I write regarding the comments of Colin Craig of the Canadian Taxpayers Federation in the Feb. 18 Leader-Post. Why is the answer to most of the questions relating to the City of Regina's financial issues to "scale back the pension plan" ....
Following a referendum that gave the city the green light to proceed with a public private partnership (P3), the City of Regina announced on October 16, 2013 that it had shortlisted three consortia (“proponent teams”) to compete for the P3 contract to build the new waste water treatment plant.
The three proponent teams are:
EPCOR Saskatchewan Water Partners
Prairie Water Partners
Wascana Environmental Partners
According to the timeline in the Request for Qualifications, the three proponent teams have until February 24, 2014 to submit their final proposals on how they will design, build, finance, operate and maintain the new waste water treatment plant. The city plans to notify the successful proponent on February 28, 2014 and sign an agreement by April 30, 2014.
The RFQ (Request for Qualifications) also states that each of the consortia that are not successful in the RFP (Request for Proposals) process will receive an honorium of $250,000. The winning team will have a 30-year multi-million dollar contract for the new WWTP.
Who are the companies involved in the three consortia?
Each “proponent team” is a newly-constructed consortium comprising five or six companies who came together to bid on the WWTP project. Each company plays a different role in the project.
The following companies make up each of the proponent teams:
EPCOR Saskatchewan Water Partners
Lockerbie Stanley Inc.: lead company on design and construction
Stantec: design and construction team
EPCOR Water Services Inc: Project lead, Operation and Maintenance Lead, Financing Team
Gracorp Capital Advisors: Project Lead, Financing Lead
Graham Infrastructure LP: Design and Construction Lead
Prairie Water Partners
CH2M Hill Canada Ltd: project lead, design and construction lead, operation and maintenance lead
Maple Reinders Constructors Ltd.: design and construction team
Alliance Energy Ltd.: design and construction team
Westridge Construction Ltd.: design and construction team
GEC Architecture: design and construction team
Macquarie Capital Group Ltd.: project lead, financing lead
Wascana Environmental Partners
Alberici Constructors, Inc.: design and construction lead
Burns and McDonnell Engineering Co. Inc.: design and construction team
Black and McDonald Ltd: design and construction team
Allnorth Consultants Ltd: design and construction team
Brookfield Financial Corp.: Project Lead, Financing Lead
Fiera Axium Infrastructure Canada II LP: project lead, financing lead
United Water Environmental Services Canada LP: operation and maintenance lead
Background on the Water Companies in the Consortia
Of the three water companies vying to operate and maintain the waste water treatment plant, one is based in the United States (CH2M Hill) and one is a U.S. subsidiary of the French multinational company, Suez (United Water). The third company - EPCOR - is owned by the City of Edmonton but operates water and waste water treatment plants in numerous communities in Alberta, British Columbia and the United States.
United Water Environmental Services
United Water is one of the largest private water companies in the United States. Since 2000 it has been fully owned by Suez Environnement, a major French multinational water company. United Water serves about 5.5 million people in 21 states, operates 90 municipal water systems and owns 16 water utilities. Since 2000, however, it has lost major contracts in Atlanta, Milwaukee and Gary, Indiana.
United Water’s headquarters are in Harrington Park, New Jersey. Total U.S. revenues were $765 million in 2012.
Suez’ headquarters are in Paris, France. The company’s total revenues in 2012 were $20 billion and its total profit was $331 million. Its CEO Jean-Louis Chaussade made $1.9 million.
The website of United Water promotes public private partnerships and privatization, stating that local governments realize “20% to 50% in cost savings” through a public private partnership. Their website states that half of all water systems in the U.S. (24,290) are privately owned, while 1,343 have shared ownership and the rest are publicly owned. This is not the case for Canada, where the large majority of water and waste water systems are publicly owned and operated.
In 2003, the city of Atlanta, Georgia cancelled its 20-year contract with United Water after only four years. The company cut its workforce in half, fell behind on more than 13,000 work orders and did not respond adequately to emergencies. The company also failed to deliver on promised savings and lost millions by failing to collect bills on meter installation and readings.
In 2010, the district of Gary, Indiana dissolved its contract with United Water to save $4.4 million a year. The company had eliminated half the workforce through attrition which led to serious decline in service quality. Between 2003 and 2007 there were more than 80 cave-ins as sewer lines fell apart. In May 2008 state inspectors found that United Water had violated discharge limits 84 times, had broken equipment, failed to monitor properly or meet mandated deadlines. In 2010 a federal indictment accused the company of conspiracy and felony violations of the Clean Water Act but a jury acquitted the company of all charges even though United Water admitted to having lowered chlorine levels.
In 2007 United Water lost its largest contract with the city of Milwaukee after receiving 20 notices of contract noncompliance including sewage overflows.
Gloucester, Massachusetts did not renew its contract with United Water in 2009 after bacterial contamination left residents boiling their drinking water for 20 days.
CH2M Hill is a large engineering, construction and water firm based in Colorado and operating in 122 countries. The company has 28,000 employees worldwide and works in the area of energy, water and facilities, government infrastructure and international projects.
CH2M Hill’s net income for 2012 was $93 million and total revenue was $6.2 billion. Its CEO Lee McIntire made about $8 million in total compensation in 2012 (salary of $1.5 million, bonus of $1.2 million, $4.9 million in stock awards and options and other compensation).
Its website claims it is ranked second in the industry for international design in sewer, rated by Engineering News Record. It also cites its selection as recipient of The World’s Most Ethical Company for the last five years in a row from Ethisphere Institute. Yet researchers on privatization have revealed a radically different profile of the company.
Privatization and private management of government services
According to the privatization watchdog website Source Watch, CH2M Hill is heavily involved in privatizing public infrastructure and water/waste systems. It has a number of contracts with municipalities to manage a wide range of municipal services.
