10 December 2021

Carterton District Council has taken possession of site of its Wastewater Treatment Pond Upgrade Project and removed the main contractor employed for the reservoir construction (Stage 2 of 3), following repeated delays and the discovery of extensive damage to the lining of its three new ponds.

Central Hawkes Bay Earthmovers (CHBE) were contracted to undertake upgrades to the Wastewater Treatment Pond Upgrade Project, part of which included earthworks and lining three new ponds. Extensions were granted in 2020 to enable CHBE to complete major works and in an attempt to prevent additional costs being passed on to ratepayers.  Project delays continued into 2021, and the Council’s project management team discovered the new pond liners had been damaged by the contractor.  Notices to fix the damage, and alter work practices that could avoid further damage, were issued to the contractor.  The proposed remediation plans were considered insufficient, and the contractor was removed from site on 9 September 2021 after being issued a default notice through a Notice to Contractor.

Upon taking possession of site in September, the Council discovered significantly more damage to the pond liners than was first anticipated and had subsequently been covered over with fill by the contractor. The damage consists of rips, tears and scratches of varying depths in the new liner, as well as damage to gas vents.  Damage to the liner at the top of the ponds is more of a risk, due to the additional effect of sunlight and ultra-violet light accelerating degradation of the liner material. Also of concern was the compaction of the anchor trenches.

Council needs to repair the damage before the ponds are filled, to ensure the integrity of the liner and minimise any potential negative environmental impacts or breaches of our resource consent conditions.  The expected cost of repairs ranges from $1.3M – $1.9M.  Council will seek to claim the cost of the repairs from the contractor, CHBE.

For the Council to still be within its consent requirements the ponds must begin filling with partially treated wastewater by April 2022.  This means the damage must be assessed and repaired as soon as possible.

The Council will meet at its Ordinary Council meeting on 15 December to approve additional budget for remediation and completion. The meeting will be open to the public and livestreamed, with the full report available in the agenda later today at www.carterton.infocouncil.biz

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Questions and Answers
What’s happened?

Central Hawkes Bay Earthmovers [CHBE] were contracted to undertake upgrades to the Wastewater Treatment Plant [WWTP] at Daleton Farm.

Part of this included lining three new ponds as part of Stage 2 works and to meet consent requirements. They are designed to hold treated wastewater to irrigate to land, rather than discharge to waterways.

In November 2018, the tender for the construction and lining of the reservoirs was awarded to Central Hawkes Bay Earthmovers (CHBE) Ltd with an expected completion date of 30th May 2019.

In May 2020, Council met with CHBE to set a final completion date and gain assurances that construction would be completed by that time. During the May meeting, CHBE stated that the reservoirs would be completed by 20t September 2020. This date was not met, and a notice of default was issued to CHBE by Council’s engineer to contract.

During construction the engineer issued extensive contractual notices.

In February 2021, CHBE were directed not to drive equipment directly on the liner surface and provided guidance on what could be done to access areas of the reservoirs. CHBE was directed to repair the damage. In August 2021, identified damage to reservoir 3 and instructed CHBE to repair.

After significant delays, several time extensions, repeated damage and more than 100 default notices, CDC served notice to CHBE to take ownership of the site in August 2021. This came into effect in September 2021. CDC took possession of the site.

Some damage to the liner was reported before CDC took over the site. However, an independent site inspection found more extensive damage than expected, including some which had been covered by fill. The inspection found many cracks, holes, scratches, and tears in the lining across all three ponds.

These reduce the amount of pressure the lining can take, which may lead to leaks, and potentially dangerous contamination.
Some of this damage occurred in the anchor trenches – an important structural element of the ponds – and had subsequently been covered over with fill by the contractor.

What’s the damage? Why is it so important to fix it?

They were designed to a high standard, and high-grade conductive lining was used. This high-grade lining provided for stress allowances four times greater than expected daily exposure.

The lining has a 70-year life expectancy, much longer than the existing resource consent of 35 years. The lining requires regular checks and maintenance, which includes repairs. Our high-grade liner, in pristine condition, would be checked approximately every three to five years.

The damage would heighten the risk of leaks and potential contamination and make it more susceptible to UV damage.

An engineering report has found the ponds would not meet the life expectancy in the current condition and may not meet the 35-year requirements of the resource consent.

What happens if we do nothing?

Under the current conditions, the threat of leakage once the ponds are full is heightened. That would cause contamination of the surrounding environment, potentially threatening the health of people, animals, and plants in the nearby area. Contamination is a breach of resource consents, which could see prosecution and financial penalties against the Council.

Why didn’t the council act sooner?

The initial issue was time delays. CDC allowed extensions in 2020, before the liner work took place, to save cost to ratepayers by allowing major works to be completed.

