Large seawater Desalination Tenders Objectives, Approach and Requirements of the Tender Committee s Technical Consultants

Transcription

1 Large seawater Desalination Tenders Objectives, Approach and Requirements of the Tender Committee s Technical Consultants Amnon Zfati and Daniel Hoffman ADAN Technical & Economic Services Ltd Abstract The paper presents and discusses the objectives, issues, considerations, concerns and approach underlying the technical requirements of the tender documents issued by the Israeli government between the years 2000 and 2005 for the construction of large seawater desalination plants. 1. Introduction The mission of the technical advisors to the government s Inter-Ministerial Tender Committee that oversaw the tendering of the large seawater desalination projects over the past five years ( the Committee ), as was the mission of the other members of the Committee s specialist-advisors subcommittee ( the Subcommittee ), the legal, financial, economic and administrative experts, was to translate the goals and guidelines of the Committee into detailed, specific tender documents requirements, terms and conditions. This required not only interpreting and understanding the Committee s goals, guidelines and wishes, but also educating its and its Subcommittee s non-technical members on what was really crucial and important technically and what was only of marginal value, what were the technical pitfalls and risks that must be avoided, what were the trade-offs between the plants technical quality and water costs, and, specifically, what will be the benefits and rewards of each requirement. The most important technical inputs to the tender documents relate to: 1. the bidders prequalification conditions and their associated data forms; 2. the projects descriptions, scopes of supply and requirements, as set out in the tenders technical documents (known as Tender Document B to those who participated in the tenders); 3. the tender forms that define the minimal data that must be supplied within the Technical Offer of each bid (Tender Document C ); 4. the criteria for evaluating and scoring the Technical Offers and their relative weights (Tender Document A ); and 5. the technical elements of the BOT or BOO agreements, as the case may be (Tender Document D ), that define Sellers obligations throughout all phases of each project. We will discuss some of these specific inputs in the final section of the paper, Section 6, but first will present, in Sections 2-5, Objectives, Issues, Considerations and Concerns, Approach and Supporting Studies, the context in which they were decided upon and the principles that guided them.

2 2. Objectives The technical advisors overall objective was to assure that all the plants that will be contracted through the tendering process will be capable of producing desalinated water reliably, in the quantities, quality and schedules required by the IWC s Master Plans (and specified in each project s tender documents), throughout the entire term of each contract ( the Agreement ) and, for the BOT projects, also at the time of their transfer to the government. Secondary, corollary objectives were to: 1. assure that all bids are complete and submitted on the same basis, i.e. have the same scope of supply; 2. assure that all bids are sufficiently detailed to enable a fair evaluation and comparison during the tendering process, and, once the agreements are signed, a clear understanding of exactly what the winning bidders obligated themselves to deliver; 3. assure that the plants minimum design and performance requirements are clear, to minimize the possibility of any bid being rejected, technically, due to ignorance or misunderstanding of these minimal requirements (Note: The Technical Offer sections of all bids must pass a minimum grade or score, regardless of other elements in the bids, including the Price Proposal); 4. assure that the minimal plant design and performance requirements are based on the experience to date in the most modern plants operating world-wide and on proper and realistic cost-benefit calculations and analyses that take into account Israel s and the projects specific conditions and the relatively long term of the Agreements - 25 years; 5. assure that the required minimal experience required for accepting any process, technology, design and/or item of equipment strikes the correct balance between the benefits in lower cost desalinated water (on the paper) and the risks inherent with adopting insufficiently tested and proven innovations; 6. assure that the plant design requirements allow bidders maximum leeway and flexibility in designing their facilities, but define sufficient limits to assure its reliability; 7. assure that superior plant design features and performance figures that exceed the minimum requirements, clearly at the expense of higher capital costs, are properly rewarded in the scoring of bids; 8. assure, through proper supervision during the detailed design, procurement, construction and completion testing phases of each project (the Development and Construction Phases of the Agreements), that the plants delivered in fact correspond to, or are even better than the plants described in the winning bids; 9. assure, through prior review and approval of all plants O&M manuals, technical staffing and training programs, and subsequent supervision and verification that these procedures are in fact followed, that the plants will be properly maintained during the Commercial Operation Phases of the Agreements; 10. assure, through the offering of adequate incentives, that the plants will be continuously updated technically and modernized during the long Commercial Operation Phase, i.e. do not become obsolete.

