Bentwood Campus, 301 East Germantown Pike, 3rd floor, East Norriton, PA p f

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1 July 13, 2012 Richard C. Gore, Chief Administrative Officer Delaware River Basin Commission 25 State Police Drive, P.O. Box 7360 West Trenton, NJ RE: Technical Proposal for Consulting Services to Estimate Future Replacement and Maintenance Costs for the Two Federal Reservoirs and Evaluate the Associated Surface Water Charging Program and Fund Dear Mr. Gore: O Brien & Gere is pleased to submit this Technical Proposal to provide consulting services to estimate future replacement and maintenance costs at Blue Marsh and Beltzville Reservoirs and evaluate the associated surface water charging program and fund to the Delaware River Basin Commission (DRBC). Our proposal is based on the information presented in the DRBC s Request for Proposal and Quotation (RFP) dated May 8, 2012, the pre-bid meeting on June 8, the meeting with Bruce Rogers of the USACE on July 3, and our long-term experience in reservoir design and construction and financial studies. We have teamed with the Municipal Financial Services Group (MFSG) to form a qualified and experienced team to provide the services identified in the RFP. Mr. Edward Donahue, President of MFSG, is a former O Brien & Gere employee and the two firms have worked together on various projects since MFSG was formed in The team has been engaged in several similar programs recently, most notably the Duck River Agency water supply project and the Kentucky Bluegrass water development project, which are very relevant and of similar magnitude to DRBC s project. We would like to draw your attention to the following qualifications and experience, which we believe will make O Brien & Gere and MFSG an effective team for DRBC for this project. Strong technical capability for dam and reservoir engineering that started with Justin & Courtney, our predecessor firm in the Philadelphia area, in the 1930s. We have been involved with numerous dams in the Delaware River Basin over the years, including Beltzville, and are currently working on several local dam and reservoir projects for the Delaware Dept. of Natural Resources and Environmental Conservation (DNREC), the Philadelphia Water Dept., the City of Wilmington (DE), Solebury Township (PA), Salford Twp. (PA), Atlantic Co. (NJ), and the North Jersey District Water Supply Commission (among others). Strong financial capability in water supply funding programs and water use charge or rate programs that are similar to this one. As noted above, MFSG has worked with O Brien & Gere on several such funding programs and independently for major water purveyors including The Denver Water Board, San Francisco/Hetch Hetchy, Stafford County Utilities Dept. (VA) and Albemarle County Service Authority (VA). Specific construction cost estimating experience for dam and reservoir improvements, provided by two engineers that formerly worked for civil works contractors and have been involved in numerous dam construction projects. The project management and dam/reservoir engineering services will be provided locally from our East Norriton, PA office and our proposed team members are all within two hours driving time of the reservoir sites and DRBC offices. Bentwood Campus, 301 East Germantown Pike, 3rd floor, East Norriton, PA p f Engineering and Project Delivery Solutions

2 July 13, 2012 Page O Brien & Gere. All Rights Reserved. Prior and current experience working with multiple USACE Districts, including Philadelphia. We have a strong working relationship with the Geotechnical Section of the Philadelphia District and have met recently with Bruce Rogers, Dam Safety Program Manager, to discuss two of our projects (the Delaware Bay Flood Dike Improvements program and the Ingham Spring Dam Restoration project for Solebury Twp.). O Brien & Gere is also a Sustaining Member of the Association of State Dam Safety Officials (ASDSO) and the United States Society on Dams (USSD), which is a national dam safety organization with which the USACE is heavily involved. Knowledge and understanding of the DRBC mission and water supply responsibilities through our involvement in the Water Resources Association (WRA) of the Delaware River Basin. Dana Pizarro, our proposed Project Manager, is a member of the Board of Directors of the WRA. More detailed information regarding our qualifications and experience for this project is presented in the following sections of this proposal. If you have any questions regarding this proposal, please feel free to contact Dana Pizarro or Robert Bowers at (215) or me at (301) We appreciate this opportunity to provide consulting services to DRBC, and look forward to working with you on this program. Very truly yours, O'BRIEN & GERE ENGINEERS, INC. George B. Rest, PE Senior Vice President Bentwood Campus, 301 East Germantown Pike, 3rd floor, East Norriton, PA p f Engineering and Project Delivery Solutions

