Paula Wallis, Reporter

The contractor on Detroit's multi-million Upper Rouge South Tunnel Contract is demobilizing even before placing a major purchase order.

On standby for nine months awaiting identification of funding sources, the Kenny Construction/Obayashi Corp JV got word two weeks ago that the contract was terminated. City officials cancelled the entire $1.5 billion URT (Upper Rouge Tunnel) CSO on May 29, 2009 due to lack of funding.

The two URT project contracts

When the JV was awarded the South Tunnel contract in September 2008 few could have foreseen the dire economic straits Detroit and south east Michigan would be in today. With Detroit's budget deficit believed to be between $250 million and $300 million, the automobile industry in freefall and the city's unemployment rate at 22 percent, civil leaders had little option but to terminate the project.

It is a major blow for the JV that must lay off workers and walk away from the $316 million contract, as well as for the City, which is under a court mandate to reduce the frequency of 17 CSOs into the Rouge River by 2015.

"The project took a long time to put together and it's just unfortunate that at the very least it gets placed on hold for a length of time, possibly years, and will be revisited," said George Ellenwood, spokesperson for the Detroit Water and Sewerage Department.

Ellenwood says$16.2 million has been allocated for contract costs to date, "and we're waiting for the contractor's claims against the contract which will be significant and will include the cost of demobilization." Ellenwood could not estimate how much it would cost the City over all to terminate the contract, but agreed it would be in the millions. The Department anticipates that claims in from the JV by the end of July.

"Under the contract language, the contractor will make an accounting of all expenses to date and will submit that to the Department for reimbursement," said Ellenwood.

Alignment of the 11.26km long x 7m diameter URT CSO control tunnel

Meanwhile it's back to the drawing board for designers and planners. While the current plan to build a 7-mile-long tunnel, mostly under Rouge Park to store up to 218 million gallons of combined sewer and stormwater until it can be treated and discharged has been shelved the Department must still meet the overall objective. Michigan Department of Environmental Quality (MDEQ) is giving the Department six months to investigate alternatives which will include revisiting an option the MDEQ has already rejected.

"The project was delayed some five to 10 years because we were trying to find a less expensive alternative," said Ellenwood. "One of the things we had been advocating earlier was a much smaller diameter tunnel. The State has higher standards than the national EPA for allowable SCO discharges. So the State required us to do a much larger tunnel to meet its standards. Going back to a smaller diameter facility is certainly one option that is being floated with support from our suburban customers and local municipalities."

City leaders used a hardship provision in the national EPA guidelines to cancel the current project. "Under the guidelines if sewer rates exceed 2% of median income, it's considered an undue economic burden. Detroit rate-payers have already seen a 16% increase in sewer bills, which took average monthly bills almost to the 2% point. Bills would continue to go higher and would exceed that 2% limitation over the life of the URT project," said Ellenwood. Rate-payers in Detroit are responsible for 83% of the cost of the CSO project with the suburbs responsible for the remaining 17%.

Another option on the table is to extend the terms of compliance by several years beyond the 2015 timeline. "What we've agreed with the MDEQ is that for the next six months we will continue investigating alternatives that will help us comply with the discharge permit to the Great Lakes in the long term, but place less of an immediate burden on the City and of course our suburban customers, who are concern about the impact of this disastrous economy on their communities in south east Michigan."

References

Funding crisis cripples Detroit tunnel projects -TunnelTalk, Apr 2009
Detroit's second DRO-2 contract terminated -TunnelTalk, Apr 2009
Funding woes affect water projects in Las Vegas -TunnelTalk, Apr 2009
Detroit's first DRO-2 contract mobilization -TunnelTalk, Nov 2001