The USDA loan may signal the demise of the design-build process, once a cornerstone of the County’s lapsed campaign to deliver affordability, competitive bidding and a co-equal cost analysis—including economical alternatives—to the Los Osos sewer project.

Hello USDA loan, good-bye design-build and all it promised.

The County is on the verge of dropping its once-touted, cost-saving design-build process for the Los Osos sewer project. The trigger for shelving design-build: The approximately $64 million USDA loan coming to the County for the project and contractual strings that the County claims are attached to the loan.

“(USDA) may not support design-build under their guidelines and under their contracting documents,” said County Project Engineer John Waddell at the July 27 Los Osos Project Update for the Board of Supervisors and public.

“In the next several days,” said Waddell at the time, “when we find out the amount of the funding, and in the next several weeks when we get their additions on the funding, we’ll be able to evaluate what their funding means, what that means for design-build, how the benefits of USDA funding compare with the benefits of design-build and so forth, and we’ll be able to resolve this question in the near future.”

The USDA loan does not preclude design-build—although design-build hasn’t been done under USDA in California. In fact, USDA regulations support design-build and inclusion of economical alternatives. However, Waddell’s comment suggests that Public Works has already predetermined that the benefits of USDA funding far exceed the benefits of design-build, to make a specious argument out of it, as if they have to make a choice between USDA and design-build, which they don’t.

The real choice the County has to make is whether they want to follow USDA regulations and fully restore design-build with STEP and alternatives—or not, and if they don’t then how to best avoid them. Among several relevant USDA regulations covering design-build is:

§ 1780.70  Owner’s procurement regulations.

Owner’s procurement requirements must comply with the following standards:

(b) Maximum open and free competition. All procurement transactions, regardless of whether by sealed bids or by negotiation and without regard to dollar value, shall be conducted in a manner that provides maximum open and free competition. Procurement procedures shall not restrict or eliminate competition. Examples of what are considered to be restrictive of competition include, but are not limited to: placing unreasonable requirements on firms in order for them to qualify to do business; noncompetitive practices between firms; organizational conflicts of interest; and unnecessary experience and bonding requirements…”

Design-build has been a neutered process for over a year now, the actual “competition” having shrunk exclusively to the existing MWH design and a few gravity system builders. The USDA loan now provides the County with a timely excuse to drop design-build entirely. At the same time, dropping design-build yields another benefit—it cuts off any remote possibility of returning to the open-bidding process. So those Los Osos community activists seeking to return STEP to the design-build process may soon have to contend with getting design-build back on the table first and STEP back in design-build second, which will further distance STEP and affordable alternatives from the debate over the County’s closed-door policy.

Of course, the County could keep the shell of design-build alive to lend the appearance that they have followed their guiding documents, such as the County’s own 2007 “Assessment Engineer’s Report,” which prominently identifies design-build and an “apples-to-apples” cost comparison of the STEP and gravity collection systems as a key components of the sewer solution. Adopted by the County, the “Engineer’s Report” influenced Los Osos homeowners who succumbed to the false advertising to vote “yes” in the fall 2007 Proposition 218 vote to be taxed or not taxed for the project. Many who voted “yes” believed that the County’s own document, certified by two engineers, was sufficient guarantee that the most affordable project would be selected.

Orenco Letter
On the surface, there appears to be little PR value in maintaining the thin design-build façade, and, in fact, it may actually pose some liability for the County to keep it on life support. Generally, though, the USDA loan is a win-win for the County’s back-room way of doing business.

Commissioned by the County, the Wallace Group’s “Assessment Engineer’s Report” of August 2007 was stamped and certified by Wallace Group Assessment Engineer Craig Campbell and Co-Assessment Engineer Dean Benedix for the County. Contained in that report, which was accepted by the Board of Supervisors, is an August 16, 2007 memo from Benedix to then-Public Works Director Noel King and then-Deputy Director Paavo Ogren that read in part:

“The special benefit of the collection system was selected such that a range of collection system alternatives could be funded. In the current project selection strategies, the STEP and gravity alternatives would compete through the construction bidding phase using a competitive bid, design/build and/or build/own/operate/transfer process.”

