Wednesday June 11, 2003
By Martha Carr
USFilter, a likely bidder in a 20-year deal to run the city's water and sewer operations, is in the midst of a major skirmish with the Sewerage & Water Board over its operation of one of the city's two wastewater- treatment plants, a conflict the company says began soon after water board employees formed a group to vie for the larger contract.
At issue are repeated problems at the city's East Bank Sewage Treatment Plant in the Lower 9th Ward, which discharged sewage into the Mississippi River 50 times during 2001 and 2002, according to records provided by the company. Most of the discharges violated a 1998 consent decree with the U.S. Environmental Protection Agency over lake pollution caused by the city's leaky sewer system, and they have resulted in more than $107,000 in fines, water board officials said.
Adding to the tension, the water board has withheld more than $2.5 million in payments to USFilter between December 2000 and April 2003, company officials said.
Marcia St. Martin, acting executive director of the water board, said the withholding of money is the only board's only recourse to penalize the company for poor performance. USFilter claims that withholding payment violates the company's contract.
"These deficiencies in contract performance, in our current opinion, do not warrant default, but have warranted reductions in your operation and maintenance payments," St. Martin wrote in a letter to the company dated May 21. The board began docking USFilter's monthly payments in August 2001, she said.
Professional Services Group, USFilter's predecessor in the contract, was hired to take over the city's faltering sewage-treatment plants in 1992. The contract was renewed in 1997, and since then, it has been extended on a year-to-year basis.
St. Martin said problems at the east bank plant include inadequate staffing levels and the company's failure to complete routine maintenance as required in its $10 million annual contract. Operations at the West Bank plant in Algiers are less of an issue, she said.
"Things started to deteriorate when we went year to year," she said.
USFilter officials said the water board is to blame, having needlessly postponed much- needed capital improvements, resulting in inefficiencies and EPA violations at the plant.
The one major repair the board did undertake, an $11 million project to renovate the plant's headworks and raw sewage channel in 2001, included a major design flaw, Smith said. Despite the flaw, the project was constructed and turned over to USFilter's care in 2002, he said. Almost a year later, the machinery is still inoperable, Smith said.
The headworks, the first step in the treatment process, removes large solids and grit from raw sewage. The channel transports the remaining liquid to the biological treatment process.
"They spent citizens' money and accepted the work as complete and functional, when it wasn't complete and functional," Smith said.
The plant also is having to use temporary channels to divert raw sewage to the portion of the plant that is functioning, a method used during construction and continued because of the problems with the new machinery, Smith said. The sewage discharges into the river are a direct result of having 50 percent of the plant out of service for the past two years, he said. When the system experiences heavy flows, the plant cannot keep up, he said.
"We've been telling them about these problems since April of 2002," Smith said. "And it's still not fixed."
At the crux of the dispute is a difference in opinion over who is responsible for certain repairs, Smith said. The company says the contract only requires USFilter to conduct repairs that cost less than $5,000. The board's staff, however, thinks the company is responsible for more expensive projects, he said.
"They pay us for our advice," he said. "We are obligated to tell them what they need to fix over $5,000. Then they ignore it."
St. Martin concedes that the board has deferred a lot of capital improvements that are not mandated by the federal consent decree in an effort to keep sewer rates down. But the company has failed to protect the board's assets by doing routine maintenance work, she said. The company also failed to notify the board of the design flaw in the headworks and raw sewage channel project before construction, she said.
Smith, however, said USFilter notified water board staff, but that the board proceeded with the project anyway.
Lastly, Smith said it is difficult to be monitored by a group of employees that could compete against USFilter for one of the largest privatization contracts in the United States.
During the board's first privatization effort that ended in October, there were three bidders: USFilter, United Water and an employees group that had designated St. Martin as their pick to oversee operations if they landed the deal.
All are likely bidders for the current privatization process, which was re-ignited by Mayor Ray Nagin this year.
"It makes it impossible for her to be nonbiased," Smith said.
St. Martin said she recommended to the board in November that USFilter's contract be rebid. The board did not act on the recommendation.