However, CDC found the contractor showed a repeated failure to meet agreed timeframes.

The delays were raised to the Council’s Audit and Risk Committee in May [http://carterton.infocouncil.biz/Open/2021/05/ARC_20210512_AGN_AT.pdf].

Once some damage was noticed by the Council’s Project Management, notices to fix the damage, and alter work practices that could avoid further damage, were issued to the contractor. This is part of the Council’s responsibility as a good employer to allow the contractor time to remedy any issues and repair any damage caused.

The proposed remediation plans were considered insufficient, and the contractor was removed from site on 9 September 2021

In September 2021, the independent inspection made once CDC took possession of the site showed a higher level of damage than first anticipated, with some of the damage covered up by fill.

What is the current expenditure and where did that go?

The construction total so far is $12,668,360

The budget allocated was $12.6 million. Before discovering the extent of the damage, an additional $300,000 was included in the 2021-2031 10 Year Plan adopted in June. That added $18,000 annually to bill of council expenditure, funded by rates.

A full breakdown of costs and budget to date is available on our website at cdc.govt.nz/wastewaterupgrade.

This will be updated again after the 15 December council meeting once additional budget to complete repairs and complete the job has been ratified.

How much will the repairs cost? Will we still be within budget? Will rates go up?

The rise in costs will not impact the 2021-22 rates.

However, the assessment made after CDC took possession of the site showed that level of damage will need at least another $1.3 million to complete the project as designed, and to meet the resource consent requirements.

Negotiations are ongoing to claim some of the costs.

There will be a need to re-budget for the repairs.

A cost estimate for this work, based on independent engineer reports, could be between $1.3 – 1.9million.

This will be loan-funded, with the interest resulting in an approximate rate increase of up to 0.3% in the 2022-2023 financial year, and subsequent years.

The contract with CHBE is under the umbrella of NZS3910 and which allows for the council to complete the contract and seek reimbursement for additional costs outside of the agreed scope of works. Council intends to follow this process to recover the cost of liner remediation and completing the contract works.  Our legal costs to enforce this will not be able to be recovered.

Included in the additional budget are legal costs of $150,000 (low estimate) and $300,000 (high estimate) and will be treated as Opex.

Why can’t Three Waters Reform pay for this?

The timeframe to meet our consent requirements means that the work must go ahead before any decisions on Three Waters are confirmed. We must have made progress on the current stage of the project by March 2022. This means the council fronting up with the costs now. However, regardless of whether the project is managed and governed by CDC or a Water Service Entity the long-term costs would ultimately come back to Carterton households.

Will the Council be claiming costs back from the contractor?

The contract with CHBE is under the umbrella of NZS3910 and which allows for the council to complete the contract and seek reimbursement for additional costs outside of the agreed scope of works. Council intends to follow this process to recover the cost of liner remediation and completing the contract works.  Our legal costs to enforce this will not be able to be recovered.

What was the process for choosing the contractor, and why were they selected?

The contractor was selected under CDC’s policy at the time which measured each bid against set criteria. There was a weighting towards lowest bids. The council has since revised its procurement policy, meaning there is no longer a greater weighting towards the lowest bidder.

Why should we trust CDC to deliver after this?

CDC has taken full possession of the site. This means we have direct management of the project. We have learned from the process already and the project will be reviewed upon completion. We are committed to meeting our immediate consent requirements and changing our process to dispose wastewater to land by mid-2022. We have already reviewed our procurement processes and changed the project governance accordingly.

The figures we have included in the budget for remediation costs are a range which allows for variance and contingency.

How does the cost of this compare to similar sized projects?

The total budget for the project with the likely repairs will be up to $14.6m. Even considering the population growth expected in the District, this compares favourably with other WWTP projects for plants serving similar sized networks.[1][2]

When and how can I follow the progress?

The project is a standing item at each Infrastructure and Services committee meeting. We will update our website at cdc.govt.nz/wastewaterupgrade. You can also contact us at info@cdc.govt.nz or Facebook [@cartertondistrictcouncil], receive out monthly projects email newsletter or speak to any of our elected representatives. To sign up to the email newsletter, visit cdc.govt.nz/newsletter

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[1]Ministry for the Environment The New Zealand Wastewater Sector  https://www.dia.govt.nz/diawebsite.nsf/Files/Three-waters-documents/$file/Report-2-Cost-Estimates-for-Upgrading-WWTPs-that-Discharge-to-the-Ocean.pdf

 

[2] Department of Internal Affairs Cost Estimates for Upgrading Wastewater treatment Plants that discharge to the Ocean – Final Report https://environment.govt.nz/assets/Publications/Files/wastewater-sector-report.pdf

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