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HomeMy WebLinkAbout11-28-2012 Board Meeting Agenda November 20, 2012 NOTICE OF REGULAR MEETING BOARD OF DIRECTORS ORANGE COUNTY SANITATION DISTRICT Wednesday, November 28, 2012 — 6:30 P.M. Administration Building 10844 Ellis Avenue Fountain Valley, California 92708 The Regular Meeting of the Board of Directors of the Orange County Sanitation District will be held at the above location, time and date. Clerk of the Board Steering Committee - Wednesday, December 19, 2012 at 5:00 p.m. Board Meeting - Wednesday, December 19, 2012 at 6:30 p.m. A ITgT � o Q 9 VWV p p F Bg THE BOARD MEETING DATES November 28, 2012 *December 19, 2012 January 23, 2013 February 27, 2013 March 27, 2013 April 24, 2013 May 22, 2013 June 26, 2013 July 24, 2013 August 28, 2013 September 25, 2013 October 23, 2013 *Meetings are being held on the third Wednesday of the month OJNSV SAHITgr ON o Wednesday, November 28, 2012 Orange County Sanitation District 9 6:30 P.M. Regular Meeting of the o Board Room Board of Directors 10844 Ellis Avenue Fountain Valley, CA 92708 cl'"s THE EN (714) 593-7130 AGENDA INVOCATION AND PLEDGE OF ALLEGIANCE: (Jim Ferryman, Costa Mesa Sanitary District) DECLARATION OF QUORUM: ROLL CALL: PUBLIC COMMENTS: If you wish to speak, please complete a Speaker's Form (located at the table outside of the Board Room) and give it to the Clerk of the Board. Speakers are requested to limit comments to three minutes. REPORTS: The Chair and the General Manager may present verbal reports on miscellaneous matters of general interest to the Directors. These reports are for information only and require no action by the Directors. • What 2 Flush: No Drugs Down the Drain CLAIMS: 1. Ratify payment of claims of the District, by roll call vote, as follows: Claims Paid for the Period Ending: 10/15/12 10/31/12 Totals $10,317,953.13 $16,416,062.24 DIRECTORS: Pursuant to Government Code Section 84308, you are required to disclose any campaign contribution greater than $250 received in the past twelve months from any party seeking a contract with OCSD. This requires that you identify the contributor by name. Further, you may not participate in the decision making process to award a contract to such party. For reference, you are directed to the Register of Warrants as to all current contractors/vendors with OCSD. For the specifics of Government Code Section 84308, please see your Director's Handbook or call the office of General Counsel. 11/28/12 OCSD Board of Directors'Agenda Page 1 of 7 CONSENT CALENDAR: Consent Calendar Items are considered to be routine and will be enacted, by the Board of Directors, after one motion, without discussion. Any items withdrawn from the Consent Calendar for separate discussion will be considered in the regular order of business. 2. Approve minutes for the Board Strategic Plan Update Workshop Meeting held on October 17, 2012. 3. Approve minutes for the Regular Board Meeting held on October 24, 2012. 4. A. Authorize the General Manager and General Counsel to execute and record any and all instruments necessary to obtain a lot line adjustment for the unused portions of the Rocky Point Pump Station property. B. Adopt Resolution No. OCSD 12-13, Declaring Unused Portions of Real Property Located at 1700-2000 West Coast Highway, Newport Beach, as Surplus Property. C. Authorize the General Manager to obtain an appraisal and offer for sale the unused portion of Rocky Point Pump Station property owned by Orange County Sanitation District at 1700-2000 West Coast Highway, Newport Beach, consistent with the requirements of the Surplus Lands Act (California Government Code Section 54220 et seq.). D. Authorize the General Manager to negotiate with Coast Community College District concerning the sale of the unused portion of the Rocky Point Pump Station property consistent with the Purchase Option Agreement between the Orange County Sanitation District and Coast Community College District/Orange Coast College Regarding the Rocky Point Pump Station Site dated September 26, 2007. E. Approve and authorize the Chair to execute an agreement and Quitclaim Deed transferring to the City of Newport Beach certain sewer facilities constructed as part of the Replacement of Rocky Point Pump Station, Contract No. 5-50, in a form approved by General Counsel. 5. A. Approve Plans and Specifications for P2 Central Generation Facility Compressor Replacement, Project No. FE09-11 , on file at the office of the Clerk of the Board; B. Receive and file bid tabulation and recommendation; C. Award a construction contract to SS Mechanical Corporation for P2 Central Generation Facility Compressor Replacement, Project No. FE09- 11, for a total amount not to exceed $212,973; and, D. Approve a contingency of $31,946 (15%). 11/28/12 OCSD Board of Directors'Agenda Page 2 of 7 STEERING COMMITTEE: 6. Approve minutes for the Steering Committee Meeting held on October 24, 2012. 7. A. Approve the Five-Year Strategic Plan dated November 2012; and, B. Direct staff to implement the goals and levels of service contained in the Plan. 8. Receive and file Santa Ana Watershed Project Authority Pretreatment Program Compliance Audit Report from Environmental Engineering & Contracting, Inc. OPERATIONS COMMITTEE: 9. Approve minutes for the Operations Committee Meeting held on November 7, 2012. 10. A. Approve a Professional Design Services Agreement with Brown and Caldwell for Santa Ana Trunk Sewer Rehabilitation, Project No. 1-17, providing for engineering design services for an amount not to exceed $457,475; and, B. Approve a contingency of $45,747 (10%). 11. A. Adopt Resolution No. OCSD 12-14, certifying the Notice of Exemption for the Orangethorpe Avenue Grade Separation Project, Finding that the Lead Agency CEQA Compliance Obligations have been Fulfilled, and Related Actions (Project No. 2-77); and, B. Approve a Reimbursement Agreement with the Orange County Transportation Authority for an amount not to exceed $3,000,000, in a form approved by General Counsel. 12. A. Award a contract to the lowest responsive and responsible bidder, Century Paving, Inc., for Plant 1 Asphalt Replacement Job No. FR11-025 and Plant 2 Asphalt Replacement Job No. FR11-026, for a total amount not to exceed $448,309; and, B. Approve a contingency of $89,661 (20%). 11/28/12 OCSD Board of Directors'Agenda Page 3 of 7 13. A. Approve a budget increase of $630,000, for a total project budget of $930,000; B. Approve a Professional Services Agreement with Arcadis U.S., Inc., for Phase 2 Facility-Wide Safety Assessment, Project No. SP-145-1, providing for services for an amount not to exceed $686,400; and, C. Approve a contingency of $68,640 (10%). 14. Approve a Waste Disposal Agreement with the County of Orange (Orange County Waste and Recycling) for the County to receive and dispose of the Orange County Sanitation District's biosolids at the Prima Deshecha Landfill, subject to available capacity, for the period commencing on December 1, 2012 through June 30, 2020, with a renewal option of 10-years in a total annual amount not to exceed $3,605,288. 15. Authorize Amendment No. 9 to Synagro West, Inc., (Synagro) Purchase Order No. 100760-OB, increasing the annual amount from $6,580,000 to an amount not to exceed (NTE) $8,600,000 for the period of January 1, 2012 through December 31, 2012 for the Orange County Sanitation District's biosolids management contract. Thereafter, the NTE will be $6,850,000. 16. (Items A — M) A. Approve Plans and Specifications for Sludge Dewatering and Odor Control at Plant No. 1 , Project No. P1-101, on file at the office of the Clerk of the Board; B. Approve Addendum Nos. 1 through 6 to the plans and specifications; C. Receive and file bid tabulation and recommendation; D. Receive and file Award Protest dated October 5, 2012 and Supplemental Award Protests dated October 12, 2012 and October 30, 2012 from Balfour Beatty Infrastructure, Inc. concerning the award to W. M. Lyles Company; E. Receive and file response letter dated October 11, 2012, from W.M. Lyles Company to Award Protest from Balfour Beatty Infrastructure, Inc.; F. Receive and file Orange County Sanitation District Final Disposition letters dated October 15, 2012 and October 31 , 2012 to Balfour Beatty Infrastructure, Inc. responding to the Award Protest; G. Deny Award Protest filed by Balfour Beatty Infrastructure, Inc.; H. Receive and File Award Protest from Moyno, Inc. dated August 23, 2012, alleging that the sole source designation of Seepex for cake pumps was improper; 11/28/12 OCSD Board of Directors'Agenda Page 4 of 7 I. Receive and file Orange County Sanitation District Final Disposition letter dated October 4, 2012 to Moyno, Inc., responding to Award Protest; J. Reject untimely Award Protest filed by Moyno, Inc.; K. Approve a budget increase of $24,708,300 for Sludge Dewatering and Odor Control at Plant No. 1, Project No. P1-101 for a total amount not to exceed $171,978,300; L. Award a construction contract to W.M. Lyles Company for Sludge Dewatering and Odor Control at Plant No. 1, Project No. P1-101, for a total amount not to exceed $126,908,300; and, M. Approve a contingency of $3,800,000 (3%). ADMINISTRATION COMMITTEE: 17. Approve minutes for the Administration Committee Meeting held on November 14, 2012. 18. Receive and file the Sanitation District's Comprehensive Annual Financial Report for the year ended June 30, 2012, prepared by staff and audited by McGladrey, Certified Public Accountants along with the following reports prepared by McGladrey: A. Report to the Administration Committee B. Report on Internal Controls C. Independent Accountants' Report on Agreed-Upon Procedures Applied to Appropriations Limit Worksheets. CLOSED SESSION: During the course of conducting the business set forth on this agenda as a regular meeting of the Board, the Chair may convene the Board in closed session to consider matters of pending real estate negotiations, pending or potential litigation, or personnel matters, pursuant to Government Code Sections 54956.8, 54956.9, 54957 or 54957.6, as noted. Reports relating to (a) purchase and sale of real property; (b) matters of pending or potential litigation; (c) employment actions or negotiations with employee representatives; or which are exempt from public disclosure under the California Public Records Act, may be reviewed by the Board during a permitted closed session and are not available for public inspection. At such time as the Board takes final action on any of these subjects, the minutes will reflect all required disclosures of information. Convene in closed session. 11/28/12 OCSD Board of Directors'Agenda Page 5 of 7 (1) CONFERENCE WITH LEGAL COUNSEL RE. ANTICIPATED LITIGATION (Government Code Section 54956.9(b)) Significant Exposure to Litigation Number of Potential Cases: 1 - Claim from Corona Resource Recovery (2) CONFERENCE WITH LEGAL COUNSEL RE. EXISTING LITIGATION (Government Code Section 54956.9(a)) Case: Kiewit Infrastructure West v. Orange County Sanitation District, Orange County Superior Court, CASE NO.: 30-2012-00544245 (3) CONFERENCE WITH LEGAL COUNSEL RE. INITIATION OF LITIGATION (Government Code Section 54956.9(c)) Number of Potential Cases: 1 Reconvene in regular session. Consideration of action, if any, on matters considered in closed session. OTHER BUSINESS AND COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY: ADJOURNMENT: Adjourn the Board meeting until the next regular Meeting on December 19, 2012, at 6:30 p.m. 11/28/12 OCSD Board of Directors'Agenda Page 6 of 7 Accommodations for the Disabled: Meeting Rooms are wheelchair accessible. If you require any special disability related accommodations, please contact the Orange County Sanitation District Clerk of the Board's office at (714) 593-7130 at least 72 hours prior to the scheduled meeting. Requests must specify the nature of the disability and the type of accommodation requested. Agenda Posting: In accordance with the requirements of California Government Code Section 54954.2, this agenda has been posted outside the main gate of the Sanitation District's Administration Building located at 10844 Ellis Avenue, Fountain Valley, California, not less than 72 hours prior to the meeting date and time above. All public records relating to each agenda item, including any public records distributed less than 72 hours prior to the meeting to all, or a majority of the Board of Directors, are available for public inspection in the office of the Clerk of the Board. NOTICE TO DIRECTORS: To place items on the agenda for the Committee Meeting, items must be submitted to the Clerk of the Board 14 days before the meeting. Maria E.Ayala Clerk of the Board (714)593-7130 mayala ocsd.com For any questions on the agenda, Committee members may contact staff at: General Manager Jim Ruth (714)593-7110 jruth0)ocsd.com Assistant General Manager Bob Ghirelli (714)593-7400 rghirelli(@ocsd.com Assistant General Manager Jim Herberg (714)593-7300 iherberg aC�ocsd.com Director of Facility Support Services Nick Arhontes (714)593-7210 narhontes(o-)ocsd.com Director of Finance and Lorenzo Tyner (714)593-7550 Ityner(cDocsd.com Administrative Services Director of Human Resources Jeff Reed (714)593-7144 jreed(cDocsd.com Director of Operations&Maintenance Ed Torres 714 593-7080 etorres@ocsd.com 11/28/12 OCSD Board of Directors'Agenda Page 7 of 7 Glossary of Terms and Abbreviations AQMD Air Quality Management District ASCE American Society of Civil Engineers BOD Biochemical Oxygen Demand CARB California Air Resources Board CASA California Association of Sanitation Agencies CCTV Closed Circuit Television CRWQCB California Regional Water Quality Control Board CWA Clean Water Act CWEA California Water Environment Association EIR Environmental Impact Report EMT Executive Management Team EPA U.S. Environmental Protection Agency FOG Fats, Oils, and Grease FSSD Facilities Support Services Department gpd Gallons per day GWR System Groundwater Replenishment System (also called GWRS) LOS Level of Service MGD Million gallons per day NACWA National Association of Clean Water Agencies NPDES National Pollutant Discharge Elimination System NWRI National Water Research Institute O&M Operations and Maintenance OCCOG Orange County Council of Governments OCHCA Orange County Health Care Agency OCSD Orange County Sanitation District OCWD Orange County Water District OOBS Ocean Outfall Booster Station OSHA Occupational Safety and Health Administration POTW Publicly Owned Treatment Works ppm Parts per million RFP Request For Proposal RWQCB Regional Water Quality Control Board SARFPA Santa Ana River Flood Protection Agency SARI Santa Ana River Inceptor SARWQCB Santa Ana Regional Water Quality Control Board Glossary of Terms and Abbreviations SAWPA Santa Ana Watershed Project Authority SCADA Supervisory Control and Data Acquisition system SCAP Southern California Alliance of Publicly Owned Treatment Works SCAQMD South Coast Air Quality Management District SOCWA South Orange County Wastewater Authority SSMP Sanitary Sewer Management Plan SSO Sanitary Sewer Overflow SWRCB State Water Resources Control Board TDS Total Dissolved Solids TMDL Total Maximum Daily Load TSS Total Suspended Solids WDR Waste Discharge Requirements WEF Water Environment Federation WERF Water Environment Research Foundation Activated-sludge process — A secondary biological wastewater treatment process where bacteria reproduce at a high rate with the introduction of excess air or oxygen, and consume dissolved nutrients in the wastewater. Biochemical Oxygen Demand (BOD) —The amount of oxygen used when organic matter undergoes decomposition by microorganisms. Testing for BOD is done to assess the amount of organic matter in water. Biosolids — Biosolids are nutrient rich organic and highly treated solid materials produced by the wastewater treatment process. This high-quality product can be recycled as a soil amendment on farm land or further processed as an earth-like product for commercial and home gardens to improve and maintain fertile soil and stimulate plant growth. Capital Improvement Program (CIP) — Projects for repair, rehabilitation, and replacement of assets. Also includes treatment improvements, additional capacity, and projects for the support facilities. Coliform bacteria —A group of bacteria found in the intestines of humans and other animals, but also occasionally found elsewhere used as indicators of sewage pollution. E. coli are the most common bacteria in wastewater. Collections system — In wastewater, it is the system of typically underground pipes that receive and convey sanitary wastewater or storm water. Certificate of Participation (COP) — A type of financing where an investor purchases a share of the lease revenues of a program rather than the bond being secured by those revenues. Contaminants of Potential Concern (CPC) — Pharmaceuticals, hormones, and other organic wastewater contaminants. Dilution to Threshold (D/T) — the dilution at which the majority of the people detect the odor becomes the D/T for that air sample. Glossary of Terms and Abbreviations Greenhouse gases — In the order of relative abundance water vapor, carbon dioxide, methane, nitrous oxide, and ozone gases that are considered the cause of global warming ("greenhouse effect"). Groundwater Replenishment (GWR) System — A joint water reclamation project that proactively responds to Southern California's current and future water needs. This joint project between the Orange County Water District and the Orange County Sanitation District provides 70 million gallons a day of drinking quality water to replenish the local groundwater supply. Levels of Service (LOS) — Goals to support environmental and public expectations for performance. NDMA — N-Nitrosodimethylamine is an N-nitrosoamine suspected cancer-causing agent. It has been found in the Groundwater Replenishment System process and is eliminated using hydrogen peroxide with extra ultra-violet treatment. National Biosolids Partnership (NBP) — An alliance of the National Association of Clean Water Agencies (NACWA) and Water Environment Federation (WEF), with advisory support from the U.S. Environmental Protection Agency (EPA). NBP is committed to developing and advancing environmentally sound and sustainable biosolids management practices that go beyond regulatory compliance and promote public participation in order to enhance the credibility of local agency biosolids programs and improved communications that lead to public acceptance. Publicly-owned Treatment Works (POTW) — Municipal wastewater treatment plant. Santa Ana River Interceptor (SARI) Line — A regional brine line designed to convey 30 million gallons per day (MGD) of non-reclaimable wastewater from the upper Santa Ana River basin to the ocean for disposal, after treatment. Sanitary sewer — Separate sewer systems specifically for the carrying of domestic and industrial wastewater. Combined sewers carry both wastewater and urban run-off. South Coast Air Quality Management District (SCAQMD) — Regional regulatory agency that develops plans and regulations designed to achieve public health standards by reducing emissions from business and industry. Secondary treatment — Biological wastewater treatment, particularly the activated-sludge process, where bacteria and other microorganisms consume dissolved nutrients in wastewater. Sludge — Untreated solid material created by the treatment of wastewater. Total suspended solids (TSS) —The amount of solids floating and in suspension in wastewater. Trickling filter — A biological secondary treatment process in which bacteria and other microorganisms, growing as slime on the surface of rocks or plastic media, consume nutrients in wastewater as it trickles over them. Urban runoff — Water from city streets and domestic properties that carry pollutants into the storm drains, rivers, lakes, and oceans. Wastewater—Any water that enters the sanitary sewer. Watershed — A land area from which water drains to a particular water body. OCSD's service area is in the Santa Ana River Watershed. BOARD OF DIRECTORS Meeting Date To Bd. of Dir. 11/28/12 AGENDA REPORT Item Number Item Number I Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: PAYMENT OF CLAIMS OF THE ORANGE COUNTY SANITATION DISTRICT GENERAL MANAGER'S RECOMMENDATION Ratify Payment of Claims of the District by Roll Call Vote. CONFLICT OF INTEREST NOTIFICATION Pursuant to Government Code Section 84308, you are required to disclose any campaign contribution greater than $250 received in the past twelve months from any party to a contract involving the Orange County Sanitation District. Further, you may not participate in the decision making process to award a contract to such party. For reference, you are directed to the Register of Warrants as to all current contractors/vendors with the District. In general, you must disclose the basis of the conflict by identifying the name of the firm or individual who was the contributor. For the specifics of Government Code Section 84308, please see your Director's Handbook or call the office of General Counsel. PRIOR COMMITTEE/BOARD ACTIONS N/A ADDITIONAL INFORMATION See attached listing. ATTACHMENTS 1. Copies of Claims Paid reports from 10/01/12 — 10/15/12 and 10/16/12 — 10/31/12 Page 1 of 1 Claims Paid From 10/1/12 to 10/15/12 Vendor Warrant No. Amount Description Accounts Payable Warrants A W Chesterton 51551 $ 3,657.92 Repair&Maintenance Services and/or Supplies Absolute Standards,Inc. 51552 2,585.00 Laboratory Services&Supplies AccuStandard 51553 212.92 Laboratory Services&Supplies Aerotek 51554 3,736.80 Professional Services/Temporary Services Ago IndustriesDBA So-Cal Sweeping 51659 1,960.00 Street Sweeping Services Air Liquide America Corp. 51368 724.94 Laboratory Services&Supplies Air Liquide America Specialty Gases LLC 51555 124.86 Laboratory Services&Supplies Air Products&Chemicals,Inc. 51351 972,119.41 Chemicals,Water/Wastewater Treatment Airgas Safety,Inc. 51369 14,765.62 Safety,Security,Health Equipment,Supplies,and Services Airgas Safety,Inc. 51556 2,722.16 Safety,Security,Health Equipment,Supplies,and Services Airgas USA,LLC 51370 2,536.87 Laboratory Services&Supplies ALFA-LAVAL INC. 51371 1,417.59 Repair&Maintenance Services and/or Supplies Alhambra Foundry Co.,Ltd. 51372 13,210.15 Repair&Maintenance Services and/or Supplies Alhambra Foundry Co.,Ltd. 51557 9,568.20 Repair&Maintenance Services and/or Supplies All American Sewer Tools 51558 373.97 Repair&Maintenance Services and/or Supplies Amazing Tents&Events 51373 147.01 Event Supplies Amazing Tents&Events 51559 1,497.37 Event Supplies American Society for Microbiology 51374 50.00 Professional Organizations Meeting/Training/Membership AMS Acoustical material Services 51560 350.47 Repair&Maintenance Services and/or Supplies Amtech Elevator Services 51561 831.60 Miscellaneous Services AMX International Inc. 51375 1,125.00 JDE Upgrade Consulting Services AON Risk Insurance Services West 51376 17,061.56 Insurance(Owner Controlled Insurance Program) AppleOne Employment Service 51562 1,100.00 Professional Services/Temporary Services Applied Industrial Technology 51377 121.77 Repair&Maintenance Services and/or Supplies APWA Southern California Chapter 51563 499.00 Professional Organizations Meeting/Training/Membership Arizona Instruments,L.L.C. 51378 20.79 Electrical/Electronic Equipment,Parts&Repairs ASCE 51379 560.00 Professional Organizations Meeting/Training/Membership ASCE 51564 280.00 Professional Organizations Meeting/Training/Membership AT&T Mobility II,L.L.C. 51381 7,551.72 Telecommunications AT&T Universal Biller 51380 2,836.25 Telecommunications AT&T 51565 32.18 Telecommunications ATM AA, Inc. 51566 1,120.00 Lab Services Austin Building and Design dba The Austin Company 51531 50,458.82 Professional Services/Engineering Design Services AWSI 51567 208.00 Professional Services-DOT Program Administration Barragan Corp. International 51568 342.50 Professional Organizations Meeting/Training/Membership Battery Specialties 51569 12,290.76 Batteries,Various Battery Systems, Inc. 51570 2,383.14 Repair&Maintenance Services and/or Supplies BC Wire Rope&Rigging 51382 1,114.55 Tools&Supplies Beach Wire and Cable 51383 364.21 Telecommunications Bee Man Pest Control, Inc. 51384 150.00 Pest Control Services Belnick Inc Dba Bizchair 51571 2,172.30 Minor Equipment/Furniture&Fixtures-Tables&Chairs Bickmore Risk Services 51385 2,250.00 Professional Organizations Meeting/Training/Membership Black&Veatch Corporation 51386 5,647.69 Professional Services/Engineering Design Services Black&Veatch Corporation 51386 9,020.50 Professional Services/Engineering Design Services BLX Group 51387 3,500.00 Professional Financial Services Bootworld 51572 6,198.79 Safety,Security,Health Equipment,Supplies,and Services Brea Imperial,Inc. 51388 2,500.00 Miscellaneous Services Brea Imperial,Inc. 51573 2,500.00 Miscellaneous Services EXHIBIT A fin/210/mm Page 1 of 8 10/18/2012 Claims Paid From 10/1/12 to 10/15/12 Vendor Warrant No. Amount Description Buchi Corporation 51389 18,149.46 Repair&Maintenance Services and/or Supplies Bureau Veritas North America,Inc. 51574 2,359.00 Industrial Hygiene Services Burlington Safety Laboratory of CA,Inc. 51390 1,870.10 Safety,Security,Health Equipment,Supplies,and Services Burlington Safety Laboratory of CA,Inc. 51575 507.90 Safety,Security,Health Equipment,Supplies,and Services California Barricade Rentals 51391 2,070.00 Miscellaneous Services California Barricade Rentals 51576 3,375.00 Miscellaneous Services California Coastal Commission 51392 270.00 Governmental Agency Fees&Charges California Dept.of Child Support 51393 1,984.24 Judgments Payable California Recreation Company 51394 3,371.00 Boat Slip Rental-Nerissa Ocean Monitoring Vessel California Relocation Services,Inc. 51395 157.50 Miscellaneous Services-Moving/Relocation Caltrol,Inc. 51396 648.00 Electrical/Electronic Equipment,Parts&Repairs Camali Corp. 51397 4,812.50 Repair&Maintenance Services and/or Supplies Camp Dresser&McKee,Inc. 51398 19,079.75 Professional Services/Engineering Design Services CAPPO,Inc. 51577 208.00 Professional Organizations Meeting/Training/Membership Carbon Activated Corporation 51399 10,464.00 Repair&Maintenance Services and/or Supplies Carollo Engineers 51400 6,460.25 Professional Services/Engineering Design Services CASA 51401 425.00 Professional Organizations Meeting/Training/Membership CEPA Operations,Inc. 51402 245.00 Repair&Maintenance Services and/or Supplies CEPA Operations,Inc. 51578 1,755.00 Repair&Maintenance Services and/or Supplies City of Fullerton 51426 42.00 Water Use City of Huntington Beach 51434 96.68 Water Use City of Newport Beach 51459 302.28 Water Use City of Westminster 51579 30.65 Water Use Cla-Val Co 51580 345.40 Valve Repair Clean Harbors Environmental Services 51403 5,915.41 Grit&Screenings;Hazard Waste Disposal CMAA 51581 110.00 Professional Organizations Meeting/Training/Membership Connell Chevrolet\GEO 51582 245.13 Autos,Trucks&Marine Equipment,Parts,Accessories&Services Constellation Newenergy Gas Division LLC 51352 40,147.34 Natural Gas Cooperative Personnel Services 51585 957.95 Human Resources Services Corner Bakery Cafe(CBC) 51404 172.22 Catering Services Cornerstone Ondemand, Inc. 51405 8,000.00 Professional Services/I.T. Corporate Image Maintenance,Inc. 51353 36,215.00 Janitor&Household Service&Supplies CORRPRO Companies, Inc. 51354 35,843.50 Professional Services/Temporary Services Cotton Point Design,Inc.dba Power Design 51406 1,222.96 Electrical/Electronic Equipment,Parts&Repairs County of Orange-Health Care Agency 51584 422.00 Governmental Agency Fees&Charges County of Orange Auditor Controller 51407 3,140.00 Governmental Agency Fees&Charges County of Orange Auditor Controller 51408 8,091.60 Governmental Agency Fees&Charges County of Orange Auditor Controller 51409 465.00 Governmental Agency Fees&Charges County of Orange Auditor Controller 51583 405.00 Governmental Agency Fees&Charges Court Order 51441 2,179.38 Judgments Payable Court Order 51443 150.00 Judgments Payable Court Order 51482 108.00 Judgments Payable Court Order 51521 912.50 Judgments Payable CR&R, Inc. 51410 1,422.12 Waste Disposal Crane Veyor Corp. 51532 36,570.22 Repair&Maintenance Services and/or Supplies CWEA Membership 51412 272.00 Professional Organizations Meeting/Training/Membership CWEA Membership 51587 280.00 Professional Organizations Meeting/Training/Membership Dale O.Henderson 51692 193.24 Meeting/Training Expense Reimbursement Dapper Tire Co. 51413 776.53 Autos,Trucks&Marine Equipment,Parts,Accessories&Services EXHIBIT A fin/210/mm Page 2 of 8 10/18/2012 Claims Paid From 10/1/12 to 10/15/12 Vendor Warrant No. Amount Description David Gutoff 51588 225.00 Laboratory Services&Supplies David Rodriguez 51527 200.00 Meeting/Training Expense Reimbursement DDB Engineering,Inc. 51589 1,485.00 Professional Services-Advocacy De La Riva Construction 51546 82,496.95 Construction Delta Q,Inc. 51590 726.01 Repair&Maintenance Services and/or Supplies Denovo Ventures LLC 51414 1,055.00 JDE Upgrade Consulting Services Dica Marketing Company 51415 556.82 Tools&Supplies DKS Associates 51591 18,539.40 Professional Services/Traffic Study DLT Solutions,Inc. 51355 59,295.42 Computer Applications&Services Drivecam,Inc. 51416 95.00 Professional Organizations Meeting/Training/Membership Employee Benefits Specialists,Inc. 51356 822,965.92 Reimbursed Prepaid Employee Medical&Dependent Care Employee Benefits Specialists,Inc. 51418 15,276.94 Reimbursed Prepaid Employee Medical&Dependent Care Employee Benefits Specialists,Inc. 51592 3,008.75 Reimbursed Prepaid Employee Medical&Dependent Care Employment Development Dept. 51593 9,235.00 Unemployment Insurance Enchanter,Inc. 51419 3,040.00 Vessel Services-Monitoring Vessel Nerissa Enchanter,Inc. 51594 3,040.00 Vessel Services-Monitoring Vessel Nerissa ENS Resources, Inc. 51420 7,500.00 Professional Services-Federal Advocacy Enviromatrix Analytical,Inc. 51421 1,120.00 Laboratory Services&Supplies Enviromatrix Analytical,Inc. 51595 3,630.00 Laboratory Services&Supplies Environmental Resource Associates 51422 963.49 Laboratory Services&Supplies Environmental Water Solutions,Inc. 51423 301.59 Repair&Maintenance Services and/or Supplies Evelyn R.Mumper Trust 51417 614.16 Sewer User Refund Ewing Irrigation 51424 531.34 Irrigation Repair&Maintenance Services and/or Supplies Excel Door&Gate Co., Inc. 51596 2,774.21 Repair&Maintenance Services and/or Supplies Fisher Scientific 51597 4,001.52 Laboratory Services&Supplies Fountain Valley AAA Auto Spa 51598 1,110.22 Autos,Trucks&Marine Equipment,Parts,Accessories&Services Franchise Tax Board 51425 985.01 Judgments Payable Franklin Covey 51599 65.42 Office Supplies Fresno First Bank-Acct 100013307 51686 5,716.60 Construction,Retention Gates Fiberglass Installers 51601 4,577.50 Repair&Maintenance Services and/or Supplies General Petroleum 51427 3,973.55 Fuel and Lubricants GHD,L.L.C. 51602 3,850.00 Professional Services/Engineering Design Services Glens Alignment&Brake Service 51603 129.00 Autos,Trucks&Marine Equipment,Parts,Accessories&Services Global Environmental Network Inc. 51604 3,750.00 Safety,Security,Health Equipment,Supplies,and Services GMU Geotechnical,Inc. 51605 3,252.50 Professional Services/General Counsel-Biiterpoint Rehab Golden State Overnight Delivery Service 51428 232.39 Courier Services Golden State Overnight Delivery Service 51606 110.33 Courier Services Golden West Machine, Inc. 51607 22,130.00 Repair&Maintenance Services and/or Supplies Grainger, Inc. 51608 9,116.45 Repair&Maintenance Services and/or Supplies Greentech Landscape,Inc 51609 395.00 Landscape Maintenance Services GRM Information Management Services 51429 370.29 Miscellaneous Services&Supplies H.H.Fremer Architects,Inc. 51430 1,366.67 Construction Hach Company 51432 5,413.27 Laboratory Services&Supplies Hardy Diagnostics 51610 2,218.13 Laboratory Services&Supplies Harrington Industrial Plastics,Inc. 51433 23,751.52 Repair&Maintenance Services and/or Supplies HDR Engineering, Inc. 51533 74,582.29 Professional Services/Engineering Design Services Heat Technology Products 51611 2,128.14 Repair&Maintenance Services and/or Supplies Helix Electric, Inc. 51547 126,678.34 Construction Hill Brothers 705 240,423.04 Chemicals,Water/Wastewater Treatment EXHIBIT A fin/210/mm Page 3 of 8 10/18/2012 Claims Paid From 10/1/12 to 10/15/12 Vendor Warrant No. Amount Description Hill Brothers 709 133,616.06 Chemicals,Water/Wastewater Treatment Home Depot 51612 265.57 Miscellaneous Parts and Supplies Hope Health/IHAC 51613 563.02 Benefits Hub Auto Supply 51614 757.46 Autos,Trucks&Marine Equipment,Parts,Accessories&Services IDEXX Distribution, Inc. 51435 6,314.15 Laboratory Services&Supplies Indiana Child Support Bureau 51436 290.00 Judgments Payable Industrial Threaded Products,Inc. 51615 2,787.79 Repair&Maintenance Services and/or Supplies Integrated Process Technologies, Inc. 51437 637.50 Repair&Maintenance Services and/or Supplies Intl.Union of Oper.Eng.AFL CIO Local 501 51438 4,862.03 Dues Deductions Intratek Computer, Inc. 51439 881.94 Network/Server/Printer Maintenance Services J F Shea Construction,Inc. 51366 111,645.77 Construction J F Shea Construction,Inc. 51367 531,314.10 Construction J F Shea Construction,Inc. 51529 10,580.90 Construction J F Shea Construction,Inc. 51548 172,576.05 Construction Jamboree Properties 51440 1,349.47 Sewer User Refund Jamison Engineering Contractors, Inc. 51357 46,983.36 Professional Services/Construction Support Services Jays Catering 51616 1,467.66 Catering Services JCI Jones Chemicals, Inc. 710 62,296.21 Chemicals,Water/Wastewater Treatment Johnstone Supply 51617 220.95 Repair&Maintenance Services and/or Supplies Kemira Water Solutions 706 183,578.58 Chemicals,Water/Wastewater Treatment Kemira Water Solutions 711 118,824.53 Chemicals,Water/Wastewater Treatment Kiewit Infrastructure West Co. 51687 19,000.00 Construction Labware, Inc. 51618 750.00 Repair&Maintenance Services and/or Supplie Larry R.Crandall 51691 906.20 Meeting/Training Expense Reimbursement Lee&Ro, Inc. 51619 2,251.77 Professional Services/Engineering Design Services Lexis-Nexis 51620 84.00 Books&Publications On-Line Liberty Mutual Claims 51358 43,454.13 Insurance Lillestrand and Associates 51442 2,112.50 Professional Services LittleJohn-Reu land Corporation 51621 8,956.35 Repair&Maintenance Services and/or Supplies Lorman Education Services 51444 578.00 Professional Organizations Meeting/Training/Membership Los Angeles County 51622 2,177.50 Governmental Agency Fees&Charges Lucci's Gourmet Foods, Inc. 51623 334.70 Catering Services Machado Environmental Corp.DBA Air Duct Cleaning 51624 610.06 Repair&Maintenance Services and/or Supplies Mail Dispatch,LLC 51625 314.70 Mail Delivery Service Malcolm Pirnie, Inc. 51534 69,247.16 Professional Services/Engineering Design Services Maria E.Ayala 51690 419.88 Meeting/Training Expense Reimbursement Marine Technology Network Association 51445 75.00 Professional Organizations Meeting/Training/Membership Marvac Electronics 51626 20.77 Electrical/Electronic Equipment,Parts&Repairs Matheson Tri Gas, Inc. 51446 428.79 Laboratory Services&Supplies Matheson Tri Gas, Inc. 51627 1,710.82 Laboratory Services&Supplies Mathew D.Rebai 51526 170.00 Meeting/Training Expense Reimbursement McGladrey&Pullen LLP 51447 22,000.00 Professional Services-Financial Auditing McJunkin Red Man Corporation 51448 992.97 Repair&Maintenance Services and/or Supplies McMaster-Carr Supply Co. 51449 5,212.97 Repair&Maintenance Services and/or Supplies McMaster-Carr Supply Co. 51628 456.21 Repair&Maintenance Services and/or Supplies MCR Technologies,Inc. 51450 2,250.22 Repair&Maintenance Services and/or Supplies Mesa Consolidated Water District 51629 32.00 Water Use Michael Puccio 51525 125.00 Meeting/Training Expense Reimbursement Midway Mfg.&Machining Co. 51452 1,594.70 Repair&Maintenance Services and/or Supplies EXHIBIT A fin/210/mm Page 4 of 8 10/18/2012 Claims Paid From 10/1/12 to 10/15/12 Vendor Warrant No. Amount Description Mid-West Associates, Inc. 51451 790.01 Repair&Maintenance Services and/or Supplies Minarik Corporation 51453 1,416.26 Repair&Maintenance Services and/or Supplies Mine Safety Appliance 51454 4,249.55 Electrical/Electronic Equipment,Parts&Repairs Moira E.Sullivan 51528 140.06 Meeting/Training Expense Reimbursement Moore Medical Inc. 51455 23,967.93 Medical Supplies Moore Medical Inc. 51630 275.02 Medical Supplies MTM Recognition Corporation 51456 376.63 Service Awards MWH Americas,Inc. 51535 57,918.15 Professional Services/Engineering Design Services NAFA, Inc. 51457 475.00 Professional Organizations Meeting/Training/Membership National Assoc.of Clean Water Agencies 51359 40,740.00 Professional Organization&Meeting/Training Registration Nautilus Environmental,L.L.C. 51536 36,800.00 Laboratory Services&Supplies Neal Supply Co. 51458 6,063.02 Repair&Maintenance Services and/or Supplies Nickell Metal Spray 51460 1,230.00 Repair&Maintenance Services and/or Supplies Ninyo&Moore 51461 2,932.00 Professional Services/Geotech&Material Testing Northeast Laboratory Services, Inc. 51462 506.99 Laboratory Services&Supplies Northeast Laboratory Services, Inc. 51631 62.01 Laboratory Services&Supplies NRG Engine Services,L.L.C. 51463 925.65 Repair&Maintenance Services and/or Supplies Nth Generation Computing, Inc. 51360 29,277.00 Computer Applications&Services O.C.Business Journal 51632 69.00 Subscription OCEA 51464 682.50 Dues Deductible O'Connell Engineering&Construction, Inc. 51361 45,408.95 Repair&Maintenance Services and/or Supplies Office Depot 51465 1,153.04 Office Supplies Office Depot 51633 313.40 Office Supplies Olin Corporation 51362 26,820.17 Chemicals,Water/Wastewater Treatment Olin Corporation 51537 3,923.09 Chemicals,Water/Wastewater Treatment Olin Corporation 51537 23,290.49 Chemicals,Water/Wastewater Treatment OneSource Distributors, Inc. 51466 1,864.46 Electrical/Electronic Equipment,Parts&Repairs Orange Coast Auto Body,Inc. 51634 1,211.77 Autos,Trucks&Marine Equipment,Parts,Accessories&Services Orange County Auto Parts 51635 94.18 Truck Supplies Orange County Hose Company 51636 19.01 Miscellaneous Parts and Supplies Orange County Sanitation District 51530 1,400.37 Petty Cash Expense Orange County United Way 51467 40.00 Employee Contributions OSTS Inc. 51637 2,360.00 Professional Organizations Meeting/Training/Membership PAC 51469 3,153.84 Laboratory Services&Supplies Pacific Mechanical Supply 51470 4,496.29 Repair&Maintenance Services and/or Supplies Pacific Mechanical Supply 51638 1,140.06 Repair&Maintenance Services and/or Supplies Parker Supply Company 51471 4,806.73 Miscellaneous Parts and Supplies Parker Supply Company 51639 2,808.53 Miscellaneous Parts and Supplies Parkhouse Tire,Inc. 51640 646.95 Autos,Trucks&Marine Equipment,Parts,Accessories&Services Peace Officers Council of CA 51472 2,254.00 Dues Deductions,Supervisors&Professionals Performance Pipeline Technologies 51473 1,190.00 Professional Services/CCTV Inspection/Sewerline Cleaning PL Hawn Company,Inc. 51474 954.97 Repair&Maintenance Services and/or Supplies Polydyne,Inc. 707 65,583.15 Chemicals,Water/Wastewater Treatment Port Supply 51641 103.74 Autos,Trucks&Marine Equipment,Parts,Accessories&Services Praxair Distribution, Inc. 51475 349.31 Laboratory Services&Supplies Praxair Distribution, Inc. 51475 1,793.93 Laboratory Services&Supplies Praxair Distribution, Inc. 51642 430.23 Laboratory Services&Supplies Primrose Ice Co.,Inc. 51476 131.25 Water&Ice Services Primrose Ice Co.,Inc. 51643 315.00 Water&Ice Services EXHIBIT A fin/210/mm Page 5 of 8 10/18/2012 Claims Paid From 10/1/12 to 10/15/12 Vendor Warrant No. Amount Description Prizio Family Trust 51468 900.15 Sewer User Refund Procare Work Injury Center 51644 135.00 Medical Services Process Equipment Company 51477 2,568.60 Repair&Maintenance Services and/or Supplies Projects Partners 51478 21,952.00 Professional Services/Temporary Employment Services Prudential Overall Supply 51645 7,525.29 Uniforms Pryor Seminars/Career Track 51600 49.00 Professional Organizations Meeting/Training/Membership Pump Action 51479 4,829.59 Oil Filters Q Air-Calif.Div.Pump Engineering 51480 570.71 Repair&Maintenance Services and Supplies Q Air-Calif.Div.Pump Engineering 51646 1,703.31 Repair&Maintenance Services and Supplies Q Air-Calif.Div.Pump Engineering 51646 3,953.78 Repair&Maintenance Services and Supplies Quickstart Intelligence 51481 975.00 Professional Organizations Meeting/Training/Membership Rainbow Disposal Co. 51647 655.00 Waste Disposal Rainin Instrument,L.L.C. 51648 388.33 Laboratory Services&Supplies Red Wing Shoes 51649 22,640.16 Safety,Security,Health Equipment,Supplies,and Services Rehab West,Inc. 51650 444.58 Human Resources Services Rexel Electrical&Datacom Supplies 51651 3,680.22 Electrical/Electronic Equipment,Parts&Repairs Roto Rooter NOC#11 51483 596.21 Repair&Maintenance Services and/or Supplies Royale Cleaners 51484 480.90 Miscellaneous Services Royale Cleaners 51652 90.30 Miscellaneous Services Safety Max 51653 493.57 Safety,Security,Health Equipment,Supplies,and Services San Diego/Orange Fluid System Technologies,Inc. 51486 479.03 Repair&Maintenance Services and/or Supplies Sancon Engineering,Inc. 51654 4,180.00 Repair&Maintenance Services and/or Supplies SCS Engineers 51488 2,500.00 Professional Services/Air Quality Monitoring Securitas Security Services USA, Inc. 51538 30,917.18 Safety,Security,Health Equipment,Supplies,and Services Shamrock Supply Co., Inc. 51489 5,718.38 Repair&Maintenance Services and/or Supplies Shamrock Supply Co., Inc. 51655 131.46 Repair&Maintenance Services and/or Supplies Siemens Water Technologies Corp. 51656 7,357.64 Repair&Maintenance Services and/or Supplies Sigma-Aldrich, Inc. 51657 66.49 Laboratory Services&Supplies Smith Pipe&Supply,Inc. 51490 337.94 Facilities,Maintenance,Services&Supplies So.Cal Gas Company 51658 292.29 Utilities Society for HR Management 51660 180.00 Professional Organizations Meeting/Training/Membership South Coast Air Quality Management Dist. 51661 436.63 Governmental Agency Fees&Charges South Coast Environmental Co. 51487 4,705.77 Professional Services-Air Quality Monitoring Southern California Edison 51662 2,053.16 Utilities Southern Counties Lubricants 51491 1,533.56 Fuel and Lubricants Southern Counties Lubricants 51663 1,986.91 Fuel and Lubricants Sparklett-Dallas 51664 2,724.04 Miscellaneous Services Sparling Instruments, Inc. 51492 2,555.72 Instrument Parts&Supplies Stanton Radiator 51665 200.00 Repair&Maintenance Services and/or Supplies Staples 51493 1,833.95 Office Supplies Staples 51666 465.19 Office Supplies STL Landscape,Inc. 51522 10,600.00 Construction Superior Awning Inc. 51494 2,938.58 Repair&Maintenance Services and/or Supplies Superior Electric Motor Service 51363 68,857.64 Electrical/Electronic Equipment,Parts&Repairs Suzanne's Catering 51667 3,886.00 Miscellaneous Expenses Sycamore Partnership 51485 1,544.11 Sewer User Refund Synagro West, Inc. 51364 628,131.66 Biosolids Management Synagro West, Inc. 51539 197,454.05 Biosolids Management Taki Sun Inc 51495 306.42 Sewer User Refund EXHIBIT A fin/210/mm Page 6 of 8 10/18/2012 Claims Paid From 10/1/12 to 10/15/12 Vendor Warrant No. Amount Description TDI 51496 8,275.00 Professional Services/Information Technology Tektronix Inc 51668 196.42 Instrument Repairs&Calibration Services TestAmerica Ontario 51669 837.00 Laboratory Services&Supplies Tetra Tech, Inc. 51497 16,790.68 Professional Services/Engineering Design ServicesS The Creative Group 51411 1,323.00 Professional Services/Temporary Services The Creative Group 51586 2,982.00 Professional Services/Temporary Services The Unisource Corporation 51678 1,006.39 Paper&Office Supplies Theodore Robins Ford 51670 46.74 Autos,Trucks&Marine Equipment,Parts,Accessories&Services Thompson Industrial Supply, Inc. 712 2,199.36 Repair&Maintenance Services and/or Supplies Tim H.Hopkins 51431 184.51 Meeting/Training Expense Reimbursement Time Warner Communications 51671 64.04 Telecommunications Tom B.Meregillano 51693 314.00 Meeting/Training Expense Reimbursement Toshiba Business Solutions USA Inc. 51498 660.20 Computers,Software/Hardware&Managed Services Total Resource Management, Inc. 51540 287,779.44 Professional Services/Implementation of IBM Maxim Trace3,Inc. 51672 7,200.00 Computer Applications&Services Tropical Plaza Nursery,Inc. 51499 12,497.50 Landscape Maintenance Services Truck&Auto Supply,Inc. 51673 2,595.00 Autos,Trucks&Marine Equipment,Parts,Accessories&Services Tule Ranch/Magan Farms 51365 256,443.40 Biosolids Management Tule Ranch/Magan Farms 51541 354,746.87 Biosolids Management TW Telecom Holdings, Inc. 51674 5,187.61 Telecommunications Ultra Scientific 51676 81.85 Laboratory Services&Supplies Underground Service Alert of So.Calif 51677 1,369.50 Professional Services-Dig Alert Notification Service Union Bank Escrow No#23861 51523 6,139.25 Construction Union Bank of California Escrow 51688 9,082.95 Construction,Retention United Parcel Service 51500 925.37 Freight Services United Parcel Service 51679 506.15 Freight Services United States Postal Service 51675 5,000.00 Postage United States Treasury-IRS 51550 458,428.74 Governmental Agency Fees&Charges and Taxes Univar USA Inc 708 6,441.06 Chemicals,Water/Wastewater Treatment Universal Flooring Systems,Inc. 51501 2,667.00 Facilities,Maintenance,Services&Supplies UPS Ground Freight, Inc. 51503 105.10 Freight Services US Peroxide,L.L.C. 51543 74,180.37 Chemicals,Water/Wastewater Treatment USA Bluebook 51504 1,761.60 Laboratory Services&Supplies USC 51502 19,690.68 Professional Services/Studies USC 51542 31,783.42 Professional Services/Studies Valin Corporation 51505 1,868.33 Repair&Maintenance Services and/or Supplies Vapex Products,Inc. 51506 5,517.56 Electrical/Electronic Equipment,Parts&Repairs Verizon California 51507 636.33 Telecommunications Verizon Wireless 51508 1,103.15 Telecommunications Verne's Plumbing 51509 1,880.00 Plumbing Services&Supplies Verne's Plumbing 51680 2,871.38 Plumbing Services&Supplies Village Nurseries 51510 238.69 Repair&Maintenance Services and/or Supplies Voyager Fleet Systems, Inc. 51544 29,592.86 Autos,Trucks&Marine Equipment,Parts,Accessories&Services VWR Scientific Products 51511 2,680.44 Laboratory Services&Supplies VWR Scientific Products 51681 607.34 Laboratory Services&Supplies W.M.Lyles Co. 51549 108,615.40 Construction Washington Q.Nguyen 51524 115.00 Meeting/Training Expense Reimbursement Water Environment Federation 51512 1,481.00 Professional Organizations Meeting/Training/Membership Water Environment Federation 51682 220.00 Professional Organizations Meeting/Training/Membership EXHIBIT A fin/210/mm Page 7 of 8 10/18/2012 Claims Paid From 10/1/12 to 10/15/12 Vendor Warrant No. Amount Description Water Environment Federation 51683 9,422.12 Meeting Registration Waters Corporation 51513 6,661.62 Laboratory Services&Supplies Waxie Sanitary Supply 51514 1,880.08 Janitor&Household Service&Supplies Wells Fargo Bank 51689 1,000.00 Construction,Retention Wells Supply Co. 51515 344.80 Repair&Maintenance Services and/or Supplies Wesco Distribution,Inc. 51516 41.40 Repair&Maintenance Services and/or Supplies West Coast Safety Supply Co. 51517 7,212.97 Safety,Security,Health Equipment,Supplies,and Services West Coast Safety Supply Co. 51518 995.00 Publication West Coast Safety Supply Co. 51684 642.46 Safety,Security,Health Equipment,Supplies,and Services West Lite Supply Company,Inc. 51519 221.98 Electrical/Electronic Equipment,Parts&Repairs White Star Pools 51520 310.00 Repair&Maintenance Services and/or Supplies Woodruff Spradlin&Smart 51545 143,650.55 Professional Services-Legal 24 Hour Fire Protection, Inc. 51685 1,542.50 Repair&Maintenance Services and/or Supplies Total Accounts Payable-Warrants $ 7,963,135.23 Payroll Disbursements Employee Paychecks 49798 - 49823 $ 4,475.92 Interim Payroll-ARBA(10/01/12) Employee Paychecks 49824 - 49861 86,581.94 Biweekly Payroll(10/03/12)* Employee Paychecks 49864 1,082.24 Interim Payroll-Retirement(10/04/12)** Employee Paychecks 49917 708.79 Interim Payroll-Retirement Payout(10/11/12) Direct Deposit Statements 326801 -326968 38,831.41 Interim Payroll-ARBA(10/01/12) Direct Deposit Statements 326969 -327532 1,411,740.54 Biweekly Payroll(10/03/12) Total Payroll Disbursements $ 1,543,420.84 *Check numbers 49862 and 49863 used in prior period **Check numbers 49865-49916 to be used in future period Wire Transfer Payments OCSD Payroll Taxes&Contributions $ 791,659.88 Biweekly Payroll(10/03/12) Union Bank of California 19,737.18 Workers'Compensation Services(10/11/12) Total Wire Transfer Payments $ 811,397.06 Total Claims Paid 10/01/12-10/15/12 $ 10,317,953.13 EXHIBIT A fin/210/mm Page 8 of 8 10/18/2012 Claims Paid From 10/16/12 to 10/31/12 Vendor Warrant No. Amount Description Accounts Payable Warrants A&G Electropolish 52035 785.00 Reconciliation Industrial Discharger Prgm A.H.Graphics Limited 51902 3,310.08 Printing and Publications-Brochures AAAS 52041 99.00 Professional Organizations Meeting/Training/Membership Accurate Measurement Systems 52042 574.41 Repair&Maintenance Services and/or Supplies Adam Shephard 52230 180.00 Meeting/Training Expense Reimbursement Aerotek 51711 1,868.40 Professional Services/Temporary Services Aerotek 51903 1,603.47 Professional Services/Temporary Services Aerotek 52043 2,164.65 Professional Services/Temporary Services Air Industries Company,A PCC 52037 14,400.76 Reconciliation User Fee Refund Program Air Products&Chemicals, Inc. 51712 19,460.73 Chemicals,Water/Wastewater Treatment Air Products&Chemicals, Inc. 51904 10,092.57 Chemicals,Water/Wastewater Treatment Air Products&Chemicals, Inc. 52017 112,512.70 Chemicals,Water/Wastewater Treatment Air Toxics,LTD 52044 680.00 Laboratory Services&Supplies Airgas Safety, Inc. 51713 5,205.37 Safety,Security,Health Equipment,Supplies,and Services Airgas Safety, Inc. 51905 9,864.92 Safety,Security,Health Equipment,Supplies,and Services Airgas Safety, Inc. 52045 6,397.04 Safety,Security,Health Equipment,Supplies,and Services Airgas USA,LLC 51714 474.75 Laboratory Services&Supplies Airgas USA,LLC 51906 1,001.19 Laboratory Services&Supplies Airgas USA,LLC 52046 1,409.90 Laboratory Services&Supplies Alan's Lawn&Garden Center,Inc. 51715 68.47 Repair&Maintenance Services and/or Supplies Alimed Inc. 51907 258.75 Laboratory Services&Supplies Alloy Die Casting 52038 3,305.26 Reconciliation User Fee Refund Program American Academy of Environmental Engine 51908 100.00 Books and Publications American Express 51694 25,484.22 Purchasing Card Program for Miscellaneous Parts and Supplies American Express TVL Related Svcs Co., Inc. 51716 2,580.18 Purchasing Card Program for Miscellaneous Travel Expenses American Industrial Heat Transfer Inc. 51909 3,919.30 Repair&Maintenance Services and/or Supplies American Society of Civil Engineers 51910 280.00 Professional Organizations Meeting/Training/Membership Amtech Elevator Services 51717 1,035.00 Miscellaneous Services Amtech Elevator Services 51911 5,104.50 Miscellaneous Services Amtech Elevator Services 52047 1,035.00 Miscellaneous Services Anaheim Plating&Polishing, Inc. 52039 18.25 Reconciliation User Fee Refund Program Apple and Terry Matthews 52233 2,000.00 Employee Computer Loan Program AppleOne Employment Service 51718 1,100.00 Professional Services/Temporary Services AppleOne Employment Service 51912 1,100.00 Professional Services/Temporary Services AppleOne Employment Service 52048 7,952.92 Professional Services/Temporary Services Applied Industrial Technology 51719 1,007.34 Repair&Maintenance Services and/or Supplies Applied Industrial Technology 52049 154.20 Repair&Maintenance Services and/or Supplies Aquatic Biosystems,Inc. 52050 489.50 Laboratory Services&Supplies Archie,Stephanie L. 52011 177.79 Meeting/Training Expense Reimbursement Arizona Instruments,L.L.C. 51913 20.69 Electrical/Electronic Equipment,Parts&Repairs Arrowhead Products 52040 6,829.33 Reconciliation User Fee Refund Program ASCE 51721 280.00 Professional Organizations Meeting/Training/Membership ASCE 51914 45.00 Professional Organizations Meeting/Training/Membership Ashbrook Simon Hartley Operations,L.P. 51722 11,058.99 Repair&Maintenance Services and/or Supplies Association of California Cities 52051 250.00 Professional Organizations,Meeting/Training/Membership Dues Astech Engineered Products, Inc#3 52105 8,462.71 Annual Reconciliation Industrial Discharge Program ASTM 51723 90.20 Books and Publications AT&T 52036 253.49 Telecommunications AT&T Long Distance. 51915 12.29 Telecommunications AT&T Mobility II,L.L.C. 52052 7,532.52 Telecommunications EXHIBIT B fin/210/mm Page 1 of 12 11/7/2012 Claims Paid From 10/16/12 to 10/31/12 Vendor Warrant No. Amount Description AT&T Universal Biller 51724 106.90 Telecommunications AT&T Teleconference Services 51916 17.57 Telecommunications ATCC:Amer.Type Culture Collect 51725 404.50 Laboratory Services&Supplies Austin Building and Design dba The Austin Company 51695 42,085.26 Professional Services/Engineering Design Services Awards&Trophies Company 51917 114.03 Awards and Framing Services AWWA 51918 238.00 Professional Organizations Meeting/Training/Membership Basic Electronics,Inc. 52053 75.54 Reconciliation User Fee Refund Program Basler Electric Company,dept 590 remit 52057 4,719.42 Electrical Parts&Supplies Battery Specialties 51726 602.54 Batteries,Various Battery Specialties 51919 192.33 Batteries,Various Battery Specialties 52058 174.81 Batteries,Various Battery Systems,Inc. 51920 2,895.35 Repair&Maintenance Services and/or Supplies Bazz Houston Co. 52054 4,458.52 Reconciliation User Fee Refund Program BC Wire Rope&Rigging 52059 225.00 Tools&Supplies Beach Wire and Cable 51727 51.18 Telecommunications BEC-Building Electronic Controls,Inc 52060 11,250.00 Electrical/Electronic Equipment,Parts&Repairs Bell Pipe&Supply Co. 51728 297.48 Repair&Maintenance Services and/or Supplies BI Technologies 52061 2,961.58 Reconciliation User Fee Refund Program Billie J Taylor 51921 3,124.89 Claimant Reimbursement Black&Veatch Corporation 51696 108,643.25 Professional Services/Engineering Design Services Black&Veatch Corporation 51696 92,980.15 Professional Services/Engineering Design Services Black&Veatch Corporation 52018 236,778.18 Professional Services/Engineering Design Services Black&Veatch Corporation 52018 3,992.23 Professional Services/Engineering Design Services BLX Group 51730 2,250.00 Professional Financial Services BNSF Railway Company 51731 600.00 Professional Services 2-41-04 Bodycote Lindberg Corp. 52055 1,067.08 Reconciliation User Fee Refund Program Bootworld 51922 4,581.35 Safety,Security,Health Equipment,Supplies,and Services Brasstech, Inc. 52056 12,550.73 Reconciliation User Fee Refund Program Brea Imperial, Inc. 52063 2,500.00 Miscellaneous Services Brown&Caldwell 51697 206,065.12 Professional Services/Engineering Design Services Brown&Caldwell 52019 63,598.51 Professional Services/Engineering Design Services Bureau Veritas North America, Inc. 51923 1,871.93 Industrial Hygiene Services Bureau Veritas North America, Inc. 52064 3,346.39 Industrial Hygiene Services CalCoast-City of Huntington Beach 52069 1,000.00 Professional Organizations Meeting/Training/Membership California Dept.of Child Support 51733 1,984.24 Judgments Payable California Dept.of Child Support 52070 1,564.24 Judgments Payable California Municipal Treasurers Assoc. 51924 175.00 Professional Organizations Meeting/Training/Membership California Recreation Company 52071 3,379.44 Boat Slip Rental-Nerissa Ocean Monitoring Vessel California Special District Association 51931 935.00 Professional Organizations Meeting/Training/Membership Callan Associates,Inc. 51734 4,231.75 Investment Advisory Services Caltrol, Inc. 51735 910.89 Electrical/Electronic Equipment,Parts&Repairs Carbon Activated Corporation 51736 19,900.00 Repair&Maintenance Services and/or Supplies Career Track 51737 149.00 Professional Organizations Meeting/Training/Membership Carollo Engineers 51698 60,373.86 Professional Services/Engineering Design Services Carollo Engineers 52072 23,514.74 Professional Services Catalina Cylinders 52065 3,505.85 Reconciliation User Fee Refund Program Central Pipe Supply Inc 51738 2,243.57 Repair&Maintenance Services and/or Supplies Cesar Corral 52223 341.50 Meeting/Training Expense Reimbursement Cherry Aerospace 52066 4,079.02 Reconciliation User Fee Refund Program Chris A.Stacklin 52014 1,214.26 Meeting/Training Expense Reimbursement City of Fountain Valley 51936 840.00 Water Use EXHIBIT B fin/210/mm Page 2 of 12 11/7/2012 Claims Paid From 10/16/12 to 10/31/12 Vendor Warrant No. Amount Description City of Fullerton 52067 800.00 Reconciliation User Fee Refund Program City of Huntington Beach 51779 12.83 Water Use City of Huntington Beach 52115 22,162.28 Water Use City of Newport Beach 51967 983.51 Water Use Cole-Parmer Instrument Co. 51739 1,652.04 Laboratory Services&Supplies Compressor Components of California 51740 2,241.20 Repair&Maintenance Services and/or Supplies Compressor Components of California 52020 33,400.35 Repair&Maintenance Services and/or Supplies Connell Chevrolet\GEO 52073 153.24 Autos,Trucks&Marine Equipment,Parts,Accessories&Services Constellation Newenergy Gas Division LLC 52074 14,786.14 Natural Gas Consumers Pipe&Supply Co. 51741 1,099.59 Repair&Maintenance Services and/or Supplies Consumers Pipe&Supply Co. 51925 39.93 Repair&Maintenance Services and/or Supplies Consumers Pipe&Supply Co. 52075 2,246.98 Repair&Maintenance Services and/or Supplies Control Factors Seattle,Inc. 52076 1,096.80 Repair&Maintenance Services and/or Supplies Converse Consultants 51742 560.00 Professional Services/Professional Services/Materials&Geotechnical Testing Cooperative Personnel Services 51927 3,425.00 Human Resource Services Corelogic Commercial 51732 7,398.27 Corelogic Commercial Corporate Image Maintenance, Inc. 51699 36,215.00 Janitor&Household Service&Supplies Corporate Image Maintenance, Inc. 52078 1,151.00 Janitor&Household Service&Supplies CORRPRO Companies,Inc. 51891 34,580.00 Professional Services/Temporary Services Coss,Ronald J. 51881 238.76 Meeting/Training Expense Reimbursement Counterpart Enterprises,Inc. 51743 2,116.25 Repair&Maintenance Services and/or Supplies County of Orange Auditor Controller 51744 510.00 Governmental Agency Fees&Charges County of Orange Auditor Controller 51926 1,020.00 Governmental Agency Fees&Charges County of Orange Auditor Controller 52079 66.00 Governmental Agency Fees&Charges Court Order 51794 150.00 Judgments Payable Court Order 51827 108.00 Judgments Payable Court Order 51878 912.50 Judgments Payable Court Order 52016 2,179.38 Judgments Payable Court Order 52130 2,179.38 Judgments Payable Court Order 52172 108.00 Judgments Payable CR&R,Inc. 51928 1,385.66 Waste Disposal CR&R,Inc. 52080 336.78 Waste Disposal Crane Veyor Corp. 51745 2,948.00 Repair&Maintenance Services and/or Supplies Crane Veyor Corp. 51929 1,270.00 Repair&Maintenance Services and/or Supplies Criterion Machine Works 52068 3,208.83 Reconciliation User Fee Refund Program Crockett Container Corp. 52117 10,919.85 Reconciliation User Fee Refund Program CS-AMSCO 51747 518.38 Repair&Maintenance Services and/or Supplies CS-AMSCO 52081 4,897.54 Repair&Maintenance Services and/or Supplies Culligan of Orange County 51748 60.40 Repair&Maintenance Services and/or Supplies Curtis Buonacorsi 52220 582.13 Meeting/Training Expense Reimbursement CWEA Membership 51750 420.00 Professional Organizations Meeting/Training/Membership CWEA Membership 51932 280.00 Professional Organizations Meeting/Training/Membership CWEA Membership 52082 412.00 Professional Organizations Meeting/Training/Membership CWEA-TCP 51749 20.00 Professional Organizations Meeting/Training/Membership David M.Reiss,M.D.,Psychiatry 51751 1,550.00 Human Resources Services David N.Phillips 51888 353.50 Meeting/Training Expense Reimbursement David Rodriguez 52013 115.00 Meeting/Training Expense Reimbursement David Wheeler Pest Control,Inc. 52084 1,260.00 Pest Control Services Dawson Company 51752 1,275.76 Repair&Maintenance Services and/or Supplies DeGuelle Glass Co., Inc. 52085 1,500.00 Repair&Maintenance Services and/or Supplies Denovo Ventures LLC 51754 1,800.00 JDE Upgrade Consulting Services EXHIBIT B fin/210/mm Page 3 of 12 11/7/2012 Claims Paid From 10/16/12 to 10/31/12 Vendor Warrant No. Amount Description Denovo Ventures LLC 52086 2,700.00 JDE Upgrade Consulting Services Derm Cosmetic Labs,Inc. 52083 5,594.21 Reconciliation User Fee Refund Program Desert Pumps&Parts,Inc. 51755 3,193.96 Repair&Maintenance Services and/or Supplies Designer Stitch Embroidery 51933 3,987.40 Public Outreach Supplies Dezurik Water Controls 52087 3,827.23 Repair&Maintenance Services and/or Supplies DLT&V Systems Engineering,Inc. 51753 1,371.00 Computer Applications&Services Don F.Stokes 52231 360.00 Meeting/Training Expense Reimbursement DRS Sensors&Targeting Systems,Inc. 52088 2,161.85 Electrical/Electronic Equipment,Parts&Repairs Dudek&Associates,Inc. 51700 35,234.49 Professional Services/Engineering Design Services Dudek&Associates,Inc. 52021 41,173.46 Professional Services/Engineering Design Services Ebrahim Duel-Main St 51934 797.53 Sewer User Refund EFT Fast Quality Service,Inc. 52090 541.80 Reconciliation User Fee Refund Program Electro Metal Finishing Corp. 52089 214.58 Annual Reconciliation Industrial Discharge Program Embark Consulting,LLC 52091 1,482.19 Professional Services/SCADA Software Maintenance Support Employee Benefits Specialists, Inc. 51756 14,057.33 Reimbursed Prepaid Employee Medical&Dependent Care Employee Benefits Specialists, Inc. 52022 785,424.12 Reimbursed Prepaid Employee Medical&Dependent Care Enchanter, Inc. 51757 2,280.00 Vessel Services-Monitoring Vessel Nerissa Enchanter, Inc. 52092 2,280.00 Vessel Services-Monitoring Vessel Nerissa Environmental Express,Inc. 52093 3,642.24 Laboratory Services&Supplies Environmental Resource Associates 52094 2,514.13 Laboratory Services&Supplies Ewing Irrigation 51758 1,454.63 Irrigation Repair&Maintenance Services and/or Supplies Excel Door&Gate Co.,Inc. 52095 1,890.00 Repair&Maintenance Services and/or Supplies Express Lens Lab 51935 1,725.71 Safety,Security,Health Equipment,Supplies,and Services Fedex Corporation 51760 109.69 Freight Services First American Corelogic 52077 208.50 Software Maintenance Agreement Fisher Scientific 51761 4,239.70 Laboratory Services&Supplies Fisher Scientific 52096 830.02 Laboratory Services&Supplies Formosan Presbyterian Church,Orange Co 51759 2,228.24 CFCC Refund Fountain Valley Paints, Inc. 51762 113.20 Facilities,Maintenance,Services&Supplies Franchise Tax Board 51763 985.01 Judgments Payable Franchise Tax Board 52097 1,292.11 Judgments Payable Frys Electronics 51764 81.88 Computers,Software/Hardware Garchow,Matthew N. 52224 818.28 Meeting/Training Expense Reimbursement Garland Manufacturing Co. 51765 5,198.05 Repair&Maintenance Services and/or Supplies Garratt Callahan Company 52100 2,202.81 Chemicals,Water/Wastewater Treatment Gates Fiberglass Installers 51766 2,635.25 Repair&Maintenance Services and/or Supplies Ge Aviation 52023 28,597.23 Annual Reconciliation Industrial Discharge Program GE Energy 52101 4,331.66 Repair&Maintenance Services and/or Supplies General Container Corp. 52098 2,027.78 Reconciliation User Fee Refund Program General Petroleum 51938 8,164.88 Fuel and Lubricants General Petroleum 52102 4,918.26 Fuel and Lubricants Generite, Inc. 52103 500.92 Laboratory Services&Supplies George Yardley Co. 51767 2,382.05 Repair&Maintenance Services and/or Supplies George Yardley Co. 52104 251.81 Repair&Maintenance Services and/or Supplies Georgia-Pacific Corrugated,L.L.C. 52099 2,850.51 Reconciliation User Fee Refund Program Getinge Castle 51768 1,045.35 Laboratory Services&Supplies Glens Alignment&Brake Service 52106 123.75 Autos,Trucks&Marine Equipment,Parts,Accessories&Services Golden State Overnight Delivery Service 51769 6.92 Courier Services Golden State Overnight Delivery Service 52107 247.46 Courier Services Golden West Window Service 51939 2,700.00 Facilities,Maintenance,Services&Supplies Grainger,Inc. 51770 713.41 Repair&Maintenance Services and/or Supplies EXHIBIT B fin/210/mm Page 4 of 12 11/7/2012 Claims Paid From 10/16/12 to 10/31/12 Vendor Warrant No. Amount Description Grainger,Inc. 51940 3,304.86 Repair&Maintenance Services and/or Supplies Graphic Products,Inc. 52108 921.72 Miscellaneous Supplies Graybar Electric Company 51771 14,665.09 Electrical/Electronic Equipment,Parts&Repairs Graybar Electric Company 51941 423.41 Electrical/Electronic Equipment,Parts&Repairs Graybar Electric Company 52109 6,786.59 Electrical/Electronic Equipment,Parts&Repairs Gregg A.Scott 52229 674.77 Meeting/Training Expense Reimbursement Guy L.Warden&Sons 51772 658.10 Repair&Maintenance Services and/or Supplies Hach Company 51942 1,333.00 Laboratory Services&Supplies Handy Hose Services 51773 1,970.77 Repair&Maintenance Services and/or Supplies Handy Hose Services 51943 1,267.32 Repair&Maintenance Services and/or Supplies Hardy Diagnostics 51944 926.60 Laboratory Services&Supplies Harold T.Gerber 51882 364.60 Meeting/Training Expense Reimbursement Harrington Industrial Plastics, Inc. 51945 2,923.59 Repair&Maintenance Services and/or Supplies Harrington Industrial Plastics, Inc. 52110 1,001.75 Repair&Maintenance Services and/or Supplies Hasco Oil Co., Inc. 52111 411.52 Fuel and Lubricants Hasler, Inc. 51774 64.65 Postage Meter Rental HDR Engineering,Inc. 51946 3,547.08 Professional Services/Engineering Design Services Health Dimensions 51947 650.00 Miscellaneous Services Hewlett Packard Company 51948 15,662.46 Computers,Software/Hardware Hill Brothers 717 131,588.68 Chemicals,Water/WastewaterTreatment Hill Brothers 721 269,479.99 Chemicals,Water/Wastewater Treatment Hills Boat Service,Inc. 51775 989.86 Autos,Trucks&Marine Equipment,Parts,Accessories&Services Hills Boat Service,Inc. 52112 985.12 Autos,Trucks&Marine Equipment,Parts,Accessories&Services Hilti,Inc. 51776 331.16 Repair&Maintenance Services and/or Supplies Hilti,Inc. 52113 1,409.90 Repair&Maintenance Services and/or Supplies Home Depot 51777 334.83 Miscellaneous Parts and Supplies Home Depot 52114 303.61 Miscellaneous Parts and Supplies Horizon Technology 51949 2,148.75 Laboratory Services&Supplies Huan Hoang Nguyen 51887 629.54 Meeting/Training Expense Reimbursement Hub Auto Supply 51778 874.17 Autos,Trucks&Marine Equipment,Parts,Accessories&Services Hub Auto Supply 51950 327.17 Autos,Trucks&Marine Equipment,Parts,Accessories&Services Hyatt Legal Plans 52116 1,843.00 Professional Services-Legal IHS Global Inc 51780 133.76 Books and Publications Indiana Child Support Bureau 51781 290.00 Judgments Payable Indiana Child Support Bureau 52119 290.00 Judgments Payable Industrial Distribution Group 51782 2,591.17 Repair&Maintenance Services and/or Supplies Industrial Distribution Group 52120 262.32 Repair&Maintenance Services and/or Supplies Industrial Fabrics Corp. 51783 12,135.88 Repair&Maintenance Services and/or Supplies Industrial Safety Shoe Co. 52121 9,167.44 Safety,Security,Health Equipment,Supplies,and Services Infrastructure Engineering Corp. 52122 180.00 Professional Services Inorganic Ventures,Inc. 52123 366.97 Laboratory Services&Supplies Insight Public Sector, Inc. 51784 14,916.40 Computers,Software/Hardware International Business Machines 52124 6,592.17 Computer Applications&Services International Paper#2 52024 41,060.34 Annual Reconciliation Industrial Discharge Program Intl.Union of Oper.Eng.AFL CIO Local 501 51785 4,740.78 Dues Deductions Invensys Systems, Inc. 52125 2,754.36 Electrical/Electronic Equipment,Parts&Repairs Irvine Ranch Water District 51786 82.00 Water Use Irvine Ranch Water District 52126 59.53 Water Use Irvine Sensors Corp. 52118 4,797.45 Reconciliation User Fee Refund Program IRWA Chapter 67 51787 260.00 Professional Organizations Meeting/Training/Membership ISE, Inc. 51788 2,064.69 Repair&Maintenance Services and/or Supplies EXHIBIT B fin/210/mm Page 5 of 12 11/7/2012 Claims Paid From 10/16/12 to 10/31/12 Vendor Warrant No. Amount Description ITT Cannon Electric 52127 16,663.97 Reconciliation User Fee Refund Program J F Shea Construction, Inc. 51892 68,404.00 Construction J R Filanc Construction 51709 1,287,055.83 Construction J R Filanc Construction 52025 240,201.80 Construction James L.Burror 52221 185.00 Meeting/Training Expense Reimbursement Jamison Engineering Contractors,Inc. 52026 105,113.13 Professional Services/Construction Support Services Jays Catering 52128 1,351.19 Catering Services JCI Jones Chemicals,Inc. 720 4,853.37 Chemicals,Water/Wastewater Treatment JG Tucker And Son, Inc. 51789 1,497.72 Safety,Security,Health Equipment,Supplies,and Services Johnstone Supply 52129 106.56 Repair&Maintenance Services and/or Supplies Jorge Menocal 52012 328.24 Meeting/Training Expense Reimbursement JP Morgan Chase Bank,NA 51951 12,261.96 Purchasing Card Program for Miscellaneous Parts and Supplies Kaiser Permanente 51952 4,944.32 Sewer User Refund Kemira Water Solutions 713 41,243.44 Chemicals,Water/Wastewater Treatment Kemira Water Solutions 718 48,778.56 Chemicals,Water/Wastewater Treatment Kemira Water Solutions 722 97,836.66 Chemicals,Water/Wastewater Treatment Kiewit/Mass,A Joint Venture 51710 176,719.95 Construction Kiewit/Mass,A Joint Venture 51893 40,179.15 Construction Kirkhill Rubber(North) 52131 18,617.33 Annual Reconciliation Industrial Discharge Program L.Johnson Painting 51791 3,985.00 Facilities,Maintenance,Services&Supplies L.Johnson Painting 52132 4,825.00 Facilities,Maintenance,Services&Supplies Lab Support 51792 3,360.00 Professional Services/Temporary Services Lance Ginest 52225 710.38 Meeting/Training Expense Reimbursement Lechman Management 51953 5,535.88 Sewer User Refund Lee&Ro,Inc. 52134 1,290.93 Professional Services/Engineering Design Services Liberty Mutual Claims 51954 6,685.28 Insurance Liebert Cassidy 52135 8,766.16 Professional Services/Employee Relations Life Technologies-Remit to: 51793 3,395.75 Laboratory Services&Supplies Lionakis 52136 4,232.00 Professional Services/Architectural and Landscaping Consulting Services Logi Graphics 52133 160.68 Annual Reconciliation Industrial Discharge Program Lynde-Ordway Company,Inc. 52137 1,273.75 Computer Applications&Services M&D Properties 51795 6,110.14 Sewer User Refund M&H Realty Partners 51955 1,776.52 Sewer User Refund Mag Trol,Inc. 51796 700.59 Electrical Parts&Supplies Magnetic Metals Corporation 52138 4,604.77 Reconciliation User Fee Refund Program Mantek 51956 554.40 Miscellaneous Parts and Supplies Marc A.Brown 51880 689.54 Meeting/Training Expense Reimbursement Marian M.Alter 52219 107.24 Meeting/Training Expense Reimbursement Mark Melby 52227 404.43 Meeting/Training Expense Reimbursement Marvac Electronics 51797 13.84 Electrical/Electronic Equipment,Parts&Repairs Marvac Electronics 52139 17.13 Electrical/Electronic Equipment,Parts&Repairs Matheson Tri Gas,Inc. 51957 994.89 Laboratory Services&Supplies Mathew D.Rebai 51889 195.00 Meeting/Training Expense Reimbursement Maxim Security Systems 51798 727.58 Safety,Security,Health Equipment,Supplies,and Services Maxim Security Systems 51958 947.17 Safety,Security,Health Equipment,Supplies,and Services McBain Instruments 51799 2,215.00 Repair&Maintenance Services-Microscope McMaster-Carr Supply Co. 51800 7,748.19 Repair&Maintenance Services and/or Supplies McMaster-Carr Supply Co. 51959 911.75 Repair&Maintenance Services and/or Supplies McMaster-Carr Supply Co. 52140 1,302.65 Repair&Maintenance Services and/or Supplies MCR Technologies, Inc. 51960 570.74 Repair&Maintenance Services and/or Supplies MCR Technologies, Inc. 52141 2,002.91 Repair&Maintenance Services and/or Supplies EXHIBIT B fin/210/mm Page 6 of 12 11/7/2012 Claims Paid From 10/16/12 to 10/31/12 Vendor Warrant No. Amount Description Mettler-Toledo 51801 77.12 Computer Applications&Services Mettler-Toledo 51961 1,322.50 Computer Applications&Services Michelle R.Hetherington 52226 1,474.64 Meeting/Training Expense Reimbursement Midway Mfg.&Machining Co. 52142 9,977.65 Repair&Maintenance Services and/or Supplies Mid-West Associates,Inc. 51962 789.23 Repair&Maintenance Services and/or Supplies Mila S.Kleinbergs 51884 364.60 Meeting/Training Expense Reimbursement Moore Medical Inc. 51963 396.47 Medical Supplies Moore Medical Inc. 52143 2,932.48 Medical Supplies Motion Industries,Inc. 51802 3,161.73 Electrical/Electronic Equipment,Parts&Repairs Motion Industries,Inc. 52144 6,740.89 Electrical/Electronic Equipment,Parts&Repairs MTM Recognition Corporation 51964 1,024.36 Service Awards MWH Americas, Inc. 52027 63,334.70 Professional Services/Engineering Design Services NACE International 51803 250.00 Professional Organizations Meeting/Training/Membership NACE International 51965 140.00 Professional Organizations Meeting/Training/Membership NACE International 52145 130.00 Professional Organizations Meeting/Training/Membership Nbty Acquisition L.L.C. 52146 785.00 Annual Reconciliation Industrial Discharge Program Neal Supply Co. 51804 3,031.01 Repair&Maintenance Services and/or Supplies Neal Supply Co. 51966 425.50 Repair&Maintenance Services and/or Supplies Neal Supply Co. 52147 57.27 Repair&Maintenance Services and/or Supplies NetworkFleet,Inc. 51805 2,568.50 Software Maintenance Agreement Nirve Sports LTD 51968 644.76 Bicycle Purchases Norman A.Traub Associates 51806 3,383.73 Legal Services Northern Tool&Equipment 51729 2,708.89 Electrical Parts&Supplies Northern Tool&Equipment 52062 6.29 Electrical Parts&Supplies NRG Engine Services,L.L.C. 51807 2,268.84 Repair&Maintenance Services and/or Supplies NRG Engine Services,L.L.C. 51894 85,660.00 Repair&Maintenance Services and/or Supplies NRG Engine Services,L.L.C. 52148 4,778.62 Repair&Maintenance Services and/or Supplies OCB Reprographics 51720 3,134.52 Printing/Reprographics Services OCCABA 51969 190.00 Professional Organizations Meeting/Training/Membership OCEA 51808 682.50 Dues Deductible OCEA 52149 711.75 Dues Deductible Office Depot 51809 4,460.95 Office Supplies Office Depot 51970 1,471.29 Office Supplies Office Depot 52150 2,709.45 Office Supplies Officemax Incorporated 52151 799.40 Furniture/Fixtures Olin Corporation 51701 3,930.34 Chemicals,Water/Wastewater Treatment Olin Corporation 51701 29,353.78 Chemicals,Water/Wastewater Treatment Olin Corporation 51971 15,316.45 Chemicals,Water/Wastewater Treatment Olin Corporation 52152 16,110.05 Chemicals,Water/Wastewater Treatment Omega Industrial Supply, Inc. 52153 2,371.86 Janitor&Household Service&Supplies OneSource Distributors,Inc. 51810 1,620.79 Electrical/Electronic Equipment,Parts&Repairs OneSource Distributors,Inc. 51972 6,648.29 Electrical/Electronic Equipment,Parts&Repairs OneSource Distributors,Inc. 52154 2,857.56 Electrical/Electronic Equipment,Parts&Repairs Oracle America Inc. 51973 21,987.11 Software Maintenance Agreement Orange County Auto Parts 51974 366.21 Truck Supplies Orange County Sanitation District 52015 1,562.14 Petty Cash Expense Orange County United Way 51812 40.00 Employee Contributions Orange County United Way 52155 40.00 Employee Contributions Orange County Water District 51702 81,857.05 GAP Water OSTS Inc. 52156 420.00 Professional Organizations Meeting/Training/Membership Pacific Investment Management 51895 164,581.94 Professional Financial Services EXHIBIT B fin/210/mm Page 7 of 12 11/7/2012 Claims Paid From 10/16/12 to 10/31/12 Vendor Warrant No. Amount Description Pacific Mechanical Supply 51813 1,823.58 Repair&Maintenance Services and/or Supplies Pacific Mechanical Supply 52159 139.15 Repair&Maintenance Services and/or Supplies Packet Fusion,Inc. 52160 62.50 Telecommunications Pamela A.Koester 51885 494.04 Meeting/Training Expense Reimbursement Parker Supply Company 51814 906.06 Miscellaneous Parts and Supplies Parker Supply Company 51975 543.06 Miscellaneous Parts and Supplies Parker Supply Company 52161 544.74 Miscellaneous Parts and Supplies Parkhouse Tire, Inc. 52162 411.87 Autos,Trucks&Marine Equipment,Parts,Accessories&Services Patio&Door Outlet,Inc. 52157 762.88 Reconciliation User Fee Refund Program PCB Piezotronics, Inc. 51976 2,900.52 Electrical/Electronic Equipment,Parts&Repairs PCS Express,Inc. 51815 148.65 Courier Services Peace Officers Council of CA 51816 2,254.00 Dues Deductions,Supervisors&Professionals Peace Officers Council of CA 52163 2,265.50 Dues Deductions,Supervisors&Professionals Peerless Wiping Materials Co. 51817 792.18 Janitor&Household Service&Supplies Performance Pipeline Technologies 52164 6,235.00 Professional Services/CCTV Inspection/Sewerline Cleaning Pine Environmental Services LLC 51818 4,940.34 Safety,Security,Health Equipment,Supplies,and Services Pk li Lanain Square SC,LP 51703 35,804.90 Sewer User Refund PL Hawn Company, Inc. 51819 5,512.85 Repair&Maintenance Services and/or Supplies PL Hawn Company, Inc. 51977 3,937.62 Repair&Maintenance Services and/or Supplies Polydyne, Inc. 714 55,218.72 Chemicals,Water/Wastewater Treatment Polydyne, Inc. 719 37,899.66 Chemicals,Water/Wastewater Treatment Polydyne, Inc. 723 29,749.12 Chemicals,Water/Wastewater Treatment Praxair Distribution,Inc. 51820 1,618.80 Laboratory Services&Supplies Praxair Distribution,Inc. 52165 1,199.49 Laboratory Services&Supplies Primrose Ice Co., Inc. 51821 603.75 Water&Ice Services Primrose Ice Co., Inc. 51978 131.25 Water&Ice Services Primrose Ice Co., Inc. 52166 262.50 Water&Ice Services Private Label Laboratories 52158 20,962.00 Reconciliation User Fee Refund Program Procare Work Injury Center 51979 855.00 Medical Services Project Management Institute 52167 303.00 Professional Organizations Meeting/Training/Membership Projectline Technical Services, Inc. 51823 691.00 Professional Services/Engineering Design Services Projects Partners 51822 16,968.00 Professional Services/Temporary Employment Services Propipe Professional Pipe Services 724 25,467.21 Professional Services/CCTV Sewerline Inspections Prudential Overall Supply 51824 1,500.77 Uniforms Prudential Overall Supply 51980 1,500.02 Uniforms Prudential Overall Supply 52168 2,993.29 Uniforms Pryor Seminars/Career Track 51937 585.00 Professional Organizations Meeting/Training/Membership PSOMAS 52169 8,800.00 Computer Applications&Services Pump Action 51825 358.46 Oil Filters Pyramid Fence Company,Inc. 51826 2,745.00 Facilities,Maintenance,Services&Supplies Q Air-Calif.Div.Pump Engineering 51981 152.94 Repair&Maintenance Services and Supplies Railmakers, Inc. 52170 174.19 Reconciliation User Fee Refund Program Rainbow Disposal Co Inc 51983 2,301.56 Sewer User Refund Rainbow Disposal Co. 51828 3,493.81 Waste Disposal Raymond Handling Solutions,Inc. 51829 185.00 Material Handling Tools&Equipment RBF Consulting 51984 195.00 Professional Services/Engineering Design Services Red Wing Shoes 51985 13,979.71 Safety,Security,Health Equipment,Supplies,and Services Red Wing Shoes 52173 117.23 Safety,Security,Health Equipment,Supplies,and Services Red Zone Robotics Inc 51830 5,402.00 Professional Services/Sonar Inspection Evaluation Regents of the University of Calif. 51831 4,350.34 Meeting/Training Registration Reign Electric Services And Systems Inc. 52174 4,953.50 Electrical/Electronic Equipment,Parts&Repair Services EXHIBIT B fin/210/mm Page 8 of 12 11/7/2012 Claims Paid From 10/16/12 to 10/31/12 Vendor Warrant No. Amount Description Reilly&Associates 51832 15,944.27 Professional Services-Legal Republic Waste Services Of So Cal LLP 52175 7,438.10 Annual Reconciliation Industrial Discharge Program Restek Corp. 51833 921.85 Laboratory Services&Supplies Rexel Electrical&Datacom Supplies 51834 10,445.55 Electrical/Electronic Equipment,Parts&Repairs RF MacDonald Co. 51982 83.71 Repair&Maintenance Services and/or Supplies Richard A.Castillon 52222 257.62 Meeting/Training Expense Reimbursement Ricoh Electronics#2 52171 16,327.37 Reconciliation User Fee Refund Program RMB Engineering&Sales, Inc. 51835 4,941.39 Electrical/Electronic Equipment,Parts&Repairs RMC Water and Environment 52176 9,370.47 Professional Services RMS Engineering&Design, Inc. 52177 9,847.50 Professional Services/Engineering Design Services Robert Bell&Apple 52232 2,000.00 Employee Computer Loan Program Robert Holdman 51883 391.36 Meeting/Training Expense Reimbursement Roto Rooter NOC#11 51836 461.20 Repair&Maintenance Services and/or Supplies Roto Rooter NOC#11 51986 268.75 Repair&Maintenance Services and/or Supplies Roy J.Reynolds 52228 573.59 Meeting/Training Expense Reimbursement Royal Wholesale Electric 52178 384.02 Repair&Maintenance Services and/or Supplies Royale Cleaners 51837 165.20 Miscellaneous Services Royale Cleaners 52179 80.10 Miscellaneous Services RTIE Holdings LLC Oob 06/30/12 52180 86.15 Annual Reconciliation Industrial Discharge Program Sacher,Fred 51838 1,536.59 Sewer User Refund Safety-Kleen 51839 106.11 Repair&Maintenance Services and/or Supplies San Diego/Orange Fluid System Technologies, Inc. 51987 1,962.28 Repair&Maintenance Services and/or Supplies San Diego/Orange Fluid System Technologies, Inc. 52183 1,367.54 Repair&Maintenance Services and/or Supplies Schenck Trebel 51840 1,237.00 Repair&Maintenance Services and/or Supplies Seal Laboratories 51841 15,025.00 Repair&Maintenance Services and/or Supplies Securitas Security Services USA,Inc. 52029 28,884.68 Safety,Security,Health Equipment,Supplies,and Services SETAC 51988 140.00 Professional Organizations Meeting/Training/Membership Shamrock Supply Co.,Inc. 51989 605.67 Repair&Maintenance Services and/or Supplies Shamrock Supply Co.,Inc. 52184 5,438.75 Repair&Maintenance Services and/or Supplies Shavarsh Keuilian MK&Sons 52185 1,500.00 Annual Reconciliation Industrial Discharge Program Shureluck Sales&Engineering 51842 54.19 Repair&Maintenance Services and/or Supplies Shureluck Sales&Engineering 51990 1,516.37 Repair&Maintenance Services and/or Supplies Shureluck Sales&Engineering 52186 1,080.20 Repair&Maintenance Services and/or Supplies Siemens Energy,Inc. 51704 29,256.36 Repair&Maintenance Services and/or Supplies Siemens Technology 51844 5,801.68 Air Conditioner Automation System Siemens Technology 51992 8,496.15 Air Conditioner Automation System Siemens Water Technologies Corp. 51843 1,362.88 Repair&Maintenance Services and/or Supplies Siemens Water Technologies Corp. 51991 68.86 Repair&Maintenance Services and/or Supplies Sigma-Aldrich,Inc. 51845 36.05 Laboratory Services&Supplies Sign Design 52187 793.73 Repair&Maintenance Services and/or Supplies Simon L.Watson 51890 413.24 Meeting/Training Expense Reimbursement Sioux Honey Assoc.Co-op 52028 37,839.49 Reconciliation User Fee Refund Program Snap On Industrial 52188 407.03 Tools So.Cal Gas Company 51846 18,507.71 Utilities Sonja Wassgren Morgan 51886 224.00 Meeting/Training Expense Reimbursement South Bay Chrome Sales 52189 193.41 Reconciliation User Fee Refund Program South Coast Air Quality Management Dist. 51847 9,243.73 Governmental Agency Fees&Charges Southern California Edison 51705 400,018.76 Utilities Southern California Edison 52190 1,494.32 Utilities Southwest Scientific,Inc. 51993 457.33 Laboratory Services&Supplies Southwest Valve&Equipment 51994 7,300.00 Repair&Maintenance Services and/or Supplies EXHIBIT B fin/210/mm Page 9 of 12 11/7/2012 Claims Paid From 10/16/12 to 10/31/12 Vendor Warrant No. Amount Description Sparklett-Dallas 52191 1,193.84 Miscellaneous Services SPEX Certiprep, Inc. 51995 74.96 Laboratory Services&Supplies St.Croix Sensory,Inc. 51848 6,600.00 Olfactometry Testing Services Stantec Consulting Services,Inc. 51996 9,184.00 Professional Services/Surveying Staples 51849 8.02 Office Supplies Staples 51997 273.01 Office Supplies Staples 52192 1,481.56 Office Supplies Statek Corporation 52181 1,834.75 Reconciliation User Fee Refund Program Summit Steel 51850 226.12 Repair&Maintenance Services and/or Supplies Summit Steel 52193 467.11 Repair&Maintenance Services and/or Supplies Sunclipse, Inc./Corru Kraft 52182 7,144.33 Reconciliation User Fee Refund Program Sunny Express 51998 122.70 Freight Charges Sunset Industrial Parts 51851 452.55 Repair&Maintenance Services and/or Supplies Sunset Industrial Parts 52194 105.05 Repair&Maintenance Services and/or Supplies Super Chem Corporation 52195 1,559.60 Repair&Maintenance Services and/or Supplies Synagro West,Inc. 51896 796,856.14 Biosolids Management T&D Communications 51852 10,323.88 Computers,Software/Hardware Tamang Electric,Inc. 52034 39,888.00 Construction TCH Associates,Inc. 51853 4,003.76 Laboratory Services&Supplies TDI 52196 6,487.50 Professional Services/Information Technology TekSystems 51999 8,350.00 Professional Services/Temporary Services Teledyne/ISCO 51854 926.04 Laboratory Services&Supplies Terra Renewal,L.L.C. 51706 49,011.20 Grit&Screenings Disposal TestAmerica Ontario 52197 550.00 Laboratory Services&Supplies The Creative Group 51746 1,344.00 Professional Services/Temporary Services The Creative Group 51930 1,722.00 Professional Services/Temporary Services The Orange County Register 51811 886.00 Notices&Ads The Standard Insurance Company 52198 5,138.18 Disability Insurance The Trane Company 52201 2,959.60 Repair&Maintenance Services and/or Supplies The Walking Man, Inc. 51855 665.00 Miscellaneous Services The Walking Man, Inc. 52000 550.00 Miscellaneous Services Thermo Electron North America,L.L.C. 51856 12,638.00 Laboratory Services&Supplies Thompson Industrial Supply,Inc. 715 9,976.48 Repair&Maintenance Services and/or Supplies Thorco Holdings,LLC 51857 2,482.99 Repair&Maintenance Services and/or Supplies Time Warner Communications 52199 64.04 Telecommunications Titan Power, Inc. 51858 7,511.26 Repair&Maintenance Services and/or Supplies Tony's Lock&Safe Service&Sales 51859 153.54 Repair&Maintenance Services and/or Supplies Tony's Lock&Safe Service&Sales 52200 1,357.33 Repair&Maintenance Services and/or Supplies Total Resource Management,Inc. 52031 61,010.00 Professional Services/Implementation of IBM Maxim Townsend Public Affairs 51860 7,500.00 Professional Services-State Legislative Advocacy Tran Consulting Engineers 52001 9,116.89 Professional Services/Engineering Design Services Transcat 51861 9,233.19 Repair&Maintenance Services and/or Supplies Transcat 52202 11,657.93 Repair&Maintenance Services and/or Supplies Tri State Pump 52203 552.16 Repair&Maintenance Services and/or Supplies Tropical Plaza Nursery, Inc. 52204 19,827.50 Landscape Maintenance Services Truck&Auto Supply, Inc. 52205 604.57 Autos,Trucks&Marine Equipment,Parts,Accessories&Services Tule Ranch/Magan Farms 51897 246,160.98 Biosolids Management UC Regents 51862 750.00 Professional Organizations Meeting/Training/Membership Ultra Scientific 51863 901.55 Laboratory Services&Supplies Underground Service Alert of So.Calif 51864 2,040.00 Professional Services-Dig Alert Notification Service Union Bank of California 51865 869.80 Banking Services EXHIBIT B fin/210/mm Page 10 of 12 11/7/2012 Claims Paid From 10/16/12 to 10/31/12 Vendor Warrant No. Amount Description United Direct Marketing 51866 1,050.00 Courier Services United Parcel Service 51867 179.08 Freight Services United Parcel Service 52002 32.96 Freight Services United Parcel Service 52206 30.66 Freight Services United Power Service, Inc. 52207 2,259.00 Electrical/Electronic Equipment,Parts&Repairs Univar USA Inc 716 21,079.25 Chemicals,Water/Wastewater Treatment Univar USA Inc 725 13,882.65 Chemicals,Water/Wastewater Treatment Universal Flooring Systems, Inc. 51868 589.00 Facilities,Maintenance,Services&Supplies UPS Ground Freight,Inc. 51869 270.07 Freight Services US Equipment Co.,Inc. 52208 1,174.36 Repair&Maintenance Services and/or Supplies US Peroxide,L.L.C. 51707 59,771.23 Chemicals,Water/Wastewater Treatment US Peroxide,L.L.C. 52032 136,433.75 Chemicals,Water/Wastewater Treatment USA Bluebook 51870 336.04 Laboratory Services&Supplies USC 51898 61,018.09 Professional Services/Studies V&S Plumbing 51901 32,775.00 Professional Services/Admin Building Water Line Insulator Valin Corporation 52209 4,080.06 Repair&Maintenance Services and/or Supplies Verizon California 52210 636.70 Telecommunications Verne's Plumbing 51871 1,204.66 Plumbing Services&Supplies Verne's Plumbing 52003 9,063.97 Plumbing Services&Supplies Verne's Plumbing 52211 9,200.93 Plumbing Services&Supplies VPPPA 52004 450.00 Professional Organizations Meeting/Training/Membership VWR Scientific Products 51872 10,601.22 Laboratory Services&Supplies VWR Scientific Products 52005 6,497.01 Laboratory Services&Supplies VWR Scientific Products 52212 1,804.09 Laboratory Services&Supplies Waco Filter 52213 2,307.75 Repair&Maintenance Services and/or Supplies Water Environment Federation 51873 456.00 Professional Organizations Meeting/Training/Membership Water Environment Federation 52007 358.00 Professional Organizations Meeting/Training/Membership Water Environment Federation 52214 407.00 Professional Organizations Meeting/Training/Membership Waxie Sanitary Supply 51874 558.74 Janitor&Household Service&Supplies Waxie Sanitary Supply 52215 1,789.61 Janitor&Household Service&Supplies WCR Incorporated 51875 9,571.92 Miscellaneous Services Wells Fargo Bank Escrow 23518600 51879 9,301.05 Construction,Retention Wells Fargo Bank Escrow 23861100 Kiewit 52008 2,377.85 Construction,Retention West Coast Arborists, Inc. 52216 5,900.00 Landscape Maintenance Services West Lite Supply Company, Inc. 51876 258.07 Electrical/Electronic Equipment,Parts&Repairs West Marine/E&B Discount Marine 52009 368.58 Autos,Trucks&Marine Equipment,Parts,Accessories&Services Western Blue/Insight/Hewlett Packard 52033 61,128.73 Computers,Software/Hardware Weston Solutions,Inc. 52217 21,895.00 Laboratory Services&Supplies White Nelson Diehl Evans LLP 51877 1,100.00 Professional Organizations Meeting/Training/Membership Wong Properties 52006 1,538.24 Sewer User Refund Worldmark,The Club 51899 25,742.99 Sewer User Refund Wyndham Vacation Ownership 51900 25,742.99 Sewer User Refund Xerox Corporation 52218 19,872.90 Computers,Software/Hardware&Managed Services Xyon Business Solutions,Inc. 52010 1,440.00 Professional Services/Temporary Services Total Accounts Payable-Warrants $ 8,721,922.85 EXHIBIT B fin/210/mm Page 11 of 12 11/7/2012 Claims Paid From 10/16/12 to 10/31/12 Vendor Warrant No. Amount Description Payroll Disbursements Employee Paychecks 49865 - 49916 $ 94,559.80 Biweekly Payroll(10/17/12)* Employee Paychecks 49918 - 49926 2,292.87 Interim Payroll-Standby Pay(10/16/12)** Employee Paychecks 49952 - 49987 89,464.44 Biweekly Payroll(10/31/12) Employee Paychecks 49988 - 49989 560.24 Interim Payroll-Retro Payouts(10/30/12) Direct Deposit Statements 327533-328106 1,417,061.52 Biweekly Payroll(10/17/12)*** Direct Deposit Statements 328276-328840 1,482,943.28 Biweekly Payroll(10/31/12) Total Payroll Disbursements $ 3,086,882.15 `Check number 49917 used in prior period **Check numbers 49927-49951 to be used in future period ***Direct deposit numbers 328107-328840 to be used in future period Wire Transfer Payments OCSD Payroll Taxes&Contributions $ 1,617,379.76 Biweekly Payroll(10/17/12&10/31/12) J F Shea Construction, Inc. 2,989,877.48 Construction J-112B PP2(10/18/12) Total Wire Transfer Payments $ 4,607,257.24 Total Claims Paid 10/16/12-10/31/12 $ 16,416,062.24 EXHIBIT B fin/210/mm Page 12 of 12 11/7/2012 BOARD OF DIRECTORS Meeting Date To Bd. of Dir. 11/28/12 AGENDA REPORT Item Number Item Number 4 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Jim Herberg, Assistant General Manager Project Manager: Martin Dix SUBJECT: REPLACEMENT OF ROCKY POINT PUMP STATION, CONTRACT NO. 5-50 GENERAL MANAGER'S RECOMMENDATION A. Authorize the General Manager and General Counsel to execute and record any and all instruments necessary to obtain a lot line adjustment for the unused portions of the Rocky Point Pump Station property. B. Adopt Resolution No. OCSD 12-13, Declaring Unused Portions of Real Property Located at 1700-2000 West Coast Highway, Newport Beach, as Surplus Property. C. Authorize the General Manager to obtain an appraisal and offer for sale the unused portion of Rocky Point Pump Station property owned by Orange County Sanitation District at 1700-2000 West Coast Highway, Newport Beach, consistent with the requirements of the Surplus Lands Act (California Government Code Section 54220 et seq.). D. Authorize the General Manager to negotiate with Coast Community College District concerning the sale of the unused portion of the Rocky Point Pump Station property consistent with the Purchase Option Agreement between the Orange County Sanitation District and Coast Community College District/Orange Coast College Regarding the Rocky Point Pump Station Site dated September 26, 2007. E. Approve and authorize the Chair to execute an agreement and Quitclaim Deed transferring to the City of Newport Beach certain sewer facilities constructed as part of the Replacement of Rocky Point Pump Station, Contract No. 5-50, in a form approved by General Counsel. SUMMARY In 2004, the Orange County Sanitation District (Sanitation District) purchased real property located at 1700-2000 West Coast Highway in the City of Newport Beach (Property) for the purpose of constructing a replacement for the outdated Rocky Point Pump Station. The design and construction of the Rocky Point Pump Station left a portion of the Property available for other uses. Specifically, staff has assessed the remaining unused portion of the Property, and has determined that Lots 61, 62, 63, 64, Page 1 of 4 and 65 of the Property located on Tract No. 1210, are no longer necessary for the Sanitation District's use (Excess Property). Coast Community College District (CCCD) operates educational programs and facilities at the Orange Coast College (OCC) School of Sailing and Seamanship located at 1801 West Coast Highway, Newport Beach. In 2007, the Sanitation District entered into a Purchase Option Agreement with CCCD/OCC concerning the Sanitation District's property located at 1700-1800 West Coast Highway, Newport Beach (Option Property), wherein both the Sanitation Disrict and CCCD agreed to work cooperatively to design compatible facilities, and which gave CCCD the option to purchase the remaining unused portion of the Option Property after the Sanitation District completed the Rocky Point Pump Station and complied with all applicable requirements of the Surplus Lands Act. Now that the project is complete, a lot line adjustment must now be processed through the City of Newport Beach for the Excess Property. An appraisal must be performed to determine the fair market value of the Excess Property and Option Property. Staff recommends the disposal of the Excess Property and/or Option Property through an "as-is" sale of the property at the best market rate, subject to the requirements of Surplus Land Act and the conditions of the Purchase Option Agreement. If the sale of the Excess Property and/or Option Property at a reasonable amount is not possible in the current market conditions, staff recommends offering the Excess Property and/or Option Property for lease until such time as market conditions improve. In addition, as a result of the Sanitation District's project, several sewers owned by the City of Newport Beach were impacted. As a result, the Sanitation District constructed several sewer pipelines, which now need to be transferred to the City of Newport Beach. The sewer facilities to be transferred are within public right of way or City of Newport Beach property and include: 3 standard 48-inch diameter manholes, 80 linear feet of 12-inch VCP sewer, 94 linear feet of 8-inch VCP sewer, and 6 linear feet of 8- inch PVC sewer. PRIOR COMMITTEE/BOARD ACTIONS August 2009 — Awarded a construction contract to Kiewit/Mass, a Joint Venture for Replacement of the Rocky Point Pump Station, Contract No. 5-50. September 2007 — Approved the Purchase Option Agreement with CCCD and OCC regarding Rocky Point Pump Station Site, in a form approved by General Counsel. December 2005 — (1) Approved a Memorandum of Understanding between CCCD and the Sanitation District in connection with the replacement of the Rocky Point Pump Station, Contract No. 5-50; and (2) authorized the General Manager to negotiate with CCCD concerning the sale, lease, or transfer and eventual use of the unused portion of the Rocky Point Pump Station property at 1700-2000 West Coast Highway, Newport Beach. Page 2 of 4 August 2004 — (1) Approved the Purchase and Sale Agreement and Joint Escrow Instructions for the real property located at 1700-2000 West Coast Highway, Newport Beach, between the Sanitation District and International Bay Clubs, Inc.; and (2) Adopted Resolution No. OCSD 04-23, Certifying the Final Environmental Impact Report for Implementation of the Rocky Point Pump Station Replacement Project, Contract No. 5-50. December 2001 — (1) Authorized the General Manager to negotiate with CCCD to establish a joint project agreement to be approved by the Board of Directors in connection with the Replacement of the Rocky Point Pump station; and (2) authorized the General Manager to negotiate with International Bay Clubs, Inc. for the purchase of real properties located at 1700 to 2000 West Coast Highway, Newport Beach, for the replacement of the Rocky Point Pump Station. ADDITIONAL INFORMATION Pursuant to the Surplus Lands Act, the Sanitation District must first send a written offer to sell or lease the property by first-class mail, including the location and description of the property, to specified public agencies for the purpose of low income housing, recreational or open space, school facilities, enterprise zone or development within an infill opportunity zone. The Sanitation District is required to enter into good faith negotiations to determine a mutually satisfactory sales price or lease terms. The Sanitation District is not restricted to selling or leasing the surplus land at fair market value. If the price or terms cannot be agreed upon after a good faith negotiation period of not less than sixty (60) days, the land may be disposed of as the Sanitation District determines. Pursuant to the Purchase Option Agreement, CCCD's option to purchase the Option Property may only be exercised, if at all, after the Sanitation District's compliance with all applicable requirements of the Surplus Lands Act. In consideration for the option, CCCD deposited $10,000 to the Sanitation District, which may be refunded. The Purchase Option Agreement provides that the purchase of the Option Property shall be the fair market value of the Option Property, as such value is determined subject to the easements, reservations and restrictions required. Either the parties will agree upon a mutually acceptable appraiser, or in the event the parties are unable to agree on an appraiser, each party, at its own cost, will select an appraiser and these two appraisers will select a third appraiser to perform the appraisal. CEQA The recommended action is exempt from the California Environmental Quality Act (CEQA) under Section 15312 of the CEQA Guidelines because the Property is not located in an area of statewide, regional, or areawide concern identified in Section 15206, subdivision (b)(4) of the CEQA Guidelines. In addition, the recommended action is statutorily exempt from CEQA under Sections 15060 and 15378 of the CEQA Guidelines because the action will not result in a direct or reasonably foreseeable indirect physical change in the environment. Page 3 of 4 BUDGET/DELEGATION OF AUTHORITY COMPLIANCE This request complies with the authority levels of the Sanitation District's Delegation of Authority. This item has been budgeted. (FY2012-13, Section 8, Page 28) Date of Approval Contract Amount Contingency N/A N/A N/A ATTACHMENT OCSD Resolution No. 12-13 JH:MD:dm Page 4 of 4 RESOLUTION NO. OCSD 12-13 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT (OCSD) DECLARING THE UNUSED PORTION OF REAL PROPERTY LOCATED AT 1700-2000 WEST COAST HIGHWAY IN NEWPORT BEACH TO BE SURPLUS PROPERTY; AND FIND THE DISPOSAL OF THESE PROPERTIES EXEMPT FROM THE REQUIREMENTS OF THE CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) UNDER THE GUIDELINES OF 14 C.C.R. 15312. WHEREAS, in 2004, OCSD purchased real property located at 1700-2000 West Coast Highway in the City of Newport Beach ("OCSD Property") for the purpose of constructing a replacement for the outdated Rocky Point Pump Station; and WHEREAS, the design and construction of the Rocky Point Pump Station left a portion of the OCSD Property, specifically, Lots 61, 62, 63, 64, and 65 available for other uses. NOW, THEREFORE, the Board of Directors of the Orange County Sanitation District, DOES HEREBY RESOLVE,DETERMINE AND ORDER: Section 1: That the unused portion of real property located at 1700-2000 West Coast Highway in Newport Beach, specifically Lots 61, 62, 63, 64, and 65, are surplus property and are in excess of OCSD's foreseeable needs. Section 2: That the sale or lease of the surplus real property at 1700-2000 West Coast Highway is exempt from CEQA under CEQA Guideline Section 15312 because the OCSD Property is not located in an area of statewide, regional, or areawide concern identified in Section 15206, subdivision(b)(4) of the CEQA Guidelines. In addition, the recommended action is statutorily exempt from CEQA under Sections 15060 and 15378 of the CEQA Guidelines because the action will not result in a direct or reasonably foreseeable indirect physical change in the environment. PASSED AND ADOPTED at a regular meeting held , 2012. Troy Edgar Chair, Orange County Sanitation District ATTEST: Maria Ayala Clerk of the Board 783168.1 BOARD OF DIRECTORS Meeting Date To Bd. of Dir. 11/28/12 AGENDA REPORT Item Number Item Number 5 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Jim Herberg, Assistant General Manager CIP Project Manager: Kathy Millea SUBJECT: P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT, PROJECT NO. FE09-11 GENERAL MANAGER'S RECOMMENDATION A. Approve Plans and Specifications for P2 Central Generation Facility Compressor Replacement, Project No. FE09-11, on file at the office of the Clerk of the Board; B. Receive and file bid tabulation and recommendation; C. Award a construction contract to SS Mechanical Corporation for P2 Central Generation Facility Compressor Replacement, Project No. FE09-11, for a total amount not to exceed $212,973; and, D. Approve a contingency of $31 ,946 (15%). SUMMARY This project provides a new air compressor and related appurtenances at the Plant 2 Central Generation Facility. The two existing air compressors will be supplied with new Field Control Panels. The Orange County Sanitation District (Sanitation District) advertised bids on August 2, 2012. One sealed bid was received on September 19, 2012. The bid was evaluated in accordance with the Sanitation District's policies and procedures. SS Mechanical Corporation was deemed the lowest responsive, responsible bidder. Staff recommends awarding a construction contract to SS Mechanical for P2 Central Generation Facility Compressor Replacement, Project No. FE09-11, for a total amount not to exceed $212,973. Page 1 of 2 Summary information on the bid opening P2 Central Generation Facility Compressor Replacement, Project No. FE09-11, is as follows: Project Budget $730,000 Construction Contract Budget $360,000 Engineer's Estimate $213,000 Lowest Responsive, Responsible Bid $212,973 High Bid N/A Bidders Amount of Bid SS Mechanical Corporation $212,973 ADDITIONAL INFORMATION None. PRIOR COMMITTEE/BOARD ACTIONS N/A CEQA Notice of Exemption was filed on December 27, 2011. BUDGET/DELEGATION OF AUTHORITY COMPLIANCE This recommendation complies with authority levels of the Sanitation District's Delegation of Authority. This item has been budgeted and the budget is sufficient for the recommended action (FY2012-13, Section 8, Page 96). Date of Approval Contract Amount Contingency 11/28/12 $212,973 $31,946 (15%) ATTACHMENT The following attachment(s) may be viewed on-line at the OCSD website (www.ocsd.com) with the complete agenda package and attachments: ( Contract Agreement, SS Mechanical Corporation (27 pages) KM:RC:dm Page 2 of 2 PART A CONTRACT AGREEMENT C-CA-072012 TABLE OF CONTENTS CONTRACT AGREEMENT SECTION - 1 GENERAL CONDITIONS.................................................................. 1 SECTION - 2 MATERIALS AND LABOR.................................................................4 SECTION - 3 PROJECT..........................................................................................4 SECTION -4 PLANS AND SPECIFICATONS ........................................................5 SECTION - 5 TIME OF COMMENCEMENT AND COMPLETION ..........................5 SECTION - 6 TIME IS OF THE ESSENCE .............................................................5 SECTION - 7 EXCUSABLE DELAYS......................................................................6 SECTION - 8 EXTRA WORK...................................................................................6 SECTION - 9 CHANGES IN PROJECT...................................................................7 SECTION - 10 LIQUIDATED DAMAGES FOR DELAY.............................................7 SECTION - 11 CONTRACT PRICE AND METHOD OF PAYMENT .........................7 SECTION - 12 SUBSTITUTION OF SECURITIES IN LIEU OF RETENTION OF FUNDS ..............................................................................................9 SECTION - 13 COMPLETION................................................................................. 10 SECTION - 14 CONTRACTOR'S EMPLOYEES COMPENSATION....................... 10 SECTION - 15 SURETY BONDS ............................................................................ 