For Miami-Dade’s sewer cleanup, a $91 million contract that quickly went over budget

When Lester Sola took over Miami-Dade’s Water and Sewer Department in 2015, he faced one task repeatedly: telling AECOM he didn’t want to give the consulting firm significantly more money to fix the county’s failing sewage system.

“They’ve always been making the case that they want more money,” said Sola, who left the water and sewer department last year to run the county’s airports. “I didn’t see, at the time, the need for additional dollars.”

Miami-Dade has a different conclusion now for AECOM, with county commissioners on Tuesday considering the department’s request for a 53 percent boost to the engineering firm’s $91 million contract.

Granted in 2014, the agreement has AECOM overseeing a court-ordered upgrade of how Miami-Dade processes sewage. The proposed new contract amount, negotiated with Sola’s successor, Kevin Lynskey, would be $140 million.

The county says AECOM is weeks away from eating up the last of the $91 million cap approved for the 2014 contract, meaning it will have taken five years to spend the money that the county predicted would last 15 years.

Miami-Dade pays AECOM and the contractors actually doing the work out of water bills paid by residents and businesses throughout the county, borrowing money against that revenue stream to cover project costs. Wastewater rates increased this year to help pay for the program AECOM is supervising, which is expected to cost $1.8 billion through 2029.

A CONSTRUCTION ESTIMATE THAT GREW

The proposed higher fees from AECOM, a Los Angeles-based engineering firm, stem from Miami-Dade agreeing to costlier estimates for dozens of the 81 original 2014 construction projects the company is supervising under the county’s “consent decree” program.

The name comes from a 2013 settlement with the Environmental Protection Agency to modernize the Miami-Dade sewage system and halt harmful leaks and spills.

In a memo released last week, Mayor Carlos Gimenez told commissioners that AECOM’s proposed 53 percent fee hike tracks with a 53 percent increase in the cost of the construction the firm is being paid to supervise.

Miami-Dade says the higher costs come from realizing some projects that initially seemed modest now are considered major replacement or reconstruction efforts. The county also cites refined standards for sea-level rise adding to the budgets.

When AECOM won the consent-decree bid in 2014, Gimenez wrote, the county estimated the construction would cost $732 million. Now, after AECOM reviewed the proposed 15-year work plan and negotiated with the water and sewer department, the county estimates the construction will cost about $1.1 billion to complete.

‘MUCH LARGER THAN WHAT THEY BID ON’

“The scope of the construction project is much larger than what they bid on,” Gimenez told commissioners during a Feb. 12 hearing. “They should be compensated for it.”

The county’s Inspector General is questioning the math in the proposed fee hikes. On Friday, the watchdog agency asked for more details on how water and sewer staff calculated the nearly $400 million hike in construction costs.

The Inspector General memo cites a 2014 bid document from AECOM summarizing its proposed $91 million fee. The spreadsheet titled “Proposed Total Contract Value for 15 Years” submitted by AECOM breaks down the two largest components of that fee — program management and construction management — as representing between 3 percent and 4 percent of construction costs.

As the Inspector General points out, “mathematically” those numbers suggest original construction costs were about $1.2 billion, and not the $732 million cited in the Gimenez memo. “Clarification is needed,” Inspector General Mary Cagle wrote.

On Monday, Jennifer Messemer, spokeswoman for the water and sewer department, said the original $732 million construction budget was well documented in 2014, and that the fee calculation cited by Cagle was oversimplified. The percentage fees were calculated not just on construction costs, but also on “soft costs that go into the entire value of the program.”

Lynskey, the former second-in-command at PortMiami, is the county’s fourth water-and-sewer director in five years. He took over in February 2018 and began a review of contracts and cost estimates under Sola.

AECOM had been pressing for increasing its fees after extensive reviews of the county’s 2012 cost estimates for implementing the consent decree. In August 2017, Sola agreed to a $14 million boost to the original $91 million fee, granting more money for an “increased level of effort” for some projects, according to a letter a company executive wrote Sola.

In the letter, AECOM vice president Mark Blanchard wrote that “we look forward to our continued discussion to review the fee adjustment” for other work, and those talks extended to Lynskey’s takeover of the agency when Gimenez tapped Sola to administer the county’s airports.

AECOM vice president Pete Hernandez ran Miami-Dade’s water and sewer department in the 1990s and went on to serve as Miami’s city manager before leaving for the private sector. He described the higher fees as a result of the more careful review of the county’s plan that was part of AECOM’s assignment in 2014.

“The numbers are solid,” he said.

The request for such a sharp increase in AECOM’s fees has drawn more scrutiny of how much Miami-Dade spends outsourcing technical work to consultants and contractors.

Lynskey told commissioners at the February hearing that Miami-Dade had just three people overseeing AECOM’s $91 million contract, making the consent-decree project one of the most expensive examples of outsourcing in local government.

“We have more than 400 architects and engineers” on staff, Commissioner Joe Martinez said during the February hearing. “People who do a great job if they’re allowed to do a great job. But we outsource so much.”

A 2018 report Martinez requested from county auditors tallied up five years of payments for firms like AECOM hired to build, design and supervise county projects. About $2.6 billion was paid between 2013 and 2017, with AECOM’s $53 million payout for consent-decree work one of the largest in the report.

Lynskey said all governments turn to private-sector experts to tackle big-ticket projects, leaving routine maintenance and operations to municipal employees.

“By state law, large construction projects have to be bid,” he said. Miami-Dade lets unions compete for “relatively modest tasks” but not for something as complex as a full reworking of the county’s sewage system.

Miami-Dade’s Water and Sewer union is trying to fight some of the outsourcing on the consent-decree contracts.

Last month, the local AFSCME chapter, which represents workers in that department, filed a grievance with Miami-Dade over excluding consent-decree jobs from a cost-savings program that allows unions to bid against private firms seeking county contracts.

Union president Emilio Azoy wrote that county workers could save Miami-Dade about $600,000 by performing cleaning work in-house on an oxygen tank in a sewage facility. “We’re talking about a lot of money,” Azoy said.

The county rejected the request, citing structural issues that make it a specialized job.

“We have concerns over the safety of staff accessing the tanks,” Messemer said. She also said the union’s bid is artificially low because it doesn’t include various construction, engineering and related costs needed to complete the work. When unions win jobs under the county’s “gainsharing” program, workers get bonuses tied to savings from unneeded outsourcing.

Lynskey called the idea that in-house work might make a dent in a $1.8 billion consent-decree budget a “long, long, long stretch.”

This story was originally published March 4, 2019 at 7:14 PM.