3 3. Issues, considerations and concerns Key Issues The key issues were identified by us as follows: 1. How to assure that all bids are complete, clear, detailed, conform to the tender requirements and can be judged on the same, common basis? 2. How much is it worth paying, in bid water costs, for higher-quality design, which will express itself in long-term reliability and lower maintenance requirements? What should the relative scores for the Technical Offers vis-à-vis price and other considerations be, or, in other words, what should be the incentives offered to bidders to avoid cutting corners and taking technological risks? 3. What should be the extent of tender-imposed technical requirements and specification, i.e. the quality-driven constraints and limitations on the plants designs? 4. Should bidders be allowed to offer design and performance options, e.g. higher peak output capabilities which enable offering excess capacities at marginal costs? If yes, how should such optional features be scored? 5. What should be the weights to be assigned to the technical evaluations of the bids within the overall scoring formulae 6. How to assure that the plant will be maintained throughout the term of the agreement and eventually transferred at the end of the contract term in good physical shape and up to date technologically, i.e. include technical improvements? What incentives should be offered for this? Considerations and concerns The considerations and concerns behind the required performances of the tendered plants, as formulated by the Planning Division of the Israel Water Commission (capacities, quality, production schedules, etc.) were discussed earlier, separately, in Dr. Dreizin s paper. We will concentrate here on the considerations and concerns underlying the plants design and operation and maintenance requirements. Almost all of them are related to assuring the plants long-term reliability. 1. In spite of backup supply sources, once the desalination plants will be operational, the regional and nearby municipal water supply systems will become dependent on their outputs and used to their resulting quality improvements. This dependence will only grow with time as populations, economic activities, standards of living and demand grow, and as the quality of groundwater continues to deteriorate. 2. It is a basic axiom in project financing that projects should not involve new technologies and that the reliability of the processes and equipment must be well established. Thus, even if the Tender Committee decides to approve a novel design or the use of a novel item of equipment, there is a clear danger that its promoters will never succeed in raising the required financing, at best delaying the project and at worst requiring change of terms and even abandonment of the project. 3. Unlike power plants, whose technologies and equipment designs are known and tested in hundreds of stations throughout the world, seawater desalination plants,

4 particularly those based on seawater reverse osmosis (SWRO), the process of choice today, are relatively new and their technology still evolving. Moreover, most of the SWRO plants operating throughout the world are considerably smaller than the plants being tendered in Israel and utilize smaller special items of equipment. 4. With the known tendering and construction times, it will take 3-5 years to replace any plant that has failed due to technical problems. 4. Approach The overall approach was to ensure plants reliability through a series of protective requirements, this while recognizing that every technical requirement has economic implications. Reliability protection included: 1. Strict bidder pre-qualification requirements 2. Close examination of all bidders qualifications. 3. Insistence on standards of design and quality control programs 4. Placing emphasis on the key and/or trouble-prone sub-systems and parameters: a. The seawater intake (location and design); b. The pretreatment sub-system; c. Materials of construction particularly in the high pressures and more corrosive high brine concentration sections; d. Membrane fluxes (vis-à-vis critical fouling fluxes) e. Flow velocities in critical pipelines f. The energy recovery devices g. Choices of manufacturers of standard and special items of equipment h. The Boron removal sub-system i. The product post-treatment sub-system j. Redundancies and backups k. Instrumentation, control and data transmission to the WDA and the regional water system operator (Mekorot) 5. Incorporation of lessons gained from failures in other plants world-wide in defining specific design requirement. 6. Detailed and critical examination of all the bids Technical Offers, with follow-up questions to clarify all ambiguities. 7. Encouraging design features and performance figures that exceed the minimum requirements. 8. Assuring that the Agreement provides for proper supervision during the detailed design, procurement, construction and completion testing phases of each project. 9. Assuring that the Agreement provides for prior review and approval of all plants O&M manuals, technical staffing and training programs, and subsequent supervision and verification that these procedures are in fact followed 10. Assuring that the Agreement provides for proper maintenance during the Commercial Operation Phases of the Agreements; 11. Assuring that the Agreement offers adequate incentives for plants modernization during the long Commercial Operation Phase.