13 SECTION - 16 INSURANCE....................................................................................14 SECTION - 17 RISK AND INDEMNIFICATION.......................................................21 SECTION - 18 TERMINATION................................................................................22 SECTION - 19 WARRANTY....................................................................................22 SECTION - 20 ASSIGNMENT.................................................................................23 SECTION - 21 RESOLUTION OF DISPUTES ........................................................23 SECTION - 22 SAFETY & HEALTH ........................................................................23 SECTION - 23 NOTICES.........................................................................................24 C-CA-072012 CONTRACT AGREEMENT ORANGE COUNTY SANITATION DISTRICT PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT THIS AGREEMENT is made and entered into, to be effective, this November 28, 2012, by and between S.S. Mechanical Corporation, hereinafter referred to as "CONTRACTOR" and the Orange County Sanitation District, hereinafter referred to as "OCSD". WITNESSETH That for and in consideration of the promises and agreements hereinafter made and exchanged, OCSD and CONTRACTOR agree as follows: SECTION — 1 GENERAL CONDITIONS CONTRACTOR certifies and agrees that all the terms, conditions and obligations of the Contract Documents as hereinafter defined, the location of the job site, and the conditions under which the Work is to be performed have been thoroughly reviewed, and enters into this Contract based upon CONTRACTOR's investigation of all such matters and is in no way relying upon any opinions or representations of OCSD. It is agreed that this Contract represents the entire agreement. It is further agreed that the Contract Documents are each incorporated into this Contract by reference, with the same force and effect as if the same were set forth at length herein, and that CONTRACTOR and its Subcontractors, if any, will be and are bound by any and all of said Contract Documents insofar as they relate in any part or in any way, directly or indirectly, to the Work covered by this Contract. A. Contract Documents Order of Precedence "Contract Documents" refers to those documents identified in the definition of"Contract Documents" in the General Conditions — Definitions. C-CA-072012 PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT CONFORMED NOVEMBER 28, 2012 Page 1 of 28 1. In the event of a conflict between one Contract Document and any of the other Contract Documents, the provisions in the document highest in precedence shall be controlling. The order of precedence of the Contract Documents is as follows: a. Supplemental Agreements—the last in time being the first in precedence b. Addenda issued prior to opening of Bids —the last in time being the first in precedence c. Contract Agreement d. Permits and other regulatory requirements e. Special Provisions f. General Conditions (GC) g. Notice Inviting Bids and Instruction to Bidders h. Geotechnical Baseline Report (GBR), if attached as a Contract Document i. Plans and Specifications — in these documents the order of precedence shall be: i. Specifications (Divisions 0 1-17) ii. Plans iii. General Requirements (GR) iv. Standard Drawings and Typical Details j. CONTRACTOR's Bid 2. In the event of a conflict between terms within an individual Contract Document, the conflict shall be resolved by applying the following principles as appears applicable: a. Figured dimensions on the Contract Documents shall govern. Dimensions not specified shall be as directed by the ENGINEER. Details not shown or specified shall be the same as similar parts that are shown or specified, or as directed. Full-size details shall take precedence over scale Drawings as to C-CA-072012 PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT CONFORMED NOVEMBER 28, 2012 Page 2 of 25 shape and details of construction. Specifications shall govern as to material and workmanship. b. The Contract Documents calling for the higher quality material or workmanship shall prevail. Materials or Work described in words, which so applied, have a well known technical or trade meaning shall be deemed to refer to such recognized standards. In the event of any discrepancy between any Drawings and the figures thereon, the figures shall be taken as correct. C. Scale Drawings, full-size details, and Specifications are intended to be fully complementary and to agree. Should any discrepancy between Contract Documents come to the CONTRACTOR's attention, or should an error occur in the efforts of others, which affect the Work, the CONTRACTOR shall notify the ENGINEER, in writing, at once. In the event any doubts or questions arise with respect to the true meaning of the Contract Documents, reference shall be made to the ENGINEER whose written decision shall be final. If the CONTRACTOR proceeds with the Work affected without written instructions from the ENGINEER, the CONTRACTOR shall be fully responsible for any resultant damage or defect. d. Anything mentioned in the Specifications and not indicated in the Plans, or indicated in the Plans and not mentioned in the Specifications, shall be of like effect as if indicated and mentioned in both. In case of discrepancy in the Plans or Specifications, the matter shall be immediately submitted to OCSD's ENGINEER, without whose decision CONTRACTOR shall not adjust said discrepancy save only at CONTRACTOR's own risk and expense. The decision of the ENGINEER shall be final. C-CA-072012 PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT CONFORMED NOVEMBER 28, 2012 Page 3 of 25 In all matters relating to the acceptability of material, machinery or plant equipment; classifications of material or Work; the proper execution, progress or sequence of the Work; and quantities interpretation of the Contract Documents, the decision of the ENGINEER shall be final and binding, and shall be a condition precedent to any payment under the Contract, unless otherwise ordered by the Board of Directors. B. Definitions Capitalized terms used in this Contract are defined in the General Conditions, Definitions. Additional terms may be defined in the Special Provisions. SECTION — 2 MATERIALS AND LABOR CONTRACTOR shall furnish, under the conditions expressed in the Plans and Specifications, at CONTRACTOR'S own expense, all labor and materials necessary, except such as are mentioned in the Specifications to be furnished by OCSD, to construct and complete the Project, in good workmanlike and substantial order. If CONTRACTOR fails to pay for labor or materials when due, OCSD may settle such claims by making demand upon the Surety to this Contract. In the event of the failure or refusal of the Surety to satisfy said claims, OCSD may settle them directly and deduct the amount of payments from the Contract Price and any amounts due to CONTRACTOR. In the event OCSD receives a stop payment notice from any laborer or material supplier alleging non-payment by CONTRACTOR, OCSD shall be entitled to deduct all of its costs and expenses incurred relating thereto, including but not limited to administrative and legal fees. SECTION — 3 PROJECT The Project is described as: PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT C-CA-072012 PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT CONFORMED NOVEMBER 28, 2012 Page 4 of 25 SECTION —4 PLANS AND SPECIFICATONS The Work to be done is shown in a set of Plans and Specifications entitled: PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT Said Plans and Specifications and any revision, amendments and addenda thereto are attached hereto and incorporated herein as part of this Contract and referred to by reference. SECTION — 5 TIME OF COMMENCEMENT AND COMPLETION CONTRACTOR agrees to commence the Project within 15 calendar days from the date set forth in the "Notice to Proceed" sent by OCSD, unless otherwise specified therein and shall diligently prosecute the Work to completion within 415 calendar days from the date of the "Notice to Proceed" issued by OCSD, excluding delays caused or authorized by OCSD as set forth in Sections 7, 8, and 9 hereof, and applicable provisions in the General Conditions. The time for completion includes 0 calendar days determined by OCSD likely to be inclement weather when CONTRACTOR will be unable to work. SECTION — 6 TIME IS OF THE ESSENCE Time is of the essence of this Contract. As required by the Contract Documents, CONTRACTOR shall prepare and obtain approval of all shop drawings, details and samples, and do all other things necessary and incidental to the prosecution of CONTRACTOR's Work in conformance with an approved construction progress schedule. CONTRACTOR shall coordinate the Work covered by this Contract with that of all other contractors, subcontractors and of OCSD, in a manner that will facilitate the efficient completion of the entire Work and accomplish the required milestone(s), if any, by the applicable deadline(s) in accordance with Section 5 herein. OCSD shall have the right to assert complete control of the premises on which the Work is to be performed and shall have the right to decide the time or order in which the various portions of the Work shall be installed or the priority of the work of subcontractors, C-CA-072012 PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT CONFORMED NOVEMBER 28, 2012 Page 5 of 25 and, in general, all matters representing the timely and orderly conduct of the Work of CONTRACTOR on the premises. SECTION — 7 EXCUSABLE DELAYS CONTRACTOR shall only be excused for any delay in the prosecution or completion of the Project as specifically provided in General Conditions, "Extensions for Delay", and the General Requirements, "By CONTRACTOR or Others — Unknown Utilities during Contract Work". Extensions of time and extra compensation arising from such excusable delays will be determined in accordance with the General Conditions, "Extension of Time for Delay" and "Contract Price Adjustments and Payments", and extensions of time and extra compensation as a result of incurring undisclosed utilities will be determined in accordance with General Requirements, "By CONTRACTOR or Others — Unknown Utilities during Contract Work". OCSD's decision will be conclusive on all parties to this Contract. SECTION — 8 EXTRA WORK The Contract Price as set forth in Section 11, includes compensation for all Work performed by CONTRACTOR, unless CONTRACTOR obtains a Change Order signed by a designated representative of OCSD specifying the exact nature of the Extra Work and the amount of extra compensation to be paid all as more particularly set forth in Section 9 hereof and the General Conditions, "Request for Change (Changes at CONTRACTOR's Request)", "OWNER Initiated Changes", and "Contract Price Adjustments and Payments". In the event a Change Order is issued by OCSD pursuant to the Contract Documents, OCSD shall extend the time fixed in Section 5 for completion of the Project by the number of days, if any, reasonably required for CONTRACTOR to perform the Extra Work, as determined by OCSD's ENGINEER. The decision of the ENGINEER shall be final. C-CA-072012 PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT CONFORMED NOVEMBER 28, 2012 Page 6 of 25 SECTION — 9 CHANGES IN PROJECT OCSD may at any time, without notice to any Surety, by Change Order, make any changes in the Work within the general scope of the Contract Document, including but not limited to changes: 1. In the Specifications (including Drawings and designs); 2. In the time, method or manner of performance of the Work; 3. In OCSD-furnished facilities, equipment, materials, services or site; or 4. Directing acceleration in the performance of the Work. No change of period of performance or Contract Price, or any other change in the Contract Documents, shall be binding until the Contract is modified by a fully executed Change Order. All Change Orders shall be issued in accordance with the requirements set forth in the General Conditions, "Request for Change (Changes at CONTRACTOR's Request)" and "OWNER Initiated Changes". SECTION — 10 LIQUIDATED DAMAGES FOR DELAY Liquidated Damages shall be payable in the amounts and upon the occurrence of such events or failure to meet such requirements or deadlines as provided in the Special Provisions, "Liquidated Damages and Incentives." SECTION — 11 CONTRACT PRICE AND METHOD OF PAYMENT A. OCSD agrees to pay and the CONTRACTOR agrees to accept as full consideration for the faithful performance of this Contract, subject to any additions or deductions as provided in approved Change Orders, the sum of Two Hundred Twelve Thousand Nine Hundred Seventy Three Dollars ($212,973) as itemized on the Attached Exhibit "A". Upon satisfaction of the conditions precedent to payment set forth in the General Requirements, Additional General Requirements and General Conditions (including but C-CA-072012 PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT CONFORMED NOVEMBER 28, 2012 Page 7 of 25 not limited to Sections entitled "Mobilization Payment Requirements" and "Payment Itemized Breakdown of Contract Lump Sum Prices"), there shall be paid to the CONTRACTOR an initial Net Progress Payment for mobilization. OCSD shall issue at the commencement of the job a schedule which shows: 1. A minimum of one payment to be made to the CONTRACTOR for each successive four (4) week period as the Work progresses, and 2. The due dates for the CONTRACTOR to submit requests for payment to meet the payment schedule. After the initial Net Progress Payment, and provided the CONTRACTOR submits the request for payment prior to the end of the day required to meet the payment schedule, the CONTRACTOR shall be paid a Net Progress Payment on the corresponding monthly payment date set forth in the schedule. Payments shall be made on demands drawn in the manner required by law, accompanied by a certificate signed by the ENGINEER, stating that the Work for which payment is demanded has been performed in accordance with the terms of the Contract Documents, and that the amount stated in the certificate is due under the terms of the Contract. Payment applications shall also be accompanied with all documentation, records, and releases as required by the Contract, Exhibit A, Schedule of Prices, and General Conditions, "Payment for Work— General". The Total amount of Progress Payments shall not exceed the actual value of the Work completed as certified by OCSD's ENGINEER. The processing of payments shall not be considered as an acceptance of any part of the Work. C-CA-072012 PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT CONFORMED NOVEMBER 28, 2012 Page 8 of 25 B. As used in this Section, the following defined terms shall have the following meanings: 1. "Net Progress Payment" means a sum equal to the Progress Payment less the Retention Amount and other qualified deductions (Liquidated Damages, stop payment notices, etc.). 2. "Progress Payment" means a sum equal to: a. the value of the actual Work completed since the commencement of the Work as determined by OCSD; b. plus the value of material suitably stored at the worksite, treatment plant or approved storage yards subject to or under the control of OCSD since the commencement of the Work as determined by OCSD; C. less all previous Net Progress Payments; d. less all amounts of previously qualified deductions; e. less all amounts previously retained as Retention Amounts. 3. "Retention Amount" for each Progress Payment means the percentage of each Progress Payment to be retained by OCSD to assure satisfactory completion of the Contract. The amount to be retained from each Progress Payment shall be determined as provided in the General Conditions—"Retained Funds; Substitution of Securities." SECTION — 12 SUBSTITUTION OF SECURITIES IN LIEU OF RETENTION OF FUNDS Pursuant to Public Contract Code Section 22300 et seq., the CONTRACTOR may, at its sole expense, substitute securities as provided in General Conditions — "Retained Funds; Substitution of Securities." C-CA-072012 PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT CONFORMED NOVEMBER 28, 2012 Page 9 of 25 SECTION — 13 COMPLETION Final Completion and Final Acceptance shall occur at the time and in the manner specified in the General Conditions, "Final Acceptance and Final Completion". Within 10 days after the Contract completion date of the Project, CONTRACTOR shall file with OCSD's ENGINEER its affidavit stating that all workers and persons employed, all firms supplying materials, and all Subcontractors upon the Project have been paid in full, and that there are no claims outstanding against the Project for either labor or material, except those certain items, if any, to be set forth in an affidavit covering disputed claims, or items in connection with stop payment notices which have been filed under the provisions of the statutes of the State of California. OCSD may require affidavits or certificates of payment and/or releases from any Subcontractor, laborer or material Supplier. Upon receipt of CONTRACTOR's affidavit, and all documentation, records, and releases as required by the Contract, Exhibit A, Schedule of Prices, and General Conditions, "Final Payment", OCSD shall prepare a Final Closeout Agreement setting forth the particular details of the completed Project, including but not limited to, description and amount of all Change Orders, the final amounts of the Contract, as amended, the time and dates of the total agreement and the identification of any unresolved Claims or disputes. Upon receipt of a Final Closeout Agreement duly executed by CONTRACTOR, OCSD's ENGINEER shall submit the Project and the agreements to the General Manager for acceptance of the Project as complete, and for approval of the Final Closeout Agreement, as per the current Delegation of Authority. SECTION — 14 CONTRACTOR'S EMPLOYEES COMPENSATION A. Davis-Bacon Act: CONTRACTOR will pay and will require all Subcontractors to pay all employees on said Project a salary or wage at least equal to the prevailing rate of per diem wages as C-CA-072012 PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT CONFORMED NOVEMBER 28, 2012 Page 10 of 25 determined by the Secretary of Labor in accordance with the Davis-Bacon Act for each craft or type of worker needed to perform the Contract. The provisions of the Davis-Bacon Act shall apply only if the Contract is in excess of Two Thousand Dollars ($2,000.00) and when twenty-five percent (25%) or more of the Contract is funded by federal assistance. If the aforesaid conditions are met, a copy of the provisions of the Davis-Bacon Act to be complied with are incorporated herein as a part of this Contract and referred to by reference. B. General Prevailing Rate: OCSD has been advised by the State of California Director of Industrial Relations of its determination of the general prevailing rate of per diem wages and the general prevailing rate for legal holiday and overtime Work in the locality in which the Work is to be performed for each craft or type of Work needed to execute this Contract, and copies of the same are on file in the Office of the ENGINEER of OCSD. The CONTRACTOR agrees that not less than said prevailing rates shall be paid to workers employed on this public works Contract as required by Labor Code Section 1774 of the State of California. Per California Labor Code 1773.2, OCSD will have on file copies of the prevailing rate of per diem wages at its principal office and at each job site, which shall be made available to any interested party upon request. C. Forfeiture for Violation: CONTRACTOR shall, as a penalty to OCSD, forfeit Two Hundred Dollars ($200.00) for each calendar day or portion thereof for each worker paid (either by the CONTRACTOR or any Subcontractor under it) less than the prevailing rate of per diem wages as set by the Director of Industrial Relations, in accordance with Sections 1770-1780 of the California Labor Code for the Work provided for in this Contract, all in accordance with Section 1775 of the Labor Code of the State of California. C-CA-072012 PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT CONFORMED NOVEMBER 28, 2012 Page 11 of 25 D. Apprentices: Sections 1777.5, 1777.6, 1777.7 of the Labor Code of the State of California, regarding the employment of apprentices are applicable to this Contract and the CONTRACTOR shall comply therewith if the prime contract involves Thirty Thousand Dollars ($30,000.00) or more. E. Workday: In the performance of this Contract, not more than eight (8) hours shall constitute a day's work, and the CONTRACTOR shall not require more than eight (8) hours of labor in a day from any person employed by him hereunder except as provided in paragraph (B) above. CONTRACTOR shall conform to Article 3, Chapter 1, Part 7 (Section 1810 et sea.) of the Labor Code of the State of California and shall forfeit to OCSD as a penalty, the sum of Twenty-five Dollars ($25.00) for each worker employed in the execution of this Contract by CONTRACTOR or any Subcontractor for each calendar day during which any worker is required or permitted to labor more than eight (8) hours in any one calendar day and forty (40) hours in any one week in violation of said Article. CONTRACTOR shall keep an accurate record showing the name and actual hours worked each calendar day and each calendar week by each worker employed by CONTRACTOR in connection with the Project. F. Record of Wages; Inspection: CONTRACTOR agrees to maintain accurate payroll records showing the name, address, social security number, work classification, straight-time and overtime hours worked each day and week, and the actual per diem wages paid to each journeyman, apprentice, worker or other employee employed by it in connection with the Project and agrees to require that each of its Subcontractors do the same. All payroll records shall be certified C-CA-072012 PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT CONFORMED NOVEMBER 28, 2012 Page 12 of 25 as accurate by the applicable CONTRACTOR or Subcontractor or its agent having authority over such matters. CONTRACTOR further agrees that its payroll records and those of its Subcontractors shall be available to the employee or employee's representative, the Division of Labor Standards Enforcement, and the Division of Apprenticeship Standards and shall comply with all of the provisions of Labor Code Section 1776, in general. Penalties for non- compliance with the requirements of Section 1776 may be deducted from Project payments per the requirements of Section 1776. SECTION — 15 SURETY BONDS CONTRACTOR shall, before entering upon the performance of this Contract, furnish Bonds approved by OCSD's General Counsel —one in the amount of one hundred percent (100%) of the Contract amount, to guarantee the faithful performance of the Work, and the other in the amount of one hundred percent (100%) of the Contract amount to guarantee payment of all claims for labor and materials furnished. As changes to the Contract occur via approved Change Orders, the CONTRACTOR shall assure that the amounts of the Bonds are adjusted to maintain 100% of the Contract Price. This Contract shall not become effective until such Bonds are supplied to and approved by OCSD. Bonds must be issued by a Surety authorized by the State Insurance Commissioner to do business in California. The Performance Bond shall remain in full force and effect through the warranty period, as specified in Section 19 below. All Bonds required to be submitted relating to this Contract must comply with California Code of Civil Procedure Section 995.630. Each Bond shall be executed in the name of the Surety insurer under penalty of perjury, or the fact of execution of each Bond shall be duly acknowledged before an officer authorized to take and certify acknowledgments, and either one of the following conditions shall be satisfied: C-CA-072012 PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT CONFORMED NOVEMBER 28, 2012 Page 13 of 25 A. A copy of the transcript or record of the unrevoked appointment, power of attorney, by- laws, or other instrument, duly certified by the proper authority and attested by the seal of the insurer entitling or authorizing the person who executed the Bond to do so for and on behalf of the insurer, is on file in the Office of the County Clerk of the County of Orange; or B. A copy of a valid power of attorney is attached to the Bond. SECTION — 16 INSURANCE CONTRACTOR shall purchase and maintain, for the duration of the Contract, insurance against claims for injuries to persons, or damages to property which may arise from or in connection with the performance of the Work hereunder, and the results of that Work by CONTRACTOR, its agents, representatives, employees, or Subcontractors, in amounts equal to the requirements set forth below. CONTRACTOR shall not commence Work under this Contract until all insurance required under this Section is obtained in a form acceptable to OCSD, nor shall CONTRACTOR allow any Subcontractor to commence Work on a subcontract until all insurance required of the Subcontractor has been obtained. CONTRACTOR shall maintain all of the foregoing insurance coverages in force through the point at which the Work under this Contract is fully completed and accepted by OCSD pursuant to the provisions of the General Conditions, "Final Acceptance and Final Completion". Furthermore, CONTRACTOR shall maintain all of the foregoing insurance coverages in full force and effect throughout the warranty period, commencing on the date of Final Acceptance. The requirement for carrying the foregoing insurance shall not derogate from the provisions for indemnification of OCSD by CONTRACTOR under Section 17 of this Contract. Notwithstanding nor diminishing the obligations of CONTRACTOR with respect to the foregoing, CONTRACTOR shall subscribe for and maintain in full force and effect during the life of this Contract, inclusive of all changes to the Contract Documents made in accordance with the provisions of the General Conditions, "Request for Change (Changes at CONTRACTOR's Request)" and/or"OWNER Initiated C-CA-072012 PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT CONFORMED NOVEMBER 28, 2012 Page 14 of 25 Changes", the following insurance in amounts not less than the amounts specified. OCSD reserves the right to amend the required limits of insurance commensurate with the CONTRACTOR's risk at any time during the course of the Project. No vehicles may enter OCSD premises/worksite without possessing the required insurance coverage. CONTRACTOR's insurance shall also comply with all insurance requirements prescribed by agencies from whom permits shall be obtained for the Work and any other third parties from whom third party agreements are necessary to perform the Work (collectively, the "Third Parties"), The Special Provisions may list such requirements and sample forms and requirements from such Third Parties may be included in an attachment to the General Requirements. CONTRACTOR bears the responsibility to discover and comply with all requirements of Third Parties, including meeting specific insurance requirements, that are necessary for the complete performance of the Work. To the extent there is a conflict between the Third Parties' insurance requirements and those set forth by OCSD herein, the requirement(s) providing the more protective coverage for both OSCD and the Third Parties shall control and be purchased and maintained by CONTRACTOR. A. Limits of Insurance 1. General Liability: Five Million Dollars ($5,000,000) per occurrence and a general aggregate limit of Five Million Dollars ($5,000,000) for bodily injury, personal injury and property damage. Coverage shall include each of the following: a. Premises-Operations. b. Products and Completed Operations, with limits of at least Five Million Dollars ($5,000,000) per occurrence and a general aggregate limit of Five Million Dollars ($5,000,000) which shall be in effect at all times during the warranty period set forth in the Warranty section herein, and as set forth in the General Conditions, "Warranty (CONTRACTOR's Guarantee)", plus any additional C-CA-072012 PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT CONFORMED NOVEMBER 28, 2012 Page 15 of 25 extension or continuation of time to said warranty period that may be required or authorized by said provisions. C. Broad Form Property Damage, expressly including damage arising out of explosion, collapse, or underground damage. d. Contractual Liability, expressly including the indemnity provisions assumed under this Contract. e. Separation of Insured Clause, providing that coverage applies separately to each insured, except with respect to the limits of liability. f. Independent CONTRACTOR's Liability. To the extent first dollar coverage, including defense of any claim, is not available to OCSD or any other additional insured because of any SIR, deductible, or any other form of self insurance, CONTRACTOR is obligated to assume responsibility of insurer until the deductible, SIR or other condition of insurer assuming its defense and/or indemnity has been satisfied. CONTRACTOR shall be responsible to pay any deductible or SIR. g. If a crane will be used, the General Liability insurance will be endorsed to add Riggers Liability coverage or its equivalent to cover the usage of the crane and exposures with regard to the crane operators, riggers and others involved in using the crane. h. If divers will be used, the General Liability insurance will be endorsed to cover marine liability or its equivalent to cover the usage of divers. 2. Automobile Liability: The CONTRACTOR shall maintain a policy of Automobile Liability Insurance on a comprehensive form covering all owned, non-owned, and hired automobiles, trucks, and other vehicles providing the following minimum limits of liability coverage: C-CA-072012 PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT CONFORMED NOVEMBER 28, 2012 Page 16 of 25 Either (1) a combined single limit of One Million Dollars ($1,000,000) and a general aggregate limit of One Million Dollars ($1,000,000)for bodily injury, personal injury and property damage; Or alternatively, (2) One Million Dollars ($1,000,000) per person for bodily injury and One Million Dollars ($1,000,000) per accident for property damage. 3. Umbrella Excess Liability: The minimum limits of general liability and automobile liability insurance required, as set forth above, shall be provided for either in a single policy of primary insurance or a combination of policies of primary and umbrella excess coverage. Excess liability coverage shall be issued with limits of liability which, when combined with the primary insurance, will equal the minimum limits for general liability and automobile liability. 4. Worker's Compensation/EmPloyer's Liability: CONTRACTOR shall provide such Worker's Compensation Insurance as required by the Labor Code of the State of California, including employer's liability with a minimum limit of One Million Dollars ($1,000,000) per accident for bodily injury or disease. If an exposure to Jones Act liability may exist, the insurance required herein shall include coverage with regard to Jones Act claims. Where permitted by law, CONTRACTOR hereby waives all rights of recovery by subrogation because of deductible clauses, inadequacy of limits of any insurance policy, limitations or exclusions of coverage, or any other reason against OCSD, its or their officers, agents, or employees, and any other contractor or subcontractor performing Work or rendering services on behalf of OCSD in connection with the planning, development and construction of the Project. In all its insurance coverages related to the Work, CONTRACTOR shall include clauses providing that each insurer C-CA-072012 PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT CONFORMED NOVEMBER 28, 2012 Page 17 of 25 shall waive all of its rights of recovery by subrogation against OCSD, its or their officers, agents, or employees, or any other contractor or subcontractor performing Work or rendering services at the Project. Where permitted by law, CONTRACTOR shall require similar written express waivers and insurance clauses from each of its Subcontractors of every tier. A waiver of subrogation shall be effective as to any individual or entity, even if such individual or entity (a) would otherwise have a duty of indemnification, contractual or otherwise, (b) did not pay the insurance premium, directly or indirectly, and (c) whether or not such individual or entity has an insurable interest in the property damaged. B. Deductibles and Self-Insured Retentions Any deductibles or self-insured retentions must be declared to and approved by OCSD. At the option of OCSD, either: the Insurer shall reduce or eliminate such deductibles or self- insured retentions as respects OCSD, its Directors, officers, agents, CONSULTANTS, and employees; or CONTRACTOR shall provide a financial guarantee satisfactory to OCSD guaranteeing payment of losses and related investigations, claim administration, and defense expenses. C. Other Insurance Provisions 1. Each such policy of General Liability Insurance and Automobile Liability Insurance shall be endorsed to contain, the following provisions: a. OCSD, its Directors, officers, agents, CONSULTANTS, and employees, and all public agencies from whom permits will be obtained, and their Directors, officers, agents, and employees are hereby declared to be additional insureds under the terms of this policy, but only with respect to the operations of CONTRACTOR at or from any of the sites of OCSD in connection with this C-CA-072012 PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT CONFORMED NOVEMBER 28, 2012 Page 18 of 25 Contract, or acts and omissions of the additional insured in connection with its general supervision or inspection of said operations related to this Contract. b. Insurance afforded by the additional insured endorsement shall apply as primary insurance, and other insurance maintained by OCSD shall be excess only and not contributing with insurance provided under this policy. 2. Each insurance policy required herein shall be endorsed to state that coverage shall not be cancelled by either party, except after thirty (30) days prior written notice by certified mail, return receipt requested, and that coverage shall not be cancelled for non-payment of premium except after ten (10) days prior written notice by certified mail, return receipt requested. Should there be changes in coverage or an increase in deductible or SIR amounts, CONTRACTOR undertakes to procure a manuscript endorsement from its insurer giving 30 days prior notice of such an event to OCSD, or to have its insurance broker/agent send to OCSD a certified letter describing the changes in coverage and any increase in deductible or SIR amounts. The certified letter must be sent Attention: Risk Management and shall be received not less than twenty (20) days prior to the effective date of the change(s). The letter must be signed by a Director or Officer of the broker/agent and must be on company letterhead, and may be sent via e-mail in pdf format. 3. Coverage shall not extend to any indemnity coverage for the active negligence of any additional insured in any case where an agreement to indemnify the additional insured would be invalid under California Civil Code Section 2782(b). 4. If required by a public agency from whom permit(s) will be obtained, each policy of General Liability Insurance and Automobile Liability Insurance shall be endorsed to specify by name the public agency and its legislative members, officers, agents, CONSULTANTS, and employees, to be additional insureds. C-CA-072012 PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT CONFORMED NOVEMBER 28, 2012 Page 19 of 25 D. Acceptability of Insurers Insurers must have an "A2, or better, Policyholder's Rating, and a Financial Rating of at least Class VIII, or better, in accordance with the most current A.M. Best Rating Guide. OCSD recognizes that State Compensation Insurance Fund has withdrawn from participation in the A.M. Best Rating Guide process. Nevertheless, OCSD will accept State Compensation Insurance Fund for the required policy of worker's compensation insurance, subject to OCSD's option, at any time during the term of this Contract, to require a change in insurer upon twenty (20) days written notice. Further, OCSD will require CONTRACTOR to substitute any insurer whose rating drops below the levels herein specified. Said substitution shall occur within twenty (20) days of written notice to CONTRACTOR by OCSD or its agent. E. Verification of Coverage CONTRACTOR shall furnish OCSD with original certificates and mandatory endorsements affecting coverage. Said policies and endorsements shall conform to the requirements herein stated. All certificates and endorsements are to be received and approved by OCSD before Work commences. OCSD reserves the right to require complete, certified copies of all required insurance policies, including endorsements, affecting the coverage required by these Specifications at any time. F. Subcontractors CONTRACTOR shall be responsible to establish insurance requirements for any Subcontractors hired by CONTRACTOR. The insurance shall be in amounts and types reasonably sufficient to deal with the risk of loss involving the Subcontractor's operations and work. OCSD and any public agency issuing permits for the Project must be named as "Additional Insured" on any General Liability or Automobile Liability policy obtained by a Subcontractor. The CONTRACTOR must obtain copies and maintain current versions of C-CA-072012 PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT CONFORMED NOVEMBER 28, 2012 Page 20 of 25 all Subcontractors' policies, Certificate of Liability and mandatory endorsements effecting coverage. Upon request, CONTRACTOR must furnish OCSD with the above referenced required documents. G. Required Forms and Endorsements 1. Required ACORD Form a. Certificate of Liability Form 25-S (7/97) 2. Required Insurance Services Office, Inc. Endorsements (when alternative forms are shown, they are listed in order of preference) In the event any of the following forms are cancelled by Insurance Services Office, Inc. (ISO), or are updated, the ISO replacement form or equivalent must be supplied. a. Commercial General Liability Form CG-0001 10 01 b. Additional Insured Including Form CG-2010 10 01 and Products-Completed Operations Form CG-2037 10 01 C. Waiver of Transfer of Rights of Form CG-2404 11 85; or Recovery Against Others to Us/ Form CG-2404 10 93 Waiver of Subrogation 3. Required State Compensation Insurance Fund Endorsements a. Waiver of Subrogation Endorsement No. 2570 b. Cancellation Notice Endorsement No. 2065 4. Additional Required Endorsements a. Notice of Policy Termination Manuscript Endorsement SECTION — 17 RISK AND INDEMNIFICATION All Work covered by this Contract done at the site of construction or in preparing or delivering materials to the site shall be at the risk of CONTRACTOR alone. CONTRACTOR shall save, indemnify, defend, and keep OCSD and others harmless as more specifically set forth in General Conditions, "General Indemnification". C-CA-072012 PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT CONFORMED NOVEMBER 28, 2012 Page 21 of 25 SECTION — 18 TERMINATION This Contract may be terminated in whole or in part in writing by OCSD in the event of substantial failure by the CONTRACTOR to fulfill its obligations under this Agreement, or it may be terminated by OCSD for its convenience provided that such termination is effectuated in a manner and upon such conditions set forth more particularly in General Conditions, "Termination for Default" and/or "Termination for Convenience", provided that no termination may be effected unless proper notice is provided to CONTRACTOR at the time and in the manner provided in said General Conditions. If termination for default or convenience is effected by OCSD, an equitable adjustment in the price provided for in this Contract shall be made at the time and in the manner provided in the General Conditions, "Termination for Default" and "Termination for Convenience". SECTION — 19 WARRANTY The CONTRACTOR agrees to perform all Work under this Contract in accordance with the Contract Documents, including OCSD's designs, Drawings and Specifications. The CONTRACTOR guarantees for a period of at least one (1) year from the date of Final Acceptance of the Work, pursuant to the General Conditions, "Final Acceptance and Final Completion" that the completed Work is free from all defects due to faulty materials, equipment or workmanship and that it shall promptly make whatever adjustments or corrections which may be necessary to cure any defects, including repairs of any damage to other parts of the system resulting from such defects. OCSD shall promptly give notice to the CONTRACTOR of observed defects. In the event that the CONTRACTOR fails to make adjustments, repairs, corrections or other work made necessary by such defects, OCSD may do so and charge the CONTRACTOR the cost incurred. The CONTRACTOR's warranty shall continue as to any corrected deficiency until the later of(1) the remainder of the original one-year warranty period; C-CA-072012 PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT CONFORMED NOVEMBER 28, 2012 Page 22 of 25 or (2) one year after acceptance by OCSD of the corrected Work. The Performance Bond and the Payment Bond shall remain in full force and effect through the guarantee period. The CONTRACTOR's obligations under this clause are in addition to the CONTRACTOR's other express or implied assurances under this Contract, including but not limited to specific manufacturer or other extended warranties specified in the Plans and Specifications, or state law and in no way diminish any other rights that OCSD may have against the CONTRACTOR for faulty materials, equipment or Work. SECTION — 20 ASSIGNMENT No assignment by the CONTRACTOR of this Contract or any part hereof, or of funds to be received hereunder, will be recognized by OCSD unless such assignment has had prior written approval and consent of OCSD and the Surety. SECTION — 21 RESOLUTION OF DISPUTES OCSD and the CONTRACTOR shall comply with the provisions of California Public Contract Code Section 20104 et. seq., regarding resolution of construction claims for any Claims which arise between the CONTRACTOR and OCSD, as well as all applicable dispute and Claims provisions as set forth in the General Conditions and as otherwise required by law. SECTION — 22 SAFETY & HEALTH CONTRACTOR shall comply with all applicable safety and health requirements mandated by federal, state, city and/or public agency codes, permits, ordinances, regulations, and laws, as well as these Contract Documents, including but not limited to the General Requirements, Section entitled "Safety." C-CA-072012 PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT CONFORMED NOVEMBER 28, 2012 Page 23 of 25 SECTION — 23 NOTICES Any notice required or permitted under this Contract may be given by ordinary mail at the address set forth below. Any party whose address changes shall notify the other party in writing. TO OCSD: Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, California 92708-7018 Attn: Clerk of the Board Copy to: Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, California 92708-7018 Attn: Construction Manager Bradley R. Hogin, Esquire Woodruff, Spradlin & Smart 555 Anton Boulevard Suite 1200 Costa Mesa, California 92626 TO CONTRACTOR: S.S. Mechanical Corporation 17631 Metzler Lane Huntington Beach, CA 92647 Copy to: Steve Stump, President S.S. Mechanical Corporation 17631 Metzler Lane Huntington Beach, CA 92647 C-CA-072012 PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT CONFORMED NOVEMBER 28, 2012 Page 24 of 25 IN WITNESS WHEREOF, the parties hereto have executed this Contract Agreement as the date first hereinabove written. Approved as to Form: Marc Dubois Contracts, Purchasing and Materials Management Division Manager CONTRACTOR: S.S. Mechanical Corporation 17631 Metzler Lane Huntington Beach, CA 92647 By Its CONTRACTOR's State License No. 686371 (Expiration Date — 3/31/2012) OCSD: Orange County Sanitation District By Chair, Board of Directors By Clerk of the Board By Marc Dubois Contracts, Purchasing and Materials Management Division Manager C-CA-072012 PROJECT NO. FE09-11 P2 CENTRAL GENERATION FACILITY COMPRESSOR REPLACEMENT CONFORMED NOVEMBER 28, 2012 Page 25 of 25 STEERING COMMITTEE Meeting Date To Bd. of Dir. 11/28/12 11/28/12 AGENDA REPORT Item Number Item Number 2 7 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Robert P. Ghirelli, Assistant General Manager GENERAL MANAGER'S RECOMMENDATION A. Approve the Five-Year Strategic Plan dated November 2012; and, B. Direct staff to implement the goals and levels of service contained in the Plan. SUMMARY The Strategic Plan has been updated for Fiscal Year 2012-13 and contains a summary of accomplishments over the past year as well as changes to the levels of service and strategic goals. The plan does not carry any additional costs associated with the changes to the strategic goals and levels of service. PRIOR COMMITTEE/BOARD ACTIONS October 2012: The Board of Directors conducted a Strategic Planning Workshop. ADDITIONAL INFORMATION Strategic Plan Update Process In 2007, the Board of Directors held a series of workshops to develop a Five-Year Strategic Plan containing strategic goals, levels of service and updated statements of mission, vision and core values. The three month process culminated in adoption of a new plan in November 2007. Every year since, the Board of Directors holds a Strategic Planning Workshop and subsequently approves an updated plan with new strategic goals and levels of service. Board Input The Executive Management Team met in July 2012 to discuss preliminary ideas and suggestions for updates to the plan. On October 17, the Board of Directors participated in a workshop to discuss the progress to date and heard presentations by members of the Executive Management Team regarding biosolids management, chemical sustainability, odor control, workforce planning and development, and business continuity planning. The discussion resulted in recommendations to add or change several strategic goals and levels of service. Form No.DW-102.1 Page 1 of 3 Plan Changes Based on the outcome of the Strategic Planning Workshop, the following changes are proposed in this update of the Strategic Plan: Environmental Stewardship Level of Service — OCSD will be a good neighbor. ( Number of Odor Complaints -- Establish a new level of service target = 0 (zero) under normal operating conditions for Treatment Plants 1 and 2. Business Principle Goals -- add new goals as follows: ( Chemical Sustainability— Ensure a reliable and sustainable chemical supply using multiple vendors to reduce the risk of supply disruption while benefiting from competitive pricing. Targeted for completion in FY 2012-13. ( Business Continuity Planning — Develop a business continuity plan that will define how OCSD will continue its everyday business functions after an event that interrupts normal operations for an extended period of time. Targeted for completion in FY 2012-13. Wastewater Management Goals— amend current goals as follows: ( Odor Control Update and Action Plan — Assess the performance of current odor control systems, validate the appropriate level of service, align future odor control improvements with asset management objectives, and update the Capital Improvement Program for odor control to meet the level of service target. Targeted for completion in FY 2013-14. ( Sustainable Biosolids Program — Assess and revise the 2006 Biosolids Board Resolution to reflect recent developments, experiences, and circumstances. Targeted for completion in FY 2012-13. Wastewater Management Level of Service — OCSD will provide a safe, reliable effluent for recycling: ( Meet Secondary Treatment Standards — Establish a new level of service target for CBOD = 25 mg/I and TSS = 30 mg/I, as required by the Sanitation District's ocean discharge permit. (CBOD = carbonaceous biological oxygen demand; TSS = total suspended solids). Wastewater Management Level of Service — OCSD will implement a Sustainable Biosolids Management Program: ( Biosolids recycled — establish a new level of service target through 2017 of less than or equal to 100 tons per day to landfill. Workplace Environment Goal— amend current goal as follows: ( Workforce Planning and Workforce Development — Design and implement comprehensive workforce planning and development activities to improve workforce capability, adaptability, efficiency, and accountability. Form No.DW-102.1 Page 2 of 3 CONTINUAL IMPROVEMENT Overall, the updated Strategic Plan continues OCSD's goal of moving from good to great through annual assessments and incremental changes. Each year, the Board will be asked to provide strategic leadership and guidance to district staff for setting goals and levels of service. The Steering Committee and Board are asked to adopt the new Five-Year Strategic Plan, which contains no new costs and will help guide the strategic direction of the organization and staff. Following Board approval of the updated plan, implementation of plan changes will occur through a series of recommended actions proposed by staff for Board consideration at future meetings. CEQA Adoption of the Strategic Plan is statutorily exempt from CEQA because it involves only feasibility or planning studies for possible future actions which the board has not approved, adopted, or funded. The Strategic Plan will not have a legally binding effect on later activities. BUDGET / DELEGATION OF AUTHORITY COMPLIANCE N/A ATTACHMENT The following attachment(s) are included in hard copy as a separate attachment, and may also be viewed on-line at the OCSD website (www.ocsd.com) with the complete agenda package and attachments: ( November 2012 Strategic Plan (54 pages) Form No.DW-102.1 Page 3 of 3 * z : N .. _ Qo Y ff ^ , I uA l"V j � �• � i it M' � : W a 'lll� W LLJ > 11 I ' � 1�1 O\Stp,\CT • 1N� _ W � f�f.Vl ILL�l1 f' t j} AV(baO • QPp� Orange County Sanitation District Five-Year Strategic Plan _ A Q � c o -� THE November 2012 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 Table of Contents OCSD Board of Directors ii Message from the General Manager iii Executive Summary 1 The Strategic Planning Framework 2 Mission Statement 3 Vision Statement 4 Core Values 5 Risk Register 6 Strategic Goals & Levels of Service 7 Goals Completed Since 2007 8 Environmental Stewardship 11 Business Principles 13 Wastewater Management 15 Workplace Environment 17 Appendix A: New Issue Papers 19 Appendix B: Previous Issue Papers 27 Appendix C: Glossary 47 {5 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 i OCSD Board of Directors Chair Troy Edgar Vice Chair John Anderson City Active Director Anaheim Gail Eastman Brea Don Schweitzer Buena Park Fred Smith Cypress Prakash Narain Fountain Valley Larry Crandall Fullerton Gregory Sebourn Garden Grove Bill Dalton Huntington Beach Joe Carchio Irvine Jeffrey Lalloway La Habra Tom Beamish La Palma Mark Waldman Los Alamitos Troy Edgar Newport Beach Steven Rosansky Orange Jon Dumitru Placentia Scott Nelson Santa Ana Sal Tinajero Seal Beach Michael Levitt Stanton David Shawver Tustin John Nielsen Villa Park Brad Reese Yorba Linda John Anderson Sanitary/Water Districts Costa Mesa Sanitary District James M. Ferryman Midway City Sanitary District Joy L. Neugebauer Irvine Ranch Water District John Withers Orange County Board of Supervisors Janet Nguyen ii 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 Message from the General Manager Five years ago,the Board of Directors and staff charted a course for success in the future through the development of the first Five-Year Strategic Plan.We committed to the execution of that plan and imple- mentation of the goals necessary to achieve success. The Strategic Plan established Levels of Service to ensure that the quality of wastewater treatment would protect the health of residents served by the District and the environment in which they live. Annually,the Goals and Levels of Service have been adjusted when necessary and new goals have been added to meet the changes in operating,regulatory,and very challenging economic conditions. I am pleased to present successes from attained goals.Many goals have been completed that improved technical operations,biosolids manage- ment,odor control,departmental strategic planning,succession plan- ning, and regulatory compliance. Some very important goals are ongo- ing, such as the Santa Ana River Interceptor relocation,the continuing effort to prepare staff for the future,and the transfer of local sewer lines to responsible cities.The greatest achievement during these last five years has been the construction of nearly$623 million of secondary treatment facilities,meeting all the regulatory requirements ahead of schedule,treating wastewater to secondary treatment standards,and doing it on time and on budget. We focused on four key strategies while developing the original Strategic Plan in 2007 and in subsequent updates while facing complex issues and challenges: • Our most important responsibility is to provide safe,effective wastewater treatment; • We continue to make decisions by incorporating social,environmental and financial considerations; • We remain leaders in the protection of the environment, collaborating with other stakeholders in the watershed to ensure we effectively meet the needs of our customers;and • We continue to provide employees with resources to do their jobs and give them opportunities for career growth. Those same four points have focused staff for the last five-years and still remain the drivers for our Level of Service updates and each new goal that has been presented in subsequent Strategic Plans. Today we set the course for this next year with a new set of goals and modifications to the Levels of Ser- vice. I am confident in the staff and the leadership at the Sanitation District, and I am confident that this organization will continue to remain a leader within our industry, and will continue to protect the public health and environment for our rate payers. My tenure at the Orange County Sanitation District will end soon. I look forward with anticipation to watching the Sanitation District continue to build on our success. I am grateful to the Board of Directors for their leadership and support and to our staff for their continued dedication. Respectfully submitted, James D. Ruth General Manager 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 iii Executive Summary In November 2007,the Board of Directors adopted the first five-year comprehensive strategic plan to steer OCSD's efforts and engage the organization to envision service levels and operational needs. This year marks the end of that five-year strategic plan cycle. Since 2007, 31 strategic goals have been completed,two have been cancelled after further evaluation and three new or modified goals remain and are scheduled to be completed by 2014. The plan has continued to provide direction for moving from good to great through annual assessments and incremental changes. As a result of the discussion at the October 17,2012 Strategic Planning Workshop,three new goals were added,three modifications to existing levels of service were made and two goal modifications were included in the plan. New Goals: • Chemical Sustainability-Ensure a reliable and sustainable chemical supply using multiple vendors to reduce the risk of supply disruption while benefiting from competitive pricing. Targeted for completion in FY 12-13 • Business Continuity Planning- Develop a business continuity plan that will define how OCSD will continue its everyday business functions after an event that interrupts normal operations for an extended period of time. Targeted for completion in FY 12-13 • Biosolids Recycling Policy-Assess and revise the 2006 Biosolids Board Resolution (Policy) to reflect recent developments,experiences, and circumstances concerning biosolids management. Targeted for completion in FY 12-13 Modification to Level of Service: • Number of Odor Complaints-Establish a new level of service target=0 (zero) under normal operating conditions for Treatment Plants 1 and 2. • Meet Secondary Treatment Standards-Establish a new level of service target for CBOD = 25 mg/1 and TSS= 30 mg/l. (CBOD = carbonaceous biological oxygen demand;TSS=total suspended solids). • Biosolids Recycling- Establish a new level of service target through 2017 of less than or equal to 100 tons per day to landfill. Goal Modification: • Odor Control Update and Action Plan-Assess the performance of current odor control systems, validate the appropriate level of service, align future odor control improvements with asset management objectives, and update the capital improvement program for odor control to meet the level of service target. Targeted for completion in FY 13-14 • Workforce Planning and Workforce Development-Design and implement comprehensive workforce planning and development activities to improve workforce capability,adaptability, efficiency,and accountability. Targeted for completion in FY 12-13 The issue papers describing these goals and level of service are contained in Appendix A. The Strategic Plan continues to chart a focused roadmap of success for the future of the Orange County Sanitation District. It continues to address critical issues and challenges,and to communicate clear and concise future direction to OCSD staff. p.01 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 Strategic Planning Framework The planning framework is illustrated below and shows how the Board of Directors play a critical role in strategic planning and resource allocation. The strategic planning effort starts with the Board of Directors setting overall policy and priorities for the Sanitation District. Based on that policy direction, staff devel- ops the annual operational plan and budget. Monitoring Strategic New or altered and Evaluation Planning Ae0Levels of Service Strategic Board Board Approval of Planning Approval of Budget Framework Strategic Plan Budget Operational \Goals and Planning Objectives 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 p.02 OCSD Mission Statement The Mission Statement is the basic foundation that defines why we exist. "We protect public health and the environment by providing effective wastewater collection, treatment, and recycling." - I ft- J, p.03 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 OCSD Vision Statement The Vision Statement supports the Mission Statement by expressing a broad philosophy of what the Orange County Sanitation District strives to achieve now and in the future in the delivery of services to our customers,vendors,other agencies,the general public,and each other. The Orange County Sanitation District is committed to: r Making decisions in an open and honest way to produce optimum financial, environmental and societal results. Cooperating with other stakeholders to protect • ' • " the ocean and regional water resources for the people we serve. AA Beneficially recycling wastewater,biosolids and other resources using safe and effective processes and systems. Developing the best possible workforce by providing employees with opportunities to advance their careers through enhanced growth, responsibility, and professional development. t. IL 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 p.04 Core Values The Core Values support the Mission and Vision Statements by expressing the values,beliefs, and philosophy that guides our daily actions.They help form the framework of our organization and reinforce our professional work ethic. Honesty, Trust and Respect We aspire to the highest degree of integrity,honesty,trust,and respect in our interaction with each other,our suppliers,our customers,and our community. Teamwork and Problem Solving We strive to reach OCSD goals through cooperative efforts and collaboration with each other and our constituencies.We work to solve problems in a creative,cost-effective and safe manner,and we acknowledge team and individual efforts. Leadership and Commitment We lead by example,acknowledging the value of our resources and using them wisely and safely to achieve our objectives and goals.We are committed to act in the best interest of our employees, our organization, and our community. Learning/Teaching We continuously develop ourselves, enhancing our talents,skills, and abilities, knowing that only through personal growth and development will we continue to progress as an agency and as individuals. Recognition/Rewards We seek to recognize,acknowledge, and reward contributions to OCSD by our many talented employees. p. 05 {5 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 Risk Register The Risk Register is an annual compilation of the various risks,opportunities and continuity challenges facing the Orange County Sanitation District,as seen by the Sanitation District's management team.The Risk Register Update in 2012 was conducted as the world dealt with a variety of crises. In the previous several months,there were a number of major earthquakes and floods around the world,a large cruise ship went aground,the San Onofre nuclear plant was shut down due to deteriorating pipes and the Eurozone struggled with high sovereign debt levels. For the Risk Register Update this year,managers and executive management of OCSD focused their attention on District concerns deemed particularly compelling,giving higher scores to several risks than in past years. The 2012 Risk Register Update identified these as the top risks: • California financial instability—points to the continuing monetary turmoil in California state government and the possibility that decisions by the state could impact OCSD funds collected. • Retirement of experienced employees—reflects the fact that many long-time OCSD employees are nearing or are eligible for retirement. The top opportunities for the 2012 update are: • Hire good staff—refers to the opportunity to find and hire competent and experienced people during a time when many are available. • Train stafffor new facilities, develop new skills and career growth—identify and value employees with "people skills"—as new construction finishes and comes online,and as long-time employees retire, there is an opportunity to prepare OCSD and its staff for these changes. • Prioritize activities and resources—reflects the fact that money is tight in these economic times,and so it is valuable to carefully allocate money where needed the most. The major continuity challenges include: • Maintaining chemical supply if disruption—refers to the Sanitation District's use of important chemicals used to treat wastewater,and our need to keep the supply coming even in the face of a disaster. • Development of formal business continuity plan—that reflects that while the District has an emergency response plan, along with safety and risk management procedures,it requires a focus on a formal longer-term business continuity plan which includes the smooth continuation of business operations after a disaster. Staff is in the process of developing plans to mitigate the identified risks and challenges, and take advantage of the opportunities. For example,as the successful effort to commission full secondary treatment is coming to fruition,the Sanitation District recently completed a reorganization of its staff to streamline its operations and eliminate duplicative functions, saving$500,000. The District's "BLAST" program seeks to give employees opportunities to improve the skills needed to successfully work in a high-performance environment. Regarding continuity,staff is developing a formal business continuity plan that focuses on the ability to continue treating wastewater even under difficult conditions. 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 p.06 Strategic Goals & Levels of Service On the following pages are the strategic goals and levels of service for the next five years.New goals for this report are noted and all goals include a projected completion time. The levels of service standards are measures of service that are seen by our customers as high priorities. Goals and levels of service are divided into four areas: • Environmental Stewardship—OCSD participates collaboratively in the protection of regional water resources for the benefit of the people we serve. • Business Principles—OCSD makes every decision based on short and long-term environmental, societal,and financial impacts (the triple bottom line). • Wastewater Management—OCSD beneficially reuses and recycles water and other resources using safe and effective wastewater systems. • Workplace Environment—OCSD provides an environment of partnership, growth, opportunity, responsibility and accountability. far__ W p.07 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 Goals completed since adoption of the 2007 Five Year Plan Environmental Stewardship 1. Contaminants of Potential Concern (CPC)—Complete three phase testing and analysis of 550+ CPC, prepare report on findings and recommendations,develop initial source control strategy if there are CPCs identified that require control. Completed FY 07-08 2. Management System for Environmental Compliance—Implement a management control system for environmental compliance information that incorporates a dashboard-style report. Completed FY 07-08 3. Engine Emission Compliance—Complete study to evaluate alternatives for complying with lower emission limits in the South Coast Air Quality Management's Rule 1110.2. Initiate planning and design of demonstration testing of the most promising technology(s) identified in the study. Completed FY 07-08 4. Fuel Cell Evaluation—Start up 300 kW demonstration unit. Completed FY10-I1 a. Evaluate cost feasibility of replacing or supplementing CGS engines with fuel cells. Completed FY 10-I1 5. Climate Change/Environmental Footprint Initiative—Develop an overall strategy for responding to climate change regulations and proactively adapting to the effects of climate change including identification and mitigation of greenhouse gases and adapting to any impacts to our facilities and operations. Completed FY 08-09 a. Develop models to estimate greenhouse gas and traditional pollutant emissions for determination of our environmental footprint. (Functional predictive greenhouse gas model completed.) Completed in FY 10-11 6. Reclaiming Santa Ana River Interceptor Line (SARI)Flows—Meet with stakeholders, develop a list of obstacles that need to be overcome to reclaim the SARI Line and develop a strategy to obtain regulatory approval of reclaiming SARI Line flows.This goal was canceled in FY 08-09 due to inability to obtain regulatory approval. v s - - The tunneling machine entering the receiving shaft indicates the completion of one of the critical tunneling segments of the Santa Ana River Interceptor project. This project is relocating the OCDS's pipeline to safer ground outside the Santa Ana River alignment. 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 p.08 Business Principles 1. Sewer Rate for Green Development—Submit for Board approval an amendment to sewer rate ordinance with incentives for green developments. Completed FY 07-08 2. Complete Facilities Master Plan Update—Complete a comprehensive update of the Facilities Master Plan and obtain Board approval. Completed FY 07-08 3. Enterprise Information Technology Strategic Plan—Complete a District-wide Information Technology Strategic Plan. Completed FY 09-10 4. Updating OCSD's Risk Register—Review and update OCSD's risk register to include an assessment of technical,regulatory,financial,and political risks (among others) and possible mitigation strategies. Completed FY 07-08 5. Annex Unincorporated Areas—With Board concurrence, annex unincorporated areas into OCSD's service area. Completed FY 07-08 6. Review Interagency Agreements—Conduct a comprehensive review of agreements with the Santa Ana Watershed Project Authority and Irvine Ranch Water District,and,if appropriate,reopen for discussion. Completed FY 09-10 7. Strategic Business Plan—With Board concurrence, annually update and implement the Strategic Plan and Business Plan. Completed FY 10-11 8. Business Accountability Charters—Create Business Accountability Charters for each department, consistent with those developed by managers and supervisors. Completed FY 10-I1 9. Chemical Supplies—Develop a Chemical Sustainability Plan that provides OCSD with options for obtaining wastewater treatment chemicals during chemical shortages,emergencies or complete stoppages. Completed FY 10-11 10. Full-Cost Recovery 2010-11—Conduct a comprehensive review of the Sanitation District's Urban Runoff Program to ensure a fair share recovery of costs for services. Completed in FY 10-I1 11. Full-Cost Recovery 2012-13—Implement a direct charging mechanism to recover the full cost of urban runoff treatment starting July 1,2013 when the new rate structure is in place. Completed in FY 12-13 p.09 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 Wastewater Management 1. Groundwater Replenishment System—Maximize the production of GWR System product water to augment and protect the Orange County groundwater basin with a goal of 70 mgd. Completed FY 08-09 2. Sustainable Biosolids Program—Complete new in-county Compost Take-Back Program Plan strategy. Completed FY 07-08 a. Evaluate the feasibility of deep injection/methane recovery including commissioning a study of the geological formations below Plants 1 and 2,and availability and acceptability of any existing wells. Completed FY 08-09 b. Evaluate option of processing some biosolids at the City of Los Angeles Terminal Island demonstration well. Completed FY 08-09 3. Implement Energy Master Plan—After the completion of the plan,assess final recommendations to ensure adequate power resources and energy management. Completed FY 09-10 4. Disinfection of Final Effluent—Develop a cost effective program to sustain protection of public health associated with bacteria in the effluent and incorporate program elements into our NPDES Permit. Completed in FY 10-I1 Workplace Environment 1. Space Planning Study Recommendations—Complete relocation of staff housed in Information Technology Trailers to the Administration Building, Control Center and Building 6. Completed FY 07-08 2. Improve the Sanitation District Security—Provide long-term security enhancements at both treatment plants and within OCSD's Collections System. Completed FY 07-08 3. Safety and Health Strategic Plan—Develop and implement a Safety and Health Strategic Plan for all OCSD activities. Completed FY 08-09 4. Human Resources Strategic Plan—Design,develop and implement human resources policies, practices, systems and tools to ensure OCSD has a workforce that meets future needs of OCSD and the public it serves. Completed FY 08-09 5. Succession Plan—Implement the Succession Management Plan including management training and the creation of a Leadership Academy. Completed FY 08-09 6. North County Yard—Open the North County Maintenance Yard and complete the relocation of selected staff and equipment to the facility. Implement flex space for added agency-wide needs as appropriate.This goal was canceled in FY 10-11 and the facility is leased. 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 P. 10 Environmental Stewardship Goals OCSD participates collaboratively in the protection of regional water resources for the benefit of the people we serve. 1. Santa Ana River Interceptor Line Relocation—Work in conjunction with the County of Orange and the Federal Government to relocate the Santa Ana River Interceptor Line by June 2013. Targeted for completion in FY 12-13 2. Engine Emission Compliance—Implement capital improvements or operational modifications in order to achieve compliance. Targeted for completion in FY 13-14 3. Fuel Cell Evaluation—Evaluate performance and fuel clean up effectiveness. Targeted for completion in FY 12-13 Environmental Stewardship Levels of Service FY 11-12 Level of Service OCSD will protect public health and the environment Results Target Accept dry weather urban runoff diversion flows without imposing fees. 1.8 mgd Up to 4 mgd Maximum oil site odor impact • Reclamation Plant No. 1 42 D/T 14 D/T • Treatment Plant No. 2 48 D/T 17 D/T (Target dates will be established as part of the Odor Control Master Plan update scheduled for 1212014.) Air emissions health risk to community and employees, per one million people (for each treatment plant) 9 < 10 No Notices of Violation (NOVs)with air,land, and water permits 2 0 FY 11-12 Level of Service OCSD will be a good neighbor Results Target Odor complaint response: • Treatment Plants within 1 hour 100% 100% • Collection System within 1 working day 100% 100% Number of odor complaints: • Reclamation Plant No. 1 1 0* • Treatment Plant No. 2 4 0* • Collection System 12 34 *New target"under normal operating conditions" Respond to collection system spills within 1 hour 100% 100% P. 11 {5 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 t � 1 F tit zt r i Research project for hydrogen fuel cell and Headworks Biotowers—Odor control system to reduce offsite odors. fueling station has been installed and is operational at Plant No. 1,converting digester gas into electricity for on-site use and hydrogen gas for fueling automobiles. ­X i J � . SARI dedication—ground breaking ceremonies at the relocation of the Santa Ana River Interceptor line October 11,2012. Olfactometry uses the sense of smell or olfactory stimuli in a controlled group of people to measure the concentration of an odorant in an air sample. 1-, Biosoilds—Recycled biosolids used on non-food Chemical dosing station—Odor and corrosion control for the crops as a land application. collection system. 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 p. 12 Business Principles Goals OCSD makes every decision based on short and long-term environmental,societal, and financial impacts (the triple bottom line). 1. Local Sewer Transfers—Complete the transfer of local sewers to member agencies and cities,focusing on completion of the Tustin transfer. Targeted for completion in FY 12-13 2. Five-Year Rate Plan—Prepare an updated 5-year rate schedule for Board consideration to go into effect July 1,2013. Targeted for completion in FY 12-13 3. Chemical Sustainability(new)—Ensure a reliable and sustainable chemical supply using multiple vendor contracts to reduce the risk of supply disruption while benefiting from competitive pricing. Targeted for completion in FY 12-13 4. Business Continuity Planning(new)—Develop a Business Continuity Plan (BCP) that will define how OCSD will continue its everyday business functions after an event that interrupts normal operations for an extended period of time. Targeted for completion in FY 12-13 r � Trickling filter at Plant No.2. p. 13 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 Business Principles Levels of Service FY 11-12 Level of Service OCSD will exercise sound financial management Results Target COP service principal and interest < O&M expenses < O&M expenses Annual user fees Sufficient Sufficient to cover all O&M requirements Actual collection,treatment, and disposal costs million gallons in comparison with the budget 8.7%under budget <_ 10% of budget Annual variance from adopted reserve policy 00.1492% >_Budgeted reserves Maintain AAA Bond Rating 100% 100% FY 11-12 Level of Service OCSD will be responsive to our customers Results Target Respond to public complaints or inquiries regarding 100% >90% construction projects within 1 working day New connection permits processed within one working day 100% >90% Comparison of Single-Family Residential Rates Per Year $700 $600 $500 $400 $300 - - - - - - - tA $200 0-� - - -v- - - - -0 0-s U0 ¢ 4� c C M c 0 �, E $100 -o- 0—o-�- �- o- �- 0-m �-�- 0- c c fo }, ro c a� �n 0 0 Ln to > V V 0 2 Li LOU 0 Source:2012 {5 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 p. 14 Wastewater Management Goals OCSD beneficially reuses and recycles water and other resources using safe and effective wastewater systems. 1. Sustainable Biosolids Program a. Conduct research to reduce the amount of biosolids produced and increase digester gas production. Targeted for completion in FY 12-13 b. (new)Assess and revise the 2006 Biosolids Board Resolution (Policy) to reflect recent developments,experiences,and circumstances concerning biosolids management. Targeted for completion in FY 12-13 2. Odor Control Update and Action Plan (modified)—Assess the performance of current odor control systems,validate the appropriate LOS, align future odor control improvements with asset management objectives, and update our Capital Improvement Program for odor control to meet our LOS goals. Targeted for completion in FY 13-14 3. Ocean Protection—Undertake studies to determine the cause of benthic community changes near the ocean outfall and take corrective action to return affected areas to reference conditions. Targeted for completion in FY 11-12 (Board presentation 1st quarter 2013) ,f w+r; Ocean Monitoring Program p. 15 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 Wastewater Management Levels of Service FY 11-12 Level of Service OCSD will provide a safe reliable effluent for recycling Results Target Concentration of emerging chemical constituents 11.0 NDMA< 150 ppt of concern in Plant No. 1 secondary effluent 11.24 1,4-Dioxane < 10 ppb Meet GWRS specification requirements for Plant 1 secondary effluent 3.0 5 NTU Thirty-day geometric mean of total coliform bacteria in effluent after initial dilution of 250:1 352.5 < 1,000 mpn Compliance with core industrial pretreatment requirements 100% 100% Meet secondary treatment standards BOD 12 mg/L CBOD 25 mg/L TSS 8.9 mg/L TSS 30 mg/L FY 11-12 Level of Service OCSD will manage flows reliably Results Target Frequency of unplanned use of emergency one-mile 0 0 per year during (78-inch diameter) outfall dry weather less than once per 3 years in peak wet weather Sanitary sewer spills per 100 miles 0.23 < 2.1 Contain sanitary sewer spills within 5 hours 100% 100% FY 11-12 Level of Service OCSD's effluent will be recycled Results Target Provide up to 104 mgd specification effluent 89 mgd 104 mgd to the Groundwater Replenishment System OCSD will implement a sustainable biosolids FY 11-12 Level of Service management program Results Target National Biosolids Partnership Certification for 5 year recertification Maintain Biosolids Management Program July 2008 certification Biosolids recycled 0 tons to landfill <_100 tons per day (New Target Level of Service through 2017) 100% recycled to landfill Respond to all biosolids contractor violations 100% 100% within a week of violation notice 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 p. 16 Workplace Environment Goals OCSD provides an environment of partnership,growth,opportunity,responsibility and accountability. 1. Workforce Planning and Workforce Development(Updated)—Design and implement comprehensive workforce planning and development activities to improve workforce capability,adaptability, efficiency, and accountability. Ongoing plan for preparing employees for the future. . %,eaders, N 0 o� " ���s fo r T off` BLAST is an internal program that is being developed by employees for employees with the ongoing support from management.BLAST continuously promotes and offers opportunities for lifelong learning in an effort to build OCSD's bench for future leadership positions. p. 17 {5 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 Workplace Environment Levels of Service FY 11-12 Level of Service OCSD will take care of its people Results Target Training hours per employee 40 45 per year Employee injury incident rate—accidents per 100 employees 4.3 Industry average 4.6 Meet mandatory OSHA training requirements 91% >95% Hours worked since last lost work day 140,000 1,000,000 Achieve annual agency target of days away from work, 3.0 2.5 days of restricted work activity, or job transferred as a result of a work-related injury or illness �v Vt 1 , {5 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 P. 18 Appendix A: New Issue Papers In preparation for the October 17, 2012 Board of Director Strategic Planning Workshop to discuss the proposed goals for 2012, staff prepared five issue papers related to the new goals. The appendix includes issue papers on the following topics: • Revisiting OCSD's 2006 Biosolids Recycling policy • Chemical Sustainability • Odor Control Update and Action Plan • Workforce Planning and Workforce Development • Business Continuity Planning p. 19 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 OCSD's Biosolids Recycling Policy Should OCSD revisit the 2006 Biosolids Recycling policy to reflect recent developments, experiences, and circumstances? Why is this issue important to the District? Since the 2006 OCSD Board Resolution (OCSD 06-10) supporting the Long Range Biosolids Management Plan (LRBMP)was adopted, OCSD implemented the diversity guidelines,managed our long-range contracts, changed our biosolids recycling level of service,and renewed our land application commitment as part of our diverse portfolio. The long-term strategy requires modifications since the EnerTech contract has ended and our biosolids volumes will drop significantly by 2017 when IRWD will be processing their own solids and new centrifuge dewatering facilities are operational. Goals • Recognize historic milestones as key rationale for biosolids policy(e.g.,grand jury report,county ordinances banning biosolids, etc.). • Recognize importance of best management practices and contractor investment that build sustainability of OCSD's biosolids program. Reaffirm the continued importance of onsite research to reduce the volume of biosolids that require offsite management. • Reaffirm our commitment to maintaining an environmental management system (EMS) for our biosolids program for which we were first certified by the National Biosolids Partnership in 2003. • Remain committed to recycling our biosolids with a level of service (updated in 2011) of at least 88%of biosolids recycled(not more than 12%to landfill) through the solids peak in 2017.The Long-Range Plan also recommended the use and development of in-county biosolids options. • Continue to adhere to the diversity goals recommended by the Long Range Plan: ■ Not more than half of our biosolids to any market or contractor; ■ Not more than one-third to any facility; ■ Maintain fail-safe backup options for at least 100%of OCSD's biosolids production (current more than 1000%) ■ Develop in-county production facilities and markets working with member agencies and local stakeholders. Once the Orange County Waste and Recycling landfill (Prima Deshecha) comes online (anticipated in January 2013),there will be a further increase in our biosolids program diversity and provide an in-county option. ■ Move into energy,composting, and a few other specific markets using merchant facilities as recommended in the Long Range Plan (not risking any OCSD capital).These recommendations were implemented through the EnerTech Rialto and Synagro South Kern compost facilities. {5 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 p. 20 Given the currently available high-quality,lower-cost biosolids management options,the sustainability of these options, and significant reduction in biosolids produced(one-third of current production)by 2017, OCSD staff believes that we can continue to meet our diversity criteria with the current contracts and without issuing a request for proposals in the near future. The 2015-16 Synagro South Kern Compost facility contract renewal will be the next significant biosolids contract decision point. The new contract with Tule Ranch allows OCSD to provide biosolids to prospective facilities to ensure they meet quality standards before committing to a contract with these facilities. OCSD's quality and sustainability standards include best management practices,truck cleanliness, onsite housekeeping, and compatibility with our biosolids and certified program requirements. More detailed information can be found online at www.ocsewers.com/bcr. Staff will propose amending the Synagro contract to match the new Tule Ranch contract language to be equally as flexible. Desired Outcome • Update current Synagro contract to address inadequate"not to exceeds"value and to allow transportation and delivery of OCSD's biosolids to facilities for research or demonstration purposes to further diversify OCSD's biosolids management options. • Update OCSD Board Resolution (OCSD 06-10)with considerations listed herein. • Continue to balance biosolids among existing contractors in conformance with diversity goals set by 2003 Long-Range Biosolids Management Plan and to be incorporated into updated Board Resolution until at least 2016 when renewal of the Synagro contract will be considered. p. 21 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 Chemical Sustainability Should OCSD provide additional efforts to promote chemical sustainability? Why is this issue important to the District? The District treatment plants and collection system use several bulk chemicals.A sustainable supply is critical to maintaining an acceptable level of operations and for ensuring compliance with all regulatory requirements.The District spends about$16,500,000 annually on the procurement of eleven key chemicals. For certain chemicals failure in supply could result in violation of our permit or shut-down of key assets such as our Central Generation System engines. Therefore,maintaining a reliable supply at a fair market price is critical to the District's mission. Goals • Contract with multiple vendors to provide OCSD chemicals in the quantities required. • Reduce reliance on a particular chemical and establish flexibility to utilize other chemicals/ processes to accomplish the same operational objectives. • Implement chemical optimization measures. Desired Outcome • Ensure a reliable chemical supply • Ensure that multiple vendor contracts are in place to supply the needed chemicals • Seek options for competitive pricing for the chemicals {5 year l STRATEGIC PLAN UPDATE I NOVEMBER 2012 p. 22 Odor Control Update and Action Plan Should OCSD defer the offsite odor level of service target dates in order to validate the scope, priority, and measurement approach for the odor control program? Why is this issue important to the District? Odors are inherent to wastewater and OCSD has a good neighbor policy to not be a nuisance to its neighbors. Controlling nuisance odor represents a significant operational and capital expense to OCSD. In 2007 the Levels of Service (LOS) for Odor Control were adopted by the Board as part of the Five-Year Strategic Plan. The District adopted a dilution to threshold (D/T) measurement system for a level of service goal. The standard was set for 14 D/T at Plant No. 1 by 2016 and 17 D/T at Plant No. 2 by 2018. This means that no odors leave the plant boundaries and affect surrounding communities. Staff believes that offsite odor impacts have been significantly reduced since the adoption of the 2007 LOS Standards. The District is continuing with its collection system chemical dosing program on four of eleven trunkines. This continuous dosing approach helps reduce corrosion and odors in the collection system and Headworks odors of both treatment plants.Additionally, a significant number of projects have been completed,some including new odor control technologies. Projects completed since the 2007 LOS adoption that reduce offsite odor impacts include: • Steve Anderson Lift Station at Plant No. 1 • Trickling Filters at Plant No. 2 • Headworks replacement at Plant No. 2 • Solids Thickening and Processing Upgrades at Plant No.2 • Conversion of the Plant No. 1 Headworks Scrubbers from hydrogen peroxide to bleach. • Conversion of the Plant No. 2 Primary Scrubbers from hydrogen peroxide to bleach. The following projects are in the design or construction phases that will further reduce offsite odor impacts: • Sludge Thickening/Dewatering and Odor Control at Plant No. 1 • Trunk Line Odor Control Improvements at Plant No. 1 Headworks. • Sludge Dewatering and Odor Control at Plant No. 2 Much of the basis for the work originally planned while adopting the current odor control standard was based on engineering studies and assumed process performance for new or altered process technologies. Recent testing of a portion of the existing odor control systems shows their performance exceeding planning expectations.Thus,before moving ahead on new odor control projects designed to meet the current standard,further performance assessment of the other components of the newly-installed odor systems including the secondary treatment facilities at both Plants and the new Headworks at Plant 2 is appropriate to verify the performance of the existing odor systems versus the original assumptions. p. 23 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 Also,new odor measurement technologies have been developed since 2007,which may potentially provide a better odor-impact measurement than the current D/T based LOS standard. Staff is requesting additional time to conduct a performance assessment of the existing odor systems and potentially develop alternatives for the existing D/T based LOS standards. Goals • The performance of completed odor control projects should be thoroughly evaluated to assess the actual performance versus original performance assumptions. (This will be done through an update of the Odor Control Master Plan Project SP1-166.) • Future planned odor control projects involving the following Plant 1 processes—Headworks, Trickling Filter and Primary Basins,and Plant 2 Primary Basins should be combined with Asset Management scopes of work to implement comprehensive refurbishment plans that limit offsite odor impacts on a priority basis. • Reassess whether dilution to threshold is the most appropriate measurement system.This may include investigating odorant based measurement systems,or shifting the dilution to threshold system to the Engineering Design Guidelines for future comprehensive Asset Management based project designs,or develop a new level of service recommendation as part of the odor control Master Plan (SP-166). • Assess retaining the odor complaint level of service measurement and reporting system,modifying our goal to achieve no offsite odor complaints during normal process operations. Desired Outcome • The District remains committed to being a good neighbor and limiting offsite odor impacts in a comprehensive and cost effective manner. Completion of the Odor Control Master Plan is necessary to make sure the District's investment in current and if needed future process systems will produce the benefits intended. 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 p. 24 Workforce Planning and Workforce Development Should OCSD design and implement comprehensive workforce planning and development activities to improve workforce capability, adaptability, efficiency, and accountability? Why is this issue important to the District? OCSD faces staffing challenges,including a changing workforce,leadership loss and difficulty finding replacement talent for some core jobs. From March 2010 through March 2012, 88 employees left OCSD, taking 1,898 years of knowledge and experience with them. OCSD has been preparing for these challenges since 2005,focusing on leadership development and technical skills training. However,these challenges continue. Over the next three-years, 50 percent of management personnel and 40 percent of staff members in core wastewater occupations are eligible to retire. Therefore,it is essential that OCSD continues to act on preparing for future staffing needs and ensuring access to qualified applicants while developing the existing workforce. The current budget outlines a commitment to effectively manage staffing resources to meet service level requirements at the lowest cost. Key elements associated with the commitment are authorized staffing levels and strength of the workforce. District-wide workforce planning and development activities will be designed to ensure the ongoing delivery of efficient and effective levels of service and to meet our mission.Workforce planning will reinforce authorized staffing levels while addressing future needs and changing work requirements. Workforce development will strengthen the workforce by preparing employees for future opportunities and focusing efforts on growth of technical skills to ensure staff is well-trained. It is important that workforce planning and workforce development be elevated to the level of an OCSD Strategic Plan Goal for the Board to emphasize to OCSD management that this is an issue requiring organization-wide attention and resource allocation. This Goal will continue to help OCSD get the right people with the right skills in the right positions at the right time. Goals • Design and implement comprehensive workforce planning processes. • Design and implement comprehensive workforce development plans. • Increase the levels of workplace accountability. Desired Outcome • Integrate workforce planning and workforce development efforts to improve workforce capability, adaptability,efficiency,and accountability. p. 25 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 Business Continuity Planning What level of a Business Continuity Plan should OCSD implement? Why is this issue important to the District? OCSD has a comprehensive Integrated Emergency Response Plan (IERP)which reflects our commitment to ensuring the safety and health of employees,the community we serve and the environment. In addition,the IERP was developed to ensure that we meet the legal and regulatory requirements to be prepared for and respond to man-made hazards,accidental disruptions,technology failures and natural disasters.Natural disasters include earthquake,flood,tornado,tsunami and other emergencies. The development of the Business Continuity Plan (BCP) will improve OCSD's ability to prepare for, respond to,remediate and effectively manage an incident in order to return to normal operations as soon as possible. The development of the BCP reflects OCSD's commitment to the integration of risk management principles into the District's culture. Goals The development of the BCP is to enhance OCSD's resilience and its ability to withstand an emergency or natural hazard without interruption of services to the community or,if the services are interrupted,to restore the services rapidly. The overall goals of the District are: • Identify and protect potentially critical assets. • Identify the critical functions of the District to determine which assets perform or support the critical functions. • Identify response-capable staff for critical operation and maintenance positions that have staff backup. • Determine line of succession for critical operations and maintenance positions. • Establish emergency power for critical operations: establish a minimum benchmark of 72 hours for back-up power for critical operations and assets. • Monitor critical parts and equipment: current longest lead time (e.g.,hours or days) for repair, replacement,or recovery of operationally critical parts or equipment that may represent single points of failure. • Documented procedures for protecting and maintaining critical IT and Supervisory Control and Data Acquisition (SCADA) systems. • Documented procedures and protocols for testing and maintaining IT, SCADA and communication systems during emergency response and recovery. • Establish an alternative recovery facility. • Protection of critical records and databases. • Review and update the IERP and Business Continuity Plan as necessary. • Test the Business Continuity Plan regularly. Desired Outcome Develop a Business Continuity Plan (BCP) that will define how OCSD will continue its everyday business functions in a not-so-everyday environment. This includes potential financial effects of a crisis as well as having the flexibility to adapt human resource policies to meet the changing needs of employees during an event,how to get back into somewhat normal operations,how to keep and pay employees and how to continue to provide effective wastewater treatment for our 2.5 million customers. {5 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 p. 26 Appendix B: Previous Issue Papers Due to the complex nature of many of the challenges that went into the preparation of this Strategic Plan, a series of issue papers were created to assist in better understanding the issues facing the Orange County Sanitation District. Included in this appendix are past year position papers on the following subjects: 2011 Issue Papers • Revisiting OCSD's 95 Percent Recycling Level of Service for Biosolids Management • Full-cost recovery: Urban Runoff Diversion Program • Evaluation of Natural Community Decline Around Ocean Outfall • Leadership of the Future • Updating the Sewer Service Fee Five-Year Rate Plan 2010 Issue Paper • Full-Cost Recovery:Urban Runoff Diversion Program 2009 Issue Papers • Providing Ongoing Leadership Development • Assessing and Mitigating the Risks of Chemical Supply Shortages • Full-Cost Recovery:External Agreements 2008 Issue Papers • Groundwater Replenishment System • Disinfection of Final Effluent • Environmental Footprint Initiative • Updating OCSD's Risk Register • Human Resources Strategic Plan 2007Issue Papers • Biosolids Management • Groundwater Replenishment System • Air Quality • Odor Control • Proposition 218 Notification p. 27 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 Revisiting OCSD's 95 Percent Recycling Level of Service for Biosolids Management November 2011 Should OCSD consider landfill options for biosolids? Why is this issue important to the District? OCSD's Board Resolution (OCSD 06-10) supports biosolids reuse and encourages its member agencies to use OCSD compost. This policy is implemented through a 95 percent recycling Level of Service goal. OCSD's solids are increasing from a historic average of 650 tons per day to a peak of about 800 tons per day until dewatering centrifuges are installed at both plants and the Irvine Ranch Water District manages its own solids. These projects are all scheduled for completion by 2017. The use of in-county landfills for OCSD's biosolids could potentially reduce the costs of managing solids during this interim period. Goals • Use landfills as a biosolids management option during the interim peak production period when there is a clear advantage to OCSD to do so. Clear advantages include: costs,problems with existing contractors,weather,and other management challenges. • Change short term diversion goals to allow greater amounts of biosolids going to the landfill during the interim period. • Continue to investigate and evaluate the use of landfills as a biosolids management option and at the same time consider the triple bottom line (environmental,financial, and societal), State of California's recycling policies,greenhouse gas emissions,and our recent survey of stakeholders to prioritize biosolids management. • Recognize that there is an interest by the County of Orange to work with OCSD to utilize local landfills as a potential biosolids management option. • Continue dialogue with the County of Orange and local agencies to build relationships and partnerships for local landfill options. • Utilize landfills that use biogas recovery and energy production. Desired Outcome • Allow the use of landfills as a biosolids management option during the interim peak production period. • Develop a biosolids management strategy that benefits both OCSD and local county landfills. • Continue recycling biosolids and utilizing them for their nutrients, carbon sequestration, and energy values. • Maintain a diversity of biosolids options. • Maintain operational flexibility. • Maintain fail-safe biosolids management options and capacity,including local options. 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 p. 28 Full-Cost Recovery: Urban Runoff Diversion Program November 2011 Should OCSD charge the County of Orange the cost of providing urban runoff treatment or continue to absorb the costs within our budget? Why is this issue important to the District? In September 2000,the Board of Directors adopted a dry weather urban runoff policy to assist in remediation of the public health and environmental problems associated with urban runoff. The original resolution and its subsequent amendment, (Resolution No. 01-07),initially waived all fees and charges associated with the urban runoff discharges for flows below 4 million gallons per day(MGD). During the past 11 years,the District has treated a total of 5.8 billion gallons of urban runoff from the city of Huntington Beach, Orange County Public Works,city of Newport Beach,Irvine Ranch Water District, and The Irvine Company. The District's urban runoff treatment cost for 2010-2011 was$976,593 based upon a reported discharge flow of 538 million gallons. These treatment costs are projected to increase steadily.While the program has been successful in reducing beach contamination, OCSD continues to provide benefits to agencies without capturing the cost of delivering this service,while our costs increase as we move to full secondary treatment in 2012. The Board of Directors directed staff to review this matter during its discussion of the 2010 strategic plan update and to return with a recommendation for this year's strategic plan update. Because of the current economic environment, OCSD must review this program and ensure that our agreements provide full cost recovery for the treatment of urban runoff from participating agencies and cities. Goals • Meet with participating agencies and cities to explain the issues and costs associated with the current Urban Runoff Diversion Program. • Amend the District's Fee Ordinance to include Urban Runoff User charges to the appropriate agency or agencies. • Recover the cost of providing the service from the agencies currently receiving the benefit. Desired Outcome • Charge the County of Orange,the NPDES permit holder of the Municipal Separate Storm Sewer Systems (MS4s),for Urban Runoff costs starting July 1,2013 when the new rate structure is in place. p. 29 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 Evaluation of Natural Community Decline Around Ocean Outfall November 2011 Should OCSD reconsider its use of chlorine disinfection? Why is this issue important to the District? The Clean Water Act requires the District to protect the natural communities that live around the ocean outfall pipe. Communities of small animals that live in the sediments in the vicinity of the outfall pipe began changing in 2005,and showed significant degradation by 2009. Changes in small animal populations have been seen up to one-half mile beyond the pipe.The District is at risk of being non- compliant with its ocean discharge permit requirements unless this trend is reversed. Ocean monitoring data shows this trend is not caused by usual sewage contaminants and is not the result of natural changes occurring in the ocean environment. There are no discernible changes over time in animal populations at clean reference areas,nor are other treatment plants (POTWs) experiencing similar occurrences,including those POTWs that disinfect their effluent. There appears to be a strong correlation between these changes and the District's use of chlorine as a disinfectant. Total chlorine use and daily maximum chlorine residual concentrations correlate to the changes we are seeing in the communities of small animals. The use of chlorine as an anti-fouling agent for the Groundwater Replenishment System's (GWRS) reverse osmosis membrane filters may also be a contributing factor.There is also a correlation with decreased final effluent flows discharged out the ocean outfall as a result of water going to GWRS. If chlorine byproducts,and their interactions with the more concentrated solids during periods of low flow are determined to be significant causes of these changes, staff would recommend discontinuing effluent disinfection to eventually reverse these adverse effects in the ocean around our outfall. Such a recommendation would be controversial because some interest groups believe disinfection prevents beach water contamination, despite evidence to the contrary. Goals • Determine if chlorine is the cause of the decline and changes in animal communities near the outfall. • Develop and implement mitigation strategies to reverse the decline. • Communicate results to regulators and stakeholders and seek approval to cease chlorine disinfection if shown to be the cause. Desired Outcomes • Definitive identification of the source(s) of the decline and changes. • Successful mitigation of the cause(s). • Return affected area to reference conditions. 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 p. 30 Leadership of the Future November 2011 Should OCSD continue devoting resources toward leadership development programs to meet future challenges of employee attrition? Why is this issue important to the District? During the past year,we have experienced increasing numbers of employees retiring,resulting in a rapid loss of institutional knowledge.We expect this trend to continue. Currently,fifty-six percent of all managers and supervisors are eligible to retire. Five year projections indicate that the retirement eligibility trend will continue. The Board has indicated that future leadership is important to maintaining service levels and ensuring our continued success. Building a bench of leaders is an important initiative that helps meet this challenge of staff attrition. The retirement impact coincides with plans to reduce the overall number of OCSD management positions; a direction given by the Board to maintain our financial strength and sustainability.While these events are complementary,they emphasize the importance of developing a pool of individuals who possess skillful and competent abilities to be eligible to compete for future leadership positions. Leadership development efforts can also aid in retaining talent. Goals • Apply Workforce Planning Assessments to advanced development efforts. • Strengthen staffing processes. • Improve talent management programs. • Increase accessibility of leadership development programs. • Support initiatives that provide the essential skills needed to develop successful leaders. • Ensure programs reinforce core values,promote fairness and equity,and are inclusive and open to all. • Partner with other organizations to share resources aimed at leadership development. Desired Outcome • Enhance and accelerate the development of diverse, dedicated,and talented employees ready to lead OCSD into the future. p.31 {5 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 Updating the Sewer Service Fee Five-Year Rate Plan November 2011 Should OCSD develop a new five-year rate plan in 2013? Why is this issue important to the District? Long-term financial planning is critical to meeting the objectives of the District's long-term strategic plan. In February 2008,the Board approved a five-year rate plan to meet the objectives of the five-year strategic plan including the design and construction of full secondary treatment facilities by December 2012 as mandated by the U. S. Court Consent Decree. This rate plan is set to expire June 30,2013.As a result,the District will need to establish a new rate plan. The benefits of implementing a five-year rate plan include the assurance that funding will be available to support the initiatives contained within the five-year strategic plan. It also provides our rate payers the ability to plan for future business expenses and personal finances.Approving a five-year rate plan for sewer service fees is fiscally advisable considering the preparation and cost of annual public notices to our 550,000 rate payers. Lastly,it provides sustainability of wastewater collection and treatment services into the future. Goals • Identify key stakeholders impacted by sewer service fee rates and develop an outreach strategy. • Prepare an updated sewer service fee rate study for the regional and local areas served. • Utilizing the sewer service fee rate study,update the 10-year forecast. • Prepare a Proposition 218 Notice which includes sewer service fee rates for the next five years. • Present the proposed five-year sewer service fee rate schedule to the Board for approval. Desired Outcome • The establishment of a new five-year sewer service fee rate schedule that balances users fees,service levels and the use of debt to ensure the sustainability of the Orange County Sanitation District. {5 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 p. 32 Full-Cost Recovery: Urban Runoff Diversion Program November 2010 Why is this issue important to the District? Dry weather urban runoff is contaminated water that is generated from day-to-day activities such as over- irrigating lawns,washing cars and hosing down driveways. This untreated,bacteria-laden water flows into storm drains and eventually makes its way to the Pacific Ocean.A 1999 Huntington Beach closure investigation found this runoff may have caused or contributed to shoreline contamination and high bacteria levels.As part of a regional best management practice, OCSD agreed to reroute the dry weather urban runoff from storm water pump stations and storm channels located in the cities of Huntington Beach and Newport Beach into OCSD's sewer system for treatment. The Urban Runoff Program began in December 1999 and was formalized in September 2001 with a Board-approved resolution that allowed up to 10 million gallons per day of runoff into the District's system and waived any fees associated with the approved discharge of urban runoff into OCSD's sewer system if the total volume of all dry weather urban runoff discharges does not exceed four million gallons a day.This threshold was established to accommodate the expected volume of runoff from coastal cities that were experiencing beach contamination problems. While the program has been successful in reducing beach contamination, OCSD continues to provide benefits to agencies without fully capturing the cost of delivering this service. As the district moves to full secondary treatment in 2012,the cost of providing this service will increase.And,in light of the current economic environment and requirements of Proposition 218, OCSD must review this program and ensure that our agreements provide full cost recovery from participating agencies. Goals • Meet with all affected parties to understand the issues and costs associated with the Urban Runoff Diversion Program. • Conduct a comprehensive review of the Urban Runoff Program to delineate the costs and benefits of moving to a full cost recovery business model. • Negotiate new agreements that ensure all agencies are paying a fair share for services provided by the District. Desired Outcome • Finalize agreements that are comprehensive and = • -- agreeable to all agencies and ensure a fair share recovery of costs for District services. A.. .. MMM Rlwdl J �►9r.n 1MNM OI�hW Ur�w Or. p.33 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 Providing Ongoing Leadership Development November 2009 Why is this issue important to the District? As baby boomers begin to retire in significant numbers over the next five years,the nation's workforce will begin to experience a shortage in qualified leaders. OCSD will be impacted by this trend as well. For example,by 2015 around half the current managers and supervisors will be eligible for retirement. While the District has pursued an aggressive strategy to strengthen and grow future leaders through its Profession of Management and Leadership Academy programs,this clearly will not be enough. By next year all management staff will have completed these programs and the Succession Management program will be fully established. However,these tools are only a foundation and in order to maintain a world-class organization,the District needs to take its leadership development to the next level. A broader leadership development program needs to be implemented to identify and train future leaders. Goals • Identify key employees that will lead OCSD into the future. • Define and build upon the essential qualities needed to develop successful leaders for OCSD's future. These qualities will focus on dealing with change,motivating others,enhancing morale and promoting productivity and job satisfaction,among others. • Identify what other organizations are doing and what incentives and training might be needed to build a talented and stable leadership team. • Develop a new model for addressing OCSD's operational,environmental regulatory and leadership priorities in an era of limited resources and greater public scrutiny. Desired Outcome • Maximize the development of a pool of dedicated and talented employees ready to lead OCSD into the future. {5 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 p. 34 Assessing and Mitigating the Risks of Chemical Supply Shortages November 2009 Why is this issue important to the District? OCSD uses large volumes of several chemicals to mitigate odors, enhance primary settling of solids, reduce bacteria formation in the activated sludge plants,flocculate solids to enhance dewatering, disinfect and then dechlorinate the effluent prior to discharge into the receiving waters. These wastewater treatment chemicals play a critical role in protecting public health and the environment. OCSD and other large wastewater treatment agencies require large volumes of chemicals that can only be provided by one supplier or a very limited number of suppliers.All of these large agencies have also experienced price increases and chemical shortages in recent years. Goals • Investigate the domestic and global chemical markets for typical wastewater and odor chemicals. • Identify possible causes of disruptions in the chemical supply chain. • Identify potential temporary suppliers capable and willing to provide chemicals during shortages. • Identify viable alternative chemicals that can be substituted for current OCSD chemicals during shortages. • Identify not only the procurement costs,but the transportations costs, of possible temporary or alternative chemical procurements. • Identify quality control assurances of chemicals procured outside the country. Desired Outcome • Develop a Chemical Sustainability Plan that provides OCSD with options for obtaining wastewater treatment chemicals during chemical shortages,emergencies or complete stoppages. p.35 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 Full-Cost Recovery: External agency agreements November 2009 Why is this issue important to the District? The District has several existing agreements with external agencies including the Santa Ana Watershed Project Authority(SAWPA) and the Irvine Ranch Water District(IRWD)which were originally signed in the 1970's and 1980's. There are other existing agreements signed between these agencies in the last 20 years. When many of these agreements were signed,the District often provided funds and resources to assist other agencies in improving the water quality and health of the citizens of the watershed. In this pursuit, OCSD allowed benefits to agencies without fully developing an equitable cost-sharing model.While this was well-intended and generated results,the District's mission was overly broad.Now,through a series of more focused efforts, OCSD has developed a mission-specific Strategic Plan with detailed goals and objectives. The combination of the District's new enhanced strategic focus,more stringent regulatory requirements (Federal Clean Water Act secondary treatment standards) and new economic realities (economic environment in general and requirements of Proposition 218), OCSD must review its external agreements and ensure that these agreements provide full cost recovery from the agencies with which it does business. District staff has already began working with these agencies to ensure the District is recovering the full costs of services provided. Goals • Continue to meet with SAWPA and IRWD staff for consensus or agreement on major issue resolution. • Continue to include future planning issues that may impact new agreements. • When possible, consolidate small agreements into more comprehensive future agreements. • Negotiate new agreements that ensure all agencies are paying a fair share for services provided by the District. Desired Outcome • Finalize agreements that are comprehensive and agreeable to all agencies and ensure a fair share for District services. 