3 TECHNICAL PROPOSAL Consulting Services to Estimate Future Replacement and Maintenance Costs and Evaluate Associated Surface Water Charging Program and Fund Delaware River Basin Commission West Trenton, NJ July 13, 2012

4 Consulting Services to Estimate Future Replacement and Maintenance Costs and Evaluate Associated Surface Water Charging Program and Fund Delaware River Basin Commission West Trenton, NJ NOTICE This copyrighted material represents the proprietary work product of O Brien & Gere. This material was prepared for the specific purpose of securing a contract with Delaware River Basin Commission. No other use, reproduction, or distribution of this material or of the approaches it contains, is authorized without the prior express written consent of O Brien & Gere. However, the recipient may make as many copies of this document as deemed necessary for the sole purpose of evaluating this document for final selection and award. Copyright, 2012 O Brien & Gere Engineers, Inc. All Rights Reserved All materials printed on recycled paper. 360 Engineering and Project Delivery Solutions

5 CONSULTING SERVICES TO ESTIMATE FUTURE REPLACEMENT AND MAINTENANCE COSTS TABLE OF CONTENTS TABLE OF CONTENTS SECTION 1 Company Background 1-1 Contact Information Company Size Experience on Similar Projects Location of Office Proposed project Team SECTION 2 Project Management 2-1 Project Methodology & Approach to Scope of Work Proposed Project Schedule SECTION 3 Supporting Documentation 3-1 Qualifications Relevant Project Experience Recent Dam Rehab Experience in DRB Area Dam Rehabilitation Experience table Resumes of Key Personnel i Delaware River Basin Commission DMF12/MUN.prp/DRBC-Reservoirs/TOC.docx

6 360 Engineering and Project Delivery Solutions SECTION 1

7 CONSULTING SERVICES TO ESTIMATE FUTURE REPLACEMENT AND MAINTENANCE COSTS SECTION 1 COMPANY BACKGROUND CONTACT INFORMATION Address: Bentwood Campus, 301 E. Germantown Pike, 3 rd Floor, East Norriton, PA Phone: ; Fax: COMPANY SIZE O Brien & Gere is an employee-owned engineering and project delivery company with over 900 scientists, engineers, construction, and operations personnel located in 25 offices across the U.S. O Brien & Gere had one of its strongest years in 2011, with revenues in excess of $200 million. EXPERIENCE ON SIMILAR PROJECTS The O Brien & Gere team has completed numerous projects of similar nature to the DRBC project. The following three projects demonstrate our nationally recognized expertise to integrate water supply engineering with municipal finance and our experience with USACE dam engineering programs. Additional relevant projects are presented in Section 3 of this proposal. 1) Regional Water Supply Study- Bluegrass Water Supply Commission/Bluegrass Area Development District, Central KY O Brien & Gere and MFSG completed a Regional Water Supply Feasibility Study and Utility Formation for the Bluegrass Water Supply Commission (BWSC), an alliance of 16 government agencies and water utilities in central Kentucky. This strategic water supply program integrated technical, financial, and organizational elements. Water Supply Alternative Evaluations - O Brien & Gere evaluated over 40 water supply alternatives, using a series of open work-sessions to screen down to eight preferred options, and ultimately achieved unanimous consensus on a recommended alternative to meet the region s long term water supply needs. The technical solution included a new 40 MGD intake on Pool 3 of the 1 Delaware River Basin Commission DMF12/MUN.prp/DRBC-Reservoirs/Background.docx