Wrote Bill Cagle of Orenco Systems to Board Chairman Frank Mecham on May 28: “Based on the above statement alone WM Lyles should have been shortlisted, because it was the only team to propose STEP technology and according to official documents STEP was supposed to be taken through the RFP construction bid stage.”

The next sentence in the report states:

“If gravity system bids are received near the high end of the cost range, it is unlikely that gravity will compete with STEP.”

“And there you have the crux of the problem,” Cagle wrote in his letter. “Notwithstanding the fact that the STEP alternative would likely beat any gravity sewer proposal on cost and that the WM Lyles team represented the most qualified team to deliver the most sustainable solution, the RFQ evaluation committee did not include the WM Lyles STEP alternative on the shortlist. The only logical explanation to this suggests impropriety and a pre-determined outcome of the RFQ process.”

Orenco introduced design-build to Los Osos in October 2006, wrote Cagle, “because if done correctly the DB project delivery method performed in an open, fair, and equitable manner can bridge all socio-economic barriers. And if Orenco lost in that type of process, that would be OK, because Los Osos would benefit, which is the ultimate goal.

“Unfortunately,” wrote Cagle, “actions by staff and the appearance of impropriety with MWH have severely damaged the Los Osos WWTP DB process, attested by the fact that the socio-economic unrest still exists, and administrative cost overruns exceeding $5 million. The Design Build Institute of America warns that if the DB process is adulterated, the benefits of DB will be stripped away.”

[Lee Evey, past president of DBIA, offered his services to SLO County. This included bringing his design-build team of consultants to help the County through the design-build process. Evey didn’t hear from the County again. Obviously, the County was never interested in playing a willing, honest broker in a co-equal design-build process or they would have at least responded.]

“Engineer’s Report”
Legally, County Counsel Warren Jensen reduced the County’s own engineer-certified, board-adopted 2007 “Assessment Engineer’s Report” to a pile of scrap paper.

“The ‘Assessment Engineer’s Report,’” said Jensen on July 27, “is not a contract and it does not create some right to challenge what’s happened subsequent to that vote. In fact that very issue about the supposed contractual nature of t
he pact created by this ‘Engineer’s Report’ that was associated with the Prop 218 process was raised in a lawsuit that the County could not proceed because of that very reason, and the judge rebuffed that.”

Jensen likes to play with words, but, contrary to his bouts of hyperbole, there has been no ruling in local courts on the significance of the “Engineer’s Report.” The fact is that the “Engineer’s Report,” while not a contract, is a guiding document promulgated by the County. What is the point of the “Engineer’s Report” if isn’t adhered to? What is the meaning and value of the engineers’ stamps certifying the report and guaranteeing its contents if the report has no bearing on the project? Why did the County go to lengths (and expense) to disclose this information and notify the public of its inclusion in the Prop 218 vote if it wasn’t to be followed?

Plainly, to some observers, such a distinct deviation from the “Engineer’s Report” constitutes a violation of Proposition 218 of the California Constitution and, despite Jensen’s word-parsing, the County appears to be in some degree of legal jeopardy for degrading the clear intent of the report that steered the $127 million assessment of developed properties.

No Competition
Once ballyhooed by the County as an integral part of its plan to build the most affordable project for Los Osos, design-build became a lame-duck process last April when the County preemptively dropped any and all alternative systems from bidding—before any side-by-side cost comparison of STEP collection versus gravity collection could take place to determine the least expensive.

Waddell of Public Works doesn’t quite see it that way.

“We did have a competitive prequalification step to the design-build process in early 2009,” said Waddell on July 29.