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 p. 36 Groundwater Replenishment System November 2008 Why is this issue important to OCSD? The Orange County Sanitation District(OCSD) has shared in construction costs for Phase 1 of the Groundwater Replenishment(GWR) System with the Orange County Water District(OCWD), each agency paying equal shares of 50 percent. The first phase has been constructed to reclaim up to 70 million gallons per day(mgd) of water, and will defer the need for OCSD to construct a new ocean outfall. Ultimate planning for the GWR System allows for reclaiming up to 130 mgd. The major GWR System pipelines and other components have been sized to accommodate this expansion;however,the advanced water purification facilities are sized for 70 mgd. OCSD has not committed additional funding for expanding the GWR System beyond the present phase. The GWR System began operation in January 2008,and is presently producing about 45 mgd of product water,reducing OCSD's ocean discharge flow from 225 mgd to 180 mgd. Completion of the Steven Anderson Lift Station (formerly Ellis Avenue Pump Station) will increase the amount of treated secondary effluent(specification water) available to the OCWD, allowing GWR System production to increase to near 70 mgd. Goals • Continue to strive for 104 mgd supply of specification water for reclamation with no planned OCSD capital cost contribution for expansion of the GWR System; • Complete construction of Steven Anderson Lift Station in the fourth quarter of FY 2008-09 and • Continue to study the potential for treating flow from the Santa Ana River Interceptor at Reclamation Plant No. 1 to increase the supply of specification water for reclamation. Desired Outcome • Maximizing the production of GWR System product water to augment and protect the Orange County groundwater basin with a goal of 70 mgd of product water by the end of FY 2008-09. p.37 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 Disinfection of Final Effluent November 2008 Why is this issue important to OCSD? OCSD began disinfection of our treated effluent in 2002 in response to two factors: • Concern from the public that our effluent might be the cause or contributing to elevated bacteria levels in Huntington State Beach and • Ocean monitoring data suggesting that on at least one occasion our effluent plume had come to within 1/4 mile of the Newport Pier. Since 2002 evidence has shown that OCSD's effluent was not the source of shoreline bacteria in Huntington Beach and that our plume is not coming to shore and creating a public health concern. The annual budget for adding chlorine to the effluent for disinfection and sodium bisulfite to remove most of the chlorine before discharging to the ocean is approximately$7.0 million. Since OCSD's facilities were not originally designed with disinfection in mind,there are physical constraints to operating in an efficient manner. In 2006, staff believed that it was prudent to have an independent review of our disinfection program to determine if it is meeting the intended purpose of protecting public health in a cost-effective manner and not increasing risks to the marine environment. The independent review panel was composed of nine members including a medical doctor, a wastewater engineer, a marine ecologist, a regulator,and a chemist among others. Goals • Through the National Water Research Institute (NWRI),commission a panel of experts to review OCSD's disinfection program and provide feedback and recommendations; • Obtain final recommendations from the NWRI Panel on the appropriateness of our current disinfection program and alternatives that should be considered and • Develop and implement strategies for responding to the recommendations including demonstration testing, regulatory approval and outreach to stakeholders. Desired Outcome • Cost effective program to sustain protection of public health associated with bacteria in our effluent. • Acceptance of any changes to our disinfection program by regulators,public and stakeholders. 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 p. 38 Environmental Footprint Initiative November 2008 Why is this issue important to OCSD? The issue of global climate change is gaining considerable interest from both the public and policy makers. As a public agency chartered with the mission to protect public health and the environment, OCSD should demonstrate leadership in this area.Moreover,wastewater operations consume large amounts of energy and produce green house gases (GHG). Despite the scientific disagreements about climate change, policy makers are addressing the issue. There are many opportunities for OCSD to also address these issues and shrink our environmental footprint. Goals • Calculation of the environmental footprint of OCSD's facilities; • Develop outreach materials describing green initiatives undertaken by OCSD; • Evaluate additional initiatives that the OCSD Board should consider; • Evaluate information from OCSD's research program on emerging green technologies and • Maximize the use of renewable fuels (digester gas). Desired Outcomes • Greater awareness of OCSD's sustainable initiatives; • Reduction in OCSD's environmental footprint through immediate greenhouse gas reduction measures and • A plan for implementing future sustainable initiatives. p. 39 {5 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 Updating OCSD's Risk Register November 2008 Why is this issue important to OCSD? Many leading organizations are formally applying risk management processes to identify and manage risks across many aspects of their business. The formalization of risk management processes is a logical step towards increased accountability and transparency placed on the Board and District management. In February 2006,strategic level risk assessment and mitigation workshops were completed by OCSD's Executive Management Team and District Managers. In May 2008,the register was updated to include additional information and to ensure alignment with the current Strategic Business Plan. Assessment of these risks and their potential impacts must be identified,reviewed and mitigated in alignment with OCSD's Strategic Plan. Goals • Identify and assess strategic and organization-wide risks facing OCSD (including technical, regulatory,financial,and political) and to develop a high level risk register; • Identify mitigation measures that OCSD currently has in place; • Propose additional mitigation measures that OCSD considers appropriate to manage; • Review of risk register to ensure it represents a balanced portfolio of the risks and that the mitigation strategies are appropriate; • Develop a plan to monitor the effect of mitigation strategies to ensure that controls are in place and effective; • Develop a formal reporting process to the Board that includes possible revisions to the overall risk profile; • Develop protocols to provide assurance to stakeholders that the annual Strategic Business Plan processes are in place to manage risks organization wide and • Develop an action plan of responsibilities and timeframes for follow-up. Desired Outcome • An update of the Risk Register including mitigation strategies (current and proposed) responsibilities, and timeframes. 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 p.40 Human Resources Strategic Plan November 2008 Why is this issue important to OCSD? Human Resources (HR) management has become more complex, evolving from primarily processing employee transactions to serving as a business partner, change agent and leader. OCSD's most important asset is its workforce. As a generation of this workforce retires, OCSD must be prepared to fill vacancies and prepare the next generation for opportunities,including leadership continuity. The HR Strategic Plan provides the focus for HR,the outcomes to be achieved and the associated roles and competencies needed. It creates clarity for planning and allocating resources. A long-range HR strategy will assure that actions are aligned with OCSD's overall vision,mission,values, and strategies. Goals • Improve HR processes, systems and infrastructure to provide high levels of efficiency, quality, customer service and cost-effectiveness. • Develop leading practices in the recruitment, retention and development of our workforce. • Support and promote the health and well-being of the workforce. • Foster and maintain a working and learning environment that is inclusive, supportive and free from discrimination. • Provide for organizational change initiatives through labor relations program that have been identified by management to grow a performance-based culture. • Focus the HR community on the needs of its customers through programs such as recognition and succession management. Desired Outcome • Design, develop,fund and implement HR policies, strategies,practices, systems, and tools to ensure OCSD has a workforce that meets the future needs of OCSD and the public it serves. p.41 {5 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 Setting OCSD's Level of Service for Biosolids Management November 2007 Policy Issue for LOS Determination:Recognizing the Board's Resolution (OCSD 06-10) that supports biosolids reuse and encourages its member agencies to use compost made from biosolids,should OCSD continue to pursue our beneficial reuse policy or include disposal options for the remaining 1/3 of its non-contractually committed biosolids production? Staff Recommendation:OCSD should continue to pursue beneficial reuse of the remaining 1/3 of its biosolids production. Staff will continue to utilize cost-effective land application reuse options in Kern County and Arizona for as long as possible (anticipated to be less than five years)while pursuing a biosolids-to-energy alternative for the balance of its biosolids production. Analysis:OCSD currently produces 650 tons of biosolids per day,by 2012 when the new secondary treatment processes are fully operational,biosolids production is projected to increase by approximately 30%to 840 tons per day. OCSD currently manages its biosolids as follows via two contracts using five options: 24 percent is land applied as Class A biosolids in Kern County($43.07/ton) 26 percent is land applied as Class B biosolids in Yuma County,Arizona ($45.44) • 38 percent is composted to Class A in Kern County($63.09) • 12 percent is composted to Class A La Paz County,Arizona ($49.74) • 3 percent is land filled in Yuma County,Arizona($45.44) In 2003, OCSD adopted the Long-Range Biosolids Master Plan (Plan). The main policy recommendations from the Plan were: • Obtain at least three diverse biosolids management options Limit participation in any market to one-half of the biosolids produced Limit contracts to one-third of total biosolids production • Strive for increased biosolids-based compost use in Orange County • Since the completion of the Plan,OCSD has entered into two long-term contracts that will service approximately two-thirds of OCSD's biosolids production EnerTech: 225 tons/day of biosolids-to-fuel in Rialto ($72.40) (on line 12/08) • Synagro: 250 tons/day of biosolids composting in Kern County($63.09) Staff is primarily investigating biosolids-to-energy technologies and markets for the remaining one- third of OCSD's biosolids production because of our concern that biosolids composting markets are being saturated which could result in de-valuing of the product,making it non-sustainable.The private sector has already significantly invested in developing biosolids-to-energy technologies which enables wastewater agencies to participate in proven and sustainable markets. Staff will also be investigating biosolids management via deep-well injection and methane production which is currently being evaluated by the City of Los Angeles. Alternatives: OCSD will pursue long term contracts if possible for non-beneficial reuse landfill disposal. Cost Implications for the remaining 113 of OCSD's biosolids (2007 dollars): Energy Production: $85/ton-Annual cost= $7.8M Deep Well Injection: $40/ton-Annual cost= $3.7M Landfill Disposal: $60/ton-Annual cost= $5.5M 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 p.42 Setting OCSD's Level of Service for the GWR System November 2007 Policy Issue for LOS Determination:The Orange County Sanitation District(OCSD) has shared in construction costs for Phase 1 of the Groundwater Replenishment(GWR) System with the Orange County Water District (OCWD),with each agency paying equal shares of 50%. Phase 1 will reclaim up to 70 million gallons per day(mgd) of water,and will defer the need for OCSD to construct a new ocean outfall estimated at$200 million. Ultimate planning for the GWR System allows for reclamation up to 130 mgd.The major GWR System pipelines and other components have been sized to accommodate this expansion;however,the advanced water purification facilities are sized for 70 mgd. OCSD has not committed additional funding for expanding the GWR System beyond the present phase. Staff Recommendation:OCSD will maintain its commitment for Phase 1 of the GWR System. This commitment for Phase 1 of GWR System includes the following: • Providing OCWD with secondary effluent to produce 70 mgd of reclaimed water • Providing 50 percent of capital costs ($250 million) for Phase 1 • Providing 50 percent of O&M costs ($500,000 per year) to remove 1,4-Dioxane and NDMA • In addition to the commitment for Phase 1,staff recommends exploring"low cost" or"no cost" options to expand water availability for the GWR System,including: • Revisiting the potential use of the SARI with the Department of Health Services • Considering grant funding of future sewer diversion projects Analysis:In 1999,the OCSD Board of Directors (Board) approved Phase 1 of the GWR System, a joint funded project of OCSD and OCWD.The objective of Phase 1 is to maximize the use of treated effluent for water recycling and to manage OCSD's peak flow,deferring the construction of a second ocean outfall beyond 2020. The GWR System is anticipated to be fully operational in November 2007. Currently, OCSD Reclamation Plant No. 1 has sufficient wastewater to allow the GWR System to produce about 55 mgd of reclaimed water for the first year of operations.When the new Ellis Pump Station is completed in 2009,there will be sufficient flow to operate the GWR System at its full 70 mgd capacity. Even though sufficient flows will be available for Phase 1 of the GWR System,the daily low flow period (1:00 am to 8:00 am)will limit water availability for expansion of the System beyond Phase 1. Camp Dresser and McKee (CDM)has analyzed options to pump additional flows to Plant No.1,segregating reclaimable and non-reclaimable (SAWPA flows)wastewater streams, and constructing separate treatment plants. In light of the benefits of the current level of service versus the high costs of making future flow available for the GWR System, staff recommends that OCSD continue to work with OCWD to study lower cost options to maximize the amount of water that can be reclaimed. Alternatives: OCSD will be directing all available reclaimable flows to Plant No. 1 to maximize reclamation. In the future,as OCSD flows increase substantially,staff will recommend implementation of the most feasible and cost-effective options for increasing the quantity of flow available for reclamation. Estimated Cost Implications for Future Phases: • OCSD Diversions and Infrastructure—up to $700 million • Expansion of OCWD Advanced Water Purification Facilities—about$150 million • Every$1 million in OCSD expenditures increases single family user rates by$1.13 per year. p.43 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 Setting OCSD's Level of Service for Air Quality November 2007 Policy Issue:OCSD expects the South Coast Air Quality Management District to amend existing regulations to require significant reductions in common pollutants (smog,visibility impairment) in December 2007.A secondary public health benefit of this regulation is the reduction in air toxic emissions. The estimated capital improvement cost to meet the new requirements is$31 million. • If the new regulations are not approved then OCSD will be required by 2012,under the existing regulations,to notify all affected residents and business surrounding our facilities of health risks associated with our emissions. • OCSD can avoid issuing notifications by proactively installing air pollution control equipment to reduce the air toxic emissions below the notification level. Analysis:Currently, State law and the South Coast Air Quality Management District require facilities to inventory their air toxic emissions and conduct a Health Risk Assessment of the health risk impact of their emissions to surrounding residents and businesses. Public notification is required if the cancer risk exceeds 10 in one million and non-cancer risk exceeds 1. This means that 10 out of 1 million residents exposed to District air emissions, over a 70-year period, can contract cancer. It is anticipated that after completion of full secondary facilities in 2012, OCSD will exceed the threshold established by South Coast Air Quality Management District and OCSD will be required to notify affected communities. New regulations proposed by the South Coast Air Quality Management District would require OCSD to make significant reductions in common pollutants. The most technically feasible and lowest cost solution will be to add air pollution controls to the existing engines,which would provide the added benefit of reducing air toxic emissions below levels that require public notification. Alternatives (If the new regulations are not enacted): • Notify the affected public of the potential health risk from OCSD's toxic air emissions. OCSD would notify the public via direct mailings to the residents,businesses,and schools followed by public meetings. The corresponding materials will also be listed on the SCAQMD Web site and, possibly,printed in local newspapers. • Add air pollution controls to reduce risk to community below public notification level. Staff Recommendation:OCSD should apply feasible and cost-effective controls in order to reduce the air toxic emissions below the health risk notification level to the surrounding community and OCSD employees. 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 p.44 Setting OCSD's Level of Service for Odor Control November 2007 Policy Issue:Thousands of homes surround OCSD's two treatment plants. Under current operating procedures, OCSD's goal is to contain odor nuisances within our property boundary. Historically, OCSD based our Level of Service on meeting hydrogen sulfide levels at the exhaust of odor control equipment within the treatment plant and at the fence line of our property. Through significant study, staff has determined that hydrogen sulfide is not the best indicator of odor due to the presence of other odorous compounds. To gauge accurately odor nuisances, OCSD is changing to a scientifically based method of odor detection to determine accurately the Level of Service it wishes to achieve for communities surrounding our treatment plants.The Board must then choose the desired LOS. Analysis:In 2002,OCSD completed the Odor Control Master Plan,which provided specific recommendations and measures to control and reduce odors. Staff conducted an extensive evaluation of OCSD facilities by collecting and analyzing odor samples from the plant processing equipment. OCSD used a panel of 6-8 people,with average olfactory sensitivity,to determine the odor detection thresholds scientifically based on the number of times the sample needed to be diluted before the panelist detected odor. Staff then assigned an odor unit to the sample—the higher the number of dilutions needed to achieve the threshold,the stronger the odor. Staff then fed the data into a computer model to predict the impact to the community. With the modeling analyses completed,staff concluded that under normal operation conditions,by using a guideline of 10 D/T (dilutions to threshold) OCSD would eliminate odor to the surrounding community. OCSD currently meets a 40-50 D/T,which is 4 to 5 times greater than 10 D/T.After the currently approved CIP projects are constructed,OCSD is estimated to reach a level of 25-30 D/T (2.5 to 3 times greater than 10 D/T). Alternatives: • Adopt a treatment plant LOS of 25-30 dilutions/threshold. LOS will be achieved when the projects approved in the current CIP are constructed. Design and construct all future projects to a service level that will keep odors from that project on District property. Staff believes this level is 10 D/T but case-by-case modeling for the projects will be required. The result is no cost impact to the current approved CIP. • Adopt a treatment plant and future project design and construction LOS for odor control of 10 dilutions/threshold (within the fence line of OCSD) and incorporate four additional odor control projects into the CIP. The result is an increase of$69.6 million to the CIP and$648,000 for O&M. Staff Recommendation:Establish OCSD odor standard based on total odor (D/T). Design all new processes,structures and equipment at the wastewater treatment plants so that odors remain within treatment plant boundaries.Add two additional odor control projects (Plant 1 trickling filters and Plant 2 biosolids truck loading) to the CIP.The result is an increase of$17.6 million to the CIP and$300,000 annually for O&M. Conduct research on cost-effective alternatives to control odors from the primary treatment facilities at both plants and report back to the Board on future staff recommendations for any further odor control. p.45 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 Proposition 218 Notices for Annual Sewer Service User Fees November 2007 Proposition 218 was a constitutional initiative governing the establishment of any new taxes,property- related fees or assessments. This initiative was approved by the state's voters in November 1996 and applies to each of California's nearly 7,000 cities,counties, special districts,schools, community college districts,redevelopment agencies, and regional organizations. In order to raise a new tax,assessment,or property-related fee, or to increase an existing one,local governments must comply with Proposition 218 regulations. In general,these requirements are that local governments may use assessments and property-related fees only to finance projects and services that directly benefit property and that most revenue-raising measures be approved in an election. Sewer service user fees are specifically exempted from some of the requirements of Proposition 218.Most notably,they are exempt from the election requirements,but not the requirement that fees cannot exceed the reasonable cost of service. The Board has agreed with staff,however,that we will comply with all of the rest of the requirements,in a spirit of good governance.A notice of rate changes is mailed to every property owner whenever the rates are proposed to increase. Based on the approval to charge for local sewer services, a second (separate) Proposition 218 notice would be included.The rates are adopted through the ordinance process,and that requires a public hearing,two Board meetings and a 2/3 majority approval of the Board. Proposition 218 Notices notify the property owners of the public hearing that coincides with the second reading of the ordinance.Notices must be mailed to property owners 45 days before the public hearing. Mailing of Proposition 218 notices requires significant Sanitation District resources and staff time as staff works with all stakeholders to ensure that notices are printed correctly and mailed to over 550,000 property owners.Additional temporary staff is needed to answer phone calls from customers. Historically, three OCSD staff and two temporary staff answer phone calls for a minimum of four weeks. In addition to written responses (including email),phone calls are also noted and tallied by city of residence. This information is made available to the Directors prior to the public hearing. 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 p.46 Appendix C: Glossary Activated-sludge process—A secondary biological wastewater treatment process where bacteria reproduce at a high rate with the introduction of excess air or oxygen, and consume dissolved nutrients in the wastewater. Biochemical Oxygen Demand(BOD)—The amount of oxygen used when organic matter undergoes decomposition by microorganisms. Testing for BOD is done to assess the amount of organic matter in water. Biosolids—Biosolids are nutrient rich organic and highly treated solid materials produced by the wastewater treatment process.This high-quality product can be recycled as a soil amendment on farm land or further processed as an earth-like product for commercial and home gardens to improve and maintain fertile soil and stimulate plant growth. Business Accountability Charters—A business unit strategic plan. Capital Improvement Program (CIP)—Projects for repair,rehabilitation,and replacement of assets.Also includes treatment improvements, additional capacity, and projects for the support facilities. Coliform bacteria—A group of bacteria found in the intestines of humans and other animals,but also occasionally found elsewhere used as indicators of sewage pollution. E. coli are the most common bacteria in wastewater. Collections system—In wastewater,it is the system of typically underground pipes that receive and convey sanitary wastewater or storm water. Certificate of Participation (COP)—A type of financing where an investor purchases a share of the lease revenues of a program rather than the bond being secured by those revenues. Contaminants of Potential Concern (CPC)—Pharmaceuticals,hormones,and other organic wastewater contaminants. Dashboard—A computer based business tool used to visually track performance. Dilution to Threshold(D/T)—the dilution at which the majority of the people detect the odor becomes the D/T for that air sample. 1,4-Dioxane—A chemical used in solvents for manufacturing,fumigants and automotive coolant. Like NDMA,it occurs in the Groundwater Replenishment System water and is eliminated with hydrogen peroxide and additional ultra-violet treatment. Greenhouse gases—In the order of relative abundance water vapor,carbon dioxide,methane,nitrous oxide,and ozone gases that are considered the cause of global warming("greenhouse effect"). Groundwater Replenishment(GWR)System—A joint water reclamation project that proactively responds to Southern California's current and future water needs. This joint project between the Orange County Water District and the Orange County Sanitation District will provide 70 million gallons a day of drinking quality water to replenish the local groundwater supply. Levels of Service(LOS)—Goals to support environmental and public expectations for performance. Million gallons per day(mgd)—A measure of flow used in the water industry. Most Probable Number(MPN)—Number of organisms per 100 ml that would yield a test result or the observed test result with the greatest frequency. Commonly used for coliform bacteria. p.47 15 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 G I ossa ry continued NDMA—N-Nitrosodimethylamine is an N-nitrosoamine suspected cancer-causing agent. It has been found in the Groundwater Replenishment System process and is eliminated using hydrogen peroxide with extra ultra-violet treatment. National Biosolids Partnership (NBP)—An alliance of the National Association of Clean Water Agencies (NACWA) and Water Environment Federation (WEF),with advisory support from the U.S. Environmental Protection Agency(EPA).NBP is committed to developing and advancing environmentally sound and sustainable biosolids management practices that go beyond regulatory compliance and promote public participation in order to enhance the credibility of local agency biosolids programs and improved communications that lead to public acceptance. O&M—Operations and maintenance of the treatment plants facilities and collections system. Publicly-owned Treatment Works (POTW)—Municipal wastewater treatment plant. Recycling—The conversion of solid and liquid waste into usable materials or energy. Risk Register—An internal document that describes vulnerabilities of the Sanitation District. Santa Ana River Interceptor(SARI)Line—A regional brine line designed to convey 30 million gallons per day(MGD) of non-reclaimable wastewater from the upper Santa Ana River basin to the ocean for disposal,after treatment. Sanitary sewer—Separate sewer systems specifically for the carrying of domestic and industrial wastewater. Combined sewers carry both wastewater and urban run-off. South Coast Air Quality Management District(SCAQMD)—Regional regulatory agency that develops plans and regulations designed to achieve public health standards by reducing emissions from business and industry. Secondary treatment—Biological wastewater treatment,particularly the activated-sludge process,where bacteria and other microorganisms consume dissolved nutrients in wastewater. Sludge—Untreated solid material created by the treatment of wastewater. Total suspended solids (TSS)—The amount of solids floating and in suspension in wastewater. Trickling filter—A biological secondary treatment process in which bacteria and other microorganisms, growing as slime on the surface of rocks or plastic media, consume nutrients in wastewater as it trickles over them. Urban runoff—Water from city streets and domestic properties that carry pollutants into the storm drains, rivers,lakes, and oceans. Wastewater—Any water that enters the sanitary sewer. Watershed—A land area from which water drains to a particular water body. OCSD's service area is in the Santa Ana River Watershed. {5 year} STRATEGIC PLAN UPDATE I NOVEMBER 2012 p.48 j,( S A N I Tg T�Oy = A c ¢ c 90TFcl/�0 THE Reclamation Plant No.1(Administration Offices) 10844 Ellis Avenue • Fountain Valley,California 92708 • 714.962.2411 Treatment Plant No.2 22212 Brookhurst Street • Huntington Beach,California 92646 www.ocsewers.com ® © ' You 0 OCSD 11/2012 STEERING COMMITTEE Meeting Date To Bd.of Dir. 11/28/12 11/28/12 AGENDA REPORT Item Number Item Number 3 8 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Jim Herberg, Assistant General Manager Env. Compliance: Jim Colston, Env. Compliance Manager SUBJECT: SAWPA Audit Report GENERAL MANAGER'S RECOMMENDATION Receive and file Santa Ana Watershed Project Authority Pretreatment Program Compliance Audit Report from Environmental Engineering & Contracting, Inc. SUMMARY Recently, the Orange County Sanitation District (OCSD) discovered that the Santa Ana Watershed Project Authority (SAWPA) violated a number of provisions contained in the 1991 Memorandum of Understanding (1991 MOU) and the 1996 Wastewater Treatment and Disposal Agreement (1996 Agreement), entered into between OCSD and SAWPA, governing the discharges from SAWPA to OCSD through the Santa Ana River Interceptor (SARI) Line. In accordance with the 1991 MOU, OCSD exercised its right to "review SAWPA's pretreatment program activities to ensure that SAWPA, any member agency thereof, and any other agency having discharge rights to the SARI system pursuant to contract with SAWPA is adequately administering its pretreatment program." OCSD determined to audit SAWPA's entire program. OCSD hired Environmental Engineering & Contracting, Inc. (EEC) to perform a comprehensive audit of SAWPA's compliance with all the requirements, responsibilities, and practices specified in OCSD's Wastewater Discharge Regulations Ordinance No. OCSD-39, the 1991 MOU and 1996 Agreement. The audit also evaluated SAWPA's role as an oversight authority, as well as SAWPA's and its member agencies' pretreatment programs. The audit report completed by EEC identifies specific findings of violations, noncompliance, deficiencies, program effectiveness issues, and best management practices, and EEC presented recommendations to address the various findings. In general, the audit revealed that SAWPA failed to comply with important program requirements, and it currently lacks sufficient pretreatment expertise and oversight to effectively manage discharges to the SARI Line. Specifically, there were deficiencies in SAWPA's pretreatment program administration, permitting, monitoring, inspection, enforcement, and data management. EEC recommended major improvements be implemented at all levels of the pretreatment program to ensure SAWPA's compliance with its obligations and to minimize the risk of a repeated instance of serious violations. To address these significant deficiencies, OCSD staff plans to follow the provisions of the 1991 MOU and issue "a remedial plan containing a description of the nature of the Page 1 of 3 pretreatment deficiencies, an enumeration of steps to be taken by SAWPA, and a time schedule for attaining compliance with all pretreatment requirements." OCSD will then conduct regular follow-up to monitor SAWPA's progress on the proposed corrective actions. In the future, OCSD should continue to conduct periodic audits to ensure that all the deficiencies are adequately addressed. PRIOR COMMITTEE/BOARD ACTIONS None ADDITIONAL INFORMATION Specific findings in the Audit Report include, but are not limited to: 1. SAWPA has insufficient legal authority to implement its pretreatment program and carry out enforcement actions in areas under the jurisdiction of SAWPA's member agencies. 2. SAWPA failed to properly oversee its member agencies. 3. SAWPA has not consistently sought approval for accepting waste originating from outside the SAWPA service area as required in the 1996 Agreement. In particular, SAWPA allowed a major discharge into the SARI Line by erroneously permitting a centralized waste treatment facility, the Corona Resource Recovery, to discharge mining waste into the SARI Line. The waste originated from outside the SAWPA service area, and SAWPA did not seek OCSD's written approval as required in the 1996 Agreement. 4. SAWPA and two of the member agencies, San Bernardino Valley Municipal Water District and Western Municipal Water District, retained the same staff from the same consulting firm, G&G Environmental Compliance, Inc., to develop and implement their respective pretreatment programs. This arrangement makes it virtually impossible for SAWPA to maintain jurisdiction and control over these agencies. 5. Some of the SAWPA discharge permits were based on inaccurate and erroneous information, and they were not properly prepared. 6. Monitoring of discharge facilities was deficient both in terms of the amount and type of monitoring conducted. There was also a lack of appropriate equipment, policies and procedures used to conduct the monitoring. 7. Inspections of permitted facilities are ineffective and insufficient. 8. Where they exist, enforcement plans currently in place may lack the legal authority, under the multijurisdictional agreements, for SAWPA to carry out enforcement actions against permitted facilities and to collect fines. Page 2 of 3 9. Data management, quality assurance and quality control are lacking and have negatively affected the collaboration between SAWPA and OCSD. 10.Required reviews of compliance data were not performed in a timely fashion, and enforcement and resampling requirements were not performed or were performed very late. 11.Despite the 1991 MOU clearly stating that SAWPA must provide monthly reports to OCSD, monthly reporting only resumed at the outset of this audit. 12.Staff and professional expertise necessary to implement an adequate pretreatment program are lacking in SAWPA's organization as well as in some of the member agencies. CEQA N/A BUDGET/DELEGATION OF AUTHORITY COMPLIANCE N/A ATTACHMENT The following attachment is included in hard copy: ( EXECUTIVE SUMMARY: Santa Ana Watershed Project Authority Pretreatment Program Compliance Audit Report (8 pages) The following attachment(s) may be viewed on-line at the OCSD website (www.ocsd.com) with the complete agenda package and attachments: ( Santa Ana Watershed Project Authority Pretreatment Program Compliance Audit Report o Final Report and Figures (48 pages) o Appendixes A — G (100+ pages) Page 3 of 3 �'� . : '• •'c,,:,''' ' :�� � �� - ., ice. '` _ • r--� w W G� �'` � :�,'` `/ ��TT�� r: /r i ., •" �. , ` V /'� MCI r� � ' � ,i� r` � �, � � .\r t. ` '• ... Y p . 1.•w . • Cq -04- of All lk • a 46 •. .. lb ►� �• \ /1 r • r t r or 4f ENVIRONMENTAL ENGINEERING & CONTRACTING, INC. Santa Ana Watershed Project Authority Pretreatment Program Compliance Audit Report November 19, 2012 Prepared for: Orange County Sanitary District 10844 Ellis Avenue Fountain Valley, California 92708 Prepared by: Environmental Engineering&Contracting, Inc. 501 Parkcenter Drive Santa Ana, California 92705 EEC W2422.01T Soil + Groundwater • Audits + Wastewater + Stormwater + GIS + Engineering • Remediation + Construction SAWPA Pretreatment Program Compliance Audit Report November 19,2012 ES EXECUTIVE SUMMARY ES.1 Introduction The Orange County Sanitary District (OCSD) has retained Environmental Engineering & Contracting, Inc. (EEC) to perform a comprehensive audit of the Santa Ana Watershed Project Authority's (SAWPA's) compliance with all the requirements, responsibilities, and practices as specified in OCSD's Wastewater Discharge Regulations Ordinance No. OCSD-39 as well as in the agreements between OCSD and SAWPA; namely, the 1991 Memorandum of Understanding (1991 MOU) and the 1996 Wastewater Treatment and Disposal Agreement (1996 Agreement; Appendix A, OCSD Wastewater Discharge Regulations Ordinance No. OCSD-39; Appendix B, 1991 Memorandum of Understanding Summary; Appendix C, 1996 Wastewater Treatment and Disposal Agreement Summary). The audit also includes an investigation and description of SAWPA's role. In addition to acting as an oversight authority for the member agencies that administer local industrial pretreatment activities on direct and indirect industrial dischargers to the Santa Ana River Interceptor (SARI) Line, also known as the Inland Empire Brine Line (IEBL), SAWPA regulates local liquid waste hauling companies and the Chino II desalter facility. To assist in performing the audit, EEC retained Pretreatment Solutions Inc. (PSI) to create an audit team with more than 30 years of auditing experience and more than 25 years of pretreatment expertise. EEC conducted this audit in accordance with generally accepted government auditing standards and United States Environmental Protection Agency(USEPA)guidelines. ES.2 Audit Scope The audit consisted of an evaluation of SAWPA's compliance with all the pertinent requirements, responsibilities, and practices and all other applicable regulations, including federal regulations (Title 40 of the Code of Federal Regulations [CFR], Section 403), OCSD ordinances, and contractual agreements between OCSD and SAWPA. The audit included all of SAWPA's delegated member agencies; namely, the Inland Empire Utility Agency (IEUA), the Eastern Municipal Water District (EMWD), the San Bernardino Valley Municipal Water District (SBVMWD) and the Western Municipal Water District (WMWD). The evaluation of SAWPA's and its member agencies' pretreatment program included all elements of the program: • Administration: policies, procedures, and workflows both internally and with SAWPA as the oversight authority. • Permitting: permitting process and review of a sample of existing permits. • Monitoring: monitoring program, including self-monitoring and monitoring by SAWPA. • Inspection: inspection program and example documents, including a field audit of 16 of SAWPA's and its member agencies' permitted facilities. W2422.01T Orange County Sanitation District 1 EEC SAWPA Pretreatment Program Compliance Audit Report November 19,2012 • Enforcement: enforcement response plan and its implementation with a review of the latest cases of significant noncompliance. In particular, the case of serious noncompliance involving the Corona Resource Recovery facility was reviewed. • Data Management: review of all types of compliance reports as required by the pretreatment program. • Reporting: quarterly and annual reporting of permitting and compliance status to OCSD. • Quality Assurance / Quality Control (QA/QC): review of implemented QA/QC measures throughout the program. • Resources: assessment of the adequacy of qualifications and resources to implement an effective pretreatment program that ensures compliance with all applicable requirements. ES.3 Objective The primary objective of this comprehensive compliance audit of SAWPA's Pretreatment Program is to identify and address any deficiencies or omissions in the administration, implementation, and enforcement of any of the applicable requirements and regulations. In order to address the identified omissions, EEC made recommendations to improve the overall pretreatment program. The recommendations, if properly and consistently implemented, will ensure consistent and long-term compliance and ultimately protect OCSD's treatment plant and its receiving waters while maintaining a viable solution for the nonreclaimable wastewater (brine) generated in the Santa Ana Watershed. Whenever encountered, best management practices (BMPs) were also described and presented in the findings. ES.4 Methods The methodology followed by the audit team in performing the audit is similar to the methodology followed by the USEPA and the RWQCB and as generally outlined in the USEPA's Control Authority Pretreatment Audit Checklist and Instructions document, dated February 2010 (Appendix D, Control Authority Pretreatment Audit Checklist, February 2010). Interviews were conducted with the 4 member agencies first and then with SAWPA. Following the interviews, the audit team inspected 12 industrial user sites and all 4 liquid waste-hauler (LWH) collection stations. The documents used by the audit team during the interviews and inspections comprised the USEPA's checklist and instructions, OCSD's Wastewater Discharge Regulations ordinance, the 1991 MOU, and the 1996 Agreement. ES.5 Findings During the pre-audit meeting with SAWPA and in all subsequent meetings, SAWPA's staff cooperated with the audit team and expressed willingness to address the audit findings for the purpose of improving its overall pretreatment program. Similarly, all member agencies cooperated with the audit team and expressed the same desire to use the audit findings to improve their pretreatment programs. W2422.01T Orange County Sanitation District 2 EEC SAWPA Pretreatment Program Compliance Audit Report November 19,2012 The audit team was granted full and unrestricted access to all 16 industrial user facilities selected by the audit team and OCSD. In regard to the Corona Resource Recovery, the audit team's investigative efforts were met with a limited flow of information. In general, the audit revealed that SAWPA and/or its member agencies did not always follow important program requirements. Some of the deficiencies were reportedly corrected after identification by the audit team during the interviewing process. The verification of corrected deficiencies was not in the scope of this audit and should be addressed in the corrective action plan follow-up and in future audits. Specific findings include the following: 1. In assessing SAWPA's administration of its pretreatment program,the audit team noted that the multijurisdictional pretreatment agreements among SAWPA and its 4 member agencies, that is, the IEUA, the EMWD, the SBVMWD, and the WMWD, are not all valid and don't necessarily give the power to SAWPA and/or the member agencies to carry out enforcement actions in areas under the jurisdiction of SAWPA's member agencies. 2. The audit also revealed that SAWPA allowed a major discharger into the IEBL, the Corona Resource Recovery (CRR), to discharge mining waste into the IEBL. The waste originated from outside the SAWPA service area and consisted of mining waste that was inaccurately referred to as "brine" waste. The origin and nature of the waste warranted a higher level of due diligence than that demonstrated by SAWPA and WMWD in the permitting process. At a minimum, SAWPA should have requested a complete waste stream characterization based on a detailed description of the process generating the waste. In addition, because of the large quantity of waste under consideration, SAWPA and/or WMWD should have performed an on-site assessment of all waste generating processes at the Molycorp's Mountain Pass facility to confirm the information provided by CRR. In order to categorically determine all the facts surrounding the CRR issue including any correlation between the excursions in arsenic level in OCSD's biosolids and the discharge of the Molycorp's waste, access to all records maintained by SAWPA, WMWD and Molycorp pertaining to the CRR issue should be granted. 3. On the program administration level, SAWPA has retained G&G Environmental Compliance, Inc. to develop and implement SAWPA's pretreatment program. Two of the member agencies, SBVMWD and WMWD, have also retained G&G Environmental Compliance, Inc. to develop and implement their pretreatment programs as they relate to the IEBL. Furthermore, the same individuals from G&G Environmental Compliance, Inc. who were working for SAWPA were also working, at the same time, for SBVMWD and WMWD. With such arrangement, it is virtually impossible for SAWPA to maintain jurisdiction and control over all of its member agencies, including SBVMWD and WMWD. 4. In many instances, permits were not properly prepared and were sometimes based on inaccurate and erroneous information. Some permit errors constitute serious deficiencies, such as misidentification of the applicable categorical pretreatment standards, referencing the incorrect ordinance, and elimination of monitoring requirements. 5. Monitoring deficiencies were encountered at all levels of the program for SAWPA, WMWD, and SBVMWD. Deficiencies included lack of monitoring of field equipment, such as pH and flow meters as well as insufficient monitoring of wastewater discharges. W2422.01T Orange County Sanitation District 3 EEC SAWPA Pretreatment Program Compliance Audit Report November 19,2012 6. Inspections that are currently performed by the member agencies are scheduled in advance and do not always reveal changes and modifications to a process or a facility. 7. Enforcement plans currently in place may lack the legal authority, under the current multijurisdictional agreements, for SAWPA to carry out enforcement actions, including collecting fines. 8. Data management has been lacking and has negatively affected the collaboration between SAWPA and OCSD. In addition, the lack of traceability makes quality checking very difficult and ineffective at identifying errors. 9. Required reviews of compliance data were not performed in a timely fashion and enforcement and resampling requirements were not performed or were performed very late. 10. Reporting by SAWPA to OCSD on a monthly basis only resumed at the outset of this audit. The 1991 MOU clearly states that SAWPA must provide monthly reports detailing the number and identification of new and existing permittees, inspections, enforcement actions, and monitoring data. 11. QA/QC measures were lacking throughout the program, especially within SAWPA's program and the IEBL pretreatment programs for WMWD and SBVMWD. 12. Human resources and expertise necessary to implement an adequate pretreatment program are lacking in SAWPA's organization as well as in the WMWD's and SBVMWD's organizations. ES.6 Recommendations Overall, major improvements should be implemented at all levels of the pretreatment program to ensure compliance with all applicable requirements and provide the highest level of protection for the IEBL and OCSD's treatment facility. Such improvements, if properly and continuously implemented, would minimize the risk of a repeated instance of serious violations, as was the case with Corona Resource Recovery. On the program administration level, SAWPA must develop and implement the necessary improvements to its pretreatment program. EEC also recommends that SAWPA manage all aspects of the pretreatment program rather than delegating permitting, monitoring, and enforcement responsibilities to its member agencies. This centralized management approach would give SAWPA the necessary control, but the legality of multijurisdictional agreements allowing enforcement actions and the levying of fines must be addressed. Alternatively, SAWPA could continue to manage its program through multijurisdictional agreements with some or all of its member agencies, but this option is not recommended because it yields a lower level of compliance and protection. Such arrangement relieves SAWPA from the responsibility of issuing permits and monitoring compliance, but would require SAWPA to closely monitor the performance of its member agencies and to conduct announced and unannounced inspections at industrial user facilities. In either arrangement, it is highly recommended for SAWPA to either acquire adequately qualified staff dedicated to SAWPA's pretreatment program and/or to retain a qualified consultant who is not retained W2422.01T Orange County Sanitation District 4 EEC SAWPA Pretreatment Program Compliance Audit Report November 19,2012 by any of its member agencies. At all times, SAWPA must ensure that any conflict of interest is eliminated and that it fulfills its role in providing additional control and program supervision. Permits are control instruments that must be properly prepared and based on accurate and comprehensive information concerning the industrial user. SAWPA should adopt a uniform permit fact sheet and permit format that addresses all applicable requirements in the federal and state regulations, in OCSD's ordinance, in the 1991 MOU, and in the 1996 Agreement requirements. It is also recommended that the practice of an agency issuing permits to itself for the control and monitoring of its LWH collection station or its own industrial facility cease throughout SAWPA's service area. Typically, and as observed in this audit, such a practice leads to many instances of noncompliance due to the inherent lack of control and monitoring. Monitoring at all levels of the pretreatment program must be improved. The level of monitoring by IEUA and EMWD is adequate, but it is lacking among SAWPA, SBVMWD, and WMWD. SAWPA must develop and implement procedures for the regular calibration and maintenance of equipment, for the sampling and testing of wastewater, for gathering information and issuing permits, and for all other activities that can ensure compliance and a higher level of protection to the IEBL and OCSD's treatment and receiving waters. SAWPA must regularly monitor the proper implementation of all adopted procedures. Inspections should consist of a critical examination of the industrial user facility and manufacturing processes. The announced inspections currently performed by the member agencies do not always reveal all changes and modifications. A minimum number of inspections must be unannounced in order to capture facts and information that are more representative of normal operating conditions at the industrial user facilities. The actual number of inspections should be determined in light of the nature of the inspections and the potential risk present. Enforcement plans that are currently in place for SAWPA and its member agencies must undergo a legal review to assess the effectiveness of the plans under the current multijurisdictional agreements. Enforcement plans must also contain a clear procedure to determine if a violation is considered an instance of significant noncompliance, to identify and undertake a timely and appropriate response and to document resolution of noncompliance. Enforcement response planning is a critical portion of every ordinance and is ultimately SAWPA's responsibility to implement. Data management must be improved to increase the level of collaboration and work transferability between SAWPA and OCSD.Traceability also must be improved to facilitate quality checking. Reporting by SAWPA to OCSD must resume and continue on a monthly basis. As required in the 1991 MOU, SAWPA must provide monthly reports detailing the number and identification of new and existing permittees, inspections, enforcement actions, and monitoring data. SAWPA and OCSD must agree on a report format for smooth and effective transfer of information. QA/QC measures specific to the IEBL must be implemented by SAWPA throughout its pretreatment program. SAWPA's primary mission should be to effectively oversee and carry out a robust quality system and quality management plan, including QA/QC activities at the industrial user level. SAWPA should also regularly review its implemented QA/QC measures. Resources to develop and implement an adequate pretreatment program for SAWPA are critically needed. SAWPA must acquire qualified staff and/or retain a qualified consultant with expertise in both, W2422.01T Orange County Sanitation District 5 EEC SAWPA Pretreatment Program Compliance Audit Report November 19,2012 pretreatment as well as program management. If SAWPA chooses to retain a qualified consultant, SAWPA will still need to elevate the pretreatment expertise of its staff members responsible for managing the consultant. EEC has estimated that, if SAWPA chooses to manage the entire IEBL pretreatment program with the current number of permittees, it would need a total of three full-time equivalent (FTE) employees (staff and/or consultants) the first year in order to develop and implement its pretreatment program without passing on any responsibility to member agencies. The 3 FTEs would be comprised of a clerical position mainly for invoicing, data management, and reporting; a junior staff position focusing primarily on permitting and inspections; and a program manager to develop and oversee the program, review permits, and liaise with OCSD and member agencies. It is expected that, after the first year, SAWPA would need fewer employees to manage the same number or permittees. The audit findings have been verbally shared with SAWPA and the member agencies throughout the audit, and SAWPA is currently in the process of addressing many of the audit findings. Starting with the recommended corrective actions presented in the report, SAWPA could begin to develop its own corrective action plan and schedule specific to the audit findings. Alternatively, OCSD could, as specified in the 1991 MOU Section 6.D, develop and issue SAWPA a remedial plan with a time schedule for attaining compliance since SAWPA has failed or has refused to fulfill key pretreatment requirements. In either case, follow-up audits by OCSD should be scheduled to determine whether the corrective actions are being implemented adequately and on schedule. W2422.01T Orange County Sanitation District 6 EEC OPERATIONS COMMITTEE Meeting Date ToBd.11/07/12 11 1/2/28//12 12 AGENDA REPORT Item Number Item Number 2 10 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Jim Herberg, Assistant General Manager CIP Project Manager: Martin Dix SUBJECT: SANTA ANA TRUNK SEWER REHABILITATION, PROJECT NO. 1-17 GENERAL MANAGER'S RECOMMENDATION A. Approve a Professional Design Services Agreement with Brown and Caldwell for Santa Ana Trunk Sewer Rehabilitation, Project No. 1-17, providing for engineering design services for an amount not to exceed $457,475; and, B. Approve a contingency of $45,747 (10%). SUMMARY In July 2010, the Orange County Sanitation District (Sanitation District) awarded a design agreement to Brown and Caldwell to prepare a Condition Assessment Report (Report) and Preliminary Design recommendation for the Santa Ana Trunk Sewer (SATS). To verify the structural and physical conditions of the SATS, the Sanitation District performed additional coring and laboratory pipeline analysis in February 2012. Based on the results of the Report and additional coring investigation, the Sanitation District decided to rehabilitate only the manholes, junction structures, and pipeline reaches that are in the worst condition and need near-term rehabilitation. The project budget was reduced from $21.1 Million to $7.3 Million. For the remaining of manholes and pipeline, the Sanitation District will perform ongoing manhole and pipeline assessment updates in approximate 5 year intervals, until conditions warrant that design and construction should commence within a 2 to 4 year timeframe. Brown and Caldwell satisfactorily furnished the engineering services for the assessment and preliminary design and their continuity with the design of these elements for construction will be efficient and cost-effective. The proposed Professional Design Services Agreement includes the preparation of plans and specifications for the rehabilitation of the worst reaches of the SATS to maximize the pipeline's useful life with minimal cost. PRIOR COMMITTEE/BOARD ACTIONS June 2012 - Authorized staff to negotiate a Professional Design Services Agreement with Brown and Caldwell to provide engineering design services for the Santa Ana Trunk Sewer Rehabilitation, Project No. 1-17. Page 1 of 3 July 2010 - Approved a Professional Design Services Agreement with Brown and Caldwell for Santa Ana Trunk Sewer Rehabilitation, Project No. 1-17, providing for engineering design services for an amount not to exceed $801 ,850; and approved a contingency of $80,185 (10%). ADDITIONAL INFORMATION The SATS was constructed in 1952 and is located in the cities of Costa Mesa, Santa Ana, and Fountain Valley. The SATS is a major wastewater pipeline that currently collects and conveys approximately 15 million gallons per day of raw wastewater to the Sanitation District's Reclamation Plant No. 1, located in Fountain Valley, California. The SATS Rehabilitation Project focuses on a portion of the SATS that is comprised of approximately 3.3 miles of concrete pipe, from 42 to 60 inches in diameter, 39 manholes, and three siphons located beneath storm drain channels and the Santa Ana River. The limits of the project are from Reclamation Plant No. 1 (western limit) to the intersection of Alton Avenue and Bristol Street (eastern limit) in Santa Ana. The Sanitation District retained Brown and Caldwell as condition assessment consultant to conduct surveying and mapping, flow monitoring, hydraulic model updates, odor control assessment, manhole inspections, and remote closed circuit television (CCTV) pipeline inspection. This work resulted in pipeline and manhole condition ratings, rehabilitation alternatives evaluation, and single contract delivery recommendations. Recognizing that the manholes in the SATS project limits are generally more degraded than the piping itself, discussions were held to explore the possibility of pursuing a near- term manhole rehabilitation project and continue monitoring the condition of SATS over time. More specifically, 21 of the 39 project manholes were deemed to require structural remediation within 5 to 10 years, whereas the remainder of the manholes and piping were deemed to likely require structural remediation in 10 to 20 years. The District received a requested fee proposal based on a written scope of work. Staff conducted negotiations with Brown and Caldwell to clarify the requirements and establish a final negotiated fee. After negotiations with the Consultant, the fee was reduced $90,399. Staff has determined this final fee to be fair and reasonable for the scope of work and recommends awarding the Professional Design Services Agreement to Brown and Caldwell for an amount not to exceed $457,475. CEQA The project is statutorily exempt from the California Environmental Quality Act pursuant to Public Resource Code Section 21080.21, and categorically exempt pursuant to CEQA Guidelines 15282(k) because it consists of actions less than one-mile in length within a public street or highway and other public rights-of-way for the installation of a new pipeline and/or the maintenance, repair, restoration, reconditioning, relocation, replacement, removal, and/or demolition of an existing pipeline. Page 2 of 3 The project is also categorically exempt pursuant to CEQA Guidelines Sections 15301 because it consists of the operation, repair, maintenance, permitting and/or minor alteration of existing public structures, facilities, and/or mechanical equipment, involving no expansion of use beyond that currently existing. The recommended action is also categorically exempt pursuant to CEQA Guidelines Sections 15302 because it consists of replacement or reconstruction of existing (below-ground) structures and facilities where the new structure will be located on the same site (within the same right-of-way) as the structure replaced, and will have substantially the same purpose and capacity as the structure replaced. The project is also within the scope of the Program Environmental Impact Report for the 1999 Strategic Plan, dated October 1999. Pursuant to CEQA Guidelines section 15168(c)(4), Sanitation District will use a written checklist to document its evaluation of the recommended action, and have determined that the recommended action is within the scope of the program EIR. BUDGET/DELEGATION OF AUTHORITY COMPLIANCE This complies with the authority levels in the Sanitation District's Delegation of Authority. The project budget is sufficient for the recommended action. (FY 2012-13, Section 8, Page 15). Date of Approval Contract Amount Contingency 11/28/12 $457,475 $45,747 ATTACHMENT The following attachment(s) may be viewed on-line at the OCSD website (www.ocsd.com) with the complete agenda package and attachments: ( Professional Design Services Agreement (16 pages) JH:MD:dm:gc Page 3 of 3 PROFESSIONAL DESIGN SERVICES AGREEMENT THIS AGREEMENT, is made and entered into to be effective the 28t" day of November, 2012 by and between the ORANGE COUNTY SANITATION DISTRICT, hereinafter referred to as "SANITATION DISTRICT", and BROWN AND CALDWELL, for purposes of this Agreement hereinafter referred to as "CONSULTANT". WITNESSETH: WHEREAS, the SANITATION DISTRICT desires to engage a CONSULTANT for Santa Ana Trunk Sewer Rehabilitation, Project No. 1-17; and to provide Design services for the rehabilitation of select manholes and segments of the gravity sewer as defined in the Scope of Work; and, WHEREAS, CONSULTANT is qualified to provide the necessary services in connection with these requirements and has agreed to provide the necessary professional services; and, WHEREAS, the SANITATION DISTRICT has adopted procedures for the selection of professional services and has proceeded in accordance with said procedures to select a CONSULTANT to perform this work; and, WHEREAS, at its regular meeting on November 28, 2012 the Board of Directors, by Minute Order, accepted the recommendation of the Operations Committee to approve this Agreement between the SANITATION DISTRICT and CONSULTANT. NOW, THEREFORE, in consideration of the promises and mutual benefits, which will result to the parties in carrying out the terms of this Agreement, it is mutually agreed as follows: 1. SCOPE OF WORK. CONSULTANT agrees to furnish necessary professional and technical services to accomplish those project elements outlined in the Scope of Work attached hereto as Attachment "A", and by this reference made a part of this Agreement. A. The CONSULTANT shall be responsible for the professional quality, technical accuracy, completeness, and coordination of all design, drawings, specifications, and other services furnished by the CONSULTANT under this Agreement, including the work performed by its Subconsultants. Where approval by the SANITATION DISTRICT is indicated, it is understood to be conceptual approval only and does not relieve the CONSULTANT of responsibility for complying with all laws, codes, industry standards and liability for damages caused by errors, omissions, noncompliance with industry standards, and/or negligence on the part of the CONSULTANT or its Subconsultants. B. CONSULTANT is responsible for the quality of work prepared under this Agreement and shall perform its work in accordance with engineering standards in effect for clarity, uniformity, and completeness. CONSULTANT shall respond to all comments, suggestions, and recommendations on the SANITATION DISTRICT's review comment sheets (i.e. DS1, DS2 and DS3). All comments shall be incorporated into the design prior to the next submittal deadline or addressed, in writing, as to why the comment has not been incorporated. CONSULTANT shall ensure that each submittal is 100% accurate for the level of PDSA PROJECT NO. 1-17 Revised 11/17/10 SANTA ANA TRUNK SEWER REHABILITATION Page 1 of 16 work submitted (i.e. correct references, terms, capitalization or equal status, spelling, punctuation, etc.) C. In the event that work is not performed to the satisfaction of the SANITATION DISTRICT and does not conform to the requirements of this agreement or any applicable industry standards, the CONSULTANT shall, without additional compensation, promptly correct or revise any errors or deficiencies in its designs, drawings, specifications, or other services within the timeframe specified by the Project Engineer/Project Manager. The SANITATION DISTRICT may charge to CONSULTANT all costs, expenses and damages associated with any such corrections or revisions. D. All CAD drawings, figures, and other work shall be produced by CONSULTANTS and Subconsultants using the SANITATION DISTRICT CAD Manual. Conversion of CAD work from any other non-standard CAD format to the SANITATION DISTRICT format shall not be acceptable in lieu of this requirement. Electronic files shall conform to the SANITATION DISTRICT specifications. Any changes to these specifications by the CONSULTANT are subject to review and approval of the SANITATION DISTRICT. Electronic files shall be subject to an acceptance period of 30 calendar days during which the SANITATION DISTRICT shall perform appropriate reviews and including CAD Manual compliance. CONSULTANT shall correct any discrepancies or errors detected and reported within the acceptance period at no additional cost to the SANITATION DISTRICT. E. The CONSULTANT shall ensure that all plans and specifications prepared, or recommended under this Agreement allow for competitive bidding. The CONSULTANT shall design such plans or specifications so that procurement of services, labor or materials are not available from only one source, and shall not design plans and specifications around a single or specific product, piece of major equipment or machinery, a specific patented design or a proprietary process, unless required by principles of sound engineering practice and supported by a written justification that has been approved in writing by the SANITATION DISTRICT. The CONSULTANT shall submit this written justification to the SANITATION DISTRICT prior to beginning work on such plans and specifications. Whenever the CONSULTANT recommends a specific product or equipment for competitive procurement, such recommendation shall include at least two brand names of products that are capable of meeting the functional requirements applicable to the project. F. All professional services performed by the CONSULTANT, including but not limited to all drafts, data, correspondence, proposals, reports, and estimates compiled or composed by the CONSULTANT, pursuant to this Agreement, are for the sole use of the SANITATION DISTRICT, its agents and employees. Neither the documents nor their contents shall be released to any third party without the prior written consent of the SANITATION DISTRICT. This provision does not apply to information that (a)was publicly known, or otherwise known to the CONSULTANT, at the time that it was disclosed to the CONSULTANT by the PDSA PROJECT NO. 1-17 Revised 11/17/10 SANTA ANA TRUNK SEWER REHABILITATION Page 2 of 16 SANITATION DISTRICT, (b) subsequently becomes publicly known to the CONSULTANT other than through disclosure by the SANITATION DISTRICT. Except for Subconsultants covered by Section 2 (a) neither the documents nor their contents shall be released to any third party without the prior written consent of the SANITATION DISTRICT. 2. COMPENSATION. Total compensation shall be paid to CONSULTANT for services in accordance with the following provisions: A. Total Compensation. Total compensation shall be in an amount not to exceed Four Hundred Fifty Seven Thousand Four Hundred Seventy Five Dollars ($457,475). Total compensation to CONSULTANT including burdened labor (salaries plus benefits), overhead, profit, direct costs, and subconsultant(s)fees and costs shall not exceed the sum set forth herein, broken down as follows: DESIGN SERVICES INCLUDING: CONSULTANT: BROWN AND CALDWELL Raw Labor $ 114,212 Fringe Rate 40% (%x Raw Labor) 45,685 Burdened labor (Raw Labor+ Fringe Rate) $ 159,897 Overhead 114.50% (%x Burden Labor) $ 183,082 Subtotal (Burden Labor+ Overhead) $ 342,979 Profit 9.79% (%x Subtotal) $ 33,578 Total Direct Costs, not to exceed 1,000 TOTAL—CONSULTANT Consulting Services, not to exceed $ 377,557 Subconsultants under$100,000: Subconsultant A Scheidegger $ 4,980 Subconsultant B SAF-R-DIG Utility Surveys, Inc. $ 15,520 Subconsultant C Traffic Control Engineering $ 16,000 Subconsultant D KDM Meridian $ 14,300 Subconsultant E Ninyo& Moore $29,118 TOTAL—Subconsultants under$100,000 $ 79,918 GRAND TOTAL for Design Services, not to exceed $ 457,475 PDSA PROJECT NO. 1-17 Revised 11/17/10 SANTA ANA TRUNK SEWER REHABILITATION Page 3 of 16 The SANITATION DISTRICT shall pay to CONSULTANT the actual costs of Subconsultant fees and charges, in an amount not to exceed Seventy Nine Thousand Nine Hundred Eighteen Dollars ($79,918). Profit for CONSULTANT and Subconsultants shall be a percentage of consulting services fees (Burdened Labor and Overhead). When the consulting or subconsulting services amount is $250,000 or less, the maximum Profit shall be 10%. Between $250,000 and $2,500,000, the maximum Profit shall be limited by a straight declining percentage between 10% and 5%. For consulting or subconsulting services fees with a value greater than $2,500,000, the maximum Profit shall be 5%. Addenda shall be governed by the same maximum Profit percentage after adding consulting services fees. B. Labor. As a portion of the total compensation to be paid to CONSULTANT, the SANITATION DISTRICT shall pay to CONSULTANT a sum equal to the burdened salaries (salaries plus benefits) actually paid by CONSULTANT charged on an hourly-rate basis to this project and paid to the personnel of CONSULTANT. Upon request of the SANITATION DISTRICT, CONSULTANT shall provide the SANITATION DISTRICT with certified payroll records of all employees' work that is charged to this project. C. Monthly Invoice. CONSULTANT shall include in its monthly invoice, a detailed breakdown of costs associated with the performance of any corrections or revisions of the work for that invoicing period. CONSULTANT shall allocate costs in the same manner as it would for payment requests as described in Section 5, Payment, of this Agreement. CONSULTANT shall warrant and certify the accuracy of these costs and understand that submitted costs are subject to Section 12 Audit Provisions. D. Overhead. As a portion of the total compensation to be paid to CONSULTANT, the SANITATION DISTRICT shall compensate CONSULTANT for overhead at a rate equal to 114.50% of burdened labor paid by CONSULTANT pursuant to Compensation Section hereof. E. Profit. As a portion of the total compensation to be paid to CONSULTANT, the SANITATION DISTRICT shall pay a profit of Thirty Three Thousand Five Hundred Seventy Eight Dollars ($33,578) for all services rendered by CONSULTANT for this project. F. Subconsultants. The SANITATION DISTRICT shall pay to CONSULTANT the actual costs of subconsultant fees and charges in an amount not to exceed Seventy Nine Thousand Nine Hundred Eighteen Dollars ($79,918). G. Direct Costs. The SANITATION DISTRICT shall pay to CONSULTANT the actual costs of permits and associated fees, travel and licenses for an amount not to exceed One Thousand Dollars ($1,000). The SANITATION DISTRICT shall also pay to CONSULTANT actual costs for equipment rentals, leases or purchases with prior approval of the SANITATION DISTRICT. Upon request, CONSULTANT shall provide to the SANITATION DISTRICT receipts and other documentary records to support CONSULTANT's request for reimbursement of these amounts. All incidental expenses shall be included in overhead pursuant to Compensation Section above. (See Attachment "D"). PDSA PROJECT NO. 1-17 Revised 11/17/10 SANTA ANA TRUNK SEWER REHABILITATION Page 4 of 16 3. REALLOCATION OF TOTAL COMPENSATION. The SANITATION DISTRICT, by its Director of Engineering, shall have the right to approve a reallocation of the incremental amounts constituting the total compensation, provided that the total compensation is not increased. 4. When the SANITATION DISTRICT determines that all Work authorized under the Contract is fully complete and that the SANITATION DISTRICT requires no further work from CONSULTANT, or the Contract is otherwise terminated or expires in accordance with the terms of the Contract, the SANITATION DISTRICT shall give the Consultant written notice that the Contract will be closed out. CONSULTANT shall submit all outstanding billings, Work submittals, deliverables, reports or similarly related documents as required under the Contract within thirty (30) days of receipt of notice of Contract closeout. Upon receipt of CONSULTANT'S submittals, the SANITATION DISTRICT shall commence a closeout audit of the Contract and will either: i. Give the CONSULTANT a final Contract Acceptance: or ii. Advise the CONSULTANT in writing of any outstanding item or items which must be furnished, completed, or corrected at the CONSULTANT'S cost. CONSULTANT shall be required to provide adequate resources to fully support any administrative Project Closeout efforts identified in Agreement. Such support must be provided within the timeframe requested by the SANITATION DISTRICT. Notwithstanding the final Contract Acceptance the CONSULTANT will not be relieved of its obligations hereunder, nor will the CONSULTANT be relieved of its obligations to complete any portions of the Work, the non-completion of which were not disclosed to the SANITATION DISTRICT (regardless of whether such nondisclosures were fraudulent, negligent, or otherwise); and the CONSULTANT shall remain obligated under all those provisions of the Contract which expressly or by their nature extend beyond and survive final Contract Acceptance. Any failure by the SANITATION DISTRICT to reject the work or to reject the CONSULTANT'S request for final Contract Acceptance as set forth above shall not be deemed to be Acceptance of the Work by the SANITATION DISTRICT for any purpose nor imply Acceptance of, or agreement with, the Consultant's request for final Contract Acceptance. 5. PAYMENT A. CONSULTANT may submit monthly or periodic statements requesting payment for those items included in Section 2 hereof in the format as required by the SANITATION DISTRICT. Such requests shall be based upon the amount and value of the work and services performed by CONSULTANT under this Agreement and shall be prepared by CONSULTANT and accompanied by such supporting data, including a detailed breakdown of all costs incurred and project element work performed during the period covered by the statement, as may be required by the SANITATION DISTRICT. PDSA PROJECT NO. 1-17 Revised 11/17/10 SANTA ANA TRUNK SEWER REHABILITATION Page 5 of 16 Upon approval of such payment request by the SANITATION DISTRICT, payment shall be made to CONSULTANT as soon as practicable of one hundred percent (100%) of the invoiced amount on a per-project-element basis. If the SANITATION DISTRICT determines that the work under this Agreement or any specified project element hereunder, is incomplete and that the amount of payment is in excess of: i. The amount considered by the SANITATION DISTRICT's Director of Engineering to be adequate for the protection of the SANITATION DISTRICT; or ii. The percentage of the work accomplished for each project element. He may, at his discretion, retain an amount equal to that which insures that the total amount paid to that date does not exceed the percentage of the completed work for each project element or the project in its entirety. B. CONSULTANT may submit periodic payment requests for each 30-day period of this Agreement for the profit as set forth in Compensation Section above. Said profit payment request shall be proportionate to the work actually accomplished to date on a per-project-element basis. In the event the SANITATION DISTRICT's Director of Engineering determines that no satisfactory progress has been made since the prior payment, or in the event of a delay in the work progress for any reason, the SANITATION DISTRICT shall have the right to withhold any scheduled proportionate profit payment. C. Upon satisfactory completion by CONSULTANT of the work called for under the terms of this Agreement, and upon acceptance of such work by the SANITATION DISTRICT, CONSULTANT will be paid the unpaid balance of any money due for such work, including any retained percentages relating to this portion of the work. D. Upon satisfactory completion of the work performed hereunder and prior to final payment under this Agreement for such work, or prior settlement upon termination of this Agreement, and as a condition precedent thereto, CONSULTANT shall execute and deliver to the SANITATION DISTRICT a release of all claims against the SANITATION DISTRICT arising under or by virtue of this Agreement other than such claims, if any, as may be specifically exempted by CONSULTANT from the operation of the release in stated amounts to be set forth therein. E. Pursuant to the California False Claims Act (Government Code sections 12650- 12655), any CONSULTANT that knowingly submits a false claim to the SANITATION DISTRICT for compensation under the terms of this Agreement may be held liable for treble damages and up to a $10,000 civil penalty for each false claim submitted. This section shall also be binding on all Subconsultants. A CONSULTANT or Subconsultant shall be deemed to have submitted a false claim when the CONSULTANT or Subconsultant: a) knowingly presents or causes to be presented to an officer or employee of the SANITATION DISTRICT a false claim or request for payment or approval; b) knowingly makes, uses, or PDSA PROJECT NO. 1-17 Revised 11/17/10 SANTA ANA TRUNK SEWER REHABILITATION Page 6 of 16 causes to be made or used a false record or statement to get a false claim paid or approved by the SANITATION DISTRICT; c) conspires to defraud the SANITATION DISTRICT by getting a false claim allowed or paid by the SANITATION DISTRICT; d) knowingly makes, uses, or causes to be made or used a false record or statement to conceal, avoid, or decrease an obligation to the SANITATION DISTRICT; or e) is a beneficiary of an inadvertent submission of a false claim to the SANITATION DISTRICT, and fails to disclose the false claim to the SANITATION DISTRICT within a reasonable time after discovery of the false claim. 6. PREVAILING WAGES To the extent CONSULTANT intends to employ employees who will perform work during the design and preconstruction phases of a construction contract, as more specifically defined under Labor Code Section 1720, CONSULTANT shall be subject to prevailing wage requirements with respect to such employees. 7. DOCUMENT OWNERSHIP— SUBSEQUENT CHANGES TO PLANS AND SPECIFICATIONS — CONSULTANT PERFORMANCE A. Ownership of Documents for the Professional Services performed, all documents, including but not limited to, original plans, studies, sketches, drawings, computer printouts and disk files, and specifications prepared in connection with or related to the Scope of work or Professional Services, shall be the property of the SANITATION DISTRICT. The SANITATION DISTRICT's ownership of these documents includes use of, reproduction or reuse of and all incidental rights, whether or not the work for which they were prepared has been performed. The SANITATION DISTRICT ownership entitlement arises upon payment or any partial payment for work performed and includes ownership of any and all work product completed prior to that payment. This Section shall apply whether the CONSULTANT's Professional Services are terminated: a) by the completion of the Agreement, or b) in accordance with other provisions of this Agreement. Notwithstanding any other provision of this paragraph or Agreement, the CONSULTANT shall have the right to make copies of all such plans, studies, sketches, drawings, computer printouts and disk files, and specifications. B. CONSULTANT shall not be responsible for damage caused by subsequent changes to or uses of the plans or specifications, where the subsequent changes or uses are not authorized or approved by CONSULTANT, provided that the service rendered by CONSULTANT was not a proximate cause of the damage. C. The CONSULTANT's performance shall be evaluated by the SANITATION DISTRICT. A copy of the evaluation shall be sent to the CONSULTANT for comment. The evaluation, together with the comments, shall be retained by the Department and may be considered in future CONSULTANT selection processes. PDSA PROJECT NO. 1-17 Revised 11/17/10 SANTA ANA TRUNK SEWER REHABILITATION Page 7 of 16 8. INSURANCE A. General i. Insurance shall be issued and underwritten by insurance companies acceptable to the SANITATION DISTRICT. ii. Insurers must have an "A-" Policyholder's Rating, or better, and Financial Rating of at least Class Vill, or better, in accordance with the most current A.M. Best's Guide Rating. However, the SANITATION DISTRICT will accept State Compensation Insurance Fund, for the required policy of Worker's Compensation Insurance subject to the SANITATION DISTRICT's option to require a change in insurer in the event the State Fund financial rating is decreased below "B". Further, the SANITATION DISTRICT will require Contractor to substitute any insurer whose rating drops below the levels herein specified. Said substitution shall occur within 20 days of written notice to Contractor, by the SANITATION DISTRICT or its agent. iii. Coverage shall be in effect prior to the commencement of any work under this Agreement. B. General Liabilitv The CONSULTANT shall maintain during the life of this contract, including the period of warranty, Commercial General Liability Insurance written on an occurrence basis providing the following minimum limits of liability coverage: Two Million Dollars ($2,000,000) per occurrence with Two Million Dollars ($2,000,000) aggregate. Said insurance shall include coverage for the following hazards: Premises-Operations, blanket contractual liability (for this Agreement), products liability/completed operations (including any product manufactured or assembled), broad form property damage, blanket contractual liability, independent contractors liability, personal and advertising injury, mobile equipment, owners and contractors protective liability, and cross liability and severability of interest clauses. A statement on an insurance certificate will not be accepted in lieu of the actual additional insured endorsement(s). If requested by SANITATION DISTRICT and applicable, XCU coverage (Explosion, Collapse and Underground) must be included in the General Liability policy and coverage must be reflected on the submitted Certificate of Insurance. C. Umbrella Excess Liabilitv The minimum limits of general liability and automotive liability insurance required, as set forth herein, shall be provided for through either a single policy of primary insurance or a combination of policies of primary and umbrella excess coverage. Umbrella excess liability coverage shall be issued with limits of liability which, when combined with the primary insurance, will equal the minimum limits for general liability and automotive liability. PDSA PROJECT NO. 1-17 Revised 11/17/10 SANTA ANA TRUNK SEWER REHABILITATION Page 8 of 16 D. AutomotiveNehicle liability Insurance The CONSULTANT shall maintain a policy of Automotive Liability insurance on a comprehensive form covering all owned, non-owned, and hired automobiles, trucks, and other vehicles providing the following minimum limits of liability coverage: Combined single limit of Two Million Dollars ($2,000,000) or alternatively Two Million Dollars ($2,000,000) per person for bodily injury and One Million Dollars ($1,000,000) per accident for property damage. A statement on an insurance certificate will not be accepted in lieu of the actual additional insured endorsement. E. Worker's Compensation Insurance The CONSULTANT shall provide such Workers' Compensation Insurance as required by the Labor Code of the State of California in the amount of the statutory limit, including Employer's Liability Insurance with a minimum limit of One Million Dollars ($1,000,000) per occurrence. Such Worker's Compensation Insurance shall be endorsed to provide for a waiver of subrogation in favor of the SANITATION DISTRICT. A statement on an insurance certificate will not be accepted in lieu of the actual endorsements unless the insurance carrier is State of California Insurance Fund and the identifier"SCIF" and endorsement numbers 2570 and 2065 are referenced on the certificate of insurance. F. Errors and Omissions/Professional Liability CONSULTANT shall maintain in full force and effect, throughout the term of this Agreement, standard industry form professional negligence errors and omissions insurance coverage in an amount of not less than Five Million Dollars ($5,000,000)with limits in accordance with the provisions of this Paragraph. If the policy of insurance is written on a "claims made" basis, said policy shall be continued in full force and effect at all times during the term of this Agreement, and for a period of five (5) years from the date of the completion of the services hereunder. In the event of termination of said policy during this period, CONSULTANT shall obtain continuing insurance coverage for the prior acts or omissions of CONSULTANT during the course of performing services under the term of this Agreement. Said coverage shall be evidenced by either a new policy evidencing no gap in coverage or by separate extended "tail" coverage with the present or new carrier. In the event the present policy of insurance is written on an "occurrence" basis, said policy shall be continued in full force and effect during the term of this Agreement or until completion of the services provided for in this Agreement, whichever is later. In the event of termination of said policy during this period, new coverage shall be obtained for the required period to insure for the prior acts of CONSULTANT during the course of performing services under the term of this Agreement. PDSA PROJECT NO. 1-17 Revised 11/17/10 SANTA ANA TRUNK SEWER REHABILITATION Page 9 of 16 CONSULTANT shall provide to the SANITATION DISTRICT a certificate of insurance in a form acceptable to the SANITATION DISTRICT indicating the deductible or self-retention amounts and the expiration date of said policy, and shall provide renewal certificates not less than ten (10) days prior to the expiration of each policy term. G. Proof of Coverage The CONSULTANT shall furnish the SANITATION DISTRICT with original certificates and amendatory endorsements effecting coverage. Said policies and endorsements shall conform to the requirements herein stated. All certificates and endorsements are to be received and approved by the SANITATION DISTRICT before work commences. The SANITATION DISTRICT reserves the right to require complete, certified copies of all required insurance policies, including endorsements, effecting the coverage required, at any time. The following are approved forms that must be submitted as proof of coverage: • Certificate of Insurance ACORD Form 25-S(7/97) or equivalent. • Additional Insurance (ISO Form) CG2010 11 85 or (General Liability) The combination of(ISO Forms) CG 2010 10 01 and CG 2037 10 01 All other Additional Insured endorsements must be submitted for approval by the SANITATION DISTRICT, and the SANITATION DISTRICT may reject alternatives that provide different or less coverage to the SANITATION DISTRICT. • Additional Insured Submit endorsement provided by carrier for the (Auto Liability) SANITATION DISTRICT approval. • Waiver of Subrogation State Compensation Insurance Fund Endorsement No. 2570 or equivalent. • Cancellation Notice State Compensation Insurance Fund Endorsement No. 2065 or equivalent. H. Cancellation Notice Each insurance policy required herein shall be endorsed to state that coverage shall not be cancelled by either party, except after thirty (30) days' prior written notice. The Cancellation Section of ACORD Form 25-S (7/97) shall state the required thirty (30) days' written notification. The policy shall not terminate, nor shall it be cancelled, nor the coverage reduced until thirty (30) days after written notice is given to the SANITATION DISTRICT except for nonpayment of premium, which shall require not less than ten (10) days written notice to the SANITATION DISTRICT. Should there be changes in coverage or an increase in deductible or SIR amounts, the CONSULTANT and its insurance broker/agent PDSA PROJECT NO. 1-17 Revised 11/17/10 SANTA ANA TRUNK SEWER REHABILITATION Page 10 of 16 shall send to the SANITATION DISTRICT a certified letter which includes a description of the changes in coverage and/or any increase in deductible or SIR amounts. The certified letter must be sent to the attention of Contracts Administration, Div. 230, and shall be received by the SANITATION DISTRICT not less than thirty(30) days prior to the effective date of the change(s) if the change would reduce coverage or increase deductibles or SIR amounts or otherwise reduce or limit the scope of insurance coverage provided to the SANITATION DISTRICT. I. Primary Insurance All liability policies shall contain a Primary and Non Contributory Clause. Any other insurance maintained by the SANITATION DISTRICT shall be excess and not contributing with the insurance provided by CONSULTANT. J. Separation of Insured All liability policies shall contain a "Separation of Insureds" clause. K. Non-Limiting (if applicable) Nothing in this document shall be construed as limiting in any way, nor shall it limit the indemnification provision contained in this Agreement, or the extent to which CONSULTANT may be held responsible for payment of damages to persons or property. L. Deductibles and Self-Insured Retentions Any deductible and/or self insured retention must be declared to the SANITATION DISTRICT on the Certificate of Insurance. All deductibles and/or self insured retentions require approval by the SANITATION DISTRICT. At the option of the SANITATION DISTRICT, either: the insurer shall reduce or eliminate such deductible or self-insured retention as respects the SANITATION DISTRICT; or the CONSULTANT shall provide a financial guarantee satisfactory to the SANITATION DISTRICT guaranteeing payment of losses and related investigations, claim administration and defense expenses. M. Defense Costs Liability policies shall have a provision that defense costs for all insureds and additional insureds are paid in addition to and do not deplete any policy limits. N. Subconsultants The CONSULTANT shall be responsible to establish insurance requirements for any subconsultant hired by the CONSULTANT. The insurance shall be in amounts and types reasonably sufficient to deal with the risk of loss involving the subconsultant's operations and work. PDSA PROJECT NO. 1-17 Revised 11/17/10 SANTA ANA TRUNK SEWER REHABILITATION Page 11 of 16 9. SCOPE CHANGES. In the event of a change in the scope of the proposed project, requested by SANITATION DISTRICT, the parties hereto shall execute an addendum to this Agreement setting forth with particularity all terms of the new Agreement, including but not limited to any additional CONSULTANT's fees. 10. PROJECT TEAM AND SUBCONSULTANTS. CONSULTANT shall provide to SANITATION DISTRICT, prior to execution of this Agreement, the names and full description of all subconsultants and CONSULTANT's project team members anticipated to be used on this project by CONSULTANT. CONSULTANT shall include a description of the scope of work to be done by each subconsultant and each CONSULTANT's project team member. CONSULTANT shall include the respective compensation amounts for CONSULTANT and each subconsultant on a per-project-element basis, broken down as indicated in Section 2 (Compensation). There shall be no substitution of the listed subconsultants and CONSULTANT's project team members without prior written approval by the SANITATION DISTRICT. 11. ENGINEERING REGISTRATION. The CONSULTANT's personnel are comprised of registered engineers and a staff of specialists and draftsmen in each department. The firm itself is not a registered engineer but represents and agrees that wherever in the performance of this Agreement requires the services of a registered engineer. Such services hereunder will be performed under the direct supervision of registered engineers. 12. AUDIT PROVISIONS i. SANITATION DISTRICT retains the reasonable right to access, review, examine, and audit, any and all books, records, documents and any other evidence of procedures and practices that the SANITATION DISTRICT determines are necessary to discover and verify that the CONSULTANT is in compliance with all requirements under this Agreement. The CONSULTANT shall include the SANITATION DISTRICT's right as described above, in any and all of their subcontracts, and shall ensure that these rights are binding upon all Subconsultants. ii. SANITATION DISTRICT retains the right to examine CONSULTANT's books, records, documents and any other evidence of procedures and practices that the SANITATION DISTRICT determines are necessary to discover and verify all direct and indirect costs, of whatever nature, which are claimed to have been incurred, or anticipated to be incurred or to ensure CONSULTANT's compliance with all requirements under this Agreement during the term of this Agreement and for a period of three (3) years after its termination. iii. CONSULTANT shall maintain complete and accurate records in accordance with generally accepted industry standard practices and the SANITATION DISTRICT's policy. The CONSULTANT shall make available to the SANITATION DISTRICT for review and audit, all Project related accounting records and documents, and any other financial data within 15 days after receipt of notice from the SANITATION DISTRICT. Upon SANITATION DISTRICT's request, the CONSULTANT shall submit exact duplicates of originals of all requested records to the SANITATION DISTRICT. If an audit is performed, CONSULTANT shall PDSA PROJECT NO. 1-17 Revised 11/17/10 SANTA ANA TRUNK SEWER REHABILITATION Page 12 of 16 ensure that a qualified employee of the CONSULTANT will be available to assist SANITATION DISTRICT's auditor in obtaining all Project related accounting records and documents, and any other financial data. 13. LEGAL RELATIONSHIP BETWEEN PARTIES. The legal relationship between the parties hereto is that of an independent contractor and nothing herein shall be deemed to make CONSULTANT an employee of the SANITATION DISTRICT. 14. TERMINATION. The SANITATION DISTRICT may terminate this Agreement at any time, without cause, upon giving thirty (30) days written notice to CONSULTANT. In the event of such termination, CONSULTANT shall be entitled to compensation for work performed on a prorated basis through and including the effective date of termination. CONSULTANT shall be permitted to terminate this Agreement upon thirty (30) days written notice only if CONSULTANT is not compensated for billed amounts in accordance with the provisions of this Agreement, when the same are due. Notice of termination shall be mailed to the SANITATION DISTRICT at: ORANGE COUNTY SANITATION DISTRICT 10844 Ellis Avenue Fountain Valley, CA 92708-7018 Attention: Gary V. Prater, Principal Contracts Administrator Notice of termination shall be mailed to CONSULTANT at: BROWN AND CALDWELL 18200 Von Karman Avenue, Suite 400 Irvine, CA 92612 Attention: Dan Bunce 15. DOCUMENTS AND STUDY MATERIALS. The documents and study materials for this project shall become the property of the SANITATION DISTRICT upon the termination or completion of the work. CONSULTANT agrees to furnish to the SANITATION DISTRICT copies of all memoranda, correspondence, computation and study materials in its files pertaining to the work described in this Agreement, which is requested in writing by the SANITATION DISTRICT. 16. COMPLIANCE. CONSULTANT certifies by the execution of this Agreement that it pays employees not less than the minimum wage as defined by law, and that it does not discriminate in its employment with regard to race, color, religion, sex or national origin; that it is in compliance with all federal, state and local directives and executive orders regarding non-discrimination in employment; and that it agrees to demonstrate positively and aggressively the principle of equal opportunity in employment. 17. CONTRACT EXECUTION AUTHORIZATION. Both the SANITATION DISTRICT and CONSULTANT do covenant that each individual executing this document by and on behalf of each party is a person duly authorized to execute contracts for that party. PDSA PROJECT NO. 1-17 Revised 11/17/10 SANTA ANA TRUNK SEWER REHABILITATION Page 13 of 16 18. DISPUTE RESOLUTION. In the event of a dispute arising between the parties regarding performance or interpretation of this Agreement, the dispute shall be resolved by binding arbitration under the auspices of the Judicial Arbitration and Mediation Service ("JAMS"), or similar organization or entity conducting alternate dispute resolution services. 19. ATTORNEY'S FEES, COSTS AND NECESSARY DISBURSEMENTS. If any action at law or inequity or if any proceeding in the form of an Alternative Dispute Resolution (ADR) is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorney's fees, costs and necessary disbursements in addition to any other relief to which he may be entitled. 20. PROGRESS REPORTS. Monthly progress reports shall be submitted for review by the tenth day of the following month and must include as a minimum: 1) current activities, 2) future activities, 3) potential items that are not included in the Scope of Work, 4) concerns and possible delays, 5) percentage of completion, and 6) budget status. 21. WARRANTY. CONSULTANT shall perform its services in accordance with generally accepted industry and professional standards. If, within the 12-month period following completion of its services, the SANITATION DISTRICT informs CONSULTANT that any part of the services fails to meet those standards, CONSULTANT shall, within the time prescribed by the SANITATION DISTRICT, take all such actions as are necessary to correct or complete the noted deficiency(ies). 22. INDEMNIFICATION. To the fullest extent permitted by law, CONSULTANT shall indemnify, defend (at CONSULTANT'S sole cost and expense and with legal counsel approved by the SANITATION DISTRICT, which approval shall not be unreasonably withheld), protect and hold harmless the SANITATION DISTRICT and all of SANITATION DISTRICT'S officers, directors, employees, CONSULTANT's, and agents (collectively the "Indemnified Parties"), from and against any and all claims, damages, liabilities, causes of action, suits, arbitration awards, losses,judgments, fines, penalties, costs and expenses (including, without limitation, attorneys' fees, disbursements and court costs, and all other professional, expert or CONSULTANT'S fees and costs and the SANITATION DISTRICT'S general and administrative expenses; individually, a "Claim"; collectively, "Claims")which may arise from or are in any manner related, directly or indirectly, to any work performed, or any operations, activities, or services provided by CONSULTANT in carrying out its obligations under this Agreement to the extent of the negligent, recklessness and/or willful misconduct of CONSULTANT, its principals, officers, agents, employees, CONSULTANT'S suppliers, CONSULTANT, subconsultants, subcontractors, and/or anyone employed directly or indirectly by any of them, regardless of any contributing negligence or strict liability of an Indemnified Party. Notwithstanding the foregoing, nothing herein shall be construed to require CONSULTANT to indemnify the Indemnified Parties from any Claim arising solely from: (A)the active negligence or willful misconduct of the Indemnified Parties; or (B) a natural disaster or other act of God, such as an earthquake; or (C) the independent action of a third party who is neither one of the Indemnified Parties nor the CONSULTANT, nor its principal, officer, agent, employee, nor CONSULTANT'S supplier, CONSULTANT, subconsultant, subcontractor, nor anyone employed directly or indirectly by any of them. PDSA PROJECT NO. 1-17 Revised 11/17/10 SANTA ANA TRUNK SEWER REHABILITATION Page 14 of 16 Exceptions (A) through (B) above shall not apply, and CONSULTANT shall, to the fullest extent permitted by law, indemnify the Indemnified Parties, from Claims arising from more than one cause if any such cause taken alone would otherwise result in the obligation to indemnify hereunder. CONSULTANT'S liability for indemnification hereunder is in addition to any liability CONSULTANT may have to the SANITATION DISTRICT for a breach by CONSULTANT of any of the provisions of this Agreement. Under no circumstances shall the insurance requirements and limits set forth in this Agreement be construed to limit CONSULTANT'S indemnification obligation or other liability hereunder. The terms of this Agreement are contractual and the result of negotiation between the parties hereto. Accordingly, any rule of construction of contracts (including, without limitation, California Civil Code Section 1654) that ambiguities are to be construed against the drafting party, shall not be employed in the interpretation of this Agreement. 23. DUTY TO DEFEND. The duty to defend hereunder is wholly independent of and separate from the duty to indemnify and such duty to defend shall exist regardless of any ultimate liability of CONSULTANT and shall be consistent with Civil Code section 2782.8. Such defense obligation shall arise immediately upon presentation of a Claim by any person if, without regard to the merit of the Claim, such Claim could potentially result in an obligation to indemnify one or more Indemnified Parties, and upon written notice of such Claim being provided to CONSULTANT. Payment to CONSULTANT by any Indemnified Party or the payment or advance of defense costs by any Indemnified Party shall not be a condition precedent to enforcing such Indemnified Party's rights to indemnification hereunder. In the event a final judgment, arbitration, award, order, settlement, or other final resolution expressly determines that the claim did not arise out of, pertain to, or relate to the negligence, recklessness, or willful misconduct of the CONSULTANT, to any extent, then the DISTRICT will reimburse CONSULTANT for the reasonable costs of defending the Indemnified Parties against such claims. CONSULTANT'S indemnification obligation hereunder shall survive the expiration or earlier termination of this Agreement until such time as action against the Indemnified Parties for such matter indemnified hereunder is fully and finally barred by the applicable statute of limitations. 24. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding and agreement between the Parties and supersedes all previous negotiations between them pertaining to the subject matter thereof. PDSA PROJECT NO. 1-17 Revised 11/17/10 SANTA ANA TRUNK SEWER REHABILITATION Page 15 of 16 IN WITNESS WHEREOF, this Agreement has been executed in the name of the SANITATION DISTRICT, by its officers thereunto duly authorized, and CONSULTANT as of the day and year first above written. ORANGE COUNTY SANITATION DISTRICT - - By Mar,, Dubois (Approved as to Form) Date Co tracts, Purchasing and Materials Mnagement Division Manager By Chair, Board of Directors Date By Clerk of the Board Date BROWN AND CALDWELL By Date By Date ORANGE COUNTY SANITATION DISTRICT By Marc Dubois Date Contracts, Purchasing and Materials Management Division Manager Attachments: Attachment"A"—Scope of Work Attachment"D"—Allowable Direct Costs Attachment"G"— Cost Matrix GVP:yp EDMS:003965017 PDSA PROJECT NO. 1-17 Revised 11/17/10 SANTA ANA TRUNK SEWER REHABILITATION Page 16 of 16 OPERATIONS COMMITTEE Meeting Date To Bd. of Dir. 11/07/12 11/28/12 AGENDA REPORT Item Number Item Number 3 11 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Jim Herberg, Director of Engineering Project Manager: Wendy Smith SUBJECT: ORANGETHORPE AVENUE GRADE SEPARATION PROJECT NO. 2-77, REIMBURSEMENT AGREEMENT GENERAL MANAGER'S RECOMMENDATION A. Adopt Resolution No. OCSD 12-14, certifying the Notice of Exemption for the Orangethorpe Avenue Grade Separation Project, Finding that the Lead Agency CEQA Compliance Obligations have been Fulfilled, and Related Actions (Project No. 2-77); and, B. Approve a Reimbursement Agreement with the Orange County Transportation Authority for an amount not to exceed $3,000,000, in a form approved by General Counsel. SUMMARY In conjunction with the City of Anaheim and the City of Placentia, the Orange County Transportation Authority (OCTA) is performing the Orangethorpe Avenue Grade Separation Project. The project consists of raising the grade of Orangethorpe Avenue and connector streets (Crowther Avenue and Miller Avenue) to pass over the Burlington Northern and Santa Fe (BNSF) railroad tracks. The location of numerous bridge abutments will necessitate the relocation of the Orange County Sanitation District's (OCSD) facilities. The relocation of OCSD's facilities is OCSD Project No. 2-77. The project will be constructed by OCTA to OCSD standards. Project construction is scheduled to begin in February 2013. OCSD has the right to use the public right-of-way within our service boundary to construct, operate, and maintain facilities for wastewater transportation (CA Health and Safety Code Section 4759 and 4759.1); however, the right is considered a statutory franchise right and as such the principle of "prior in time, prior in right" applies. The public right-of-way existed before OCSD's facility; therefore, it is OCSD's responsibility to pay for the relocation of its facilities. Per the terms of the Reimbursement Agreement, OCSD will reimburse OCTA for the construction costs of the project. OCTA has agreed to pay for the design costs and construction administration costs. Page 1 of 2 PRIOR COMMITTEE/BOARD ACTIONS N/A ADDITIONAL INFORMATION OCSD's pipeline is located in the City of Anaheim public right-of-way and on Orange County Flood Control District (OCFCD) property by encroachment permit. OCSD's facilities consist of a 42-inch to 52-inch reinforced concrete pipe that conveys flow from north to south from Carbon Canyon Creek across the railroad right-of-way and OCFCD property to Miller Avenue. Per the reimbursement agreement, OCSD has the right to have an on-site inspector at the construction site to oversee the work. Due to the fact that OCSD and OCTA are represented by the same law firm, OCSD has been represented by Rutan and Tucker, LLP concerning this project and agreement. CEQA The City of Placentia is the lead agency under the California Environmental Quality Act (CEQA), for the proposed Orangethorpe Grade Separation Project. Resolution No. OCSD 12-14 makes CEQA findings required from the OCSD as a CEQA responsible agency and then makes a finding that the City of Placentia have satisfied CEQA compliance. BUDGET/DELEGATION OF AUTHORITY COMPLIANCE This request complies with authority levels of the Sanitation District's Delegation of Authority. This item has been budgeted. (Line item: Section 8, Page 23). Project contingency funds will not be used for this agreement. Date of Approval Contract Amount Contingency N/A N/A N/A ATTACHMENTS 1. Resolution No. OCSD 12-14 2. Reimbursement Agreement WS:sa Page 2 of 2 RESOLUTION NO. OCSD 12-14 CERTIFYING THE NOTICE OF EXEMPTION FOR THE ORANGETHORPE GRADE SEPARATION PROJECT, FINDING THAT LEAD AGENCY CEQA COMPLIANCE OBLIGATIONS HAVE BEEN FULFILLED, AND RELATED ACTIONS A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT CERTIFYING THE NOTICE OF EXEMPTION FOR THE ORANGETHORPE GRADE SEPARATION PROJECT; AND FINDING THAT LEAD AGENCY CEQA COMPLIANCE OBLIGATIONS HAVE BEEN FULFILLED. The Board of Directors of the Orange County Sanitation District does hereby find: A. The Orange County Sanitation District (OCSD) owns the sewers in the Orangethorpe Grade Separation Project area. B. The Cities of Placentia and Anaheim have contracted with the Orange County Transportation Agency (OCTA) to design and construct the Orangethorpe Grade Separation Project. C. The Orange County Transportation Agency (OCTA) has proposed the relocation of the sewers along Orangethorpe to accommodate a railroad grade separation. D. The City of Placentia is the lead agency under the California Environmental Quality Act (CEQA), for the proposed protection/relocation of the Orangethorpe Grade Separation Project. E. The City of Placentia prepared a Notice of Exemption for the Orangethorpe Grade Separation Project pursuant to the requirements of the California Environmental Quality Act (CEQA), the State CEQA Guidelines. F. The City of Placentia certified the project and the Notice of Exemption on November 17, 2008 and filed a Notice of Determination on November 18, 2008. G. No comments or challenges were filed during the 30-day review period for the Project. H. OCSD is a responsible agency under the California Environmental Quality Act (CEQA). NOW, THEREFORE, the Board of Directors of Orange County Sanitation District, DOES HEREBY RESOLVE, DETERMINE, AND ORDER: 661060.1 http://ecni/sites/board/PublishedBoardAgendaSP2010/14.Orangethorpe 2-77tSP/14.02-CEQA Resolution for 2-77-Art l.docx Section 1: That the Board of Directors certifies the Notice of Exemption as complete and adequate in that it addresses all of the environmental effects of the Project and fully complies with the requirements of CEQA and the CEQA Guidelines environmental analysis procedures. All of the information comprising the Notice of Exemption is on file with the City of Placentia at 401 East Chapman Avenue, Placentia, California. Section 2: The Board of Directors finds that Project has no known potentially significant environmental impacts. Section 3: The Board of Directors finds that no substantial evidence has been presented which would call into question the facts and conclusions of the City of Placentia in preparing and filing a Notice of Exemption. Section 4: The Board of Directors finds that the Notice of Exemption reflects the independent review and judgment of the Orange County Sanitation District. Section 5: The Board of Directors finds that a Notice of Exemption serves as adequate and appropriate environmental documentation for the Project. PASSED AND ADOPTED at a regular meeting held XX, 2012. Chair, Orange County Sanitation District ATTEST: Clerk of the Board 661060.1 http://ecm/sites/board/PublishedBoardAgendaSP2010/14.Orangethorpe 2-7-ZSP/14.02-CEQA Resolution for 2-77-Art l.docx OCTA Orange County Transportation Authority UTILITY AGREEMENT Page 1 of 3 Project County Route Location Orangethorpe Orange Orangethorpe Orangethorpe Avenue Grade Rail Corridor Avenue west of Separation Miller to east of Traub Federal Aid No. N/A Notice OCSD-1 Number Owners File:S0205-1 OCSD Utility Agreement.docx Date: June 6,2012 Grade ® Yes ❑ No Separation: UTILITY AGREEMENT NO: OCSD-1 DATE The Orange County Transportation Authority, (OCTA)proposes to construct a grade separation at Orangethorpe Avenue west of Miller to east of Traub(Grade Separation Project)on behalf of the Cities of Anaheim and Placentia. Orange County Sanitation District (OCSD) owns and maintains sanitary sewer facilities (Facilities) within the boundaries of the Grade Separation Project.The Facilities must be relocated in order to construct the Grade Separation Project. To accommodate the Grade Separation Project, It is hereby mutually agreed that: I. WORK TO BE PERFORMED In accordance with Notice to Owner (in the form attached hereto as Exhibit "A"), OCTA shall relocate the Facilities (Facilities Relocation) on behalf of OCSD within the street rights of way of the Cities of Anaheim and Placentia, OCTA will provide plans, specifications and estimates (Relocation Plans)for the Facilities Relocation to OCSD for review and approval at least 30 calendar days before advertisement of the Relocation Plans for bids. The Relocation Plans will be prepared in conformance with OCSD's regulations, procedures, manuals, standards and specifications, and other applicable agency standards. OCTA shall perform the Facilities Relocation in substantial conformance with the Relocation Plans. No modification,waiver or amendment of the Relocation Plans will be valid unless the same is in writing and executed by duly authorized representatives of OCTA and OCSD. OCTA shall not interrupt the sewer services provided by OCSD to its customers without the prior written approval of OCSD, OCTA's Contractor shall make every effort to minimize the duration of temporary sewer facility use.OCSD shall be responsible for the cost and expense of providing temporary sewer facilities to avoid sewer service interruption. II. LIABILITY FOR WORK The Facilities will be relocated in accordance with OCSD's statutory franchise in the streets of the Cities of Anaheim and Placentia for this relocation, OCTA's expense shall be Zero(0%)and OCSD's expense shall be One Hundred Percent(100%). The estimated cost to OCSD for the Facilities Relocation is Two million three hundred thirty-four thousand and nine hundred thirty-eight Dollars ($2,334,938) (Estimated Cost); provided that, no contract to perform the Facilities Relocation will be let for a sum exceeding Three million Dollars$3,000,000 without the prior,written consent of the Board of directors of OCSD. OCSD acknowledges that Estimated Cost is an estimate only, and that OCTA does not warrant, promise, or otherwise, represent that the facilities Relocation will or can be performed for the Estimated Cost. Nothing in this agreement limits or modifies OCSD's obligation by law to relocate its Facilities to accommodate the Grade Separation Project. III. PERFORMANCE OF WORK: OCTA agrees to perform the Facilities Relocation with its own forces or to cause the Facilities Relocation to be performed by OCTA's contractor as a component of the contract for the Grade Separation Project, and to furnish all necessary labor, materials, tools and equipment required therefore,and to prosecute said work diligently to completion. OCTA agrees to require all legally required bonds, including a Faithful Performance Bond and a Labor and material Bond. IV. PAYMENT FOR WORK OCSD shall be fully responsible for the reasonable payment of the cost and expense to construct the Facilities Relocation. All cost incurred by OCTA to construct the Facilities Relocation (OCSD Project Costs), will be billed pursuant to the terms and conditions of this Agreement. OCSD shall pay its share of the actual cost of the OCSD Project Cost within 90 days after receipt of OCTA's itemized bill in quintuplicate, signed by a responsible official of OCTA and prepared on OCTA letterhead, compiled on the basis of the actual cost and expense incurred and charged or allocated to the Facilities Relocation in accordance with the applicable system of accounts prescribed to OCSD by OCTA. Revised 10/31/2012 OCTA Orange County Transportation Authority UTILITY AGREEMENT Page 2 of 3 It is understood and agreed that the OCTA will not pay for any betterment or increase in capacity of the Facilities. Not more frequently than monthly, but not less than quarterly, OCTA will prepare and submit progress bills for OCSD Project Costs incurred as of the billing date,less estimated credits,if any,applicable to completed work. The OCTA shall submit a final bill to the OCSD for OCSD Project Costs within 90 days after the completion of the Facilities Relocation. The final bill shall be in the form of an itemized statement of the total OCSD Project Costs attributable to the Facilities Relocation, less credits,if any, and less any amounts covered by progress payments. Any and all increases in the OCSD Project Costs that are the direct result of deviations from the work described in Section I of this Agreement shall have the prior concurrence of OCTA. Detailed records from which the bill is compiled shall be retained by the OCTA for a period of three years from the date of the final bill and will be available for audit by OCSD and/or Federal auditors. V. INSURANCE OCTA will require its. Contractors and sub-contractors to maintain the following insurance coverage during the entire period of the Facilities Relocation at levels no less than required by law,with the following minimum insurance coverage: a. Commercial General Liability, to include Products/Completed Operations, Independent Contractors, Contractual Liability and Personal Injury Liability with at least$5,000,000 of coverage. b. Automobile Liability Insurance with the following limits: 1) Bodily Injury and Property Damage with limits of$1,000,000.00 per accident combined single limit; c. Worker's Compensation with limits as required by the State of California. VI. WARRANTY OCTA will obtain on behalf of OCSD a one-year warranty on the work to be performed for all of OCSD sewer facilities from OCTA's construction contractor. OCTA will promptly notify OCSD of the commencement of the warranty period. Such warranty will read as follows: "Contractor guaranteed for a period of one (1) year from the date of final acceptance of the work by OCTA (for OCSD) that the Contractor will repair or move and replace any work,together with any other work which may be displaced in so doing,this is found to be defective in workmanship and/or materials without any expense to OCTA or its assigns, ordinary wear and tear excepted. If Contractor fails to comply with this warranty within one (1) week after being notified in writing, OCTA (OCSD) or is assigns are authorized to proceed to have the defects remedied at Contractors expense. Contractor will pay the cost and charges thereof immediately on demand. If, in the opinion of OCTA(OCSD) or its assigns, defective work detected during the guarantee period creates a dangerous condition or requires immediate correction or modification to prevent further loss to OCTA (OCSD) or its assigns or to prevent interruption of OCTA's (OCSD)or its assigns' operations, OCTA(OCSD)or its assigns will be authorized to repair the condition without prior notice to the Contractor and Contractor will pay the cost and charges thereof immediately upon demand. Contractor's obligations under this section are in addition to Contractor's other express or implied assurances under the Construction Contract and State and in no way diminish any other rights that OCTA (OCSD) or its assigns may have against Contractor for faulty materials,equipment, or work. Contractor agrees that this warranty and guarantee will be freely assignable to the Orange County Sanitation District without any further notice to or consent from Contractor. VII INDEMNIFICATION a. OCTA shall defend, indemnify and hold harmless OCSD, and its officers, agents, elected officials, and employees, from and against all liability,claims, losses and demands, including defense costs and reasonable attorney's fees,whether resulting from court action or otherwise,arising out of the acts or omissions of OCTA, its officers,agents,or employees, in the performance of this Agreement, excepting acts or omissions directed by OCSD,or by its officers, agents or employees, acting within the scope of their employment,for which the OCSD agrees to defend and indemnify OCTA in a like manner. This indemnity shall survive even after the termination of this Agreement. b. OCSD shall defend, indemnify and hold harmless OCTA, and its officers, agents, elected officials, and employees from and against all liability,claims, losses and demands, including defense costs and reasonable attorneys'fees,whether resulting from court action or otherwise,arising out of the acts or omissions of OCSD, its officers,agents,or employees, in the performance of the Agreement, excepting acts or omissions directed by OCTA,or by its officers,agents,or employees, acting within the scope of their employment,for which OCTA agrees to defend and indemnify OCSD in a like manner. This indemnity shall survive even after the termination of this Agreement. VIII GENERAL CONDITIONS If the Grade Separation Project is canceled or modified so as to eliminate the necessity for the Facilities Relocation,OCTA will notify OCSD in writing.Thereafter,the parties will meet and confer to discuss an amendment to this agreement that shall provide for close out of the work. OCTA agrees to cease all work under this agreement on or before the effective date of any such notice. The amendment shall provide that OCTA reimburse OCSD the cost of the Facilities Relocation Project. Such costs shall include but not be limited to the cost of labor and materials. Revised 10/31/2012 OCTA Orange County Transportation Authority UTILITY AGREEMENT Page 3 of 3 OCTA shall submit a Notice of Completion to the OCSD within 30 days of the completion of work described herein. The parties intend the Facilities Relocation to be made within the street rights of way of the Cities of Anaheim and Placentia, subject to all of the rights, restrictions,and limitations of OCSD's statutory franchise in the Cities streets. OCTA agrees to provide all staff, employees, agents, consultants and contractors deemed necessary and appropriate by OCTA to manage, administer, coordinate and oversee engineering design, right-of-way, construction and construction management of the Facilities Relocation. As deemed necessary and appropriate by OCTA, OCTA agrees further to prepare construction contract documents, advertise and award construction contracts, and conduct construction administration and construction management for the Facilities Relocation. OCTA will invite OCSD staff to all construction progress meetings that are focused on the Facilities Relocation. OCTA will provide OCSD staff with contractor schedules and updates. OCTA will notify OCSD 48 hours prior to the need for an inspection. OCTA will cause OCSD to be provided with"as-built drawings of the relocated Facilities upon completion of the Facilities Relocation. OCSD will perfume a recorded closed-circuit television (cctv) review of the Sewer Facilities before and after construction and within the last 20 business days of the warranty period. OCSD will provide a copy of the recordings to OCTA promptly after each review is performed. OCSD shall be entitled to a 60-day submittal review period OCSD shall be entitled to have an on-site inspector in the work area. OCSD shall have ability to witness and verify geotechnical testing and survey elevations. Both parties agree to collaborate and cooperate with staff, consultants, employees, agents and contractors during design and construction of the Facilities Relocations. This agreement contains the entire agreement between the parties and supersedes any prior oral or written statements or agreements between the parties. UTILITY AGREEMENT NO.00SD-1 IN WITNESS WHEREOF,the parties have executed this AGREEMENT as of,and this AGREEMENT shall be effective as of,the"Date"set forth on the face page of this AGREEMENT. ORANGE COUNTY SANITATION DISTRICT: By: Print Name: Title: Approved As To Form: By: Kathy Jenson Special Counsel ORANGE COUNTY TRANSPORTATION AUTHORITY, A public agency By: Print Name: Title: Approved As To Form: By: Kennard R.Smart,Jr. General Counsel Revised 10/31/2012 OPERATIONS COMMITTEE Meeting Date To Bd. of Dir. 11/07/12 11/28/12 AGENDA REPORT Item Number Item Number 4 12 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Nick Arhontes, P.E., Director of Facilities Support Services Engineering Manager: Mark Esquer, P.E., FSSD SUBJECT: PLANT 1 ASPHALT REPLACEMENT JOB NO. FR11-025 PLANT 2 ASPHALT REPLACEMENT JOB NO. FR11-026 GENERAL MANAGER'S RECOMMENDATION A. Award a contract to the lowest responsive and responsible bidder, Century Paving, Inc., for Plant 1 Asphalt Replacement Job No. FR11-025 and Plant 2 Asphalt Replacement Job No. FR11-026, for a total amount not to exceed $448,309; and, B. Approve a contingency of $89,661 (20%). SUMMARY The project includes replacing and/or repairing deteriorated and damaged asphalt pavement in various locations within Reclamation Plant No.1 and Treatment Plant No.2. This project scope is based on the Bucknam and Associates Pavement Condition Assessment report and an Orange County Sanitation District (Sanitation District) staff inspection from January 2008. The Contractor will also repair cracks, pot holes, as well as deteriorated concrete curbs and gutters. The repair work also includes approximately 54,000 cubic yards of slurry seal and/or approximately 2,400 tons of asphalt concrete repair overlay. The Sanitation District advertised for bids on August 28, 2012 and sealed bids were received on October 9, 2012. The bids were evaluated in accordance with the Sanitation District's policies and procedures. Century Paving, Inc. was deemed the lowest responsive, responsible bidder. Staff recommends awarding a contract to Century Paving, Inc. for Plant 1 Asphalt Replacement Job No. FR11-025 and Plant 2 Asphalt Replacement Job No. FR11-026, for a total amount not to exceed $448,309. Page 1 of 2 Summary information on the bid opening for Plant 1 Asphalt Replacement Job No. FR11-025 and Plant 2 Asphalt Replacement Job No. FR11-026 is as follows: Project Budget $1,000,000 Contract Budget $ 503,000 Engineer's Estimate $ 503,000 Bidder Amount of Bid Century Paving, Inc. $448,309 Command Performance Constructors, Inc. $472,599 Ben's Asphalt $539,345 All American Asphalt $732,122 PRIOR COMMITTEE/BOARD ACTIONS None ADDITIONAL INFORMATION The overall goal of this repair project is to reduce the life cycle cost of maintaining asphalt paving within the plants by performing preventative maintenance at the appropriate time to maintain the asset properly. Slurry sealing existing pavements will last about eight (8) years. This is the first of future pavement management projects. CEQA N/A BUDGET/DELEGATION OF AUTHORITY COMPLIANCE This request complies with authority levels of the Sanitation District's Delegation of Authority. This repair will be funded through the Small Capital Replacement /Rehabilitation Project SP-34 (Budget Update Fiscal Year 2012-2013 and 2013-2014 Misc. & Support Projects; Section 8 — Page 111). This Small Capital fund is used to pay for capital repairs and/or direct replacements. The SP-34 budget is adequate to cover these two projects. Date of Approval Contract Amount Contingency 11/28/12 $448,309 $89,661 (20%) ATTACHMENT The following attachment is included in hard copy and may be viewed on-line at the OCSD website (www.ocsd.com) with the complete agenda package and attachments: ( Service Agreement (7 pages) JF:am:dm:gc Page 2 of 2 SERVICE AGREEMENT Plant 1 and 2 Asphalt Replacement Specification No. FR11-025 and FR11-026 THIS AGREEMENT is made and entered into as of the date fully executed below by and between Orange County Sanitation District, with a principal place of business at 10844 Ellis Avenue, Fountain Valley, CA 92708-7018 (hereinafter referred to as "OCSD") and Century Paving, Inc. with a principal business at 14630 East Firestone Blvd., La Mirada, CA 90638 (hereinafter referred to as "Contractor") collectively referred to as the "Parties". RECITALS WHEREAS, OCSD desires to retain the services of Contractor for asphalt replacement at OCSD plant numbers 1 and 2 ("Services"); and WHEREAS, OCSD has chosen Contractor to conduct Services in accordance with Purchasing Resolution No. OCSD07-04; and WHEREAS, on November 28, 2012, the Board of Directors of OCSD, by minute order, authorized execution of this Agreement between OCSD and Contractor; and WHEREAS, Contractor is qualified by virtue of experience, training, and education and expertise to accomplish such Services, NOW THEREFORE, in consideration of the promises and mutual benefits exchanged between the Parties, it is mutually agreed as follows: 1. Introduction 1.1 This Agreement and all exhibits hereto (called the "Agreement") is made by OCSD and Contractor. The Terms and Conditions herein exclusively govern the purchase of Services as described in the Scope of Work, attached hereto and incorporated herein by reference as Exhibit "A„ 1.2 Exhibits to this Agreement are incorporated by reference and made a part of this Agreement as though fully set forth at length herein. Exhibits to this Agreement are as follows in order of precedence: Exhibit "A" Technical Specifications as Modified by Addendum No.1 to the Notice Inviting Bids Exhibit "B" Safety Requirements and Human Resources Policies Exhibit "C" Bid from Contractor Exhibit "D" Acknowledgement of Insurance Requirements 1.3 In the event of any conflict or inconsistency between the provisions of this Agreement and any of the provisions of the exhibits hereto, the provisions of this Agreement shall in all respects govern and control. 1.4 The provisions of this Agreement may be amended or waived only by a writing executed by authorized representatives of both Parties hereto. 1.5 The various headings in this Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any Paragraph or provision hereof. Orange County Sanitation District 1 of 7 Specification Nos. FR11-025& FR11-026 1.6 The term "days", when used in the Agreement, shall mean calendar days, unless otherwise noted as business days. 1.7 The term "hours", when used in this Agreement, shall be as defined in Exhibit "A". 1.8 Contractor shall provide OCSD with all required premiums and/or overtime work at no charge beyond the price provided under"Compensation" below. 1.9 Except as expressly provided otherwise, OCSD accepts no liability for any expenses, losses, or action incurred or undertaken by Contractor as a result of work performed in anticipation of purchases of said services by OCSD. 2. Compensation Compensation for this project shall not exceed the total amount of Four Hundred Forty-eight Thousand Three Hundred Nine and 00/00 Dollars ($448,309.00). 3. Payments Payments shall be made upon approval by OCSD Engineer, John Falkenstein or his designee, of invoices submitted for work completed as described in Exhibit "A". OCSD, at its sole discretion, shall be the determining party as to whether the tasks and deliverables have been satisfactorily completed. 4. Invoices 4.1 OCSD shall pay within 30 days of completion and receipt and approval by OCSD Engineer of an itemized invoice, in a form acceptable to OCSD to enable audit of the charges thereon. Contractor shall not pay less than the prevailing wage, if applicable. Invoices shall include the Purchase Order Number. 4.2 Invoices shall be mailed by Contractor to OCSD'S Administration Office at the following address: Accounts Payable, Finance Department, Orange County Sanitation District, 10844 Ellis Avenue, Fountain Valley, CA 92708-7018. 5. Audit Rights Contractor agrees that, during the term of this Agreement and for a period of three (3) years after its termination, OCSD shall have access to and the right to examine any directly pertinent books, documents, and records of Contractor relating to the invoices submitted by Contractor pursuant to this Agreement. 6. Scope of Work Subject to the terms of this Agreement, Contractor shall perform the Services identified in Exhibit "A". Contractor shall perform said Services in accordance with generally accepted industry and professional standards. 7. Modifications to Scope of Work Requests for modifications to the Scope of Work hereunder can be made by OCSD at any time. All modifications must be made in writing and signed by both Parties. 8. A_greement Term The services provided under this Agreement shall be completed within 150 days from the date of notice to proceed. 9. Termination 9.1 OCSD reserves the right to terminate this Agreement for its convenience, with or without cause, in whole or in part, at any time, by written notice from OCSD, (delivered by certified mail, return receipt requested) of intent to terminate. Upon receipt of a termination notice, Contractor shall immediately discontinue all work under this Agreement (unless the notice directs otherwise). OCSD shall thereafter, within thirty (30) days, pay Contractor for work performed (cost and fee) to the date of termination. Contractor expressly waives any claim to receive Orange County Sanitation District 2 of 7 Specification Nos. FR11-025& FR11-026 anticipated profits to be earned during the uncompleted portion of this Agreement. Such notice of termination shall terminate this Agreement and release OCSD from any further fee, cost or claim hereunder by Contractor other than for work performed to the date of termination. 9.2 OCSD reserves the right to terminate this Agreement immediately upon OCSD'S determination that Contractor is not meeting specification requirements, if the level of service is inadequate, or any other default of this Agreement. 9.3 OCSD may also immediately cancel for default of this Agreement in whole or in part by written notice to Contractor: ■ if Contractor becomes insolvent or files a petition under the Bankruptcy Act; or ■ if Contractor sells its business; or ■ if Contractor breaches any of the terms of this Agreement; or ■ if total amount of compensation exceeds the amount authorized under this Agreement. 9.4 All OCSD property in the possession or control of Contractor shall be returned by Contractor to OCSD upon demand, or at the termination of this Agreement, whichever occurs first. 10. Insurance Contractor and all subcontractors shall purchase and maintain, throughout the life of this Agreement and any periods of warranty or extensions, insurance in amounts equal to the requirements set forth in the signed Acknowledgement of Insurance Requirements (attached hereto and incorporated herein as Exhibit "D"). Contractor shall not commence work under this Agreement until all required insurance is obtained in a form acceptable to OCSD, nor shall Contractor allow any subcontractor to commence service pursuant to a subcontract until all insurance required of the subcontractor has been obtained. Failure to maintain required insurance coverage shall result in termination of this Agreement. 11. Indemnification and Hold Harmless Provision Contractor agrees to save, indemnify, defend and hold harmless OCSD against any and all liability, claims, judgments, cost and demands, including demands arising from injuries or death of persons and damage to property, arising directly or indirectly out of the negligence or willful misconduct of Contractor, its employees or agents, in relation to the rendition of services pursuant to this Agreement, except claims or litigations arising through the sole negligence or willful misconduct of OCSD. Contractor agrees to reimburse OCSD for any expenditure, including reasonable attorney's fees, OCSD may incur by reason of such matters, and, if requested by OCSD, will defend any such suits at the cost and expense of Contractor. 12. Warranty 12.1 Manufacturer's standard warranty shall apply. All manufacturer warranties will begin at date of completion of this Contact. 12.2 Contractor's warranty: If, within the 12-month period following completion of its Services, OCSD informs Contractor that any part of the Services fails to meet the standards required under this Agreement, Contractor shall, within the time agreed to by OCSD and Contractor, take all such actions as are necessary to correct or complete the noted deficiency(ies). 13. Frei_ght(F.O.B. Destination) Contractor assumes full responsibility for all transportation, transportation scheduling, packing, handling, insurance, and other services associated with delivery of all products deemed necessary under this Agreement. Orange County Sanitation District 3 of 7 Specification Nos. FR11-025& FR11-026 14. Force Maieure Neither party shall be liable for delays caused by accident, flood, acts of God, fire, labor trouble, war, acts of government or any other cause beyond its control, but said party shall use reasonable efforts to minimize the extent of the delay. Work affected by a Force Majeure condition may be rescheduled by mutual consent or may be eliminated from the Agreement. 15. Independent Contractor It is agreed that Contractor shall act and be an independent contractor and not an agent or employee of OCSD, and shall obtain no rights to any benefits which accrue to OCSD'S employees. 16. Limitations upon Subcontracting and Assignment Contractor shall not delegate any duties nor assign any rights under this Agreement without the prior written consent of OCSD. Any such attempted delegation or assignment shall be void. 17. Performance Time is of the essence in the performance of this Agreement and the provisions hereof. 18. Licenses, Permits, Ordinances and Regulations Contractor represents and warrants to OCSD that it has obtained all licenses, permits, qualification and approvals of whatever nature that are legally required to engage in this work. Any and all fees required by State, County, City and/or municipal laws, codes and/or tariffs that pertain to work performed under the terms of this Agreement will be paid by Contractor. 19. Applicable Laws and Re-gulations Contractor shall comply with all applicable federal, state, and local laws, rules, and regulations. Contractor also agrees to indemnify and hold harmless from any and all damages and liabilities assessed against OCSD as a result of Contractor's noncompliance therewith. Any permission required by law to be included herein shall be deemed included as a part of this Agreement whether or not specifically referenced. 20. Familiarity with Work By executing this Agreement, Contractor warrants that: 1) it has investigated the work to be performed; 2) it has investigated the site of the work and is aware of all conditions there; and 3) it understands the facilities, difficulties and restrictions of the work under this Agreement. Should Contractor discover any latent or unknown conditions materially differing from those inherent in the work or as represented by OCSD, it shall immediately inform OCSD of this and shall not proceed, except at Contractor's risk, until written instructions are received from OCSD. 21. Public Contracts Law OCSD has been advised by the State of California Director of Industrial Relations of its determination of the general prevailing rate of per diem wages and the general prevailing rate for legal holiday and overtime work in the locality in which the work is to be performed for each craft or type of work needed to execute this Contract. Contractor agrees that not less than said prevailing rates shall be paid to workers employed on this Contract as required by Labor Code Section 1774 of the State of California. 22. Governing Law This Agreement shall be governed by and interpreted under the laws of the State of California and the Parties submit to jurisdiction in Orange County, in the event any action is brought in connection with this Agreement or the performance thereof. 23. Breach The waiver of either party of any breach or violation of, or default under, any provision of this Agreement, shall not be deemed a continuing waiver by such party of any other provision or of any subsequent breach or violation of this Agreement or default thereunder. Any breach by Contractor to which OCSD does not object shall not operate as a waiver of OCSD'S rights to seek remedies available to it for any subsequent breach. Orange County Sanitation District 4 of 7 Specification Nos. FR11-025& FR11-026 24. Remedies In addition to other remedies available in law or equity, if the Contractor fails to make delivery of the goods or Services or repudiates its obligations under this Agreement, or if OCSD rejects the goods or Services or revokes acceptance of the goods or Services, OCSD may (1) cancel the Agreement; (2) recover whatever amount of the purchase price OCSD has paid, and/or (3) "cover" by purchasing, or contracting to purchase, substitute goods or Services for those due from Contractor. In the event OCSD elects to "cover" as described in (3), OCSD shall be entitled to recover from Contractor as damages the difference between the cost of the substitute goods or Services and the contract price, together with any incidental or consequential damages. 25. Dispute Resolution 25.1 In the event of a dispute as to the construction or interpretation of this Agreement, or any rights or obligations hereunder, the Parties shall first attempt, in good faith, to resolve the dispute by mediation. The Parties shall mutually select a mediator to facilitate the resolution of the dispute. If the Parties are unable to agree on a mediator, the mediation shall be conducted in accordance with the Commercial Mediation Rules of the American Arbitration Agreement, through the alternate dispute resolution procedures of Judicial Arbitration through Mediation Services of Orange County ("JAMS"), or any similar organization or entity conducting an alternate dispute resolution process. 25.2 In the event the Parties are unable to timely resolve the dispute through mediation, the issues in dispute shall be submitted to arbitration pursuant to California Code of Civil Procedure, Part 3, Title 9, Sections 1280 et seq. For such purpose, an agreed arbitrator shall be selected, or in the absence of agreement, each party shall select an arbitrator, and those two arbitrators shall select a third. Discovery may be conducted in connection with the arbitration proceeding pursuant to California Code of Civil Procedure Section 1283.05. The arbitrator, or three arbitrators acting as a board, shall take such evidence and make such investigation as deemed appropriate and shall render a written decision on the matter in question. The arbitrator shall decide each and every dispute in accordance with the laws of the State of California. The arbitrator's decision and award shall be subject to review for errors of fact or law in the Superior Court for the County of Orange, with a right of appeal from any judgment issued therein. 26. Survival The provisions of this Agreement dealing with Payment, Warranty, and Forum for Enforcement, shall survive termination or expiration of this Agreement. 27. Severability If any section, subsection, or provision of this Agreement, or any agreement or instrument contemplated hereby, or the application of such section, subsection, or provision is held invalid, the remainder of this Agreement or instrument in the application of such section, subsection or provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby, unless the effect of such invalidity shall be to substantially frustrate the expectations of the Parties. 28. Disclosure Contractor agrees not to disclose, to any third party, data or information generated from this project without the prior written consent from OCSD. 29. Third Party Rights Nothing in this Agreement shall be construed to give any rights or benefits to anyone other than OCSD and Contractor. 30. Dama_ge to OCSD's Property Any of OCSD'S property damaged by Contractor, any subcontractors or by the personnel of either will be subject to repair or replacement by Contractor at no cost to OCSD. 31. Safety Requirements and Human Resources (HR) Policies Contractor shall adhere to the Safety Requirements and HR Policies in Exhibit "B" hereto. Orange County Sanitation District 5 of 7 Specification Nos. FR11-025& FR11-026 32. Attorney's Fees If any action at law or inequity or if any proceeding in the form of an Alternative Dispute Resolution (ADR) is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorney's fees, costs and necessary disbursements in addition to any other relief to which he may be entitled. 33. Authority to Execute The persons executing this Agreement on behalf of the Parties warrant that they are duly authorized to execute this Agreement and that by executing this Agreement, the Parties are formally bound. 34. South Coast Air Quality Management District's (SCAQMD) Requirements It is Contractor's responsibility that all equipment furnished and installed be in accordance with the latest rules and regulations of the South Coast Air Quality Management District (SCAQMD). All contract work practices, which may have associated emissions such as sandblasting, open field spray painting or demolition of asbestos containing components or structures, shall comply with the appropriate rules and regulations of the SCAQMD. 35. Regulatory Requirements Contractor shall perform all work under this Agreement in strict conformance with applicable federal, state, and local regulatory requirements including, but not limited to, 40 CFR 122, 123, 124, 257, 258, 260, and 261, Title 22, 23, and California Water Codes Division 2. 36. Authority to Execute The persons executing this Agreement on behalf of the Parties warrant that they are duly authorized to execute this Agreement and that by executing this Agreement, the Parties are formally bound. 37. Read and Understood By signing this Agreement, Contractor represents that he has read and understood the terms and conditions of the Agreement. 38. Entire Agreement This Agreement constitutes the entire agreement of the Parties and supersedes all prior written or oral and all contemporaneous oral agreements, understandings, and negotiations between the Parties with respect to the subject matter hereof. Orange County Sanitation District 6 of 7 Specification Nos. FR11-025& FR11-026 39. Notices All notices under this Agreement must be in writing. Written notice shall be sent by registered or certified mail, postage prepaid, return receipt requested, or by any other overnight delivery service which delivers to the noticed destination and provides proof of delivery to the sender. Any facsimile notice must be followed within three (3) days by written notice. All notices shall be effective when first received at the following addresses: OCSD: Clarice M. Marcin Senior Contracts Administrator Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, CA 92708-7018 Contractor: Century Paving, Inc. IN WITNESS WHEREOF, the Parties hereto have hereunto set their hands the day and year indicated below. ORANGE COUNTY SANITATION DISTRICT Dated: By: Chair Board of Directors Dated: By: Clerk of the Board Dated: By: Contracts/Purchasing Manager CENTURY PAVING, INC. Dated: By: Print Name and Title of Officer IRS Employer's I.D. Number Orange County Sanitation District Approved as to Form: Clarice M. Marcin Date Senior Contracts Administrator Orange County Sanitation District 7 of 7 Specification Nos. FR11-025& FR11-026 Orange County Sanitation District Plant 1 and 2 Asphalt Replacement Specification No. FR11-025 and FR11-026 Exhibit "A" Technical Specifications as Modified by Addendum No.1 to the Notice Inviting Bids Orange County Sanitation District Specification Nos. FR11-025 &FR11-026 OPERATIONS COMMITTEE Meeting Date To Bd. of Dir. 11/07/12 11/28/12 AGENDA REPORT Item Number Item Number 5 13 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Jim Herberg, Assistant General Manager Project Manager: Gary Conklin SUBJECT: PHASE 2 FACILITY-WIDE SAFETY ASSESSMENT, PROJECT NO. SP-145-1 GENERAL MANAGER'S RECOMMENDATION A. Approve a budget increase of $630,000, for a total project budget of $930,000; B. Approve a Professional Services Agreement with Arcadis U.S., Inc., for Phase 2 Facility-Wide Safety Assessment, Project No. SP-145-1 , providing for services for an amount not to exceed $686,400; and, C. Approve a contingency of $68,640 (10%). SUMMARY Three firms responded to a Request for Proposal (RFP) by submitting proposals. Orange County Sanitation District (Sanitation District) staff reviewed the proposals in accordance with Sanitation District policy. Based on the overall qualifications, expertise, and cost, staff recommends awarding a Professional Services Agreement (PSA) to Arcadis U.S., Inc. (Arcadis) for an amount not to exceed $686,400. A budget increase was anticipated during preparation of the current budget. However, the phase 1 study did not deliver the final budget estimates before the budget preparation deadline. Therefore, staff is now requesting a $630,000 budget increase to $930,000. The Sanitation District has $6 billion in assets that have been constructed over the past 50 years. The safety regulations under which the projects have been constructed have changed and become more stringent over time. The proposed PSA includes a comprehensive safety assessment of Plant Nos. 1 and 2, and the outlying 15 pumping stations. The PSA also includes the development of facility-wide safety standards. This comprehensive study is recommended after several audits were conducted to understand the current state of compliance with current safety regulations and codes. Page 1 of 4 The Sanitation District has continued to deal with historical safety deficiencies on a case-by-case basis over the last 20 years. The two primary drivers for past work have been new regulatory guidance and potential risk to the employees. While we believe that outstanding risk of potential injuries is very low, the consequence of injuries can remain high. Also, the cost to correct structural deficiencies has been high when dealing with these issues on a case-by-case or change order basis. Upon completion of the study, the Sanitation District will benefit greatly by having consistent facility-wide safety standards, and an implementation plan that prioritizes remaining safety-related upgrades across the Capital Improvement Program (CIP). This includes efficiently packaging safety-related upgrades in the design projects. ADDITIONAL INFORMATION Request for Proposals An RFP which outlined the Scope of Work and selection criteria for this study was sent to all firms who were registered in the Online Bidding System. Three proposals were received. A panel of staff members reviewed and ranked each proposal in accordance with the evaluation process set forth in the Sanitation District's Resolution No. OCSD 07-04, Section 5.07. The proposals were evaluated according to the following criteria: Item Weighting 1 Understanding of the Scope of Work 20% 2 Project Approach 20% 3 Qualifications of the Team 20% 4 Qualifications of the Firm 20% 5 Price 20% TABLE 1 PROPOSAL EVALUATION Consultant Evaluator Arcadis Bureau Veritas Dansure (Rank) Rank (Rank) Reviewer A 1 2 3 Reviewer B 1 2 3 Reviewer C 1 2 3 Reviewer D 1 2 3 Reviewer E 1 2 3 Average Rank 1 2 3 Overall Ranking 1 2 3 Proposal Fee $722,303 $649,913 $862,980 Page 2 of 4 Consultant Evaluator Arcadis Bureau Veritas Dansure (Rank) (Rank) (Rank) Negotiated Fee Proposal $686,400 The Arcadis team has the combination of safety assessment experience and wastewater treatment plant design experience needed to identify and prioritize safety issues, and provide cost-effective solutions that insure safety and maintain operational efficiency. Staff conducted negotiations with Arcadis to clarify the requirements of the Scope of Work and to establish the final negotiated fee. Elements reviewed include total labor hours and labor-hour distribution by task as related to the work items, labor overhead rates, and profit calculations. These elements are compared to budgeted amounts, RFP requirements, industry standards, historical data, and Sanitation District guidelines. Based on the above, staff determined the final cost proposal to be fair and reasonable for the Scope of Work. Background: In late 2010 through early 2011, staff identified the need for a facility-wide safety assessment in order to develop a comprehensive plan to address safety issues at Sanitation District facilities. A budget increase was anticipated during preparation of the current budget. However, the phase 1 study did not deliver the final budget estimates before the budget preparation deadline. Therefore, staffs are now requesting a $630,000 budget increase to $930,000. Scope of Work: The proposed study will perform a comprehensive health and safety assessment of the Sanitation District wastewater treatment and collections facilities. This includes the treatment plants in Fountain Valley (Plant No. 1) and Huntington Beach (Plant No. 2), and 15 pump stations. The Scope Elements are summarized below: 1. Develop standards (Protocol) for this evaluation and future Sanitation District designs. 2. Inventory all deficiencies. 3. Provide a risk rating (Severity, Frequency, and Probability). 4. Identify alternative solutions with cost estimates. 5. Develop an implementation plan to prioritize safety-related upgrades. These above elements will be applied to the following 19 safety categories: Page 3 of 4 Battery Areas, Classified Locations, Electrical Systems, Emergency Address and Communications Systems, Emergency Lighting and Exit Signs, Ergonomics, Fall Protection, Fire Extinguishers, Floor and Working Space Loads, Gas Detection Systems, Hot Pipes and Surfaces, Lockout/Tagout and Motor Control Center Labeling, Machine Guarding, Noise, Pump Stations, Stairs and Ladders, Tunnels, Ventilation, and Walking Working Surfaces. This study will prioritize safety-related CIP efforts. The goal is to enhance the health and safety of workers and visitors, meet regulatory compliance, reduce liability, provide standards for future improvements, and ultimately provide the most value from safety- related expenditures. PRIOR COMMITTEE/BOARD ACTIONS None. CEQA Notice of Exemption was filed on April 14, 2011. BUDGET/DELEGATION OF AUTHORITY COMPLIANCE This request complies with authority levels of the Sanitation District's Delegation of Authority. This item has been budgeted (FY2012-13, Section 8, Page 114) at $300,000, which is insufficient. Staff recommends a budget transfer of $630,000 from the Replacement, Rehabilitation, and Refurbishment funds (FY2012-13, Section 14, line 13). Date of Approval Contract Amount Contingency 11/28/12 $686,400 $68,840 (10%) ATTACHMENT The following attachment(s) may be viewed on-line at the OCSD website (www.ocsd.com) with the complete agenda package and attachments: ( Professional Services Agreement (16 pages) GC:sa Page 4 of 4 PLANNING SERVICES AGREEMENT THIS AGREEMENT, is made and entered into to be effective the 28t" day of November, 2012, by and between the ORANGE COUNTY SANITATION DISTRICT, hereinafter referred to as "SANITATION DISTRICT", and ARCADIS U.S., Inc., for purposes of this AGREEMENT hereinafter referred to as "CONSULTANT'. The SANITATION DISTRICT and CONSULTANT are referred to herein collectively as the "Parties" or individually as a "Party." WITNESSETH: WHEREAS, the SANITATION DISTRICT desires to engage a consultant for Phase 2 Facility Wide Safety Assessment, Project No. SP-145-1, to provide planning services and produce a study for comprehensive health and safety assessment of the SANITATION DISTRICT wastewater treatment and collections facilities which includes the treatment plants in Fountain Valley (Plant No. 1) and Huntington Beach (Plant No. 2), and 15 pump stations; and, WHEREAS, CONSULTANT is qualified to provide the necessary services in connection with these requirements and has agreed to provide the necessary planning services; and, WHEREAS, the SANITATION DISTRICT has adopted procedures for the selection of planning services and has proceeded in accordance with said procedures to select CONSULTANT to perform this work; and, WHEREAS, at its regular meeting on November 28, 2012 the Board of Directors, by Minute Order, accepted the recommendation of the Operations Committee to approve this AGREEMENT between the SANITATION DISTRICT and CONSULTANT. NOW, THEREFORE, in consideration of the promises and mutual benefits, which will result to the parties in carrying out the terms of this AGREEMENT, it is mutually agreed as follows: 1. SCOPE OF WORK. CONSULTANT agrees to furnish necessary planning services to accomplish those project elements outlined in the Scope of Work attached hereto as "Attachment A", and by this reference made a part of this AGREEMENT. In the event of a conflict between the Scope of Work and this AGREEMENT, the terms of this AGREEMENT shall prevail. A. The CONSULTANT shall be responsible for the professional quality, technical accuracy, and completeness of the work and services furnished by the CONSULTANT under this AGREEMENT, including the work performed by its Subconsultants. Where approval by the SANITATION DISTRICT is indicated, it is understood to be conceptual approval only and does not relieve the CONSULTANT of responsibility for complying with all applicable laws, regulations, codes, industry standards and liability for damages caused by errors, omissions, noncompliance with industry standards, and/or negligence on the part of the CONSULTANT or its Subconsultants. PSA PROJECT NO. SP-145-1 PHASE 2 FACILITY WIDE SAFETY ASSESSMENT Page 1 of 16 B. CONSULTANT is responsible for the quality of work prepared under this AGREEMENT and shall ensure that all work is performed to the standards of best professional practice for clarity, uniformity, and completeness. CONSULTANT shall timely respond to all comments, suggestions, and recommendations from the SANITATION DISTRICT. All comments from the SANITATION DISTRICT, or its agent, shall be incorporated into the report prior to the next review deadline or addressed, in writing, as to why the comment(s) has/have not been incorporated. CONSULTANT shall ensure that each submittal is 100% accurate for the level of work submitted (i.e. correct references, terms, capitalization or equal status, spelling, punctuation, etc.) C. In the event that CONSULTANT's services and/or work product(s) is not to the satisfaction of the SANITATION DISTRICT and/or does not conform to the requirements of this AGREEMENT or the applicable industry standards, the CONSULTANT shall, without additional compensation, promptly correct or revise any errors or deficiencies in its work product(s) within the timeframe specified by the Project Engineer/Project Manager. The SANITATION DISTRICT may charge to CONSULTANT all costs, expenses and damages associated with any such corrections or revisions. D. Any CAD drawings, figures, and other work shall be produced by CONSULTANT and Subconsultants using the SANITATION DISTRICT CAD Manual. Conversion of CAD work from any other non-standard CAD format to the SANITATION DISTRICT format shall not be acceptable in lieu of this requirement. Electronic files shall conform to the Format for Deliverables listed in "Attachment A", Scope of Work. Any changes to these specifications by the CONSULTANT require advance written approval of the SANITATION DISTRICT. E. All planning services performed by the CONSULTANT, including, but not limited to, all drafts, data, correspondence, proposals, and reports compiled or composed by the CONSULTANT, pursuant to this AGREEMENT, are for the sole use of the SANITATION DISTRICT, its agents and employees. Neither the documents nor their contents shall be released to any third party without the prior written consent of the SANITATION DISTRICT. This provision does not apply to information that (a) was publicly known, or otherwise known to the CONSULTANT, at the time that it was disclosed to the CONSULTANT by the SANITATION DISTRICT, or (b) subsequently becomes publicly known to the CONSULTANT other than through disclosure by the SANITATION DISTRICT. Except for Subconsultants covered by Section 2 (a) neither the documents nor their contents shall be released to any third party without the prior written consent of the SANITATION DISTRICT. PSA PROJECT NO. SP-145-1 PHASE 2 FACILITY WIDE SAFETY ASSESSMENT Page 2 of 16 2. COMPENSATION. Total compensation shall be paid to CONSULTANT for services performed in accordance with the following provisions: A. Total Compensation Total compensation for the services provided under this AGREEMENT shall be in an amount not to exceed Six Hundred Eighty Six Thousand Four Hundred Dollars ($686,400) ("Total Compensation"). Total Compensation to CONSULTANT, which includes burdened labor (salaries plus benefits), overhead, profit, direct costs, and Subconsultant(s) fees and costs, shall not exceed the sum set forth herein. As a portion of the Total Compensation, CONSULTANT shall pay to all Subconsultants, excluding out-of-pocket costs, on an hourly-rate basis per Attachment "B." The SANITATION DISTRICT shall pay to CONSULTANT the actual costs of Subconsultant fees and charges subject to the limitations set forth herein. Profit for CONSULTANT shall be 9.2851%. Amendments shall be governed by the established profit percentage stated in the RFP. The profit percentage shall apply to the Prime CONSULTANT and all Subconsultants. B. Labor. As a portion of the Total Compensation to be paid to CONSULTANT, the SANITATION DISTRICT shall pay to CONSULTANT a sum equal to the fully burdened salaries (salaries plus benefits, overhead and profit) charged on an hourly-rate basis to this Project. CONSULTANT and Subconsultants will provide the SANITATION DISTRICT with certified payroll records of all employees where time is charged to this Project if requested. The benefits rate is 52% of the burdened labor paid by CONSULTANT. C. Overhead. As a portion of the total compensation to be paid to CONSULTANT, the SANITATION DISTRICT shall compensate CONSULTANT for overhead at a rate equal to 80% of burdened labor paid by CONSULTANT pursuant to this Compensation Section hereof. D. Subconsultants. CONSULTANT shall pay all Subconsultants in accordance with Section 2. Total Compensation. Payments shall be based on the hourly-rates per the schedule attached hereto as Attachment "B". E. Direct Costs. As a portion of the Total Compensation, the SANITATION DISTRICT shall reimburse CONSULTANT and Subconsultants for the expenses described as Other Direct Costs, and identified as allowable on Attachment "D" hereto that CONSULTANT and Subconsultants actually incur in performance of this AGREEMENT. Attachment "D" is hereby incorporated by reference. Reimbursement for Other Direct Costs for CONSULTANT and all Subconsultants shall not include markup of any kind. CONSULTANT shall provide to the SANITATION DISTRICT itemized receipts, regardless of amount, and other documentary records to support each request for reimbursement. SANITATION DISTRICT shall pay to CONSULTANT the actual direct costs for an amount not to exceed Thirty Nine Thousand Six Hundred Seven Dollars ($39,607). The PSA PROJECT NO. SP-145-1 PHASE 2 FACILITY WIDE SAFETY ASSESSMENT Page 3 of 16 SANITATION DISTRICT shall also pay to CONSULTANT actual costs for equipment rentals, leases or purchases with prior written approval of the SANITATION DISTRICT. All incidental expenses shall be included in overhead pursuant to Compensation Section above. (See Attachment B). 3. REALLOCATION OF TOTAL COMPENSATION. The SANITATION DISTRICT, by its Director of Engineering, shall have the right to approve a reallocation of the incremental amounts constituting the Total Compensation, provided that the Total Compensation is not increased. 4. When the SANITATION DISTRICT determines that all Work authorized under the AGREEMENT is fully complete and that the SANITATION DISTRICT requires no further work from CONSULTANT, or the AGREEMENT is otherwise terminated or expires in accordance with the terms of the AGREEMENT, the SANITATION DISTRICT shall give the Consultant written notice that the AGREEMENT will be closed out. CONSULTANT shall submit all outstanding billings, work submittals, deliverables, reports or similarly related documents as required under the AGREEMENT within thirty (30) days of receipt of notice of AGREEMENT closeout. Upon receipt of CONSULTANT'S submittals, the SANITATION DISTRICT shall commence a closeout audit of the AGREEMENT and will either: i. Give the CONSULTANT a final AGREEMENT Acceptance: or ii. Advise the CONSULTANT in writing of any outstanding item or items which must be furnished, completed, or corrected at the CONSULTANT'S cost. Notwithstanding the final AGREEMENT acceptance, the CONSULTANT will not be relieved of its obligations hereunder, nor will the CONSULTANT be relieved of its obligations to complete any portions of the work, the non-completion of which were not disclosed to the SANITATION DISTRICT (regardless of whether such nondisclosures were fraudulent, negligent, or otherwise), and the CONSULTANT shall remain obligated under all those provisions of the AGREEMENT which expressly or by their nature extend beyond and survive final AGREEMENT Acceptance. Any failure by the SANITATION DISTRICT to reject the work or to reject the CONSULTANT'S request for final AGREEMENT Acceptance as set forth above shall not be deemed to be an acceptance of the work by the SANITATION DISTRICT for any purpose nor imply acceptance of, or AGREEMENT with, the Consultant's request for final AGREEMENT Acceptance. 5. PAYMENT A. CONSULTANT will submit monthly statements covering services and/or work performed for payment for those items included in Section 2 hereof no later than the second Wednesday of the following month and in the format required by the SANITATION DISTRICT. The format must include, as a minimum: 1) current billing period invoicing, 2) current billing period "total percent invoiced to date", 3) future activities, 4) previous billing period "total invoiced to date", 5) potential items that are not included in the Scope of Work, 6) concerns and possible PSA PROJECT NO. SP-145-1 PHASE 2 FACILITY WIDE SAFETY ASSESSMENT Page 4 of 16 delays, 7) percentage of completion to date, and 8) budget status and amount remaining. Such requests shall be accompanied by such supporting data as may be required by the SANITATION DISTRICT. Monthly Invoice. CONSULTANT shall include in its monthly invoice, a detailed breakdown of costs associated with the performance of any corrections or revisions of the work for that invoicing period. CONSULTANT shall warrant and certify the accuracy of these costs and provide all support documentation required by the SANITATION DISTRICT. CONSULTANT understands that submitted costs are subject to Section 12 Audit Provisions. Upon approval of such payment request by the SANITATION DISTRICT, payment shall be made to CONSULTANT as soon as practicable of one hundred percent (100%) of the invoiced amount on a per-project-element basis. If the SANITATION DISTRICT determines that the work under this AGREEMENT or any specified project element hereunder, is incomplete and that the amount of payment is in excess of: i. The amount considered by the SANITATION DISTRICT's Director of Engineering to be adequate for the protection of the SANITATION DISTRICT; or ii. The percentage of the work accomplished for each project element, The SANITATION DISTRICT may, at the discretion of the Director of Engineering, retain an amount equal to that which insures that the total amount paid to that date does not exceed the percentage of the completed work for the Project in its entirety. B. Upon satisfactory completion by CONSULTANT of the work called for under the terms of this AGREEMENT, and upon acceptance of such work by the SANITATION DISTRICT, CONSULTANT will be paid the unpaid balance of any money due for such work based on the monthly statements, including any retained percentages relating to this portion of the work. C. Upon satisfactory completion of the work performed hereunder and prior to final payment under this AGREEMENT for such work, or prior settlement upon termination of this AGREEMENT, and as a condition precedent thereto, CONSULTANT shall execute and deliver to the SANITATION DISTRICT a release of all claims against the SANITATION DISTRICT arising under or by virtue of this AGREEMENT other than such claims, if any, as may be specifically exempted by CONSULTANT from the operation of the release in stated amounts to be set forth therein. D. Pursuant to the California False Claims Act (Government Code sections 12650- 12655), any CONSULTANT that knowingly submits a false claim to the SANITATION DISTRICT for compensation under the terms of this AGREEMENT may be held liable for treble damages and up to a $10,000 civil penalty for each false claim submitted. This section shall also be binding on all Subconsultants. PSA PROJECT NO. SP-145-1 PHASE 2 FACILITY WIDE SAFETY ASSESSMENT Page 5 of 16 A CONSULTANT or Subconsultant shall be deemed to have submitted a false claim when the CONSULTANT or Subconsultant: (a) knowingly presents or causes to be presented to an officer or employee of the SANITATION DISTRICT a false claim or request for payment or approval; (b) knowingly makes, uses, or causes to be made or used a false record or statement to get a false claim paid or approved by the SANITATION DISTRICT; (c) conspires to defraud the SANITATION DISTRICT by getting a false claim allowed or paid by the SANITATION DISTRICT; (d) knowingly makes, uses, or causes to be made or used a false record or statement to conceal, avoid, or decrease an obligation to the SANITATION DISTRICT; or (e) is a beneficiary of an inadvertent submission of a false claim to the SANITATION DISTRICT, and fails to disclose the false claim to the SANITATION DISTRICT within a reasonable time after discovery of the false claim. 6. PREVAILING WAGES To the extent CONSULTANT intends to utilize employees who will perform work during the contract, as more specifically defined under Labor Code Section 1720, CONSULTANT shall be subject to prevailing wage requirements with respect to such employees. 7. DOCUMENT OWNERSHIP — SUBSEQUENT CHANGES TO PLANS AND SPECIFICATIONS — CONSULTANT PERFORMANCE A. Ownership of Documents for the Planning Services performed, all documents in all forms (electronic, paper, etc.), including, but not limited to, studies, sketches, drawings, computer printouts, disk files, and electronic copies prepared in connection with or related to the Scope of Work or Planning Services, shall be the property of the SANITATION DISTRICT. The SANITATION DISTRICT's ownership of these documents includes use of, reproduction or reuse of and all incidental rights, whether or not the work for which they were prepared has been performed. The SANITATION DISTRICT ownership entitlement arises upon payment or any partial payment for work performed and includes ownership of any and all work product completed prior to that payment. This Section shall apply whether the CONSULTANT's Planning Services are terminated: a) by the completion of the AGREEMENT, or b) in accordance with other provisions of this AGREEMENT. Notwithstanding any other provision of this paragraph or AGREEMENT, the CONSULTANT shall have the right to make copies of all such plans, studies, sketches, drawings, computer printouts and disk files, and specifications. B. CONSULTANT shall not be responsible for damage caused by subsequent changes to or uses of the study or deliverable where the subsequent changes or uses are not authorized or approved by CONSULTANT, provided that the service rendered by CONSULTANT was not a proximate cause of the damage. C. The CONSULTANT's performance shall be evaluated by the SANITATION DISTRICT. A copy of the evaluation shall be sent to the CONSULTANT for comment. The evaluation, together with the comments, shall be retained by the PSA PROJECT NO. SP-145-1 PHASE 2 FACILITY WIDE SAFETY ASSESSMENT Page 6 of 16 SANITATION DISTRICT and may be considered in future CONSULTANT selection processes. 8. INSURANCE A. General i. Insurance shall be issued and underwritten by insurance companies acceptable to the SANITATION DISTRICT. ii. Insurers must have an "A-" Policyholder's Rating, or better, and Financial Rating of at least Class VIII, or better, in accordance with the most current A.M. Best's Guide Rating. However, the SANITATION DISTRICT will accept State Compensation Insurance Fund, for the required policy of Worker's Compensation Insurance subject to the SANITATION DISTRICT's option to require a change in insurer in the event the State Fund financial rating is decreased below "B". Further, the SANITATION DISTRICT will require CONSULTANT to substitute any insurer whose rating drops below the levels herein specified. Said substitution shall occur within 20 days of written notice to CONSULTANT, by the SANITATION DISTRICT or its agent. iii. Coverage shall be in effect prior to the commencement of any work under this AGREEMENT. B. General Liability The CONSULTANT shall maintain during the life of this AGREEMENT, including the period of warranty, Commercial General Liability Insurance written on an occurrence basis providing the following minimum limits of liability coverage: Two Million Dollars ($2,000,000) per occurrence with Two Million Dollars ($2,000,000) aggregate. Said insurance shall include coverage for the following hazards: Premises-Operations, blanket contractual liability (for this AGREEMENT), products liability/completed operations (including any product manufactured or assembled), broad form property damage, blanket contractual liability, independent contractors liability, personal and advertising injury, mobile equipment, owners and contractors protective liability, and cross liability and severability of interest clauses. A statement on an insurance certificate will not be accepted in lieu of the actual additional insured endorsement(s). If requested by SANITATION DISTRICT and applicable, XCU coverage (Explosion, Collapse and Underground) must be included in the General Liability policy and coverage must be reflected on the submitted Certificate of Insurance. C. Umbrella Excess Liability The minimum limits of general liability and automotive liability insurance required, as set forth herein, shall be provided for through either a single policy of primary insurance or a combination of policies of primary and umbrella excess coverage. Umbrella excess liability coverage shall be issued with limits of liability which, when combined with the primary insurance, will equal the minimum limits for general liability and automotive liability. PSA PROJECT NO. SP-145-1 PHASE 2 FACILITY WIDE SAFETY ASSESSMENT Page 7 of 16 D. Automotive/Vehicle liability Insurance The CONSULTANT shall maintain a policy of Automotive Liability insurance on a comprehensive form covering all owned, non-owned, and hired automobiles, trucks, and other vehicles providing the following minimum limits of liability coverage: Combined single limit of One Million Dollars ($1,000,000) or alternatively, One Million Dollars ($1,000,000) per person for bodily injury and One Million Dollars ($1,000,000) per accident for property damage. A statement on an insurance certificate will not be accepted in lieu of the actual additional insured endorsement. E. Worker's Compensation Insurance The CONSULTANT shall provide such Workers' Compensation Insurance as required by the Labor Code of the State of California in the amount of the statutory limit, including Employer's Liability Insurance with a minimum limit of One Million Dollars ($1,000,000) per occurrence. Such Worker's Compensation Insurance shall be endorsed to provide for a waiver of subrogation in favor of the SANITATION DISTRICT. A statement on an insurance certificate will not be accepted in lieu of the actual endorsements unless the insurance carrier is State of California Insurance Fund and the identifier"SCIF" and endorsement numbers 2570 and 2065 are referenced on the certificate of insurance. F. Errors and Omissions/Professional Liability CONSULTANT shall maintain in full force and effect, throughout the term of this AGREEMENT, standard industry form professional negligence errors and omissions insurance coverage in an amount of not less than Two Million Dollars ($2,000,000) with limits in accordance with the provisions of this Paragraph. If the policy of insurance is written on a "claims made" basis, said policy shall be continued in full force and effect at all times during the term of this AGREEMENT, and for a period of five (5) years from the date of the completion of the services hereunder. In the event of termination of said policy during this period, CONSULTANT shall obtain continuing insurance coverage for the prior acts or omissions of CONSULTANT during the course of performing services under the term of this AGREEMENT. Said coverage shall be evidenced by either a new policy evidencing no gap in coverage or by separate extended "tail" coverage with the present or new carrier. In the event the present policy of insurance is written on an "occurrence" basis, said policy shall be continued in full force and effect during the term of this AGREEMENT or until completion of the services provided for in this AGREEMENT, whichever is later. In the event of termination of said policy during this period, new coverage shall be obtained for the required period to insure for the prior acts of CONSULTANT during the course of performing services under the term of this AGREEMENT. PSA PROJECT NO. SP-145-1 PHASE 2 FACILITY WIDE SAFETY ASSESSMENT Page 8 of 16 CONSULTANT shall provide to the SANITATION DISTRICT a certificate of insurance in a form acceptable to the SANITATION DISTRICT indicating the deductible or self-retention amounts and the expiration date of said policy, and shall provide renewal certificates not less than ten (10) days prior to the expiration of each policy term. G. Proof of Coverage The CONSULTANT shall furnish the SANITATION DISTRICT with original certificates and amendatory endorsements effecting coverage. Said policies and endorsements shall conform to the requirements herein stated. All certificates and endorsements are to be received and approved by the SANITATION DISTRICT before work commences. The SANITATION DISTRICT reserves the right to require complete, certified copies of all required insurance policies, including endorsements, effecting the coverage required, at any time. The following are approved forms that must be submitted as proof of coverage: • Certificate of Insurance ACORD Form 25 or equivalent. • Additional Insurance (ISO Form) CG2010 11 85 or (General Liability) The combination of (ISO Forms) CG 2010 1001 and CG 2037 1001 All other Additional Insured endorsements must be submitted for approval by the SANITATION DISTRICT, and the SANITATION DISTRICT may reject alternatives that provide different or less coverage to the SANITATION DISTRICT. • Additional Insured Submit endorsement provided by carrier for (Auto Liability) the SANITATION DISTRICT approval. • Waiver of Subrogation State Compensation Insurance Fund Endorsement No. 2570 or equivalent. • Cancellation Notice State Compensation Insurance Fund Endorsement No. 2065 or equivalent. H. Cancellation Notice Each insurance policy required herein shall be endorsed to state that coverage shall not be cancelled by either party, except after thirty (30) days' prior written notice. The Cancellation Section of ACORD Form 25 shall state the required thirty (30) days' written notification. The policy shall not terminate, nor shall it be cancelled, nor the coverage reduced until thirty (30) days after written notice is given to the SANITATION DISTRICT except for nonpayment of premium, which shall require not less than ten (10) days written notice to the SANITATION DISTRICT. Should there be changes in coverage or an increase in deductible or PSA PROJECT NO. SP-145-1 PHASE 2 FACILITY WIDE SAFETY ASSESSMENT Page 9 of 16 SIR amounts, the CONSULTANT and its insurance broker/agent shall send to the SANITATION DISTRICT a certified letter which includes a description of the changes in coverage and/or any increase in deductible or SIR amounts. The certified letter must be sent to the attention of Contracts Administration, Division 230, and shall be received by the SANITATION DISTRICT not less than thirty (30) days prior to the effective date of the change(s) if the change would reduce coverage or increase deductibles or SIR amounts or otherwise reduce or limit the scope of insurance coverage provided to the SANITATION DISTRICT. I. Primary Insurance All liability policies shall contain a Primary and Non Contributory Clause. Any other insurance maintained by the SANITATION DISTRICT shall be excess and not contributing with the insurance provided by CONSULTANT. J. Separation of Insured All liability policies shall contain a "Separation of Insureds" clause. K. Non-Limiting (if applicable) Nothing in this document shall be construed as limiting in any way, nor shall it limit the indemnification provision contained in this AGREEMENT, or the extent to which CONSULTANT may be held responsible for payment of damages to persons or property. L. Deductibles and Self-Insured Retentions Any deductible and/or self insured retention must be declared to the SANITATION DISTRICT on the Certificate of Insurance. All deductibles and/or self insured retentions require approval by the SANITATION DISTRICT. At the option of the SANITATION DISTRICT, either: the insurer shall reduce or eliminate such deductible or self-insured retention as respects the SANITATION DISTRICT; or the CONSULTANT shall provide a financial guarantee satisfactory to the SANITATION DISTRICT guaranteeing payment of losses and related investigations, claim administration and defense expenses. M. Defense Costs Liability policies shall have a provision that defense costs for all insureds and additional insureds are paid in addition to and do not deplete any policy limits. N. Subconsultants The CONSULTANT shall be responsible to establish insurance requirements for any Subconsultant hired by the CONSULTANT. The insurance shall be in amounts and types reasonably sufficient to deal with the risk of loss involving the Subconsultant's operations and work. PSA PROJECT NO. SP-145-1 PHASE 2 FACILITY WIDE SAFETY ASSESSMENT Page 10 of 16 9. SCOPE CHANGES. In the event of a change in the Scope of Work or a change in the proposed Project, as requested by the SANITATION DISTRICT, the Parties hereto shall execute an Amendment to this AGREEMENT setting forth with particularity all terms of the new AGREEMENT, including, but not limited to any additional CONSULTANT's fees, changes in the period of performance, or modifications to the Scope of Work. CONSULTANT must obtain written approval from the SANITATION DISTRICT Project Manager prior to performing any work outside the approved Scope of Work. When CONSUTLANT foresees the possibility that any of the Project goals will not be met, CONSULTANT shall immediately notify the SANITATION DISTRICT Project Manager to discuss a corrective plan. A corrective plan will be required for any changes to Attachment "A", Scope of Work, schedule, budget, or level of quality. 10. PROJECT TEAM AND SUBCONSULTANTS. CONSULTANT shall provide to SANITATION DISTRICT, prior to execution of this AGREEMENT, the names and full description of all Subconsultants and CONSULTANT's project team members anticipated to be used on this Project under this AGREEMENT by CONSULTANT. CONSULTANT shall include a description of the work and services to be done by each Subconsultant and each of CONSULTANT's Project team member. CONSULTANT shall include the respective compensation amounts for CONSULTANT and each Subconsultant on a per-project-element basis, broken down as indicated in Section 2 (Compensation). There shall be no substitution of the listed Subconsultants and CONSULTANT's project team members without prior written approval by the SANITATION DISTRICT. 11. ENGINEERING REGISTRATION. The CONSULTANT's employees and Subconsultants are comprised of registered engineers and a staff of specialists and draftsmen in each department. The firm itself is not a registered engineer but represents and agrees that wherever, in the performance of this AGREEMENT, the services of a registered engineer is required, such services hereunder will be performed under the direct supervision of registered engineers who are registered in California. 12. AUDIT PROVISIONS A. SANITATION DISTRICT retains the reasonable right to access, review, examine, and audit, any and all books, records, documents and any other evidence of procedures and practices that the SANITATION DISTRICT determines are necessary to discover and verify that the CONSULTANT is in compliance with all requirements under this AGREEMENT. The CONSULTANT shall include the SANITATION DISTRICT's right as described above, in any and all of their subagreements, and shall ensure that these rights are binding upon all Subconsultants. B. SANITATION DISTRICT retains the right to examine CONSULTANT's books, records, documents and any other evidence of procedures and practices that the SANITATION DISTRICT determines are necessary to discover and verify all direct and indirect costs, of whatever nature, which are claimed to have been incurred, or anticipated to be incurred or to ensure CONSULTANT's compliance PSA PROJECT NO. SP-145-1 PHASE 2 FACILITY WIDE SAFETY ASSESSMENT Page 11 of 16 with all requirements under this AGREEMENT during the term of this AGREEMENT and for a period of three (3) years after its termination. C. CONSULTANT shall maintain complete and accurate records in accordance with generally accepted industry standard practices and the SANITATION DISTRICT's policy. The CONSULTANT shall make available to the SANITATION DISTRICT for review and audit, all Project related accounting records and documents, and any other financial data within 15 days after receipt of notice from the SANITATION DISTRICT. Upon SANITATION DISTRICT's request, the CONSULTANT shall submit exact duplicates of originals of all requested records to the SANITATION DISTRICT. If an audit is performed, CONSULTANT shall ensure that a qualified employee of the CONSULTANT will be available to assist SANITATION DISTRICT's auditor in obtaining all Project related accounting records and documents, and any other financial data. 13. LEGAL RELATIONSHIP BETWEEN PARTIES. The legal relationship between the parties hereto is that of an independent contractor and nothing herein shall be deemed to transform CONSULTANT, its staff, independent contractors, or Subconsultants into employees of the SANITATION DISTRICT. CONSULTANT'S staff performing services under the AGREEMENT shall at all times be employees and/or independent contractors of CONSULTANT. CONSULTANT shall monitor and control its staff and pay wages, salaries, and other amounts due directly to its staff in connection with the AGREEMENT. CONSULTANT shall be responsible for hiring, review, and termination of its staff and shall be accountable for all reports and obligations respecting them, such as social security, income tax withholding, unemployment compensation, workers' compensation and similar matters. 14. NOTICES. All notices hereunder and communications regarding the interpretation of the terms of this AGREEMENT, or changes thereto, shall be effected by delivery of said notices in person or by depositing said notices in the U.S. mail, registered or certified mail, return receipt requested, postage prepaid and addressed as follows: ORANGE COUNTY SANITATION DISTRICT 10844 Ellis Avenue Fountain Valley, CA 92708-7018 Attention: Sarah L. Strader, Senior Contracts Administrator CONSULTANT: ARCADIS U.S., Inc. 8001 Irvine Center Drive Suite 1100 Irvine, CA 92618 Attention: Joseph A. Lauria, PE, BCEE All communication regarding the Scope of Work, will be addressed to the Project Manager. Direction from other OCSD staff must be approved by the OCSD Project Manager prior to action from the CONSULTANT. PSA PROJECT NO. SP-145-1 PHASE 2 FACILITY WIDE SAFETY ASSESSMENT Page 12 of 16 15. TERMINATION. The SANITATION DISTRICT may terminate this AGREEMENT at any time, without cause, upon giving thirty (30) days written notice to CONSULTANT. In the event of such termination, CONSULTANT shall be entitled to compensation for work performed on a prorated basis through and including the effective date of termination. CONSULTANT shall be permitted to terminate this AGREEMENT upon thirty (30) days written notice only if CONSULTANT is not compensated for billed amounts in accordance with the provisions of this AGREEMENT, when the same are due. Notice of termination shall be mailed to the SANITATION DISTRICT at the address listed in Paragraph 14. 16. DOCUMENTS AND STUDY MATERIALS. The documents and study materials for this Project shall become the property of the SANITATION DISTRICT upon the termination or completion of the work. CONSULTANT agrees to furnish to the SANITATION DISTRICT copies of all memoranda, correspondence, electronic materials, computation and study materials in its files pertaining to the work described in this AGREEMENT, which is requested in writing by the SANITATION DISTRICT. 17. COMPLIANCE. CONSULTANT certifies by the execution of this AGREEMENT that it pays employees not less than the minimum wage as defined by law, and that it does not discriminate in its employment with regard to race, color, religion, sex or national origin; that it is in compliance with all federal, state and local directives and executive orders regarding non-discrimination in employment; and that it agrees to demonstrate positively and aggressively the principle of equal opportunity in employment. 18. AGREEMENT EXECUTION AUTHORIZATION. Both the SANITATION DISTRICT and CONSULTANT do covenant that each individual executing this document by and on behalf of each Party is a person duly authorized to execute this AGREEMENT for that Party. 19. DISPUTE RESOLUTION. In the event of a dispute arising between the parties regarding performance or interpretation of this AGREEMENT, the dispute shall be resolved by binding arbitration under the auspices of the Judicial Arbitration and Mediation Service ("JAMS"), or similar organization or entity conducting alternate dispute resolution services. 20. ATTORNEY'S FEES, COSTS AND NECESSARY DISBURSEMENTS. If any action at law or inequity or if any proceeding in the form of an Alternative Dispute Resolution (ADR) is necessary to enforce or interpret the terms of this AGREEMENT, the prevailing party shall be entitled to reasonable attorney's fees, costs and necessary disbursements in addition to any other relief to which he may be entitled. 21. WARRANTY. CONSULTANT shall perform its services in accordance with generally accepted industry and professional standards. If, within the 12-month period following completion of its services, the SANITATION DISTRICT informs CONSULTANT that any part of the services fails to meet those standards, CONSULTANT shall, within the time prescribed by the SANITATION DISTRICT, take all such actions as are necessary to correct or complete the noted deficiency(ies). PSA PROJECT NO. SP-145-1 PHASE 2 FACILITY WIDE SAFETY ASSESSMENT Page 13 of 16 22. INDEMNIFICATION. To the fullest extent permitted by law, CONSULTANT shall indemnify, defend (at CONSULTANT'S sole cost and expense and with legal counsel approved by the SANITATION DISTRICT, which approval shall not be unreasonably withheld), protect and hold harmless the SANITATION DISTRICT and all of SANITATION DISTRICT'S officers, directors, employees, CONSULTANT's, and agents (collectively the "Indemnified Parties"), from and against any and all claims, damages, liabilities, causes of action, suits, arbitration awards, losses, judgments, fines, penalties, costs and expenses (including, without limitation, attorneys' fees, disbursements and court costs, and all other professional, expert or CONSULTANT'S fees and costs and the SANITATION DISTRICT'S general and administrative expenses; individually, a "Claim"; collectively, "Claims")which may arise from, pertain to, or relate to any work performed, or any operations, activities, or services provided by CONSULTANT in carrying out its obligations under this AGREEMENT to the extent of the negligent, recklessness and/or willful misconduct of CONSULTANT, its principals, officers, agents, employees, CONSULTANT'S suppliers, CONSULTANT, subconsultants, subcontractors, and/or anyone employed directly or indirectly by any of them, regardless of any contributing negligence or strict liability of an Indemnified Party. Notwithstanding the foregoing, nothing herein shall be construed to require CONSULTANT to indemnify the Indemnified Parties from any Claim arising solely from: (A) the active negligence or willful misconduct of the Indemnified Parties; or (B) a natural disaster or other act of God, such as an earthquake; or (C) the independent action of a third party who is neither one of the Indemnified Parties nor the CONSULTANT, nor its principal, officer, agent, employee, nor CONSULTANT'S supplier, CONSULTANT, subconsultant, subcontractor, nor anyone employed directly or indirectly by any of them. Exceptions (A) through (B) above shall not apply, and CONSULTANT shall, to the fullest extent permitted by law, indemnify the Indemnified Parties, from Claims arising from more than one cause if any such cause taken alone would otherwise result in the obligation to indemnify hereunder. CONSULTANT'S liability for indemnification hereunder is in addition to any liability CONSULTANT may have to the SANITATION DISTRICT for a breach by CONSULTANT of any of the provisions of this AGREEMENT. Under no circumstances shall the insurance requirements and limits set forth in this AGREEMENT be construed to limit CONSULTANT'S indemnification obligation or other liability hereunder. The terms of this AGREEMENT are contractual and the result of negotiation between the parties hereto. Accordingly, any rule of construction of contracts (including, without limitation, California Civil Code Section 1654) that ambiguities are to be construed against the drafting party, shall not be employed in the interpretation of this AGREEMENT. 23. DUTY TO DEFEND. The duty to defend hereunder is wholly independent of and separate from the duty to indemnify and such duty to defend shall exist regardless of any ultimate liability of CONSULTANT and shall be consistent with Civil Code section 2782.8. Such defense obligation shall arise immediately upon presentation of a Claim by any person if, without regard to the merit of the Claim, such Claim could potentially PSA PROJECT NO. SP-145-1 PHASE 2 FACILITY WIDE SAFETY ASSESSMENT Page 14 of 16 result in an obligation to indemnify one or more Indemnified Parties, and upon written notice of such Claim being provided to CONSULTANT. Payment to CONSULTANT by any Indemnified Party or the payment or advance of defense costs by any Indemnified Party shall not be a condition precedent to enforcing such Indemnified Party's rights to indemnification hereunder. In the event a final judgment, arbitration, award, order, settlement, or other final resolution expressly determines that the claim did not arise out of, pertain to, or relate to the negligence, recklessness, or willful misconduct of the CONSULTANT, to any extent, then the DISTRICT will reimburse CONSULTANT for the reasonable costs of defending the Indemnified Parties against such claims. CONSULTANT'S indemnification obligation hereunder shall survive the expiration or earlier termination of this AGREEMENT until such time as action against the Indemnified Parties for such matter indemnified hereunder is fully and finally barred by the applicable statute of limitations. 24. ENTIRE AGREEMENT. This AGREEMENT constitutes the entire understanding and AGREEMENT between the Parties and supersedes all previous negotiations between them pertaining to the subject matter thereof. PSA PROJECT NO. SP-145-1 PHASE 2 FACILITY WIDE SAFETY ASSESSMENT Page 15 of 16 IN WITNESS WHEREOF, this Agreement has been executed in the name of the SANITATION DISTRICT, by its officers thereunto duly authorized, and CONSULTANT as of the day and year first above written. ORANGE COUNTY SANITATION DISTRICT -By-: / a / Z M9rc Du ois Approved as to Form) Date Pontracts, Purchasing and Materials Management Division Manager By Chair, Board of Directors Date By Clerk of the Board Date ARCADIS U.S., INC. By Date By Date ORANGE COUNTY SANITATION DISTRICT By Marc Dubois Date Contracts, Purchasing and Materials Management Division Manager Attachments: Attachment"A" — Scope of Work Attachment"B" — Labor Hour Matrix Attachment "D"—Allowable Direct Costs Attachment "G" — Cost Matrix SLS:yp EDMS:003965289 PSA PROJECT NO. SP-145-1 PHASE 2 FACILITY WIDE SAFETY ASSESSMENT Page 16 of 16 OPERATIONS COMMITTEE Meeting Date To Bd. of Dir. 11/07/12 11/28/12 AGENDA REPORT Item Number Item Number 7 14 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Jim Herberg, Assistant General Manager Project Manager: Jim Colston, Environmental Compliance Manager SUBJECT: Orange County Waste and Recycling Waste Disposal Agreement GENERAL MANAGER'S RECOMMENDATION Approve a Waste Disposal Agreement with the County of Orange (Orange County Waste and Recycling) for the County to receive and dispose of the Orange County Sanitation District's biosolids at the Prima Deshecha Landfill, subject to available capacity, for the period commencing on December 1 , 2012 through June 30, 2020, with a renewal option of 10-years in a total annual amount not to exceed $3,605,288. SUMMARY The Orange County Sanitation District's (OCSD) biosolids management policy (Resolution OCSD 06-10) seeks to maintain a long-term sustainable biosolids program. To carry out this policy, OCSD continues to implement a diverse program of multiple biosolids contractors, markets, and facilities while maintaining fail-safe back-up capacity and developing in-county facilities and markets. For this reason, OCSD has been collaborating with the County of Orange, Orange County Waste and Recycling (County), to provide an in-county option to manage OCSD's biosolids. This option will reduce hauling mileage and cost for OCSD. The County offers to receive and dispose of OCSD's biosolids at their Prima Deshecha Landfill (Prima), subject to available capacity, at a tipping fee of $39.51 per ton of biosolids. This contract rate is subject to Consumer Price Index and other adjustments by the County. The term of the Waste Disposal Agreement (WDA) is for a period of seven years (December 1 , 2012 to June 30, 2020), with one renewal option for 10-years. With a hauling fee of $6 per ton (Yule Ranch Biosolids Contract, effective January 1, 2013), the total cost for disposal at Prima is $45.51 per ton during the first year, which will be OCSD's lowest cost biosolids management option. PRIOR COMMITTEE/BOARD ACTIONS November 2011 — Approval of the 2011 Strategic Plan. Page 1 of 6 ADDITIONAL INFORMATION The Prima Deshecha Sanitary Landfill (Prima) is located in the City of San Juan Capistrano. The landfill was opened in 1976 and is scheduled to close in 2067. Designated as a Class III landfill, Prima is permitted to accept a maximum of 4,000 tons per day (TPD) of construction, demolition, mixed municipal and industrial waste, including a maximum of 350 TPD of biosolids/wastewater sludge. The biosolids must be co-disposed with refuse at a minimum ratio of five-to-one (5/1) municipal waste to biosolids. In addition, the site is permitted to receive a maximum traffic volume of 1797 vehicles per day. Presently, Prima is the only landfill in Orange County that is permitted to accept biosolids, which is not used as an Alternative Daily Cover. The biosolids are mixed with other solid waste material and covered with soil. The South Orange County Wastewater Authority (SOCWA) is currently the only agency in Orange County that is sending biosolids to Prima. Their contract is limited to 85 TPD of biosolids. Prima is receiving an average of 1 ,000 to 1 ,100 tons of refuse per day. In applying biosolids ratio, this means that Prima can accept a total of 200-220 TPD of biosolids. Thus, the remaining available tonnage, subtracting SOCWA's reserved capacity of 85 TPD, is approximately 115-135 TPD. Under OCSD's current policy, OCSD may send a maximum of 100 TPD of the biosolids, which is within Prima's landfill capacity. General Provision of the Waste Disposal Agreement: Permitted Biosolids Disposals: Subject to available capacity (0-135 Wet Tons Per Day or more). If OCSD uses a landfill for biosolids management, OCSD must use Prima first, up to the amount that the County is able to receive (excluding emergencies). OCSD has no minimum requirement to use the landfill. Contract Rate: Base Tipping Fee (with Current CPI): $31.37 10% (Increase for post 2010 agencies entering into Waste Disposal Agreement) $5 (Special Service Fee-Fixed cost) Total Tipping Fee: $39.51 per ton Contract rate is subject to Consumer Price Index adjustments. Contract Term: From December 1, 2012 to June 30, 2020 — Option to renew for an additional 10 Years. Page 2 of 6 Estimated Annual Net Savings with OC Landfill Option Online: Current Cost Distribution without EnerTech % Tons Per Cost per ton Total annual cost Vendor Location Allocated Day (w/fuel) per site Synagro South Kern 35% 260 $ 74.50 $ 7,070,050 Synagro AZ Soils 19% 140 $ 63.50 $ 3,244,850 Tule Ranch Yuma - Farm 47% 350 $ 56.00 $ 7,154,000 100% 750 Total Cost: $17,468,900 Proposed Cost Distribution with OC Landfill % Tons per Cost per ton Total annual cost FVendor Location Allocated day (w/fuel) per site Synagro South Kern 33% 250 $ 74.50 $ 6,798,125 Synagro AZ Soils 10% 75 $ 63.50 $ 1,738,313 Tule Ranch Yuma - Farm 43% 325 $ 56.00 $ 6,643,000 OC Landfill Tule Ranch (Prima) 13% 100 $ 45.51 $ 1,661,115 100% 750 Total Cost: $16,840,553 Annual Net Savings with OC Landfill $628,348 1. $39.51 Tipping Fee plus$6 Hauling Cost/truckload(25 tons)—Hauling cost effective 1/1/13 Potential Risks: During the course of negotiations with the County, OCSD identified potential risks associated with the proposed indemnification language of the WDA. Currently, there are 32 cities, three sanitary districts, and one Joint Powers Authority with existing WDAs with the County. The proposed indemnification language in the WDA with OCSD is identical to the other existing WDAs. The County has taken the position that it cannot alter or modify the original language in a manner that is more favorable than the original WDAs per the standard agreement. Despite negotiations, the County remains resolute not to modify the indemnification language. The proposed indemnification language is narrow in scope, only providing indemnity for claims arising out of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). Even with such indemnification, in the event the County exhausts all of its resources to defend such a claim or to remediate environmental conditions that arise out of CERCLA, OCSD may end up paying a portion of such cost by way of the County increasing the contract rate to offset the costs. As presented, other than CERCLA claims, OCSD will not be fully protected from other claims, including tort or nuisance abatement actions, arising from the County's management and operations of Prima. Page 3 of 6 The County has been operating Prima since 1976, and the County has been receiving and disposing of biosolids into the landfill without any of the above issues occurring. Similar to OCSD, the County is stringently regulated by local, state, and federal agencies and is required to comply with regulations to protect public health and the environment. CEQA OCSD, as lead agency, prepared a Program Environmental Impact Report (PIER) entitled "Orange County Sanitation District 1999 Strategic Plan Program Environmental Impact Report," State Clearinghouse No. 97101065 (the 1999 PEIR). The Board certified the 1999 PEIR on October 27, 1999, and OCSD filed a Notice of Determination on October 29, 1999. The 1999 Strategic Plan analyzed the wastewater collection, treatment, and disposal facilities needed to accommodate the projected growth in OCSD service area through the year 2020, and recommended expansion of OCSD's facilities. The 1999 Strategic Plan projected an increase in OCSD biosolids production from the 1996/1997 baseline level of 180,000 wet tons per year (WTPY), and 7,200 annual haul truck trips, to 421,000 WTPY and 16,840 annual haul truck trips. The 1999 PEIR analyzed the environmental effects of the 1999 Strategic Plan. The 1999 PEIR assumed that an additional 38 haul truck trips per day would be required to accommodate the projected increase in biosolids production (from the baseline of 27 truck trips per day to 65 truck trips per day in 2020). The 1999 PEIR assumed that less than one truck trip per day would travel from OCSD's facilities to the Landfill. The County, as lead agency, prepared a Program Environmental Impact Report entitled "2001 Prima Deshecha General Development Plan Program Environmental Impact Report," State Clearinghouse No. 99041035 (the 2001 PEIR). The County certified the PEIR on November 6, 2001 and filed a Notice of Determination on November 6, 2001. The 2001 PEIR evaluated the environmental impacts associated with long-term development and implementation of the Prima site, including the continued use of the site for landfill purposes. The 2001 PEIR analyzed the environmental impacts associated with an increase in waste disposal at Prima from 2,500 tons per day (TPD) in 2001 to 4,000 TPD in 2014 (and thereafter until 2067). The 2001 PEIR assumed that 350 TPD of the anticipated 4,000 TPD disposed at Prima would be biosolids. The activities contemplated in the WDA are subsequent activities within the scope of the 1999 PEIR and the 2001 PEIR. OCSD's total biosolids production is currently 20-30 truck trips per day, which is within the scope of biosolids production analyzed in the 1999 PEIR of up to 65 truck trips per day. The WDA does not call for an expansion of OCSD's biosolids production. It is contemplated that under the WDA, OCSD will dispose 100 TPD of biosolids at Prima, or 4 truck trips per day. The South Orange County Wastewater Authority (SOCWA) is currently disposing 25 TPD of biosolids at Prima, or 1 truck trip per day. The combination of the existing disposal by SOCWA at Prima (25 TPD) and OCSD's projected disposal at Prima under the WDA (100 TPD), or 125 TPD, is within the 350 TPD analyzed by the 2001 PEIR. Although the WDA calls for a small increase in the daily truck trips analyzed in the 1999 PEIR from OCSD to Prima, from less than 1 truck trip per day to up to 4 truck trips per day, this increase is Page 4 of 6 de minimis. In fact, the truck trips to Prima may actually reduce impacts created by existing conditions. The truck trips to Prima anticipated in the WDA will take the place of currently existing trips to the EnerTech Facility in San Bernardino County. The truck trips to the EnerTech facility are approximately 60 miles each way. The truck trips to Prima are approximately 28 miles each way. The truck trips to Prima will accordingly result in a substantial reduction in the total vehicle miles traveled. OCSD has determined, therefore, that the WDA is within the scope of the 1999 PEIR and the 2001 PEIR and that no additional documentation is required. (Public Resources Code § 21166; CEQA Guidelines §§ 15168, 15162). Even if the WDA was not within the scope of these prior PEIRs, the activities contemplated within the WDA are exempt from CEQA pursuant to: (1) CEQA's Class 1 Exemption (CEQA Guidelines § 15301); and (2) CEQA's "Common Sense" Exemption (CEQA Guidelines § 15061(b)(3)). The Class 1 exemption applies to the operation, repair, maintenance, permitting, leasing, licensing, or minor alteration of existing public or private facilities involving negligible or no expansion of a use beyond the use existing at the time of the lead agency's CEQA determination. (Cal. Code Regs., Tit. 14, § 15301.) Under existing conditions, Prima is receiving 1 truck trip per day of biosolids for disposal from SOCWA. Under the WDA, Prima will receive a total of 5 truck trips per day of biosolids for disposal, including 1 truck trip per day from SOCWA and 4 truck trips per day from OCSD. This is an increase of 4 truck trips per day. OCSD's rate of operation and biosolids production will not change under the WDA. As a result, the WDA calls for the operation of existing public facilities involving a negligible expansion of the uses existing at the time that OCSD's Board considers the WDA and makes its CEQA determination. The Agreement is therefore exempt from CEQA review pursuant to CEQA Guidelines Section 15301. CEQA's "Common Sense" Exemption applies where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment (CEQA Guidelines § 15061(b)(3)). In order to determine whether a project will have a significant environmental effect, a lead agency must first define the baseline environmental conditions. The "project" for CEQA purposes consists of changes in the baseline conditions, if any, that the lead agency's action will cause. The baseline usually consists of the physical conditions that exist when the lead agency commences CEQA review (CEQA Guidelines § 15125(a)). As explained above, the WDA calls for an increase in biosolids disposal at Prima from 1 truck trip per day to 5 truck trips per day, or a total increase of 4 truck trips per day. This is a De Minimis increase in existing conditions. OCSD's rate of operation and biosolids production will not change under the WDA. And, the truck trips to Prima will take the place of existing trips to the EnerTech facility in San Bernardino County, which will result in a substantial reduction in the total vehicle miles traveled by OCSD trucks. It can be seen with certainty, therefore, that there is no possibility that the WDA may have a significant effect on the environment and the WDA is exempt from CEQA review pursuant to CEQA Guidelines Section 15061(b)(3). Page 5 of 6 BUDGET/DELEGATION OF AUTHORITY COMPLIANCE This request complies with authority levels of the Sanitation District's Delegation of Authority. This item has been budgeted. (Line item: Section 5, Page 6). Project contingency funds will not be used for this Agreement. Date of Approval Contract Amount Contingency 11/28/12 $3,605,288 N/A ATTACHMENT The following attachment(s) may be viewed on-line at the OCSD website (www.ocsd.com) with the complete agenda package and attachments: ( Waste Disposal Agreement (23 pages) JC:sa:gc Page 6 of 6 WASTE DISPOSAL AGREEMENT Between THE COUNTY OF ORANGE,CALIFORNIA and the ORANGE COUNTY SANITATION DISTRICT Dated ,2012 County Authorization Date: District Authorization Date: County Notice Address: District Notice Address: Director OC Waste&Recycling 300 N.Flower Street,Suite 400 Santa Ana,CA 92703 Execution Copy TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND INTERPRETATION Section 1.1 DEFINITIONS..................................................................................................................................2 Section 1.2 INTERPRETATION.........................................................................................................................6 ARTICLE II REPRESENTATIONS AND WARRANTIES Section 2.1 REPRESENTATIONS AND WARRANTIES OF THE DISTRICT...............................................7 Section 2.2 REPRESENTATIONS AND WARRANTIES OF THE COUNTY.................................................8 ARTICLE III DELIVERY AND ACCEPTANCE OF WASTE AND PROVISION OF DISPOSAL SERVICE Section 3.1 DELIVERY OF WASTE..................................................................................................................8 Section 3.2 PROVISION OF DISPOSAL SERVICES BY THE COUNTY.......................................................9 Section 3.3 COUNTY RIGHT TO REFUSE WASTE......................................................................................10 Section 3.4 UNINCORPORATED AREA ACCEPTABLE WASTE...............................................................I I Section 3.5 MISCELLANEOUS OPERATIONAL MATTERS.......................................................................I I Section 3.6 OTHER USERS OF THE DISPOSAL SYSTEM. .........................................................................I I Section 3.7 COUNTY PROVISION OF WASTE DIVERSION SERVICES...................................................12 ARTICLE IV DISTRICT CONTRACT RATE Section 4.1 CHARGING AND SECURING PAYMENT OF DISTRICT CONTRACT RATE......................12 Section 4.2 CONTRACT RATE........................................................................................................................12 Section 4.3 RESPONSIBILITY FOR PAYMENT OF THE CONTRACT RATE. ..........................................13 Section 4.4 BILLING OF THE CONTRACT RATE........................................................................................13 Section4.5 [RESERVED].................................................................................................................................13 Section 4.6 AUDITED FINANCIAL STATEMENTS......................................................................................13 Section 4.7 ANNUAL UPDATE OF TEN-YEAR FINANCIAL PROJECTION.............................................13 ARTICLE V BREACH,ENFORCEMENT AND TERMINATION Section5.1 BREACH........................................................................................................................................14 Section 5.2 DISTRICT CONVENIENCE TERMINATION.............................................................................14 Section 5.3 TERMINATION.............................................................................................................................14 Section5.4 NO WAIVERS................................................................................................................................15 Section 5.5 FORUM FOR DISPUTE RESOLUTION......................................................................................15 Execution Copy ARTICLE VI TERM Section 6.1 EFFECTIVE DATE AND TERM. .................................................................................................15 Section6.2 [RESERVED].................................................................................................................................16 ARTICLE VII GENERAL PROVISIONS Section 7.1 OPERATION AND MAINTENANCE OF THE DISPOSAL SYSTEM.......................................16 Section 7.2 UNCONTROLLABLE CIRCUMSTANCES GENERALLY........................................................16 Section 7.3 INDEMNIFICATION.....................................................................................................................17 Section 7.4 RELATIONSHIP OF THE PARTIES............................................................................................17 Section 7.5 LIMITED RECOURSE..................................................................................................................17 Section 7.6 PRE-EXISTING RIGHTS AND LIABILITIES.............................................................................17 Section 7.7 NO VESTED RIGHTS...................................................................................................................18 Section 7.8 LIABILITY FOR COLLECTION,TRANSPORTATION AND PROCESSING..........................18 Section 7.9 NO CONSEQUENTIAL OR PUNITIVE DAMAGES..................................................................18 Section7.10 AMENDMENTS............................................................................................................................18 Section 7.11 NOTICE OF LITIGATION............................................................................................................18 Section 7.12 FURTHER ASSURANCES............................................................................................................18 Section 7.13 ASSIGNMENT OF AGREEMENT...............................................................................................18 Section 7.14 INTEREST ON OVERDUE OBLIGATIONS...............................................................................18 Section 7.15 BINDING EFFECT........................................................................................................................18 Section7.16 NOTICES........................................................................................................................................18 Execution Copy WASTE DISPOSAL AGREEMENT THIS WASTE DISPOSAL AGREEMENT is made and dated as of the date indicated on the cover page hereof between the County of Orange, a political subdivision of the State of California (the "County"), and the Orange County Sanitation District,a county sanitation district duly existing under the laws of the State of California (the"District"). RECITALS The County owns,manages and operates a sanitary landfill system for the disposal of municipal solid waste generated by the cities and the unincorporated area within the County (the "Disposal System"). The Disposal System includes three active landfills and four regional household hazardous waste collection centers. The Disposal System is used for the disposal of municipal solid waste which is not reused, recycled or otherwise diverted from landfill disposal, pursuant to the California Integrated Waste Management Act of 1989 (Division 30 of the California Public Resources Code) (the"Act"). The District operates a wastewater treatment processing facility, which generates Acceptable Waste (defined below)consisting of sewage sludge on a daily basis. In July 2009, the County entered into waste disposal agreements (the "Original Waste Disposal Agreements")with all of the cities in the County,as well as certain other government entities and private solid waste facility operators (the "Original Waste Disposal Agreement Entities"), pursuant to which the County agreed to provide disposal capacity for waste generated in or under the control of the Original Waste Disposal Agreement Entities, and the Original Waste Disposal Agreement Entities agreed to deliver or cause the delivery of waste generated in or under the control of the Original Waste Disposal Agreement Entities to the Disposal System,as more specifically set forth in,and subject to the terms and conditions of,the Original Waste Disposal Agreements. The Original Waste Disposal Agreements provide that the County may enter into additional waste disposal agreements with any Sanitary District, Transfer Station and Independent Hauler, or otherwise accept Acceptable Waste from such parties,but only within the limitations contained in the Original Waste Disposal Agreements. The District has determined that the execution of this Agreement by the District is in the best interest of the District and will serve the public health, safety and welfare by providing greater disposal rate stability, more predictable and reliable long-term disposal service,and sound environmental management. The County has determined that the execution by the County of this Agreement will serve the public health, safety and welfare by providing a more stable, predictable and reliable supply of municipal solid waste and the resulting service payment revenue to the Disposal System,thereby enabling the County to plan,manage,operate and finance improvements to the Disposal System on a more prudent and sound long term,businesslike basis consistent with its obligations to the State and the holders of obligations secured by its Disposal System. Official action approving this Agreement and determining it to be in the public interest and authorizing its execution and delivery was duly taken by the County on the County authorization date indicated on the cover page hereof. Official action approving this Agreement and determining it to be in the best interest of the District, pursuant to Health and Safety Code Section 4742.1, and in the public interest and authorizing its execution and delivery was duly taken by the District on the District authorization date indicated on the cover page hereof. It is,therefore,agreed as follows: Execution Copy ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 DEFINITIONS. As used in this Agreement,the following terms shall have the meanings set forth below. "Acceptable Waste" means all garbage, refuse, rubbish and other materials and substances discarded or rejected as being spent, useless, worthless or in excess to the owners at the time of such discard or rejection and which are normally disposed of by or collected from residential (single family and multi-family), commercial, industrial, governmental and institutional establishments and which are acceptable at Class III landfills under Applicable Law. "Act" means the California Integrated Waste Management Act of 1989 (Division 30 of the California Public Resources Code),as amended,supplemented,superseded and replaced from time to time. "Agreement"means this Waste Disposal Agreement between the County and the District as the same may be amended or modified from time to time in accordance herewith. "Applicable Law" means the Act, the Orange County Code, CERCLA, RCRA, CEQA, any Legal Entitlement and any federal or state rule,regulation,requirement,guideline,permit,action,determination or order of any Governmental Body having jurisdiction, applicable from time to time to the siting, design, permitting, acquisition, construction, equipping, financing, ownership, possession, operation or maintenance of the Disposal System, the transfer, handling, transportation and disposal of Acceptable Waste, Unacceptable Waste, or any other transaction or matter contemplated hereby (including any of the foregoing which concern health, safety, fire, environmental protection,mitigation monitoring plans and building codes). "Board"means the California Integrated Waste Management Board. "CEQA"means the California Environmental Quality Act, codified at Cal. Pub. Res. Code Section 21000 et seq. as amended or superseded,and the regulations promulgated thereunder. