri-Dam, resulting from unreimbursed expenses from the insurance company for the Donnells generator failure; weak power prices; and escalating construction costs of the Tulloch third unit.

The memo further stated that at the last Tri-Dam advisory meeting, that Federal Energy Regulatory Commission (FERC) licensing projects scheduled for Beardsley dam will cost upwards of $7 million to build, which was originally estimated at $4.8 million a few years ago. That money would go to the forest service for the work.

Knell proposed that these projects be performed in-house between OID and its Tri-Dam sister district, South San Joaquin Irrigation District. He said that there is the potential to save approximately $4 million (jointly) by performing the projects using district staff instead of hiring contractors.

“This is easy construction work,” Knell said, adding that it includes things that OID workers do all the time, such as building roads, laying pipes, and so on. “We can do this work… We have the expertise in-house to do this.”

Knell said that the project involves building a couple of campgrounds, a boat ramp, and other work. He said that OID has not been able to look at the plans, but by doing the FERC work, it will save money. He added that it benefits both districts but even if SSJID doesn’t participate, it’s still of value to OID.

Knell’s memo calculated out the costs, and said “it’s safe to assume that 10 percent (of the $7 million) is profit to the contractor and some duplication of overhead.” He went on to state in the memo that the cost is approximately 50 percent for labor, the other 50 percent for materials and transportation. In labor alone, there is a potential to save $3.15 million, and an easy 25 percent savings, by not paying prevailing wages to contract labor. Additionally, construction management services account for upwards of 15 percent of the project costs, but by using in-house forces to manage the work, another $1 million can be saved.

There was some discussion amongst the board members, with comments and questions about SSJID’s position on the topic, as well as potential liabilities, bids for the work, and more about the bottom line. This matter is slated to appear on the Jan. 20 Tri-Dam board agenda.

FERC is the main agency that issues licenses for all non-federal hydroelectric projects in its jurisdiction. A license specifies the conditions for construction, operation, and maintenance of the project.

The next regular meeting of the OID Board of Directors will be at 9 a.m. on Tuesday, Feb. 1 at the OID boardroom, 1205 East F.

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