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Morro Bay and Cayucos waste water plant bidding process under fire

October 11, 2010

By KAREN VELIE

While city officials in Morro Bay battle over which of two contractors should design a multimillion dollar wastewater treatment upgrade, one of the contractors has decided to withdraw their proposal and the other is under fire for engaging in a wide range of questionable practices.

Earlier this year, Morro Bay city officials elected to have Montgomery Watson Harza (MWH) design the upgraded plant for about $31 million. The plant serves both the communities of Morro Bay and Cayucos under a joint powers agreement.

Then, because of community concerns, officials decided to also allow PERC Water of Costa Mesa to submit a proposal to upgrade the plant located on the shore of Estero Bay in Morro Bay. The designers of the alternative PERC Water solution said that they could build a technologically-advanced plant for $10 million less than the proposal made by MWH.

Nevertheless, last Thursday, the president of PERC sent a letter to Andrea Lueker, Morro Bay’s city manager, that said they were dropping out of the bidding process.

“Based on our recent receipt and review of the MBCSD’s existing contracts, the lack of cooperation of city staff and that the current draft EIR does not contemplate the PERC Water solution, at the direction of our attorneys we will no longer continue our efforts on the wastewater project and will not be presenting our draft CDR on October 14, 2010,” Brian Cullen said in his letter to the city.

Rob Livick, Morro Bay public services director, contends the EIR was broad enough to cover both the design submitted by PERC and the MWH design.

Meanwhile, MWH is under fire from several government entities because of allegations of overcharging, bad business practices and poor workmanship. [SLOCoastJournal]

Two weeks ago, the city of New Orleans canceled their $48 million hurricane-recovery contract with MWH after the city’s inspector general found that the firm charged for time spent doing contract negotiations, over billed the city, gave gifts to city employees overseeing MWH’s work, engaged in noncompetitive bidding and disregarded “truth in negotiation” contract provisions.

In addition, a New Orleans city board member was sentenced to 22 years in prison for taking kickbacks involving MWH funds.

Rob Livick, Morro Bay public services director said that MWH has sent a letter refuting the office of the attorney general in New Orleans’ findings.

“We will continue to move forward as directed by the board with the oxidation ditch plan by MWH,” Livick said. “Unless directed by the board, we do not plan to look at the allegations (from the attorney general in New Orleans).”

On Oct. 14 the Joint Power Agreement Board will meet to discuss the EIR, PERC and MWH at a meeting at the Cayucos Vet’s Hall at 4 p.m.


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The facts and deficiencies presented in the MWH contract cancellation letter sound very similar to some of the supposed services provided by those such as the Wallace group. Consider Wallace anually bugets under $200K for District administration and engineering services provided by exclusively his staff for the Sanitation District, Avila CSD, and many other government agencies. lt looks somewhat acceptable initally, but when you look at years end totals you will see the actual years charges from Wallace total anywhere from $750K to $900K for these services. This can backed up by reviewing a past monthly invoices. Also as far as where the funds were defered to there is typically nothing more than a few vague words as a description. This needs to stop and they need to be investigated along with any other local providers taking advantage, and held accountable for their crimes.


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I don’t see how this is good news, taxpayer.

It appears our local governments aren’t doing their homework, are performing their jobs in a sloppy manner, and caving to corruption.

The Wallace Groups, PERCs and MWHs of our world are really screwing things up, and our local governments aren’t doing anything about it.


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Hey, SLOChuck, PERC is the good guy in all of this – unlike the other two. Speaking of the other two, does anyone remember the mysterious break-in at the MWH headquarters in Los Osos not so long ago? Yes, that would be back when Morro Bay’s Capital Improvements Project Manager, who just happened to be on the committee that picked MWH for the Morro Bay WWTP design contract, was working for MWH – in Los Osos.


Well, right before that break-in, which resulted in the disappearance of project records, the Los Osos CSD terminated the MWH contract in a August 14, 2006 letter. Among the reasons for the termination, quoted directly from from that letter from the CSD to MWH (public record), are the allegations that MWH:


• Has had numerous substantive contacts and communications with contractors, regulators, governmental agencies, litigants and other third parties and has not copied the District, despite the District’s request for such copies, minutes and transcripts of such contacts and communications.