8 CONSULTING SERVICES TO ESTIMATE FUTURE REPLACEMENT AND MAINTENANCE COSTS SECTION 1 Kentucky River, a new water treatment plant, pumping stations, storage tanks, and a grid of water transmission mains to interconnect the region s water utilities. Cost and Financing- O Brien & Gere worked with MFSG to develop a computer cost model to assess financing plans, and worked with the water utilities to develop a partnership between the public and privately-owned utilities to finance the $200 million program. The financing plan included wholesale take or pay contracts for committed capacity, with a minimum daily delivery of water to maintain water quality in the grid and use of a single common rate for sale of finished water. At the conclusion of the study, eleven of the BWSC participants declared intent to purchase water, with a total commitment of approximately 32 MGD. O Brien & Gere and MFSG worked with the consortium to select an organizational structure, and helped them form the new BWSC. Extensive Public Involvement- O Brien & Gere led BWSC through a uniquely open study, with extensive opportunities for input from the public, elected officials, and governmental agencies through the use of public workshops and informational meetings, routine updates via newsletters/mailers/ , agency briefings and technical meetings and press coverage. The result of the Regional Water System Feasibility Study was unanimous consensus from all 16 member utilities on the technical solution (Pool 3 Supply), the new organizational structure, and the financing plan. Project Management- O Brien & Gere provided management support and general consultation to enhance the effectiveness and efficiency of the BWSC, including: developing strategic facility plans, conceptual design, value engineering, permitting and water quality studies, site selection and routing support, and assisting BWSC in producing project budgets and schedules, cost-benefit analysis, and grant support. The regional water system facilities were permitted and then constructed on time (operational in 2010) and under budget. 2 Delaware River Basin Commission DMF12/MUN.prp/DRBC-Reservoirs/Background.docx

9 CONSULTING SERVICES TO ESTIMATE FUTURE REPLACEMENT AND MAINTENANCE COSTS SECTION 1 2) Duck River Comprehensive Regional Water Supply- Tennessee Duck River Development Agency; Shelbyville, TN The Tennessee Duck River Development Agency retained O Brien & Gere to develop a Comprehensive Regional Water Supply Plan for five counties in central Tennessee. The purpose of the plan was to develop a roadmap for meeting future water demands and addressing drought conditions that could cause water shortages over the next 50 years. The program integrated water supply evaluations, dam stability investigations, financial planning, and program management. Water Supply Plan O Brien & Gere documented existing water demands and projected future demands for a 50-year period (through 2060), and identified constraints on Duck River and Normandy Reservoir, to establish water supply needs for the region. For each of the 26 viable water supply alternatives, O Brien & Gere conducted hydrologic modeling to identify the reliability of the sources under severe drought conditions and estimated costs for new reservoirs and river intakes, upgrades to existing dams, and a variety of other structural and non-structural solutions. The study used a financial and decision support model to integrate cost, reliability, potential environmental impacts, and permitting requirements. The 50-Year Water Supply Plan includes raising Normandy Dam and constructing a new downstream intake on Duck River, together with several non-structural elements to enhance the efficiency of water use. The Plan received unanimous support from the diverse 17 member Board of the Duck River Agency. Dam Safety Assessments and Stability Analyses Following completion of the Water Supply Plan in 2010, O Brien & Gere was retained to perform a detailed stability analysis and to evaluate 3 Delaware River Basin Commission DMF12/MUN.prp/DRBC-Reservoirs/Background.docx

10 CONSULTING SERVICES TO ESTIMATE FUTURE REPLACEMENT AND MAINTENANCE COSTS SECTION 1 potential dam safety issues associated with the proposed raising of Normandy Dam, working with the dam s owner, the Tennessee Valley Authority (TVA). The stability analysis uses methodology and criteria developed by the US Army Corps of Engineers (USACE), FERC and TVA, in assessing the stability of the earth embankment and concrete spillway segments of the dam. Dam safety issues that were addressed included increasing the Spillway Design Flood to current PMF standards and assessing the potential for seepage related to karst geology and the need for an expanded filter drain system. Ongoing work involves evaluating alternatives and updating cost estimates for raising Normandy Dam, based on detailed dam stability analyses and updated seismic load analysis. Financial Planning O Brien & Gere developed a financing plan that relies on fees for raw water withdrawals from the river. This approach, which is similar to the technique used to finance Normandy Dam in the 1970 s, will generate adequate revenues to support the $62 million investments recommended by the Water Supply Plan. The finance options include inter-municipal contracts or new state legislation to amend DRA s charter to allow for assessing the new withdrawal fees. The finance plan also allows for connection fees so that growth pays for growth. The regional water supply program used extensive public outreach and regulatory involvement, including six public work sessions with key stakeholders and three open house meetings throughout the watershed, to present the findings to interested citizens. O Brien & Gere is now serving as program manager on a task basis, developing water supply contracts and negotiating with federal agencies. 3) Picatinny Arsenal Dam Upgrades- US Army Corps of Engineers, New York District (under Philadelphia District IDC); Picatinny Arsenal, NJ O Brien & Gere provided engineering services for the upgrade and repair of Picatinny Lake Dam and Lake Denmark Dam. O Brien & Gere was retained for the preparation of construction contract 4 Delaware River Basin Commission DMF12/MUN.prp/DRBC-Reservoirs/Background.docx

