Pipe Cleaning Bidding:
April 26, 2011As a municipal infrastructure owner, it makes sense to get the best value for your money on your projects and often that means getting the lowest bid for municipal storm and sanitary sewer cleaning services.
In this neck of the woods, we often see cleaning bid prices vary by an order of magnitude for the same work, leaving one to wonder how contractors who do this work can bid with such wide variations in their pricing? Are these simply variations in the market price for the service or is something else going on? Maybe the terms and risk associated with the work are being interpreted differently by the bidders? Perhaps some of the bidders are attempting to game the system, maybe some are simply willing to take on elevated risk in the hope that the work is not defined correctly, perhaps some are rolling the dice?
This article discusses some of the reasons there is such a large variation in prices for sewer cleaning projects on tenders with pipe diameters less than 900 mm. This article does not address the specific issues related to reaming/cutting of hard debris and obstructions or simple flushing of sewers with a dedicated number of hose passes.
As a contractor, we see a wide variety of tender forms for sewer cleaning, either as a standalone sewer cleaning project or as part of a larger sewer rehabilitation contract. The variety we see in sewer cleaning tender forms on a weekly basis is truly amazing and partially reflects the different needs and conditions associated with the work in each particular jurisdiction. Part of the variation is also due to the difficulty owners have in understanding and defining the work, and everyone has a different approach based on their historical experience. Let’s have a closer look at two key factors that directly affect the cost of cleaning sewers.
Debris Disposal Costs
Chart A is an illustration of only the disposal fees at a regulated and approved landfill site for municipal sewer waste for various diameters of sewers based on the volume of debris in the sewer. It shows an obvious direct and significant correlation between the diameter of sewer and the level of debris in the sewer vs. the cost of disposal. There is an order of magnitude direct cost increase from 200 to 900 mm sewers as soon as any appreciable level of debris is present in the sewers. The costs for the 75 percent full 900 mm costs are simply off the chart. The red area is the approximate disposal cost for the debris shown in the background picture of a 600-mm sewer, 20 to 30 percent full of debris.
The chart clearly makes the case that separate pricing for cleaning sewers of different diameters and levels of debris makes a lot of sense. While it is a simple matter to pre-determine the diameter of sewers scheduled for cleaning for a bid form, it is quite another thing to be able to pre-determine the level or quantity of debris expected in the sewer and put this in the bid document. Ideally, a threshold of some kind is needed in order to compensate the contractor for the several thousand percent variation in the effort and costs to clean sewers with higher levels of debris. This is compounded because the debris levels in sewers not only vary from one line to another but they vary within the line significantly and how does one record and verify all this?
Time Onsite to Remove Debris
When sewers have little debris, the cleaning time is typically about 30 minutes for diameters under 900 mm. As the quantity of debris increases, the time onsite increases almost exponentially; could be several days or more. Chart B illustrates the total cost of cleaning and debris disposal in a 200-mm diameter sewer with varying levels of debris. This chart doesn’t factor in any of the other variables in Table 1 but shows only a single variable, the level of debris. The total cleaning cost easily varies from standard low single digit dollar per meter rates upward to high double digits per meter rates when the level of debris rises. Look in Table 1 at some of the other variables that can affect pricing, the ability to predict them and who controls them.
Bid Form Dilemmas
Except for the last few items in Table 1, all the factors related to the cost of cleaning sewers are beyond the control of the contractor and many of these are simply unknown at the time of bidding and remain unknown until the work is essentially completed. This would lead an independent observer to believe that an hourly rate structure for sewer cleaning is the only fair option. However, hourly rates are also a double-edge sword because the top operators who can do the work more quickly and therefore less costly are also typically paid more by the hour by the owners to keep them on staff, but this makes them appear more costly on your typical hourly bid form. Top quality equipment is more efficient at cleaning, but again is more costly to purchase and good equipment works against you on procurement bids based on hourly rates.
Straight piece work (cleaning by the meter) is preferred by most municipalities as it provides the cost certainty that is needed in today’s tight budget environment. As a contractor, bidding for piece work under work conditions that you do not control and have limited information on is tough as you might imagine, and not very smart. For example, DM Robichaud recently received an invitation to bid on a cleaning project with some 60,000 m of cleaning — no maps, no locations, no diameters, no provision for debris disposal, just a line item to clean the sewers by the meter. We did not bid but there really is not enough information for anyone to put together a quote. When we want to bid and question purchasing agents during the bid stage about the variables in Table 1, many push back with the typical line: “You should know your work,” or “It all works out in the end with the easy and the tough.” Some know that it is unfair and are beholden to a system they cannot change. Some see no issues at all because they get bids.