• Have submitted invoices not in accordance with the Agreement;

• Have submitted invoices and has been compensated multiple times for the same work;

• Has knowingly submitted multiple false claims in violation of Government Code (GC) §12650”

• Calculated an effluent application rate for the Broderson Leach Fields was not in compliance with normally accepted standards and guidelines established by the United States Environmental Protection Agency (USEPA) and the State Water Resources Control Board (SWRCB). On July 7, 2006, the District requested that MWH explain the discrepancy and justify the application rates used in the Project Report and that served as the basis of design. On July 15, 2006, MWH refused to provide this information (Section 10(A);

• Has knowingly submitted multiple false claims in violation of GC §12650 (section 10(A))

• Has knowledge of said false claims and not disclosed said false claims in violation of GC §12651 (section 10(A));

• Submitted inaccurate, false and misleading information to the District, local and state agencies in support of but not necessarily limited to, regulatory requirements, permits, financing and licenses (Section 10(A) and (B));

• Failed to have documents stamped by a registered professional engineer that was in responsible charge of the work at the time of submission of critical reports in violation of the Business and Professions Code (BPC) § 6735 (Section 10(A), (B), and (c));

• Failed to provide a project manager for the period of March 3, 2000 through January 30, 2002 that was a registered professional engineer in responsible charge of the work in violation of BPC §6700 through 6706.3 and BPC §6785 through §6785 and the rules of professional conduct as established by the BPC and administered by the California Department of Consumer Affairs.


Violation of Section 12 entitled “Conflict of Interest”, in that MWH has aggressively acted, on numerous instances, in a manner that is a clear conflict of interest but at a minimum is the appearance of a conflict of interest as follows:

• Has knowingly and with malice actively worked with regulatory agencies in a manner that is not in the best interests of the District;

• Has knowingly and with malice actively worked with third parties in a manner that is not in the best interests of the District;

• Has knowingly and with malice actively worked with contractors in a manner that is not in the best interests of the District;

• Has knowingly and as a matter of public record made financial contributions to entities that are litigating against the District in an effort to stop the project;

• Has knowingly and as a matter of public record made financial contributions to government officials in a manner so as to influence courses of actions that are not in the best interests of the District;

• Has knowingly and with malice had inappropriate contacts and communications with parties litigating against the project and said contacts and communication s are not in the best interests of the District;

• Failed to notify the District of the above described conflicts of interest or the appearance of a conflict of interest.

• Has not provided a copy of the original Certificate of Insurance;

• Has not provided any proof of Professional Liability Insurance;

• Has not provided any Certificates of insurance evidencing renewal of coverage.


The letter includes also includes the following statement:


“The District is continuing its investigating into the circumstances regarding MWH’s contract performance and reserves all rights and remedies per Section 29 of the Contract Agreement.


As provided under Section 34 of the contract agreement, MWH is directed to provide all requested documents immediate upon receipt of this notice of termination for default.”


Check out the New Orleans Inspector General’s report http://www.nolaoig.org/uploads/File/Final%20Report%20With%20Appendices.pdf and compare to the above allegations.


This makes some of us a bit nervous about what could happen here. Remember that the City of Fillmore got an initial estimate that its WWTP would cost $24 and it ended up costing $83. We fear that could happen here. PERC guarantees its final plant cost. MWH does not.


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The folks who should be nervous are the staff members out in Morro Bay and the ones on the JPA who, despite warnings and a flood of facts shown to them, insist

on staying in bed with MWH. There could easily be legal repercussions as a

result of their shennanigans.


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Please excuse me if this contains duplicate information – something appeared to go awry with my last post.


First, to SLOChuck – PERC is the good guy here.


For some interesting allegations made by someone a lot closer to home than New Orleans, please consider the content of this letter (public record) sent by the Los Osos CSD to MWH in on August 14, 2006, and compare them to the allegations made by the New Orleans Inspector General regarding alleged offenses in that city.


“This letter is official notification that the subject Contract, as amended, has been terminated effective immediately.


Montgomery Watson Harza (NWH) has knowingly violated numerous contract provisions and failed to correct these deficiencies in accordance with the contract agreement.


The Los Osos Community Services District (District), curing the course of the analysis of MWH’s performance related to the subject contract, has determined that MWH is in material breach of certain contract terms and has failed to perform in accordance with the contract provisions as promised by MWH. The termination for default is based on the following:


Violation of Section 4 entitled, “Scope of Services” in that MWH:

• Has had numerous substantive contacts and communications with contractors, regulators, governmental agencies, litigants and other third parties and has not copied the District, despite the District’s request for such copies, minutes and transcripts of such contacts and communications.