11 CONSULTING SERVICES TO ESTIMATE FUTURE REPLACEMENT AND MAINTENANCE COSTS SECTION 1 plans and specifications for the upgrades and repairs and to assist in obtaining required Dam Safety and Freshwater Wetlands permits. This included review of existing studies and designs, site investigation, and design in support of meeting code compliance. The work involved three design phases: Phase I Site Investigation and Preliminary Design and Report; Phase II 90% Design Submission; Phase III 100% Contract Documents. The Phase I services included field and engineering investigations to develop a basis of design. Topographic surveys were performed at both dam sites providing mapping for use in detailed design. Incremental Hazard Evaluations were performed to develop recommendation for an appropriate Spillway Design Flood for each dam. With NJDEP approval, O Brien & Gere evaluated alternates for raising the Lake Denmark Dam to confine the 100-Year Flood in the existing spillway and alternatives for safely passing the approved Spillway Design Flood (30% PMF) at the Picatinny Lake Dam. Concrete and subsurface investigations were performed at both dams (with UXO) to provide the required data for slope stability analysis of each dam s earth embankment and structural stability analyses of the Picatinny Lake Dam spillway. Additionally, recommendations were made for a new low-level outlet system for Picatinny Lake Dam and repair of the low-level outlet system for Lake Denmark Dam. Recommendations were also made for repair of the existing sluice gates at the Picatinny Lake Dam. Estimates of the Probable Construction Cost were made using USACE s MCASES (MII) program, to assist in the selection of alternatives for detailed design. 5 Delaware River Basin Commission DMF12/MUN.prp/DRBC-Reservoirs/Background.docx

12 CONSULTING SERVICES TO ESTIMATE FUTURE REPLACEMENT AND MAINTENANCE COSTS SECTION 1 Phase II & III services involved detailed design of the following improvements: A Roller Compacted Concrete (RCC) overlay for the crest and downstream face of Picatinny Lake Dam, including a filter drain system beneath the RCC overlay; Spillway training walls to protect an occupied building at the toe of the embankment; Concrete repairs and upgrades to the upstream crest wall and exposed spillway surfaces; A new siphon-operated low-level outlet for Picatinny Lake Dam; New sluice gates at Picatinny Lake Dam; Relocation of existing utilities and security fencing at Picatinny Lake Dam; A stabilized toe block/dam section for the Lake Denmark Dam spillway consisting of reinforced concrete, pre-stressed rock anchors and pressure relief drain system; Upgrades and repairs to existing low-level outlets at Lake Denmark Dam; and Riprap slope protection on the upstream face of the Lake Denmark Dam embankment. Technical Specifications were prepared using the USACE Specs-Intact system. Final construction cost estimates were prepared using MCASES (MII). The Final Design was used to obtain required permits and approvals, including an NJDEP Dam Safety permit, NJDEP Freshwater Wetlands permit, and Soil Erosion and Sediment Control Plan Certification by the Morris County Soil Conservation District. O Brien & Gere assisted with the negotiation of a contract to construct the improvements, awarded in During construction, O Brien & Gere has provided archaeological monitoring of excavations due to the historical significance of the dam site, in addition to supporting USACE staff with periodic inspections, review of submittals and response to requests for information. LOCATION OF OFFICE The services will be provided from our office located in East Norriton, PA. Members of the project team have national experience, but are locally based and within short driving distance of the sites and the DRBC offices. 6 Delaware River Basin Commission DMF12/MUN.prp/DRBC-Reservoirs/Background.docx