5 5. Supporting Studies Following is a list of some of the studies performed under the sponsorship of the IWC to support the technical requirements of the tender documents: 1. Quantifying the economies of scale with the two main potential bid processes to establish minimal and optimal plant capacities. 2. Quantifying the costs and benefits of requiring lower levels of chloride in the desalination plants product. 3. Quantifying the costs, in various processes and schemes, of requiring lower boron concentrations in the desalination plants product. 4. Quantifying the cost savings from blending the desalination plants product with hard and even saline water from adjacent wells, vis-à-vis conventional product posttreatment. 5. Quantifying the benefits of utilizing existing infrastructures and auxiliary systems (seawater intake, brine discharge, etc.) from adjacent power stations and wastewater treatments plants. 6. Quantifying the costs and savings of increasing the initial size of infrastructures and common systems to allow for future expansion. 7. Quantifying the relation between plant size and available site area, i.e. the trade- offs between land and plant costs. 8. Evaluating the sensitivity of SWRO plants to seawater feed contamination. 9. Evaluating potential design-related technical risks to advanced, large-scale SWRO plants. 10. Comparing the performance, costs, benefits and risks of alternative large SWRO plants energy recovery devices. 6. Key specific requirements It is impossible in the short time available for this presentation, to review all the technical conditions, terms and requirements of the Tender Documents. Following, as examples, are the key requirements pertaining only to the tendering phases of the BOT projects. Some of these have been omitted from and/or curtailed in the BOO tender. A. Pre-Qualifications Requirements The Pre-Qualification (P-Q) requirements were drafted so as to strike a balance between the desire not to limit competition and the need to assure that only highly qualified teams participate in the bidding. Preliminary studies of the main desalination plant manufacturers and operators records worldwide came up with a phantom list of at least fifteen potential bidding teams that satisfied all the P-Q requirements for the Ashkelon BOT tender and perhaps five more that satisfied the somewhat more lenient P-Q requirements for the BOO tender. In fact (we believe mainly due to political reasons, i.e. heavy involvement in the Arab markets, e.g. Japanese companies) only 3 teams bid for the Ashkelon project and only 6 teams for the BOO projects. 1. Requirement: Minimal experience of the EPC companies and their key personnel over past 10 years with plants utilizing the offered process (minimal years of

6 successful experience with minimal sizes of plants for each type of process plants to be still in operation). Justification: a)10 years period to enable the participation of companies that have the required design, manufacture and erection capabilities and experience, but have been unfortunate in not winning contracts over the past few years, yet to assure that references brought by such companies relate to plants that do not represent designs and equipment that are completely obsolete today; b) both company and personnel experience to assure that the plants designs do not rely only on company reference plants (that may have been designed by personnel who are no longer with the company), but also on the experience of qualified designers who may have good references from other companies; c) the reference plants must be still in operation to assure that their experience is indeed verifiable and satisfactory. 2. Requirement: Minimal EPC company volume of desalination business over past 5 years. Justification: to demonstrate companies strength and continuity in the desalination business and the ability to handle the very large projects being bid over the long terms of the BOT and BOO agreements. 3. Requirement: Minimal experience of the O&M companies and their key personnel during the past 3 years with all type of water treatment (including but not limited to desalination) and/or wastewater treatment plants utilizing types of equipment similar to those in desalination plants. Justification: to enable participation of Israeli companies that can and currently do provide O&M services not only for desalination plants but also for large conventional water and/or wastewater plants that require similar types of equipment maintenance, this in view of the fact that the large desalination plants being bid are the first of a series and no Israeli company, except for two (Mekorot, which was forbidden to participate in the tenders, and IDE Technologies Ltd.), can be expected to offer such experience. If such companies are not allowed to build up such experience on the first large scale desalination projects, bidders in future tenders will have to continue to rely on foreign companies and personnel, which, by the very nature of things, would be more costly. 4. Requirement: Minimal project management, organization and supervision experience with large infrastructure projects over the past 10 years, utilizing and coordinating a multi-disciplined technical work force and subcontractors. Justification: The majority of desalination companies capable of building plants with the required capacities have never managed projects on the scale called for in the tenders. A suitable subcontractor will have to be added to any bidding team. B. Bid Requirements As noted earlier, the projects descriptions and scopes of supply and the plants required performance figures were spelled out in great detail and clarity within the tender documents, to assure that all bids will be submitted on the same basis. Detailed tender forms were drawn to assure also that these bids will also be complete and include all the data required for their evaluation and comparison. The design requirements, however, were minimal and allowed all Bidders maximum leeway. The main design restrictions were:

7 1. Requirement: Bidders will be responsible for obtaining all the information and data required for their performing the project, including design, manufacture, permitting, taxation, etc. Justification: Minimize the need for works change orders due to tender documents omissions, errors and /or ambiguities. 2. Requirement: All plant designs must meet specified international and Israeli national engineering standards and codes, and environmental, health, civil defense and safety requirements. Justification: To avoid the use of existing and readily available designs based on other national standards, codes and requirements that, even though proven satisfactory and effective elsewhere, would violate Israeli law and/or possibly create permitting problems. 3. Requirement: Bidders may offer only desalination processes, technologies and designs which have been used by them in their reference plants. Justification: To avoid having companies that pre-qualified on the basis of experience with one type of plant offering a design with which they have no experience. 4. Requirement: Offered unit capacities must be limited by the size and operating experience of their largest components, items of equipment and/or sub-systems, and such equipment (e.g. energy recovery devices) must have a proven, successful record of at least 2 years (1 year for the BOO tender) on the same scale of operation. Justification: To avoid technological risks due to scale-ups, new materials and designs. 5. Requirement: Minimum qualities of materials of construction of key plant items of equipment, particularly in the high pressure sections of the plants. Justification: To ensure that the plants will operate properly and reliably for the full term of the contract and will be in a position to continue such operation, if desired, after the plants are transferred. 6. Requirement: Minimal distances below sea level and above sea bottom for location of all seawater intake structures and provisions for detecting and protecting these intakes from contamination by fuel and oil spills. Justification: Seawater feed contamination by fuel, oil and other potential floating pollutants and by storm induced sand carryover was deemed a critical risk to plant operation. 7. Requirement: Specifying maximum filtration and minimal backwash velocities Justification: Pretreatment was deemed a critical element in the plants designs. 8. Requirement: Specifying acceptable or approved (equivalent) manufacturers of key items of equipment, e.g. membranes Justification: To avoid quality problems due to use of inferiorly designed and/or manufactured but low cost equipment from less reputable manufacturers. 9. Requirement: Minimum electrical, instrumentation, control and automation requirements Justification: To avoid under-design.

8 10. Requirement: Specifying minimum levels of redundancies in design and standby equipment. Justification: To ensure the required plant availability. 11. Requirement: Specifying minimum levels of on-site stored chemicals Justification: To ensure the required plant availability. Closing thoughts and comments Not withstanding anyone s opinion on whether the tender specifications and technical requirements were too tight or too open and lenient (we think the latter) and whether less or more weight should be given the scoring of the Technical Offers (we think more), the fact is that, though some bids took more risks than others, all bids submitted and evaluated to date (in both the BOT and BOO tenders) were of excellent technical quality. Sounds good, but, at this point only two projects have proceeded beyond their financial closings and are under construction: Ashkelon, which as you will see tomorrow, during your visit, is almost complete, and Palmachim, which is in its final Development Phase and initial Construction Phase. Neither has been put yet to the test. As with any new plant or piece of equipment, most of the technical quality concerns discussed in this paper will manifest themselves (in case of failures or problems) either during the first few months of operation (possibly even during the initial testing stages), as was the case in the well known Tampa Bay 94,500 m 3 /day plant desalination project, or after the first 5-10 years of operation, as, unfortunately, was the case in many SWRO plants throughout the world, such as the Addur 44,000 m 3 /day plant in Bahrain. What should be done differently in the future, what can be improved in the next, upcoming tenders? It depends on how the current BOT and BOO type of contracts with the current tendering system turn out. Now that the Hadera 100 million m 3 /year BOT tender has been issued, and with no other tender currently in sight (given the rainy season we are witnessing this year), we probably have a few years to wait and see. We only hope that several years from now, in some future IDS Annual Conference, we will not have to stand here and tell the story about Neil Armstrong and his lunar mission. Neil Armstrong was asked right before taking off on that mission, as he was waiting for blast- -off, strapped in his capsule, how it feels to potentially be the first man to step on the moon. He replied: The same way you would feel sitting on top of 200 tons of highly inflammable, explosive fuel and in a rocket made up of 300,000 parts, each of which was supplied by its lowest bidder.