Despite Waddell’s distortion of the facts, no cost competition ever took place and no final numbers were ever compared to see which system cost less, though STEP representatives claimed STEP would cost at least $50 million less than MWH gravity collection. As Project Engineer, Waddell should know that “competitive prequalification” is hardly the same as “competitive bidding,” which was always the essence of the design-build advantage.

Dumping the design-build process will most likely hand MWH a design-only contract, circumventing regulations preventing them from bidding, and contractors will then bid on the MWH design again as they did in 2005. This absolutely eliminates competition on the design, and virtually assures elimination of any real innovation in the project.

“The Design Build Institute of America training attended by County staff… warns this will happen whenever the design-build process is adulterated,” wrote Cagle to Chairman Mecham: “Had the current DB process gone down this path we’d already be in construction. And if a re-start were declared, construction of a sustainable wastewater solution could feasibly begin in a shorter timeframe than even the current project.”

Chairman Mecham did not respond to Cagle’s letter or to community inquires regarding the Cagle letter.

Public Works Director Paavo Ogren responded to Cagle in a June 3 email, largely ignoring the substance of Cagle’s comments, instead directing his response to copied supervisors, and volunteering to meet with them individually to review project milestones.

“Obviously I don’t agree with several of Mr. Cagle’s statements in his most recent correspondence,” wrote Ogren. “The project that your Board approved, and which is now the jurisdiction of the Commission, is an excellent project for Los Osos, and the time has come to move forward.”

Forward to design-build failure and tragedy for thousands in Los Osos.


Centurion Gibson Calls for ‘Ramming Speed!’ to Accelerate Los Osos Sewer


Second District Supervisor Bruce Gibson is in a big hurry, at least when it comes to the Los Osos Wastewater Project. He would do anything to speed up the project, anything. If he could push the start of construction up six months from March 2012 to September 2011 by ramming it by his pliable County Board of Supervisor brethren, then he will ram them head-on by lawyering, squeezing, smothering, hustling, and palavering them until they roll over, which they all eventually do. Gibson, like the Roman Centurion commanding the war galley rowed by slave Ben-Hur, has called for “Ramming speed!” on the Los Osos sewer. Public Works staff has been asked to return to the board in September with an accelerated plan.

Second District Supervisor Bruce Gibson is in a big hurry, at least when it comes to the Los Osos Wastewater Project. He would do anything to speed up the project, anything. He’s proven that over and over again. If he could push the start of construction up six months from March 2012 to September 2011 by ramming it by his pliable County Board of Supervisor brethren, then he will ram them head-on by lawyering, squeezing, smothering, hustling, and palavering them until they roll over, which they all eventually do.

Gibson, like the Roman Centurion commanding the war galley rowed by slave Ben-Hur, has called for “Ramming speed!” on the Los Osos sewer. Public Works staff has been asked to return to the board in September with an accelerated plan. It seems like Gibson has been trying to speed up the project from the moment it landed in the lap of the County in 2006 and he joined the board.

This rush tactic is nothing new for speed demon Gibson. He tried to bowl over the California Coastal Commission in January by pounding on the urgency of receiving their CDP in time to meet the County’s USDA loan application deadline, but it didn’t work. Coastal at least forced him to slow down long enough so more specific environmental safeguards could be conditioned into the permit the County eventually received in June, despite lingering environmental concerns from activists and professionals about the County’s choice of big-pipe gravity collection for the Los Osos sewer.

Gibson the pirate would happily ram the ship of County government into the Los Osos Wastewater Project, or vice versa, if it meant breaking ground earlier on the most expensive sewer per capita – about $350 per month — in the history of California. Only a pirate would levy outrageous new taxes and plunder a disadvantaged community in the trough of the deepest recession since the Great Depression. Only a pirate living by the sword, bereft of compassion, would rush forward an over-the-top public works project that will force half the town to walk the plank—sell their homes and move out—at the lowest point in their lives.