13 CONSULTING SERVICES TO ESTIMATE FUTURE REPLACEMENT AND MAINTENANCE COSTS SECTION 1 PROPOSED PROJECT TEAM Successful projects begin by selecting and committing an experienced project team and providing the necessary resources to complete the key individual elements of the project in a timely manner. We have teamed with the MFSG to form a qualified and experienced team to provide the services identified in the RFP. Mr. Edward Donahue, President of MFSG, is a former O Brien & Gere employee and the two firms have worked together on various projects since MFSG was formed in A company description for MFSG is provided in Section 3 of the proposal. The team has been engaged in several similar programs recently, most notably the Duck River Agency water supply project and the Kentucky Bluegrass water development project, which are very relevant and of similar magnitude to DRBC s project. The following presents our proposed organization chart for this project. Delaware River Basin Commission Project Manager Dana Pizarro, PE Deputy Project Manager Thomas Dumm, PE Project Officer George Rest, PE Dam & Reservoir Engineering Robert R. Bowers, PE Financial Edward Donahue III, CMC Municipal & Financial Services Group Hydrology & Hydraulics N. Johan Anestad, PE Geotechnical Dreher Whetstone, PE Economic Analysis William Rule II, PhD Financial Analysis David Hyder Structural Edward Drummond Cost Estimating Robert Regan, Jr. Resumes are included in Section 3. 7 Delaware River Basin Commission DMF12/MUN.prp/DRBC-Reservoirs/Background.docx

14 360 Engineering and Project Delivery Solutions SECTION 2

15 CONSULTING SERVICES TO ESTIMATE FUTURE REPLACEMENT AND MAINTENANCE COSTS SECTION 2 PROJECT MANAGEMENT PROJECT METHODOLOGY & APPROACH TO SCOPE OF WORK It is our understanding that the DRBC intends the first phase of this project to be a collaborative effort with the USACE, yet culminate in an independent assessment of costs related to dam upgrades, operations and maintenance and funding approaches for sharing of these costs. The O Brien & Gere team is well-suited for assisting the DRBC in developing a water charging program to provide a sustainable revenue stream for the foreseeable future. Technical Review and Construction Cost Evaluations The foundation of this task is an independent evaluation of USACE s prior recommendations for upgrading Beltzville and Blue Marsh Dams to satisfy current dam safety requirements, and reviewing the previous USACE cost estimates and developing updated cost estimates (as appropriate) for capital work items and operation & maintenance costs over the next 30 years. Funding Reserve Analysis This task focuses on the analysis of funding (including the use of reserve funds) the costs associated with these two dams and reservoirs. We understand that the current cost allocation and pricing formulae and practices related to the facilities do not produce sufficient revenues on a recurring and reliable basis to meet the cash needs (including funding of reserves) for the two dams and reservoirs. Our approach includes a comprehensive review of funding options as needed to support the recommended investments and annual operating costs for the dams, and to produce stable and predictable cash flows. Reexamination of Water User Charges Under this task, the O Brien & Gere Team will review the water use rate charge formula and evaluate the merits of expanding the existing payer base. DRBC and Stakeholder Involvement O Brien & Gere encourages a decision-making process that will 1 Delaware River Basin Commission DMF12/MUN.prp/DRBC-Reservoirs/ProjectMgmt.docx

16 CONSULTING SERVICES TO ESTIMATE FUTURE REPLACEMENT AND MAINTENANCE COSTS SECTION 2 allow ample opportunity for input from stakeholders such as the Water Charges Advisory Committee and DRBC staff. We offer our decision support modeling tools and expertise to facilitate the complex process of raising revenues in today s budget-conscious environment. In this manner, our integration of technical, cost, and funding issues can take full advantage of a robust decision-making process. We recognize that the Commission needs a credible and efficient study process to reach a fiscally responsible solution for financing proposed improvements through This can be accomplished with an approach that allows for concurrent activities and a well-defined decision-making process. Our interactive method of analysis will result in a timely and effective conclusion while allowing adequate opportunities for input and collaboration with DRBC staff and the Water Charges Advisory Committee. TASK A REVIEW AND EVALUATION OF USACE RECOMMENDATIONS AND COST ESTIMATES A.1. Conduct meeting to review summary studies of dams We will meet with the USACE in the Philadelphia District or DRBC offices to be briefed on USACE studies relevant to dam safety and proposed remedial measures at Beltzville and Blue Marsh Reservoirs. Currently identified needs at both reservoirs include improvements to the dam to meet the revised Probable Maximum Flood (PMF) criteria; however, this issue represents a relatively small portion of the estimated improvement costs. Perhaps the most significant issue to be addressed is that of the internal filter drain systems for the dams that do not meet current USACE standards for dam safety. O Brien & Gere has a substantial amount of experience in the investigation of seepage issues and the design of filter drain systems to improve the condition of existing earth dams. Another issue to be addressed is the potential need for repair of the outlet tower at Beltzville Dam, which has been affected by the alkaliaggregate reaction (AAR). O Brien & Gere has recent experience in the investigation and design of structural improvements to address AAR issues and we will be able to assess the need to include such repair costs in the 30 year projection. We will also address other dam safety improvements 2 Delaware River Basin Commission DMF12/MUN.prp/DRBC-Reservoirs/ProjectMgmt.docx