Some more informed infrastructure owners try to reduce the number of dice being thrown by contractors by establishing different thresholds for work — for example, by setting up piece-work categories based on some of the more easily categorized factors that affect production in Table 1 above. This bid form structuring can provide some reduced risk to the bidder, but the really important factors that affect the ability to be productive will always remain unknown until each individual sewer line is completed, and a complicated bid form leaves the municipality open to contractors who might game the system betting that certain items might not be used.
If the bid form is too complicated with multiple categories and thresholds, it almost requires that the contractor and owner drag around an army of lawyers and accountants with them all day to keep track of everything. There must be a way that is easy to administer, ensures environmental compliance, keeps prices low and lets the best rise to the top.
Problem? What Problem?
Many municipalities are not even aware that there is a problem. After all, some might think, I am getting a “low” bid, so how could there be a problem? The primary mitigating factor that keeps costs reasonable is that some contractors have worked in certain areas and have historical records and information that permit them to estimate the level of work effort expected and bid accordingly. This is particularly true when there is lots of work and the contractors have cleaned these lines in the past. However, contractors bidding on work in a area where they have not worked before or where information is scant or unreliable have no choice but to guess, leading to the grossly low and high bids that we see every day.
With the advent of zoom cameras and self-propelled inspection robots that sniff out sewers in need of actual maintenance, it means that more and more cleaning contracts are being put to the street that only target bad sewers. Gone are the days when municipalities just cleaned everything; now the zoom cameras tell them what sewers need to be cleaned. The law of averages that most contractors have relied on are being eroded way and now, more and more, we are only cleaning sewers that are very dirty. The risk level is increasing, year after year but the bid forms are not.
Some high bids come from contractors who actually read the tender fine print where it says “the contractor should inspect the site conditions to make sure that they fully understand the work.” And since this is not possible, they bid high to cover themselves.
Some low bids come from contractors who work on hope, and that is a bad way to run a company and a municipal procurement system. In a tight market, regardless of the fairness of a tender spec, most municipalities are often able to obtain apparent low pricing for their cleaning work. In a hot market, prices will either be off the chart or no bids will be received. Either way, the owner and contractor on many cleaning projects are both often simply rolling the dice, with the result that the owner is not always meeting the mandate of the procurement process, namely to get the best value for its money, and the contractor is often only a few really bad sewer sections away from losing the company, asking for more money from the owner, or walking from the job. The status quo simply awards the work to the contractor who throws the lowest dice.
Dice Are For Board Games & Casinos
On most typical construction projects, all the variables are pre-defined in a bid document so the contractor can price the work. A roll of the dice and a number scribbled on a napkin would not be acceptable to anyone hiring a contractor to install a new sewer, but this is the current state of the sewer cleaning industry today in many markets. It is obvious that the companies that provide this vital cleaning service have some work to do in educating the infrastructure owners and system operators about what we do and how to get the best value for their money during procurement.
One potential solution we foresee is a blended bidding system where sewer cleaning is based on a flat rate cost per setup location (which varies depending on right of way issues) and piece work sewer cleaning pricing based on actual productivity. If productivity is defined as the weight of decanted debris removed then everything will change. The contractor is paid for the material removal and disposal cost on a per kg basis. The flat rate setup charge covers the cost to get to the location and pull the nozzle back. If there is no debris the contractor is paid the flat rate sewer cleaning fee. If numerous passes are required — or if they at it all day — the cleaning work is compensated for by how productive they are. If they do not remove debris, they are not productive and they will not get paid.
The first municipalities to structure bids this way will likely see more bidders, or at least a change in who’s bidding, and a tighter spread on the bids that will strike fear into firms with poor capabilities. This will require some new checks and balances to be implemented to ensure that trucks are weighed in the morning and decanted at the end of the day before weighing out each night, but this should not be a problem as most municipalities have accessible scales.
As the truck is weighed at the municipality, the waste disposal facility scales the system provides trackable independent records of the weight of debris removed. The contractor is paid for performance off of the independent records that at the same time also ensures environmental compliance for debris disposal. While not perfect, and some big issues are still not addressed with this base pricing model, most notably the volume of flow in the sewer and presence of “fixed” debris in the line, it is a good start and these remaining unknowns (flow volume, fixed debris etc) can be accommodated with a well thought out bid form and specification addressing these issues.
Good operators and equipment can clean faster than poor operators with poor equipment and therefore, at last, all sewer cleaning contractors can compete on a truly level playing field. The owner pays the lowest market rates for actual work performed, environmental compliance is assured, the dice are left to board games and casinos, and let the best contractor win.
Randy Kowal is an engineering technologist and vice president and Lisa Pike is a technology specialist, both of DM Robichaud Associates Ltd.