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.A. Section 9601 et seq.,as amended or superseded,and the regulations promulgated thereunder. "Change in Law"means any of the following events or conditions which has a material and adverse effect on the performance by the parties of their respective obligations under this Agreement (except for payment obligations), or on the siting, design, permitting, acquisition, construction, equipping, financing, ownership, possession,operation or maintenance of the Disposal System or other matters to which Applicable Law applies: (1) the enactment,adoption,promulgation,issuance,material modification or written change in administrative or judicial interpretation on or after the Original Waste Disposal Agreement Commencement Date of any Applicable Law(other than Applicable Law enacted by the County); (2) the order or judgment of any Governmental Body(other than the County), on or after the Original Waste Disposal Agreement Commencement Date, to the extent such order or judgment is not the result of willful or negligent action, error or omission or lack of reasonable diligence of the County or of the District, whichever is asserting the occurrence of a Change in Law; provided, however, that the contesting in good faith or the failure in good faith to contest any such order or judgment shall not constitute or be construed as such a willful or negligent action,error or omission or lack of reasonable diligence;or (3) the denial of an application for, delay in the review, issuance or renewal of, or suspension, termination, interruption, imposition of a new or more stringent condition in connection with the issuance, renewal or failure of issuance or renewal on or after the Original Waste Disposal Agreement Commencement Date of any Legal Entitlement to the extent that such denial, delay, suspension, termination, interruption,imposition or failure materially and adversely interferes with the performance of this Agreement,if and 2 Execution Copy to the extent that such denial, delay, suspension, termination, interruption, imposition or failure is not the result of willful or negligent action, error or omission or a lack of reasonable diligence of the County or of the District, whichever is asserting the occurrence of a Change in Law;provided,however that the contesting in good faith or the failure in good faith to contest any such denial, delay, suspension, termination, interruption, imposition or failure shall not be construed as such a willful or negligent action,error or omission or lack of reasonable diligence. A"Change in Law"shall include but not be limited to any new or revised requirements relating to the funding or provision of disposal services, including but not limited to any regulations for disposal operations or activities associated with the remediation, closure, funding or monitoring of closed sites with respect to facilities comprising the Disposal System, or facilities which the County previously utilized to provide waste disposal, transfer,recycling,processing or other waste related activities. "Contract Date"means the first date on which this Agreement has been executed by both parties hereto. "Contract Rate" means the Contract Rate payable by the Original Waste Disposal Agreement Entities in accordance with the Original Waste Disposal Agreements, as such Contract Rate may be adjusted from time to time pursuant to the Original Waste Disposal Agreements. "Contract Year" means the fiscal year commencing on July 1 in any year and ending on June 30 of the following year. "County" means the County of Orange, a political subdivision of the State of California and party to this Agreement. "County Plan"means the integrated waste management plan of the County approved by the Board pursuant to the Act as in effect from time to time. "County OC Waste & Recycling Enterprise Fund" means the waste management enterprise fund established and managed by the County pursuant to Section 25261 of the Government Code separate from its other funds and accounts for receipts and disbursements in connection with the Disposal System. "County-wide Recycling Services"has the meaning set forth in subsection 3.7(A)hereof. "Department" means OC Waste & Recycling, and any agency, department or other Governmental Body which succeeds to the duties and powers thereof. "Disposal Services" means the solid waste disposal services to be provided by the County pursuant to the Service Covenant and otherwise hereunder. "Disposal System" means the Orange County Waste Disposal System which includes solid waste disposal operations at three active landfills (Olinda Alpha, Frank R. Bowerman and Prima Deshecha); four regional Household Hazardous Waste Collection Centers; as well as services, such as monitoring and other activities, at closed refuse stations formerly operated by the County,as appropriate under Applicable Law. "District"means the Orange County Sanitation District. "District Acceptable Waste" means all Acceptable Waste constituting sewage sludge generated at the Facility. "District Acceptable Waste" does not include: (i) any sewage sludge which is diverted from landfill disposal through source reduction, recycling, or composting activities; (ii) any sewage sludge temporarily required for research or demonstration purposes; (iii) any other type of Acceptable Waste generated at the Facility,including Acceptable Waste generated from the District's administrative operations or other activities; or (iv) Acceptable Waste generated from screening and grit removal,digester cleaning,or similar means. "District Contract Rate" means the District Contract Rate payable by the District pursuant to Section 4.2 hereof. 3 Execution Copy "Facility"means the District's wastewater treatment facility located at "Governmental Body" means any federal, State, county, city or regional legislative, executive,judicial or other governmental board,agency,authority,commission,administration,court or other body,or any officer thereof acting within the scope of his or her authority. "Hazardous Substance" has the meaning given such term in CERCLA, the Carpenter-Presley-Tanner Hazardous Substance Account Act(California Health and Safety Code Section 25300 et seq.), and Titles 22 and 26 of the California Code of Regulations and other regulations promulgated thereunder. "Hazardous Waste" means (a)any waste which by reason of its quality, concentration, composition or physical,chemical or infectious characteristics may do either of the following: cause, or significantly contribute to, an increase in mortality or an increase in serious irreversible, or incapacitating reversible, illness, or pose a substantial threat or potential hazard to human health or the environment,or any waste which is defined or regulated as a hazardous waste,toxic substance,hazardous chemical substance or mixture,or asbestos under Applicable Law, as amended from time to time including, but not limited to: (1)the Resource Conservation and Recovery Act and the regulations contained in 40 CFR Parts 260-281; (2)the Toxic Substances Control Act (15 U.S.C. Sections 2601 et seq.) and the regulations contained in 40 CFR Parts 761-766; (3)the California Health and Safety Code, Section 25117 (West 1992 & Supp. 1996); (4)the California Public Resources Code, Section 40141 (West 1996); and(5)future additional or substitute Applicable Law pertaining to the identification,treatment, storage or disposal of toxic substances or hazardous wastes;or(b)radioactive materials which are source, special nuclear or by-product material as defined by the Atomic Energy Act of 1954 (42 U.S.C. Section 2011 et seq.) and the regulations contained in 10 CFR Part 40. "Imported Acceptable Waste" means Acceptable Waste that is generated outside of the geographical boundaries of the County and delivered to the Disposal System. "Independent Haulers" means those waste collection/hauler companies primarily engaged as a principal business in the collection and transportation of municipal solid waste generated in the County of Orange which are not obligated to deliver Acceptable Waste generated in the County to the Disposal System pursuant to a franchise, contract,permit or other authorization with a city in the County. "Initial Term"has the meaning specified in Section 6.1(A)hereof. "Legal Entitlement" means all permits, licenses, approvals, authorizations, consents and entitlements of whatever kind and however described which are required under Applicable Law to be obtained or maintained by any person with respect to the Disposal System or the performance of any obligation under this Agreement or the matters covered hereby. "Legal Proceeding" means every action, suit, litigation, arbitration, administrative proceeding, and other legal or equitable proceeding having a bearing upon this Agreement. "Loss-and-Expense" means any and all loss, liability, obligation, damage, delay, penalty, judgment, deposit,cost,expense,claim,demand,charge,tax,or expense,including all fees and costs. "Original Waste Disposal Agreement Commencement Date" means July 23, 2009, which is the date on which the Commencement Date occurred in accordance with the terms of the Original Waste Disposal Agreement. "Original Waste Disposal Agreement Entities" means the Cities and franchise haulers which entered into the Original Waste Disposal Agreements. "Original Waste Disposal Agreements" means the Waste Disposal Agreements entered into between the County and each of the Original Waste Disposal Agreement Entities on or before the Commencement Date. A copy of an Original Waste Disposal Agreement is attached hereto as Appendix A. 4 Execution Copy "Overdue Rate"means the maximum rate of interest permitted by the laws of the State, if applicable,or the prime rate established from time to time by the Bank of America, N.A. or its successors and assigns, plus 2%, whichever is lower. "Posted Disposal Rate"means the per ton tipping fee charged by the County for the disposal of solid waste at the Disposal System by parties which are not entitled to disposal service at the Contract Rate pursuant to this Agreement. "Prohibited Medical Waste" means any medical or infectious waste prohibited or restricted under Applicable Law from being received by or disposed at the Disposal System. "Qualified Household Hazardous Waste"means waste materials determined by the Board, the Department of Health Services,the State Water Resources Control Board,or the Air Resources Board to be: (1) Of a nature that they must be listed as hazardous in State statutes and regulations; (2) Toxic/ignitable/corrosive/reactive; and (3) Carcinogenic/mutagenic/teratogenic; which are discarded from households as opposed to businesses. Qualified Household Hazardous Waste shall not include Unacceptable Waste. "Renewal Term"has the meaning specified in Subsection 6.1(B)hereof. "Resource Conservation and Recovery Act" or "RCRA" means the Resource Conservation and Recovery Act,42 U.S.C.A. Section 6901 et seq.,as amended and superseded. "Sanitary Districts" means the sanitary districts in the County formed pursuant to the Sanitary District Act of 1923, codified at Cal. Ann. Health & Safety Code Section 6400 et seq., as amended, supplemented, superseded and replaced from time to time. "Service Coordinator" means the service coordinator for either party designated pursuant to subsection 3.5(C)hereof. "Service Covenant" means the covenants and agreements of the County set forth in Sections 3.2 and 3.3 hereof. "State"means the State of California. "Term"shall mean the Term of this Agreement. "Ton"means a"short ton"of 2,000 pounds. "Transfer Station" means any materials recovery facility, composting facility, intermediate processing facility, recycling center, transfer station or other waste handling or management facility to which solid waste collected for the City is delivered for processing before disposal in the Disposal System. "Unacceptable Waste" means Hazardous Waste; Hazardous Substances; Prohibited Medical Waste; Qualified Household Hazardous Waste separated from Acceptable Waste; explosives, ordnance, highly flammable substances, and noxious materials and lead-acid batteries (except if delivered in minimal quantities); drums and closed containers; liquid waste, oil, human wastes (other than human waste present in amounts typically present in sewage sludge generated from the Facility); machinery and equipment from commercial or industrial sources, such as hardened gears, shafts, motor vehicles or major components thereof, agricultural equipment, trailers, marine 5 Execution Copy vessels and steel cable; hot loads; and any waste which the Disposal System is prohibited from receiving under Applicable Law. "Uncontrollable Circumstance" means any act, event or condition affecting the Disposal System, the County, the District, or any of their contractors or suppliers to the extent that it materially and adversely affects the ability of either party to perform any obligation under the Agreement(except for payment obligations), if such act, event or condition is beyond the reasonable control of and is not also the result of the willful or negligent act, error or omission or failure to exercise reasonable diligence on the part of the party relying thereon as justification for not performing an obligation or complying with any condition required of such party under the Agreement; provided, however, that the contesting in good faith or the failure in good faith to contest such action or inaction shall not be construed as willful or negligent action or a lack of reasonable diligence of either party. Examples of Uncontrollable Circumstances are: (1) an act of God, landslide, lightning, earthquake, fire, explosion, flood, sabotage or similar occurrence,acts of a public enemy,extortion,war,blockade or insurrection,riot or civil disturbance;and (2) a Change in Law. "Unincorporated Area" means those portions of the County which are not contained within the jurisdictional boundaries of incorporated cities. "Unincorporated Area Acceptable Waste" means Acceptable Waste originating from or generated within the Unincorporated Area. "Waste Disposal Covenant" means the covenants and agreements of the District set forth in Section 3.1 hereof. SECTION 1.2 INTERPRETATION. In this Agreement,unless the context otherwise requires: (A) References Hereto. The terms"hereby", "hereof', "herein", "hereunder"and any similar terms refer to this Agreement, and the term "hereafter" means after, and the term "heretofore" means before, the Contract Date. (B) Gender and Plurality. Words of the masculine gender mean and include correlative words of the feminine and neuter genders and words importing the singular number mean and include the plural number and vice versa. (C) Persons. Words importing persons include firms, companies, associations, general partnerships, limited partnerships, trusts, business trusts, corporations and other legal entities, including public bodies,as well as individuals. (D) Headings. The table of contents and any headings preceding the text of the Articles, Sections and subsections of this Agreement shall be solely for convenience of reference and shall not constitute a part of this Agreement,nor shall they affect its meaning,construction or effect. (E) No Third Party Beneficiaries. Nothing in this Agreement is intended to confer on haulers or any other person other than the parties hereto and their respective permitted successors and assigns hereunder any rights or remedies under or by reason of this Agreement. (F) Counterparts. This Agreement may be executed in any number of original counterparts. All such counterparts shall constitute but one and the same Agreement. (G) Applicable Law. This Agreement shall be governed by and construed in accordance with the Applicable Laws of the State of California. 6 Execution Copy (H) Severability. If any clause, provision, subsection, Section or Article of this Agreement shall be ruled invalid by any court of jurisdiction,then the parties shall: (1)promptly meet and negotiate a substitute for such clause, provision, subsection, Section or Article which shall, to the greatest extent legally permissible, effect the intent of the parties therein; (2)if necessary or desirable to accomplish item(1) above, apply to the court having declared such invalidity for a judicial construction of the invalidated portion of this Agreement; and (3)negotiate such changes in, substitutions for or additions to the remaining provisions of this Agreement as may be necessary in addition to and in conjunction with items (1) and (2) above to effect the intent of the parties in the invalid provision. The invalidity of such clause,provision, subsection, Section or Article shall not affect any of the remaining provisions hereof, and this Agreement shall be construed and enforced as if such invalid portion did not exist,unless such invalidity frustrates the underlying primary purpose of the Agreement. (1) Integration: Preservation of Certain Agreements. This Agreement contains the entire agreement between the parties with respect to the transactions contemplated hereby. This Agreement shall completely and fully supersede all prior understandings and agreements between the Parties with respect to such transactions;provided,however,that this Agreement shall not supersede the following agreements: 1) MOU, dated March 10, 1992, between the City of Brea and the County of Orange regarding the Olinda Alpha Landfill as amended on April 6, 1993 and November 29, 1994; 2) MOU, dated May 11, 1995,between the City of Brea and the County of Orange regarding importation of out-of-County waste to the Olinda Alpha Landfill; 3) Settlement Agreement,dated August 1, 1984,between the City of Irvine and the County of Orange regarding the Bee Canyon Landfill(currently called Frank R.Bowerman Landfill); 4) MOU, dated May 16, 1995, between the City of Irvine and the County of Orange regarding importation of out-of-County waste to the Frank R.Bowerman Landfill; 5) MOU, dated September 12, 1995, and amended November 21, 1995, between the City of San Juan Capistrano and the County of Orange regarding importation of out-of-County waste to the Prima Deshecha Landfill; 6) MOU, dated July 1, 1997, between the City of San Clemente[, the Orange County Flood Control District] and the County of Orange regarding the Prima Deshecha Landfill;and 7) Cooperative Agreement, dated August 15, 2006, between the County and the City of Irvine. (J) Recitals. The recitals to this Agreement are not intended to bind the parties hereto. In the event of a conflict between the recitals and the operative provisions of this Agreement,the operative provisions shall prevail. The recitals shall not be used to interpret the provisions of the Agreement. ARTICLE 11 REPRESENTATIONS AND WARRANTIES SECTION 2.1 REPRESENTATIONS AND WARRANTIES OF THE DISTRICT. The District represents and warrants that: (A) Existence. The District is a county sanitation district validly existing under the Constitution and laws of the State. (B) Due Authorization. The District has duly authorized the execution and delivery of this Agreement,and this Agreement has been duly executed and delivered by the District. 7 Execution Copy SECTION 2.2 REPRESENTATIONS AND WARRANTIES OF THE COUNTY. The County represents and warrants that: (A) Existence. The County is a political subdivision of the State of California validly existing under the Constitution and laws of the State. (B) Due Authorization. The County has duly authorized the execution and delivery of this Agreement,and this Agreement has been duly executed and delivered by the County. ARTICLE III DELIVERY AND ACCEPTANCE OF WASTE AND PROVISION OF DISPOSAL SERVICE SECTION 3.1 DELIVERY OF WASTE. (A) Waste Disposal Covenant. During the Term of this Agreement, the District shall deliver or cause the delivery of all District Acceptable Waste, if any, to the Disposal System, subject to availability of acceptance in the Disposal System,in accordance herewith. (B) Waste Flow Enforcement. The District acknowledges and agrees that in the event the District breaches the Waste Disposal Covenant by disposing of District Acceptable Waste at a landfill outside the Disposal System (other than District Acceptable Waste which the County does not accept at the Disposal System pursuant to Section 3.3.), the District shall pay the County an amount equal to the amount that the District would have been required to pay to the County had the Waste Disposal Covenant not been breached, which shall be calculated by multiplying (x) the number of tons of District Acceptable Waste disposed at landfills outside of the Disposal System (other than District Acceptable Waste which the County does not accept at the Disposal System pursuant to Section 3.3.),times(y)the District Contract Rate in effect at the time of such breach(or any higher rate with respect to which the County has provided notice pursuant to Section 4.2). In the event that the County terminates the Waste Disposal Agreement as a result of such breach,the damages due as a result of such termination shall be equal to (aa) the average monthly deliveries by the District for the twelve months prior to the commencement of the breach multiplied by(bb)the Contract Rate in effect at the time of such breach(or any higher rate with respect to which the County has provided notice pursuant to Section 4.2),multiplied by(cc)the number of months that would have remained in the Term of the Agreement had the termination not occurred. The parties recognize that if the District fails to meet its obligations hereunder,the County will suffer damages and that it is and will be impracticable and extremely difficult to ascertain and determine the exact amount of such damages. Therefore, the parties agree that the damages specified above represent a reasonable estimate of the amount of such damages, considering all of the circumstances existing on the date hereto, including the relationship of the sums to the range of harm to the County that reasonably could be anticipated and anticipation that proof of actual damages would be costly or inconvenient. In signing this Agreement, each party specifically confirms the accuracy of the statements made above and the fact that each party had ample opportunity to consult with legal counsel and obtain an explanation of this liquidated damage provision at the time that this Agreement was made. (C) Waste Information System. The District shall cooperate with the Department in collecting information and otherwise monitoring haulers of District Acceptable Waste in order to assure compliance with this Agreement. Such information may include,to the extent practicable,data pertaining to District Acceptable Waste collected,transported, stored,processed and marketed or disposed of, such collection terms, collection areas, transportation routes and compliance with Applicable Law; and all other information which may reasonably be required by the Department in connection with this Agreement. The District agrees to include in any revised contract, license or permit or other arrangement with haulers of District Acceptable Waste to provide to the County information relating to the District Acceptable Waste transported by such hauler, as well as other sewage sludge generated from the Facility transported by such hauler which was diverted from landfill disposal and therefore did not constitute District Acceptable Waste hereunder, including the location of any facility or location to which such sewage sludge was delivered,and other related information. (D) District Actions Affecting County. The District agrees to carry out and fulfill its responsibilities under this Agreement and Applicable Law so as to permit full and timely compliance by the County 8 Execution Copy with its covenants and agreements with the State. In particular, the District agrees not to conduct, authorize or permit any disposal services for District Acceptable Waste to be provided in competition with the Disposal Services provided by the County hereunder, and not to take or omit to take any action with respect to District Acceptable Waste or its collection, transportation, transfer, storage, treatment or disposal that may materially and adversely affect the County's ability to achieve such timely compliance. (E) No Right of Waste Substitution. Nothing in this Agreement shall authorize or entitle the District to deliver or cause the delivery to the Disposal System of Acceptable Waste originating from or generated outside the jurisdiction of the District, nor obligate the County to receive or dispose of any such Acceptable Waste. The District shall not assign in whole or in part its right to deliver or cause to be delivered District Acceptable Waste to the County hereunder, and shall not permit any Acceptable Waste originating from or generated outside the jurisdiction of the District to be substituted for District Acceptable Waste for any purpose hereunder. The County acknowledges that the provision of wastewater treatment services at the Facility by the District with respect to wastewater generated outside of the County will not violate this section. SECTION 3.2 PROVISION OF DISPOSAL SERVICES BY THE COUNTY. (A) Service Covenant. Commencing on ,2012,the County shall provide or cause the provision of the service of(1)receiving and disposing of all District Acceptable Waste at the Disposal System (or such other facilities, including transfer stations, as the County may determine to use), (2) disposing in accordance with subsection 3.2(C)hereof of District Acceptable Waste which, at any time and for any reason, is in excess of the disposal capacity of the Disposal System, and (3)in accordance with subsection 3.3(C) hereof, disposing of Unacceptable Waste inadvertently accepted at the Disposal System. The County, to the maximum extent permitted under Applicable Law, shall use its best efforts to keep the Olinda Alpha, Prima Deshecha and Frank R. Bowerman Landfills open for the receipt of waste for disposal or transfer of District Acceptable Waste pursuant to this Agreement. The County shall do and perform all acts and things which may be necessary or desirable in connection with its covenants in this subsection, including without limitation all planning,development, administration, implementation, construction, operation, maintenance, management, financing and contract work related thereto or undertaken in connection therewith. The County shall exercise all reasonable efforts to minimize the costs incurred in complying with the Service Covenant consistent with its responsibilities hereunder and under this Agreement,Applicable Law and prudent solid waste management practice and environmental considerations. (B) Particular Facilities. The Department and the District shall consult and cooperate in determining whether and to what extent from time to time other landfills other than that primarily used by the District shall be utilized to receive District Acceptable Waste. The District acknowledges that, due to the fact that District Acceptable Waste constitutes sewage sludge, (i) the acceptance at the Disposal System of District Acceptable Waste may be limited or prohibited by the Legal Entitlements during periods when Acceptable Waste otherwise generated in the County is not subject to such prohibition or limitation; and (ii) the Department may be required to direct District Acceptable Waste to particular facilities within the Disposal System during periods when Acceptable Waste is not generally subject to such requirements.As of the Contract Date,the only landfill within the Disposal System at which District Acceptable Waste may currently be accepted is the Prima Deshecha Landfill. The Department shall immediately advise the District by telephone of any situation, event or circumstance which results in the partial or complete inability of the County to receive District Acceptable Waste at Prima Deshecha Landfill,its effect on the County's ability to perform its obligations hereunder,and the County's best estimate of the probable duration The Department shall confirm such advice in writing within 24 hours of the occurrence of any such inability. The County shall use its best efforts to resume normal operation of the landfill primarily used by the District as soon as possible. In the event of a temporary material increase in average daily deliveries of District Acceptable Waste from the District which the County reasonably believes could result in the permitted daily disposal capacity limit to be exceeded with respect to a particular landfill within the Disposal System, to the extent permitted by Legal Entitlements, the County shall have the right to redirect the increased District Acceptable Waste to another landfill within the Disposal System for the duration of the increase in average daily deliveries. (C) Particular Restrictions Relating to the Receipt of District Acceptable Waste. The District acknowledges that the Legal Entitlements relating to the Prima Deshecha Landfill contain particular limitations relating to sewage sludge not generally applicable to Acceptable Waste, including a limit on the maximum amount of sewage sludge that may be accepted equal to the lesser of (x) 350 tons per day or (z) 16.6% of the total 9 Execution Copy Acceptable Waste accepted per day. The District also acknowledges that Changes in Law may have additional specific requirements or prohibitions relating to sewage sludge (and therefore District Acceptable Waste). The County shall be excused from its obligation to accept District Acceptable Waste pursuant to the Service Covenant in the event that the County is prohibited from doing so pursuant to any Legal Entitlements relating to the Disposal System. In the event that a Change in Law precludes or further limits the County from accepting District Acceptable Waste at the Disposal System, the County shall use all efforts to effectuate executive, legislative or judicial change in or relief from the applicability of such law so as to enable the County lawfully to resume compliance with such covenants as soon as possible following the Change in Law. SECTION 3.3 COUNTY RIGHT TO REFUSE WASTE. (A) Right of Refusal. Notwithstanding any other provision hereof, the County may refuse delivery of: (1) Hazardous Waste; (2) District Acceptable Waste delivered at hours other than those provided in Section 3.5 hereof; (3) Waste that does not constitute District Acceptable Waste; (4) Waste that is delivered by any party which has not executed a Waste Disposal Agreement; (5) District Acceptable Waste the acceptance of which would cause the County to violate any Legal Entitlements; (6) District Acceptable Waste the acceptance of which would materially and adversely affect the ability of the County to receive and dispose of Acceptable Waste from(i)the parties identified in the MOU, dated July 1, 1997,between the City of San Clemente, the Orange County Flood Control District and the County of Orange, including successor entities, regarding the Prima Deshecha Landfill, or (ii) the Original Waste Disposal Agreement Entities in accordance with the Original Waste Disposal Agreements. (B) Identification of Unacceptable Waste. The Department shall have the right (but not the duty or the obligation)to inspect any vehicles delivering District Acceptable Waste to the Disposal System,and may require that the operator of the vehicle remove any Unacceptable Waste from such vehicle before it is unloaded. If the Department determines that it is impractical to separate District Acceptable Waste from Unacceptable Waste in any vehicle, or if the operator of the vehicle delivering such waste is unwilling to make such separation, or if any vehicle is carrying waste which may spill or leak,then the Department may reject the entire vehicle,and the District shall forthwith remove or cause the removal of the entire delivery from the Disposal System. The Department may take all reasonable measures to prevent waste from being blown or scattered before and during unloading. The District shall cause the operators of any vehicles delivering District Acceptable Waste to observe and comply with Applicable Law, the operating rules and regulations of the Department, and the provisions of this Agreement prohibiting the delivery of Unacceptable Waste to the Disposal System. (C) Hazardous Waste and Hazardous Substances. The parties acknowledge that the Disposal System has not been designed or permitted, and is not intended to be used in any manner or to any extent, for the handling,transportation, storage or disposal of Hazardous Waste or Hazardous Substances. Neither the County nor the District shall countenance or knowingly permit the delivery of Hazardous Waste or Hazardous Substances to the Disposal System. (D) Disposal of Unacceptable Waste and Hazardous Waste. If Unacceptable Waste or Hazardous Waste is discovered in a vehicle at any landfill within the Disposal System,the driver of the vehicle will not be permitted to discharge the load. If a vehicle is observed unloading Unacceptable Waste or Hazardous Waste in the tipping area of a landfill within the Disposal System, Department personnel will use reasonable efforts to 10 Execution Copy assure that such material has been characterized, properly secured, and its disposition resolved. The return or reloading onto the delivery vehicle of any Hazardous Waste, Prohibited Medical Waste or other waste requiring handling or transportation shall be conducted in accordance with Applicable Law. Whenever Hazardous Waste is detected at any landfill within the Disposal System, the Department shall take immediate action in accordance with Applicable Law. SECTION 3.4 UNINCORPORATED AREA ACCEPTABLE WASTE. Commencing on the Contract Date,the County in accordance with Applicable Law shall provide or cause to be provided the service of disposing of non-recycled Acceptable Waste originating or generated within the Unincorporated Area and, with respect to such waste, shall comply with the Waste Disposal Covenant as if the County constituted a City subject to the Waste Disposal Covenant hereunder. Rates charged by the County for the disposal of each class of non-recycled Acceptable Waste generated in the Unincorporated Area shall be the same as the Contract Fee charged for the disposal of each class of District Acceptable Waste. The County shall use its best efforts to preserve, protect and defend its right to exercise and comply with the Waste Disposal Covenant (with respect to non-recycled Acceptable Waste generated in the Unincorporated Area) against any challenge thereto, legal or otherwise,by a franchise hauler or any other person,based upon breach of contract,violation of law or any other legal theory. The County shall bear the cost and expense of any such Legal Proceeding or other challenge (with respect to non-recycled Acceptable Waste generated in the Unincorporated Area). SECTION 3.5 MISCELLANEOUS OPERATIONAL MATTERS. (A) Operating Hours. The County shall keep the Disposal System open for the receiving of District Acceptable Waste during such regular operating hours as may be established by the Department in the operating rules and regulations applicable to the Disposal System. The County shall utilize best efforts to maintain substantially similar hours, as were in effect on the Contract Date, for the receipt of waste through the term of this Agreement(subject to Applicable Law). (B) Scales and Weighing. The Department shall operate and maintain permanent scales at the Disposal System. The Department shall weigh all vehicles delivering waste by or on behalf of the District (whether or not the County accepts such waste)and prepare a daily weight record with regard to such delivery. (C) Service Coordinator. The County and the District each shall designate in writing on or prior to the Contract Date a person to transmit instructions, receive information, and otherwise coordinate service matters arising pursuant to this Agreement(each a"Service Coordinator"). Either party may designate a successor or substitute Service Coordinator at any time by notice to the other party. (D) Review of Records. Each party may review the other party's books and records with respect to matters relevant to the performance by either party under this Agreement or otherwise related to the operation of the Disposal System to the extent allowed under the California Public Records Act(interpreted as if the parties to this Agreement were natural persons for purposes of the Public Records Act). SECTION 3.6 OTHER USERS OF THE DISPOSAL SYSTEM. (A) FRESERVED] (B) Other County Entities. The County shall have the right to enter into waste disposal agreements with other Orange County entities in accordance with the Original Waste Disposal Agreements. (C) Receipt of Imported Acceptable Waste on a Contract Basis. The County shall have the right to enter into a contract or other agreement with any municipal or private non-County entity for the delivery of Imported Acceptable Waste in accordance with the Original Waste Disposal Agreements. (D) Self Haulers. The Department and the County acknowledge that Self-Haulers shall be entitled to deliver Self-Hauled Waste to the Disposal System, on a non-contract basis, at the Posted Disposal Rate. Such Self-Haulers shall not be entitled to dispose of Acceptable Waste for the Contract Rate. 11 Execution Copy (E) [RESERVED] SECTION 3.7 COUNTY PROVISION OF WASTE DIVERSION SERVICES. (A) County-Wide Recycling Services. This Agreement does not require the County to provide for any source reduction,materials recovery,recycling,composting,or other waste diversion services by the County nor any payment therefor by the District; provided,however, any County-Wide Recycling Services may be funded through the County OC Waste&Recycling Enterprise Fund. Any such recycling services may be expanded, contracted or modified by the County at any time in its sole discretion. (B) Separate District-County Diversion Service Agreements. Nothing in this Agreement is intended to limit the right of the County to enter into a separate agreement with the District or any other person to provide source reduction, materials recovery, recycling, composting or other waste diversion services. Any such program conducted by the County, whether in participation with the District, any of the Original Waste Disposal Agreement Entities, other cities, Sanitary Districts, Transfer Stations, Independent Haulers,Unincorporated Area or non-County entity, shall be operated, managed and accounted for as a program separate and distinct from the Disposal Services program contemplated by the Disposal Agreements and shall not be funded through the general revenues of the Disposal System. ARTICLE IV DISTRICT CONTRACT RATE SECTION 4.1 CHARGING AND SECURING PAYMENT OF DISTRICT CONTRACT RATE. The District acknowledges that the County shall have the right to charge and collect a District Contract Rate for the acceptance and disposal of District Acceptable Waste delivered to the System by the District. The District Contract Rate shall be calculated and established, and may be modified, as provided in Section 4.2 hereof. In addition, the District acknowledges that the County shall have the right to establish as part of the operating rules and regulations reasonable measures to secure the payment of the District Contract Rate. SECTION 4.2 CONTRACT RATE. (A) Establishment of Contract Rate. The District Contract Rate payable by the District shall at all times be equal to 110% of the then-current Contract Rate (e.g. Contract Rate plus ten percent) payable by Original Waste Disposal Agreement Entities pursuant to the Original Waste Disposal Agreements, as such Contract Rate may be adjusted or escalated from time to time pursuant to the Original Waste Disposal Agreements. The County shall provide notice to the District of any adjustment to the Contract Rate under the Original Waste Disposal Agreements at the same time it provides notice thereof to the Original Waste Disposal Agreement Entities pursuant to the Original Waste Disposal Agreements. (B) [RESERVED] (C) [RESERVED] (D) FRESERVED] (E) Special Charges. Notwithstanding Section 4.2(A), the County shall have the right to impose special charges for the receipt of District Acceptable Waste in the event that Legal Entitlements or operating considerations require special handling of sewage sludge, or if any surcharge or additional fee is payable by the County with respect to District Acceptable Waste under any host community or similar agreement between the County and any city in the County. Such special charges shall be calculated to reflect the reasonable incremental costs to the County of such special handling of sewage sludge.In addition,in the event that the Board of Supervisors of the County makes a determination to implement a facility(including but not limited to a transfer station, landfill, conversion technology facility, or a materials recovery or processing facility), which facility would be intended to provide for disposal alternatives after the closure of one or more of the landfills currently operating within the 12 Execution Copy Disposal System,the County may impose an additional charge of$0.50 per ton of Acceptable Waste in order to pay the costs of the study,development,planning,construction and/or operation of such facility. (F) FRESERVED] (G) FRESERVED1 (H) [RESERVED] (I) [RESERVED] (J) [RESERVED] SECTION 4.3 RESPONSIBILITY FOR PAYMENT OF THE CONTRACT RATE. (A) Payment by the District. The District shall be responsible for the payment of the District Contract Rate, and shall take all such budgetary, appropriation and other action as may be necessary to provide for the timely payment of the District Contract Rate. Such action may include, depending upon the means authorized by the District to provide for such payment, the collection of user fees, generator charges or other similar impositions. From the Contract Date to the date of expiration or termination of this Agreement,the obligation to the District to pay the Contract Rate shall be absolute and unconditional and shall not be subject to delay or diminution by reason of set-off,abatement,counterclaim,existence of a dispute or otherwise. (B) FRESERVEDI (C) Disputes. If the District disputes any amount billed by the County in any Billing Statement, the District shall nonetheless pay the billed amount and shall provide the County with written objection within 30 days of the receipt of such Billing Statement indicating the amount that is being disputed and providing all reasons then known to the District for any objection to or disagreement with such amount. If the District and the County are not able to resolve such dispute within 30 days after the District's objection, either party may pursue appropriate legal remedies. SECTION 4.4 BILLING OF THE CONTRACT RATE. The County shall continue to bill District Contract Rates after the Commencement Date, in the same manner as it has customarily billed tipping fees. Subject to the other provisions of this Agreement,the County shall have the right to modify or amend such manner of billing on reasonable notice to affected parties. SECTION 4.5 [RESERVED] SECTION 4.6 AUDITED FINANCIAL STATEMENTS. The County shall annually, on or before January 1 each year, prepare or cause to be prepared and have on file for inspection an annual report for the preceding Contract Year,accompanied by a certificate of an independent public accountant or of the County Auditor and Controller as to the examination of the financial statements therein (describing such statements as fairly presenting the information therein in conformity with generally accepted accounting principles) relating to the Disposal System,the Disposal Services, and the fiscal activities of the County OC Waste Disposal Enterprise Fund, and including statements in reasonable detail of the financial condition of the County OC Waste Disposal Enterprise Fund as of the end of the Contract Year and revenue and expenses for the Contract Year. SECTION 4.7 ANNUAL UPDATE OF TEN-YEAR FINANCIAL PROJECTION. The County shall annually, on or before May 1 of each year, prepare or cause to be prepared, an updated Ten-Year Financial Projection for the Disposal System. Said Financial Projection shall include at least two full years of prior actual data and ten years of future projections including the following elements: 1. County Acceptable Waste,in tons; 13 Execution Copy 2. Imported Acceptable Waste,in tons; 3. Revenues and expenditures; 4. Cash fund balances, including all monies in the County Solid Waste Enterprise Fund; 5. Projected liabilities for closure and post closure as well as reasonable reserves for other environmental costs. The purpose of the Ten-Year Financial Projection is to keep the District fully informed about the future financial condition of the Disposal System. The County shall cause a copy of the Ten-Year Financial Projection to be delivered to the District no later than May 1 of each year. ARTICLE V BREACH,ENFORCEMENT AND TERMINATION SECTION 5.1 BREACH. The parties agree that in the event either party breaches any obligation under this Agreement or any representation made by either party hereunder is untrue in any material respect, the other party shall have the right to take any action at law or in equity(including actions for injunctive relief,mandamus and specific performance)it may have to enforce the payment of any amounts due or the performance of any obligations to be performed hereunder. Neither party shall have the right to terminate this Agreement except as provided in Section 5.2 and Section 5.3 hereof or as otherwise provided in this Agreement. SECTION 5.2 DISTRICT CONVENIENCE TERMINATION. The District shall have the right to terminate this Agreement in its sole discretion, for its convenience and without cause at any time during the Term hereof upon 90 days' written notice to the County. If the District exercises its rights to terminate the Agreement pursuant to this Section, the District shall pay the County a termination fee equal to the District Contract Rate in effect at the time of such termination (or any higher rate with respect to which the County has provided notice pursuant to Section 4.2) multiplied by the number of tons of District Acceptable Waste delivered to the Disposal System during the preceding twelve months (or, if the District had been in breach of the Waste Disposal Covenant during such prior months, such amount as would have been delivered if the District had complied with the Waste Disposal Covenant),multiplied by the number of years remaining in the Term of the Agreement. SECTION 5.3 TERMINATION. (A) By District. Except as expressly provided herein, the District shall have no right to terminate this Agreement for cause except in the event of the repeated failure or refusal by the County substantially to perform any material obligation under this Agreement unless such failure or refusal is excused by an Uncontrollable Circumstance; except that no such failure or refusal shall give the District the right to terminate this Agreement for cause under this subsection unless: (1) The District has given prior written notice to the County stating that a specified failure or refusal to perform exists which will, unless corrected, constitute a material breach of this Agreement on the part of the County and which will,in its opinion,give the District the right to terminate this Agreement for cause under this subsection unless such breach is corrected within a reasonable period of time,and (2) The County has neither challenged in an appropriate forum(in accordance with Section 5.5) the District's conclusion that such failure or refusal to perform has occurred or constitutes a material breach of this Agreement nor corrected or diligently taken steps to correct such breach within a reasonable period of time not more than 90 days from the date of the notice given pursuant to clause (1) of this subsection (but if the County shall have diligently taken steps to correct such breach within such reasonable period of time,the same shall not constitute a breach giving rise to the right of termination for as long as the County is continuing to take such steps to correct such breach). 14 Execution Copy (B) By County. Except as expressly provided herein, the County shall have no right to terminate this Agreement for cause except in the event of the repeated failure or refusal by the District substantially to perform any material obligation under this Agreement unless such failure or refusal is excused by an Uncontrollable Circumstance; except that no such failure or refusal shall give the County the right to terminate this Agreement for cause under this subsection unless: (1) The County has given prior written notice to the District stating that a specified failure or refusal to perform exists which will, unless corrected, constitute a material breach of this Agreement on the part of the District and which will, in its opinion, give the County right to terminate this Agreement for cause under this subsection unless such breach is corrected within a reasonable period of time,and (2) The District has neither challenged in an appropriate forum(in accordance with Section 5.5) the County's conclusion that such failure or refusal to perform has occurred or constitutes a material breach of this Agreement nor corrected or diligently taken steps to correct such breach within a reasonable period of time not more than 90 days from the date of the notice given pursuant to clause (1) of this subsection (but if the District shall have diligently taken steps to correct such breach within such reasonable period of time,the same shall not constitute a breach giving rise to the right of termination for as long as the District is continuing to take such steps to correct such breach). SECTION 5.4 NO WAIVERS. No action of the County or the District pursuant to this Agreement (including,but not limited to,any investigation or payment), and no failure to act,shall constitute a waiver by either party of the other party's compliance with any term or provision of this Agreement. No course of dealing or delay by the County or the District in exercising any right, power or remedy under this Agreement shall operate as a waiver thereof or otherwise prejudice such party's rights,powers and remedies. No single or partial exercise of(or failure to exercise)any right,power or remedy of the County or the District under this Agreement shall preclude any other or further exercise thereof of the exercise of any other right,power or remedy. SECTION 5.5 FORUM FOR DISPUTE RESOLUTION. It is the express intention of the parties that all legal actions and proceedings related to this Agreement or to the Disposal System or to any rights or any relationship between the parties arising therefrom shall be solely and exclusively initiated and maintained in courts of the State of California having appropriate jurisdiction. ARTICLE VI TERM SECTION 6.1 EFFECTIVE DATE AND TERM. (A) Initial Term. This Agreement shall become effective, shall be in full force and effect and shall be legally binding upon the District and the County from the Contract Date and shall continue in full force and effect until June 30, 2020, unless earlier terminated in accordance with its terms, in which event the Term shall be deemed to have expired as of the date of such termination. (B) Option to Renew. This Agreement shall be subject to renewal by mutual agreement of the parties, on or before June 30,2018, for an additional term of ten years(the"Renewal Term")on the same terms and conditions as are applicable during the Initial Term hereof. The District shall give the County written notice of its irrevocable election to renew this Agreement on or before June 30, 2017. If the parties do not renew this Agreement by June 30,2018,the Agreement shall expire on June 30,2020. (C) Contract Rate During Renewal Term. In connection with the parties' right to renew this Agreement for an additional ten-year term pursuant to Section 6.1(B),the parties shall, on or before June 30, 2018, negotiate an applicable change in the District Contract Rate for such renewal term. In determining any revisions to the Contract Rate to be applicable during any renewal period, in addition to the circumstances described in Section 4.2(A),the parties may take into consideration the following parameters,including but not limited to: (i) actual cost of operations; 15 Execution Copy (ii) population growth; (iii) increase or decrease in available tonnage; (iv) economic and disposal market conditions in the Southern California region; (v) changes in transportation and technology; (vi) closure and expansion of nearby landfills; (vii) capacity of the Disposal System;and (viii) available reserves which are in excess of the amount reasonably required as reserves. (D) Survival; Accrued Rights. The rights and obligations of the parties hereto pursuant to Sections 5.1, 5.3, 5.5, 7.2, 7.3, 7.5, 7.7, 7.8, 7.9, and 7.10 hereof shall survive the termination or expiration of this Agreement,and no such termination or expiration shall limit or otherwise affect the respective rights and obligations of the parties hereto accrued prior to the date of such termination or expiration. At the end of the Term of this Agreement,all other obligations of the parties pursuant to this Agreement shall terminate. SECTION 6.2 (RESERVED] ARTICLE VII GENERAL PROVISIONS SECTION 7.1 OPERATION AND MAINTENANCE OF THE DISPOSAL SYSTEM. The County, at its cost and expense through the County Solid Waste Enterprise Fund, shall at all times operate, or cause to be operated, the Disposal System in accordance with Applicable Law and the operating rules and regulations of the Department. SECTION 7.2 UNCONTROLLABLE CIRCUMSTANCES GENERALLY. (A) Performance Excused. Except as otherwise specifically provided in this Agreement, neither the County nor the District shall be liable to the other for any failure or delay in the performance of any obligation under this Agreement (other than any payment at the time due and owing) to the extent such failure or delay is due to the occurrence of an Uncontrollable Circumstance. (B) Notice, Mitigation. The party experiencing an Uncontrollable Circumstance shall notify the other party by telecommunication or telephone and in writing, on or promptly after the date the party experiencing such Uncontrollable Circumstance first knew of the commencement thereof, followed within 15 days by a written description of(1)the Uncontrollable Circumstance and the cause thereof(to the extent known), (2)the date the Uncontrollable Circumstance began and the cause thereof, its estimated duration, the estimated time during which the performance of such party's obligations hereunder will be delayed, (3)the estimated amount, if any, by which the District Contract Rate may need to be adjusted as a result of such Uncontrollable Circumstance, (4) its estimated impact on the other obligations of such party under this Agreement and (5)potential mitigating actions which might be taken by the County or District and any areas where costs might be reduced and the approximate amount of such cost reductions. Each party shall provide prompt written notice of the cessation of such Uncontrollable Circumstance. Whenever such act,event or condition shall occur,the party claiming to be adversely affected thereby shall, as promptly as reasonably possible,use its best efforts to eliminate the cause therefor,reduce costs and resume performance under this Agreement. In addition,with respect to Changes in Law,the County shall diligently contest any such changes the imposition of which would have a material adverse impact on the Disposal System. While the delay continues,the County or District shall give notice to the other party,before the first day of each succeeding month,updating the information previously submitted. 16 Execution Copy (C) Impact on Contract Rate. If and to the extent that Uncontrollable Circumstances interfere with, delay or increase the cost to the County of meeting its obligations hereunder and providing Disposal Services to the Participating Cities in accordance herewith,the County shall be entitled to an increase in the Contract Rate as provided in the Original Waste Disposal Agreements (and therefore an increase in the District Contract Rate hereunder)or an extension in the schedule for performance equal to the amount of the increased cost or the time lost as a result thereof. The proceeds of any insurance available to meet any such increased cost shall be applied to such purpose prior to any determination of cost increases payable under this subsection. Any cost reductions achieved through the mitigating measures undertaken by the County pursuant to the Original Waste Disposal Agreements upon the occurrence of an Uncontrollable Circumstance shall be reflected in a reduction of the amount by which the Contract Rate would have otherwise been increased or shall serve to reduce the Contract Rate to reflect such mitigation measures,as applicable. SECTION 7.3 INDEMNIFICATION. To the extent permitted by law, the County agrees that, it will protect, indemnify, defend and hold harmless the District from and against all Loss-and-Expense arising from the District's activity as an"arranger"(for purposes of and as such term is defined under CERCLA or comparable state statutes)of municipal solid waste disposal pursuant to this Agreement. In the event the District shall determine that because of conflict or any other reason that it wishes to be defended by legal counsel other than the legal counsel provided by the County, the cost of providing such legal counsel shall be the District's sole responsibility. The District acknowledges the County's legitimate interest in actively participating in any defense, litigation or settlement whether the County or the District provides legal counsel. Any costs incurred by the County pursuant to this Section shall be considered an Uncontrollable Circumstance cost and the County shall be entitled to adjust the Contract Rate (and therefore the District Contract Rate) as provided in subsection 4.2(A) herein. The County shall not, however, be required to indemnify or defend the District from and against all Loss-and-Expense arising from any willful, knowing, illegal or negligent disposal of hazardous waste (other than incidental amounts of Household Hazardous Waste commonly found in municipal solid waste and permitted to be disposed in Class III landfills under RCRA) which violates the County's landfill permits or Applicable Law. The parties agree that this provision constitutes an indemnity under CERCLA (to the extent of the specific provisions of this Section). The parties acknowledge that this subsection is not intended to and does not create any obligation on the part of the County to provide any indemnification or defense to any hauler or other party which transports, receives, processes or otherwise handles District Acceptable Waste, whether franchised or not, or any Independent Hauler or Transfer Station which transports, receives, processes or otherwise handles District Acceptable Waste, under any circumstances. The District acknowledges the County's legitimate interest in actively participating in any defense, litigation or settlement,and shall,as a condition to this indemnity,coordinate fully with the County in the defense. SECTION 7.4 RELATIONSHIP OF THE PARTIES. Neither party to this Agreement shall have any responsibility whatsoever with respect to services provided or contractual obligations or liabilities assumed by the other party hereto, whether accrued, absolute, contingent or otherwise, or whether due or to become due. The County is an independent contractor of the District and nothing in this Agreement shall be deemed to constitute either party a partner, agent or legal representative of the other party or to create any fiduciary relationship between the parties. SECTION 7.5 LIMITED RECOURSE. No recourse shall be had to the general funds or general credit of the County for the payment of any amount due the District hereunder, or the performance of any obligation incurred hereunder, including any Loss-and-Expense of any nature arising from the performance or non- performance of the County's obligations hereunder. The sole recourse of the District for all such amounts shall be to the funds held in the County Solid Waste Enterprise Fund in accordance with the terms of this Agreement. All amounts held in the County Solid Waste Enterprise Fund shall be held for the uses permitted and required thereby, and no such amounts shall constitute property of the District. The County shall make adequate provision in the administration of the County Solid Waste Enterprise Fund for the payment of any amount or the performance of any obligation which may be due hereunder. SECTION 7.6 PRE-EXISTING RIGHTS AND LIABILITIES. Nothing in this Agreement is intended to affect,release,waive or modify any rights,obligations or liabilities which any party hereto may have to or against the other party as of the Contract Date relating to the disposal of waste in the Disposal System or any other related matter. 17 Execution Copy SECTION 7.7 NO VESTED RIGHTS. The District shall not acquire any vested property, license or other rights in the Disposal System by reason of this Agreement. SECTION 7.8 LIABILITY FOR COLLECTION, TRANSPORTATION AND PROCESSING. Any liability incurred by the District as a result of collecting Acceptable Waste or processing it for diversion from landfill, or as a result of causing, franchising, permitting, licensing, authorizing or arranging any of the foregoing, shall be its sole liability,except as expressly otherwise provided herein. SECTION 7.9 NO CONSEQUENTIAL OR PUNITIVE DAMAGES. In no event shall either party hereto be liable to the other or obligated in any manner to pay to the other any special, incidental, consequential, punitive or similar damages based upon claims arising out of or in connection with the performance or non- performance of its obligations or otherwise under this Agreement, or the material inaccuracy of any representation made in this Agreement, whether such claims are based upon contract, tort, negligence, warranty or other legal theory. SECTION 7.10 AMENDMENTS. Neither this Agreement nor any provision hereof may be changed, modified,amended or waived except by written agreement duly authorized and executed by both parties. SECTION 7.11 NOTICE OF LITIGATION. Each party shall deliver written notice to the other of any Legal Proceeding to which it is a party and which questions the validity or enforceability of this Agreement executed by the District or the County or any Legal Entitlement issued in connection herewith. SECTION 7.12 FURTHER ASSURANCES. At any and all times the District and the County so far as may be authorized by law shall pass, make, do, execute, acknowledge and deliver any and every such further resolutions, acts, deeds, conveyances, instruments, assignments, transfers and assurances as may be necessary or reasonably requested by the other in order to give full effect to this Agreement. SECTION 7.13 ASSIGNMENT OF AGREEMENT. (A)Assignment.Neither this Agreement nor any of the rights or obligations hereunder may be assigned by either party hereto without the prior written consent of the other party,which may be withheld in the other party's sole discretion. Notwithstanding the foregoing, either party may assign this Agreement to another public entity, subject to the reasonable consent of the other party. In such circumstances the party not requesting the assignment shall have the right to demand assurances of the financial, technical and legal ability of the proposed assignee to undertake the responsibilities and obligations of the assigning party. (B) Sale.The County shall not enter into any agreement for the sale of the Disposal System which provides for an effective date for such sale prior to the termination of this Agreement. SECTION 7.14 INTEREST ON OVERDUE OBLIGATIONS. Except as otherwise provided herein, all amounts due hereunder, whether as damages, credits, revenue or reimbursements, that are not paid when due shall bear interest at the Overdue Rate on the amount outstanding from time to time, on the basis of a 365-day year, counting the actual number of days elapsed,and all such interest accrued at any time shall,to the extent permitted by Applicable Law,be deemed added to the amount due,as accrued. SECTION 7.15 BINDING EFFECT. This Agreement shall bind and inure to the benefit of the parties hereto and any successor or assignee acquiring an interest hereunder consistent with the provisions of Section 7.13 hereof. SECTION 7.16 NOTICES. Any notice or communication required or permitted hereunder shall be in writing and sufficiently given if delivered in person or sent by certified or registered mail, postage prepaid, to the notice address of the respective parties set forth on the cover page of this Agreement. Changes in the respective addresses to which such notices may be directed may be made from time to time by any party by notice to the other party. 18 Execution Copy IN WITNESS WHEREOF, COUNTY and DISTRICT have caused this Agreement to be executed by their duly authorized officers or representatives as of the day and year first above written. COUNTY OF ORANGE Date By Director,OC Waste&Recycling Date By [NAME] District Representative Orange County Sanitation District APPROVED AS TO FORM: COUNTY COUNSEL ORANGE COUNTY,CALIFORNIA By Date 19 Execution Copy APPENDIX A COPY OF ORIGINAL WASTE DISPOSAL AGREEMENT Execution Copy OPERATIONS COMMITTEE Meeting Date To Bd. of Dir. 11/07/12 11/28/12 AGENDA REPORT Item Number Item Number 8 15 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Jim Herberg, Assistant General Manager Project Manager: Jim Colston, Environmental Compliance Manager SUBJECT: Synagro Contract Amendment GENERAL MANAGER'S RECOMMENDATION Authorize Amendment No. 9 to Synagro West, Inc., (Synagro) Purchase Order No. 100760-013, increasing the annual amount from $6,580,000 to an amount not to exceed (NTE) $8,600,000 for the period of January 1, 2012 through December 31, 2012 for the Orange County Sanitation District's biosolids management contract. Thereafter, the NTE will be $6,850,000. SUMMARY The recent termination of the EnerTech contract has resulted in significant savings to the Orange County Sanitation District's (Sanitation District) biosolids management costs. Biosolids formerly managed by EnerTech are being sent to our existing vendors, Synagro and Tule Ranch and will be sent to Orange County Waste and Recycling's Prima Deshecha Landfill commencing in January 1 , 2013 (pending board approval). The proposed Amendment No. 9 to Synagro's contract is needed to accommodate the additional loads of approximately 100-125 tons per day with no changes to the unit price. PRIOR COMMITTEE/BOARD ACTIONS ( April 26, 2006 - Approved Amendment No. 8, amended cost of sludge removal and included a not to exceed limit of 6,580,000. ( April 28, 2004 - Approved Amendment No. 7, amended to include South Kern Industrial Center and a not to exceed limit of $5,800,000 and amended term of contract. ( May 22, 2002 - Approved Amendment No. 6, amended substituting Synagro West, Inc. for Pima Gro Systems, Inc, cost of sludge removal, term of contract, and required an Environmental Management System. ( August 25, 1999 - Approved Amendment No. 5, amended cost of sludge removal, terms of contract, and incorporated force majeure clause. Page 1 of 3 ( Nov 2, 1996 - Approved Amendment No. 4, amended agricultural use sites and cost of sludge removal. ( March 29, 1995 - Approved Amendment No. 3, amended agricultural use sites, term of contract, incremental weather conditions, and cost of sludge removal. ( May 8, 1991 - Approved Amendment No. 2, amended agricultural use sites, term of contract, early termination, and cost of sludge removal. ( October 10, 1990 - Approved Amendment No. 1, amended agricultural use sites and cost of sludge removal. ( May 11, 1988 - Authorized General Manager to enter into an agreement with Prima Gro Systems, Inc. (Currently known as Synagro West, Inc.) for removal and disposal/reuse of Districts' residual solids from Plants 1 and 2. ADDITIONAL INFORMATION There is no proposed change in the unit price per ton from the existing Synagro contract, and staff is not proposing to change the volume of tonnage sent to Synagro beyond that which has previously been discussed to manage the EnerTech tonnage; however, with the additional loads to Synagro, the NTE contract amount of $6,580,000 for 2012 calendar will be exceeded. To accommodate the increased loads for this calendar year, Synagro's NTE contract limits must be increased by $1,956,438, which totals to $8,600,000. Thereafter, the NTE will be $6,850,000, which is sufficient to cover the required contract minimum. The proposed Amendment is exempt from CEQA pursuant to: (1) CEQA's Class 1 Exemption (CEQA Guidelines § 15301); and (2) CEQA's "Common Sense" Exemption (CEQA Guidelines § 15061(b)(3)). CEQA's Class 1 exemption applies to the operation, repair, maintenance, permitting, leasing, licensing, or minor alteration of existing public or private facilities involving negligible or no expansion of a use beyond the use existing at the time of the lead agency's CEQA determination (CEQA Guidelines § 15301). Here, the Amendment calls for a continuation of the status quo: the Sanitation District's facilities will continue to operate at their current rate; Synagro will continue to use the same streets and freeways to haul the same quantity of biosolids for processing from the Sanitation District to Synagro's operations in Kern County, California, and La Paz, Arizona, respectively, that it currently hauls biosolids for processing to its operations in Kern County, California, and La Paz, Arizona, respectively. As a result, the Amendment calls for the operation of existing public and private facilities involving negligible or no expansion of the use existing at the time that the Amendment will be considered by the Sanitation District's Board, and when the Sanitation District makes its CEQA determination. The Amendment is therefore exempt from CEQA review pursuant to CEQA Guidelines Section 15301. Page 2 of 3 CEQA's "Common Sense" Exemption applies where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment (CEQA Guidelines § 15061(b)(3)). In order to determine whether a project will have a significant environmental effect, a lead agency must first define the baseline environmental conditions. The "project" for CEQA purposes consists of changes in the baseline conditions, if any, that the lead agency's action will cause. It follows that a lead agency is not required to identify impacts that are considered part of the baseline conditions. The baseline usually consists of the physical conditions that exist when the lead agency commences CEQA review (CEQA Guidelines § 15125(a)). As explained above, the Amendment calls for a continuation of the status quo. The activities contemplated under the Amendment are already part of the environmental baseline conditions. As a result, it can be seen with certainty that there is no possibility that the Amendment may have a significant effect on the environment, and the Amendment is exempt from CEQA review pursuant to CEQA Guidelines Section 15061(b)(3). BUDGET/DELEGATION OF AUTHORITY COMPLIANCE This request complies with authority levels of the Sanitation District's Delegation of Authority. This item has been budgeted. (Line item: Section 5, Page 6). Project contingency funds will not be used for this Amendment. Date of Approval Contract Amount Contingency 04/26/06 $6,580,000 N/A 11/28/12 $8,600,000 N/A ATTACHMENT The following attachment is included in hard copy and may be viewed on-line at the OCSD website (www.ocsd.com) with the complete agenda package and attachments: ( Amendment No. 9 (3 pages) JC:jb:gc Page 3 of 3 AMENDMENT NO. 9 TO AGREEMENT FOR THE AGRICULTURAL USE OF SEWAGE SOLIDS THIS AMENDMENT NO. 9 TO AGREEMENT,is made and entered into this day of 2012,and to be effective the day of ,2012,by and between the Orange County Sanitation District("DISTRICT"), and SYNAGRO WEST, INC., formerly known as,Pima Gro Systems, Inc.,of Redlands, CA("CONTRACTOR"). WITHNESSETH: WHEREAS,DISTRICT and CONTRACTOR previously executed an Agreement dated June 1, 1988, for professional services entitled"AGREEMENT FOR THE AGRICULTURAL USE OF SEWAGE SOLIDS" ("ORIGINAL AGREEMENT") for removal and disposal/reuse of DISTRICT's Residual Solids(biosolids); and, WHEREAS, DISTRICT and CONTRACTOR amended such ORIGINAL AGREEMENT by Amendment No. 1 dated October 10, 1990,Amendment No. 2 dated June 1, 1991,Amendment No. 3 dated April 1, 1995,Amendment No.4 dated December 2, 1996,Amendment No. 5 dated September 1, 1999, letter entitled"Modification of the Synagro West, Inc. Agreement for the Management of Biosolids" dated September 23,2005 ("Letter Modification"),Amendment No. 6 dated July 1,2002, Amendment No. 7 dated July 1,2004, and Amendment No. 8 dated July 1,2006 (the ORIGINAL AGREEMENT,Amendment No. 1,Amendment No. 2,Amendment No. 3,Amendment No.4, Amendment No. 5,Letter Modification,Amendment No. 6,Amendment No. 7, and Amendment No. 8 shall be collectively referenced herein as the "AGREEMENT"); and, WHEREAS, DISTRICT has determined that management of biosolids is necessary; and, WHEREAS, CONTRACTOR is qualified to provide the necessary services in connection with these additional requirements based on its demonstrated competence and has agreed to provide the necessary services,and has been selected in accordance with the DISTRICT's selection policy regarding professional services and conformance with the DISTRICT's Environmental Management System for Biosolids(EMS); and, WHEREAS,DISTRICT,has negotiated with CONTRACTOR and has determined the final negotiated fee for said service as reasonable; and, WHEREAS,the Board of Directors has accepted the recommendation of staff, and has approved this Amendment No. 9 between DISTRICT and CONTRACTOR. NOW, THEREFORE, in consideration of the promises and mutual benefits which will result to the parties in carrying out the terms of this Amendment No. 9,it is mutually agreed as follows: 1. The annual compensation allowed under the AGREEMENT pursuant to Paragraph 2 of Amendment No. 8,which amended Paragraph 2 of Amendment No. 7, amending Paragraph 1 of Page 1 of 3 886380.1 Amendment No. 6, and amending Paragraph 1 of Amendment No. 5 shall be replaced with an annual compensation allowed under this AGREEMENT not to exceed$8,600,000 for the period of January 1,2012 through December 31,2012;thereafter,this AGREEMENT shall not to exceed$6,850,000. 2. This Amendment No. 9 does not modify or change the Term of the AGREEMENT as set forth in Paragraph 7 of Amendment No. 7 and reaffirmed in Paragraph 7 of Amendment No. 8. 3. This Amendment No. 9 is supplemental to the ORIGINAL AGREEMENT date June 1, 1988, as modified by Amendments Nos. 1 through 8 and the Letter Modification, and is by reference made a part of said AGREEMENT. All of the terms,conditions and provisions thereof shall continue in full force and effect unless specifically addressed by this Amendment. 4. hi the event of any conflict or inconsistency between the provisions of this Amendment No. 9 and any of the provisions of the ORIGINAL AGREEMENT,Amendment Nos. 1 through 8, or the Letter Modification,the provisions of this Amendment No. 9 shall in all respects govern and control. 5. The persons executing this Amendment No. 9 on behalf of the Parties hereto warrant that(i) such party is duly organized and existing, (ii)they are duly authorized to execute and deliver this Amendment No. 9 on behalf of said Party, (iii)by so executing this Amendment No. 9, such party is formally bound to the provisions of this Amendment No. 9, and(iv)the entering into this Amendment No. 9 does not violate any provisions of any other agreement to which said Party is bound. [SIGNATURES ON NEXT PAGE] Page 2 of 3 886380.1 IN WITNESS WHEREOF,this Amendment No. 9 to the AGREEMENT has been executed in the name of the DISTRICT by its duly authorized officers and by CONTRACTOR, as of the day and year first above written. ORANGE COUNTY SANITATION DISTRICT By Troy Edgar Chairman,Board of Directors By Maria Ayala Secretary,Board of Directors CONTRACTOR By NAME President By NAME Assistant Secretary APPROVED AS TO FORM: By Bradley R. Hogin DISTRICT, General Counsel Page 3 of 3 886380.1 OPERATIONS COMMITTEE Meeting Date To Bd. of Dir. 11/07/12 11/28/12 AGENDA REPORT Item Number Item Number 9 16 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Jim Herberg, Assistant General Manager CIP Project Manager: Umesh Murthy SUBJECT: SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1, PROJECT NO. P1-101 GENERAL MANAGER'S RECOMMENDATION (Items A — M) A. Approve Plans and Specifications for Sludge Dewatering and Odor Control at Plant No. 1, Project No. P1-101, on file at the office of the Clerk of the Board; B. Approve Addendum Nos. 1 through 6 to the plans and specifications; C. Receive and file bid tabulation and recommendation; D. Receive and file Award Protest dated October 5, 2012 and Supplemental Award Protests dated October 12, 2012 and October 30, 2012 from Balfour Beatty Infrastructure, Inc. concerning the award to W. M. Lyles Company; E. Receive and file response letter dated October 11 , 2012, from W.M. Lyles Company to Award Protest from Balfour Beatty Infrastructure, Inc.; F. Receive and file Orange County Sanitation District Final Disposition letters dated October 15, 2012 and October 31 , 2012 to Balfour Beatty Infrastructure, Inc. responding to the Award Protest; G. Deny Award Protest filed by Balfour Beatty Infrastructure, Inc.; H. Receive and File Award Protest from Moyno, Inc. dated August 23, 2012, alleging that the sole source designation of Seepex for cake pumps was improper; I. Receive and file Orange County Sanitation District Final Disposition letter dated October 4, 2012 to Moyno, Inc., responding to Award Protest; J. Reject untimely Award Protest filed by Moyno, Inc.; K. Approve a budget increase of $24,708,300 for Sludge Dewatering and Odor Control at Plant No. 1 , Project No. P1-101 for a total amount not to exceed $171,978,300; Page 1 of 9 L. Award a construction contract to W.M. Lyles Company for Sludge Dewatering and Odor Control at Plant No. 1, Project No. P1-101, for a total amount not to exceed $126,908,300; and, M. Approve a contingency of $3,800,000 (3%). SUMMARY Sludge Dewatering and Odor Control at Plant No. 1, Project No. P1-101 (Project), replaces existing solids and dewatering odor control systems and installs sludge thickening systems at the Orange County Sanitation District (Sanitation District) Plant No. 1. The Sanitation District needs this project for the following reasons: 1. Additional capacity to thicken and dewater sludge due to conversion of Plant No. 1 to full secondary treatment and increased flows to support expansion of the Ground Water Replinishment System (GWRS). 2. Existing sludge dewatering facilities that was built in the late 1970s and early 1980s has to be replaced because equipment is in poor condition and is reaching the end of its useful life. 3. Increase biosolids cake dryness to reduce biosolids management costs. 4. Improve sludge thickening to optimize use of existing digesters and eliminate construction of new digesters. 5. Manage site constraints at Plant No. 1 by building compact solids treatment facilities and facilitate future expansion. This project will reduce operational costs by an estimated $3.62M annually and has a lower total 25-year operations and capital costs compared to the Sanitation District existing process/technology. Bid Evaluation The Sanitation District advertised for bids on May 8, 2012. Seven sealed bids were received on August 9, 2012. The bids were evaluated in accordance with the Sanitation District's policies and procedures. W.M. Lyles Company was deemed the lowest responsive, responsible bidder. The bids were significantly higher than the engineer's estimate and an increase in the project budget of $24,708,300 is required in order to award the recommended contract. Staff recommends awarding a construction contract to W.M. Lyles Company for Sludge Dewatering and Odor Control at Plant No. 1 , Project No. P1-101, for a total amount not to exceed $126,908,300. Page 2 of 9 Summary information on the bid opening for Sludge Dewatering and Odor Control at Plant No. 1, Project No. P1-101, is as follows: Project Budget $147,270,000 Construction Contract Budget $102,200,000 Engineer's Estimate $102,200,000 Lowest Responsive, Responsible Bid $126,908,300 High Bid $147,928,647 Bidder Amount of Bid W.M. Lyles Co. $126,908,300 Balfour Beatty Infrastructure $127,846,000 J.R. Filanc Construction $130,544,357 J.F. Shea Construction $135,413,689 Shimmick Construction $139,916,069 Flatiron West, Inc. $142,000,000 Archer Western Contractors $147,928,647 Balfour Beatty Infrastructure, Inc. ("Balfour"), the second low bidder, and Moyno, Inc., an equipment supplier, sent formal protests of the award recommendation to the Sanitation District following the bid evaluation and notification of award recommendation. Staff reviewed, considered and responded to these protests and Staff determined that the protests do not merit a change to the award recommendation. With respect to Balfour's bid protest, Balfour claims that the Sanitation District should award the contract to Balfour, or in the alternative, reject all bids and rebid, because: (1) Lyles' allegedly admitted in its response to the bid protest (letter dated October 11, 2012) that Lyles substituted a wood shoring system in lieu of a steel shoring system, and therefore, the Sanitation District must declare Lyles' bid nonresponsive; and (2) If the Sanitation District does not in fact require a steel shoring system, than the Sanitation District's response to bid question number 27 misled the bidders, creating an unfair/uneven playing field. Following careful consideration and evaluation of Balfour's bid protest, the Sanitation District staff determined that: (1) Lyles's bid is responsive to the bid requirements. Other than alternative equipment and materials proposed by the bidder, OCSD did not require any other materials or equipment be listed as part of the bid submittals. The notice inviting bids was clear as to what was required as part of the bid submittals and what criteria would be used as part of the bid evaluation. There was no requirement that bidders submit plans for the shoring system or specify what materials would be used in the design. An evaluation of Lyles' bid, based upon the criteria and requirements specified in the notice inviting bids, requires that the District deem Lyles Page 3 of 9 responsive. As a result, the District has no grounds to reject W.M. Lyles' bid as nonresponsive. It is irrelevant whether Lyles based its bid costs on steel or wood because it expressly acknowledged and affirmed that it would perform the contract according to the bid specifications. (2) The Sanitation District's response to bid question number 27 was clear and not misleading. Steel is required for only those sections of the shoring system referenced in the response to bid question number 27; however, contrary to Balfour's claim, steel is not required for the entire shoring system. (3) Even if the Sanitation District finds Lyles' bid nonresponsive, the Sanitation District cannot award the contract to Balfour because Balfour's bid contains a material deviation and is therefore nonresponsive. On January 25, 2012, the District adopted Resolution No. OCSD 12-01, making findings consistent with Public Contract Code section 3400 and authorizing that Seepex to be listed by name for sludge cake pumps. Contrary to the District's sole source specification listed in the notice inviting bids as well as part of Addendum No. 1, Balfour's bid proposed an alternative manufacturer for the sludge cake pumps, which is a material deviation from the bid specifications. Therefore, Balfour's bid is nonresponsive, and the District cannot award the contract to Balfour. PRIOR COMMITTEE/BOARD ACTIONS June 2012 - Approved Equipment Pre-Selection Agreement with GEA Westfalia Separator, Inc., for a total amount not to exceed $14,665,007, in a form approved by General Counsel (Attachment 8). January 2012 - Adopted Resolution No. OCSD 12-01, a Resolution of the Board of Directors of the Orange County Sanitation District, making findings pursuant to Public Contract Code, Section 3400 in support of the Sole Source Specification of Sludge Cake Pumps for Sludge Dewatering and Odor Control at Plant No. 1, Project No. P1-101, approved plans and specifications, and authorized staff to advertise Invitations for Bid and solicit bids. November 2010 - Adopted Resolution No. OCSD 10-21, adopting the "One Water, One Watershed" Integrated Regional Water Management Plan and authorized the General Manager, or his designee, to enter into a Grant Funding Program with California Department of Water Resources for monetary assistance under Proposition 84, for the Sludge Dewatering, Odor Control, Land Primary Sludge Thickening at Plant No. 1, Project No. P1-101. July 2010 - Adopted Resolution No. OCSD 10-10. A Resolution of the Board of Directors of the Orange County Sanitation District, making findings pursuant to Public Contract Code Section 3400 in support of the Sole Source Specification of Thickening and Dewatering Centrifuges. Page 4 of 9 ADDITIONAL INFORMATION The lowest responsive, responsible bidder is W.M. Lyles Company in the amount of $126,908,300 and is higher than the engineer's estimate by $24,708,300. Due to the significant difference between the engineer's estimate and the low bid, staff, along with the Design Consultant, HDR Inc., analyzed the following: 1. Compared engineer's estimate to the low bid by reviewing bid documents, bid item pricing, subcontractor pricing, and focused on areas where there was comparable information from bidders. 2. Revalidated the P1-101 Project by updating economic the comparison of solids processing alternatives study completed in August 2010. 3. Evaluated the potential savings and costs for awarding the contract or rejecting and rebidding. 1. Comparison of Engineer's Estimate vs. Low Bid The Design Consultant, HDR Inc., and OCSD staff evaluated the reasons for the difference of $24,708,300 between the engineer's estimate and the low bid. The summary of differences in the engineer's estimate and low bid are listed below: Cost Item Cost Difference Comments/Reasons Contractors markups for Based on recent bids evaluated overhead and profit $12 million by HDR, the markups were based on optimistic assumptions Contractors are concerned about Low escalation value $3 million inflation of commodity prices on multi-year projects Building and site materials $10 million Engineer's estimate was low Equipment costs $4 million Engineer's estimate was low 2. Revalidation of the P1-101 Project If approved, the Project budget will increase by $24,708,300 for the construction phase of this Project. Due to this impact, staff directed HDR Inc., to revalidate the project economics by updating the August 2010 study that compares the costs of solids processing alternatives at Plant No. 1. The revalidation was based on current and future wastewater flows, process configurations, land constraints, and engineering economics taking into account costs for energy, biosolids hauling/management, labor, chemicals, facility repair, and rehabilitation. Three basic process configurations were analyzed for a variety of conditions: Page 5 of 9 Alternative 1 — Current Configuration: In this system, primary sludge is thickened in the clarifiers, Waste Activated Sludge (WAS) is thickened with Dissolved Air Flotation Thickeners (DAFTs), the thickened sludge streams are combined and digested, the digested sludge is dewatered using belt filter presses (BFPs), the dewatered cake is stored in silos, and the cake is hauled offsite for various beneficial uses. Alternative 2 — P1-101 Project Configuration: In this system, primary sludge and WAS would be co-thickened with centrifuges, the thickened sludge would be digested, the digested sludge would be dewatered with centrifuges, and the dewatered biosolids cake would be stored in silos and then hauled offsite. Alternative 3 — Blended Configuration: This is a hybrid of the first two configurations. Thickening and digestion would be the same as the current configuration; however, the digested sludge would be dewatered with centrifuges. 2012 Present Worth Update Present Worth, $ millions Alternative Capital R&R Operating Total 25-Year 1 - Current Configuration 265 134 474 873 2 - P1-101 Project Configuration 205 119 393 717 3 - Blended Configuration 237 125 366 729 The following conclusions were derived from the revalidation study: 1. Centrifuge thickening and dewatering option for solids handling has a lower present worth for the 25 year and 50 year life periods. 2. Non-economic factors such as space utilization and operational flexibility still favored centrifuge thickening and dewatering processes for solids handling. Based on economic and non-economic considerations, centrifuge thickening and dewatering processes for solids handling at Plant No. 1 (consistent with the existing P1-101 design) was confirmed as the best long term facility option. 3. Award and Rebid Options Following are options for moving forward on this Project: Reject all bids and rebid the Project: Under this option, the Project would be redesigned and rebid. Potential design changes to reduce cost were reviewed. However, staff does not recommend this option due to the following reasons: Page 6 of 9 a. There are not sufficient design changes and deletions that would result in substantial cost savings for this Project. Value engineering was performed for this Project in September 2010 and recommendations were implemented during the design of this Project. b. Significant additional design fees would be required for the Consultant to make design changes and rebid the Project. c. Staff estimates a delay of nine months for the Project to be redesigned and rebid. The delay cost for lost operational savings and inflation can be significant and offset any potential redesign savings. In addition, delays increase the risk of not having the required capacity or operating equipment to meet demand when needed. d. There is no assurance (because of market timing and Contractors' workload) that cost savings will be achieved by rebidding the Project. Award Contract to Lowest, Responsive, and Responsible Bidder: Staff has evaluated bids and determined that W.M. Lyles Company is the lowest, responsive, and responsible bidder. Staff will continue to pursue savings on this Project without relegating safety, operational, and maintenance issues. The three lowest bids are priced within a 3% range. This close price range confirms that the Scope of Work was properly reflected in the contract documents (plans and specifications). Based on the findings described in this agenda report, staff recommends awarding the contract to W.M. Lyles Company, the lowest responsive, responsible bidder for a total amount not to exceed $126,908,300. Sole Source Items The Sanitation District has designated the following items by specific brand or trade name pursuant to Public Contract Code §3400 (c)(2) in order to match other products in use on a particular public improvement either completed or in the course of completion; or, §3400 (c)(3) in order to obtain a necessary item that is only available from one source: Cutler-Hammer— Switchgear Circuit Breaker Air Products and Chemical, Inc. - Hydrogen Line WEED Modbus+ Communication - Programmable Logic Control Processors Modicon Quantum - Programmable Logic Controls Cisco - Ethernet Network Switches Edwards System Technologies - Fire Alarm Systems Securitas Services USA - Security ION 7550 - Power Monitors Casi-Ruso - Access Control and Security System Sumitomo Electric - Fiber Optic Network System Westfalia and Alfa-Laval - Dewatering Centrifuges Westfalia - Thickening Centrifuges Seepex - Sludge Cake Pumps Page 7 of 9 CEQA The recommended action is within the scope of the Subsequent Environmental Impact Report for the Secondary Treatment and Plan Improvement Project, dated March 2005. The Subsequent Environmental Impact Report for the Secondary Treatment and Plan Improvement Project, supplementing the Sanitation District's Strategic Plan Program Environmental Impact Report (PEIR), was certified in October 1999. Pursuant to CEQA Guidelines section 15168(c)(4), the Sanitation District has used a written checklist to document its evaluation of the recommended action, and has determined that the recommended action is still within the scope of program EIR. In addition, the Project was determined to be eligible for a categorical exclusion under the National Environmental Pollution Act (NEPA) in June 2006. BUDGET/DELEGATION OF AUTHORITY COMPLIANCE This recommendation complies with authority levels of the Sanitation District's Delegation of Authority. This item has been budgeted (FY2012-13, Section 8, Page 55) but the budget is insufficient and requires additional funds to cover the increased cost of construction. If approved, additional funding will be transferred from the Replacement, Rehabilitation, and Refurbishment line item identified in Budget Section 4 - Page 16, line item 13, to the CIP line item 12 and allocated to this project. The funding will be transferred by fiscal years in the following manner: FY 12-13: $791,420 FY 13-14: $3,415,850 FY 14-15: $10,088,780 FY 15-16: $8,157,530 FY 16-17: $2,254,720 Date of Approval Contract Amount Contingency 11/28/2012 $126,908,300 $3,800,000 (3.0%) Page 8 of 9 ATTACHMENTS The following attachments are included in hard copy and may be viewed on-line at the OCSD website (www.ocsd.com) with the complete agenda package and attachments: 1. Balfour Beatty Infrastructure Award Protest letter dated October 5, 2012 [Enclosures on file with the Clerk of the Board] 2. Balfour Beatty Infrastructure Supplemental Award Protest dated October 12, 2012 [Enclosures on file with the Clerk of the Board] 3. Balfour Beatty Infrastructure Supplemental Award Protest dated October 30, 2012 [Enclosures on file with the Clerk of the Board] 4. W.M Lyles Company response letter dated October 11, 2012 [Enclosures on file with the Clerk of the Board] 5. OCSD Final Disposition letter dated October 15, 2012 RE: Balfour Beatty Protest dated October 15, 2012 6. OCSD Final Disposition letter dated October 31, 2012 RE: Balfour Beatty Protest dated October 30, 2012 7. Moyno, Inc. Award Protest letter dated August 23, 2012 [Enclosures on file with the Clerk of the Board] 8. OCSD Final Disposition RE: Moyno Protest dated October 4, 2012 The following attachment(s) may be viewed on-line at the OCSD website (www.ocsd.com) with the complete agenda package and attachments: 9. Contract Agreement (33 pages) 10.Pre-Selection Agreement (21 pages) JH:DF:UM:dm:gc Page 9 of 9 MARKS, FINCH, THORNTON & BAIRD, LLP ROBERT J. MARKS, APC * ATTORNEYS AT LAW JON F. GAUTHIER, APC P. RANDOLPH FINCH JR, 4747 EXECUTIVE DRIVE — SUITE 700 DANIELLE C. HUMPHRIES JASON R. THORNTON CHRISTOPHER R. SILLARI JEFFREY B. BAIRD SAN DIEGO, CALIFORNIA 92121-3107 DUSTIN R. JONES CHAD T. WISHCHUK TELEPHONE (858) 737-3100 LAURA B. MACNEEL LOUIS J. BLUM FACSIMILE ) RODRIGO F. MOREIRA DAVID S. DEMIAN (B5B 737-3101 DANIEL P. SCHOLZ STEPHEN J. SCHULTZ + INTERNET www.mftb.com RYAN P. KENNEDY MARK T. BENNETT + ADAM C. WITT DAVID W. SMILEY E-MAIL pfinch@mftb.com BRETT T. WALKER BERNARD F. KING III M. KATY ROSS NOWELL A. LANTZ J. PATRICK HICKS JUSTIN M. STOGER October 5, 2012 ALLISON N. COOPER * OF COUNSEL ANDREA L. PETRAY OUR FILE NUMBER + OF COUNSEL via MERRILL, SCHULTZ & BENNETT, LTD. 1439.001 BID PROTEST VIA ELECTRONIC MAIL AND UNITED STATES PARCEL SERVICE Ms. Natasha K. Dubrovski Principal Contracts Administrator Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, California 92708 construction@ocsd,com Re: Entity: Orange County Sanitation District Project: Sludge Dewatering And Odor Control At Plant No. 1 Project No.: PI-101 Non-Responsive Bidder: W. M. Lyles Company Lowest Responsive Bidder: Balfour Beatty Infrastructure Inc Dear Ms. Dubrovski: 1. Introduction We represent Balfour Beatty Infrastructure, Inc. (Balfour Beatty), having its principal California address and phone number of 5050 Business Center Drive, Suite 250, Fairfield, California 94534, (707) 427-8900. This is Balfour Beatty's protest of the District's October 1, 2012, notice of intent to award the above-referenced project to W. M. Lyles Company ("WML"). WML's bid for the project is non-responsive and may not be accepted because WML offered to install a temporary wooden shoring system in lieu of the District-specified permanent steel shoring system. Had WML committed to install the District-specified steel shoring system, it would not have been the low bidder. Moreover, because the District knows about WML's improper product substitution, it cannot accept WML's bid and then insist that WML install the specified system without paying WML a multi-million dollar change order. Accordingly, WML enjoyed an unfair competitive advantage and its bid should be rejected. The District should award the project to Balfour Beatty as the lowest responsive, responsible bidder. Ms. Natasha K. Dubrovski October 5, 2012 Page 2 of 11 2. Factual Background A. The Project And Bid Documents In the first half of 2012, the District issued its Notice Inviting Bids and Bid Documents ("Bid Documents"), for the District's Sludge Dewatering And Odor Control At Plant No. I project, Project No. PI-101 ("Project"). The Project consists of the replacement of existing sludge dewatering and odor control systems, and the installation of primary sludge and waste activated sludge thickening systems. Construction requires the installation of below-water-table pipe systems, valve vaults and tunnels, as well as shoring to protect those components and existing pipes which will remain. Portions of the Bid Documents which are relevant to WML's bid deviation are cited and summarized: • During a set period prior to the bid deadline, prospective bidders could request clarification of the Project plans and specification in writing. (Tab 1, p. 4, Notice Inviting Bids.) Bidders had a duty to request the District's interpretation of any portion of the Bid Document about which the bidder was "in doubt as to the meaning...." (Tab 2, p. 3, Instructions to Bidders, § I13-3, subd. A.) • Bidders were required to submit responsive bids. (Tab 2, p. 7, Instructions To Bidders, § I13-14, subd. B.) "Bids submitted in strict accordance with the IFB Documents [the Bid Documents] will be deemed responsive. (Ibid.) • Bidders could not submit alternative bids, i.e., bids that are not precisely based on the Bid Documents. Section 8 of the Instructions To Bidders clearly states: 113-8 MODIFIED AND ALTERNATIVE BIDS A. Bids must not deviate from what is requested in the IFB Documents. B. A Bid Shall he rejected when the Bidder imposes conditions that would modify requirements of the IFB, (Tab 2, p.5, Instructions To Bidders, § IB-8, subds. A and B.) • In accordance with the California Subletting and Subcontracting Fair Practices Act, Public Contract Code section 4100, et seq., bidders were required to disclose in their bids each subcontractor that would be performing in excess of one-half-of-one percent of the work. (Tab 3, p. 3, Bid Form No. 2.) Ms. Natasha K. Dubrovski October 5, 2012 Page 3 of 11 • The Bid Documents required the two apparent low bidders to escrow their Bid Documents with the District as part of their bids for the Project. (Tab 4, p. 6, Special Provision § SP-13.) • The District reserved the right to reject any bid it received. (Tab 2, p. 9, Instruction To Bidders, § I13-19.) B. The Below-Water-Table Steel Shoring System Specified By The District And The Pre-Bid Question And Answer The Bid Documents included a Schedule of Prices which required bidders to separately price the Project's extensive shoring work. (Tab 3, p. 32, Bid Forms.) The Project plans called for a shoring system below the Centrifuge Building which was designed to protect below-water-table pipes and tunnels. (See Tab 5, Drawing C1-7006.) For example, the Project drawings include notes such as: 5, PROTECT TUNNEL 17 ALONG ITS ENTIRE LENGTH. SEE SPECIFICATION SECTION 01722, PROTECTION F OF ADJACENT CONSTRUCTION FOR REQUIREMENTS AND LOCATION OF SHORING. 