PROJ01898 ‎(2)‎

• Contract/PO #: C153700
• Contractor Name: Norwood, Town of and Norwood Water Commission
• Contract Type: Loan
• Water District: 60
• County: San Miguel
• Bill Number: HB 93-1273
• Loan Projects - Doc Type: Feasibility Study

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In the spring of 1992, an application for funding was prepared by the Town (enclosed are
two copies of forms for this application). We assume that the application was prepared by
the Town's intern administrator. We do not"know to whom the application was being made,
since we only have the two forms without any additional information. Those forms listed the
cost of the 8" ductile iron pipe as $327,200 but without the footnote regarding the
hydroelectric plant. Following this, numerous other items of correspondence we(~ent to
CWCB and DOLA. Unfortunately, the $327,200 figure continued to be carried forward in
this correspondence without further explanation and became accepted as the amount of the
pipeline.

It is obvious at this time that the $327,200 figure was the incorrect amount to list without
providing additional information, or arranging for additional financing for the hydroelectric
plant. The total cost of an 8" DIP with hydroelectric was estimated to be $633,600. It was
also mentioned in the 1991 report (page 62) that a more in-depth analysis should be made by
a consultant that specializes in hydroelectric power prior to committing to this alternative. If
the hydroelectric had proved feasible, a more complete package should have been assembled
for financing the entire system; for example, it may have been necessary to issue a separate
revenue bond in the amount of $300,000 for the hydroelectric portion.

As it stands now, the $327,200 request is basically in error. The application occurred when
the Town was in a transitional period with a new mayor and council, a relatively
inexperienced town administrator and a relatively new public works director on board. As
your engineer, I have to assume partial responsibility for this oversight. I can only say that
my primary reasons for not detecting this error is that I was never provided a complete
package of the grant application information and I was only contacted at two to three month
intervals for various specific items of information. After we had gotten about a year into the
project, the $327,200 figure became an accepted number. The problem was also
compounded by the fact that the cost of the reservoir was estimated at $328,000 and when
the final application was made to CWCB, it appeared that that was going to be the
alternative selected; the error on the pipeline was not relevant.

The CWCB board member also stated that the new cost for the pipeline outlined in our
1994 report was almost a million dollars. This is a significant exaggeration, since our
estimated cost was $830,900 (Table V-A). Although higher than the 1991 number, there are
substantial differences in our approach to the new cost estimate as compared to the 1991
cost estimate. The following items contributed to the difference:

1. Table V-A (from the 1994 Feasibility Report) includes a 20% engineering add-
on cost. The initial calculation in Table IV-F of the 1991 report did not
include engineering (as mentioned, this was added later in the summary
chapter) .

2. Actual construction costs of the pipeline alone (without the intake) in the 1991
report was $438,000 (with 20% contingency). The actual construction cost of
the pipeline in the 1994 report. was $590,400 (with 20%contingency), or a
difference of $152,400. Part of this can be attributed to inflation of

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