17 CONSULTING SERVICES TO ESTIMATE FUTURE REPLACEMENT AND MAINTENANCE COSTS SECTION 2 recommended by the USACE over the next 30 years. We would request hard copies or electronic files of these studies in advance of the meeting to focus the discussions. For purposes of our cost proposal, we assume that this meeting will be a 4-hour meeting. Documents that we would anticipate reviewing include: as-built or record drawings from dam construction; all periodic inspections since the reservoirs were constructed; 2012 underwater inspection videos/reports; all contracts for the maintenance, repair or alteration of real property since the reservoirs were constructed, including costs or bids; all condition surveys (conduit crack surveys); hydraulic steel structures (HSS) inspection reports; piezometer/observation well data/logs; other instrumentation data/surveys; tower monitoring program reports; and other relevant O&M records including costs for manpower, materials or contractors. Deliverable: Meeting minutes to document the discussions and information obtained during the site visit. A.2. Conduct site visits to reservoirs to view conditions of the dams and appurtenances We will conduct site visits to both the Beltzville and Blue Marsh Reservoirs with USACE and DRBC personnel familiar with the above referenced studies. The purpose of these visits is to view and familiarize our team with the existing conditions of the dams, outlet structures and associated infrastructure. Particular focus will be upon the remedial actions proposed by the USACE and locations of such repairs/needs so the nature and extent of these measures can be further described in the field by the personnel who developed the approaches and cost estimates. This field visit will also serve as a basis for identifying any additional dam safety measures or maintenance items that might be necessary over the next 30 years and for developing cost estimates for these items under Task A.5. We will conduct a one-day site visit to each dam with observations based on features accessible by foot. It is assumed that site photographs will be allowed. No allowance has been made for the use of watercraft to access dam appurtenances not accessible by foot. No field surveys, investigations, or confined space entry inspections 3 Delaware River Basin Commission DMF12/MUN.prp/DRBC-Reservoirs/ProjectMgmt.docx

18 CONSULTING SERVICES TO ESTIMATE FUTURE REPLACEMENT AND MAINTENANCE COSTS SECTION 2 will be conducted to verify the nature, extent or quantities of USACE identified repairs or needs. A.3. Determine if USACE work items and costs are reasonable to expect over next 30 years Following the site visits, the field team will review, on a work item basis, the construction cost estimates, the maintenance recommendations and associated estimated costs developed by USACE given the understanding of the age and construction of the two dams and appurtenant structures. Work items and costs that are deemed reasonable and considered to be necessary within the next 30 years will be identified/confirmed. Where our opinion of the necessity of a proposed work item or the construction cost estimate of a work item differs from that of the USACE, we will develop an alternate approach or cost estimate and basis supporting our opinion and will have further discussions with the DRBC and the USACE to resolve the differences. The same approach will be applied to the USACE estimate of O&M costs. Because any cost estimates that we develop will be based on limited information, we would recommend an upper bound of 30 to 50% contingency for strategic planning purposes. Anticipated timing for implementation of individual items will also be identified. Review of these items and commentary will be consolidated into a single spreadsheet for each dam for incorporation into the summary report under Task A.6. Deliverable: Spreadsheet model summarizing proposed work item review of capital and O&M costs and supporting comments or notes. A.4. Project capital, operating and maintenance costs to support current USACE infrastructure needs The purpose of this task is to identify the true (full) costs of upgrading and operating each reservoir, including the recovery of capital costs, over the next 30 years. The basis for the inclusion/exclusion of such costs, the source for cost data related to each category of cost, and the proper amount of such costs to be included for the time periods under review will be developed under previous subtasks. In this subtask, we will identify and document the appropriate index, indices or cost factors that should be used to project costs for the future. Indices considered will be ENR Construction Cost Index (CCI), USACE Civil 4 Delaware River Basin Commission DMF12/MUN.prp/DRBC-Reservoirs/ProjectMgmt.docx