In 2005, the CH2M Hill subsidiary OMI signed a contract with Sandy Springs, Georgia to manage all its municipal services except fire and police. Two years later two other newly-incorporated towns signed contracts to establish “fully outsourced cities” to CH2M Hill.
Johns Creek, Georgia contracted with CH2M Hill/OMI to run its local government. Only seven officials worked as government employees while 108 employees were hired by CH2M Hill/OMI or its subcontractors.
In 2008, the City of Centennial, Colorado entered into a five-year contract with CH2M Hill to provide almost all public works services, including transportation, traffic engineering, infrastructure maintenance and snow removal. In 2013, the city renewed its contract with CH2M Hill for $53 million.
In 2012, CH2M Hill published a report for the West Coast Infrastructure Exchange (California, Oregon, Washington and BC) that promoted privatization of infrastructure and services. For the state of Washington, the report suggested the privatization of schools, public building, energy efficiency projects and water/sewer systems.
In 2012, the company spent $377,000 on lobbying at the federal level and $648,694 in political contributions to federal candidates. At the state level, CH2M Hill has spent nearly $1.2 million from 2003 to 2012. The company hired 81 lobbyists in 16 states during the same period to lobby for privatization of public services.
Violations of the company
CH2M Hill has been involved in a number of scandals relating to bribery, no-bid contracts, labour and environmental violations, and over billing its clients. Below are a few examples.
a federal indictment unsealed in January 2005 charged that a consultant paid $10,000 a month by CH2M Hill bribed then-East Cleveland mayor in order to retain its contract with the city. The mayor had convinced council to award a no-bid $3.9 million contract to CH2M Hill to manage its water and sewer systems. Nine people were indicted on federal racketeering charges and the mayor received a 108-month sentence and was ordered to pay back the city $5.1 million.
In 2013, the Municipality of Anchorage filed a lawsuit against CH2M Hill and another contractor for major failures and delays related to its port expansion project. The port expansion was supposed to be completed in 2013 but construction was halted in 2010 when extensive damage was found in installed sheet piles. The mayor of Anchorage estimated that the port could end up costing more than $1 billion, significantly higher than the initial estimates of $220 million.
In July 2012, the City of St. John’s, NFL filed a civil suit against six companies, including CH2M Hill, for defective work at the Riverhead regional wastewater plant. The gas proof coating that line two concrete tanks failed and began to peel off the concrete shortly after the plant was completed. The city has done some remedial work and estimates that the total cost of repairs will be more than $5 million.
The Ethics Commission of Miami-Dade County concluded that the handling of a $1.6 billion bid for a contract to repair sewers was flawed after CH2M Hill directly contacted members of the selection committee to submit more than 400 pages of additional documents related to its bid. Although the action was not illegal, it raised serious concerns about the integrity of the process. The company also contributed $13,500 to the political party of the mayor of Miami-Dade County between June 2011 and August 2012.
In September 2012, the U.S. federal government filed a lawsuit against CH2M Hill for overbilling the government for the number of hours worked at the Hanford Nuclear Site. The company had been submitting falsified time cards. In the end, CH2M Hill settled the case by paying $19 million in fines, hiring a corporate monitor, and agreeing to cooperate with the government’s ongoing fraud investigation. CH2M Hill had received nearly $1.4 billion in federal stimulus funds to do the clean up at the Hanford nuclear project. An audit revealed that about $2.1 million in Recovery Act money was wasted by CH2M Hill at Hanford for temporary offices and buildings it did not use.
Between 2003 and 2005, two CH2M Hill employees allegedly billed taxpayers for over 200 purchases of marked-up goods from companies owned by the employees’ spouses and then charged the over priced goods to the government. Four individuals were indicted on charges of fraud and CH2M Hill paid $1.5 million to settle the charges.
In 2007, CH2M Hill was accused of over-billing the Los Angeles Department of Water and Power by $3.3 million. An audit found that the company allowed subcontractors to improperly mark up services, and that the company lacked oversight of cost controls and management of subcontractors and construction.
Radioactive Safety and Environmental Violations
In July 2013, a CH2M Hill-operated wastewater system backed up and rerouted toilet water into a new water park attraction in Traverse City while several children played
In June 2008, CH2M was found to have committed nine nuclear safety violations after an investigation of a radioactive waste spill in 2007.
In March 2005, CH2M Hill was cited for four radioactive safety violations and was required to pay a civil penalty of $316,250.
After Hurricane Katrina, CH2M Hill was awarded a no-bid contract to install and maintain emergency trailers as temporary housing for hurricane victims. The trailers turned out to contain formaldehyde which exposed hurricane victims to toxic fumes. Hurricane victims brought a class action lawsuit against CH2M Hill and other companies for their injuries. The companies involved, including CH2M Hill paid $5 million and then $42 million to settle the case in September 2012.
In 1902, the Edmonton Electric Lighting and Power Company became a public, municipally-owned power company. In 1970 it became Edmonton Power.
In 1996, EPCOR Utilities was formed as a merger of natural gas, power and water utilities. Although EPCOR is owned by the City of Edmonton (its only shareholder), the company and its board acts independently of the city. No city employees or city officials sit on the board.
EPCOR provides electricity to more than 620,000 residential and business customers in Alberta. It also operates water and waste water treatment plants and distribution systems to more than one million people in 75 Canadian communities and to 14 municipalities and 6 counties in the United States. Most of its customers in the United States are in Arizona and New Mexico.
Although EPCOR is fully-owned by the city of Edmonton, it acts much like any other private corporation and has taken over many municipal water and waste water services.
A major corporate profile on EPCOR is currently being prepared by Polaris Institute and will be released within months.