Assessments of Two Major DBO Projects Part Way into Their Operations Phases and Consideration of Enhancements to the DBO Contracting Model

Seattle Public Utilities’ Cedar Treatment Facility and San Diego County Water Authority’s Twin Oaks Valley Water Treatment Plant have both been delivered using a Design-Build-Operate contracting approach. The Cedar and Twin Oaks projects went into operations in 2004 and 2008, respectively. Owners using this approach typically believe that by allowing a DBO contractor to innovate in the combined design, permitting, construction, and operations by customizing the design and construction of the facility to achieve its unique performance requirements and water quality expectations, the designer-builder-operator will maximize efficiency, resulting in lower construction and long term operations costs, and improved schedule and reliability. This paper will review each project’s initial objectives and assess results to date to determine whether desired outcomes have been achieved. While every DBO project is different, there tend to be similar reasons for owners to select a DBO model, and at a high level, similar risk allocations among projects. The Cedar DBO project was modeled after Seattle Public Utilities (SPU) Tolt Treatment Facility DBO project, which began operations three years prior to the Cedar DBO project. Many aspects of the Twin Oaks Project were modeled after the Tolt and Cedar DBO projects. Each of these projects has been the subject of industry observers interested in understanding whether the DBO model can consistently deliver results equal to or superior to conventional public works contracting or other alternative contracting approaches. Lessons have been learned, and in general, improvements have been made in each subsequent implementation of these DBO models, and those closely involved in the projects discussed in this paper can conceive of further evolution of the model - public-private partnerships for which risks and incentives are optimally placed in all phases of the projects. While this is the intent for any DBO project, we find that the further we get into the long term operations and maintenance phase, the more likely that the contracts can be further improved based on the unique challenges of the operations and maintenance phase.