19 CONSULTING SERVICES TO ESTIMATE FUTURE REPLACEMENT AND MAINTENANCE COSTS SECTION 2 Works Construction Cost Index System (CWCCIS), Consumer Protection Index (CPI) Inflation Data, or similarly recognized sources. It is anticipated that use of these sources will create a cost envelope that will serve to develop a high-low projection or range for both capital and operating costs for the dams, given the long term nature of the projection. The range of costs will be considered in the funding analyses under subsequent Tasks B and C. Deliverable: Expand spreadsheet model for projections. A.5. Evaluate and determine any additional replacement or maintenance items beyond USACE recommendations Our team will identify and evaluate any additional upgrade measures and/or maintenance items that may be necessary beyond those identified by the USACE. This evaluation will be based on our review of supplied documents, the site visits, and our professional experience with earth dams and USACE dam safety standards. If any such items merit consideration and inclusion, further discussions will be held with the USACE to verify that these items should be included in the cost projections and cost estimates will be prepared with the appropriate level of contingency and anticipated timing of implementation will be identified. We will project these capital and O&M costs applying selected factors or indices used in Task A.4. These items will supplement the spreadsheets developed for each site under Task A.4. Deliverable: Updated spreadsheet developed under Task A.3 with additional work items that may be required. A.6. Prepare summary report of projected costs and time frame for these replacement/repair costs We will prepare a report that summarizes the findings of Task A. The report will include spreadsheet tables of projected future capital costs for dam safety improvements and operation & maintenance costs. The projected time frames for implementation of these improvements will be identified in the spreadsheets. The spreadsheets will also have a breakout of the Commission s portion of the estimated costs that may be assigned to DRBC based on the 1966 Beltzville Reservoir or the 1971 Blue Marsh Reservoir water storage contract with the United States or as provided by DRBC for purposes of this 5 Delaware River Basin Commission DMF12/MUN.prp/DRBC-Reservoirs/ProjectMgmt.docx

20 CONSULTING SERVICES TO ESTIMATE FUTURE REPLACEMENT AND MAINTENANCE COSTS SECTION 2 subtask. Graphics and figures will be used to illustrate key points, ranges of capital and O&M costs, projections and cost projection envelopes. We will submit draft copies of the report to the DRBC for review and comment, and will incorporate one round of consolidated comments into the final report. We will provide seven bound copies of the final report to DRBC along with the electronic files in Microsoft Excel or Word format and Acrobat pdf format. Deliverable: Draft and final report. TASK B - FUNDING RESERVE ANALYSIS OF THE WATER SUPPLY FACILITY FUND B.1. Evaluate feasibility of current charging program to pay for Commission s cost for dams The current formulae and methodology employed by the USACE, combined with the Commission s internal costs, will be documented, reviewed and evaluated to assess their adequacy to fully fund those costs that the Commission is required to fund, whether by law or contract, related to the reservoirs that are being studied during this project. We will develop projections (using sensitivity analyses) of the likely costs which the Commission will be required to recover, and compare these costs with the likely amount of revenue that will be generated by the Commission based on the current rate/fee structure used by the Commission, assuming the expected usage of the Commission s customers for these reservoirs. B.2. Determine rates and schedule of rate increases to pay for expected costs Based upon the cost projections developed in Task A.5, above, and the water usage projections (both consumptive and non-consumptive), we will compare projected expenses for the reservoirs with expected revenues under the current charging methodology employed by the Commission. We understand that the current methodology, while perhaps adequate for past cost scenarios, does not generate sufficient revenues to cover the currently projected costs plus the costs of upgrades to the reservoirs; we will develop projected rates and fees adequate (using conservative projections as to both expenses and demand) on a year-by-year basis for the next ten years, and projected rate increases for the subsequent twenty-year period. Among the issues to be investigated will be the basis for the differential between consumptive and non-consumptive usage rates and the determination of the denominator 6 Delaware River Basin Commission DMF12/MUN.prp/DRBC-Reservoirs/ProjectMgmt.docx