6, PROTECT THE 72' RCP TFE PIPE ALONG ITS ENTIRE LENGTH. SEE SPECIFICATION SECTION 01722, PROTECTION OF ADJACENT CONSTRUCTION FOR REOUIRFMENTS AND LOCATION OF SHORING. (Tab 5.) The District specified a steel shoring system which will be left in place after Project completion as part of the finished Project. (See Tab 6, Specification Section 02361, Steel Sheet Piling.) Prior to bid, the District published an answer to Bidder Question No. 27 regarding the nature of the shoring system under the Centrifuge Building. A copy of the Question and Answer is enclosed at Tab 7. Summarily, a bidder identified plan sheets detailing the shoring work and asked which type of shoring was required to be installed. The District answered the question, stating clearly that steel sheet shoring was required and referred bidders to Specification Section 02361, Steel Sheet Piling. (Tabs 6 and 7.) The District's response directed contractors to "Bid as specified."' Although the District has the discretion to specify whatever shoring system it wants, the District was justified, in insisting that its contractor install the steel sheet 1 Notably,Bidder Question No.27 is phrased to elicit an answer that would have allowed bidders the option to install a cheaper wood shoring system. The question states,"Please confirm that specifically permanent sheet pile shoring is not required in this location and the contractor has an option on which type of shoring to use." (Tab 7.) In other words,the contractor that asked the question wanted to use a cheaper system. The District recognized and rejected that tactic,electing instead to enforce its specifications. The District did not publish the identity of the bidder that asked the question. Ms. Natasha K. Dubrovski October 5, 2012 Page 4 of 11 shoring system. First, use of the steel shoring system will minimize the chance of damage to new and existing pipe below the Centrifuge Building because the system can be left in place. Removal of a shoring system after construction often requires significant vibration of the shoring to get it to detach. That vibration could damage the underground pipes, especially older, existing pipes. Accordingly, the system needs to be one that could be left permanently in place. A non-steel system, such as a"beam and wood lagging" system, would not suffice. Beam and wood lagging systems consist of treated lumber stacked between vertical steel beams, and are substantially cheaper than steel systems, but are inappropriate for permanent shoring systems where the treated lumber below the water table will deteriorate much quicker than steel. The steel system is superior and was specified as such in the Contract documents. Second, the steel system is essential to the Project because the shoring will be located up to 15 feet below the water table and must therefore be water tight. A timber system cannot achieve the moisture seal that the District would achieve with an interlocked steel panel shoring system. Photographs of steel shoring systems and beam and wood lagging shoring systems are enclosed at Tabs 8 and 9, respectively. C. The District's Receipt Of Bids The District received the following seven bids for the Project on August 9, 2012. Bidder Amount Percent From WML WML $126,908,300.00 --- Balfour Beatty $127,846,000.00 .73 % J.R. Filanc $130,544,357.00 2.8 % J.F. Shea Construction $135,413,689.00 6.7 % Shimmick Construction $139,916,069.00 10.2 % Flatiron West, Inc. $142,000,000.00 11.9 % Archer Western Contractors $147,928,647.00 16.6 % (Tab 10, District's Summary of Bid Results.) Balfour Beatty's bid was less than three- quarters of a percent behind WML's bid. D. WML's Shoring Substitution While Balfour Beatty proposed to provide exactly what the District asked for, WML took the opposite approach. WML's bid includes use of Schnabel Foundation Company ("Schnabel"), to perform wood shoring work as opposed to the required steel. WML listed Schnabel as its shoring subcontractor on WML's bid. (Tab 10, p. 1.) Schnabel also sent its shoring proposal, a copy of which is enclosed at Tab 11, to Balfour Beatty. Unlike WML, and based on the District's prohibition of bids that"deviate from what is requested in the IFB documents" (Tab 2, pp. 5, § IB-8.), Balfour Beatty rejected the Schnabel proposal because Schnabel proposed a beam and wood lagging system Ms. Natasha K. Dubrovski October 5, 2012 Page 5of11 instead of the required steel system. Schnabel's bid states under the Scope of Work section, "The shoring will consist of drilled in steel solder piles with timber lagging between the piles," i.e., a beam and wood lagging system. (Tab 11, p. 2; see also example photographs at Tab 9.) Schnabel advertises its proposed wood shoring system on its website, a copy of which is enclosed at Tab 12. The website confirms the wood system is designed for temporary, rather than permanent, protection, stating: Excavation support, as herein described, refers to a temporary shoring system that is built from the top down, a sequence that provides continuous support of the soil as the excavation proceeds. Often the most economical support system is a soil nail wall or tiedback soldier beam and wood lagging wall. These systems function to support the surrounding ground during subsurface excavation and only until the basement walls and floor slabs are constructed and achieve stren h; at that time the new foundation walls and slabs take over the support which was provided by the excavation support system. (Tab 12, emphasis added.) Notably, Schnabel does not install steel shoring systems. Balfour Beatty's compliance with the Bid Documents and agreement to supply the specified steel shoring system, instead of deviating from the Bid Documents like WML, resulted in WML being the apparent low bidder for the Project. Schnabel's beam and wood lagging proposal price was $1,521,600.00. Balfour Beatty's cost to install the steel shoring system is $3,604,800.003, which is $2,083,200.00 more than what WML agreed to pay Schnabel for the substitute wood system. The difference between Balfour Beatty's bid and WML's is only $937,700.00. Had Balfour Beatty used the Schnabel bid, its price would have been over $2 million lower and over $1 million lower than WML underscoring the unfair competitive advantage taken by WML by use of Schnabel's wood ''The District can confirm WML's substitution of the beam and wood lagging system, for the specified steel system,by reviewing WML's escrowed bid documents. As a"condition of award of the Contract," WML and Balfour Beatty were required to deposit with the District"all documentary information generated in preparation of Bid Prices for this Project." Accordingly,WML may not be awarded the contract unless it submitted Schnabel's beam and wood-lagging proposal as part of its bid deposit. As detailed below, if WML did submit the Schnabel bid,the District may not enforce its bid documents against WML because it knows WML's bid was for wood shoring,not steel. 3 Balfour Beatty's cost can be verified in.its Bid Analysis Sheet#3 escrowed with its bid documents. The cost being used by Balfour Beatty here is exclusive of movement monitoring and bond so it reflects a true comparison with Schnabel's bid. Ms. Natasha K. Dubrovski October 5, 2012 Page 6 of 11 shoring. In other words, the single reason WML submitted a lower price than Balfour Beatty is that WML deviated from the requirements of the Bid Documents and accepted Schnabel's proposal to substitute the shoring system. 3. California Law Precludes Acceptance Of WML's Bid Because Of The Shoring Substitution A. Summary Of Competitive Bidding Law A responsive bid is one that conforms to the project specifications. (Konica Business Machines U.S.A., Inc. v. The Regents of the University of California(1988) 206 Cal.App.3d 449, 454.) In Konica Business Machines, the California Court of Appeal succinctly stated the consequences of filing a non-responsive bid: A basic rule of competitive bidding is that bids must conform to specifications, and that if a bid does not so conform, it may not be accepted (Id. at p. 454, emphasis added.) The Court outlined a narrow exception to this general rule, holding that minor bid irregularities may be waived only where the defect: (1) "cannot have affected the amount of the bid;" and(2) the defect cannot have resulted in "an advantage or benefit not allowed other bidders." (Ibid.) Further, the Court stated: Because of the potential for abuse arising from deviations from strict adherence to standards which promote these public benefits, the letting of public contracts universally receives close judicial scrutiny and contracts awarded without strict compliance with bidding requirements will be set aside. The importance of maintaining integrity in government and the ease with which policy goals underlying the requirement for open competitive bidding may be surreptitiously undercut, mandate strict compliance with bidding requirements. (Id. at pp. 456-457, emphasis added; see also Valley Crest Landscape, Inc. v. City Council of the City of Davis (1996) 41 Cal.AppAth 1432, 1440.) Applying the above principles, the Konica Court ruled that an alternative bid, one that offers something different than what is specified, may not be accepted. In that case, the University of California published a Request For Proposals seeking offers to supply copy machines with precise performance capabilities. (Konica Business Machines, supra, 206 Cal.App.3d at pp. 452-453.) The low bidder offered copy machines that met Ms. Natasha K. Dubrovski October 5, 2012 Page 7 of 11 some of the specifications but fell short of others. (Ibid.) The Court held that the bidder had submitted a non-responsive alternative bid, which California law precluded the University from accepting. (Id. at pp. 455-456.) As detailed below, California Law precludes the District from accepting WML's bid for the same reasons. B. WML's Bid Does Not Conform. To The District's Specifications And Is Therefore Non-Responsive The District could not have more clearly expressed the requirement that bidders supply a steel shoring system rather than a wooden system. The Project plan sheets referenced the protective steel system (see e.g., Tab 5) and the Project Specifications outlined precise material and installation requirements (See Tab 6). In response to a bidder's question, the District reinforced the steel shoring requirement. (Tab 7.) There can be no dispute the Bid Documents mandated the steel shoring system. There can also be no dispute that WML's bid deviated from those requirements. Schnabel's bid substituted a wood shoring system and offered to perform the work at a cost of just over$1.5 million. (Tab 11, p. 1.) WML listed Schnabel on the face of its bid as performing the shoring work for $1.6 million. (Tab 10.) Schnabel does not sell or install steel shoring systems. Finally, WML's escrowed bid documents confirm its bid includes the non-compliant wooden shoring.4 Summarily, WML's bid deviated from the Bid Documents and is therefore non-responsive and must be rejected. C. California Law Precludes The District From Waiving The Defects In WML's Non-Responsive Bid As detailed above, the District could only waive WML's bid deviation if the shoring system substitution could not have affected WML's price or given WML an advantage or benefit which was not afforded to bidders who complied with the Bid Documents. WML's substitution of the cheaper shoring system offered by Schnabel allowed WML to substantially lower its price. Conversely, Balfour Beatty's bid price was $2,083,200.00 higher than it would have been had Balfour Beatty accepted Schnabel's proposal and offered the District wood instead of steel. As a result, WML's deviation from the specifications resulted in an advantage or benefit which was not enjoyed by WML's competitors. Accordingly, California law precludes the District from waiving WML's bid deviation. 4 If WML's escrowed bid documents do not contain and incorporate the Schnabel bid,then they are incomplete. As a result,WML would not be eligible to be awarded the contract. (Tab 4,pp. 6-9, Special Provisions, § 13 ["Timely submission of complete Escrow Bid Documents is an essential element of the Bidder's responsiveness and a prerequisite to Contract Award."].) This provision illustrates the District may examine the escrowed documents pre-award. Ms. Natasha K. Dubrovski October 5, 2012 Page 8 of 11 Even if the District tried to require WML to install the steel shoring, WML would have enjoyed a competitive advantage over the others bidders based on the fact that Schnabel did not bid and could not install the steel shoring system. WML would have the opportunity to substitute Schnabel off the Project pursuant to Public Contract Code section 4107, and bid-shop the shoring work to other subcontractors with the post-award pricing leverage of having been awarded the job. The ability to bid-shop post-bid is a competitive advantage mandating finding WML's bid non-responsive, and also contrary to the purpose of the Subletting and Subcontracting Fair Practices Act, Public Contract Code section 4100, et seq. D. The Bid Documents Require The District To Review Schnabel's Proposal To WML California law requires public entities to enforce and follow the rules and procedures set forth in their bid documents. (Pozar v. Department of Transporation (1983) 145 Cal.App.3d 269 [bidder was entitled to writ of mandate based on public entity's failure to enforce its own bid documents].) Here, the Bid Documents provide that bidders are required to escrow complete copies of all estimating documents as a condition precedent to award of the Project. (Tab 4, p. 6.) Because WML listed Schnabel on its bid as its shoring subcontractor, the District has the ability and duty to determine whether WML escrowed Schnabel's proposal to WML. If WML failed to escrow the Schnabel proposal, WML did not meet the mandatory condition precedent to award and may not be awarded the Project, regardless of whether the District considers WML's bid to be responsive. (Id.) Failure to verify the escrow requirement by opening the submission would be a violation of the District's own Bid Documents. E. The District Cannot Enforce The Bid Documents Steel Shoring Requirement Against WML Because It Knows WML Proposed Wood Shoring California law precludes the District from accepting a bid and enforcing its bid documents against a bidder where the District knows, prior to award, that the bid contains a mistake. (See Emma Corp. v. Inglewood Unified School Dist. (2004) 114 Cal.App.4th 1018.) In Emma Corp., a school district owner received bids for a project, all of which exceeded the district's budget. The district knew the low bidder on the project mistakenly failed to include the plumbing scope of work, causing the bid to be $786,000.00 too low. (Id. at p. 1020.) The district nonetheless accepted the erroneously 5 Notably, if WML selected a subcontractor, Schnabel,without confirming it can perform the specified shoring work,then WML falls short of the responsibility standard set forth in Public Contract Code section 1103 and Section 14 of the Instructions To Bidder. (Tab 2,p. 7.) A contractor cannot be considered a "responsible"contractor after it retains a subcontractor that is incapable of performing the specified work on a project of the size and complexity of the Project. Ms. Natasha K. Dubrovski October 5, 2012 Page 9 of 11 low bid and attempted to force the bidder to perform the project at its artificially low bid price. (Id.) The district contended the bidder must perform the project as specified regardless of its mistake. The California Court of Appeal disagreed, holding the district was estopped from forcing the bidder to perform the work as specified because the district knew about the error in the bid prior to awarding the contract. (See also, M. F. Kemper Const. Co. v. City of Los Angeles (1951) 37 Cal.2d 696, 702-703 [holding the City could not enforce abid against a contractor where the City knew the contractor's bid contained an error making the bid too low; "The evidence clearly supports the conclusion that it would be unconscionable to hold the company to its bid at the mistaken figure....it appears that it would be unjust and unfair to permit the City to take advantage of the company's mistake."].) Like the owners in the cited authority, the District now knows that WML's bid does not cover the full scope of the Project; it is for wood not steel shoring. As such, if WML were awarded the Project the District could not insist WML install the steel shoring system without paying WML a change order to cover the additional cost of that system. As detailed above, that cost would exceed $2 million, meaning that WML would ultimately be paid over $1 million more than Balfour Beatty's lowest responsive bid to perform the work. For these reasons, WML has an unfair competitive advantage in that it was able to offer a lower price by deviating from the bid requirements. Consequently, the defect cannot be waived and a writ of mandate would set aside any award of the Project to WML. (Konica Business Machines U.S.A., Inc. v. The Regents of the University of California, supra, 206 Cal.App.3d 449.) F. WML's Deviation Appears On The Face Of The Bid One might take the position that WML's bid may be considered responsive because WML's product substitution did not appear "on the face of the bid." That argument misconstrues the opinion in D.H. Williams Const., Inc. v. Clovis Unified School Dist., (2007) 146 Cal.App.4th 757. There, a school district rejected a bid as non- responsive because the bidder inadvertently listed a subcontractor that was not licensed on bid day. The subcontractor's license defect did not appear on the face of the bid -the school District conducted its own research into the subcontractor's license status. The rejected bidder filed a lawsuit challenging the determination that the subcontractor license defect rendered its bid non-responsive. The court held that the bid was, in fact, responsive because neither the bid documents nor California law prohibited bidders from listing subcontractors that were not licensed on bid day. Since the bid was technically responsive, the court surmised that it could only be rejected if the district found, after a hearing, that the bidder was not "responsible" (i.e., lacked the fitness, quality and capacity to perform the work), based on Ms. Natasha K. Dubrovski October 5, 2012 Page 10 of 1 I the fact that it chose to list an unlicensed subcontractor. Since the school district never held a fact-finding hearing on that issue, the court held the rejection of the bid was improper. One might try and liken WML's shoring system deviation to the subcontractor license defect in D.H. Williams, contending that neither defect was apparent"on the face of the bid" so neither defect could render the bid non-responsive. That argument is without merit. First, the bid in D.H. Williams was held to be responsive because there simply was no requirement that listed subcontractors be licensed. The court's holding and rationale did not depend in any way on whether the defect appeared on the face of the bid. Conversely, the Bid Documents in this case: (1) expressly required bidders to supply a steel shoring system; and (2) prohibited bidders from submitting alternative or deviant bids. WML's bid violated both aspects of the Bid Documents. Second, D.H. Williams does not hold that responsiveness must be determined from the "face of the bid." Rather, the court stated that "in the usual case, the determination that a bid is nonresponsive is not based on disputed facts, does not involve an exercise of agency discretion, and does not require a hearing for the excluded bidder." (Id. at p. 764.) Bidder responsibility, on the other hand, "is a complex matter dependent, often, on information received outside the bidding process and requiring, in many cases, an application of subtle judgment." (Id.) Thus, the responsiveness/responsibility distinction depends on whether the determination is based on disputed facts requiring fact-finding about a complex matter. In WML's case, there are no disputed facts. Schnabel only offered to provide the cheaper and disallowed wood shoring system. WML's bid plainly listed Schnabel and WML, in order to be considered for award, filed a copy of Schnabel's proposal with the District in its escrowed bid documents. Since there are no disputed facts, there is no need for the District to apply "subtle judgment." Accordingly, WML's bid defect renders WML's bid non-responsive under D.H. Williams. Third, even if D.H. Williams held that responsiveness must be evaluated based only on information within the bid (which it did not), WML's bid would still be non- responsive because WML's shoring deviation is apparent on the face of WML's bid. WML listed Schnabel on its bid form as its shoring subcontractor. Based on the undisputed fact that Schnabel did not offer to provide the specified steel shoring system, WML's bid is non-responsive. Moreover, WML's escrowed bid documents, which plainly show Schnabel's proposal, are essential bid documents that bidders were required to submit to be awarded the Project. Those documents are part of WML's bid - WML could not be awarded the Project without submitting them. Summarily, an argument that WML's bid was responsive because the deviation from steel to wood did not appear on the face of the bid is without merit because: (1)the Ms. Natasha K. Dubrovski October 5, 2012 Page 11 of 11 defect is apparent on the face of the bid; and (2) even if it had not appeared on the face of the bid, the defect renders the bid non-responsive because it is based on undisputed facts. 4. Conclusion WML was the apparent low bidder on the Project solely because it deviated from the District's specifications and submitted a bid offering to perform something different than what the Bid Documents required. Balfour Beatty complied with the Bid Documents. WML's bid is non-responsive because it ignored the District's clear response to Question No. 27, and the requirement for a steel shoring system rather than a cheaper wooden system. The District is now aware of the deviation in WML's bid and cannot require WML to install the more costly steel shoring without paying WML more money. WML's non-responsive bid afforded WML an unfair competitive advantage which cannot be waived. Balfour Beatty requests the District reject WML's non- responsive bid and award the Project to Balfour Beatty. We request copies of all communications between the District and WML concerning this protest and notice of any hearing concerning the above issues. Thank you for your consideration. Very tru ours, P. Ran o�piinci Jr., of MARKS, FINCH, THORNTON & BAIRD, LLP Enclosures DRJ:kam/3 3 56997 cc: Orange County Sanitation District Attn: Mr. Bradley R. Hogin, Legal Counsel Mr. Jim Herberg, Assistant General Manager& Director of Engineering Mr. Jim Ruth, General Manager Balfour Beatty Infrastructure, Inc. - Fairfield, CA (via e-mail only) Attn: Mr. Crandall Bates, Vice President Western Region Mr. Dan Dischner, Chief Estimator MARKS, FINCH,THORNTON & BAIRD, LLP ROBERT J. MARKS, APC * ATTORNEYS AT LAW JON F. GAUTHIER, APC P. RANDOLPH FINCH JR. 4747 EXECUTIVE DRIVE — SUITE 700 DANIELLE C. HUMPHRIES JASON R. THORNTON CHRISTOPHER R. SILLARI JEFFREY B. BAIRD SAN DIEGO, CALIFORNIA 92121-3107 DUSTIN R. JONES CHAD T. WISHCHUK TELEPHONE (858) 737-3100 LAURA B. MACNEEL LOUIS J. BLUM FACSIMILE (858) 737-3101 RODRIGO F. MOREIRA DAVID S. DEMIAN DANIEL P. SCHOLZ STEPHEN J. SCHULTZ + INTERNET www.mftb.com RYAN P. KENNEDY MARK T. BENNETT + E-MAIL pfinch@mftb.com ADAM C. WITT DAVID W. SMILEY BRETT T. WALKER BERNARD F. KING III M. KATY ROSS NOWELL A. LANTZ J. PATRICK HICKS JUSTIN M. STOGER October 12, 2012 ALLISON N. COOPER * OF COUNSEL ANDREA L. PETRAY OUR FILE NUMBER + OF COUNSEL vie MERRILL, SCHULTZ 8 BENNETT, LTD. 1439.001 SUPPLEMENTAL BID PROTEST VIA ELECTRONIC MAIL Ms.Natasha K. Dubrovski Principal Contracts Administrator Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, California 92708 construction@ocsd.com Re: Entity: Orange County Sanitation District Project: Sludge Dewatering And Odor Control At Plant No. I Project No.: PI-101 Non-Responsive Bidder: W. M. Lyles Company Lowest Responsive Bidder: Balfour Beatty Infrastructure, Inc. Dear Ms. Dubrovski: This supplements the bid protest on the above referenced project filed by Balfour Beatty on October 5, 2012. The purpose of this supplement is to identify newly-disclosed public bidding records for OCSD's consideration. These newly-disclosed records confirm OCSD should not, and cannot, accept WML's flawed, non-responsive and artificially low bid for the project. Enclosed at Tab 1 is an e-mail from WML project manager, Matt Cain, to OCSD dated July 19, 2012, three weeks before the bid deadline. Mr. Cain transmitted WML's cumulative list of 70 pre-bid questions, including two questions at the bottom of that list which WML had highlighted for OCSD's consideration. OCSD ultimately labeled one of the two highlighted questions as Question No. 27, which asked OCSD to agree that bidders were not required to bid and install the specified steel shoring system. As detailed in Balfour Beatty's October 5, 2012 bid protest, OCSD's answer to that question unambiguously instructed bidders to bid and install the steel shoring system, i.e., bid according to OCSD's plans and specifications. The WML e-mail at Tab 1 confirms that WML did more than negligently deviate from OCSD's instructions to provide steel and not wood. WML: (1) identified an opportunity to cut its costs and gain a competitive advantage; (2) asked OCSD to Ms.Natasha K. Dubrovski October 12, 2012 Page 2 of 2 acquiesce to its shoring substitution; (3)received OCSD's denial of that request; and (4) substituted the shoring system anyway. WML did not just miss the steel shoring requirement while estimating the work—WML consciously ignored OCSD's requirement for steel in order to achieve a competitive advantage which is prohibited under California law. (Konica Business Machines U.S.A. Inc. v. Regents of University of California (1988) 206 Cal.App.3d 449, 454 ["A basic rule of competitive bidding is that bids must conform to specifications, and that if a bid does not so conform, it may not be accepted."].) As detailed in Balfour Beatty's October 5, 2012 protest, use of wood instead of steel resulted in WML's competitive advantage. The newly disclosed documents confirm WML created an even more lopsided playing field. By submitting its question and eliciting a published answer which it ultimately ignored, WML made certain that none of its competitors would make the same illicit shoring substitution. In other words, WML made sure that it was the only bidder that enjoyed the more than $2 million savings on bid day. OCSD should not condone and encourage the circumventing of its instructions and California public bidding law. The project should be awarded to Balfour Beatty Infrastructure, Inc.,the lowest responsive and responsible bidder. Thank you. Very truly yours, P. Randolph Finch Jr., of MARKS, FINCH, THORNTON & BAIRD, LLP Enclosures DRJ:kam/3418762 cc: Orange County Sanitation District Attn: Mr. Bradley R. Hogin, Legal Counsel Mr. Jim Herberg, Assistant General Manager& Director of Engineering Mr. Jim Ruth, General Manager Balfour Beatty Infrastructure, Inc. -Fairfield, CA (via e-mail only) Attn: Mr. Crandall Bates, Vice President Western Region Mr. Dan Dischner, Chief Estimator MARKS, FINCH, THORNTON & BAIRD, LLP ROBERT J. MARKS, APC * ATTORNEYS AT LAW JON F. GAUTHIER, APC P. RANDOLPH FINCH JR. 4747 EXECUTIVE DRIVE — SUITE 700 DANIELLE C. HUMPHRIES JASON R. THORNTON CHRISTOPHER R. SILLARI JEFFREY B. BAIRD SAN DIEGO, CALIFORNIA 921 21-31 0 7 DUSTIN R. JONES CHAD T. WISHCHUK TELEPHONE (858) 737-3100 LAURA B. MACNEEL LOUIS J. BLUM RODRIGO F. MOREIRA DAVID S. DEMIAN FACSIMILE (858) 737-3101 DANIEL P. SCHOLZ STEPHEN J. SCHULTZ + INTERNET www,mftb.com RYAN P. KENNEDY MARK T. BENNETT + E-MAIL pfinch@mftb.com ADAM C. WITT DAVID W. SMILEY BRETT T. WALKER BERNARD F. KING III M. KATY ROSS NOWELL A. LANTZ J. PATRICK HICKS JUSTIN M. STOGER October 30, 2012 ALLISON N, COOPER * OF COUNSEL ANDREA L. PETRAY OUR FILE NUMBER + OF COUNSEL via MERRILL, SCHULTZ & BENNETT, LTD. 1439.001 SUPPLEMENTAL BID PROTEST VIA ELECTRONIC MAIL Ms. Natasha K. Dubrovski Principal Contracts Administrator Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, California 92708 ndubrovski@ocsd.com Re: Entity: Orange County Sanitation District Project: Sludge Dewatering And Odor Control At Plant No. I Project No.: PI-101 Non-Responsive Bidder: W, M, Lyles Company Lowest Responsive Bidder: Balfour Beatty Infrastructure, Inc. Dear Ms. Dubrovski: 1, Introduction Competitive bidding requires fundamental fairness and a level playing field. The issues framed by Balfour Beatty's bid protest and WML's response are: (1) does OCSD want the permanent steel shoring that Balfour Beatty read the bid documents to require, or is OCSD satisfied with the cheaper wood shoring proposed by WML, which WML contends is allowed; and (2) if OCSD is satisfied with the cheaper wood, did it provide a level playing field for all bidders or mislead them with pre-bid Question and Answer 27 such that a re-bid is required. Ms. Natasha K. Dubrovski October 30, 2012 Page 2 of 7 As set forth below, OCSD cannot reasonably or fairly answer these questions so as to allow the project to be awarded to WML. Balfour Beatty should be awarded the project or it should be re-bid. OCSD's October 15, 2012 letter stated OCSD lacked the necessary information to confirm WML substituted a cheaper shoring system in its bid for the above referenced project. (Tab 1.) OCSD concluded it could not declare WML's bid non-responsive without considering WML's escrowed documents, and could not"speculate" as to how WML bid the project without reviewing those documents. WML has since admitted it substituted the shoring system in its October 11, 2012 opposition to Balfour Beatty's protest. (Enclosed at Tab 2, without its enclosures.) WML's opposition to the bid protest is part of the bid process and, under California law, must be considered in evaluating the responsiveness of WML's bid. It is now undisputed that WML's bid substituted temporary wood shoring where permanent steel shoring was required. As such, even without review of the escrow documentation, WML's bid is non-responsive and must be rejected. OCSD should award the project to Balfour Beatty as the lowest responsive bidder, or re-bid the project to achieve a level playing field. 2. WML Is Wrong—The Bid Documents Undoubtedly Required Permanent Steel Shoring WML admits it bid the project using temporary wood shoring, but nonetheless contends its bid is responsive because the bid documents did not call for permanent shoring. The argument is meritless. OCSD clearly called for permanent shoring to protect delicate portions of the existing facility. Those areas and the relevant bid documents are detailed below. A. Specifications 01772 And 02361, Plan Sheets C1-7006 And S2-1001, And Question And Answer 27 Clearly Mandated Bidders Submit Bids Covering Permanent Steel Shoring Three existing structures on the project are decades old and easily damaged, such that OCSD required bidders to protect those structures with permanent steel shoring. The structures are: (1) Tunnel 17, which was built in 1964 and is not supported on piles; (2) the 72-inch trickling filter effluent pipe ("TFE Pipe"); and (3) Digesters 9 and 10, which were built in 1979 and are also not supported on piles. Ms. Natasha K. Dubrovski October 30, 2012 Page 3 of 7 Tunnel 17 and the TFE Pipe are set forth in Plan Sheet C1-7006. (See Tab 3.) That drawing includes Notes 5 & 6 which directs bidders to protect those components with shoring pursuant to Specification 01772, PROTECTION OF ADJACENT CONSTRUCTION: a. PROT:CT'R)NNCL 17 ALONG ITS CNMIRC LEN01H, SEE splo lCAMN SEC'90N 01722, PROTCC"ON OF ADJACENT CO?JS RUCTIC44 FOR REC..0 32`:KENTS AND LOCAPON OF SHORING 6, PROITGT 111E 72' RCP Tf PIPE ALONG ITS. E`411P.E LEPaGIK SEE SPtC,RCAT?ON SCtAON 01722, PROIECPON OF AWACE?SIT C£k'STRUCTkDN FOR-REPaF3 REMi NTS AND LOCATION OF SHORMGI The third area needing permanent protection is around Digesters 9 and 10, and is set forth on Plan Sheet S2-1001. (See Tab 4.) It details Tunnel 29 which is to be constructed between Digesters 9 & 10. That drawing also includes a note instructing bidders to provide protective shoring in accordance with the PROTECTION OF ADJACENT CONSTRUCTION specification. Specification 01722, PROTECTION OF ADJACENT CONSTRUCTION, is enclosed at Tab 5. It includes separated subsections concerning each of the three above described structures. Each subsection requires the areas be protected by shoring that is to be "left in lace" (i.e., the shoring is permanent),I OCSD clearly stated its reasons for requiring permanent shoring within Specification 01722. With respect to Tunnel 17, OCSD told bidders that the tunnel was 58 years old and instructed bidders to "use caution during all construction activities to avoid damage to Tunnel 17." (Tab 5, section 3.4 (13)(1)). With respect to Tunnel 29 and Digesters 9 and 10, OCSD stated, "The District is concerned about potential damage to the digesters." (Tab 5, section 3.4 (D)(1).) While the above described drawings and Specification 01722 identify where and why the permanent shoring was required, Specification 02361, STEEL SHEET PILING (copy at Tab 6), detailed the type of permanent shoring to be installed. Specification 02361 states in its first paragraph: This section covers only materials and installation of permanent hot-rolled steel piling to be installed and left in place as part of the steel sheet piling 1 Section 3.4(13)(3)states"The Shoring system installed parallel to Tunnel 17 shall be left in place." Section 3.4(C)(5)states the shoring system protecting TFE Pipe"shall be left in place." Section 3.4(D)(3) states"The shoring system installed along Tunnel 29 shall be left in place"to protect Digesters 9 and 10. Ms. Natasha K. Dubrovski October 30, 2012 Page 4 of 7 utilized in the excavation of the building basement and tunnels and as protections stem for pipelines and existing structures as indicated on the Drawings. (Tab 5, section 1.1(A), emphasis added.) Specification 02361 expressly applies to shoring that is "left in place"to protect "tunnels," "pipelines" and "existing structures." It clearly applies to the shoring that protects Tunnel 17, the TFE Pipes, and Digesters 9 and 10. Even if a bidder had been uncertain whether the steel sheet shoring in Specification 02361 had to be installed to protect Tunnel 17, the TFE Pipes and Digesters 9 and 10, OCSD's answer to Question 27 eliminated all uncertainty. It very clearly stated Specification 02361 identified the type of shoring to be installed in those areas—"STEEL SHEET" shoring. (See Tab 7.) Summarily, Drawings C1-7006 and S2-1001, Specifications 01722 and 03361, and OCSD's answer to Question 27, consistently and clearly require permanent steel sheet shoring to protect Tunnel 17, the TFE pipes, and Digesters 9 and 10. B. WML's Contention That Steel Shoring Was Not Required Is Meritless WML contends OCSD did not require permanent shoring because the general earthwork specification requires the contractor to remove all temporary wood shoring used on the project. The argument is meritless because the project requires both temporary and permanent shoring. The fact that the general earthwork specification requires temporary shoring to be removed does not negate the requirement to install permanent shoring to protect the above described areas. In other words, the earthwork specification does not conflict with or undermine the steel shoring requirements to protect existing structures. Moreover, even if the general earthwork specification conflicted with the steel shoring requirement, it would not trump the specific drawings, specifications, and Question andAnswer which expressly call for permanent steel shoring. (Code Civ. Proc., § 1859 [more specific contract requirements trump general specifications].) As such, WML's argument that the general earthwork specification negates the steel shoring requirement is without merit. In the alternative, WML argues that even if steel shoring were required in the three above-described areas, Addendum 3 changed the shoring to temporary wood Ms. Natasha K. Dubrovski October 30, 2012 Page 5 of 7 shoring by deleting the requirement that a concrete wall be poured against the shoring in Tunnel 17. The argument is also without merit. First, Addendum 3 affected just one of the three areas requiring steel shoring—Tunnel 17. Modification of one area certainly did not eliminate the steel shoring requirement in the other two. Second, and more important, Addendum 3 specifically left in the requirement that the Tunnel 17 shoring was to be "left in place." (Tab 5, section 3.4 (13)(3).) In other words, the removal of the requirement to pour the wall against the shoring is irrelevant to whether steel shoring was required to be installed. Summarily, both of WML's arguments that steel shoring was not required are patently false. 3. WML Confirmed That Its Bid Was Non-Responsive In Its Opposition To Balfour Beatty's Protest OCSD contended in its letter at Tab 1 that it could not determine WML's bid to be non-responsive without relying on the escrow documents. The conclusion is based on the notion that the escrow documents cannot be considered because they are "information received outside of the bidding process," which the Court in D.H. Williams Construction stated was not part of the responsiveness inquiry. (See D.H. Williams Const., Inc. v. Clovis Unified School Dist. (2007) 146 Cal.App.4th 757, 764 [generally issues requiring investigation outside of the bidding process fall under the "responsibility"requirement, rather than responsiveness].) Accepting the notion that the escrow documents may not be considered, OCSD must still reject WML's bid as non-responsive because WML admitted in its opposition to Balfour Beatty's protest that its bid is based on temporary wood shoring. (See Tab 2.) That opposition was submitted to OCSD within "the bidding process." Accordingly, WML's confirmation of its choice of shoring system can and must be considered by OCSD. As such, WML's shoring substitution is an"undisputed fact" which directly negates the responsiveness of its bid. (D.K Williams Const., Inc. v. Clovis Unified School Dist., supra, 146 Cal.App.4th at p. 764 ["In the usual case, the determination that a bid is non-responsive is not based on disputed facts."].) WML admitted that it did not promise to do what the bidding instructions required. As such, its bid is non-responsive. (Valley Crest Landscape, Inc. v. City Council(1996) 41 Cal.App.4th 1432, 1438.) Ms.Natasha K. Dubrovski October 30, 2012 Page 6 of 7 4. WML's Bid Defect May Not Be Waived WML cites Konica Business Machines U.S.A., Inc. v. Regents of University of California (1988) 206 Cal.App.3d 449, in support of its request that OCSD waive its bid deviation as "inconsequential." In fact, WML's bid deviation was anything but "inconsequential," and may not be waived. California law precludes waiver of any bid deviation which could have affected the bid price or given the bidder an advantage or benefit not allowed to competitors. (Valley Crest Landscape, Inc. a City Council, supra, 41 Cal.AppAth at p. 1441.) WML's shoring substitution did both. WML does not dispute that its wood shoring system is cheaper than permanent steel. As such, the shoring substitution both could have affected WML's price and afforded WML an advantage. WML cannot sidestep this rule by contending the permanent shoring was required in only a few areas. The inquiry is whether the deviation could have affected price or afforded WML an advantage or benefit not allowed to the other bidders—the extent of the price impact or advantage is irrelevant. OCSD also may not waive WML's undisputed bid deviation based on WML's post-bid commitment to install the required shoring system. The advantage enjoyed by WML on bid day cannot be retroactively erased by WML's post-bid agreement. California law is clear—WML's bid day advantage precludes OCSD from waiving the defect. 5. Re-bidding The Project Avoids Claims And Litigation Balfour Beatty and WML framed the issues for OCSD: (1) did OCSD's bid documents require steel shoring?; and (2) if not, did OCSD create an unleveled playing field by leading WML's competitors to believe steel shoring was required? As detailed above, the answer to the first question is yes—steel shoring was required and, as a result, the project may not be awarded to WML. If OCSD engineering now decides to accept wood shoring, OCSD clearly unleveled the playing field by telling WML's competition that steel shoring was essential (through the above-described plans and specifications and the answer to Question 27). In either case, award to WML would be set aside via writ of mandate. (Konica Business Machines U.S.A. Inc. v. Regents of University of California, supra, 206 Cal.App.3d at p. 456.) The District can avoid a writ of mandate by rejecting all bids. (Kajima/Ray Wilson v. Los Angeles County Metropolitan Transp. Authority (2000) 23 CalAth 305, 315 [public entity has absolute discretion to reject all bids].) In addition, the District Ms. Natasha K. Dubrovski October 30, 2012 Page 7 of 7 exceeded its budget for the Project by more than $24 million due to price inflation by sole-source suppliers. If the District elects to re-bid, the District could broaden the allowable products/suppliers to include "equal" suppliers. Balfour Beatty will to work with the District prior to the re-bid to identify the alternative products/suppliers that will bring the Project to the budget saving $20 million of District funds. Pursuant to Public Contract Code section 22037, the District could accept a second round of bids for the Project just 15 days after advertising a new bid deadline. In other words, the District could realistically re-bid and award the Project in under a month. 6. Conclusion As detailed above, the fact that WML bid wood and not steel is undisputed. There is no need for OCSD to perform any outside investigation or apply subtle judgment to disputed issues outside the bid process. The only issue is whether OCSD required steel shoring. If so, WML's bid is non-responsive and must be rejected. If not, WML's bid would be responsive, but would also be the result of an unleveled playing field. If OCSD engineering is fine with wood then it should reject all and re-bid to allow a level playing field. The project should be awarded to Balfour Beatty as the lowest responsive bidder, or put out for re-bid. Very truly yours, P. Ran , Partner of MARKS, FINCH, THORNTON & BAIRD, LLP Enclosures PRF:kam/3450946 cc: Orange County Sanitation District Attn: Mr. Bradley R. Hogin, Legal Counsel Mr. Jim Herberg, Assistant General Manager & Director of Engineering Mr. Jim Ruth, General Manager Balfour Beatty Infrastructure, Inc. - Fairfield, CA (via e-mail only) Attn: Mr. Crandall Bates, Vice President Western Region Mr. Dan Dischner, Chief Estimator DOWLING I AARON I N C O R P O R A T E D ATTORNEYS AND COUNSELORS AT LAW 8080 North Palm Third October 11, 2012 Fresno,o,C CA 93711 P: 559.432.4500 F: 559.432.4590 WRITER'S E-MAIL: asloter�Jdowlingaaron.com www.dowlingoaron.com File No. 14946-000 MICHAEL D.DOWLING VIA E-MAIL (construction@ocsd.com) RICHARD M.AARON DAVID J.WETLAND CHRISTOPHER A.BROWN AND FACSIMILE (714) 593-7779 CHR MICHAEL J.HOGAN DANIEL K.KLINGENBERGER LARRY B.LINDENAU Ms. Natasha K. Dubrovski RONALD A.HENDERSON DONALD R.FISCHBACH Principal Contracts Administrator RUSSELL F.HURLEY PHILIP B.LAIRD Orange County Sanitation District JAMES D. STEVEN D.MCGEEE III 10844 Ellis Avenue KEVIN C.GRANT TIMOTHY J.CARBON•• J Fountain Valley, California 92708 TIMOTHY JOHN C.GANAHL KENTON J.KLASSEN JEFFREY P.DAVIS Re: Entity: Orange County Sanitation District MARK D.KRUTHERS LEIGH W.BURNSIDE Project: Sludge Dewatering and Odor Control at Plant No. 1 DAVID LYNNET AXTER RO Project No.: P1-101 LYNNE THAXTER BROWN DANIELO.JAMISON Opposition to Bid Protest Submitted b Balfour Beat DAVID O.FLEWALLEN PP Y t3' STEPHACHRISTNIEH. E.SEYMRS Infrastructure Inc. CHRISTOPHER E.SEYMOUR � NATHAN W.POWELL GREGORY N.MISKULIN PAUL M.PARVANIAN Dear: Ms. Dubrovski JOSHUA S.ALIPAZ GREGORY J.NORYS STEVEN M. SLATE On October 1 2012 the Orange Count Sanitation District hereinafter, G.ANDREW SLATER > > g Y ( MICAH K. N MATTHEW T. BESMER• the "District") sent an Award Recommendation Notice that W. M. Lyles ATTH BES MATTHEW R.DILDINE Company (hereinafter, "Lyles") was the lowest responsive, responsible bidder MARK J.GLEASON JARED C.MARSHALL on the Orange County Sanitation District Sludge Dewatering and Odor Control ROBERI W.PENDERGRASS at Plant No. 1 project (hereinafter, the "Project"). STEPHEN M.BLUMBERG CKOLAS J.DIBIASO In a misguided effort to derail the proper award of the Project to Lyles, STEVEN M.VARTABEDIAN Balfour BeattyInfrastructure, Inc. (hereinafter, "Balfour" has submitted a Bid KENNETMYRON MOSKOVITZ �'" ) JAMESCHM RWOO Protest. Balfour's Bid Protest contests the District's intent to award the Project JAMS C.S1�RWOOD OF COUNSEL to Lyles asserting that Lyles' bid was not responsive to the Invitation for Bids. Balfour's Bid Protest is without merit. This office has been engaged by Lyles Als ^Alsoad on*mittedediin Indwnon hcfio to oppose and defend against Balfour's protest. • od BI.AINE PETTrrr (1916-2002) I. LYLES' BID IS RESPONSIVE. MORRIS M.$HERR (1930-20%) A public entity is required to put significant contracts out for competitive bidding and to award the contract to the lowest responsive, 200forniaAvenue Suite responsible bidder. (See MC'M Construction, Inc. v. City and County of San Bakersfield,CA 9 P: 661.7 6.3000331� Francisco (1998) 66 Cal. App. 4th 359, 368; Ghilotti Construction Co. v. City F: 661.716.3005 of Richmond(1996) 45 Cal. App. 4th 897, 904-905; and Pub. Contract Code § 403 North Floral Street 20162.) A bidder is responsible if it can perform the contract as promised. Visalia.CA 93291 P: 559.739.7200 F: 559.739-7233 Ms. Natasha K. Dubrovski October 11, 2012 Page 2 (Id.) A bid is responsive if it promises to do what the bidding instructions require. (Id.) In its Bid Protest, Balfour asserts that Lyles' bid is non-responsive as it offers to install a temporary wooden shoring system rather than a permanent steel shoring system. In its protest, Balfour takes the position that the entire shoring system required by the Invitation to Bid was to be permanent and consist of steel sheet piling. Balfour is incorrect. To the contrary, most, if not all, of the shoring system for the Project is to be temporary and is not required to be constructed of steel sheet piling. Specification Section 02200 "Earthwork" makes the nature of the shoring system clear at: Part 1.6.A.: "General: The CONTRACTOR shall furnish all labor, equipment, and materials to construct, install, and remove the entire shoring system including removal of lagging, soldier beams, bracing, and detensioning of tiebacks." (Emphasis added.) Part 1.1: The Requirement: with regard to the earthwork: "...the furnishing, placing, and removing of sheeting, shoring and bracing ..." (Emphasis added.) Part 1.6.E: "Shoring Beams/Piles: The CONTRACTOR shall coordinate the methods of installation and removal of shoring beams/piles with the requirements for noise and vibration control listed elsewhere in these specifications. Maximum noise and vibration levels shall not be exceeded by the installation and removal methods." (Emphasis added.) Part 1.6.G: "Shoring Removal: Shoring shall be removed cautiously such that no damage of any type is caused to existing or newly constructed facilities." (Emphasis added.) (See enclosed at Exhibit A.) Not only does Section 02200 specify that the general nature of the shoring system is to be temporary, but it acknowledges the acceptable use of a beam and lagging wooden system. Further, Addendum No. 3 to Specification Section 01722 "Protection of Adjacent Construction" strikes out the language requiring the north and west walls of Tunnel 17 (at Part 3.4.13) and the Trickling Filter Effluent Pipeline (at Part 3.4.C) to be "poured against the shoring".' (See enclosed at Exhibit B.) If the walls were to be poured against the shoring, obviously the intent would be for the shoring to be permanent. Conversely, the fact that the walls are not to be poured against the shoring shows the intent of the District that the shoring be removed, which is consistent with Section 02200. This point is also addressed in an answer given by the District to a question from a bidding contractor, see enclosed Exhibit E,answer to Question 28(last page of exhibit). Ms. Natasha K. Dubrovski October 11, 2012 Page 3 The above notwithstanding, it is arguable that Specification Section 01722, Parts 3.4.13, C and D require a portion of the overall shoring system to be permanent (portions of Tunnel 17, the Trickling Filter Effluent Pipeline, and Tunnel 29 between Digester Nos. 9 and 10). (See enclosed Exhibit B.) However, these sections amount to only about 1,500 sq. ft. (Tunnel 29 between Digester Nos. 9 and 10) and 10,500 sq. ft. (Tunnel 17 and the TFE Pipeline), respectively, of the total of approximately 41,000 sq. ft. of shoring required for the Project. In no way do these portions transform the general nature of the shoring system provided by Section 02200. Nor does Section 01722 require the use of steel sheets or reference Specification Section 02361, which contains specs for steel sheet piling. Nonetheless, if the District desires these specific portions to be permanent and/or steel, the work can be performed by Lyles' listed shoring subcontractor, Schnabel Foundation Company (hereinafter, "Schnabel"). Contrary to Balfour's assertion in its Bid Protest, Schnabel does install steel shoring systems. (See enclosed Exhibit C.) Any permanent shoring system required for the project can and will be designed and installed by Schnable using materials acceptable to the District at no extra cost to the District. It should also be noted that all 3 of the bidders that listed shoring subcontractors listed Schnabel as the shoring subcontractor; and provided subcontractors bids to the District from Schnabel in roughly the same amount as Lyles. (See Balfour's Bid Protest, Tab 10.) The wide use of Schnabel by bidders is further evidence that Lyles' interpretation of the shoring system and materials for the Project is correct. Without question Lyles' bid is responsive to the District's Invitation to Bid. To the extent Lyles' bid contains any minor deviation from the Invitation to Bid, a public agency has wide discretion to waive inconsequential errors in a bid and can accept a bid that deviates from, but which substantially conforms to the call for bids. (See Konica Business Machs. U. S. A. v. Regents of Univ. of Cal. (1998) 206 Cal. App. 3d 449, 454; and MCM, supra at 368) U. BALFOUR'S BID IS NON-RESPONSIVE. Balfour's Bid Protest operates as an 11 page admission that its bid is non-responsive. As demonstrated above, the Invitation for Bids called for a primarily removable shoring system. Balfour admits by way of its Bid Protest that it bid the Project for an entirely permanent shoring system, contrary to the Project specifications rendering its bid non-responsive. (See Konica, supra at 454.) III. BALFOUR'S BID PROTEST IS UNPERSUASIVE. The documentation and information submitted by Balfour in support of its Bid Protest is insufficient to show Lyles' bid is non-responsive. A. The Proiect and Bid Documents (Balfour's Bid Protest, Tabs 1-4). As shown above, Lyles' interpretation of the shoring system required -ror the Project is correct. Thus, Lyles' bid does not deviate from the bid documents. To the extent Balfour's Bid Protest alleges Lyles failed to escrow all necessary documents with the District, the allegation is Ms. Natasha K. Dubrovski October 11, 2012 Page 4 false. The District can confirm that all necessary documents were escrowed, including documents from Sehnabel. B. Bid Document, Section 02361 (Balfour's Bid Protest, Tab 6). Specification Section 02361 "Steel Sheet Piling" is a Red Herring. Section 02361 provides specifications for the use of steel sheet piling on the Project. (See enclosed Exhibit D.) However, the Bid Documents themselves do not require the use of steel sheet piling. Additionally, Part 2.1.13 of Section 02361 refers to Project "Drawings" where use of the steel sheet piling is to be indicated. However, the reference is not reflected on any of the actual Project drawings. Balfour's Bid Protest argues that Notes 5 and 6 of Drawing C 1-7006 (discussed in greater detail below) require materials specified in Section 02361. However, C1- 7006 makes no reference to Section 02361.'(See enclosed Exhibit F.) Instead, C 1-7006 makes reference to Section 01722, which makes no reference to Section 02361 and does not specify materials to be used by the contractor. Presumably, Section 02361 was included as an option should the contractor choose to install steel sheet piling rather than beam and lagging shoring. To the extent Sections 02200 and 01722 conflict with Section 02361, the District's intent that the bidding contractor have the freedom to design an appropriate shoring system on its own is evident in its responses to bidder submitted questions, wherein it stated multiple times, "Contractor is responsible for designing a shoring system." (See enclosed Exhibit E, answers to questions 2, 7, 8, 16 and 27.) C. Drawinz C1-7006 (Balfour's Bid Protest, Tab 5). As stated above, Balfour's Bid Protest references Drawing C 1-7006 Notes 5 and 6 as support for its position that the District intended the shoring system to be permanent and consist of the steel sheet piling specified in Section 02361. Unfortunately for Balfour, Drawing C1-7006 does nothing of the sort. (See enclosed Exhibit F.) C 1-7006 does not require the shoring to be permanent, does not require the shoring to be constructed with steel sheet piling, and refers the bidding contractor to Section 01722, not Section 02361 for specifications. As addressed above, Section 01722 does not require permanent shoring and does not specify the shoring be steel sheet piling. Even if C1-7006 required the use of steel sheets (which it clearly does not), the section covered by Notes 5 and 6 (Section 01722) only represents the approximately 12,000 sq. ft. of shoring which may be permanent described above, not the entire Project. Thus, C 1-7006 does not support Balfour's position. D. Bidder Question No. 27 (Balfour's Bid Protest, Tab 7) Bidder Question No. 27 asks the District to clarify the situation along Tunnel 17 and the 72-inch Trickling Filter Effluent Pipeline. The response was, in essence, to bid as specified, without further clarification. Specifically, the District pointed the contractor to Section 01722 and Section 02361. As discussed above, Section 01722 cites the specifications in 02200, allowing beams and lagging, while Section 02361 provides specs for steel sheets. Again, presumably the District is giving the bidding contractor leeway to design the details of the shoring system. Ms. Natasha K. Dubrovski October 11, 2012 Page 5 IV. CONCLUSION. The Invitation to Bid did not require Lyles to bid a permanent steel sheet piling shoring system. Lyles did not fail to escrow any of its Bid Documents. And if any portion of the shoring requires permanent steel sheet piling, Lyles can perform without gaining any improper advantage over other bidders. In conclusion, Lyles is the lowest responsive, responsible bidder. This fact has already been recognized by the District and the Project should proceed with Lyles as awarded. Very truly yours, DOWLING AARON INCORPORATED By: Steven D. McGee, Esq. G. Andrew Slater, Esq. SDM/GAS:nmj Enclosures cc: Mr. David Dawson Mr. Rick Amigh Ms. Andrea Oliver P. Randolph Finch Jr. Orange County Sanitation District Bradley R. Hogin, Legal Counsel Jim Herberg—Assistant General Manager& Director of Engineering Jim Ruth, General Manager 14946-000\01079126.DOC. Orange County Sanitation District 10844 Ellis Avenue,Fountain Valley,CA 92708 Anaheirn (714)962-2411 www.ocsewers.corn Brea Buena Park October 15, 2012 Fountain Valley,� Randolph Finch Jr. Fullerton MARKS, FINCH, THORNTON & BAIRD Garden GroveI 4747 Executive Drive, Suite 700 San Diego, CA 92121 Huntington Beach s Irvine SUBJECT: OCSD Response to Balfour Beatty Infrastructure, Inc. Bid Protest and Supplemental Bid Protest La Habra Re: Project No. P1-101, Sludge Dewatering and Odor Control La Palma at Plant No. 1 NewportLos Alarnitos This letter responds to the Bid Protest filed by Balfour Beatty Infrastructure (Balfour Beatty) dated October 5, 2012, as well as the Supplemental Bid Protest submitted Orange on October 12, 2012, protesting the Orange County Sanitation District's (OCSD) Placentia Notice of Intent to Award dated October 1, 2012. Santa Ana In summary, Balfour Beatty claims that the lowest bidder, W.M. Lyles Company SealBeach (Lyles), presented a non-responsive bid because Lyles offered to install a temporary Stanton wood shoring system in lieu of a permanent steel shoring system, which you assert was required in the bid specifications. In order to reach a determination that Lyles is Tustin non-responsive, Balfour Beatty suggests that OCSD (i) review the escrowed bid documents in order to verify that a listed subcontractor, Schnabel Foundation Villa Park Company (Schnable), proposed wood shoring work as opposed to steel; and (ii) Yorba Linda conclude, based on the pre-bid questions submitted by Lyles, that Lyles' bid in fact County of Orange did not conform to the bid specifications. Costa Mesa As you are probably aware, "a bid is responsive if it promises to do what the bidding Sanitary District instructions require." (Taylor Bus Service, Inc. v. San Diego Bd. of Education Midway City (1987) 195 Cal.App.3d 1331, 1341.) Generally, whether a bid is responsive can be Sanitary District determined from the face of the bid based on a set of requirements established by a public agency without outside investigation or information. (Id. at 1341-1342.) As Irvine Ranch you stated in the bid protest, "California law requires public entities to enforce and Water District follow the rules and procedures set forth in their bid documents." (Pozar v. Department of Transportation (1983) 145 Cal.App.3d 269.) OCSD has considered Balfour Beatty's Bid Protest, in which all arguments lead to �� sax,igT the same request —that OCSD review the escrowed bid documents to find that Lyles is non-responsive. Pursuant to the Special Provisions, SP-13, entitled °ems„ "Escrow of Bid Documents", subsection C, (Bid Protest Tab 4, p.6) provides: c 9 n • "Purpose: Escrow Bid Documents will be used to assist in the 9 negotiation of price adjustments and Change Orders and in the settlement of disputes, Claims and other controversies. They will THE EN not be used for pre-award evaluation of the CONTRACTOR'S anticipated methods of construction or to assess the CONTRACTOR'S qualifications for performing the Work." We protect public health and the environment by providing effective wastewater collection, treatment, and recyling. 4oJ�1-j SANITq T'�N � � O V � = 9 c ¢ n 0 4 ti 90r O��2 0 THE EN Randolph Finch Jr. Page 2 October 15, 2012 Contrary to Balfour Beatty's suggestion, SP-13 expressly restricts OCSD from using the Escrow Bid Documents for the purpose of the pre-award evaluation. OCSD is required to follow the procedures set forth in the Public Contracts Code, OCSD Resolution 07-04, and the bid documents. Furthermore, Balfour Beatty argues that the pre-bid questions submitted by Lyles are conclusive proof that Lyles' bid deviated from OCSD's instructions. OCSD cannot reach that conclusion. OCSD has carefully reviewed the bid submitted by Lyles consistent with the law and OCSD's procedures, and has determined that the bid submitted by Lyles is responsive to what the bidding instructions require. Lyles did not propose a wood shoring system in its bid proposal, and has signed the acknowledgement and certification that it will construct the Project consistent with the bid plans and specifications. OCSD will not engage in speculation concerning the anticipated methods of construction of the shoring system when the bid submitted by Lyles is responsive to what was requested in the bid documents. By merely listing Schnabel as a subcontractor and by submitting a pre-bid question, OCSD is unable to conclude that Lyles is non-responsive. Therefore, OCSD has determined that the bid submitted by Lyles is responsive to the bid requirements, and that Lyles is responsible, that is, Lyles has the fitness, quality, and capacity to perform the proposed work satisfactorily. OCSD has evaluated and considered the Balfour Beatty's Bid Protest and Supplemental Bid Protest and arguments raised therein protesting award of Project No. P1-101 to Lyles. Based on the evaluation and conclusions as described herein, OCSD hereby denies Balfour Beatty's Bid Protest, and will proceed to recommend award of the Project No. P1-101 to the lowest responsive and responsible Bidder, Lyles, at the Board of Directors meeting on November 28, 2012. 4A 1_� Natasha K. Dubrovski Principal Contracts Administrator NKD:MC:ms EDMS: 003964609 cc: Contract File 7.4.4e Orange County Sanitation District 10844 Ellis Avenue,Fountain Valley,CA 92708 Anaheim (714)962-2411 www.ocsewers.com Brea Buena Park October 31, 2012 CypressVia Fax: 858-737-3101, Fountain Valley Email: nhorn@mftb.com, & Certified Mail FullertonGarden Grove P. Randolph Finch, Jr. MARKS, FINCH, THORNTON & BAIRD HuntingtonBeach 4747 Executive Drive, Suite 700 Irvine San Diego, CA 92121 HabraLa La Palma SUBJECT: Response to Balfour Beatty Infrastructure Supplemental Bid Protest Re: Project No. P1-101, Sludge Dewatering and Odor Control Los Alamitos at Plant No. 1 Newport OrangeThe Orange County Sanitation District (OCSD) received and reviewed the Placentia Supplemental Bid Protest letter dated October 30, 2012 submitted by Balfour Beatty Infrastructure, Inc. OCSD has evaluated and considered the arguments and issues raised in Balfour Beatty's Bid Protest and Supplemental Bid Protest SealBeach referenced above protesting the award of Project No. P1-101 to W.M. Lyles Stanton claiming that W.M. Lyles' bid was nonresponsive. Based on OCSD's evaluation of the facts and arguments presented, OCSD's position remains unchanged from Tustin its letter of October 15, 2012. OCSD will proceed to recommend award of the Project No. P1-101 to the lowest responsive and responsible Bidder, W.M. Lyles, Villa Park at the Board of Directors meeting on November 28, 2012. LindaYorba County Orange SanitaryCosta Mesa Natasha K. Dubrovski Principal Contracts Administrator MidwaySanitary District NKD:ms RanchIrvine EDMS: 003966202 DistrictWater USPS Certified Mail Tracking Number: 7005 0390 0004 8201 6548 cc: Contract File 7.4.4e GOJNtY SANITgToN V N� 2' 9 Q O � O N 901�cr�NG 7HE ENV�Qo���2 We protect public health and the environment by providing effective wastewater collection, treatment, and recyling. 11 %F MOYNO Always the Right Solution TM August 23, 2012 Attn: Ms. Natasha Dubrovski, Principal Contract Administrator Orange County Sanitation District 10844 Ellis Ave. Fountain Valley, CA 92708 Re: OCSD project P1-101, Cake pumps and sludge pumps Dear Ms. Dubrovski, Moyno has been working with the engineer, HDR, on this project for several years. During this time we have helped HDR with design criteria for pump setup, running speeds, and with empirical data on piping pressure losses. While the spec was essentially changed to "sole-source" excluding Moyno, I'd like to discuss a few pertinent items: • Moyno is fully capable of providing cake pumps that can operate under the conditions given in the spec. Currently the spec is the proprietary design of another manufacturer, thus it contains some features different from our cake pump products. We are providing equipment that our extensive experience shows will work in demanding cake applications such as these. • Moyno data was used in the design of the OCSD cake system, even though Moyno is no longer listed as a bidder. • Moyno has a vast array of cake pump installations successfully operating throughout the United States and other countries since the 1950's, and has valuable experience working with most major US municipalities. This real world experience could be of great benefit to OCSD as we work toward the successful completion of this important project. Although we could not provide the consultant with a Cake pump installation of the same or greater horsepower, we feel we have demonstrated our capability to fully perform in cake applications for all the previous major municipal projects with a great degree of success. Therefore, we would ask to not be excluded from providing an offering on this project solely because of not having a similar horsepower unit. To the best of our knowledge, our competitor offered a reference for a private company, Entertech, whom accepts sludge from OCSD, and LA County. A Unit of Robbins&Myers./nc. • We respectfully object to the way the bid process excluded Moyno from being able to offer competitive pricing. The competitor, whom was sole-sourced in spec Section 11250 - Cake pumps, packaged the Cake pumps with Section 11309 - Sludge pumps for which Moyno was a named supplier. Moyno was thereby prevented from offering a competitive bid that could be considered on its own merit. • Our competitor offered sole-source pricing far exceeding Moyno's normal market pricing on comparable equipment. We feel Orange County Sanitation District did not benefit from competitive market pricing on the project. The final bid price being several Million dollars over the engineering budget price, we strongly urge OCSD to re-evaluate this bid, both to provide Moyno an honest opportunity to compete and to secure for yourselves a competitive and successful project. We are available to meet with the District regarding this bid and would like to be considered. Moyno has an extensive history and presence in the OCSD plant with several long term installations. We would like very much to be given a chance to compete and be of service to the District. Regards Mark A. Yingling Municipal Sales Manager Moyno Inc., A Unit of Robbins and Myers, Inc. PHONE: (937)-327-3017 FAX: (937)-327-3177 mark.yingling0robn.com www.moyno.com Orange County Sanitation District Serving: 10844 Ellis Avenue,Fountain Valley,CA 92708 Anaheim (714)962-2411 www.ocsewers.com Brea Buena Park October 4, 2012 Cypress Via Fax: (937) 327-3177 Fountain Valley & mark.vinglinq(c�robn.com FullertonMark A. Yingling Garden Grove Moyno Inc., A Unit of Robbins and Myers. Inc. 1895 W. Jefferson HuntingtonBeach Springfield. OH 45506 Irvine La •• • SUBJECT: Response to Moyno's Letter of August 23, 2012 La PaIrna— Re: Project No. P1-101, Sludge Dewatering and Odor Control at Plant No. 1 Los Alamitos Newport Beach Orange County Sanitation District (OCSD) received your letter dated August 23, Orange2012 regarding Project P1-101 ("Project"). Placentia On January 25, 2012, OCSD's Board of Directors adopted Resolution No. 12-01 Santa Ana making findings pursuant to Public Contract Code Section 3400 in support of the SealBeach Sole Source of cake pumps and directing that the sludge cake pumps manufactured by Seepex meeting OCSD's needs be specified by name in the Invitation for Bids for Stantonthe Project. A copy of OCSD's Resolution 12-01 is included for your reference. The Tustin Agenda Report and draft Resolution 12-01 was published and made available for viewing prior to the above referenced Board meeting in accordance with OCSD's Villa Park policies and procedures and applicable laws and regulations. Yorba Linda Consistent with Resolution No. 12-01, the Invitation for Bids listed Seepex by name Countyof Orange for the sludge cake pumps. Pursuant to the Instructions to Bidders, Section I13-30, Costa Mesa solicitation protests must be submitted no later than 10 days after the First Sanitary District Advertisement. Your request for consideration is untimely- Midway We appreciate your input and value our relationship. Thank you for your Sanitary District communication and we look forward to working with your company in the future. Water District Irvine Ranch Nat sha K. Dubrovski Principal Contracts Administrator o�NSV S AHl iq J�Oy NKD:MC:ms = y EDMS: 003964176 c ¢ c o - • Enclosures: OCSD Resolution 12-01 9or�cT'N v`Qo��`2 cc: A. Mirzy (Moyno, Inc.), Contract File 7.4.4e � THE EN We protect public health and the environment by providing effective wastewater collection, treatment, and recyling. PART A CONTRACT AGREEMENT C-CA-070612 TABLE OF CONTENTS CONTRACT AGREEMENT SECTION - 1 GENERAL CONDITIONS.................................................................... 1 SECTION - 2 MATERIALS AND LABOR..................................................................4 SECTION - 3 PROJECT............................................................................................5 SECTION -4 PLANS AND SPECIFICATONS..........................................................5 SECTION - 5 TIME OF COMMENCEMENT AND COMPLETION............................5 SECTION - 6 TIME IS OF THE ESSENCE...............................................................6 SECTION - 7 EXCUSABLE DELAYS........................................................................6 SECTION - 8 EXTRA WORK....................................................................................7 SECTION - 9 CHANGES IN PROJECT....................................................................7 SECTION - 10 LIQUIDATED DAMAGES FOR DELAY ...............................................8 SECTION - 11 CONTRACT PRICE AND METHOD OF PAYMENT............................8 SECTION - 12 SUBSTITUTION OF SECURITIES IN LIEU OF RETENTION OF FUNDS ..............................................................................................10 SECTION - 13 COMPLETION....................................................................................10 SECTION - 14 CONTRACTOR'S EMPLOYEES COMPENSATION ......................... 11 SECTION - 15 SURETY BONDS............................................................................... 13 SECTION - 16 INSURANCE ......................................................................................14 SECTION - 17 RISK AND INDEMNIFICATION ......................................................... 15 SECTION - 18 TERMINATION................................................................................... 16 SECTION - 19 WARRANTY....................................................................................... 16 SECTION - 20 ASSIGNMENT.................................................................................... 17 SECTION - 21 RESOLUTION OF DISPUTES........................................................... 17 SECTION - 22 SAFETY & HEALTH........................................................................... 17 SECTION - 23 NOTICES ........................................................................................... 18 C-CA-070612 CONTRACT AGREEMENT ORANGE COUNTY SANITATION DISTRICT PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 THIS AGREEMENT is made and entered into, to be effective, this October 24, 2012, by and between W.M. Lyles Company, hereinafter referred to as "CONTRACTOR" and the Orange County Sanitation District, hereinafter referred to as "OCSD". WITNESSETH That for and in consideration of the promises and agreements hereinafter made and exchanged, OCSD and CONTRACTOR agree as follows: SECTION — 1 GENERAL CONDITIONS CONTRACTOR certifies and agrees that all the terms, conditions and obligations of the Contract Documents as hereinafter defined, the location of the job site, and the conditions under which the Work is to be performed have been thoroughly reviewed, and enters into this Contract based upon CONTRACTOR's investigation of all such matters and is in no way relying upon any opinions or representations of OCSD. It is agreed that this Contract represents the entire agreement. It is further agreed that the Contract Documents are each incorporated into this Contract by reference, with the same force and effect as if the same were set forth at length herein, and that CONTRACTOR and its Subcontractors, if any, will be and are bound by any and all of said Contract Documents insofar as they relate in any part or in any way, directly or indirectly, to the Work covered by this Contract. C-CA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 1 of 19 A. Contract Documents Order of Precedence "Contract Documents" refers to those documents identified in the definition of"Contract Documents" in the General Conditions - Definitions. 1. In the event of a conflict between one Contract Document and any of the other Contract Documents, the provisions in the document highest in precedence shall be controlling. The order of precedence of the Contract Documents is as follows: a. Supplemental Agreements, including, but not limited to, Pre-Selection Agreement assigned to and accepted by Contractor- the last in time being the first in precedence b. Addenda issued prior to opening of Bids - the last in time being the first in precedence C. Contract Agreement i. OCIP Insurance policies ii. Exhibit B iii. Exhibit C OCIP Insurance Manual iv. Exhibit D OCIP Safety Standards V. Other provisions of the Contract Agreement d. Permits and other regulatory requirements e. Special Provisions f. General Conditions (GC) g. Notice Inviting Bids and Instruction to Bidders h. Geotechnical Baseline Report (GBR), if attached as a Contract Document i. Plans and Specifications - in these documents the order of precedence shall be: i. Specifications (Divisions 01-17) ii. Plans C-CA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 2 of 19 iii. General Requirements (GR) iv. Standard Drawings and Typical Details j. CONTRACTOR's Bid 2. In the event of a conflict between terms within an individual Contract Document, the conflict shall be resolved by applying the following principles as appears applicable: a. Figured dimensions on the Contract Documents shall govern. Dimensions not specified shall be as directed by the ENGINEER. Details not shown or specified shall be the same as similar parts that are shown or specified, or as directed. Full-size details shall take precedence over scale Drawings as to shape and details of construction. Specifications shall govern as to material and workmanship. b. The Contract Documents calling for the higher quality material or workmanship shall prevail. Materials or Work described in words, which so applied, have a well known technical or trade meaning shall be deemed to refer to such recognized standards. In the event of any discrepancy between any Drawings and the figures thereon, the figures shall be taken as correct. C. Scale Drawings, full-size details, and Specifications are intended to be fully complementary and to agree. Should any discrepancy between Contract Documents come to the CONTRACTOR's attention, or should an error occur in the efforts of others, which affect the Work, the CONTRACTOR shall notify the ENGINEER, in writing, at once. In the event any doubts or questions arise with respect to the true meaning of the Contract Documents, reference C-CA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 3 of 19 shall be made to the ENGINEER whose written decision shall be final. If the CONTRACTOR proceeds with the Work affected without written instructions from the ENGINEER, the CONTRACTOR shall be fully responsible for any resultant damage or defect. d. Anything mentioned in the Specifications and not indicated in the Plans, or indicated in the Plans and not mentioned in the Specifications, shall be of like effect as if indicated and mentioned in both. In case of discrepancy in the Plans or Specifications, the matter shall be immediately submitted to OCSD's ENGINEER, without whose decision CONTRACTOR shall not adjust said discrepancy save only at CONTRACTOR's own risk and expense. The decision of the ENGINEER shall be final. In all matters relating to the acceptability of material, machinery or plant equipment; classifications of material or Work; the proper execution, progress or sequence of the Work; and quantities interpretation of the Contract Documents, the decision of the ENGINEER shall be final and binding, and shall be a condition precedent to any payment under the Contract, unless otherwise ordered by the Board of Directors. B. Definitions Capitalized terms used in this Contract are defined in the General Conditions, Definitions. Additional terms may be defined in the Special Provisions. SECTION — 2 MATERIALS AND LABOR CONTRACTOR shall furnish, under the conditions expressed in the Plans and Specifications, at CONTRACTOR'S own expense, all labor and materials necessary, except such as are mentioned in the Specifications to be furnished by OCSD, to construct and complete the Project, in good workmanlike and substantial order. If CONTRACTOR fails to pay for labor or C-CA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 4 of 19 materials when due, OCSD may settle such claims by making demand upon the Surety to this Contract. In the event of the failure or refusal of the Surety to satisfy said claims, OCSD may settle them directly and deduct the amount of payments from the Contract Price and any amounts due to CONTRACTOR. In the event OCSD receives a stop payment notice from any laborer or material supplier alleging non-payment by CONTRACTOR, OCSD shall be entitled to deduct all of its costs and expenses incurred relating thereto, including but not limited to administrative and legal fees. SECTION — 3 PROJECT The Project is described as: PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 SECTION —4 PLANS AND SPECIFICATONS The Work to be done is shown in a set of Plans and Specifications entitled: PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 Said Plans and Specifications and any revision, amendments and addenda thereto are attached hereto and incorporated herein as part of this Contract and referred to by reference. SECTION — 5 TIME OF COMMENCEMENT AND COMPLETION CONTRACTOR agrees to commence the Project within 15 calendar days from the date set forth in the "Notice to Proceed" sent by OCSD, unless otherwise specified therein and shall diligently prosecute the Work to completion within 1425 calendar days from the date of the "Notice to Proceed" issued by OCSD, excluding delays caused or authorized by OCSD as set forth in C-CA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 5 of 19 Sections 7, 8, and 9 hereof, and applicable provisions in the General Conditions. The time for completion includes 30 calendar days determined by OCSD likely to be inclement weather when CONTRACTOR will be unable to work. In addition, CONTRACTOR shall accomplish such milestones within the periods of performance set forth in Appendix A of the Special Provisions entitled "Work Completion Schedule." SECTION — 6 TIME IS OF THE ESSENCE Time is of the essence of this Contract. As required by the Contract Documents, CONTRACTOR shall prepare and obtain approval of all shop drawings, details and samples, and do all other things necessary and incidental to the prosecution of CONTRACTOR's Work in conformance with an approved construction progress schedule. CONTRACTOR shall coordinate the Work covered by this Contract with that of all other contractors, subcontractors and of OCSD, in a manner that will facilitate the efficient completion of the entire Work and accomplish the required milestone(s), if any, by the applicable deadline(s) in accordance with Section 5 herein. OCSD shall have the right to assert complete control of the premises on which the Work is to be performed and shall have the right to decide the time or order in which the various portions of the Work shall be installed or the priority of the work of subcontractors, and, in general, all matters representing the timely and orderly conduct of the Work of CONTRACTOR on the premises. SECTION — 7 EXCUSABLE DELAYS CONTRACTOR shall only be excused for any delay in the prosecution or completion of the Project as specifically provided in General Conditions, "Extensions for Delay", and the General Requirements, "By CONTRACTOR or Others - Unknown Utilities during Contract Work". Extensions of time and extra compensation arising from such excusable delays will be C-CA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 6 of 19 determined in accordance with the General Conditions, "Extension of Time for Delay" and "Contract Price Adjustments and Payments", and extensions of time and extra compensation as a result of incurring undisclosed utilities will be determined in accordance with General Requirements, "By CONTRACTOR or Others - Unknown Utilities during Contract Work". OCSD's decision will be conclusive on all parties to this Contract. SECTION — 8 EXTRA WORK The Contract Price as set forth in Section 11, includes compensation for all Work performed by CONTRACTOR, unless CONTRACTOR obtains a Change Order signed by a designated representative of OCSD specifying the exact nature of the Extra Work and the amount of extra compensation to be paid all as more particularly set forth in Section 9 hereof and the General Conditions, "Request for Change (Changes at CONTRACTOR's Request)", "OWNER Initiated Changes", and "Contract Price Adjustments and Payments". In the event a Change Order is issued by OCSD pursuant to the Contract Documents, OCSD shall extend the time fixed in Section 5 for completion of the Project by the number of days, if any, reasonably required for CONTRACTOR to perform the Extra Work, as determined by OCSD's ENGINEER. The decision of the ENGINEER shall be final. SECTION — 9 CHANGES IN PROJECT OCSD may at any time, without notice to any Surety, by Change Order, make any changes in the Work within the general scope of the Contract Document, including but not limited to changes: 1. In the Specifications (including Drawings and designs); 2. In the time, method or manner of performance of the Work; 3. In OCSD-furnished facilities, equipment, materials, services or site; or 4. Directing acceleration in the performance of the Work. C-CA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 7 of 19 No change of period of performance or Contract Price, or any other change in the Contract Documents, shall be binding until the Contract is modified by a fully executed Change Order. All Change Orders shall be issued in accordance with the requirements set forth in the General Conditions, "Request for Change (Changes at CONTRACTOR's Request)" and "OWNER Initiated Changes". SECTION — 10 LIQUIDATED DAMAGES FOR DELAY Liquidated Damages shall be payable in the amounts and upon the occurrence of such events or failure to meet such requirements or deadlines as provided in the Special Provisions, "Liquidated Damages and Incentives." SECTION — 11 CONTRACT PRICE AND METHOD OF PAYMENT A. OCSD agrees to pay and the CONTRACTOR agrees to accept as full consideration for the faithful performance of this Contract, subject to any additions or deductions as provided in approved Change Orders, the sum of One Hundred Twenty-Six Million Nine Hundred Eight Thousand Three Hundred Dollars ($126,908,300) as itemized on the Attached Exhibit "A". Upon satisfaction of the conditions precedent to payment set forth in the General Requirements, Additional General Requirements and General Conditions (including but not limited to Sections entitled "Mobilization Payment Requirements" and "Payment Itemized Breakdown of Contract Lump Sum Prices"), there shall be paid to the CONTRACTOR an initial Net Progress Payment for mobilization. OCSD shall issue at the commencement of the job a schedule which shows: 1. A minimum of one payment to be made to the CONTRACTOR for each successive four (4) week period as the Work progresses, and C-CA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 8 of 19 2. The due dates for the CONTRACTOR to submit requests for payment to meet the payment schedule. After the initial Net Progress Payment, and provided the CONTRACTOR submits the request for payment prior to the end of the day required to meet the payment schedule, the CONTRACTOR shall be paid a Net Progress Payment on the corresponding monthly payment date set forth in the schedule. Payments shall be made on demands drawn in the manner required by law, accompanied by a certificate signed by the ENGINEER, stating that the Work for which payment is demanded has been performed in accordance with the terms of the Contract Documents, and that the amount stated in the certificate is due under the terms of the Contract. Payment applications shall also be accompanied with all documentation, records, and releases as required by the Contract, Exhibit A, Schedule of Prices, and General Conditions, "Payment for Work - General". The Total amount of Progress Payments shall not exceed the actual value of the Work completed as certified by OCSD's ENGINEER. The processing of payments shall not be considered as an acceptance of any part of the Work. B. As used in this Section, the following defined terms shall have the following meanings: 1. "Net Progress Payment" means a sum equal to the Progress Payment less the Retention Amount and other qualified deductions (Liquidated Damages, stop payment notices, etc.). 2. "Progress Payment" means a sum equal to: a. the value of the actual Work completed since the commencement of the Work as determined by OCSD; C-CA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 9 of 19 b. plus the value of material suitably stored at the worksite, treatment plant or approved storage yards subject to or under the control of OCSD since the commencement of the Work as determined by OCSD; C. less all previous Net Progress Payments; d. less all amounts of previously qualified deductions; e. less all amounts of OCIP payments for the CONTRACTOR's obligation, OCIP-related costs and OCIP penalties assessed as specified in the General Conditions; f. less all amounts previously retained as Retention Amounts. 3. "Retention Amount" for each Progress Payment means the percentage of each Progress Payment to be retained by OCSD to assure satisfactory completion of the Contract. The amount to be retained from each Progress Payment shall be determined as provided in the General Conditions - "Retained Funds; Substitution of Securities." SECTION — 12 SUBSTITUTION OF SECURITIES IN LIEU OF RETENTION OF FUNDS Pursuant to Public Contract Code Section 22300 et seq., the CONTRACTOR may, at its sole expense, substitute securities as provided in General Conditions - "Retained Funds; Substitution of Securities." SECTION — 13 COMPLETION Final Completion and Final Acceptance shall occur at the time and in the manner specified in the General Conditions, "Final Acceptance and Final Completion" and "Final Payment". C-CA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 10 of 19 Upon receipt of CONTRACTOR's affidavit, and all documentation, records, and releases as required by the Contract, OCSD shall proceed with the Final Acceptance as specified in General Conditions. SECTION — 14 CONTRACTOR'S EMPLOYEES COMPENSATION A. Davis-Bacon Act: CONTRACTOR will pay and will require all Subcontractors to pay all employees on said Project a salary or wage at least equal to the prevailing rate of per diem wages as determined by the Secretary of Labor in accordance with the Davis-Bacon Act for each craft or type of worker needed to perform the Contract. The provisions of the Davis- Bacon Act shall apply only if the Contract is in excess of Two Thousand Dollars ($2,000.00) and when twenty-five percent (25%) or more of the Contract is funded by federal assistance. If the aforesaid conditions are met, a copy of the provisions of the Davis-Bacon Act to be complied with are incorporated herein as a part of this Contract and referred to by reference. B. General Prevailing Rate: OCSD has been advised by the State of California Director of Industrial Relations of its determination of the general prevailing rate of per diem wages and the general prevailing rate for legal holiday and overtime Work in the locality in which the Work is to be performed for each craft or type of Work needed to execute this Contract, and copies of the same are on file in the Office of the ENGINEER of OCSD. The CONTRACTOR agrees that not less than said prevailing rates shall be paid to workers employed on this public works Contract as required by Labor Code Section 1774 of the State of California. C-CA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 11 of 19 Per California Labor Code 1773.2, OCSD will have on file copies of the prevailing rate of per diem wages at its principal office and at each job site, which shall be made available to any interested party upon request. C. Forfeiture for Violation: CONTRACTOR shall, as a penalty to OCSD, forfeit Two Hundred Dollars ($200.00) for each calendar day or portion thereof for each worker paid (either by the CONTRACTOR or any Subcontractor under it) less than the prevailing rate of per diem wages as set by the Director of Industrial Relations, in accordance with Sections 1770-1780 of the California Labor Code for the Work provided for in this Contract, all in accordance with Section 1775 of the Labor Code of the State of California. D. Apprentices: Sections 1777.5, 1777.6, 1777.7 of the Labor Code of the State of California, regarding the employment of apprentices are applicable to this Contract and the CONTRACTOR shall comply therewith if the prime contract involves Thirty Thousand Dollars ($30,000.00) or more. E. Workday: In the performance of this Contract, not more than eight (8) hours shall constitute a day's work, and the CONTRACTOR shall not require more than eight (8) hours of labor in a day from any person employed by him hereunder except as provided in paragraph (B) above. CONTRACTOR shall conform to Article 3, Chapter 1, Part 7 (Section 1810 et seg.) of the Labor Code of the State of California and shall forfeit to OCSD as a penalty, the sum of Twenty-five Dollars ($25.00) for each worker employed in the execution of this Contract by CONTRACTOR or any Subcontractor for each calendar day during which any worker is required or permitted to labor more than eight (8) hours in any one calendar day and forty (40) hours in any one week in violation of said Article. C-CA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 12 of 19 CONTRACTOR shall keep an accurate record showing the name and actual hours worked each calendar day and each calendar week by each worker employed by CONTRACTOR in connection with the Project. F. Record of Wages; Inspection: CONTRACTOR agrees to maintain accurate payroll records showing the name, address, social security number, work classification, straight-time and overtime hours worked each day and week, and the actual per diem wages paid to each journeyman, apprentice, worker or other employee employed by it in connection with the Project and agrees to require that each of its Subcontractors do the same. All payroll records shall be certified as accurate by the applicable CONTRACTOR or Subcontractor or its agent having authority over such matters. CONTRACTOR further agrees that its payroll records and those of its Subcontractors shall be available to the employee or employee's representative, the Division of Labor Standards Enforcement, and the Division of Apprenticeship Standards and shall comply with all of the provisions of Labor Code Section 1776, in general. Penalties for non- compliance with the requirements of Section 1776 may be deducted from Project payments per the requirements of Section 1776. SECTION — 15 SURETY BONDS CONTRACTOR shall, before entering upon the performance of this Contract, furnish Bonds approved by OCSD's General Counsel — one in the amount of one hundred percent (100%) of the Contract amount, to guarantee the faithful performance of the Work, and the other in the amount of one hundred percent (100%) of the Contract amount to guarantee payment of all claims for labor and materials furnished. As changes to the Contract occur via approved C-CA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 13 of 19 Change Orders, the CONTRACTOR shall assure that the amounts of the Bonds are adjusted to maintain 100% of the Contract Price. This Contract shall not become effective until such Bonds are supplied to and approved by OCSD. Bonds must be issued by a Surety authorized by the State Insurance Commissioner to do business in California. The Performance Bond shall remain in full force and effect through the warranty period, as specified in Section 19 below. All Bonds required to be submitted relating to this Contract must comply with California Code of Civil Procedure Section 995.630. Each Bond shall be executed in the name of the Surety insurer under penalty of perjury, or the fact of execution of each Bond shall be duly acknowledged before an officer authorized to take and certify acknowledgments, and either one of the following conditions shall be satisfied: A. A copy of the transcript or record of the unrevoked appointment, power of attorney, by- laws, or other instrument, duly certified by the proper authority and attested by the seal of the insurer entitling or authorizing the person who executed the Bond to do so for and on behalf of the insurer, is on file in the Office of the County Clerk of the County of Orange; or B. A copy of a valid power of attorney is attached to the Bond. SECTION — 16 INSURANCE CONTRACTOR shall not commence Work under this Contract until it enrolls in the Owner Controlled Insurance Program (OCIP) and all additional insurance as required by the Contract Exhibit B and Exhibit C is obtained in a form acceptable to OCSD, nor shall CONTRACTOR allow any Subcontractor to commence Work on a subcontract until each eligible Subcontractor enrolls in the OCIP and all additional insurance required of the Subcontractor by the Contract, Exhibit B and Exhibit C has been obtained. CONTRACTOR shall maintain all of the additional C-CA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 14 of 19 insurance coverages in force through the point at which the Work under this Contract is fully completed and accepted by OCSD pursuant to the provisions of the General Conditions, "Final Acceptance and Final Completion". Furthermore, CONTRACTOR shall maintain all of the additional insurance coverages in full force and effect throughout the warranty period, commencing on the date of Final Acceptance. The requirement for carrying the additional insurance shall not derogate from the provisions for indemnification of OCSD by CONTRACTOR under Section 17 of this Contract. CONTRACTOR's additional insurance shall also comply with all insurance requirements prescribed by agencies from whom permits shall be obtained for the Work and any other third parties from whom third party agreements are necessary to perform the Work (collectively, the "Third Parties"), The Special Provisions may list such requirements and sample forms and requirements from such Third Parties may be included in an attachment to the General Requirements. CONTRACTOR bears the responsibility to discover and comply with all requirements of Third Parties, including meeting specific insurance requirements, which are necessary for the complete performance of the Work. To the extent there is a conflict between the Third Parties' insurance requirements and those set forth by OCSD herein, the requirement(s) providing the more protective coverage for both OSCD and the Third Parties shall control and be purchased and maintained by CONTRACTOR. SECTION — 17 RISK AND INDEMNIFICATION All Work covered by this Contract done at the site of construction or in preparing or delivering materials to the site shall be at the risk of CONTRACTOR alone. CONTRACTOR shall save, indemnify, defend, and keep OCSD and others harmless as more specifically set forth in General Conditions, "General Indemnification". C-CA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 15 of 19 SECTION — 18 TERMINATION This Contract may be terminated in whole or in part in writing by OCSD in the event of substantial failure by the CONTRACTOR to fulfill its obligations under this Agreement, or it may be terminated by OCSD for its convenience provided that such termination is effectuated in a manner and upon such conditions set forth more particularly in General Conditions, "Termination for Default" and/or "Termination for Convenience", provided that no termination may be effected unless proper notice is provided to CONTRACTOR at the time and in the manner provided in said General Conditions. If termination for default or convenience is effected by OCSD, an equitable adjustment in the price provided for in this Contract shall be made at the time and in the manner provided in the General Conditions, "Termination for Default" and "Termination for Convenience". SECTION — 19 WARRANTY The CONTRACTOR agrees to perform all Work under this Contract in accordance with the Contract Documents, including OCSD's designs, Drawings and Specifications. The CONTRACTOR guarantees for a period of at least one (1) year from the date of Final Acceptance of the Work, pursuant to the General Conditions, "Final Acceptance and Final Completion" that the completed Work is free from all defects due to faulty materials, equipment or workmanship and that it shall promptly make whatever adjustments or corrections which may be necessary to cure any defects, including repairs of any damage to other parts of the system resulting from such defects. OCSD shall promptly give notice to the CONTRACTOR of observed defects. In the event that the CONTRACTOR fails to make adjustments, repairs, corrections or other work made necessary by such defects, OCSD may do so and charge the CONTRACTOR the cost incurred. The CONTRACTOR's warranty shall continue as to any corrected deficiency until the later of(1) the remainder of the original one-year warranty period; C-CA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 16 of 19 or (2) one year after acceptance by OCSD of the corrected Work. The Performance Bond and the Payment Bond shall remain in full force and effect through the guarantee period. The CONTRACTOR's obligations under this clause are in addition to the CONTRACTOR's other express or implied assurances under this Contract, including but not limited to specific manufacturer or other extended warranties specified in the Plans and Specifications, or state law and in no way diminish any other rights that OCSD may have against the CONTRACTOR for faulty materials, equipment or Work. SECTION — 20 ASSIGNMENT No assignment by the CONTRACTOR of this Contract or any part hereof, or of funds to be received hereunder, will be recognized by OCSD unless such assignment has had prior written approval and consent of OCSD and the Surety. SECTION — 21 RESOLUTION OF DISPUTES OCSD and the CONTRACTOR shall comply with the provisions of California Public Contract Code Section 20104 et. seq., regarding resolution of construction claims for any Claims which arise between the CONTRACTOR and OCSD, as well as all applicable dispute and Claims provisions as set forth in the General Conditions and as otherwise required by law. This Section does not apply to any OCIP-related claims. SECTION — 22 SAFETY & HEALTH CONTRACTOR shall comply with all applicable safety and health requirements mandated by federal, state, city and/or public agency codes, permits, ordinances, regulations, and laws, as well as these Contract Documents, including but not limited to the General Requirements Section entitled "Safety" and Exhibit D, OCIP Safety Standards. C-CA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 17 of 19 SECTION — 23 NOTICES Any notice required or permitted under this Contract may be given by ordinary mail at the address set forth below. Any party whose address changes shall notify the other party in writing. TO OCSD: Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, California 92708-7018 Attn: Clerk of the Board Copy to: Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, California 92708-7018 Attn: Construction Manager Bradley R. Hogin, Esquire Woodruff, Spradlin & Smart 555 Anton Boulevard Suite 1200 Costa Mesa, California 92626 TO CONTRACTOR: W.M. Lyles Company P.O. Box 4377 Fresno, CA 93744 Copy to: David B. Dawson, Sr. Vice President W.M. Lyles Company P.O. Box 4377 Fresno, CA 93744 C-CA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 18 of 19 IN WITNESS WHEREOF, the parties hereto have executed this Contract Agreement as the date first hereinabove written. Approved as to Form: Marc Dubois Contracts, Purchasing and Materials Management Division Manager CONTRACTOR: W.M. Lyles Company P.O. Box 4377 Fresno, CA 93744 By Its CONTRACTOR's State License No. 422390 (Expiration Date — 5/31/2014) OCSD: Orange County Sanitation District By Chair, Board of Directors By Clerk of the Board By Marc Dubois Contracts, Purchasing and Materials Management Division Manager C-CA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 19 of 19 EXHIBIT A SCHEDULE OF PRICES C-EXA-070612 TABLE OF CONTENTS EXHIBIT A SCHEDULE OF PRICES EXA-1 BASIS OF COMPENSATION .............................................................................. 1 EXA-2 PROGRESS PAYMENTS.................................................................................... 1 EXA-3 RETENTION AND ESCROW ACCOUNTS ......................................................... 1 EXA-4 STOP PAYMENT NOTICE ..................................................................................3 EXA-5 PAYMENT TO SUBCONTRACTORS..................................................................3 EXA-6 PAYMENT OF TAXES.........................................................................................3 EXA-7 FINAL PAYMENT ................................................................................................4 EXA-8 DISCOVERY OF DEFICIENCIES BEFORE AND AFTER FINAL PAYMENT.....6 ATTACHMENT 1 CERTIFICATION FOR REQUEST FOR PAYMENT........................7 ATTACHMENT 2 SCHEDULE OF PRICES ...........................................................8 C-EXA-070612 EXHIBIT A SCHEDULE OF PRICES EXA-1 BASIS OF COMPENSATION CONTRACTOR will be paid the Contract Document price according to the Schedule of Prices, and all other applicable terms and conditions of the Contract Documents. EXA-2 PROGRESS PAYMENTS Progress payments will be made in accordance with all applicable terms and conditions of the Contract Documents, including, but not limited to: 1. Contract Agreement— Section 11 — "Contract Price and Method of Payment;" 2. General Conditions —"Payment— General"; 3. General Conditions— "Payment—Applications for Payment"; 4. General Conditions — "Payment— Mobilization Payment Requirements;" 5. General Conditions — "Payment— Itemized Breakdown of Contract Lump Sum Prices"; 6. General Conditions—"Contract Price Adjustments and Payments"; 7. General Conditions— "Suspension of Payments"; 8. General Conditions— "OCSD's Right to Withhold Certain Amounts and Make Application Thereof'; and 9. General Conditions— "Final Payment." EXA-3 RETENTION AND ESCROW ACCOUNTS A. Retention: OCSD shall retain a percentage of each progress payment to assure satisfactory completion of the Work. The amount to be retained from each progress payment shall be determined as provided in General Conditions — "Retained Funds; Substitution of Securities". In all contracts between CONTRACTOR and its Subcontractors and/or Suppliers, the retention may not exceed the percentage specified in the Contract Documents. C-EXA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 1 of 10 B. Substitution of Securities: CONTRACTOR may, at its sole expense, substitute securities as provided in General Conditions—"Retained Funds; Substitution of Securities." Payment of Escrow Agent: In lieu of substitution of securities as provided above, the CONTRACTOR may request and OCSD shall make payment of retention earned directly to the escrow agent at the expense of the CONTRACTOR. At the expense of the CONTRACTOR, the CONTRACTOR may direct the investment of the payments into securities consistent with Government Code §16430 and the CONTRACTOR shall receive the interest earned on the investments upon the same terms provided for in this article for securities deposited by the CONTRACTOR. Upon satisfactory completion of the Contract, the CONTRACTOR shall receive from the escrow agent all securities, interest and payments received by the escrow agent from OCSD, pursuant to the terms of this article. The CONTRACTOR shall pay to each Subcontractor, not later than twenty (20) calendar days after receipt of the payment, the respective amount of interest earned, net of costs attributed to retention withheld from each Subcontractor, on the amount of retention withheld to ensure the performance of the Subcontractor. The escrow agreement used by the escrow agent pursuant to this article shall be substantially similar to the form set forth in §22300 of the California Public Contract Code. C. Release of Retention: Upon Final Acceptance of the Work, the CONTRACTOR shall submit an invoice for release of retention in accordance with the terms of the Contract. D. Additional Deductions: In addition to the retentions described above, OCSD may deduct from each progress payment any or all of the following: 1. Liquidated Damages that have occurred as of the date of the application for progress payment; 2. Deductions from previous progress payments already paid, due to OCSD's discovery of deficiencies in the Work or non-compliance with the Specifications or any other requirement of the Contract; 3. Sums expended by OCSD in performing any of the CONTRACTOR'S obligations under the Contract that the CONTRACTOR has failed to perform, and; 4. Other sums that OCSD is entitled to recover from the CONTRACTOR under the terms of the Contract, including but not limited to OCIP related withholdings, costs and fees as specified in Exhibit B and Exhibit C Insurance Manual. C-EXA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 2 of 10 The failure of OCSD to deduct any of the above-identified sums from a progress payment shall not constitute a waiver of OCSD's right to such sums or to deduct them from a later progress payment. EXA-4 STOP PAYMENT NOTICE In addition to other amounts properly withheld under this article or under other provisions of the Contract, OCSD shall retain from progress payments otherwise due the CONTRACTOR an amount equal to one hundred twenty-five percent (125%) of the amount claimed under any stop payment notice under Civil Code §9350 et. seq. or other lien filed against the CONTRACTOR for labor, materials, supplies, equipment, and any other thing of value claimed to have been furnished to and/or incorporated into the Work; or for any other alleged contribution thereto. In addition to the foregoing and in accordance with Civil Code §9358 OCSD may also satisfy its duty to withhold funds for stop payment notices by refusing to release funds held in escrow pursuant to public receipt of a release of stop payment notice executed by a stop payment notice claimant, a stop payment notice release bond, an order of a court of competent jurisdiction, or other evidence satisfactory to OCSD that the CONTRACTOR has resolved such claim by settlement. EXA-5 PAYMENT TO SUBCONTRACTORS Requirements 1. The CONTRACTOR shall pay all Subcontractors for and on account of Work performed by such Subcontractors, not later than seven (7) days after receipt of each progress payment as required by the California Business and Professions Code §7108.5. Such payments to Subcontractors shall be based on the measurements and estimates made pursuant to article progress payments provided herein. 