Violation of Section 6 entitled “Compensation of Consultant, in that MWH and individuals employed by MWH:

• Have submitted invoices not in accordance with the Agreement;

• Have submitted invoices and has been compensated multiple times for the same work;

• Has knowingly submitted multiple false claims in violation of Government Code (GC) §12650”


“Violation of Section 10 entitled, “Performance Standards” in that MWH:

• Calculated an effluent application rate for the Broderson Leach Fields was not in compliance with normally accepted standards and guidelines established by the United States Environmental Protection Agency (USEPA) and the State Water Resources Control Board (SWRCB). On July 7, 2006, the District requested that MWH explain the discrepancy and justify the application rates used in the Project Report and that served as the basis of design. On July 15, 2006, MWH refused to provide this information (Section 10(A);

• Has knowingly submitted multiple false claims in violation of GC §12650 (section 10(A))

• Hs knowledge of said false claims and not disclosed said false claims in violation of GC §12651 (section 10(A));

• Submited inaccurate, false abnd misleading information to the District, local and state agencies in support of but not necessarily limited to, regulatory requirements, permits, financing and licences (Section 10(A) and (B));

• Failed to have documents stamped by a registered professional engineer that was in responsible charge of the work at the time of submission of critical reports inviolation of the Business and Professions Code (BPC) § 6735 (Section 10(A), (B), and (c));

• Failed to provide a project manager for the period of March 3, 2000 through January 30, 2002 that was a registered professional engineer in responsible charge of the work in violation of BPC §6700 through 6706.3 and BPC §6785 through §6785 and the rules of professional conduct as established by the BPC and administered by the California Department of Consumer Affairs.


Violation of Section 12 entitled “Conflict of Interest”, in that MWH has aggressively acted, on numerous instances, in a manner that is a clear conflict of interest but at a minimum is the appearance of a conflict of interest as follows:

• Has knowingly and with malice actively worked with regulatory agencies in a manner that is not in the best interests of the District;

• Has knowingly and with malice actively worked with third parties in a manner that is not in the best interests of the District;

• Has knowingly and with malice actively worked with contractors in a manner that is not in the best interests of the District;

• Has knowingly and as a matter of public record made financial contributions to entities that are litigating against the District in an effort to stop the project;

• Has knowingly and as a matter of public record made financial contributions to government officials in a manner so as to influence courses of actions that are not in the best interests of the District;

• Has knowingly and with malice had inappropriate contacts and communications with parties litigating against the project and said contacts and communication s are not in the best interests of the District;

• Failed to notify the District of the above described conflicts of interest or the appearance of a conflict of interest.


The numerous actions that violate Section 12 were clearly designed to benefit parties at the District’s risk, including but not limited to MWH, third parties and the contractors in such a manner to demonstrate MWH’s loss of objectivity in representing the best interests of the District.”


Violation of Section 14 entitled “Ownership of Documents” and Section 15 entitled “Records, Audit and Review” in that MWH:

Has not provided copies of all electronic data as requested by the District including but not limited to e-mails, data files, CAD data etc.;


Violation of Section 17 entitled “Insurance”, in that MWH:

• Has not provided a copy of the original Certificate of Insurance;

• Has not provided any proof of Professional Liability Insurance;

• Has not provided any Certificates of insurance evidencing renewal of coverage.


The District is continuing its investigating into the circumstances regarding MWH’s contract performance and reserves all rights and remedies per Section 29 of the Contract Agreement.


As provided under Section 34 of the contract agreement, MWH is directed to provide all requested documents immediate upon receipt of this notice of termination for default.


The District is formulating a claim for reimbursements of all costs incurred and anticipated to be incurred as a result of MWH’s default.”


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It is a FACT that Rob Miller of the Wallace Group and Steve Hyland of MWH are REALLY close buddies….both are equally inept people.


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Now that really is interesting. Did you know that when the Morro Bay City staff took a trip to PERC’s Santa Paula Plant, they took along none other than MWH employee Steve Hyland? Yes, that’s right. They took a major competitor of PERC with them to tour the PERC facility. Yet, records show that when a Morro Bay City Council member wanted to go on the trip, that person was told it was for “staff only” and there was no room. Looks like there are just all kinds of interesting friendships around here, doesn’t it?


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to mbactivist1,

I am STUNNED by this information that you have provided for all of us to read! As you probably know, Rob Miller, of the Wallace Group, is the “engineer” for the abysmal sewer mess created for Los Osos by the good old boys of SLO County Government! They’re all in bed with these very CORRUPT players! MWH & Wallace Group have been a huge part of this sewer fiasco from DAY 1! I remember VIVIDLY, attending meetings at LOCSD & was absolutely disgusted by the constant “huddling” going on between Steve Hyland & Rob Miller…but when they were asked the “hard questions”, neither of them had any input, usually “claiming” that they did NOT have their “files/information” with them! They were ALWAYS unprepared for any questions…AMAZING!


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Wow, wonder if the W in MWH is for Wallace Group. Sure sounds familiar to their fine self indulging ways. Kinda like Robin Hood but backwards,stealing from the poor and giving to the rich.


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Wallace group is part of the project management team for the WWTP upgrade project, so maybe that IS what the “W” stands for. :)


There are now three local news sources reporting serious issues regarding this project and MWH – the Cal Coast News, the New Times, and the SLO Coast Journal. The MWH issues in New Orleans are being reported by the Times Picayune – the major paper in that city.


