The $34.95 million base bid the Hot Springs Board of Directors awarded Tuesday night exceeded the available balance in the Lake Ouachita water supply project bond fund by almost $8 million, but the city said soliciting a new round of bids would be even costlier.

The bid awarded to Crow Group of Morrilton provides for the construction of a 27,500-square-foot water treatment plant and 5,500-square-foot administration and laboratory building off Amity Road. The resulting contract will be the largest awarded for the more than $100 million supply project.

The bid exceeded the city's 2017 estimate by $12 million but was the lowest of the three from the July 26 bid opening. According to information provided to the board, CDI Contractors and McKee Utility Contractors submitted bids of $47.60 million and $54.35 million.

"If we reject it, we go out for bids again," City Attorney Brian Albright told the board. "I'm not trying to hold you hostage here. I'm just telling you you're not going to get a lower bid."

The enabling resolution the board adopted included a $7.95 million bridge loan from the city's general fund. It had to be added to the $27 million remaining in the bond fund to certify the availability of funds to the contractor.

"We're seeing these kinds of projects throughout the state coming in well over any type of an estimate," City Manager Bill Burrough told the board. "I think that's become the norm now, if you can find a contractor that will even bid on the projects.

"I was happy to get three bids. I wasn't happy with the number. I'm glad to have Crow coming in at the number they did. Otherwise, we'd be looking at 47 to 54, and the entire project would be in jeopardy."

The city said the general fund loan is a placeholder for a yet-to-be-determined funding source that will be in place before the bond funds are depleted. The additional funding will pay for the balance of the plant contract and finished lines that will distribute treated water from the new plant.

The 12-inch main on Central Avenue (Highway 7 south) will be the primary conduit until additional funding is secured for a large-diameter finished line and other new lines. The city told the board the distribution system's current configuration can absorb less than half of the new plant's 15 million-gallon a day capacity.

Burrough told the board the 75-year-old Lakeside Plant that treats water from the city reservoir at Lake Ricks can be decommissioned after the new lines are added, saving the water fund about $1 million a year in operating costs.

Burrough raised the possibility of another rate increase at the board's Aug. 6 workshop. The rate structure servicing the $109 million bond issue the board authorized in June 2020 raised monthly base rates for residential meters inside the city from $5 to $13 over a four-year period that expired at the end of last year. They rose from $7.50 to $19 for customers outside the city. Annual 3% increases took effect at the start of the year.

Burrough said a property tax has not been discussed, despite talk to the contrary. The city hasn't levied a property tax since the 2017 tax year.

"It's widely rumored this board will pass 5 mills to go towards bond debt," he said. "I can tell you there's not been one discussion, even at the staff level, of asking for a millage to pay for this bond. If that rumor is circulating out there, I want to make sure people understand it's not true."

A letter Crow included with its bid said the contract Tuesday's night resolution authorized Burrough to execute won't be a fixed price agreement. Citing market volatility, Crow said the contract will have a mutually agreed escalation clause.

Albright told the board change orders won't add up to $13 million, the difference between Crow's bid and the next highest.

"No one here can tell you that there will not be a request for a change order with respect to escalation, materials or time, however, this bid was $34 million," Albright said. "Change orders will not be $13 million."

The city had initially hoped to have the supply project completed by this time next year, but Crow's letter said it can't meet the 540- to 600-day timeline in the city's bid form. The schedule Crow provided called for a 700- to 800-day timeline, with final completion in December 2024.

Crow's schedule is based on a five-month time frame for delivery of ductile iron pipe, but the letter said suppliers are on a seven- to 18-month schedule. That timeline risks "significant project delay," the letter said.

"Crow requests that the city of Hot Springs, Crist Engineers and the Crow project management team work together to expedite the necessary piping, evaluate alternative material utilization and otherwise focus on achieving a 5-month delivery schedule." the letter said.

Print Headline: Board OKs $34.95M bid for water treatment plant

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