2. Except as specifically provided by law, the CONTRACTOR shall pay all Subcontractors any and all retention due and owing for and on account of Work performed by such Subcontractors not later than seven (7) days after CONTRACTOR'S receipt of said retention proceeds from OCSD as required by the California Public Contract Code §7107. EXA-6 PAYMENT OF TAXES Unless otherwise specifically provided in this Contract, the Contract Price includes full compensation to the CONTRACTOR for all taxes. The CONTRACTOR shall pay all federal, state, and local taxes, and duties applicable to and assessable against any Work, including but not limited to retail sales and use, transportation, export, import, business, and special taxes. The CONTRACTOR shall ascertain and pay the taxes when due. The CONTRACTOR will maintain auditable records, subject to OCSD reviews, confirming that tax payments are current at all times. C-EXA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 3 of 10 EXA-7 FINAL PAYMENT After Final Acceptance of the Work, as more particularly set forth in the General Conditions, "Final Acceptance and Final Completion", and after Resolution of the Board authorizing final payment and satisfaction of the requirements as more particularly set forth in General Conditions — "Final Payment", a final payment will be made as follows: 1. Prior to Final Acceptance, the CONTRACTOR shall prepare and submit an application for final payment to OCSD, including: a. The proposed total amount due the CONTRACTOR, segregated by items on the payment schedule, amendments, Change Orders, and other bases for payment; b. Deductions for prior progress payments; c. Less all amounts for the OCIP including, but not limited to, payments for the Contractor's Obligation, OCIP-related audit costs and OCIP penalties assessed; d. Amounts retained; e. A Conditional Waiver And Release On Final Payment for each Subcontractor (per Civil Code Section 8136); f. A Conditional Waiver And Release On Final Payment on behalf of the CONTRACTOR (per Civil Code Section 8136); g. List of Claims the CONTRACTOR intends to file at that time or a statement that no Claims will be filed, h. List of pending unsettled claims, stating claimed amounts, and copies of any and all complaints and/or demands for arbitration received by the CONTRACTOR; and i. For each and every claim that resulted in litigation or arbitration which the CONTRACTOR has settled, a conformed copy of the Request for Dismissal with prejudice or other satisfactory evidence the arbitration is resolved. j. All completed Aon Form-5 Notices of Work Completion for itself and each Subcontractor as specified in Exhibit B and Exhibit C Insurance Manual. 2. The application for final payment shall include complete and legally effective releases or waivers of liens and stop payment notices satisfactory to OCSD, arising out of or filed in connection with the Work. Prior progress C-EXA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 4 of 10 payments shall be subject to correction in OCSD's review of the application for final payment. Claims filed with the application for final payment must be otherwise timely under the Contract and applicable law. 3. Within a reasonable time, OCSD will review the CONTRACTOR'S application for final payment. Any recommended changes or corrections will then be forwarded to the CONTRACTOR. Within ten (10) calendar days after receipt of recommended changes from OCSD, the CONTRACTOR will make the changes, or list Claims that will be filed as a result of the changes, and shall submit the revised application for final payment. Upon acceptance by OCSD, the revised application for final payment will become the approved application for final payment. 4. If no Claims have been filed with the initial or any revised application for final payment, and no Claims remain unsettled within thirty (30) calendar days after Final Acceptance of the Work by OCSD, and agreements are reached on all issues regarding the application for final payment, OCSD, in exchange for an executed release, satisfactory in form and substance to OCSD, will pay the entire sum found due on the approved application for final payment, including the amount, if any, allowed on settled Claims. 5. The release from the CONTRACTOR shall be from any and all Claims arising under the Contract, except for Claims that with the concurrence of OCSD are specifically reserved, and shall release and waive all unreserved Claims against OCSD and its officers, directors, employees and authorized representatives. The release shall be accompanied by a certification by the CONTRACTOR that: a. It has resolved all Subcontractors, Suppliers and other Claims that are related to the settled Claims included in the final payment; b. It has no reason to believe that any party has a valid claim against the CONTRACTOR or OCSD which has not been communicated in writing by the CONTRACTOR to OCSD as of the date of the certificate; c. All warranties are in full force and effect, and; d. The releases and the warranties shall survive final payment. 6. If any claims remain open, OCSD may make final payment subject to resolution of those claims. OCSD may withhold from the final payment an amount not to exceed one hundred fifty percent (150%) of the sum of the amounts of the open claims, and one hundred twenty-five percent (125%) of the amounts of open stop payment notices referred to in article entitled stop payment notices herein. 7. The CONTRACTOR shall provide an Unconditional Waiver and Release On Final Payment from each Subcontractor and Supplier providing Work under the Contract (per Civil Code section 8138) and an Unconditional Waiver and Release On Final Payment on behalf of the CONTRACTOR (per Civil Code Section 8138) within 30 days of receipt of Final Payment. C-EXA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 5 of 10 EXA-8 DISCOVERY OF DEFICIENCIES BEFORE AND AFTER FINAL PAYMENT Notwithstanding OCSD's acceptance of the application for final payment and irrespective of whether it is before or after final payment has been made, OCSD shall not be precluded from subsequently showing that: 1. The true and correct amount payable for the Work is different from that previously accepted; 2. The previously-accepted Work did not in fact conform to the Contract requirements, or; 3. A previous payment or portion thereof for Work was improperly made. OCSD also shall not be stopped from demanding and recovering damages from the CONTRACTOR, as appropriate, under any of the foregoing circumstances as permitted under the Contract or applicable law. C-EXA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 6 of 10 ATTACHMENT 1 CERTIFICATION FOR REQUEST FOR PAYMENT I hereby certify under penalty of perjury as follows: That the claim for payment is in all respects true, correct; that the services mentioned herein were actually rendered and/or supplies delivered to OCSD in accordance with the Contract. I understand that it is a violation of both the federal and California False Claims Acts to knowingly present or cause to be presented to OCSD a false claim for payment or approval. A claim includes a demand or request for money. It is also a violation of the False Claims Acts to knowingly make use of a false record or statement to get a false claim paid. The term "knowingly" includes either actual knowledge of the information, deliberate ignorance of the truth or falsity of the information, or reckless disregard for the truth or falsity of the information. Proof of specific intent to defraud is not necessary under the False Claims Acts. I understand that the penalties under the Federal False Claims Act and State of California False Claims Act are non-exclusive, and are in addition to any other remedies which OCSD may have either under contract or law. I hereby further certify, to the best of my knowledge and belief, that: 1. The amounts requested are only for performance in accordance with the Specifications, terms, and conditions of the Contract; 2. Payments to Subcontractors and Suppliers have been made from previous payments received under the Contract, and timely payments will be made from the proceeds of the payment covered by this certification; 3. This request for progress payments does not include any amounts which the prime CONTRACTOR intends to withhold or retain from a Subcontractor or Supplier in accordance with the terms and conditions of the subcontract; and 4. This certification is not to be construed as Final Acceptance of a Subcontractor's performance. Name Title Date C-EXA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 7 of 10 ATTACHMENT 2 SCHEDULE OF PRICES Item Approx. Item Unit Total No. Qty. Price Price 1. Lump Mobilization Sum Mobilization in accordance with General (LS) Conditions, Payment— Mobilization Payment requirements, Division 01, Section 01155, Measurement and Payment and Section 01711, Mobilization and Demobilization, in conformance with the Contract Documents for the lump sum price of: LS $ 3,000,000 2. Lump Sheeting, Shoring and Bracing Sum Furnish all labor, materials and equipment (LS) necessary for sheeting, shoring and bracing for protection of life and limb in trenches, open excavations and confined spaces and in conformance with the Contract Documents for the lump sum price of: LS $ 2,000,000 3. Lump Sludge Dewatering and Odor Control at Plant 1 Sum Furnish all labor, materials, equipment and (LS) services, except for Bid Item Nos. 1 through 12, for the Construction of Sludge Dewatering and Odor Control at Plant no. 1 in conformance with the Contract Documents, and consistent with the selected Dewatering Centrifuge Alternative selected in Bid Item 5, for the lump sum price of: LS $ 86,343,573 4. 41,240 Piles Linear Furnish all labor, materials and equipment Feet necessary for piles as specified in Sections (LF) 02373, Drilled piers and 02374, Drilled Piers— Load Testing and in compliance with the Contract $153/ Documents for the unit and total price of: LF $ 6,309,720 5. Lump Thickening Centrifuges Sum Furnish, factory test and deliver three (3) (LS) Thickening Centrifuge systems, including centrifuges, motors, variable frequency drives, lubrication systems, control panels, sensors and monitoring Equipment, sludge density meters, centrate and discharge chutes, spare parts, tools, all other accessories and appurtenances, training and on-site services in accordance with Section 11369, Thickening Centrifuges and in conformance with the Contract Documents for the lump sum price of(Cost for installation and on-site testing of the centrifuge system shall be included in Bid Item No. 3): LS $ 12,852,007 C-EXA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 8 of 10 Item Approx. Item Unit Total No. Qty. Price Price 5a. Lump Thickening Centrifuge Spare Rotating Sum Assembly (LS) Furnish, factory test and deliver one spare rotating assembly for the Thickening Centrifuge systems, including rotating assembly, bearings, storage supports, and all other accessories and appurtenances in accordance with Section 11369, Thickening Centrifuges and in conformance with the Contract Documents for the lump sum price of: LS $ 1,452,000 5b. Lump Thickening Centrifuge Operations and Sum Maintenance Assistance (LS) Furnish operations and maintenance assistance associated with the Thickening Centrifuge systems, including parts and materials, in accordance with Section 11369 and in conformance with the Contract Documents for the lump sum price of: LS $ 361,000 6. Lump Dewatering Centrifuges Sum Furnish, factory test and deliver three (3) (LS) Dewatering Centrifuge systems, including centrifuges, motors, variable frequency drives, lubrication systems, control panels, sensors and monitoring equipment, sludge density meters, centrate and discharge chutes, spare parts, tools, all other accessories and appurtenances, training and on-site services using either Alternative A or Alternative B and indicating with a checkmark in the appropriate box below for the alternative being bid, and in conformance with the Contract Documents for the lump sum price of(Cost for installations and on-site testing of the centrifuge system shall be included n Bid Item No. 3): ALTERNATIVE A: [ ] Westfalia, as specified in Section 11365A ALTERNATIVE B: [ ] Alfa Laval, as specified in Section 11365B LS $ 6,300,000 6a. Lump Dewatering Centrifuge Spare Rotating Sum Assembly (LS) Furnish, factory test and deliver one spare rotating assembly for the Dewatering Centrifuge systems bid in item 6, including rotating assembly, bearings, storage supports and all other accessories and appurtenances and in conformance with the Contract Documents for the lump sum price of: LS $ 1,200,000 C-EXA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 9 of 10 Item Approx. Item Unit Total No. Qty. Price Price 6b. Lump Dewatering Centrifuge Operations and Sum Maintenance Assistance (LS) Furnish operations and maintenance assistance associated with the Dewatering Centrifuge systems bid Item 6, including parts and materials and in conformance with the Contract Documents for the lump sum price of: LS $ 110,000 7. Lump Sludge Cake Pumping System Sum Furnish, factory test and deliver sludge cake (LS) pumping system including progressing cavity pumps, motors, inlet chutes, sludge gates, load cell, slip injection pumps and rings, flexible connections, cake piping and fittings, valves and actuators, pipe supports and all sludge cake pumping apparatus in accordance with Section 11250, Sludge Cake Pumping System and Section 11210, Pumps, General and in conformance with the Contract Documents for the lump sum price of: LS $ 6,100,000 8. Lump Commissioning Sum Furnish all labor, materials and equipment (LS) necessary for Commissioning in accordance with Section 01810, Commissioning and in conformance with the Contract Documents for the lump sum price of: LS $ 780,000 9. Lump Demobilization Sum Demobilization in accordance with Section 01155, (LS) Measurement and Payment and Section 01711, Mobilization and demobilization and in conformance with the Contract Documents for the lump sum price of: LS $ 100,000 TOTAL AMOUNT OF BID (BASIS OF AWARD) $ 126,908,300 C-EXA-070612 PROJECT NO. P1-101 SLUDGE DEWATERING AND ODOR CONTROL AT PLANT NO. 1 CONFORMED NOVEMBER 28, 2012 Page 10 of 10 PRE-SELECTION AGREEMENT Sludge Dewatering and Odor Control at Plant No. 1, Project No P1-101 Pre-Selection Agreement THIS AGREEMENT is made and entered into as of the date fully executed below by and between ORANGE COUNTY SANITATION DISTRICT, with a principal place of business at 10844 Ellis Avenue, Fountain Valley, CA 92708-7018 (hereinafter referred to as "OCSD") and GEA Mechanical Equipment US, INC., with a principal business at 100 Fairway Court, Northvale, New Jersey 07647 (hereinafter referred to as "VENDOR") collectively referred to as the "Parties", or individually referred to as a "Party". RECITALS: WHEREAS, pursuant to Resolution No. OCSD 10-10, OCSD made sole source specification findings as required under Public Contract Code §3400 designating VENDOR by name as the only manufacturer of centrifuges meeting OCSD's needs for co-thickening sludge; and WHEREAS, OCSD desires to purchase the equipment and retain the services of VENDOR as described in the attached Scope of Work/Technical Specifications (Exhibit "A") and herein referred to as "Equipment" and "Services"; and WHEREAS, VENDOR has submitted a cost Proposal as provided in the attached Exhibit "B"to sell the Equipment and Services in an amount not to exceed fourteen million six hundred sixty-five thousand and seven dollars ($14,665,007); and WHEREAS, the Parties enter into this Agreement with the understanding that OCSD shall thereafter assign this Agreement to its construction contractor. NOW, THEREFORE, in consideration of the promises and mutual benefits exchanged between the Parties, it is mutually agreed as follows: 1. Introduction 1.1 This Agreement and all exhibits hereto (called the "Agreement") is made by OCSD and VENDOR. The Terms and Conditions herein exclusively govern the purchase of Equipment and Services as described in the Scope of Work/Technical Specifications, attached hereto and incorporated herein by reference as Exhibit "A". 1.2 Exhibits to this Agreement are incorporated by reference and made a part of this Agreement as though fully set forth at length herein. Exhibits to this Agreement are as follows in order of precedence: Exhibit "A" Scope of Work/Technical Specifications Exhibit "B" VENDOR Cost Proposal Exhibit "C" Assignment of Agreement, Consent to Assignment, and Acceptance of Assignment Exhibit "D" Acknowledgement of Insurance Requirements Pre-Selection Agreement P1-101 -1- This Agreement along with the Exhibits referenced herein shall collectively be referred to as "Agreement Documents." The following items, which may be delivered or issued on or after the Effective Date of this Agreement and are not attached hereto, shall also constitute part of the Agreement Documents: • Notice to Proceed; • Notice(s) to Commence Fabrication; • Written Amendment(s) (upon written acceptance of both parties); • Change Order(s) (upon written acceptance of both parties); • Field Order(s) (upon written acceptance of both parties); • Engineer's Written Directive(s) (upon written acceptance of both parties); and • Information for Bid (IFB) for Project No. P1-101. 1.3 In the event of any conflict or inconsistency between the provisions of this Agreement and any of the provisions of the Exhibits hereto, the provisions of this Agreement shall in all respects govern and control. 1.4 The provisions of this Agreement, including changes affecting the Scope of Work/Technical Specifications detailed in Exhibit"A", may be amended or waived only by a writing executed by authorized representatives of both Parties hereto. 1.5 The various headings in this Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any Paragraph or provision hereof. 1.6 The term "work", when used in this Agreement, shall mean all the work specified in the Agreement Documents necessary to complete the requirements of the Agreement, including the furnishing of all labor and materials. 1.7 The term "days", when used in this Agreement, shall mean calendar days, unless otherwise noted as business days. 1.8 VENDOR shall provide OCSD with all required premiums and/or overtime work within the Scope of Work/Technical Specifications at no charge beyond the price provided under"Compensation" below. 1.9 Except as expressly provided otherwise, OCSD accepts no liability for any expenses, losses, or action incurred or undertaken by VENDOR as a result of work performed in anticipation of purchases of said Equipment and Services by OCSD. 2. Equipment and Services 2.1 VENDOR shall furnish the Equipment and Services as specified or indicated in the Agreement Documents. The Equipment and Services to be furnished are described in the Scope of Work/Technical Specifications attached hereto as Exhibit"A", and may be generally described as follows: design, shop drawings, Preselection Agreement P1-101 -2- fabrication, testing and delivery of three (3) thickening centrifuges and ancillary components in accordance with Specification section 11369 of the Sludge Dewatering and Odor Control Project at Plant 1, Project No. P1-101, assistance during installation of the Equipment, commissioning of the Equipment, delivery of Equipment manuals, operations assistance and warranty of the Equipment. 2.2 All Equipment and Services associated with the performance of this Agreement shall be done in accordance with generally accepted industry and professional standards. 3. The Project 3.1 The Project for which the Equipment and Services are to be provided under this Agreement is for OCSD's the Sludge Dewatering and Odor Control Project at Plant 1, Project No. P1-101 ("Project"). 3.2 OCSD retains the right to assign all or a portion of this Agreement, which includes the production, delivery and commissioning of Equipment and all or a portion of the associated Services, to a Contractor. For this Project, an assignment of this Agreement shall be made for the Equipment and Services to be provided herein. 4. Point of Destination 4.1 The place where the Equipment and Services are to be delivered and/or provided shall be F.O.B. destination to OCSD, Plant No. 1, 10844 Ellis Avenue, Fountain Valley, California, within the lead time as required by the subsequent Invitation for Bid (IFB) issued for the Project. 4.2 VENDOR assumes full responsibility for all transportation, transportation scheduling, packing, handling, insurance, and other services associated with delivery of all products deemed necessary under this Agreement. 4.3 Title of Equipment shall transfer to OCSD upon payment in full. Risk of loss shall transfer to OCSD upon delivery of Equipment to OCSD's Point of Destination. 5. Agreement Times 5.1 All time limits for Milestones for the delivery of Equipment and the furnishing of Services as stated in the Invitation for Bid are of the essence of the Agreement. All work performed under this Agreement shall be completed within the days specified in the subsequent Information for Bid. 5.2 The term of this Agreement may be extended only by written instrument signed by both Parties. 5.3 Liquidated Damages 5.3.1 OCSD and VENDOR recognize that time is of the essence of this Agreement and that OCSD will suffer damages if the Equipment is not Pre-Selection Agreement P1-101 -3- fabricated and ready for delivery within the time specified in the subsequent Information for Bid and/or the Services are not delivered in a timely manner or are not in conformance with the requirements of the Agreement Documents as to cause a delay in the Commissioning of the Equipment. The Parties also recognize that the timely performance of services by other parties involved in OCSD's Project are materially dependent upon the VENDOR's specific compliance with the times specified in the subsequent Information for Bid plus any extensions thereof allowed in accordance with the terms provided herein. Further, the Parties recognize that the delays, expense, and difficulties involved in proving the actual losses or damages suffered by OCSD if complete acceptable submittals are not delivered on time. Accordingly, and instead of requiring proof of such losses or damages, OCSD and VENDOR agree that as liquidated damages for delay (but not as a penalty), VENDOR shall pay OCSD one thousand dollars ($1,000) for each day that expires after the times or dates specified for deliveries. By execution of this Agreement, the Parties expressly agree that these liquidated damage amounts are reasonable under the circumstances existing at the time this Agreement is executed. 5.3.2 OCSD may deduct the amount of liquidated damages from monies due the VENDOR under this Agreement. 5.3.3 The liquidated damages set forth in this section 5 shall constitute OCSD's sole and exclusive remedy for delays by the VENDOR in achieving any of the milestone delivery dates with respect to the delivery of Equipment and Services under the applicable provisions of the Agreement Documents. 6. Compensation 6.1 OCSD shall pay VENDOR for furnishing the Equipment and Services in accordance with the Agreement Documents in current funds in an amount not to exceed the total amount of fourteen million six hundred sixty-five thousand and seven dollars ($14,665,007) as stated in VENDOR's Proposal, attached hereto as Exhibit "B." 6.2 Pricing as indicated in VENDOR's Proposal attached hereto as Exhibit"B" shall remain available to OCSD for a period of two (2) years from the date of the execution of this Agreement. At no time shall the pricing as indicated in VENDOR's Proposal be altered unless approved by OCSD. 7. Payment 7.1 Payment(s) shall be made within thirty (30) days of delivery and acceptance of the Equipment and Services to OCSD as provided in VENDOR's Proposal. VENDOR shall submit an application for progress payment to OCSD. OCSD shall be the determining party as to whether the tasks and deliverables have been completed in accordance with the Agreement Documents. Pre-Selection Agreement P1-101 -4- 8. Vendor's Representations 8.1 In order to induce the District to enter into this Agreement, VENDOR makes the following representations: 8.1.1 VENDOR has examined and carefully studied the Agreement Documents and the other related data identified in the Scope of Work/Technical Specifications attached hereto as Exhibit "A". 8.1.2 If specified, or if, in VENDOR's judgment, any local condition may affect cost, progress or the furnishing of Equipment and Services, VENDOR has visited the Point of Destination and become familiar with the Project, and is satisfied as to the local conditions that may affect cost, progress or the furnishing of Equipment and Services. 8.1.3 VENDOR is familiar with and is satisfied as to all local federal, state and local laws and regulations that may affect cost, progress and the furnishing of the Equipment and Services. 8.1.4 VENDOR has carefully studied and correlated the information known to VENDOR, and information and observations obtained from VENDOR's visits, if any, to the Point of Destination, with the Agreement Documents. 8.1.5 VENDOR has given OCSD written notice of all conflicts, errors, omissions, ambiguities, discrepancies, exceptions to Agreement Documents that VENDOR has discovered in the Agreement Documents. 8.1.6 The Agreement Documents are generally sufficient to indicate and convey understanding of all terms and conditions for furnishing Equipment and Services. 8.1.7 Should VENDOR discover any latent or unknown conditions materially differing from those inherent in the work or as represented by OCSD, VENDOR shall immediately inform OCSD of this and shall not proceed, except at VENDOR's risk, until written instructions are received from OCSD. 8.1.8 VENDOR's relationship to OCSD in the performance of this Agreement is that of an Independent Contractor. VENDOR's personnel performing services under this Agreement shall at all times be under VENDOR's exclusive direction and control and not employees of OCSD. VENDOR shall pay all wages, including prevailing wages, where applicable, salaries and other amounts due to its employees in connection with this Agreement and shall be responsible for all applicable state, federal, and local reports and obligations respecting them as labor wages, social security, income tax withholding, unemployment compensation and similar matters. Pre-Selection Agreement P1-101 -5- 9. Assignment 9.1 OCSD has the right to assign this Agreement for furnishing Equipment and Services hereunder, and VENDOR shall accept such assignment. Services shall be furnished by VENDOR. Forms documenting the assignment of this Agreement are attached as Exhibit"C"to this Agreement. 9.2 This Agreement will be executed in the name of OCSD initially, and will be later assigned to a construction contractor, hereinafter referred to as the "Contractor," designated by OCSD. The assignment of this Agreement will occur on the effective date of the agreement between OCSD and the Contractor, which is expected to occur on or about August of 2012. As of the date of acceptance of the assignment by the Contractor, all references in the Agreement Documents to OCSD shall mean the designated Contractor whose responsibilities will include the installation or erection or incorporation of the Equipment. 9.3 Except for the obligations set forth in Section 15 (Safety Requirements of OCSD) and 16 (Proprietary and Confidential Information), the assignment of this Agreement shall relieve the District from all further obligations and liabilities under the Agreement that shall be consistent with or reasonably inferable from the overall intent of the Agreement Documents. After assignment, VENDOR shall become a subcontractor or supplier to the assignee and, except as noted herein, all rights, duties, and obligations of OCSD under the Agreement shall become the rights, duties and obligations of the assignee. 9.4 After assignment: 9.4.1 All performances, warranties, and guarantees required by the Agreement Documents will continue to run for the benefit of OCSD and, in addition, for the benefit of the assignee. 9.4.2 Upon written request by either assignee or VENDOR, OCSD will issue, with reasonable promptness, such clarifications or interpretations of the Agreement Documents, which shall be consistent with or reasonably inferable from the overall intent of the Agreement Documents. Such written clarifications and interpretations will be final and binding on assignee and VENDOR unless a written appeal is delivered to OCSD within 30 days after the date of such decision. 9.4.3 No other assignment by a Party hereto of any rights under or interests in the Agreement Documents will be binding on another party hereto without the written consent of the Party sought to be bound. Unless specifically stated to the contrary in any written consent to an assignment, no assignment will release or discharge the assignor from any duty or responsibility under the Agreement Documents. 9.5 This Agreement shall be binding upon the Parties to this Agreement and their respective successors, representatives, heirs and assigns. Pre-Selection Agreement P1-101 -6- 10. Termination 10.1 OCSD reserves the right to terminate this Agreement for its convenience, with or without cause, in whole or in part, at any time, by written notice from OCSD, (delivered by certified mail, return receipt requested) of intent to terminate. Upon receipt of a termination notice, VENDOR shall immediately discontinue all work under this Agreement(unless the notice directs otherwise). OCSD shall thereafter, within thirty (30) days, pay VENDOR for work performed and costs incurred (cost and fee) to the date of termination. VENDOR expressly waives any claim to receive anticipated profits to be earned during the uncompleted portion of this Agreement. Such notice of termination shall terminate this Agreement and release OCSD from any further fee, cost or claim hereunder by VENDOR other than for work performed and costs incurred to the date of termination. 10.2 OCSD reserves the right to terminate this Agreement immediately upon OCSD'S determination that VENDOR is not meeting specification requirements, if the level of service is inadequate, or any other default of this Agreement. 10.3 OCSD may also immediately cancel for default of this Agreement in whole or in part by written notice to VENDOR: ❑ If VENDOR becomes insolvent or files a petition under the Bankruptcy Act; or ❑ If VENDOR sells its business; or 0 If VENDOR breaches any of the terms of this Agreement; or ❑ If total amount of compensation exceeds the amount authorized under this Agreement. 10.4 No termination by OCSD for default shall be effective unless, within five (5) days after receipt by VENDOR of OCSD's written notice specifying such default, VENDOR shall have failed to initiate and pursue with due diligence correction of such specified default. 10.5 All OCSD property in the possession or control of VENDOR shall be returned by VENDOR to OCSD upon demand, or at the termination of this Agreement, whichever occurs first. 11. Insurance 11.1 VENDOR shall purchase and maintain, throughout the life of this Agreement and any periods of warranty or extensions, insurance in amounts equal to the requirements set forth in the signed Acknowledgement of Insurance Requirements (attached hereto and incorporated herein as Exhibit T"). VENDOR shall not commence work under this Agreement until all required insurance is obtained in a form specified in Exhibit "D", nor shall VENDOR allow any subcontractor to commence services pursuant to a subcontract until all insurance required of the subcontractor has been obtained. Failure to maintain required insurance coverage shall result in termination of this Agreement. Pre-Selection Agreement P1-101 -7- 12. Indemnification and Hold Harmless Provision 12.1 VENDOR agrees to save, indemnify, defend and hold harmless OCSD against any and all claims made by third parties for liability, claims, judgments, cost and demands arising from injuries or death of persons and damage to property, to the extent arising directly or indirectly out of the negligence or willful misconduct of VENDOR, its employees or agents, in relation to the rendition of Equipment and Services pursuant to this Agreement, except claims or litigations arising through the sole negligence or willful misconduct of OCSD. VENDOR agrees to reimburse OCSD for any expenditure, including reasonable attorney's fees, OCSD may incur by reason of such matters, and, will defend any such suits at the cost and expense of VENDOR, provided that OCSD has given VENDOR prompt notice of such action, all necessary assistance in the defense thereof and the right to control all aspects of the defense thereof including the right to settle or otherwise terminate such action on behalf of OCSD. 13. Warranty 13.1 All manufacturer warranties will begin as specified in Section 13.3. VENDOR shall be responsible for repairing or replacing the defective part, at no cost to OCSD including installation and freight. This warranty does not cover parts damaged by decomposition from chemical reaction or wear caused by abrasive materials, nor does it cover damage resulting from misuse, accident, neglect, or from improper operation, maintenance, modification or adjustment. 13.2 VENDOR's obligation under this warranty and any other warranty or guarantee which is part of the Agreement is limited to furnishing repairs or replacements for Equipment or parts determined to be defective on inspection by an authorized representative of VENDOR. 13.3 VENDOR warrants to OCSD that the Equipment purchase from VENDOR are free from defects in material and workmanship for a period of twenty-four (24) months from the date of OCSD's initial operation or production using the Equipment. provided that: (a) the Equipment is installed in accordance with VENDOR's specifications and instructions and is used and maintained normally and properly in accordance with VENDOR's instructions as to maintenance and operation, as set forth in written operation and maintenance manuals furnished to OCSD by VENDOR; (b) the Equipment is used for processing product consistent with the feed characteristics set forth in VENDOR's proposal or, if none are stated in the proposal, then consistent with the Specifications outlined in the Scope of Work/Technical Specifications, but if no feed characteristics or feed specifications are stated in the proposal or Scope of Work/Technical Specifications, the Equipment is used to process product identical to produce provided to VENDOR for testing prior to the Scope of Work/Technical Specifications being entered into; (c) the Equipment has not been changed without the prior written approval of Vendor; (d) OCSD gives prompt written notice to VENDOR before the end of the warranty period specifying all alleged defects in the Equipment; and (e) OCSD preserves and turns over to VENDOR and permits reasonable inspection by VENDOR of all allegedly defective Equipment, parts or items and access to the Equipment to observe its startup, operation and maintenance. Pre-Selection Agreement P1-101 -8- 13.4 This warranty shall not cover(i) any Equipment furnished by OCSD or any third party (other than a subcontractor of VENDOR), (ii) any defects arising from corrosion, abrasion, use of unsuitable lubricants, operation outside of prescribed temperature ranges, or negligent attendance or faulty operation, (iii) ordinary wear and tear, (iv) any defects caused by errors on the part of OCSD in not providing suitable premises in which the Equipment is to be located, adequate foundation, or adequate protection against influences within or outside the premises which may affect the Equipment or its operation. Notwithstanding the warranty set forth above, VENDOR shall not warrant any Equipment, where the seller of such Equipment (other than by Vendor) is specified by OCSD, for a period longer than warranted by the seller. 13.5 This warranty of material and workmanship is the only warranty made by VENDOR and is in lieu of all other warranties, express or implied, and VENDOR disclaims, on behalf of itself, its subcontractors and subsuppliers, any and all implied warranties, including, without limitation, warranties of merchantability, fitness for a specific purpose (other than the purpose stated in OCSD's Scope of Work/Technical Specifications set forth in the Agreement Documents), suitability or performance. 14. Force Maieure 14.1 Neither party shall be liable for any loss or damage from delays caused by strikes or other labor difficulties, war, riots, changes in laws and regulations and other acts of governmental authorities, inclement weather, fire, flood, unavoidable casualties, acts of God, or any other cause beyond its control, but said party shall use reasonable efforts to minimize the extent of the delay. Work affected by a Force Majeure condition may be rescheduled by mutual consent or may be eliminated from the Agreement. In the event of any delay caused by a Force Majeure, VENDOR will notify OCSD within a reasonable time, after VENDOR becomes aware of such cause of delay, and it is agreed that the time for delivery or completion shall be extended for a period of time at least equal to the time lost by reason of the delay. 15. Safety Requirements of OCSD 15.1 OCSD shall use all safety devices, guards, and proper safe operating and maintenance procedures as prescribed by all applicable laws, rules, regulations, codes and standards, and as set forth in operating and maintenance manuals furnished by VENDOR. OCSD shall not remove or modify any safety device, guard or warning sign. OCSD agrees to indemnify, defend and safe VENDOR harmless from any claim, liability or obligation (including the costs and reasonable attorneys'fees of any suit or claims related thereto) incurred by VENDOR as a result of persons being injured or property being damaged: (i) as a result of OCSD's failure to observe the aforesaid safety requirements; or (ii) due to use of the product for materials or products not specified in the Scope of Work/Technical Specifications; or(iii) use of non-original replacement parts not specifically authorized in writing by VENDOR; or (iv) due to changes in the Equipment made by OCSD without VENDOR's specific authorization. If the Pre-Selection Agreement P1-101 -9- terms of the Scope of Work/Technical Specifications do not require VENDOR to install and/or commission the Equipment, OCSD shall permit VENDOR to have an engineer on site during commissioning to perform a health and safety check, otherwise VENDOR assumes full responsibility for operation, training and verification of all aspects of health and safety with respect to the Equipment. 16. Proprietary and Confidential Information. 16.1 All drawings, notebooks, operating data, specifications, and other information, data and material ("Information") furnished to OCSD by VENDOR shall remain the proprietary and confidential property of VENDOR, and shall be used by VENDOR only with respect to the Equipment covered by the Agreement and not in connection with any other project. Information shall not be made available to any third party without VENDOR's prior written consent. 16.2 In the event VENDOR refuses to provide consent to disclose information requested pursuant to a Public Records Act request, VENDOR agrees to defend, indemnify, and hold harmless OCSD, its directors, employees, and agents, against any claim or lawsuit involving allegations of violation(s) of the Public Records Act. 16.3 OCSD shall not, nor knowingly permit any third party to reverse engineer Vendor's Equipment. Any information shall be disclosed by OCSD to its employees, consultants, contractors, or subcontractors on a need-to-know basis for the operation, maintenance, and repair of the Equipment. Intellectual property or patent rights which may be obtained on the basis of the Information or the Equipment shall remain the exclusive property of VENDOR. 17. Patent Infringement 17.1 VENDOR warrants that Equipment furnished hereunder and the sale or use thereof will not infringe any United States apparatus patent or misappropriate any third party intellectual property rights. VENDOR shall defend any suit or proceeding brought against OCSD for any alleged infringement and to pay all costs, attorney fees, and damages relating thereto provided that OCSD has given VENDOR prompt written notice of such action, all necessary assistance in the defense thereof and the right to control all aspects of the defense thereof including the right to settle or otherwise terminate such action on behalf of OCSD. VENDOR shall have no obligation hereunder and this provisions shall not apply to: (i) any Equipment which has been modified or combined with other goods or process not supplied by VENDOR; (ii) any Equipment supplied according to a design, other than a VENDOR design, required by OCSD; (iii) any products manufactured by the Equipment; (iv) any patent issued after the date hereof; or(v) any action settled or otherwise terminated without the prior written consent of VENDOR. If, in any such action, the Equipment is held to constitute an infringement, VENDOR shall, at its option and its own expense, procure for OCSD the right to continue using said Equipment or modify or replace it with non-infringing Equipment or remove it and refund the portion of the price allocable to the infringing Equipment. THE FOREGOING PARAGRAPHS STATE THE ENTIRE LIABILITY OF VENDOR AND EQUIPMENT MANUFACTURER FOR ANY PATENT INFRINGEMENT. Pre-Selection Agreement P1-101 -10- 18. Acceptance 18.1 Acceptance shall be deemed completed once VENDOR meets all the requirements as set forth in the subsequent Information for Bid, and the Equipment successfully operates as set forth in the Scope of Work/Technical Specifications. In the event, due to no fault of the Vendor, acceptance testing is not conducted within 30 months from delivery of Equipment to site or storage, OCSD shall release all retention amounts withheld for Equipment delivered and/or work performed pursuant to the Information for Bid specifications. 19. Licenses, Permits, Ordinances and Regulations 19.1 VENDOR represents and warrants to OCSD that it has obtained all licenses, permits, qualification and approvals of whatever nature that is legally required to engage in this work. Any and all fees required by State, County, City and/or municipal laws, codes and/or tariffs that pertain to work performed under the terms of this Agreement will be paid by VENDOR. 20. Applicable Laws and Regulations 20.1 VENDOR shall comply with all applicable federal, state, and local laws, rules, and regulations. The Equipment, including their design, installation, use and operation, will comply with all applicable governmental laws, regulations, executive orders, ordinances and restrictions in force at the time of the execution of this Agreement. OCSD will notify VENDOR of any state or local law, regulation, executive order, ordinance or restriction that goes above and beyond those as stated by federal agencies. However, other than as expressly agreed herein, VENDOR does not guarantee compliance with, nor will VENDOR incur any liability for failure of the Equipment to comply with any federal, state or local pollution control laws (which shall include effluent or utility control laws, rules, regulations, codes or standards; provided, however, that the Equipment will comply with any specific Equipment emission guarantees which form part of the Scope of Work/Technical Specifications. VENDOR also agrees to indemnify and hold harmless from any and all damages and liabilities assessed against OCSD as a result of VENDOR'S noncompliance therewith 20.2 VENDOR shall perform all work under this Agreement in strict conformance with applicable federal, state, and local regulatory requirements including, but not limited to, 40 CFR 122, 123, 124, 257, 258, 260, and 261, Title 22, 23, and California Water Codes Division 2. 21. Public Contracts Law 21.1 OCSD has been advised by the State of California Director of Industrial Relations of its determination of the general prevailing rate of per diem wages and the general prevailing rate for legal holiday and overtime work in the locality in which the work is to be performed for each craft or type of work needed to execute this Agreement. VENDOR agrees that not less than said prevailing rates shall be paid to workers employed on this Agreement as required by Labor Code Section 1774 of the State of California. Pre-Selection Agreement P1-101 -11- 22. MISCELLANEOUS 22.1 Governing Law. This Agreement shall be governed by and interpreted under the laws of the State of California and the Parties submit to jurisdiction in Orange County, in the event any action is brought in connection with this Agreement or the performance thereof. 22.2 Breach. The waiver of either Party of any breach or violation of, or default under, any provision of this Agreement, shall not be deemed a continuing waiver by such Party of any other provision or of any subsequent breach or violation of this Agreement or default thereunder. Any breach by VENDOR to which OCSD does not object shall not operate as a waiver of OCSD'S rights to seek remedies available to it for any subsequent breach. 22.3 Remedies. Except as otherwise provided in this Agreement, In addition to other remedies available in law or equity, if the VENDOR repudiates its obligations under this Agreement, or if OCSD rejects the Equipment or Services, OCSD may (1) cancel the Agreement; (2) recover whatever amount of the purchase price OCSD has paid, and/or (3) "cover" by purchasing, or contracting to purchase, substitute Equipment or Services for those due from VENDOR. In the event OCSD elects to "cover" as described in (3), OCSD shall be entitled to recover from VENDOR as damages the difference between the reasonable cost of the substitute Equipment or Services and the agreement price. 22.4 Survival. The provisions of this Agreement dealing with Payment, Warranty, and Forum for Enforcement, shall survive termination or expiration of this Agreement. 22.5 Severability. If any section, subsection, or provision of this Agreement, or any agreement or instrument contemplated hereby, or the application of such section, subsection, or provision is held invalid, the remainder of this Agreement or instrument in the application of such section, subsection or provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby, unless the effect of such invalidity shall be to substantially frustrate the expectations of the Parties. 22.6 Disclosure. VENDOR agrees not to disclose, to any third party, data or information generated from this Project without the prior written consent from OCSD. 22.7 Damage to OCSD'S Property. Any of OCSD'S property damaged by VENDOR, any subcontractors or by the personnel of either will be subject to repair or replacement by VENDOR at no cost to OCSD. 22.8 Safety and Accident Prevention Safety and Accident Prevention. VENDOR shall adhere to the Safety Requirements in Exhibit "A", if applicable. 22.9 Attorney's Fees. If any action at law or inequity or if any proceeding in the form of an Alternative Dispute Resolution (ADR) is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorney's fees, costs and necessary disbursements in addition to any other relief to which he may be entitled. Pre-Selection Agreement P1-101 -12- 22.10 Authority to Execute. The persons executing this Agreement on behalf of the Parties warrant that they are duly authorized to execute this Agreement and that by executing this Agreement, the Parties are formally bound. 22.11 Drug-Free Workplace. All employees of VENDOR who will work at OCSD'S treatment Plant 1 (Fountain Valley) and/or Plant 2 (Huntington Beach) must adhere to the California Drug-Free Workplace Act, Sections 8350 through 8357. 22.12 Read and Understood. By signing this Agreement, VENDOR represents that he has read and understood the terms and conditions of the Agreement. 22.13 Entire Agreement. This Agreement constitutes the entire agreement of the Parties and supersedes all prior written or oral and all contemporaneous oral agreements, understandings, and negotiations between the Parties with respect to the subject matter hereof. 22.14 Notices. All notices under this Agreement must be in writing. Written notice shall be sent by registered or certified mail, postage prepaid, return receipt requested, or by any other overnight delivery service which delivers to the noticed destination and provides proof of delivery to the sender. Any facsimile notice must be followed within three (3) days by written notice. All notices shall be effective when first received at the following addresses: OCSD: Natasha Dubrovski, Principal Contracts Administrator Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, CA 92708-7018 VENDOR: Michael J. Vick, President GEA Mechanical Equipment US, Inc. GEA Westfalia Mechanical Division 100 Fairway Court Northvale, NJ 07647 23.0 Except as otherwise provided in this Agreement, in no event shall either OCSD, VENDOR, its subcontractors or subsuppliers be liable in contract or in tort or under any other legal context or theory, including negligence and strict liability, for any special, punitive, indirect, incidental or consequential damages of any kind or character, including, but not limited to, loss of use of productive facilities or goods, costs of product recall, plant downtime, damage to or loss of product, chemicals, catalysts, feedstock or other raw materials, loss of revenues or profits or loss under purchases or contracts made in reliance on the performance or non-performance of the Equipment, whether suffered by OCSD, VENDOR or any third party. OCSD, VENDOR's and its subcontractors' and subsuppliers' aggregate responsibility and liability, whether arising out of contract or tort or any other legal context or theory, including negligence and strict liability, all claims for breach of any warranty or guarantee, failure of performance or delay in performance by either party or performance or non-performance of the Equipment shall not exceed the Agreement price for the Equipment. Pre-Selection Agreement P1-101 -13- IN WITNESS WHEREOF, the Parties hereto have executed this Agreement in duplicate. One counterpart each has been delivered to OCSD and VENDOR. All portions of the Agreement Documents have been signed by OCSD and VENDOR on their behalf on the day and year indicated below. ORANGE COUNTY SANITATION DISTRICT Dated: 2 Z By: -'11A �4- 141� General ounsel (A proved As to Form) Dated: 1, 2 By: Chair Boar of'rectors Dated: —7 19 1 By: .�- Cl4rk of the Bo d GEA MECHANIC EQUIPMENT U , I C., Dated:— 1y I Z 1 Z By: V W /6 �� Dated: C By: ORANGE COUNTY NITATION DISTRICT GG �' Dated: By: ontracts, Purchasing and Materials Management Division Manager NKD:ms EDMS: Exhibit "A" Scope of Work/Technical Specifications Exhibit "B" VENDOR Cost Proposal Exhibit "C" Assignment of Agreement, Consent to Assignment, and Acceptance of Assignment Exhibit "D" Acknowledgement of Insurance Requirements Pre-Selection Agreement P1-101 -14- EXHIBIT "B39 COST PROPOSAL EXHIBIT "B" G4i"�-Jrok GEA Mechanical Equipment US, Inc. GEA Westfalla Separator Division 100 Fairway Court Northvale,NJ 07647 Phone(201)767-3900 Fax(201)767.3901 sales.wsu9@9e3.00m www.wsus.COM July 12, 2012 Orange County Sanitation District 10844 Ellis Avenue Fountain Valley,CA 92708-7018 Attention: Umesh Murthy Centrifuge Cost Proposal Project P1-101 Specification section 11369 Item #5 Thickening Centrifuges Furnish, factory test and deliver three (3)Thickening Centrifuge systems, including centrifuges, motors, variable frequency drives, lubrication systems, control panels, sensors and monitoring equipment, sludge density meters, centrate and discharge chutes, spare parts, tools and all other accessories and appurtenances,training and onsite services in accordance with Section 11369, Thickening Centrifuges and in conformance with the contract documents for the lump sum price of$ 12,852,007. Item 5a Thickening Centrifuge Spare Rotating Assembly Furnish,factory test and deliver one spare rotating assembly for the Thickening Centrifuge systems including rotating assembly, bearings, storage supports and all other accessories and appurtenances in accordance with Section 11369,Thickening Centrifuges and in conformance with the contract documents for the lump sum price of$ 1,452,000. Midwest Office South Office Southwest Office West Office 725 Tollgate Road 4725 Lakeland Commerce Pkwy#4 2408 Timberloch Place,C-4 555 Baldwin Road Elgin,Illinois 60123 Lakeland,Florida 33805-7666 The Woodlands,Texas 77380 Patterson,California 95363 Phone:(630)503-4700 Phone:(863)603-8900 Phone:(281)465.79W Phone: (209)895.6300 Fax:(630)503-4701 Fax:(883)603-8901 Fax: (281)465.7901 Fax:(209)895-6301 G L7 AO 5b Thickening Centrifuge Operations and Maintenance Assistance Furnish operations and maintenance assistance associated with the Thickening Centrifuge systems, including parts and materials, in accordance with Section 11369 and in conformance with the contract documents for the lump sum price of$361,000. Total Price: $14,666,007.00 GEA Mechanical Equipment S nc. Richard 1.eeaburg, PE Market Manager, Environm nt" Technology EXHIBIT 66C75 ASSIGNMENT OF CONTRACT, CONSENT TO ASSIGNMENT, AND ACCEPTANCE OF ASSIGNMENT EXHIBIT "C" ASSIGNMENT OF CONTRACT, CONSENT TO ASSIGNMENT, AND ACCEPTANCE OF ASSIGNMENT Sludge Dewatering and Odor Control at Plant No. 1, Project No P1-101 Pre-Selection Agreement This assignment will be effective on the Effective Date of the Agreement between the Orange County Sanitation District (OCSD) and the construction contractor (Contractor). The Pre- Selection Agreement by and between OCSD and GEA Westfalia Separator, Inc. (Vendor) for furnishing Equipment and Services under the Agreement Documents for centrifuges meeting OCSD's needs for co-thickening sludge is hereby assigned, transferred, and set over to (Contractor). Contractor hereinafter shall be totally and completely responsible for the performance of OCSD and for the duties, rights and obligations of OCSD under the terms of the Agreement between OCSD and Vendor. ASSIGNMENT DIRECTED BY: ORANGE COUNTY SANITATION DISTRICT (Name, Title) ASSIGNMENT CONSENT BY: GEA WESTFALIA SEPARATOR, INC. ('VENDOR") (Name, Title) CONTRACTOR hereby acknowledges and accepts the assignment of the Pre-Selection Agreement by and between OCSD and Vendor and shall hereinafter assume the duties, rights, and obligations of OCSD set forth therein. ASSIGNMENT ACKNOWLEDGED AND ACCEPTED BY: CONTRACTOR (Name, Title) Attachment'C'—Assignment Of Contract,Consent To Assignment,And Acceptance Of Assignment Page 1 of 1 EXHIBIT « D79 ACKNOWLEDGMENT OF INSURANCE REQUIREMENTS AND CERTIFICATION OF ABILITY TO PROVIDE COVERAGES SPECIFIED ATTACHMENT 66W ACKNOWLEDGMENT OF INSURANCE REQUIREMENTS AND CERTIFICATION OF ABILITY TO PROVIDE COVERAGES SPECIFIED Id1611AE1 , V j G they L s i pCtiT (Michael J. Vick, President) of �CA <�L`G� 'k� ✓ �` �'� (/� � , certify that the (GEA Mechanical Equipment US, INC) Insurance Requirements set forth in Section 11 of the Pre-Selection Agreement, Section 16 of the Contract Agreement of the P1-101 Invitation for Bid (IFB) and other provisions of the P1-101 (IFB) as applicable to the insurance requirements have been read and understood and that our insurance company(ies) ALA: AN2- &L06A(_ (Z1 tCS C,1 S /ANC 2 U21C14 N or CA [fill in name(s) of insurance company(ies)J is/are able to provide the coverages specified. SiO, a i ent, Secretary, Manager, Own r r Representative P ( 6 Il >- Date ADMINISTRATION COMMITTEE Meeting Date To Bd.of Dir. 11/14/12 11/28/12 AGENDA REPORT Item Number Item Number 2 18 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: ORANGE COUNTY SANITATION DISTRICT COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR) FOR THE YEAR END JUNE 30, 2012. GENERAL MANAGER'S RECOMMENDATION Receive and file the Sanitation District's Comprehensive Annual Financial Report for the year ended June 30, 2012, prepared by staff and audited by McGladrey, Certified Public Accountants, along with the following reports prepared by McGladrey: A. Report to the Administration Committee. B. Report on Internal Controls. C. Independent Accountants' Report on Agreed-Upon Procedures Applied to Appropriations Limit Worksheets. SUMMARY The Sanitation District's independent auditors, McGladrey, have completed their examination of the Sanitation District's financial statements for the year ended June 30, 2012, and have issued an unqualified opinion. Each year, the Administration Committee reviews the results of the audit and the corresponding Auditor's report. During their audit, McGladrey, noted no matters involving the internal control over financial reporting and its operations that they consider to be material weakness. McGladrey will attend the meeting to respond to any questions of Directors. Staff has prepared the Comprehensive Annual Financial Report, including the audited financial statements. As the Sanitation District has consistently earned the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association (GFOA), this year's report will be submitted to GFOA for their review. Page 1 of 2 PRIOR COMMITTEE/BOARD ACTIONS N/A ADDITIONAL INFORMATION None. ATTACHMENTS The following attachment(s) are included in hard copy, and may also be viewed on-line at the OCSD website (www.ocsd.com) with the complete agenda package and attachments: 1. Report to the Administration Committee. 2. Report on Internal Controls. 3. Independent Accountants' Report on Agreed-Upon Procedures Applied to Appropriations Limit Worksheets. 4. Comprehensive Annual Financial Report for the Year Ended June 30, 2012. (separately bound document) JDR:LT:MW:jmf Page 2of2 Orange County Sanitation District Report to the Administration Committee November 14, 2012 McGladrey McGladrey LLP McGladrey November 14, 2012 Members of the Administration Committee Orange County Sanitation District Fountain Valley, CA We are pleased to present this report related to our audit of financial statements and compliance of the Orange County Sanitation District(the District)for the year ended June 30, 2012. This report summarizes certain matters required by professional standards to be communicated to you in your oversight responsibility for the District's financial reporting process. This report is intended solely for the information and use of the Administration Committee, Board of Directors and management, and is not intended to be and should not be used by anyone other than these specified parties. It will be our pleasure to respond to any questions you have regarding this report. We appreciate the opportunity to continue to be of service to the District. Member of the RSM International network of Independent accounting,tax and consuhing firms. Contents RequiredCommunications.......................................................................................................................1 -2 Summary of Accounting Estimates...................................................................................................3-4 Exhibit A—Certain Written Communications between Management and Our Firm..................................... 5 Representation Letter ■ ■ ■ ■ Required Communications 0 Statement on Auditing Standards No. 114 requires the auditor to communicate certain matters to keep those charged with governance adequately informed about matters related to the financial statement audit that are, in our professional judgment, significant and relevant to the responsibilities of those charged with governance in overseeing the financial reporting process. The following summarizes these communications. Area Comments Auditor's Responsibility Under Our responsibility under auditing standards generally Professional Standards accepted in the United States of America and Government Auditing Standards, issued by the Comptroller General of the United States; the provisions of the Single Audit Act, OMB Circular A-133 and OMB's Compliance Supplement, has been described to you in our arrangement letter dated June 7, 2012. Accounting Practices Adoption of, or Change in, Accounting Policies Management has the ultimate responsibility for the appropriateness of the accounting policies used by the District. The District did not adopt any significant new accounting policies nor have there been any changes in existing significant accounting policies during the current period. Significant or Unusual Transactions We did not identify any significant or unusual transactions or significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus. Alternative Treatments Discussed with Management We did not discuss with management any alternative treatments within generally accepted accounting principles for accounting policies and practices related to material items during the current audit period. Management Judgments and Accounting Summary information about the process used by Estimates management in formulating particularly sensitive accounting estimates and about our conclusions regarding the reasonableness of those estimates is in the attached "Summary of Accounting Estimates." Financial Statement Disclosures In our meeting with you, we will discuss with you the following items as they relate to the neutrality, consistency, and clarity of the disclosures in the financial statements: • Accounting pronouncements issued, but not yet effective. Area Comments Audit Adjustments There were no audit adjustments made by us to the original trial balance presented to us to begin our audit. However, we were provided one reclassifying adjustments by management during the course of the audit and that adjustment was evaluated by us as part of our audit. Uncorrected Misstatements Uncorrected misstatements are summarized in the attached "Summaries of Uncorrected Misstatements" included within Exhibit A. Disagreements with Management We encountered no disagreements with management over the application of significant accounting principles, the basis for management's judgments on any significant matters, the scope of the audit, or significant disclosures to be included in the financial statements. Consultations with Other Accountants We are not aware of any consultations management had with other accountants about accounting or auditing matters. Significant Issues Discussed with Following is a description of significant areas arising Management from the audit that were discussed with management: • Capitalized interest • Goodwill recorded related to IRWD • Feasibility studies related to abandoned capital asset projects Difficulties Encountered in Performing the We did not encounter any difficulties in dealing with Audit management during the audit. Letter Communicating Internal Control We did not identify any material weaknesses or and Compliance Matters noncompliance during our audit of the financial statements that are required to be communicated in accordance with Government Auditing Standards. Certain Written Communications Between Copies of certain written communications between our Management and Our Firm Firm and the management of the District are attached as Exhibit A. Orange County Sanitation District Summary of Accounting Estimates Year Ended June 30, 2012 Accounting estimates are an integral part of the preparation of financial statements and are based upon management's current judgment. The process used by management encompasses their knowledge and experience about past and current events and certain assumptions about future events. You may wish to monitor throughout the year the process used to compute and record these accounting estimates. The following describes the significant accounting estimates reflected in the District's June 30, 2012, basic financial statements: EstimationArea Accounting Policy . Useful Lives of Long- The estimated useful Management reviews for We tested the Lived Assets lives of assets generally changes in the useful lives of reasonableness of have the following long-lived assets by information underlying ranges: sewage evaluating prominent events management's estimate. collection facilities 50 or changes in circumstances Based on our years; sewage affecting capital assets to procedures,we treatment facilities 40 determine whether concluded that the years; sewage disposal impairment or change in assigned useful lives of facilities 40 years and useful life of a capital asset capital assets are general plant and has occurred.A capital asset reasonable. administrative facilities is considered impaired if both 11.5 years.These the decline in the service assets are depreciated utility of the capital asset is using the straight-line large in magnitude and the method. Construction in event or change in process is not circumstances is outside the depreciated until ready normal life cycle of the capital for use and put into asset. service. Pension Obligations A pension or OPEB For postemployment benefits We tested the and Postemployment asset is recorded if other than pensions, reasonableness of the Benefits Other Than contributions exceed management utilizes an information underlying Pensions the annual required actuarial consulting firm to the actuarial evaluations. contribution.A pension perform an evaluation using Based on our or OPEB liability is the entry age actuarial cost procedures,we recorded if the method. Management concluded that the contributions are less reviewed and approved the pension and that the annual required actuarial assumptions and postemployment benefits contribution. calculations used to other than pension costs determine the recorded are reasonable. postemployment benefit costs. For pension obligations management utilizes Orange County Employees' Retirement System (OCERS) actuaries for its defined benefit plan. Management reviewed and approved the actuarial assumptions and calculations used to determine the pension costs. For the Additional Retiree Benefit Account(ARBA) defined benefit plan obligation, management utilizes an actuarial consulting firm to perform an evaluation using the projected unit credit cost method. Management reviewed and approved the actuarial assumptions and calculations used to determine the ARBA costs. Exhibit A - Certain Written Communications Between Management and Our Firm °Ns� SAh�Tq'�°N ORANGE COUNTY SANITATION DISTRICT s We protect public health and the environment by providing effective wastewater collection,treatment,and recycling. � n O -I F�TiNG THE ENV\Qoa November 5, 2012 McGladrey LLP 18401 Von Karman Ave., 5t" Floor Irvine, CA 92612 In connection with your audit of the basic financial statements of Orange Serving County Sanitation District (the Sanitation District) as of and for the year ended Anaheim June 30, 2012, we confirm that we are responsible for the fair presentation in Brea the financial statements of financial position, changes in financial position, Buena Park and cash flows in conformity with accounting principles generally accepted in Cypress the United States of America. Fountain Valley We confirm to the best of our knowledge and belief, as of November 5, 2012 Fullerton the following representations made to you during your audit. Garden Grove 1. The financial statements referred to above are fairly presented in Huntington Beach conformity with accounting principles generally accepted in the United Irvine States of America. La Habra 2. We have identified for you all organizations that are a part of this reporting La Palma entity or with which we have a relationship, as these organizations are defined in Section 2100 of the Governmental Accounting Standards Los Alamitos Board's Codification of Governmental Accounting and Financial Reporting Newport Beach Standards that are component units in which we participated. In that Orange regard, the Orange County Sanitation District Financing Corporation is a Placentia blended component unit of the Sanitation District. There are no organizations for which the nature and significance of their relationship Santa Ana with the Sanitation District are such that exclusion would cause the Seal Beach reporting entity's financial statements to be misleading or incomplete or Stanton jointly organized organizations in which we participated. Tustin 3. We have indicated to you that the Sanitation District operates as a single Villa Park proprietary fund. 'YorbaLinda 4. We have properly classified all activities. Costa Mesa 5. We are responsible for compliance with laws and regulations applicable to Sanitary District the Sanitation District including adopting, approving, and amending Midway City budgets. Sanitary District g Irvine Ranch 6. We have identified and disclosed to you all laws and regulations that have Water District a direct and material effect on the determination of financial statement County of Orange amounts including legal and contractual provisions for reporting specific activities in separate funds. 10844 Ellis Avenue • Fountain Valley,CA 92708-7018 • (714)962-2411 • www.ocsd.com 4�JNjv SAW TgT�oy McGladrey LLP November 5, 2012 • Page 2 9 �2 �N THE E v`Q 7. We have made available to you: a. All financial records and related data of all activities in existence at any time during the period covered by your audit. b. All minutes of the meetings of the governing board and committees of board members or summaries of actions of recent meetings for which minutes have not yet been prepared. 8. We have no knowledge of fraud or suspected fraud affecting the Sanitation District involving: a. Management or employees who have significant roles in the internal control. b. Others where the fraud could have a material effect on the financial statements. 9. We acknowledge our responsibility for the design and implementation of programs and controls to provide reasonable assurance that fraud is prevented and detected. 10.We have no knowledge of any allegations of fraud or suspected fraud affecting the Sanitation District received in communications from employees, former employees, analysts, regulators, short sellers, or others. 11.We are aware of no significant deficiencies, including material weaknesses, in the design or operation of internal controls that could adversely affect the Sanitation District's ability to record, process, summarize, and report financial data. 12.There have been no communications from regulatory agencies concerning noncompliance with, or deficiencies in, financial reporting practices. 13.We have no plans or intentions that may materially affect the carrying value or classification of assets and liabilities. 14.The following have been properly recorded and/or disclosed in the financial statements: a. Arrangements with financial institutions involving restrictions on cash balances. b. Security agreements in effect under the Uniform Commercial Code. c. Any other liens or encumbrances on assets or revenues or any assets or revenues which were pledged as collateral for any liability or which were subordinated in any way. d. The fair value of investments. McGladrey LLP November 5, 2012 • Page 3 � THE EN e. Amounts of contractual obligations for construction and purchase of real property or equipment not included in the liabilities or encumbrances recorded on the books. f. Debt issue repurchase options or agreements, or sinking fund debt repurchase ordinance requirements. g. Debt issue provisions. h. All significant estimates and material concentrations known to management which are required to be disclosed in accordance with the AICPA's Statement of Position No. 94-6, Disclosure of Certain Significant Risks and Uncertainties. Significant estimates are estimates at the balance sheet date which could change materially within the next year. Concentrations refer to volumes of business, revenues, available sources of supply, or markets for which events could occur which would significantly disrupt normal finances within the next year. i. Risk financing activities. j. Deposits and investment securities categories of risk. k. Arbitrage rebate liabilities. I. Defined pension plan disclosures. 15.We are responsible for making the accounting estimates included in the financial statements. Those estimates reflect our judgment based on our knowledge and experience about past and current events and our assumptions about conditions we expect to exist and courses of action we expect to take. In that regard, adequate provisions have been made: a. To reduce receivables to their estimated net collectable amounts. b. For risk retention, including uninsured losses or loss retentions (deductibles) attributable to events occurring through June 30, 2012, and/or for expected retroactive insurance premium adjustments applicable to periods through June 30, 2012. c. For pension obligations, post-retirement benefits other than pensions rendered through June 30, 2012. 16.There are no: a. Communications from grantors, lenders, other funding sources, or regulatory agencies concerning noncompliance with: (1) Statutory, regulatory, or contractual provision requirements. V�N9 McGladrey LLP Q November 5, 2012 • Page 4 9 �2 THE ENv`Q (2) Financial reporting practices that could have a material effect on the financial statements. b. Material transactions that have not been properly recorded in the accounting records underlying the financial statements. c. Violations or possible violations of laws or regulations whose effects should be considered for disclosure in the financial statements or as a basis for recording a loss contingency. In that regard, we specifically represent that we have not been designated as, or alleged to be, a "potentially responsible party" by the Federal Environmental Protection Agency or any equivalent state agencies in connection with any environmental contamination. d. Other material liabilities or gain or loss contingencies that are required to be accrued or disclosed by Statement of Financial Accounting Standards No. 5 and/or GASB Statement No. 10. e. Related-party transactions as defined in section 2100 of the Governmental Accounting Standards Board's Codification of Governmental Accounting and Financial Reporting Standards. f. Line of credit or similar arrangements. g. Guarantees, whether written or oral, under which the Sanitation District is contingently liable. h. Significant leases or material amounts of rental obligations under long- term leases. i. Liabilities which are subordinated in any way to any other actual or possible liabilities. j. Special and extraordinary items. k. Obsolete, damaged, or excess inventories. I. Investments, intangibles or other assets which have permanently declined in value. m. Material losses to be sustained in the fulfillment of, or from the inability to fulfill, and service commitments. n. Material losses to be sustained as a result of purchase commitments. o. Environmental clean-up obligations. p. Arrangements with financial institutions involving compensating balances. q. Authorized but unissued bonds and/or notes. 4�JNty SANITgT�o9 N9 McGladrey LLP November 5, 2012 • Page 5 90 �? E 17.There are no unasserted claims or assessments that our lawyer has advised us are probable of assertion and must be disclosed in accordance with Statement of Financial Accounting Standards No.5 and/or GASB Statement No.10. 18.We have no direct or indirect, legal or moral, obligations for any debt of any organization, public or private that is not disclosed in the financial statements. 19.We have satisfactory title to all owned assets. 20.We have complied with all aspects of contractual agreements that would have a material effect on the financial statements in the event of noncompliance. 21.Net asset components (invested in capital assets, net of related debt; restricted; and unrestricted) are properly classified and, if applicable, approved. 22.Capital assets, including infrastructure assets, are properly capitalized, reported, and depreciated. 23.Required supplementary information is properly measured and presented. 24.We have reviewed, approved, and are responsible for overseeing the preparation and completion of the basic financial statements and related notes. 25.We are aware of and acknowledge the effect on the financial statements of GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position; GASB Statement No. 65, Items Previously Reported As Assets and Liabilities and GASB Statement No. 68, Accounting and Financial Reporting for Pensions-An Amendment of GASB Statement No. 27 which have been issued, but which we have not yet adopted. We have elected to not disclose these in the notes to the financial statements as of June 30, 2012. 26.The Sanitation District incurs certain costs that relate to the construction of capital assets. The Sanitation District capitalizes only those costs that are incremental to the construction of capital assets. In connection with your audit, conducted in accordance with Government Auditing Standards, we confirm: 27.We are responsible for: a. Compliance with the laws, regulations, and provisions of contracts and grant agreements applicable to the Sanitation District. O�JNjv SANI>•q Troy 9 McGladrey LLP November 5, 2012 • Page 6 a cl/N� THE EN��Qo b. Establishing and maintaining effective internal controls over financial reporting. 28. We have identified and disclosed to you all laws, regulations, and provisions of contracts and grant agreements that have a direct and material effect on the determinations of financial statement amounts or other financial data significant to audit objectives. 29.We have a process to track the status of audit findings and recommendations. In our meeting with you on August 30, 2012 we discussed the accounting treatment of certain transactions including, netting the BAB's interest subsidy against interest expense versus recording as non-operating revenue; recording the amortization of the cost of issuance, premiums/discounts per the straight line method versus the effective rate method; capitalizing interest utilizing the FASB 34 guidance versus FASB 62 guidance; adjusting investment balances for fair market value and variances in the broker statements. Although not GAAP, the Sanitation District prefers netting the BAB's interest subsidy against interest expense to convey the true interest cost the Sanitation District is paying on this debt. We believe it is misleading to the reader when we report the high rate of interest paid on these bonds without netting. These BAB transactions would never have been completed without the Federal interest expense subsidy. Since the netting of this transaction is immaterial to the financial statements taken as a whole, the Sanitation District intends to continue to report BABs interest expense net of the Federal subsidy going forward. In the past, the Sanitation District has reported recording the amortization of the cost of issuance, premiums/discounts per the straight line method versus the GAAP effective rate method. Due to immateriality, the Sanitation District intends to continue recording cost of issuance, premiums/discounts per the straight line method on current debt issues but will begin to record them using the effective rate method on new debt issuances. Also, going forward, the Sanitation District will begin to capitalize interest under both FASB 34 and FASB 62 guidelines. 30.There have been no: a. Violations (and possible violations) of laws, regulations, and provisions of contracts and grant agreements whose effect should be considered for disclosure in the auditor's report on non-compliance. b. Fraud, illegal acts, violations of provisions of contracts or grant agreements, or abuse that has been reported. O�JNSV SA l rgToy 9 McGladrey LLP November 5, 2012 • Page 7 �2 c. Previous financial audits, attestation agreements performance audits, or other studies related to the objectives of the audit being undertaken and the corrective action taken to address significant findings and recommendations. d. Report findings, conclusions, or recommendations, as well as our planned corrective actions for the report. 31.In connection with your engagements to perform, in accordance with attestation standards established by the American Institute of Certified Public Accountants, specified agreed-upon procedures with respect to certain records and transactions of the Sanitation District for the year ended June 30, 2012 for the purpose of determining as to whether OCSD's appropriation limitation calculation was computed in accordance with Article XIIIB of the Constitution of the State of California and whether the Sanitation District's net tangible worth is in compliance with the Interconnection Facilities Agreement between the Southern California Edison Company and the Sanitation District, we confirm the following: a. We understand that we have the responsibility for determining the appropriation limitation calculation and the tangible net worth calculation and the selection of the criteria against which the calculations are capable of being evaluated. b. We understand that we have the responsibility for determining that such criteria are appropriate for our purposes. c. There are no known matters contradicting the calculations or any communication from regulatory agencies affecting the calculations. d. We have made available to you all records and related data relevant to the subject matter and the agreed-upon procedures. e. We have responded fully to all inquiries made to us by you during your engagement. 32.We are responsible for determining that significant events or transactions that have occurred since the balance sheet date and through November 5, 2012 have been recognized or disclosed in the financial statements. No events or transactions other than those disclosed in the basic financial statements have occurred subsequent to the balance sheet date and through November 5, 2012 that would require recognition or disclosure in 6�JNjv S ANI Tgroy OWN 9 McGladrey L?_ November 512012 • Page 8 Fc/ THE EN�\Poa the basic financial statements. We further represent that as of November 5, 2012, the basic financial statements were complete in a form and format that complied with accounting principles generally accepted in the United States of America, and all approvals necessary for issuance of the financial statements had been obtained. During the course of your audit, you may have accumulated records containing data that should be reflected in our books and records. All such data have been so reflected. Accordingly, copies of such records in your possession are no longer needed by us. As of and for the Year Ended June 30, 2012 Below you have provided a listing of what you believe to be uncorrected misstatements. Although we are not in total agreement with this listing, we believe that the effects of this listing aggregated by you and summarized below are immaterial, both individually and in the aggregate to the financial statements taken as a whole. For purposes of this representation, we consider items to be material, regardless of their size, if they involve the misstatement or omission of accounting information that, in light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would be changed or influenced by the omission or misstatement. GOJNtH SAHITyr/0 q 9 McGladrey LLP November 5, 2012 • Page 9 A 'l HE Effect—Debit(Credit) Description Assets Liabilities Equity Revenue Expenses Reversing Prior Year Misstatements • To adjustCOP premiums,discounts,COls and deferred charges for the difference between straight-line and the effective interest m ethod. $ $ - (1,460,222) $ $ 1,460,222 • To reverse the effects of the preliminary survey other assets accounts which were expensed during the year. 7,079,922 (7,079,922) Current Year Misstatements • To reclassify BAB subs idy rebate received from interest expense to other income. (5,060,034) 5,060,034 • To adjust COP premiums,discounts,COls and deferred charges for the difference between straight-line and the effective interest m ethod. (613,728) (1,075,275) 3,378,006 - (1,689,003) • To adjust for the understatementof investment values based on the year-end statements received byOCSD. 247,288 - (247,288) • To adjustfor the overstatementof investment values based on fair market values. (641,344) - 641,344 • To adjustfor the unamortized goodwill amortization related to the IRWD transaction (2,878,566) 3,536,275 - (657,709) • To record additional capitalized interest on CIP using FASB 34. 655,000 - (655,000) Total effect $ (3,231,350) $ (1,075,275) 12,533,981 $ (4,665,978) $ (3,561,378) Current year effect of change in net assets $ (8,227,356) Effect on ending net assets $ 4,306,625 Totals for the Year Ended June 30, 2012 $3,067,239,027 $1,461,422,094 $1,605,816,933 $352,636,158 $266,241,379 Percentage of Misstatements to Totals -0.11% -0.07% 0.78% -1.32% -1.34% 4oJN.�Y SANITgT�oy 9 McGladrey LLP November 5, 2012 • Page 10 �2 a� THE Orange County Sanitation District 2 es D. Ruth, General Manager Loren o Tyner, Director of Finance and Admin. Services Mike White, Controller M<Gladrey LLP 18401 Von Karman.5"Floor Irvine,CA 92612-8531 O 949.255.6500 F 949.255.5091 McGladrey www.mcgladrey.com Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards Board of Directors Orange County Sanitation District Fountain Valley, CA We have audited the basic financial statements of the Orange County Sanitation District (the District) as of and for the year ended June 30, 2012, and have issued our report thereon dated November 5, 2012. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting Management of the District is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered the District's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the District's internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the District's financial statements will not be prevented, or detected and corrected, on a timely basis. Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. Compliance and Other Matters As part of obtaining reasonable assurance about whether the District's basic financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. wnilx r of the Aw Int?mattonal network of mdeWndent accounting,tax and consulting firms. This report is intended solely for the information and use of the Board of Directors and management and is not intended to be, and should not be, used by anyone other than these specified parties. LG� Irvine, CA November 5, 2012 McGladrey LLP 18401 Von Karman,5"Floor Irvine,CA 92612-8531 O 949.255.6500 F 949.255.5091 ._ M c G l a d rcy www.mcgladrey.com Independent Accountant's Report on Applying Agreed-Upon Procedures Board of Directors Orange County Sanitation District Fountain Valley, CA We have performed the procedures enumerated below to the accompanying Appropriations Limit Calculation of the Orange County Sanitation District (the District) for the year ended June 30, 2012. These procedures, which were agreed to by the District and the League of California Cities (as presented in the publication entitled Agreed-Upon Procedures Applied to the Appropriations Limitation Prescribed by Article XIII-B of the California Constitution), were performed solely to assist the District in meeting the requirements of Section 1.5 of Article XIII-B of the California Constitution. The District's management is responsible for the Appropriations Limit Calculation. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of those parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. The procedures performed and our findings were as follows: 1. We obtained the completed internal calculations from management and compared the limit and annual adjustment factors included in those calculations to the limit and annual adjustment factors that were adopted by a resolution of the Board of Directors. We also compared the population and inflation options included in the aforementioned calculations to those that were selected by a recorded vote of the Board of Directors. Finding: No exceptions were noted as a result of our procedures. 2. For the accompanying Appropriations Limit Calculation, we added line A, last year's limit, to line E, total adjustments, and compared the resulting amount to line F, this year's limit. Finding: No exceptions were noted as a result of our procedures. 3. We compared the current year information presented in the accompanying Appropriations Limit Calculation to the supporting calculations described in item 1 above. Finding: No exceptions were noted as a result of our procedures. Mr,mtx r of the FSM International network of mckW dont accountsng,tax and cons uhtrg firms 4. We compared the prior year Appropriations Limit presented in the accompanying Appropriations Limit Calculation to the prior year Appropriations Limit adopted by the Board of Directors during the prior year. Finding: No exceptions were noted as a result of our procedures. We were not engaged to, and did not, conduct an audit, the objective of which would be the expression of an opinion on the accompanying Appropriations Limit Calculation of the District. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. No procedures have been performed with respect to the determination of the appropriations limit for the base year, as defined by Article XIII-B of the California Constitution. This report is intended solely for the information and use of the Board of Directors and management of the District, and is not intended to be, and should not be, used by anyone other than these specified parties. However,this report is a matter of public record and its distribution is not limited. G e—locl Irvine, CA November 5, 2012 Orange County Sanitation District Appropriations Limit Calculation Year Ended June 30,2012 Amount Source A. Last year's limit $ 79,329,154 B. Adjustment factors: 1. Population change 1.0069867 State Finance 2. Per capita change 1.0251000 State Finance Total adjustments [(B.1 x B.2)-1.0] 0.0322620 C. Annual adjustment 2,559,319 (BxA) D. Other adjustments: 1. Lost responsibility(-) - 2. Transfer to private(-) - 3. Transfer to fees (-) - 4. Assumed responsibility(+) - Subtotal - E. Total adjustments 2,559,319 (C+D) F. This year's limit $ 81,888,473 (A+E) 2 i i ONor range County Sanitation District Comprehensive Annual Financial Report for the Period Ended June 30, 2012 Z Orange ounty, alifornia We're here for you. ORANGE COUNTY SANITATION DISTRICT ORANGE COUNTY, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2012 Prepared By: Administrative Services Department Financial Management Division Michael D. White, CPA Controller (THIS PAGE LEFT INTENTIONALLY BLANK) ORANGE COUNTY SANITATION DISTRICT Comprehensive Annual Financial Report Table of Contents For the Year Ended June 30, 2012 Paqe INTRODUCTORY SECTION: Letterof Transmittal..................................................................................................................... i-vii GFOA Certificate of Achievement............................................................................................... viii Boardof Directors........................................................................................................................ ix OrganizationChart....................................................................................................................... x Mapof Service Area.................................................................................................................... xi FINANCIAL SECTION: IndependentAuditors' Report...................................................................................................... 1-2 Management's Discussion and Analysis—Required Supplementary Information...................... 3-8 Basic Financial Statements: Statementof Net Assets..................................................................................................... 10 Statement of Revenues, Expenses, and Changes in Net Assets ..................................... 11 Statementof Cash Flows.................................................................................................... 12 Notes to Basic Financial Statements.................................................................................. 13-37 Supplementary Information: Schedule of Combining Area Net Assets............................................................................ 40 Schedule of Combining Area Revenues, Expenses, and Changes in Net Assets ............ 41 Schedule of Combining Area Cash Flows.......................................................................... 42 STATISTICAL SECTION: Net Assets by Component—Last Ten Fiscal Years.................................................................... 44 Revenues and Gross Capital Contributions by Source—Last Ten Fiscal Years........................ 45 Expenses by Type— Last Ten Fiscal Years................................................................................ 46 Change in Net Assets—Last Ten Fiscal Years........................................................................... 47 Cash and Investment Reserve Balances— Last Ten Fiscal Years............................................. 48 Sewer Service Fees— Last Nine Fiscal Years & Next Fiscal Year............................................. 49 Number of Accounts and Revenues by Customer Class— Last Ten Fiscal Years..................... 50 Principal Sewer Service Customers—Current Fiscal Year and Nine Years Ago ....................... 51 Ratio of Annual Debt Service to Total Expenses— Last Ten Fiscal Years ................................. 52 Debt Coverage Ratios— Last Ten Fiscal Years.......................................................................... 53 Computation of Direct and Overlapping Debt—Current Fiscal Year.......................................... 54 Ratios of Outstanding Debt— Last Ten Fiscal Years .................................................................. 55 Comparison of the Volume of Wastewater Treated — Last Ten Fiscal Years............................. 56 Authorized Full-time Equivalents by Function — Last Ten Fiscal Years...................................... 57 Biosolids Produced — Last Ten Fiscal Years............................................................................... 58 Capital Asset Statistics— Last Ten Fiscal Years......................................................................... 59 Demographic Statistics— Last Ten Fiscal Years......................................................................... 60 Estimated Populations Served by Orange County Sanitation District—Current Fiscal Year...... 61 Principal Orange County Employers—Current Fiscal Year and Nine Years Ago....................... 62 OperatingIndicators .................................................................................................................... 63 OTHER DATA&TRENDS: Cash and Investment Portfolio—As of June 30, 2012................................................................ 66 Property Tax Rates— Direct and Overlapping Governments— Last Ten Fiscal Years............... 67 Assessed and Estimated Actual Value of Taxable Property—Last Ten Fiscal Years................ 68 Property Tax and User Fee Levies and Collections — Last Ten Fiscal Years............................. 69 Property Value and Construction — Last Ten Fiscal Years ......................................................... 70 Insurance in Force— Next Fiscal Year ....................................................................................... 71 (THIS PAGE LEFT INTENTIONALLY BLANK) ONw SANIt4 ORANGE COUNTY SANITATION DISTRICT r. o� ip THE ENJ�Q November 5, 2012 40B•74 Ellis Avenue Fountain Valley,CA The Board of Directors of the 92708-7018 Orange County Sanitation District, Mailing Address Orange County, California P.O. Box 8127 Fountain Valley, CA 92728-8127 Submitted herewith is the Comprehensive Annual Financial Report of the Orange County Sanitation District, Orange County, California for the fiscal year ended June 30, 2012. This report includes the v�+.ocad.00m financial position and activity of individual revenue areas, as described within the Governmental Structure Phone below, as of June 30, 2012 and was prepared by the Financial Management Division of the Sanitation (7 7 41 962-241 1 District's Administrative Services Department. Fax (714)962.0356 Responsibility for both the accuracy of the data, and the completeness and fairness of the presentation, including all disclosures, rests with the Sanitation District. To the best of our knowledge and belief, the enclosed data is accurate in all material respects and is reported in a manner designed to present fairly SBrving the financial position and results of operations of the Sanitation District. All disclosures necessary to Anaheim enable the reader to gain an understanding of the agency's financial activities have been included. Brea Included within the accompanying financial statements are all of the organizations, activities, and functions Buena Park controlled by the Sanitation District's Board of Directors in accordance with the Governmental Accounting Cypress Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting. For the Fountain Valley purpose of this evaluation, control was determined by the Board's responsibility for: (1) adoption of the budget and user charges, (2) taxing authority, and (3) establishment of policies. The reporting entity and Fullerton its services are described in further detail in Note 1 of the financial statements. Garden Grove :Huntington Beach An audit of the books, financial records and transactions of the Sanitation District is conducted annually by Irvine independent certified public accountants. The Sanitation District selected the accounting firm of McGladrey, LLP to perform the audit for the year ended June 30, 2012. The auditors' report on the La Habra Sanitation District's basic financial statements and supplementary information is located on page 1 within La Palms the financial section of this report. This report renders an unqualified opinion on the Sanitation District's Los Alamitos basic financial statements for the year ended June 30, 2012. Newport Beach Orange Management's discussion and analysis (MD&A) immediately follows the independent auditor's report and provides a narrative introduction, overview, and analysis of the basic financial statements. The MD&A Placentia complements this letter of transmittal and should be read in conjunction with it. Santa Ana Seal Beach GOVERNMENTAL STRUCTURE Stanton Tustin The Orange County Sanitation District encompasses the Northern section of Orange County. The Kle Park Sanitation District provides wastewater treatment for an area of the County covering 479 square miles and Yorbe Linda serving a population of approximately 2.5 million, or 81 percent of the County's population. The Sanitation District was originally incorporated in 1954 as nine separate public corporations, or districts. In April of SanitaryDist ct 1998, at the Sanitation District's request, the Board of Supervisors of the County of Orange passed Midway city Resolution No. 98-140 ordering the consolidation of these nine County Sanitation Districts into a new, Sanitary District single sanitation district, to be known as the Orange County Sanitation District, effective July 1, 1998. This Irvine Rench action was recommended to the Board by the Local Agency Formation Commission in order to simplify Water District governance structures, reduce the size of the Board, ease administrative processes, streamline decision- County ofOrange making and consolidate accounting and auditing processes. The boundaries of the nine previous districts had remained intact for the purpose of collecting sewer user fees at the previously established rate schedules, and were referred to as nine individual revenue areas through June 30, 2000. Effective July 1, i We protect public health and the environment by providing effective wastewater collection, treatment, and recycling. 