Wake up, people. If it walks like a duck and quacks like a duck, it just might be….. a duck! My question is, why are some of the elected officials and staff in Morro Bay and Cayucos so very fond of this particular duck? It is way too expensive to keep as a pet.


Morro Bay voters should remember that the candidates who have consistently supported the current badly-flawed WWTP project are Yates, Leage and Johnson.


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Utter nonsense, tendered with an obvious touch of desperation. PERC was late because the staff published on the City Web site a totally-out-of-date schedule that specified an RFP issuance date that was 8 months later than the date the RFP was actually issued. No one’s “bluff” has been called. No competent and responsible company would come forward at this point with any final numbers or design based on a Draft Environmental Impact Report (DEIR) that is so seriously deficient as the one recently produced by the staff. As stated by all Planning Commission members Monday night, the DEIR failed to present viable options for other locations – a major problem. It also failed to address the PERC technology, making it impossible for PERC to finaiize its design and its estimates. Many believe the Coastal Commission will reject the DEIR outright because of these and other major problems. The serious errors made need to be corrected and when that is done, hopefully we can persuade PERC to come back. Anyone who thinks this is over is seriously out of touch with reality. As to the allegations regarding MWH’s actions in other communities, what happened in New Orleans, Cape Coral, and Los Osos has everything to do with the Morro Bay project. It speaks to the way a company does business. Morro Bay and Cayucos residents deserve far better. They deserve to do business with the kind of company that one of the Santa Paula council members calls a “class act”. That is PERC Water.


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PERC is like Professor Hill in the Music Man. They came into town to sell the town something it didn’t need. You must have loved that musical. PERC’s out. The project is moving forward and all the people who like to stop projects from actually being accomplished will turn out from Morro Bay and Los Osos to whine to the JPA. You’re not an engineer. You and others like you have been sold 76 trombones and now the band has left town.


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LOL !!!

I believe you have been sold the 76 trombones.

Ha, ha!


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Finally, some good news in Morro Bay. PERC was late to the bidding process and tried to throw a monkey wrench into the process. Their bluff was called and now their out of the game. Time to move forward on the shortened timeline that was pushed by Betty Winholtz and Noah Smuckler and get the plant built as planned. What did, or did not , happen in New Orleans has nothing to do with the Morro Bay plant. It’s just some more mud being thrown on the wall to see if it will stick and gum up the works. It’s time to ignore the naysayers and finish the upgrade.


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PERC was not late to the bidding. Read the agendas and minutes of the meetings.

See how they were cut out of the process from the beginning and how long the JPA

refused to listen to any suggestion that there was a better, less expensive way to

build the plant. Getting the JPA to even listen to the possibility of a proposal from

PERC took a good deal of public demand.


And the latest monkey wrench was the staff refusing to sign a standard confidentiality agreement – some thing very common is legitimate business dealings. Staff could not help knowing that any above-board, intelligent business person would balk at such a refusal. Of course, that was staff’s bluff. And PERC not being fools,called it by walking away.


What happened in New Orleans, Cape Coral and Portland has a good deal to do

with Morro Bay. It indicates that Morro Bay may have a preference for doing business with a company that doesn’t include a scruples clause in their contracts.


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“staff refusing to sign a standard confidentiality agreement – some thing very common is legitimate business dealings.”


BUT NOT IN GOVERNMENT DEALINGS! The public has EVERY right to know the dealings of their government, and the city has NO RIGHT to keep secrets. Confidentiality is abhorrent to the public’s interest. PERC are certainly not fools–they were attempting a coup, not legitimacy.


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In that case, would you please post the financial information attached to the MWH contract? I’m sure you must have them on hand as you speak with such authority -and as we know, MWH is always frank and above board in all their dealings.


See: mbactivist1 says:

10/12/2010 at 12:13 pm


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This is just plain silly. The confidentiality agreement was obviously to protect PERC’s intellectual property from being given to and used by others, as in competitors. You are so right when you say that PERC people are not fools. That is the only thing you said that is right, but that one thing is right on target.


If PERC had let the Morro Bay and Cayucos staff walk away with a document with all the details of their technical design for the plant, guess who would have gotten it. Yes, indeed, you can bet would have been the staff’s buddies at MWH. PERC would have been completely crazy to give up those documents without the legal assurance that they would not be shared with competitors. Do remember that the staff people actually had the audacity to take Steve Hyland of MWH along when they toured PERC facilities while refusing to include a Council Member.


Beyond that, the CDR was a draft – NOT a final proposal. It was prepared so that PERC could get input from the staff in order to do a final document. Release of a draft document to the public would have been potentially confusing and problematic. In fact, drafts prepared by government agencies are generally exempt from disclosure under the Public Records Act. No, PERC is not a government agency, but the principle is a sound one.


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