With what Gibson calls a “known project” (price still unknown) and Coastal Development Permit in hand, the benefits of speeding up the project outweigh the risks, Gibson the gambler assured the board and public at the Board of Supervisors’ Los Osos Update in San Luis Obispo on July 27:

“I’m comfortable enough that the financing will fall into place or that we have gotten far enough down the due diligence line to propose that we find another $400,000 to accelerate efforts.”

Screw the risks, throw more good money down the bad sewer—RAMMING SPEED!

“If we pass the due diligence early (and financing falls through) ,” Gibson acknowledged, “we would be on the hook for the entire $165 million project—without knowing if the rates and charges passed, without knowing what the State Revolving Fund loan yield is going to be… We (the County) would then be in the gun-sights of the Regional (Water) Board for being the (financially) responsible party to making a sewer happen, without the necessary blocks of financing set up.

“I see the picture gradually clarifying,” quickly added Gibson the gypsy, gazing into his crystal ball, which looks suspiciously like a magic 8-ball purchased at Target. “I think we’re headed toward a diligence resolution. I think we’re headed toward taking formal acceptance of the project as these various issues and items fall into place… It is risking general taxpayers’ dollars on a loan basis… (but) I see that we are getting closer to resolving those uncertainties…”

That’s when Gibson the gambler put his foot on top of the County’s foot and jammed it down on the accelerator.

“As I look at the way things are lining up, under the assumption that we have a favorable result from the USDA application,” he said, “I think it would be a legitimate manageable risk of general tax-payer money to accelerate this project, so we get the best possible bid environment and get the water conservation plan going and all the benefits that an accelerated timeline would provide.”

The County should have started a mandatory water conservation program in Los Osos long ago, without a sewer in place, but Gibson will say and do anything to get his way, including twisting the County’s lack of a water conservation plan for Los Osos to make it seem like a benefit to moving up the start of construction.

Groundbreaking can’t come soon enough for dwindling County coffers tapped by Gibson and Public Works Director Paavo Ogren to plot the Sewer to Nowhere. Accept the project earlier, start the project earlier, and the County can move faster to begin drawing from funds assessed Los Osos “Prohibition Zone” homeowners—to pay itself back the $8 million in County general funds already spent, misspent some say, simply to bring the project to bid.

Gibson is in such a hurry that he would openly lie to the board and public attending the July 27 meeting, and those at home watching on TV or listening to the radio. No problem:

“Six months of delay is something like another 180 million gallons of improperly treated pollution dumped in the Morro Bay National Estuary, and we seek to correct that as soon as we can, it’s been going on far too long,” he intoned.

And, when asked if there was a building moratorium in Los Osos, Gibson the liar, who graduated with a master’s degree in geophysics and lava lamps from the University of Hawaii, said:

“There’s not a building moratorium in Los Osos, but there is a requirement to retrofit to build and that is basin wide. New development actually ends up reducing the seawater intrusion problem.”

Wrong and wronger.

At the following week’s Board of Supervisors meeting, during public comment, a speaker chastised Gibson for spreading misinformation—for using his bogus “180 million gallons” and “New development reduces seawater intrusion” arguments to pressure a board motion to expedite the project—without offering a shred of proof or a single document to verify either fallacious claim. Unperturbed by the confrontation, Gibson maintained his stony silence, offering no clarification, no apology, although a whole community has been sentenced to economic Death Row on just such false evidence he has entered into the record.

The other board members said nothing about Gibson’s propaganda because they didn’t know the subject matter and didn’t want to get drawn any deeper into the Los Osos quagmire they’re already sinking in. Instead, they chose to play willing victims of false claims from a fellow board member breaching his fiduciary duty, rather than asking a single question in even a belated fake-sincere attempt to uphold their sworn duty. They have already allowed Gibson to get away with too much wrongdoing, and that in itself is casting a long shadow across the board.

