City ends contract with US Water group
By Christine Bolaños
The Liberty Hill Council voted unanimously Monday to terminate within 45 days the city’s contract with US Water Utility Group, which operates and maintains the city’s wastewater treatment plant, amid a budget that was 48 percent more than its contracted amount.
No discussion followed after the council reconvened from executive session regarding the item; however, they had a lengthy discussion with the company’s personnel and city staff just prior.
Underlying issues included the company not providing the city with its bill until several months later giving the city little or no time to challenge questionable costs.
“We got an update (at last week’s meeting) on where we’re at with the operation of the plant. As of February I believe, we were at $150,000 over what was budgeted for the operation of the plant,” City Manager Greg Boatright told the council. “One of the things that is concerning to staff is that US Water has been late on this reporting. The contract calls for a monthly report fielded to the city 20 days prior to the third Wednesday of the following month, which is when staff meets with the contractor.
“When we first started we were in nine months before we got our first report and that process has not improved a whole lot as we’ve moved forward,” Boatright said. “We are concerned once again, that we’re in a position of not knowing until we have what is called in the industry a true-up. We are still in negotiations, if you want to call it that, with the BRA on cost overruns when they were running our plant. It seems like we’re headed down that same path again with US Water and it’s concerning to me because that’s not something that we budget for.
“We budget according to the contract,” Boatright continued. “Yes, there are provisions within the contract when you have additional flows. The contract was based on 181,000 gallons per day when US Water bid the contract. We are currently at 224,000 gallons per day as far as the flows are concerned.”
The city manager said there was some inflow of groundwater and storm water due to recent rains, but that is an exception.
“We’ve seen some backup material now from US Water, but until the last month or so, that information has not been forthcoming. We’re concerned about that. We’re wanting the council apprised of information we have received so that we can make a decision as to what we want to do,” he told council members. “I feel like a lot of the expenditures that were made in the contract called for council approval prior to that being spent or that being approved for an expenditure.”
A spreadsheet details US Water’s expenses in comparison to the budget and the variance. There is a notes section where cost overruns are briefly explained.
In the salaries, benefits and vehicle expenses sections, the notes attribute cost overrun to overtime and additional work performed. Cost overrun for chemicals is due to lower volume of chemicals calculated and increased flow, according to the spreadsheet.
Cost overrun for lab supplies and equipment is attributed to increased sampling for new permit while scrap/sludge cost overrun is due to lower volume of sludge calculated and increased flow. The lift station wetwell cleaning, according to the spreadsheet, went over due to heavy grease and trash in several lift stations.
Scott Spidle, a representative for US Water Utility Group, had the opportunity to address cost overrun issues during the meeting.
He began with an apology.
“We have not been providing a level of reporting, not only detailed reporting but timeliness of reporting as we should have,” Spidle said.
He said he met with city staff and shared six months worth of data that had not been provided to them prior.
“That was not the intention. I’m going to take the responsibility. I had staff here locally that was not providing the level of reporting that should have happened,” Spidle said. “That’s not your fault. That’s not staff’s fault. That’s the company’s responsibility. I did apologize and I will continue to apologize for that.
“Moving forward we did provide some reporting on a monthly basis and then I can tell you there were months, actually January and February, that we had some accounting software issues that didn’t allow to report in a timely manner for a whole month. So we did bring to staff’s attention two months worth of data at one time,” he pointed out. “We’ve had some issues. We’ve had some hurdles we’ve been trying to get over.”
Spidle said the company hired an accountant that is Texas-based.
“She’s dedicated to all of our Texas projects and so moving forward we should have this issue resolved as far as the tardiness and the detail of the reporting of the monthly activities that go on. Hopefully that will help ease your mind,” he said.
A councilmember asked Spidle if cost overruns could be attributed to software issues, to which the US Water representative responded “no.”
Spidle said he looked for the best price and service when working with vendors.
Finance Director Amber Lewis then cited her concerns to council.
“I did calculate the cost overages and so basically right now they’re 48 percent over their contracted amount,” Lewis said, referencing the spreadsheet. “I believe any contract that’s over 25 percent should be presented and considered by council. When he presented the very first report to us in November, I believe, they were already 48 percent (over) and we had a lot of sticker shock at that point as well.
“Hoped that things would be turning around, but it looked like it consistently stayed the same and we saw the same overruns. Chemicals, basically 608 percent over. Salaries, they’re over 45 percent. General repairs and maintenance, 582 percent over budget,” Lewis said. “One thing they weren’t over budget on was grinder pump rebuilds and repairs and that was because in-house staff decided to take over that.”
To miss the contracted amount with a significant difference was frustrating to staff, Lewis said.
“We budget for this contract amount and expect this amount. We’re sold on the contract that any under budget items that we would share in some of the profit. But here’s the bad side of that kind of contract that’s open-ended; the issue with overrun,” she said.
Boatright pointed out costs associated with vehicle maintenance, repairs and oil change for a truck the city does not own.
“How is that not part of a contract that we have with you,” he asked Spidle. “We’re paying for oil changes, tire replacement, toll charges and what we don’t know is what is the responsibility of John. Why are we paying if your employee is not our employee? That’s what I don’t understand.”
John is a company employee that is “pretty much dedicated” to Liberty Hill, Spidle explained.
“On the other side of it is. The way I understand the contract – maybe there’s a discrepancy as far as the way it’s understood is that any expense related to the operations of the facility including the vehicle. I believe it’s mentioned we would provide the vehicle for the project and those expenses are included in the true-up,” Spidle said.
Spidle said the best option would likely be to sit down and have both the company and city representatives look at it.
“The variance on the single page. What it was originally budgeted for. What the actual expense was. This one threw me for a loop – don’t you have a set salary for the operator,” Boatright asked Spidle. “We’re $34,000 over budget on salary. How do you miss a salary, a known that is probably the most static number that you could possibly plug into a budget?”
Spidle said it depends on time the employee spends at the facility. At the end of the year it’s “trued-up.”
He said the company has two true-up contracts in Texas and two in Iowa. US Water Utility Group is new to doing this type of contract versus fixed amount contracts, he said.
Spidle continued assuring the council and staff that there would be no more tardiness in reporting issues.
“To me if we’re not getting the reports on time there’s no way we can have checks and balance. So if we’ve got a bill we’ve got to have a way of justifying that bill. If we’re getting it six months down the road, like it’s already been mentioned, that’s a management problem in my opinion,” said Councilmember Ron Rhea. Spidle agreed.
“We can’t be proactive. We’re in a situation where we have to be reactive,” Boatright added.
“We’ve been an open book. They bid the project. They gave us that price,” Lewis said. “To have them give us that bid. Then come back on the back end and say, ‘Oh well, maybe we can make up for it on the backend.’ That’s how it feels like with this kind of a contract.”
“It’s not just a feeling, Amber, it is what it is,” Mayor Connie Fuller said.
After about 40 minutes of discussing the item, the council went into executive session and returned 30 minutes later with its decision.