So here they all are again, gathered around the roulette wheel at Casino San Luis, otherwise known as the Board of Supervisors meeting on July 27, spinning for more tax dollars to keep the Los Osos project on the attack. Gibson the gambler is in so much of a hurry to cover the deep debt he’s worked up that he’s willing to risk $400,000 more of County general funds, on top of the already-spent $8 million, to move the project start-up date six months, six months closer to being unstoppable.

Unstoppability is Gibson’s goal for the sewer and why he can’t stop pushing. And one of the unspoken reasons why he’s in such a mad dash—is ghosts. That’s right, ghosts. Gibson knows all about the Los Osos jinx and the ghosts of sewer failures past. Whatever can happen will happen in that topsy-turvy, whimsical land of sea-seasoned nature-preserve dwellers, where lawsuits pop up like mushrooms in a damp basement. Gibson inherited the jinx from previous 2nd District Supervisor Shirley Bianchi, who in 2005—with her own personal radio ads—fought against the recall of three Los Osos Community Service District directors promoting the ill-conceived midtown Tri-W project—and lost to strong community opposition to the Tri-W project, however slim the margin.

Gibson saw firsthand how the jinx claimed Bianchi. He studied the grand failure of Tri-W, and knows that anything can happen anytime in Los Osos to stop project cold in its tracks. He knows a lawsuit could drop at the 11th hour, or there’s always a good chance Public Works will screw up and snatch defeat from the jaws of victory as it has so many times before with the project; as it has by wasting millions of dollars to develop a flawed project from a flawed EIR that had to be corrected, changed and conditioned extensively by the Planning Commission and reinforced by the Coastal Commission.

History is not on his side and time is his enemy, and Gibson is trying to beat the Los Osos jinx by closing the window of opportunity for failure. He’s fighting to take time off the clock for the humongously bloated and grotesquely expensive project to get bogged down, perhaps forever, in the uniquely absorbent “magic sand” of Los Osos. Gibson seems to have learned his lessons well. Or has he?

A new face at public comment is always a point of interest for jaded board members weary of seeing the same faces and hearing the same voices and same complaints at meetings, week after week, no matter how legitimate they are. Arlene McQueen, a Los Osos homeowner and senior, had never spoken at a Board of Supervisors meeting before July 27, so her poignant, plain-spoken comments carried an extra measure of weight to those tuned that afternoon to a fresh face and new voice in the crowd. Here are her comments in their entirety:

“I have come here today because I am extremely worried about our future in Los Osos. We built our home in 1980 and intended to stay here for the rest of our lives. However, it doesn’t appear that that will happen. So many of us will not be able to pay this exorbitant sewer bill which you are forcing on us. We trusted you, our County, to protect us from losing our homes, but instead you are leading us down the hill to disaster. We trusted you to find an affordable alternative to this very expensive gravity collection system. We all know that there are other options available that are used all around the world, but you haven’t even tried to get bids for STEP or vacuum systems.

“Bruce Gibson—you have let us down. Public Works—you have let us down. You have all let us down. You have tunnel vision and only want to see this project get underway, no matter what the cost, no matter who is hurt. We implore you to rethink this situation before it’s too late. What you are doing is a crime to the community of Los Osos. This cleansing and removal of the lower and middle income residents will be on your conscience forever. Can you live with that on your conscience? There is simply no way that we and thousands of others can afford this project. It’s a bad project and it’s far too expensive. We know that there has to be another way, and you know that also. Thank you.”

There is yet one more compelling benefit—conveniently omitted by Gibson—to accelerating the unaffordable project: The faster construction starts, the sooner Mrs. McQueen will have to pack and move. That’s one less senior that Gibson and the mute board will have to hear whine about being kicked out of town by a $350 a month sewer bill. Multiply her voice by 6,000 and that’s a lot of whining this board and the next board does not want to hear every Tuesday.

Mrs. McQueen did not use all of her allotted three minutes to complete her heartfelt comments, and tha
t must have greatly pleased Gibson and the board, which offered her no response from which to take even a grain of solace. None at all.

Gibson the salesman had closed the deal.