2003, all Revenue Areas, except Revenue Area 14, consolidated user fee rates and all enterprise fund accounting and budgeting activities and are now known as the Consolidated Revenue Area. The Sanitation District is managed by an administrative organization composed of directors appointed by the agencies or cities which are serviced by the Sanitation District. Each of the two remaining Revenue Areas, the Consolidated Revenue Area and Revenue Area 14, has its own budget and is responsible for the construction and maintenance of its own collection system. All Revenue Areas, except Revenue Area 14 and the portion of the Consolidated Revenue Area previously known as Revenue Area 13, receive their own share of the one-percent ad valorem property tax levy. In addition, all Revenue Areas except Revenue Area 14, collect user fees from property owners. Revenue Area 14 receives all of its revenues from service charges to the Irvine Ranch Water District. The purpose of the Sanitation District's wastewater management program is to protect the public's health, preserve the beneficial uses of the coastal waters, and maintain air quality. The objectives of operating the treatment plants are to process and dispose of the treated wastewater and the separated solids in accordance with Federal, state, and local laws including the Environmental Protection Agency. The Sanitation District sewerage system includes approximately 572 miles of sewers that convey wastewater generated within the Sanitation District's boundaries to the Sanitation District's two wastewater treatment plants, Reclamation Plant No. 1 located in the City of Fountain Valley, and Treatment Plant No. 2 located in the City of Huntington Beach. Plants No. 1 and No. 2 have primary treatment capacities, including standby, of 204 million gallons per day (mgd) and 168 mgd, respectively. In fiscal year 2011-12, greater than 98.8 percent of all advanced primary effluent also received secondary treatment. Both plants are master-planned for a future primary and secondary treatment capacity of 235 mgd for a combined total of 470 mgd by the year 2070. After wastewater receives secondary treatment at Plant No. 1, it flows to the Groundwater Water Replenishment System (GWRS) at the Orange County Water District, located adjacent to the Sanitation District, where it undergoes a state-of-the-art purification process consisting of microfiltration, reverse osmosis, and ultraviolet light with hydrogen peroxide. The product water is near-distilled-quality. Approximately 35 million gallons (132,500 cubic meters) per day of the GWRS water are pumped into injection wells to create a seawater intrusion barrier. Another 35 million gallons (132,500 cubic meters) are pumped daily to Orange County Water District's percolation basins in Anaheim where the GWRS water naturally filters through sand and gravel to the deep aquifers of the groundwater basin. Remaining outflows of treated wastewater from Plants No. 1 and No. 2 are combined and discharged to the ocean off the Huntington Beach coast through an outfall pipe that is 120 inches in diameter and approximately five miles long. The last mile of the outfall pipe is a diffuser that dilutes the wastewater with seawater in a ratio of 148 parts seawater to one part treated wastewater at an average depth of 185 feet. ECONOMIC CONDITIONS AND OUTLOOK In October 2012, the Institute for Economic and Environmental Studies at the California State University Fullerton Mihaylo College of Business and Economics (CSUF) forecasts that the U.S. gross domestic product (GDP) will grow an average of 2.1 percent this year, slow to 1.8 percent in 2013, then rise to 2.7 percent in 2014. The forecast assumes that the U.S. economy will stumble over the next few months as business holds its breath waiting for Washington to act on taxes and the federal deficit and Europe and China to deal with their economic woes. The forecast assumes that Washington will extend all the current Bush tax breaks though the first quarter and delay the major budget cuts scheduled for January 1 before eventually compromising over a combination of tax increases and spending reductions. ii CSUF's forecast reports that Orange County's recovery has recently gathered more strength than the national economy. In particular, after the deep national downturn led the housing sector collapse, the county's housing and construction sectors have shown real signs of a self-sustained, broad based recovery. Housing-related sectors, and construction in particular, were the worst hit sectors during this great recession. This was expected, given that the collapse in the mortgage markets led to an unprecedented decline in home prices, which in turn dramatically precipitated the deeper economic decline. However, CSUF forecasts that although the county will lose 1,500 construction jobs this year, it will add 2,500 workers in that sector in 2013, followed by another 7,000 the following year. Housing permits in Orange County declined steadily from 7,100 in 2007 to 2,200 in 2009, or a year-over year decline of 55.4 percent from 2007 to 2008 and 30.9 percent decline from 2008 to 2009, but have since somewhat recovered to 3,100, or 40.9 percent from 2009 to 2010, and to 4,800, or 54.8 percent from 2010 to 2011, and are now forecasted to rise to 5,200 in 2012, or by 8.3 percent, and to 6,300 in 2013, or by 21.2 percent. Non-residential construction in Orange County fell by 28.2 percent from 2007 to 2008 and by an additional 33.9 percent in 2009, but appears to have recovered from its trough and has been on a steady but moderate path over the second and third quarters of 2012. The CSUF forecast sees Orange County's economy accelerating from an estimated 1.9 percent annual job-growth rate this year to 3.0 percent by 2014. That translate into a projected 26,500 new jobs countywide in 2013, jumping to 42,400 in 2014. In 2009, during the darkest days of the recession, the County lost 110,000 jobs. Although CSUF believes that it will be several years before all the jobs lost during this most recent economic downturn are recovered, the uptrend noticed at the national level and reinforced at the county level will be sustainable unless unexpected events short-circuit the recovery. Recent improvements in the Housing/Construction, Leisure & Hospitality, High-tech, Professional and Business Services, and Retail trade all point to a healthier growth in the near future. Manufacturing likely will be slower to recover because of the slowdown in exports to Europe and China. CSUF believes the Orange County unemployment rate to average 7.9 percent over 2012, 7.3 percent over 2013, and 6.7 percent in 2014. According to the California Association of Realtors, the median price for a detached single-family home in Orange County fell to a low of$442,000 in January 2009 after reaching a high of$775,000 in June 2007. However, in June 2012, the median price came in at $568,000. Compared to year-over-year values, home prices turned positive in June 2012 for the first time in almost two years. The Anderson Center for Economic Research at Chapman University forecasts within their June 2012 Economic and Business Review that housing prices in Orange County, measured by the median price of a single-family home, to show an increase of 2.0 percent in 2012 and by 7.1 percent in 2013. MAJOR INITIATIVES Moving Towards Full Secondary Treatment Standards The Sanitation District's Board of Directors decided in July 2002 to voluntarily give up its modified ocean discharge permit, issued under section 301(h) of the Federal Clean Water Act, which allowed the Sanitation District to discharge a higher level of Suspended Solids and Biochemical Oxygen Demand than otherwise required by the Act if adequate environmental and public health protection was demonstrated. To obtain a renewal of its ocean discharge permit without the modification (often referred to as a"waiver"), the Sanitation District is undertaking a massive capital improvement program ("CIP") of building new, and rehabilitating existing, facilities in order for the Sanitation District to operate its facilities in a manner that will allow it to achieve secondary treatment standards as defined by the Act. Construction of the capital improvements necessary to achieving secondary treatment standards will take until December 31, 2012. Permits are issued for a five (5) year duration, and the U.S. Environmental Protection Agency (EPA) has no authority to waive the discharge limits requirements or grant a longer permit (except per Sec. 301(h)). In November 2004, a consent decree was signed by EPA and filed with iii the U.S. District Court that approved the construction schedule and decrees that no penalties will be imposed for discharges that exceed the secondary treatment limits during the period of construction. Seven milestones towards achieving secondary treatment standards were identified within the consent decree along with due dates. The District is in compliance with the decree and has successfully completed six of these milestones within the time permitted, as follows: • On March 15, 2006—Completion of the new$44.4 million "Trickling Filter Facility' at Plant No. 1. • On November 15, 2006 — Completion of the design and advertising for construction of the "New Activated Sludge System"at Plant No. 1. • On January 15, 2007—Completion of the design and advertising for construction of"Trickling Filters at Plant No. 2". • On March 28, 2008 — Completion of construction for"Rehabilitation of Activated Sludge Plant at Plant No.2." • February 15, 2011 —Complete construction of Plant No. 2 secondary treatment expansion. • July 10, 2012—Complete construction of Plant No. 1 secondary treatment expansion. Following is the timeline for the one remaining milestone: • December 31, 2012 — Achieve full compliance with the Code of Federal Regulations secondary treatment requirements. Strategic Planning In November 2007, the Board of Directors adopted a new comprehensive strategic plan to steer OCSD's efforts and engage the organization to envision service levels and operational needs for the next five years. In continuing to look at the five-year horizon, the Strategic Plan has been updated on an annual basis. Each of these strategic plan annual updates has followed a similar process that had been established when the original November 2007 had been adopted with the General Manager's Office initiated the planning effort with the Executive Management Team, and then soliciting input and ideas from managers and supervisors. In October 2012, the staff-generated ideas were presented to the Board of Directors during a workshop, where Board Members discussed and deliberated changes and additions to the plan. Driven by the Sanitation District's mission, vision and core values, the 2012 Strategic Plan update maintains an aggressive effort to meet the sanitation, health, and safety needs of the 2.5 million people being served in a cost effective manner, while protecting the environment where we live. Since 2007, 78 percent of the strategic goals identified have been completed. Four new goals were added in the 2012 update and the continuation of ten previous goal was included in the plan. The New Goals include: • Biosolids Management — Update Biosolids Policy to reflect Board of Director's decision to maintain the District's environmental management system that was first certified by the National Biosolids Partnership in 2003, to reaffirm recycling of at least 88 percent of total biosolids with no more than 12 percent deposited in landfills, and to reaffirm the diversity goals pertaining to percentage limits by market, contractor, or facility as originally recommended by the Long Range Biosolids Management Plan. IV • Chemical Sustainability—Develop a diversification model to ensure a reliable and sustainable chemical supply that includes having multiple vendor contracts in place that supports a dependable chemical supply and provides for competitive pricing. • Odor Control Update and Action Plan—Completion of an Odor Control Master Plan to ensure that the District is limiting offsite odor impacts in a comprehensive and cost effective manner and to ensure that the District's investment in current and potentially future process systems will produce the benefits intended. • Workforce Planning and Workforce Development - Integrate workforce planning and workforce development efforts to improve workforce capability, adaptability, efficiency, and accountability. • Business Continuity Planning— Develop a Business Continuity Plan that will define how the District will continue its everyday business functions during an emergency or natural hazard so that services are either uninterrupted or restored rapidly following an interruption. This includes potential financial effects of a crisis as well as having the flexibility to adapt human resource policies to meet the changing needs of employees during an event and to continue providing effective wastewater treatment to the 2.5 million people living in the service area. Continuation of previous Goals: • Full-Cost Recovery: Urban runoff division program — Review the feasibility of implementing a direct charging mechanism to recover the cost of urban runoff treatment starting July 1, 2013 when the new rate structure is in place. • Ocean Protection— Undertake studies to determine the cause of benthic community changes near the ocean outfall and take corrective action to return affected areas to reference conditions. • Update the sewer service fee five-year rate plan — Prepare an updated five-year rate schedule for Board consideration that would be effective for the fiscal year beginning July 1, 2013. • Providing ongoing leadership development — Maximize the development of a pool of dedicated and talented employees ready to lead OCSD into the future. This strategic plan continues to chart a focused roadmap of success for the future of the Orange County Sanitation District. It addresses critical issues and challenges, and communicates clear and concise future direction to Sanitation District staff. SERVICE EFFORTS AND ACCOMPLISHMENTS In December 2012, the Sanitation District received the 2012 National Environmental Achievement Award in Research and Technology from the National Association of Clean Water its fuel cell demonstration on the Energy and Hydrogen Production project. In April 2012, the Sanitation District received the 2011 Research and Achievement Award from the Santa Ana River Basin Section of the California Water Environment Association for its engine emissions control demonstration project. In June 2012, the Sanitation District received the 2012 Project of the Year Award from Communication Media Management Association for the trickling filter project at Plant No. 2. In July 2012, the Sanitation District received the Gold Peak Performance Award from the National Association of Clean Water Agencies covering Reclamation Plant No. 1 and Treatment Plant No. 2 for v outstanding compliance with the National Pollutant Discharge Elimination System (NPDES) permit limits for 2011-12. ACCOUNTING AND BUDGETARY CONTROLS The Sanitation District's accounting records are maintained on the accrual basis. In developing and evaluating the Sanitation District's accounting system, consideration is given to the adequacy of internal accounting controls. Internal accounting controls are designed to provide reasonable, but not absolute, assurance regarding: (1) the safeguarding of assets against loss from unauthorized use or disposition; and (2) the reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the evaluation of costs and benefits requires estimates and judgments by management. We believe that the Sanitation District's internal accounting controls adequately safeguard assets and provide reasonable assurance of proper recording of financial transactions. Each year the Sanitation District's Board of Directors adopts an annual operating plan. A joint works budget is first prepared that identifies the specific capital projects and operating activities to be undertaken by the Sanitation District during the year. The budgetary level of control, the level at which expenses cannot exceed budget, is exercised at the individual district, or fund level. The Sanitation District has adopted a Uniform Purchasing Policy that identifies the agreed upon purchasing standards. ACCUMULATED FUNDS AND RESERVES POLICY The Board of Directors of the Orange County Sanitation District has established the following Accumulated Funds and Reserves Policy: Cash Flow Reserve: is established to fund operations, maintenance and certificates of participation expenses for the first half of the fiscal year, prior to the receipt of the first installment of the property tax allocation and the sewer service user fees which are collected as a separate line item on the property tax bill. The level of this reserve will be established as the sum of an amount equal to six months operations and maintenance expenses and the total of the annual debt (COP) service payments due in August each year. Operating Contingency Reserve: is established to provide for non-recurring expenditures that were not anticipated when the annual budget and sewer service fees were considered and adopted. The level of this reserve will be established at an amount equal to ten percent of the annual operating budget. Capital Improvement Reserve: is established to fund annual increments of the capital improvement program. The long-term target is for one half of the capital improvement program to be funded from borrowing and for one half to be funded from current revenues and reserves. With this program in mind, the target level of this reserve has been established at one half of the average annual capital improvement program through the year 2020. Levels higher and lower than the target can be expected while the long- term financing and capital improvement programs are being finalized. Catastrophic Loss or Self-Insurance Reserves: are established for property damage including fire, flood and earthquake; for general liability; and for workers' compensation. These reserves are intended to work with purchased insurance policies, FEMA disaster reimbursements and State disaster reimbursements. Based on the current infrastructure replacement value of$6.26 billion, the reserve level has been set to fund the District's non-reimbursed costs, estimated to be$57 million. Capital Replacement/Renewal Reserve Policy: is established to provide thirty percent of the funding to replace or refurbish the current collection and treatment and disposal facilities at the end of their useful economic lives. The current replacement value of these facilities is estimated to be $3.14 billion for the collection facilities and $3.12 billion for the treatment and disposal facilities. The initial reserve level was vi established at$50 million, which will be augmented by interest earnings and a small portion of the annual sewer user fees in order to meet projected needs through the year 2030. Provisions of the various Certificate of Participation (COP) issues require debt service reserves to be under the control of the Trustee for that issue. These reserve funds are not available for the general needs of the District and must be maintained at specified levels. The projected level of required COP service reserves at June 30, 2012 is$69.8 million. Accumulated funds exceeding the levels specified by District policy will be maintained in a rate stabilization fund. These funds will be applied to future years' needs in order to maintain rates or to moderate annual fluctuations. There is no established target for this reserve. As of June 30, 2012, the Sanitation District was in compliance with the Accumulated Funds and Reserves Policy with designated net assets totaled $577 million, and have been earmarked for the following specific purposes in accordance with the Sanitation District's reserve policy: Designated For Cash Flow Contingency $183 million Designated For Self-Insurance 57 million Designated For Capital Improvements 199 million Designated For Debt Service Requirements 138 million Total Designated Net Assets $ 577 million CERTIFICATE OF ACHIEVEMENT FOR EXCELLENCE IN FINANCIAL REPORTING The Government Finance Officers' Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Orange County Sanitation District for the Sanitation District's comprehensive annual financial report for the year ended June 30, 2011. This was the eighteenth consecutive year that the Sanitation District has received this award. In order to be awarded a Certificate of Achievement, a governmental unit must publish an easily readable and efficiently organized comprehensive annual financial report, whose contents conform to program standards. Such reports must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program requirements and we are submitting it to GFOA to determine its eligibility for another certificate. ACKNOWLEDGMENTS This report could not have been accomplished without the dedicated services of the Financial Management Division staff, and I would like to especially express my appreciation to Lina Hsiao, Accounting Supervisor, who assisted in its preparation. I would also like to thank the Sanitation District's Board of Directors, the General Manager, and the Director of Finance and Administrative Services for their interest and support in conducting the financial operations of the Sanitation District in a responsible and progressive manner. Respectfully submitted, C*Zla�elv A Michael D. White, CPA Controller vii Certificate of Achievement for Excellence in Financial Reporting Presented to Orange County Sanitation District California For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2011 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. ITFO STATES w AIN0 4 A OD��RJiTI01l President sc, C�ICA6a � Executive Director Vlll ORANGE COUNTY SANITATION DISTRICT Board of Directors As of June 30, 2012 Agency Active Director Alternate Director Cities: Anaheim Gail Eastman Harry Sidhu Brea Don Schweitzer Ron Garcia Buena Park Fred Smith Steve Berry Cypress Prakash Narain Doug Bailey Fountain Valley Larry Crandall Steve Nagel Fullerton Gregory Sebourn Pat McKinley Garden Grove Bill Dalton Kris Beard Huntington Beach Joe Carchio Devin Dwyer Irvine Jeffrey Lalloway Steven Choi La Habra Tom Beamish Rose Espinoza La Palma Mark Waldman Steve Hwangbo Los Alamitos Troy Edgar Gerri Graham-Mejia Newport Beach Steven Rosansky Nancy Gardner Orange Jon Dumitru Denis Bilodeau Placentia Scott Nelson Constance Underhill Santa Ana Sal Tinajero David Benavides Seal Beach Michael Levitt Gordon Shanks Stanton David Shawver Carol Warren Tustin John Nielsen Jerry Amante Villa Park Brad Reese Rick Barnett Yorba Linda John Anderson Jim Winder Sanitary Water Districts: Costa Mesa Sanitary District James M. Ferryman Robert Ooten Midway City Sanitary District Joy L. Neugebauer Allan P. Krippner Irvine Ranch Water District John Withers Douglas Reinhart County Areas: Member of the Board Janet Nguyen Shawn Nelson of Supervisors 1X ORANGE COUNTY SANITATION DISTRICT Organizational Chart As of June 30, 2012 Board of General Counsel Office SupportGeneral Manager Assistant Assistant General General Manager Manager Human Administrative Facilities Board Services Resources M Dept. Services Dept. Services Dept. Departmenqtl Administrative FSSD Engineering Public Affairs Services Admin 0&M Admin Admin Financial Equipment- Plant No.1 Planning Mgmt. Rebuild Operations Contracts, Facilities Plant No.2 Project Purchasing& Engineering Operations Management Materials Office Management Collections Mech.Maint. Engineering& Information Construction Technology Asset Instrumentation Management Risk &Electrical Management) Maint Safety Environmental Environmental Compliance Laboratory& Ocean Monitoring X ORANGE COUNTY SANITATION DISTRICT Map of Service Area As of June 30, 2012 LOS ANGELES COUNTY ORANGE UNTY LA _ o °FR HABRA BREA e �F Ro110 o OG�TL COG�TL y YORBA J� FULLERTON PLACENTIA LINDA °mot BUE �so� LA PAR C co PALMA ANAHEIM CYPRESS VILLA © PA It LOS STANTON / ORANGE ;Q ALAMITOS GARDEN ° GROVE %2�7- SEAL BEACH STMINSTER SANTA ANA A NTAIN TUSTIN VA HUNTINGTON Oec aDrnation ,© BEACH lant No. 1 j COSTA - ` �' / ME IRVINE Ocean Pacifrc - ' �CSD � L Treatmen lF Plant No.2 Emergency Pipeline (1.5 mile long) NtWPORT BEACH N OCSD n Offshore Pipeline (10-ft diameter,5 miles long) 0 125 25 5 Miles OCSD Service Area Boundary(463 square miles) Approximately—Map Not To Scale A OCSD Pump Station(15 total) Unincorporated Orange County(white) DISCLAIMER: Map prepared by Orange County Sanitation District.This map is intended for graphical representation only.No level of accuracy is claimed for the base mapping shown hereon and graphics should not be used to obtain coordinate values,bearings or distances. Portions of this derived product contain geographical information copyrighted by Thomas Brothers.All Rights Reserved. SOURCE:OCSO GIS Data.Thomas Brothers 2010 REVISED:01/2012 Xi (THIS PAGE LEFT INTENTIONALLY BLANK) xii McGladrey LLP 18401 Von Karman,50'Floor Irvine,CA 92612-8531 O 949.255.6500 F 949.255.5091 McGladrey www.mcgladrey.com Independent Auditor's Report Board of Directors Orange County Sanitation District Fountain Valley, CA We have audited the accompanying basic financial statements of the Orange County Sanitation District (the District) as of and for the years ended June 30, 2012 and 2011, as listed in the table of contents. These financial statements are the responsibility of the District's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the District as of June 30, 2012 and 2011, and the changes in its net assets and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Accounting principles generally accepted in the United States of America require that the management's discussion and analysis be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audits were conducted for the purpose of forming an opinion on the financial statements that comprise the District's basic financial statements. The separate "Combining Area" financial statements, listed in the table of contents as supplementary information, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from, and relates directly to, the underlying accounting and other records used to prepare the basic financial statements. The "Combining Area" financial statements have been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information Member of the RSM International network of Independent accounting,tax and oontuMrg firms 1 directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the "Combining Area" financial statements are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The financial statements include partial or summarized prior year comparative information. Such information does not include all of the information required or sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the government's financial statements for the year ended June 30, 2011,from which such partial or summarized information was derived. Irvine, CA November 5,2012 2 Management Discussion and Analysis June 30, 2012 This section of the financial statements of the Orange County Sanitation District (Sanitation District) is management's narrative overview and analysis of the financial activities of the Sanitation District for the fiscal year ended June 30, 2012. The information presented here is to be considered in conjunction with additional information provided within the letter of transmittal located in the Introductory Section of this report. Financial Highlights ■ As of June 30, 2012, the assets of the Sanitation District exceeded its liabilities by $1,605.8 million (net assets). Of this amount, $479.9 million (unrestricted net assets) may be used to meet the Sanitation District's ongoing obligations to citizens and creditors. ■ The Sanitation District's total net assets increased $95.3 million, or 6.3 percent over the prior year. ■ Net Capital Assets, consisting of non-depreciable capital assets and depreciable capital assets net of accumulated depreciation, increased $13.3 million, or 0.6 percent over the prior year. ■ Net Assets invested in capital assets, net of related debt decreased $5.1 million, or 0.5 percent. ■ Unrestricted Net Assets increased $100.4 million, or 26.5 percent from the prior year. Overview of the Basic Financial Statements The Sanitation District operates as a utility enterprise and presents its financial statements using the economic resources measurement focus and the full accrual basis of accounting. As an enterprise fund, the Sanitation District's basic financial statements are comprised of two components: financial statements and notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. In accordance with the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards, the Sanitation District's financial statements include a statement of net assets, statement of revenues, expenses and changes in net assets, and a statement of cash flows. The statement of net assets includes all of the Sanitation District's assets and liabilities and provides information about the nature and amounts of investments in resources (assets) and the obligations to Sanitation District creditors (liabilities). It also provides the basis for computing the rate of return, evaluating the capital structure of the Sanitation District, and assessing the liquidity and financial flexibility of the Sanitation District. The statement of revenues, expenses, and changes in net assets accounts for the current year's revenues and expenses. This statement measures the success of the Sanitation District's operations over the past year and can be used to determine the Sanitation District's creditworthiness. It also highlights the Sanitation District's dependency on property tax revenues in supplementing user fees and other charges for recovering total costs. The final required financial statement is the statement of cash flows. The statement reports cash receipts, cash payments, and net changes in cash resulting from operations and investments during the reporting period. Net Assets As previously stated, net assets increased $95.3 million, or 6.3 percent to $1,605.8 million in FY 2011-12 over the prior year. In comparison, net assets increased $79.4 million, or 5.5 percent, to $1,510.5 million in FY 2010-11 over FY 2009-10. 3 (Dollars in thousands) Percentage June 30, June 30, Increase Increase 2012 2011 (Decrease) (Decrease) Assets Current and other assets $ 653,545 $ 648,994 $ 4,551 0.7% Capital assets, net 2,414,269 2,400,922 13,347 0.6% Total assets 3,067,814 3,049,916 17,898 0.6% Liabilities Current liabilities 276,972 292,307 (15,335) -5.2% Noncurrent liabilities 1,184,450 1,247,123 (62,673) -5.0% Total liabilities 1,461,422 1,539,430 (78,008) -5.1% Net assets: Investment in capital assets, net of related debt 1,125,966 1,131,063 (5,097) -0.5% Unrestricted 479,851 379,423 100,428 26.5% Total net assets $ 1,605,817 $ 1,510,486 $ 95,331 6.3% Current and other assets increased $4.6 million, or 0.7 percent, due primarily to net cash provided by operations of $111.5 million, net non-operating revenues of $20.0 million, and receipt of capital facilities capacity charges of$8.9 million funding offset by $73.9 million in capital improvements and $61.5 million in certificates of participation (COP) debt outlays. Capital assets, net increased $13.3 million, or 0.6 percent, due mostly to the ongoing capital improvement program capital additions of $100.4 million in FY 2011-12 less depreciation of $56.1 million, and the expensing of $27.7 million of feasibility studies previously recorded as capital assets. Included in total capital outlays was the New Secondary Treatment System at Plant No. 1. This project is one of several capital improvements that are necessary to achieve secondary treatment standards by December 31, 2012 in accordance with a consent decree signed by EPA and filed with the U.S. District Court. This project includes construction of aeration basins, clarifiers, a blower building, and waste sludge pumping stations, that will provide additional secondary treatment capacity of 60 million gallons per day (MGD) at Plant No. 1. Capital outlays of$6.9 million were incurred in FY 2011-12 with total project outlays to date of$252.5 million. The total projected cost is $255.6 million with completion expected in the fall of 2012. Another secondary treatment project underway is the construction of Trickling Filters at Plant No. 2. This project includes the construction of three trickling filters, a solids contact basin, and six clarifiers for additional secondary treatment capacity of 60 MGD at Plant No. 2. Capital outlays of $3.3 million were incurred in FY 2011-12 with total project outlays to date of $219.6 million. The total projected cost is $220.2 million with completion expected in FY 2012-13. The completion of the Headworks Improvements at Plant No. 2 was another project with significant outlays in FY 2010-11. This project replaces the existing headworks due to failing gates and the ineffectiveness of the bar screens and grit chambers that are allowing grit screenings to pass through into the downstream processes causing increased operating costs. This project includes an influent diversion and metering structure, bar screens, influent pump station, vortex grit chambers, primary influent splitter and metering structure, ferric chloride feed facilities, headworks and trunk line odor control facilities, screenings handling building including a washer/compactor, grit handling building, and an electrical building that includes standby power. In FY 2011-12, $9.5 million of the estimated $257.7 million was incurred bringing the total outlay to date to$251.3 million with completion expected in FY 2012-13. 4 See page 7 for the Schedule of Capital Assets and a listing of the other major capital additions for FY 2011-12. Net assets invested in capital assets, net of related debt decreased $5.1 million, or 0.5 percent over the prior year primarily as a result of the $13.3 million increase in net capital assets offset by an increase of $18.4 million in net related debt. Unrestricted net assets increased $100.4 million, or 26.5 percent over the prior year, and is due to the overall increase in net assets of $95.3 coupled with the decrease in investment in capital assets net of related debt of$5.1 million. Changes in Net Assets Net assets increased $95.3 million in FY 2011-12, a 6.3 percent increase over the prior year. (Dollars in thousands) Percentage June 30, June 30, Increase Increase 2012 2011 (Decrease) (Decrease) Revenues: Operating revenues Service Charges $ 259,491 $ 244,465 $ 15,026 6.1% Permit and inspection fees 1,030 784 246 31.4% Total operating revenues 260,521 245,249 15,272 6.2% Non-operating revenues Property taxes 67,882 64,307 3,575 5.6% Investment and interest income 15,747 10,092 5,655 56.0% Contrib. from other government 7,723 9,708 (1,985) -20.4% Other 763 1,307 (544) -41.6% Total non-operating revenues 92,115 85,414 6,701 7.8% Total revenues 352,636 330,663 21,973 6.6% Expenses: Operating expense other than depreciation and amortization 172,319 143,388 28,931 20.2% Depreciation and amortization 56,051 49,288 6,763 13.7% Non-operating expense 37,871 68,374 (30,503) -44.6% Total expenses 266,241 261,050 5,191 2.0% Income before capital contributions 86,395 69,613 16,782 24.1% Capital facilitites capacity charges 8,936 9,800 (864) -8.8% Increase in net assets 95,331 79,413 15,918 20.0% Beginning net assets 1,510,486 1,431,073 79,413 5.5% Ending net assets $ 1,605,817 $ 1,510,486 $ 95,331 6.3% 5 Sources of Revenue Functional Expenses June 30,2012 June 30,2012 ❑Collections 2% 19% ° 9% ■Treatment& ❑Interest 5% 16/° io Disposal ■User Fees 11% ❑Depreciation & ❑Other Amortization ❑Taxes Levied 43% ❑Interest Expense 4i21% ■Other 74% As previously stated, an enterprise fund is used to account for the operations of the Sanitation District, which is financed and operated in a manner similar to private business enterprises. This allows the Sanitation District to determine that the costs (expenses, including depreciation and amortization) of providing wastewater management services on a continuing basis are financed or recovered primarily through user charges. Sewer service user fees are evaluated annually based primarily on budget requirements for total operation, maintenance and capital expenditures for providing wastewater management services. Property tax revenues are dedicated for the payment of debt service. In FY 2011-12, operating revenues increased $15.3 million, or 6.2 percent over the prior year that is predominately reflective of the $15.0 million, or 6.1 percent increase in service charges. The increase in service charges is primarily due to the 9.4 percent increase in the average sewer user fee rate over the prior year. The $6.7 million, or 7.8 percent increase in non-operating revenues primarily consists of a $5.7 million, or 56.0 percent increase in investment and interest income, a $3.6 million, or 5.6 percent increase in property tax revenues, a $2.0 million, or 20.4 percent decrease in contributions from other governments, and a $0.5 million, or 41.6 percent decrease in other non-operating revenues. The increase in investment and interest income is attributable to higher yields earned on investments and higher cash and investment balances. Yields earned on investments increased from 2.0 percent in FY 2011-12 to 2.8 percent in FY 2011-12 while cash balances increased during this same time period from $561 million to $577 million. The increase in property tax revenue is primarily the result of the increase in total assessed valuation of 1.4 percent over the prior year. The decrease in contributions from other governments is reflective of the decrease in capital contributions from the Irvine Ranch Water District (IRWD) primarily as a result of the overall decrease in capital construction in FY 2011-12 as compared to the prior year. The decrease in other non-operating revenues is mostly reflective of the $400,000 decrease in federal grants earned in the current year in comparison with the prior year. Operating expense before depreciation and amortization increased $28.9 million or 20.2 percent over the prior year. The majority of this increase is attributable to the $29.7 million increase in feasibility studies, of which $27.4 million was incurred in prior years and previously recorded as construction in progress, a Non-depreciable Capital Asset on the Statement of Net Assets. Although not deemed material in prior years, management made the decision to expense the costs in the current year to conform to generally accepted accounting principles in regards to accounting for feasibility studies. Excluding feasibility studies, operating expense before depreciation and amortization decreased $0.7 million or 0.5 percent over the prior year. Operating salaries and benefits totaling $75.6 million increased $2.5 million, or 3.3 percent over the prior year. The operating salaries and benefits costs are part of the overall increase of $0.4 million in total salaries and benefits when including the salaries and benefits 6 capitalized within the capital improvement program. Overall, total Sanitation District salaries and benefits were $90.6 million, a 0.4 percent increase over the prior year total of $90.2 million. This increase is mostly attributable to the $0.8 million, or 1.6 percent increase in regular salaries primarily over the prior year that was primarily driven by existing bargaining agreements as total authorized staffing levels were reduced by 4.0 full time equivalent positions to 637.0 in FY 2011-12. Biosolids disposal cost increased $1.0 million, or 5.8 percent over the prior year as the District continued to move towards full secondary treatment standards by the court consent decree date of December 2012. Somewhat offsetting the increased cost in personnel services and biosolids disposal was the decrease of $2.2 million, or 66.0 percent in disinfection costs. Conversely to the increases in biosolids disposal due to increased secondary treatment, the use of disinfection chemicals was reduced because of the increased level of treatment. Also, repairs and maintenance costs decreased $1.4 million, or 12.6 percent as planned co-generation engine overhauls and digester cleanings were able to be deferred. Non-operating expense decreased $30.5 million, or 44.6 percent and is primarily reflective of the decrease in capital distribution back to the Irvine Ranch Water District (IRWD) in FY 2011-12 of $28.6 million over the prior year, as only$4.6 million of capital distribution was owed back to IRWD in FY 2011- 12, as opposed to $33.3 million in FY 2010-11. The decline in the reduction is reflective of IRWD's volume of sewage flow contributions coming into alignment with their corresponding equity share in the District's treatment plant. Capital Facility Capacity Charges decreased $0.9 million, or 8.8 percent over the prior year due to the continuing effects of the last recession and the continuing decline in construction. Capital Assets At June 30, 2012, the Sanitation District had a net investment of $2.414 billion in capital assets. This amount represents a net increase (including additions and deletions) of $13.3 million or 0.6 percent over the prior year. (Dollars in thousands) Percentage June 30, June 30, Increase Increase 2012 2011 (Decrease) (Decrease) Land $ 15,960 $ 19,217 $ (3,257) -16.9% Construction in Progress 1,271,217 1,258,267 12,950 1.0% Sewage collection facilities 337,561 346,959 (9,398) -2.7% Sewage treatment facilities 660,728 639,790 20,938 3.3% Effluent disposal facilities 42,490 44,136 (1,646) -3.7% Solids disposal facilities 346 356 (10) -2.8% General and administrative facilities 83,088 88,660 (5,572) -6.3% Assets acquired in excess of book value 2,879 3,537 (658) -18.6% Capital assets, net $ 2,414,269 $ 2,400,922 $ 13,347 0.6% Major capital asset additions for the current fiscal year included the following: • $ 9.5 million- Headworks Improvements at Plant No. 2 • $ 8.6 million-Sludge Digester Rehabilitation at Plant No. 1 • $ 7.3 million -66-inch Interplant Effluent Pipeline Rehabilitation • $ 6.9 million- New Secondary Treatment Systems at Plant No. 1 • $ 5.9 million - Bitter Point Pump Station 7 More detailed information about the Sanitation District's capital assets is provided in Notes 1 and 3 of Notes to the Financial Statements. Debt Administration At June 30, 2012, the Sanitation District had $1.3 billion outstanding in COP debt, a net decrease of $71.2 million, or 5.1 percent over the prior year. Other than the schedule of debt service payments, this decrease is due to the advance-refunding of $89.8 million of Series 2000 variable rate debt and the advance-refunding of $83.3 million of Series 2003 fixed rate debt with the issuance of $147.6 million in fixed rate debt, Series 2011A Wastewater Refunding Revenue Obligations; the advance-refunding of the remaining $108.2 million outstanding Series 2003 fixed rate debt with the issuance of $100.6 million Series 2012A Wastewater Refunding Revenue Obligations. In addition, Revenue Refunding Certificate Anticipation Notes, Series 2011 B Certificates of Anticipation Notes (CANs) fixed rate debt was issued in the amount of$143.2 million in November 2010 to refund the $154.7 million outstanding principal balance of the CANs Series 2010B fixed rate debt. Both Standard and Poor's Corporation and Fitch Ratings reaffirmed their AAA rating of the Orange County Sanitation District in the past fiscal year. The Sanitation District's long-range financing plan is designed to maintain this high rating. Over the next five years, the Sanitation District is projecting an additional $1.1 billion in future treatment plant and collection system capital improvements. In accordance with the Sanitation District's long-term debt fiscal policy, the Sanitation District will restrict long-term borrowing to capital improvements that cannot be financed from current revenue. No new debt issuances is being proposed over the next five years to assist with the funding of the system improvements scheduled over this time period. For more information on long-term debt activities, see Note 4 of the Notes to Basic Financial Statements. Economic Factors and Next Year's Budgets and Rates ■ The unemployment rate within the County of Orange is currently 7.9 percent, an increase from the rate of 9.2 percent a year ago. ■ Inflation for Orange County in 2011 increased 2.7 percent based on the 2011 actual percentage change in the consumer price index according to the June 2012 Economic and Business Review report prepared by Chapman University. ■ The actual rate of return on investments increased from the 2.0 percent earnings rate in FY 2010-11 to 2.8 percent for FY 2011-12. All of these factors were considered in preparing the District's biennium budget beginning July 1, 2012. The Sanitation District's user fee schedule was increased by 10.1 percent for FY 2012-13 over the prior year. The annual fee applicable to the Sanitation District's largest customer base and the underlying basis for all other user rates: the single-family residential fee, increased by $27.00, from $267.00 to $294.00. This rate increase was necessary to finance the Sanitation District's cash flow needs as capital improvement outlays alone are projected to be $133.9 million in FY 2012-13 and are projected to total $2.0 billion over the next 10 years in order to rehabilitate and upgrade existing facilities and provide for full secondary treatment standards. Requests for Information The financial report is designed to provide a general overview of the Sanitation District's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Financial Management Division, Orange County Sanitation District, 10844 Ellis Avenue, Fountain Valley, CA 92708-7018. 8 ORANGE COUNTY SANITATION DISTRICT BASIC FINANCIAL STATEMENTS 9 ORANGE COUNTY SANITATION DISTRICT Statement of Net Assets June 30, 2012 (With Comparative Data for June 30, 2011) 2012 2011 Current assets: Cash and cash equivalents $ 135,014,420 $ 127,573,371 Investments 378,937,214 285,952,014 Accounts receivable, net of allowance for uncollectibles $7,693 9,452,589 10,411,347 Accrued interest receivable 1,576,247 1,296,054 Connection fees receivable 647,485 385,765 Property tax receivable 1,542,223 1,408,477 Inventories 5,596,197 5,366,513 Prepaid expenses 858,826 623,907 Prepaid retirement 14,937,778 14,463,000 Total current assets 548,562,979 447,480,448 Noncurrent assets: Restricted: Cash and cash equivalents 36,541,736 120,419,824 Investments 26,829,427 26,829,427 Accrued interest receivable 239,070 210,010 Non-depreciable capital assets 1,287,176,876 1,277,484,094 Depreciable capital assets, net of accumulated depreciation 1,127,092,227 1,123,437,456 Deferred charges 9,934,078 10,975,310 Due from other governmental agency 30,852,290 36,000,000 Other noncurrent assets, net 10,344 7,079,922 Total noncurrent assets 2,518,676,048 2,602,436,043 Total assets 3,067,239,027 3,049,916,491 Current liabilities: Accounts payable 12,232,536 14,722,600 Accrued expenses 7,410,100 6,654,544 Retentions payable 2,045,987 2,260,426 Interest payable 21,839,400 22,525,700 Due to other governmental agency 47,659,381 57,196,110 Current portion of long-term obligations 185,784,283 188,948,106 Total current liabilities 276,971,687 292,307,486 Noncurrent liabilities: Noncurrent portion of long-term obligations 1,184,450,407 1,247,122,884 Total liabilities 1,461,422,094 1,539,430,370 Net assets: Invested in capital assets, net of related debt Collection system 517,578,982 495,641,055 Treatment and disposal -Land 4,475,751 4,475,751 Treatment and disposal system 1,892,214,370 1,900,804,744 Capital assets related debt (1,288,302,786) (1,269,858,548) Subtotal 1,125,966,317 1,131,063,002 Unrestricted 479,850,616 379,423,119 Total net assets $ 1,605,816,933 $ 1,510,486,121 See Accompanying Notes to Basic Financial Statements. 10 ORANGE COUNTY SANITATION DISTRICT Statement of Revenues, Expenses, and Changes in Net Assets For the Year Ended June 30, 2012 (With Comparative Data for the Year Ended June 30, 2011) 2012 2011 Operating revenues: Service charges $ 259,490,532 $ 244,464,692 Permit and inspection fees 1,030,329 784,458 Total operating revenues 260,520,861 245,249,150 Operating expenses other than depreciation and amortization: Salaries and benefits 75,641,767 73,112,286 Utilities 7,405,843 6,947,781 Supplies, repairs and maintenance 24,254,601 27,018,195 Contractual services 26,698,372 27,048,501 Directors'fees 145,562 152,377 Meetings and training 742,765 613,697 Feasibility studies 34,198,026 4,536,965 Other 3,232,535 3,958,695 Total operating expenses other than depreciation and amortization 172,319,471 143,388,497 Operating income before depreciation and amortization 88,201,390 101,860,653 Depreciation and amortization 56,051,029 49,288,136 Operating income 32,150,361 52,572,517 Non-operating revenues: Property taxes 67,882,072 64,307,594 Investment and interest income 15,747,493 10,092,102 Contributions from other government 7,722,571 9,708,267 Other 763,161 1,306,771 Total non-operating revenues 92,115,297 85,414,734 Non-operating expenses: Interest 29,438,312 29,129,550 Contributions to other government 4,615,468 33,262,610 Loss on disposal of assets and other 3,817,099 5,981,829 Total non-operating expenses 37,870,879 68,373,989 Income before capital contributions 86,394,779 69,613,262 Capital Contributions; Capital facilities capacity charges 8,936,033 9,800,190 Change in net assets 95,330,812 79,413,452 Total net assets- beginning 1,510,486,121 1,431,072,669 Total net assets-ending $ 1,605,816,933 $ 1,510,486,121 See Accompanying Notes to Basic Financial Statements. 11 ORANGE COUNTY SANITATION DISTRICT Statement of Cash Flows For the Year Ended June 30, 2012 (With Comparative Data for the Year Ended June 30, 2011) 2012 2011 Cash flows from operating activities: Receipts from customers and users $ 251,972,581 $ 263,032,782 Payments to employees (73,257,661) (72,478,818) Payments to suppliers (72,465,597) (71,041,781) Net cash provided by operations 106,249,323 119,512,183 Cash flows from noncapital financing activities: Proceeds from property taxes 67,748,326 64,939,187 Proceeds from various resources 729,471 - Net cash provided by noncapital financing activities 68,477,797 64,939,187 Cash flows from capital and related financing activities: Capital facilities capacity charges 8,674,313 10,410,855 Additions to property, plant and equipment (73,861,468) (159,563,286) Disposal of other assets - 1,266,387 Interest paid (51,661,572) (46,543,583) Principal payments on debt obligation (462,635,000) (191,760,000) Proceeds from debt issuances 401,099,196 315,341,085 Debt issuance costs (824,812) (495,978) Net cash(used in)capital and related financing activities (179,209,343) (71,344,520) Cash flows from investing activities: Proceeds from the sale of investments 8,625,518,492 3,745,902,911 Purchases of investments (8,710,267,505) (3,723,593,143) SARI project(advance)/payments 5,147,710 (36,000,000) Interest received 7,646,487 12,409,379 Net cash(used in)investing activities (71,954,816) (1,280,853) Net increase(decrease)in cash and cash equivalents (76,437,039) 111,825,997 Cash and cash equivalents, beginning of year 247,993,195 136,167,198 Cash and cash equivalents, end of year $ 171,556,156 $ 247,993,195 Reconciliation of operating income to net cash provided by operating activities: Operating income $ 32,150,361 $ 52,572,517 Adjustments to reconcile operating income to net cash provided by operations: Depreciation and amortization 56,051,029 49,288,136 Bad debt expense(Net recoveries) (29,691) 17,368 Feasibility study amortization 28,979,182 4,536,965 (Increase)/decrease in operating assets: Accounts receivable 988,449 2,640,967 Inventories 992,447 23,824 Prepaid and other assets (709,697) 625,979 Increase/(decrease)in operating liabilities: Accounts payable (2,490,064) (5,369,395) Accrued expenses 499,985 (605,963) Retentions payable (214,439) 672,440 Due to other governmental agency (9,536,729) 15,142,665 Pension/OPEB payable 360,710 718,305 Compensated absences (212,750) (115,481) Other payable 116,907 (1,037,481) Claims and judgments (696,377) 401,337 Net cash provided by operations $ 106,249,323 $ 119,512,183 Noncash Activities: Unrealized gain(loss)on the fair value of investments $ 8,236,187 $ (2,073,978) Contributions from(to)other government 3,107,103 (23,554,343) Capital facilities capacity contribution 2,184,800 2,492,300 Feasibility studies with no cash effect 21,909,604 4,536,965 See Accompanying Notes to Basic Financial Statements. 12 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2012 (1) Summary of Significant Accounting Policies Reporting Entity The Orange County Sanitation District (OCSD) is a public agency which owns and operates certain wastewater facilities in order to provide regional wastewater collection, treatment, and disposal services to approximately 2.5 million people in the northern and central portion of the County of Orange, California. OCSD is managed by an administrative organization comprised of directors appointed by the agencies and cities which are serviced by OCSD. OCSD's service area was originally formed in 1954 pursuant to the County Sanitation District Act and consisted of seven independent special districts. Two additional districts were formed and additional service areas were added in 1985 and 1986. These special districts were jointly responsible for the treatment and disposal facilities which they each used. In April of 1998, the Board of Supervisors of Orange County passed Resolution 98-140 approving the consolidation of the existing nine special districts into a new, single sanitation district. This action was taken in order to simplify the governance structures, reduce the size of OCSD's Board of Directors, ease administrative processes, streamline decision-making and consolidate accounting and auditing processes. Pursuant to the Resolution and Government Code Section 57500, the predecessor special districts transferred and assigned all of their powers, rights, duties, obligations, functions and properties to OCSD, including all assets, liabilities, and equity. Effective July 1, 1998, the organization became known as the Orange County Sanitation District. The boundaries of one of the previous districts, now known as Revenue Area No. 14, have been maintained separately because their use of OCSD's collection, treatment, and disposal system is funded by the Irvine Ranch Water District. The boundaries of the other eight districts have been consolidated and are collectively referred to as the Consolidated Revenue Area. OCSD utilizes joint operating and capital outlay accounts to pay joint treatment, disposal, and construction costs. These joint costs are allocated to each revenue area based on gallons of sewage flow. The supplemental schedules and statements show internal segregations and are not intended to represent separate funds for presentation as major or non-major funds in the basic financial statements. The accompanying financial statements present OCSD and its blended component unit, the Orange County Sanitation District Financing Corporation. The Corporation is a legally separate entity although in substance it is considered to be part of OCSD's operations. OCSD is considered to be financially accountable for the Corporation which is governed by a board comprised entirely of OCSD's board members. There is no requirement for separate financial statements of the Corporation; consequently, separate financial statements for the Corporation are not prepared. The Corporation had no financial activity during the fiscal year ended June 30, 2012, other than principal and interest payments on outstanding certificates of participation (see Note 4). OCSD is independent of and overlaps other formal political jurisdictions. There are many governmental entities, including the County of Orange, that operate within OCSD's jurisdiction; however, financial information for these entities is not included in the accompanying financial statements in accordance with the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. Comparative Information The financial statements include partial prior-year comparative information. Such information does not include all of the information required for a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read 13 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2012 in conjunction with the government's financial statements for the year ended June 30, 2011, from which such partial information was derived. Measurement Focus and Basis of Accounting OCSD operates as an enterprise activity. Enterprise funds account for operations that are financed and operated in a manner similar to private business enterprises, where the intent of the Board of Directors is that the costs (expenses, including depreciation and amortization) of providing services to the general public on a continuing basis be financed or recovered primarily through user charges. Basis of accounting refers to when revenues and expenses are recognized in the accounts and reported in the financial statements. Enterprise funds are accounted for on the flow of economic resources measurement focus and use the accrual basis of accounting, whereby revenues are recognized when earned and expenses are recognized when incurred, regardless of the timing of related cash flows. OCSD applies all GASB pronouncements currently in effect as well as Financial Accounting Standards Board Statements and Interpretations, Accounting Principal Board Opinions and Accounting Research Bulletins of the Committee on Accounting Procedure issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements. Operating Plans Each year, OCSD staff prepares an annual operating plan which is adopted by the Board of Directors. The annual operating plan is used to serve as a basis for monitoring financial progress, estimating the levy and collection of taxes, and determining future service charge rates. During the year, these plans may be amended as circumstances or levels of operation dictate. Cash and Cash Equivalents Investments with original maturities of three months or less when purchased are considered to be cash equivalents. Investments All investments are stated at fair value (the value at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale). Changes in fair value that occur during the fiscal year are reported as part of investment and interest income. Investment and interest income includes interest earnings and realized and unrealized changes in fair value. Accounts Receivable Accounts receivable is shown net of the allowance for uncollectible receivables. Uncollectible receivables were $7,693 at June 30, 2012. Unbilled sewer services through June 30, 2012 are recorded as revenue and receivables. Management determines the allowance for uncollectible receivables by evaluating individual accounts receivable at least one year past due and considering a customer's financial condition, credit history and current economic conditions. Accounts receivables are written off when deemed uncollectible. Recoveries of accounts receivables previously written off are recorded when received. Inventory Inventory, which is held for consumption and not resale, is stated at cost on a weighted-average basis, and then is expensed when used. 14 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2012 Capital Assets Outlays for property, plant, equipment, and construction in progress are recorded in the revenue area which will use the asset. Such outlays may be for individual revenue area assets or for a revenue area's share of joint assets. Capital assets of property, plant, and equipment are defined as assets with an initial, individual cost of more than $5,000 and an estimated useful life of at least three years. Such assets are recorded at cost, except for assets acquired by contribution, which are recorded at fair market value at the time received. Cost includes labor; materials; outside services; vehicle and equipment usage; full overhead costs consisting of direct and allocated indirect charges such as engineering, purchasing, supervision, fringe benefits, and other indirect costs. Net interest costs are capitalized on projects. During the fiscal year ended June 30, 2012, net interest costs of $19.1 million were capitalized. Depreciation of plant and equipment is provided for over the estimated useful lives of the assets using the straight-line method in accordance with generally accepted accounting principles. OCSD also considers the guidelines of estimated useful lives as recommended in the State of California Controller's Uniform System of Accounts for Waste Disposal Districts, which range from 3 to 75 years. The following are estimated useful lives for major classes of depreciable assets: Sewage collection facilities — 50 years, Sewage treatment facilities — 40 years, Sewage disposal facilities—40 years, and General plant and administrative facilities— 11.5 years. Amortization Amortization of the excess purchase price over the book value of assets acquired is provided using the straight-line method over an estimated useful life of 30 years. Discounts and deferred charges on the certificates of participation are amortized to interest expense over the respective terms of the installment obligations based on the straight-line method which approximates the effective interest method (note 4). Restricted Assets Certain assets are classified as restricted because their use is limited by applicable debt covenants. Specifically, the assets are restricted for installment payments due on certificates of participation or are maintained by a trustee as a reserve requirement for the certificates of participation. When both restricted and unrestricted resources are available for use, it is OCSD's policy to use restricted resources first, then unrestricted resources as they are needed. Compensated Absences OCSD's employees, other than operations and maintenance personnel, are granted vacation and sick leave in varying amounts with maximum accumulations of 200 hours and 560 hours for vacation and sick days earned but unused, respectively. Operations and maintenance personnel accrue between 80 and 250 personal leave hours per year depending on years of service. Personal leave can be accumulated up to a maximum of 440 hours. Vacation and sick leave benefits and personal days are recorded as an expense and liability when earned by eligible employees. The distribution between current and long-term portions of the liability is based on historical trends. 15 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2012 Claims and Judgments OCSD records estimated losses, net of any insurance coverage under its self-insurance program when it is probable that a claim liability has been incurred and when the amount of the loss can be reasonably estimated. Claims payable includes an estimate for incurred but unreported claims. The distribution between current and long-term portions of the liability is based on historical trends. Property Taxes The County is permitted by State law (Proposition 13) to levy taxes at one percent of full market value (at time of purchase) and can increase the assessed value no more than two percent per year. OCSD receives a share of this basic levy, proportionate to what was received in the 1976 to 1978 period. Property taxes are determined annually as of January 1 and attached as enforceable liens on real property as of July 1 and are payable in two installments which become delinquent after December 10 and April 10. The County bills and collects the property taxes and remits them to OCSD in installments during the year. Property tax revenues are recognized when levied for. The Board of Directors has designated property tax revenue to be used for the annual debt service requirements prior to being used as funding for current operations. Capital Facilities Capacity Charges Capital facilities capacity charges represent fees imposed at the time a structure is newly connected to the District's system, directly or indirectly, or an existing structure or category of use is increased. This charge is to pay for District facilities in existence at the time the charge is imposed or to pay for new facilities to be constructed that are of benefit to the property being charged. Operating and Non-operating Revenues and Expenses Operating revenues and expenses result from collecting, treating, and disposing of wastewater and inspection and permitting services. OCSD's operating revenues consist of charges to customers for the services provided. Operating expenses include the cost of providing these services, administrative expenses, and depreciation and amortization expenses. All revenues and expenses not meeting these definitions and which are not capital in nature are reported as non-operating revenues and expenses. Construction Commitments OCSD has active construction projects to add additional capacity, improve treatment, or replace/rehabilitate existing assets. At June 30, 2012, the outstanding commitments with contractors totaled $69.3 million. Self-Insurance Plans For the year ended June 30, 2012, OCSD was self-insured for portions of workers' compensation, property damage, and general liability. The self-insurance portion of the workers' compensation exposure is the $750,000 deductible per occurrence under the outside excess insurance coverage to statutory levels. The self-insurance portion of the property damage exposure covering fire and other perils is the $250,000 per occurrence deductible (for most perils) under the outside excess property insurance coverage to $1 billion. The self-insurance portion of the property damage exposure covering flood is the $100,000 per occurrence deductible with outside excess property insurance coverage to $300 million. OCSD is self-insured for virtually all property damage from the peril of earthquake. The self-insurance portion of the boiler & machinery exposure is the 16 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2012 deductible ranging from $25,000 to $350,000 under the outside excess boiler & machinery insurance coverage to $100 million per occurrence combined limit. The self-insurance portion of the general liability exposure is the $250,000 per occurrence deductible ($500,000 for employment practices liability) under the outside excess liability coverage to $30 million per occurrence and aggregate. The self-insurance portion of the pollution liability exposure is the $100,000 per loss deductible under the outside pollution liability insurance coverage to $10 million. There are no significant changes in insurance coverage during the fiscal year ended June 30, 2012. During the past three fiscal years there have been no settlements in excess of covered amounts. Claims against OCSD are processed by outside insurance administrators. These claims are charged to claims expense based on amounts which will ultimately be paid. Claims incurred but not yet reported have been considered in determining the accrual for loss contingencies. OCSD management believes that there are no unrecorded claims as of June 30, 2012 that would materially affect the financial position of OCSD. Deferred Compensation Plan OCSD offers its employees a deferred compensation plan established in accordance with Internal Revenue Code Section 457. The plan permits all employees of OCSD to defer a portion of their salary until future years. The amount deferred is not available to employees until termination, retirement, death or for unforeseeable emergency. The assets of the plan are held in trust for the exclusive benefit of the participants and their beneficiaries. Since the plan assets are administered by an outside party and are not subject to the claims of OCSD's general creditors, in accordance with GASB Statement 32, the plan's assets and liabilities are not included within OCSD's financial statements. Reclassifications Certain non-operating revenues on the Statement of Revenues, Expenses, and Changes in Net Assets as of June 30, 2011 have been reclassified, with no effect on ending total net assets, to be consistent with the classifications adopted as of June 30, 2012. (2) Cash and Investments Cash and investments as of June 30, 2012 are classified within the accompanying Statement of Net Assets as follows: Statement of Net Assets: Current, Unrestricted: Cash and cash equivalents $ 135,014,420 Investments 378,937,214 Subtotal -current, unrestricted 513,951,634 Restricted: Cash and cash equivalents 36,541,736 Investments 26,829,427 Subtotal - restricted 63,371,163 Total cash and cash equivalents and investments $577,322,797 17 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2012 Cash and investments consist of the following as of June 30, 2012: Cash on hand $ 3,000 Deposits with financial institutions 5,152,164 Managed portfolio - cash and investments (details on page 20) 508,796,470 Subtotal - unrestricted cash and investments 513,951,634 Monies held by trustees: Cash and cash equivalents $ 36,541,736 Investment contracts 26,829,427 Subtotal - monies held by trustees 63,371,163 Grand total cash and investments $ 577,322,797 Investments Authorized by the California Government Code and OCSD's Investment Policy The following table identifies the investment types that are authorized by the California Government Code and OCSD's investment policy. This table, and the subsequent tables on pages 19-22 also identifies certain provisions of either the California Government Code or OCSD's investment policy (whichever is more restrictive) that address interest rate risk, credit risk, and concentration of credit risk. Authorized Maximum by OCSD's Maximum Investment Investment Type-Authorized by the Investment Maximum Percentage in a Single California Government Code Policy? Maturity (1)(1) of Portfolio(1) Issuer(l) Local Agency Bonds Yes 5 years No limit No limit U.S. Treasury Obligations Yes 5 years No limit No limit California State Treasury Obligations Yes 5 years No limit No limit U.S. Agency Securities Yes 5 years No limit No limit Banker's Acceptances Yes 180 days 40% 30% Commercial Paper Yes 270 days / 31 days 15% /25% 10% Negotiable Certificates of Deposit Yes 5 years 30% No limit Repurchase Agreements Yes 1 year No limit No limit Reverse Repurchase Agreements Yes 90 days (2) 5% (2) No limit Corporate Medium-Term Notes Yes 5 years 30% No limit Mutual Funds Yes N/A 15% (2) 10% Money Market Mutual Funds Yes N/A 15% (2) No limit Mortgage Pass-Through Securities/CMO Yes 5 years 20% No limit County Investment Pools Yes N/A No limit No limit Local Agency Investment Fund (LAIF) Yes N/A No limit No limit Notes (1)Restrictions are in accordance with the California Government Code unless indicated otherwise. (2)The restriction is in accordance w ith OCSD's Investment Policy w hich is more restrictive than the California Government Code. (3)As allowed by California Government Code Section 53601,the Board of Directors has adopted a policy of no maximum maturity for investments purchased by OCSD's external money manager for the long-term investment portfolio. However,the duration of the long-term investment portfolio can never exceed 60 months. Investments purchased for the short-term portfolio are subject to the maturity restrictions noted in this table. 18 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2012 Investments Authorized by Debt Agreements The investment of debt proceeds held by trustees is governed by provisions of the debt covenant agreements, rather than the general provisions of the California Government Code or OCSD's investment policy. The following table identifies the investment types that are authorized for investments held by OCSD's debt trustees. This table, and the subsequent tables on pages 20-22 also identifies certain provisions of the debt covenant agreements that address interest rate risk, credit risk, and concentration of credit risk. Maximum Maximum Investment Investment Type -Authorized by Debt Maximum Percentage in a Single Covenant Agreements Maturity of Portfolio Issuer State and Local Agency Bonds 5 years No limit No limit U.S. Treasury Obligations 5 years No limit No limit U.S. Agency Securities 5 years No limit No limit Banker's Acceptances 180 days 40% 10% Commercial Paper 270 days / 31 days 15% / 30% 10% Negotiable Certificates of Deposit 5 years 30% 10% Repurchase Agreements 1 year No limit No limit Corporate Medium-Term Notes 5 years 30% No limit Mutual Funds N/A 20% 10% Money Market Mutual Funds N/A 20% No limit Local Agency Investment Fund (LAIF) N/A No limit No limit Guaranteed Investment Contracts N/A No limit No limit Disclosures Relating to Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer an investment has before maturity, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that OCSD manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time, as necessary to provide the cash flow and liquidity needed for operations. OCSD monitors the interest rate risk inherent in its managed portfolio by measuring the modified duration of its portfolio. The duration of monies held for shorter term purposes is recommended by OCSD's Treasurer and is based on OCSD's cash flow requirements in meeting current operating and capital needs. The average duration of monies invested for shorter term purposes may never exceed 180 days. The duration of monies held for longer term purposes is recommended annually by OCSD's Treasurer and is based on OCSD's five-year cash flow forecast. The average duration may not exceed 120 percent nor be less than 80 percent of the recommended duration. The average duration of monies invested for longer term purposes may never exceed 60 months. There is no stated maximum maturity for the Money Market Mutual Funds. The money market mutual funds for Blackrock Institutional Fund and the US Bank Money Market Fund are daily liquid funds available on demand. Following is a table which summarizes OCSD's managed portfolio investments by purpose with the modified duration as of June 30, 2012. 19 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2012 Modified Modified Duration Duration Investment Type Fair Value (in years) (in months) Short-Term Portfolio: U.S. Treasury Bills $ 34,572,613 0.399 4.79 U.S. Agency Securities 2,349,789 0.033 0.40 Corporate Medium-term Notes 6,352,350 0.036 0.43 Repurchase Agreement 10,900,000 0.008 0.10 Local Agency Investment Fund 20,668,660 N/A N/A Money Market Mutual Funds 553,723 0.083 1.00 Short-term portfolio subtotal $ 75,397,135 0.260 3.12 Long-Term Portfolio: U.S. Treasury Bills $ 92,162,132 0.776 9.31 U.S. Treasury Notes 92,220,940 6.093 73.12 U.S. Treasury Obligations 3,770,753 1.097 13.16 U.S. Treasury Inflation-Protected Securities (TIPS) 33,965,088 9.866 118.39 U.S. Agency Securities 20,186,264 1.223 14.68 U.S. Govt. Backed Mortgage Pools 466,693 4.538 54.46 Taxable Municipal Bonds 20,965,667 9.432 113.18 Tax-Exempt Municipal Bonds 601,805 13.859 166.31 Corporate Medium-Term Notes 74,068,544 2.335 28.02 Repurchase Agreement 83,100,000 0.008 0.10 Money Market Mutual Funds 844,381 0.081 0.97 Mortgage Pass-Through Securities/CMO 11,047,068 3.356 40.27 Long-term portfolio subtotal $433,399,335 3.268 39.22 Total Portfolio $508,796,470 OCSD monitors the interest rate risk inherent in its other investments using specific identification of the investments. Following is a table of these investments all held by trustees, as of June 30, 2012. Fair Value Maturities Cash equivalents held by fiscal agents: Money Market Mutual Funds: Blackrock Institutional Funds $ 86,725 48 days US Bank Money Market Fund 463,906 N/A Local Agency Investment Fund (LAIF) 35,991,105 N/A Investments held by fiscal agents: Guaranteed Investment Agreements: Bayerische Landesbank Girozentrale -2000 COP 9,888,462 August 1, 2016 FSA Capital Management Services LLC-2007A COP 9,518,000 January 30, 2030 Bayerische Landesbank Girozentrale-2009A COP 7,422,965 August 1, 2016 Fair Value of Investments Held by Fiscal Agents $ 63,371,163 20 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2012 Investments with Fair Values Highly Sensitive to Interest Rate Fluctuations OCSD's investments (including investments held by trustees) include the following investments that are highly sensitive to interest rate fluctuations (to a greater degree than already indicated in the information provided above): • Mortgage-backed securities: These securities are subject to early payment in a period of declining interest rates. The resulting reduction in expected total cash flows affects the fair value of these securities, making them highly sensitive to change in interest rates. At fiscal year end, the fair value of investments in mortgage-backed securities totaled $17,423,351 including $11,047,068 of mortgage pass-through securities, $5,909,590 of U.S. agency securities, and $466,693 of U.S. government backed mortgage pools. Disclosures Relating to Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The following table presents the minimum rating as required by the California Government Code, OCSD's investment policy, or debt agreements, and the actual rating as of year-end for each investment type: 21 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2012 Investment Type and the Lowest Rating Reported at Year End Fair Value Investments with no legal minimum rating&no required disclosure: U.S.Treasury Obligations $ 256,691,526 U.S.Agency Securities-GNMA 466,693 Subtotal $ 257,158,219 Investments with no legal minimum rating: U.S.Agency Securities(other than GNMA): Rating of AA+(Standard&Poor's) 21,130,439 Rating of A(Standard&Poor's) 1,405,614 Municipal Bonds: Rating of Aaa(Moody's) 1,436,220 Rating of Aa1(Moody's) 1,538,446 Rating of Aa2(Moody's) 1,625,637 Rating of Aa3(Moody's) 3,313,655 Rating of AA- (Standard&Poor's) 3,337,817 Rating of Al(Moody's) 2,643,914 Rating of A2(Moody's) 390,795 Rating of A3(Moody's) 5,407,953 Rating of A- (Standard&Poor's) 1,873,035 Repurchase Agreements: Not rated at fiscal year end 94,000,000 Local Agency Investment Fund (LAIF): Not rated at fiscal year end 56,659,765 Investments with fiscal agents-Guaranteed Investment Contracts: Not rated at fiscal year end 26,829,427 Subtotal 221,592,717 Investments with a legal minimum rating(or its equivalent) of A: Corporate Medium-Term Notes: Rating of AA+(Standard&Poor's) 29,972,740 Rating of A(Standard&Poor's) 3,415,300 Rating of A2(Moody's) 5,016,279 Rating of A3(Moody's)* 8,770,322 Rating of Baal(Moody's)* 8,045,416 Rating of BBB+(Standard and Poor's)* 6,782,615 Rating of Baal(Moody's)* 12,202,045 Rating of BBB(Fitch)* 4,245,082 Rating of Baa3(Moody's)* 1,383,845 Not rated at fiscal year end 587,250 Money Market Mutual Funds: Rating of Aaa (Moody's) 1,398,104 Invested with fiscal agents: Rating of Aaa-mf(Moody's) 86,725 Rating of A+(Standard &Poor's) 463,906 Subtotal 82,369,629 Investments with a legal minimum rating(or its equivalent) of AA: Mortgage Pass-Through Securities/CMO: Rating of Aaa(Moody's) 424,532 Rating of AA+(Standard&Poor's) 9,902,892 Rating of BBB(Fitch)* 107,357 Rating of BB(Fitch)* 612,287 Subtotal 11,047,068 Total $ 572,167,633 *Investment was in compliance with legal requirements at the time it was purchased. 22 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2012 Concentration of Credit Risk Limitations on the amount that OCSD is allowed to invest in any one issuer have been identified previously in the section "Investments Authorized by the California Government Code and OCSD's Investment Policy" and in the section "Investments Authorized by Debt Covenant Agreements." OCSD follows whichever guideline is the most restrictive. Custodial Credit Risk Custodial credit risk for deposits is the risk that in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The California Government Code and OCSD's investment policy contain legal requirements that limit the exposure to custodial credit risk for deposits as follows: a financial institution must secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. Custodial credit risk for investments is the risk that in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and OCSD's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for investments. As of June 30, 2012, in accordance with OCSD's investment policy, none of OCSD's investments were held with a counterparty. All of OCSD's investments were held with an independent third party custodian bank. OCSD uses Bank of New York (BNY) Mellon as a third party custody and safekeeping service for its investment securities. Investment in State Investment Pool OCSD is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The fair value of OCSD's investment in this pool is reported in the accompanying financial statements at amounts based upon OCSD's pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. Included in LAIF's investment portfolio are mortgage-backed securities, other asset-backed securities, loans to certain state funds, securities with interest rates that vary according to changes in rates greater than a one-for-one basis, and structured notes. The amounts invested in LAIF are recorded as cash and cash equivalents at June 30, 2012. 23 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2012 (3) Capital Assets Capital asset activity for the year ended June 30, 2012 is as follows: Balance at Balance at June 30,2011 Additions Deletions June 30,2012 Capital assets not depreciated: Cost: Land $ 19,217,480 $ - $ (3,257,921) $ 15,959,559 Construction in progress 1,258,266,614 100,359,573 (87,408,870) 1,271,217,317 Total nondepreciable assets 1,277,484,094 100,359,573 (90,666,791) 1,287,176,876 Depreciable capital assets: Cost: Sewage collection facilities 600,551,475 4,023,461 - 604,574,936 Sewage treatment facilities 1,144,716,082 53,966,552 - 1,198,682,634 Effluent disposal facilities 97,014,820 - - 97,014,820 Solids disposal facilities 3,463,236 - - 3,463,236 General and administrative facilities 209,975,740 1,715,789 (155,928) 211,535,601 Excess purchase price over book value on acquired assets 19,979,000 - - 19,979,000 Subtotal 2,075,700,353 59,705,802 (155,928) 2,135,250,227 Accumulated depreciation: Sewage collection facilities (253,592,256) (13,421,240) - (267,013,496) Sewage treatment facilities (504,926,403) (33,027,793) - (537,954,196) Effluent disposal facilities (52,878,386) (1,646,535) - (54,524,921) Solids disposal facilities (3,107,660) (9,718) - (3,117,378) General and administrative facilities (121,315,466) (7,288,037) 155,928 (128,447,575) Excess purchase price over book value on acquired assets (16,442,725) (657,709) - (17,100,434) Subtotal (952,262,896) (56,051,032) 155,928 (1,008,158,000 Net depreciable assets 1,123,437,457 3,654,770 - 1,127,092,227 Net capital assets $2,400,921,551 $ 104,014,343 $ (90,666,791) $2,414,269,103 Capital asset additions for the fiscal year ended June 30, 2012 are $27.7 million less than the amount deleted from Construction in Progress primarily due to $27.4 million of accumulated costs for feasibility studies that were removed from Construction in Progress and recorded as expense in accordance with generally accepted accounting principles. (4) Long-Term Liabilities The following is a summary of the changes in long-term liabilities for the year ended June 30, 2012: Certificates of Arbitrage Compensated Claims and Participation/Notes Net Pension Net OPEB Payable Absences Judgments and Re\tenue Obligation Obligation Obligation Totals Balance,July 1 $ 290,365 $ 7,812,631 $ 2,143,318 $ 1,407,155,000 $ 7,471,180 $1,035,686 $1,425,908,180 Additions 455,420 7,018,904 (297,894) 391,445,000 978,398 884,446 400,484,274 Deletions (338,513) (7,231,654) (398,483) (462,635,000) (367,210) (1,134,925) (472,105,785) Balance,June 30 407,272 7,599,881 1,446,941 1,335,965,000 8,082,368 785,207 1,354,286,669 Due within one year - (6,822,413) (491,870) (178,470,000) (185,784,283) Unamortized(discount) premium 40,439,784 - - 40,439,784 Unamortized deferred amount on refundings - - - (24,491,763) - - (24,491,763) Long-term amount $ 407,272 $ 777,468 $ 955,071 $ 1,173,443,021 $ 8,082,368 $ 785,207 $1,184,450,407 24 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2012 Arbitrage Payable The Tax Reform Act of 1986 (the Act) requires OCSD to calculate and remit rebatable arbitrage earnings to the Internal Revenue Service. Certain of OCSD's debt and interest earnings on the proceeds thereof are subject to the requirements of the Act. OCSD's liability at June 30, 2012 is $407,272. Compensated Absences OCSD's policies related to compensated absences are described in Note 1. OCSD's liability at June 30, 2012 is $7,599,881 with an estimated $6,822,413 to be paid or used within the next fiscal year. Claims and Judgments Payable OCSD is self-insured in a number of areas as described in Note 1. The following is a summary of the change in claims and judgments payable for the years ended June 30, 2012 and 2011: 2011-12 2010-11 Claims and judgments payable at July 1 $2,143,318 $1,741,981 Claims incurred during the fiscal year (297,894) 858,945 Payments on claims during the fiscal year (398,483) 457,608 Claims and judgments payable at June 30 1,446,941 2,143,318 Less: current portion (491,870) 487,470 Total long-term claims and judgments payable $ 955,071 $1,655,848 Certificates of Participation OCSD issues certificates of participation in order to finance construction of the treatment facilities. Each certificate of participation represents a direct and proportionate interest in the semi-annual interest payments. Installment payments for the issues are payable from any source of lawfully available funds of OCSD. Certificates of participation at June 30, 2012 are summarized as follows: Amount 2000 refunding certificates of participation $ 91,900,000 2007A refunding certificates of participation 92,845,000 2007B certificates of participation 279,250,000 2008A refunding certificates of participation 25,710,000 2008B refunding certificates of participation 26,550,000 2009A certificates of participation 191,265,000 2010A wastewater revenue obligations 80,000,000 2010C wastewater revenue obligations 157,000,000 2011 A wastewater refunding revenue obligations 147,595,000 2011B revenue refunding certificate anticipation notes 143,205,000 2012A wastewater refunding revenue obligations 100,645,000 Total certificates of participation payable $1,335,965,000 25 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2012 Outstanding Certificates of Participation All of the outstanding debt of OCSD is senior lien debt with rate covenants that require a minimum coverage ratio of 1.25. The minimum coverage ratio is the ratio of net annual revenues available for debt service requirements to total annual debt service requirements. As of June 30, 2012, the coverage ratio for senior lien debt was 3.21. August 2000 Refunding Certificates of Participation, Series 2000 On August 31, 2000, OCSD completed the sale of $218,600,000 of refunding certificates of participation. The certificates were issued to refund the remaining outstanding principal balance of the 1990-92 Series A, B, and C certificates of participation and to reimburse OCSD for improvements made to the wastewater system. The interest rate on the refunding certificates is adjusted by the remarketing agent daily based on market interest rates. The weighted average interest rate for the fiscal year ended June 30, 2012 was 0.10 percent. Annual principal payments are due on August 1, beginning August 1, 2001. On October 3, 2011, $89,800,000 of the outstanding principal balance of the 2000 series A and B certificates was advance-refunded with the proceeds of the October 3, 2011 wastewater refunding revenue obligations (see below) in a transaction accounted for as an in-substance defeasance. All of the $89.8 million is held in an escrow account that is not reflected on OCSD's financial statements because it has been legally defeased. At June 30, 2012, this $89,800,000 represents the amount still outstanding on bonds considered defeased. The refunding certificates are subject to purchase on the demand of the holder at a price equal to principal plus accrued interest on seven days' notice and delivery to OCSD's applicable remarketing agent, Bank of America Merrill Lynch. The remarketing agent is required to use its best efforts to sell the repurchased bonds at a price equal to 100% of the principal amount by adjusting the interest rate. The refunding certificates are secured by Standby Bond Purchase Agreement (SBPA) with Lloyds TSB Bank that expires on August 24, 2012. Under the SBPA, if the refunding certificates are not successfully remarketed or repaid according to their terms or if the existing SBPA is not renewed and OCSD does not replace the SBPA or otherwise refinance the refunding certificates, Lloyds TSB Bank is required to purchase the refunding certificates. Any of the refunding certificates purchased by Lloyds TSB Bank constitute bank bonds that bear interest at the bank rate, which may not exceed the maximum rate of 18%. If the OCSD does not reimburse Lloyds TSB Bank within 180 days following Lloyds TSB Bank's purchase of any refunding certificates or the expiration of the SBPA, the District would be required to redeem the bank bonds over a period of four years. However, OCSD has refunded the remaining outstanding series prior to the expiration of the SBPA, and there were no purchase of any refunding certificates by Lloyds TSB Bank up through the final refunding date (see Note 10). The required reserve amount at June 30, 2012 is $16,793,580. August 2003 Certificates of Participation, Series 2003 On August 26, 2003, OCSD completed the sale of$280,000,000 of certificates of participation. The certificates were issued to finance and to reimburse OCSD for the acquisition, construction, and installation of additional improvements made to the wastewater system. The interest rate on the certificates is fixed and ranges from 5.00 percent to 5.25 percent. Annual principal payments are due on February 1, beginning February 1, 2021. 26 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2012 On May 22, 2007, $88,500,000 of the outstanding principal balance of the 2003 certificates was advance-refunded with the proceeds of the May 2007 refunding certificates of participation (see below) in a transaction accounted for as an in-substance defeasance. All of the $88.5 million is held in an escrow account that is not reflected on OCSD's financial statements because it has been legally defeased. At June 30, 2012, this $88,500,000 represents the amount still outstanding on bonds considered defeased. On October 3, 2011, $83,320,000 of the outstanding principal balance of the 2003 certificates was advance-refunded with the proceeds of the October 3, 2011 wastewater refunding revenue obligations (see below) in a transaction accounted for as an in-substance defeasance. All of the $83.3 million is held in an escrow account that is not reflected on OCSD's financial statements because it has been legally defeased. At June 30, 2012, this $83,320,000 represents the amount still outstanding on bonds considered defeased. On March 22, 2012, $108,180,000 of the outstanding principal balance of the 2003 certificates was advance-refunded with the proceeds of the March 22, 2012 wastewater refunding revenue obligations (see below) in a transaction accounted for as an in-substance defeasance. All of the $108.2 million is held in an escrow account that is not reflected on OCSD's financial statements because it has been legally defeased. At June 30, 2012, this $108,180,000 represents the amount still outstanding on bonds considered defeased. Mav 2007 Refunding Certificates of Participation, Series 2007A On May 22, 2007, OCSD completed the sale of $95,180,000 of refunding certificates of participation. The certificates were issued to refund $88,500,000 of the outstanding principal balance of the 2003 Series certificates of participation (see above). The interest rate on the refunding certificates is fixed and ranges from 4.00 percent to 4.5 percent. Annual principal payments are due on February 1, beginning February 1, 2008. The trust agreement for the certificates requires the establishment of a reserve which was funded from certificate proceeds. The June 30, 2012 reserve of $9,518,000 is held by Union Bank, the trustee, and meets the reserve requirement. December 2007 Certificates of Participation, Series 2007B On December 20, 2007, OCSD completed the sale of $300,000,000 of certificates of participation. The certificates were issued to finance and to reimburse OCSD for the acquisition, construction, and installation of additional improvements made to the wastewater system. The interest rate on the refunding certificates is fixed and ranges from 4.00 percent to 5.25 percent. Annual principal payments are due on February 1, beginning February 1, 2008. The trust agreement for the certificates requires the establishment of a reserve which was funded from certificate proceeds. The June 30, 2012 reserve of$19,838,777 is held by Union Bank, the trustee, and meets the reserve requirement. Mav 2008 Refunding Certificates of Participation, Series 2008A On May 29, 2008, OCSD completed the sale of $77,165,000 of refunding certificates of participation. The certificates were issued to refund the $85,505,000 outstanding principal balance of the 1992 Series certificates of participation. The interest rate on the refunding certificates is fixed and ranges from 2.95 percent to 4.0 percent. Annual principal payments are due on February 1, beginning February 1, 2009. 27 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2012 The trust agreement for the certificates requires the establishment of a reserve which was funded from certificate proceeds. The June 30, 2012 reserve of $7,723,355 is held by US Bank, the trustee, and meets the reserve requirement. September 2008 Refunding Certificates of Participation, Series 2008B On September 11, 2008, OCSD completed the sale of$27,800,000 of refunding certificates of participation. The certificates were issued to refund the $26,900,000 outstanding principal balance of the 1993 Series certificates of participation. The interest rate on the refunding certificates is fixed and ranges from 2.80 percent to 3.0 percent. Annual principal payments are due on August 1, beginning August 1, 2009. The trust agreement for the certificates requires the establishment of a reserve which was funded from certificate proceeds. The June 30, 2012 reserve of $2,782,485 is held by US Bank, the trustee, and meets the reserve requirement. May 2009 Certificates of Participation, Series 2009A On May 7, 2009, OCSD completed the sale of $200,000,000 of certificates of participation. The certificates were issued to finance and to reimburse OCSD for the acquisition, construction, and installation of additional improvements made to the wastewater system. The interest rate on the certificates is fixed and ranges from 3.00 percent to 5.00 percent. Annual principal payments are due on February 1, beginning February 1, 2010. The trust agreement for the certificates requires the establishment of a reserve which was funded from certificate proceeds. The June 30, 2012 reserve of $13,123,671 is held by US Bank, the trustee, and meets the reserve requirement. May 2010 Wastewater Revenue Obligations, Series 2010A On May 18, 2010, OCSD completed the sale of $80,000,000 of wastewater revenue obligations under the federally taxable Build America Bonds program. The obligations were issued to finance and to reimburse OCSD for the acquisition, construction, and installation of additional improvements made to the wastewater system. The stated interest rate on the obligations is fixed and ranges from 5.56 percent to 5.58 percent, however, in accordance with their designation as Build America Bonds, OCSD expects to receive a cash subsidy from the United States Treasury equal to 35 percent of the interest payable with respect to these revenue obligations. Thus, the net interest rate on the obligations is fixed and ranges from 3.614 percent to 3.627 percent. Annual principal payments are due on February 1, beginning February 1, 2034. The trust agreement for the revenue obligations does not require the establishment of a reserve. December 2010 Wastewater Revenue Obligations, Series 2010C On December 8, 2010, OCSD completed the sale of $157,000,000 of wastewater revenue obligations under the federally taxable Build America Bonds program. The obligations were issued to finance and to reimburse OCSD for the acquisition, construction, and installation of additional improvements made to the wastewater system. The stated interest rate on the obligations is fixed and ranges from 6.35 percent to 6.40 percent, however, in accordance with their designation as Build America Bonds, OCSD expects to receive a cash subsidy from the United States Treasury equal to 35 percent of the interest payable with respect to these revenue obligations. Thus, the net interest rate on the obligations is fixed and ranges from 28 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2012 4.1275 percent to 4.16 percent. Annual principal payments are due on February 1, beginning February 1, 2031. The trust agreement for the revenue obligations does not require the establishment of a reserve. October 2011 Wastewater Refunding Revenue Obligations, Series 2011A On October 3, 2011, OCSD completed the sale of $147,595,000 of wastewater refunding revenue obligations. The obligations were issued to refund $89,800,000 of the outstanding principal balance of 2000 Series A and B refunding certificates of participation, and $83,320,000 of the outstanding principal balance of 2003 certificates of participation. The stated interest rate on the obligations is fixed and ranges from 3 percent to 5 percent. Annual principal payments are due on August 1 and February 1, beginning August 1, 2012. The aggregate difference in debt service between the refunding debt and the refunded debt is a negative amount of approximately $1.3 million. The total future payments for the new debt provide a net present value gain of approximately $10.7 million to refund the old debts in payments. The trust agreement for the revenue obligations does not require the establishment of a reserve. November 2011 Revenue Refunding Certificate Anticipation Notes, Series 2011 B On November 10, 2011, OCSD completed the sale of $143,205,000 of revenue refunding certificate anticipation notes. The notes were issued to refund the $154,665,000 outstanding principal balance of the November 2010 Series B revenue refunding certificate anticipation notes. The interest rate on the notes is fixed at 2.0 percent. The notes will mature on November 9, 2012. OCSD expects the principal and interest on the notes to be paid from proceeds of the sale, prior to the maturity date, of a future series of certificates of participation, notes or other obligations. The aggregate difference in debt service between the refunding debt and the refunded debt is a negative amount of approximately $23,000. The total future payments for the new debt provides a net present value loss of approximately $266,000 to refund the old debt in payments. The trust agreement for the certificates does not require the establishment of a reserve. March 2012 Wastewater Refunding Revenue Obligations, Series 2012A On March 22, 2012, OCSD completed the sale of $100,645,000 of wastewater refunding revenue obligations. The obligations were issued to refund the $108,180,000 outstanding principal balance of the 2003 certificates of participation. The stated interest rate on the obligations is fixed and ranges from 3 percent to 4 percent. Annual principal payments are due on February 1, beginning February 1, 2031. The aggregate difference in debt service between the refunding debt and the refunded debt is a positive amount of approximately $15.3 million. The total future payments for the new debt provide a net present value gain of approximately $15.3 million to refund the old debt in payments. The trust agreement for the certificates does not require the establishment of a reserve. 29 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2012 Annual Amortization Requirements The annual requirements to amortize all debt related to certificates of participation, anticipation notes, and revenue obligations as of June 30, 2012, including the Revenue Refunding Certificates of Anticipation Notes, Series 2011 B that currently matures in November 2012, are as follows: There is no future revenue pledged to make the debt service payments. Year Ending Estimated June 30, Principal Interest Total 2013 $ 178,470,000 $ 50,485,349 $ 228,955,349 2014 52,890,000 47,103,304 99,993,304 2015 39,975,000 45,867,118 85,842,118 2016 41,905,000 44,690,257 86,595,257 2017 53,075,000 43,302,740 96,377,740 2018-2022 131,820,000 199,716,491 331,536,491 2023-2027 166,520,000 169,616,160 336,136,160 2028-2032 253,180,000 123,532,507 376,712,507 2033-2037 277,835,000 59,298,519 337,133,519 2038-2042 128,020,000 13,677,675 141,697,675 2043-2044 12,275,000 397,908 12,672,908 Total $ 1,335,965,000 $797,688,028 $ 2,133,653,028 (5) Net Assets The difference between assets and liabilities is reported as net assets. Net assets are classified as restricted, unrestricted, or invested in capital assets, net of related debt. Net assets at June 30, 2012 consisted of the following: June 30, 2012 Invested in capital assets, net of related debt: Capital assets, net of accumulated depreciation $2,414,269,103 Outstanding debt issued to acquire capital assets, net of: unamortized bond discount, deferred amount on refundings, and unspent proceeds (1,288,302,786) Subtotal 1,125,966,317 Unrestricted: All other unrestricted 479,850,616 Total Net Assets $ 1,605,816,933 30 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2012 (6) Pension Benefits OCSD has two pension plans for retirees: a defined benefit pension plan maintained through and by the Orange County Employees' Retirement System (OCERS) and the Additional Retiree Benefit Account (ARBA) administered directly by OCSD. Pension Plan OCSD participates in the Orange County Employee's Retirement System (OCERS), a cost-sharing multiple-employer, defined benefit pension plan which is governed and administered by a nine member Board of Retirement. OCERS was established in 1945 under the provisions of the County Employees Retirement Law of 1937, and provides members with retirement, death, disability, and cost-of-living benefits. OCERS issues a stand-alone comprehensive annual financial report which can be obtained from OCERS at 2223 Wellington Avenue, Santa Ana, California 92701. Benefits: All OCSD employees except for interns and the Board of Directors participate in OCERS. Employees who retire at or after age 50 with five or more years of service are entitled to an annual retirement allowance. The amount of the retirement allowance is based upon the member's age at retirement, the member's "final compensation" as defined in Section 31462 of the Retirement Law of 1937, the total years of service under OCERS, and the Plan under which the employee is covered. OCERS also provides death and disability benefits. Eligible employees are covered under one of three plans, depending on their entry date into the plan. Plans G and H provide 2.5% of final average compensation per year of service at age 55; Plan B provides 1.667% per year of service at age 57.5. Plan G members' retirement benefit are calculated using the highest single year of compensation, while Plans B and H are based on the average of the highest three consecutive years of compensation. Contributions: As a condition of participation under the provisions of the County Employees Retirement Law of 1937, members are required to contribute a percentage of their annual compensation to OCERS. Employees covered by Plans B, G, and H are required to contribute 5.76% - 11.58%, 8.28% - 14.52% and 7.93% - 14.52%, respectively, of their annual compensation to OCERS. OCSD is required to make periodic contributions to OCERS in amounts that are estimated to remain a constant percentage of covered employees' compensation such that, when combined with covered employees' contributions, will fully provide for all covered employees' benefits by the time they retire. For the fiscal years ended June 30, 2012, 2011, and 2010, the "Annual Required Contribution" equaled the contributions actually made. Required contributions, which are actuarially determined, are set by OCERS. The following table provides salary and contributions requirements for the two previous fiscal years and the current year. 31 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2012 For the Fiscal Year Ending June 30, 2010 June 30, 2011 June 30, 2012 Total Payroll Costs $ 62,934,336 $62,107,324 $ 62,603,878 Payroll Costs of Employees Covered by OCERS 60,593,735 59,787,560 60,419,910 Contributions Requirements: Contributed by Employees 4,317,182 4,422,908 4,566,386 Contributed by the District on Behalf of Employees 2,071,340 2,078,679 2,089,868 Total Employee Required Contribution 6,388,522 6,501,587 6,656,254 District Required Contribution 13,029,795 14,370,158 15,767,050 Total Contribution $ 19,418,317 $20,871,745 $ 22,423,304 Total Actual Contribution as a Percent of the "Annual Required Contribution (ARC)" 100.00% 100.00% 100.00% Employee Required Contribution as a Percent of Covered Payroll 10.54% 10.87% 11.02% District Required Contribution as a Percent of Covered Payroll 21.50% 24.04% 26.10% Total Contribution as a Percent of all Participating Entities'Contributions 3.61% 3.66% 3.60% Additional Retiree Benefit Account(ARBA) The OCSD ARBA plan is a single-employer defined benefit plan which was administered by OCERS until February 29, 2008, when OCSD began direct administration. This benefit was established by the OCSD Board of Directors on October 25, 1992. It provides a monthly payment to retirees towards the premium costs of health insurance for the retiree and eligible dependents. The retiree is not required to use this amount for health insurance premium or to remain on the OCSD medical plan. The plan is currently paying benefits to 188 retirees. The plan is included in OCSD's financial statements; stand-alone financial statements are not issued for the plan. Benefits: Employees who retire receive $10 per month for every year of service up to a maximum of 25 years, or $250 per month. This amount is independent of salary and is fixed at retirement. Because the District cannot ensure the use of the benefit for payment of eligible health insurance expenditures, the benefit is taxable to the retiree. Survivor benefits are provided in the event that a retiree pre-deceases his/her spouse. For retirees hired prior to July 1, 1988, OCSD provides health insurance coverage for 2'/z months per year of service (see Note 7—Other Postemployment Benefits). ARBA benefits begin immediately after this benefit ends. For those hired on or after July 1, 1988, ARBA benefits begin immediately upon retirement and continue for life. Employees hired into the OCEA bargaining group after August 1, 2011 are ineligible for this benefit. Funding: There are no employee contributions for this plan; OCSD covers 100% of the cost. An actuarial evaluation was performed as of July 1, 2011, using the Projected Unit Credit Cost method. This method represents the present value of benefits earned to date assuming that an employee earns benefits ratably over his/her career. An investment rate of return of 5.0% per year and an inflation rate of 2.5% were used; no salary adjustment was used due to the flat dollar nature of the benefit. The unfunded actuarial liability was amortized on a level dollar basis over an open period of 30 years. OCSD utilizes a pay-as-you-go method for funding the plan. 32 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2012 Trend Information and Funding Progress: Trend information gives an indication of the progress made in accumulating sufficient assets to pay benefits when due. The District's trend information follows. Annual Pension Cost Annual Pension Percentage Net Fiscal Cost of APC Pension Year (APC) Contributed Obligation 6/30/10 851,009 31.9% 6,956,975 6/30/11 842,288 39.0% 7,471,180 6/30/12 978,398 37.5% 8,082,368 The Schedule of Funding Progress shows the recent history of the actuarial value of assets, actuarial accrued liability, their relationship, and the relationship of the unfunded actuarial accrued liability to payroll. This schedule presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. Entry Age Actuaria UAAL as a Actuarial Actuarial I Value Percentage Valuation Accrued of Unfunded Funded Covered of Covered Date Liability (AAL) Assets AAL (UAAL) Ratio Payroll Payroll 7/1/2005 N/A N/A N/A N/A N/A N/A 7/1/2007 7,395,472 - 7,395,472 - 49,788,835 14.9% 7/1/2009 8,904,499 - 8,904,499 - 57,681,058 15.4% 7/1/2011 10,753,718 - 10,753,718 - 60,419,910 17.8% *Actuarial valuation not performed for this year. The annual pension cost and net pension obligation for the year ended June 30, 2010, 2011 and 2012 were as follows: For the Fiscal Year Ending June 30, 2010 June 30, 2011 June 30, 2012 Annual required contribution $ 946,999 $ 946,999 $ 1,090,849 Interest on net pension obligation 318,871 347,849 373,559 Adjustment to annual required contribution (414,861) (452,560) 486,010 Annual pension cost 851,009 842,288 978,398 Contributions made (271,470) (328,083) (367,210) Increase in net pension obligation 579,539 514,205 611,188 Net pension obligation, beginning of year 6,377,436 6,956,975 7,471,180 Net pension obligation, end of year $ 6,956,975 $ 7,471,180 $ 8,082,368 The net pension obligation is reported in the noncurrent portion of long-term obligations on the Statement of Net Assets. 33 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2012 (7) Other Postemployment Benefits OCSD offers medical insurance to active and retired employees, as well as their qualified dependents. This is a single-employer defined benefit plan administered by OCSD. All retirees may choose coverage in an OCSD medical plan, with retirees paying the full premium. However, for employees hired prior to July 1, 1988, medical benefits begin immediately at retirement with OCSD paying 2.5 months of premium for each year of continuous service toward the cost of coverage under OCSD medical plans. At the termination of this period the retiree may elect to continue coverage at his/her own expense. This plan was established and may be modified only by action of the OCSD Board of Directors. The plan is included in the OCSD financial statements; stand-alone financial statements are not issued. As of the date of the latest actuarial valuation (7/1/11), there were 593 active employees, 72 retirees paying premiums, and 64 retirees whose premium is fully paid by OCSD. Premiums ranged between $171.43 and $3,368.32 per month, depending on the plan and number of dependents covered. Funding Policy: There are no employee contributions to this plan; OCSD covers 100% of the cost. Retirees opting to remain with the plan after employment pay 100% of the premium cost, except for those for whom the District pays for a period (see above). An actuarial evaluation was performed as of July 1, 2011, using the Projected Unit Credit Cost method. This method represents the present value of benefits earned to date, assuming that an employee earns benefits ratably over his/her career. An investment rate of return of 5.0% per year was used. The rate of increase for healthcare premium was set as 7.0% for the 2012-13 fiscal year, and 7.0% for years thereafter. The unfunded actuarial liability was amortized on a level dollar basis over an open period of 30 years. OCSD utilizes a pay-as-you-go method for funding the plan. For fiscal year 2011-12, OCSD contributed $1,134,925 and retirees contributed $520,757 to cover current year expenditures. Annual OPEB Cost and Net OPEB Obligation: The annual OPEB cost is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize the unfunded actuarial liabilities over 30 years. The following OPEB cost and net OPEB obligation was determined for the years ended June 30, 2012, 2011, and 2010: June 30, 2010 June 30, 2011 June 30, 2012 Annual required contribution $ 819,692 $ 819,692 $ 900,035 Interest on net OPEB obligation 32,792 41,579 51,784 Adjustment to annual required contribution 42,663 54,096 67,373 Annual OPEB cost 809,821 807,175 884,446 Contributions made 634,067 603,074 1,134,925 Increase in net OPEB obligation 175,754 204,101 (250,479) Net OPEB obligation, beginning of year 655,831 831,585 1,035,686 Net OPEB obligation, end of year $ 831,585 $ 1,035,686 $ 785,207 The District's annual OPEB cost contributed and the net OPEB obligation for the years ended 2012, 2011, and 2010 are shown in the following table. 34 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2012 Annual OPEB Cost Percentage Annual of OPEB Fiscal OPEB Actual Cost Net OPEB Year Cost Contributions Contributed Obligation 6/30/10 809,821 634,067 78.3% 831,585 6/30/11 807,175 603,074 74.7% 1,035,686 6/30/12 884,446 1,134,925 128.3% 785,207 The net OPEB obligation is reported in the noncurrent portion of long-term obligations on the Statement of Net Assets. Funded Status and Progress: The funding status of the plan as of the most recent actuarial valuation dates are as follows: Unfunded AAL Actuarial as a Actuarial Actuarial Accrued Unfunded Percentage of Valuation Value of Liability AAL Funded Covered Covered Date Assets (AAL) (UAAL) Ratio Payroll Payroll 7/1/2005* N/A N/A N/A N/A N/A N/A 7/1/2007 - 9,949,638 9,949,638 0% 49,788,835 19.98% 7/1/2009 - 8,799,624 8,799,624 0% 57,681,058 15.26% 7/1/2011 - 10,706,789 10,706,789 0% 60,419,910 17.72% *GASB Statement 45 Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions was implemented on June 30, 2008 and thus earlier valuations were not done. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Actuarially determined amounts are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented above, compares whether the actuarial values of plan assets are increasing or decreasing over time relative to the actuarial liabilities for benefits. Actuarial methods and assumptions: Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing the benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. The ARC for the current year was determined as part of the 7/1/11 actuarial valuation using the Projected Unit Credit cost method. The actuarial assumptions include a 5% investment rate of return (changed from 6% for the 7/1/07 valuation), an annual rate of inflation of 2.5%, and an annual healthcare cost trend rate of 7%. The UAAL is being amortized ratably over 30 years. 35 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2012 Inflation assumptions are included as part of the healthcare cost trend. No benefit increase is anticipated and the benefit is unaffected by changes in salary. (8) Transactions with Irvine Ranch Water District—Revenue Area No. 14 Formation of Revenue Area No. 14 & Excess Purchase Price Over Book Value of Acquired Assets On July 1, 1985, Revenue Area No. 14 was formed as an independent special district as a result of a negotiated agreement between OCSD and Irvine Ranch Water District (IRWD). At the time of Revenue Area 14's creation, OCSD consisted of eight independent special districts (see Note 1 — Reporting Entity). The eight existing districts sold a portion of the joint treatment facilities and land to the newly created district and recorded capacity rights revenue at the time of the sale. In accordance with the negotiated agreement between OCSD and IRWD, IRWD paid OCSD $34,532,000 for an initial 15,000,000 gallons per day capacity in OCSD's joint treatment facilities (with an ultimate collection capacity of 32,000,000 gallons per day) and for a pro-rata interest in real property (based on flow of 32,000,000 gallons per day). The book value of the assets acquired was determined to be $14,553,000 as of June 30, 1986; these assets were recorded at book value in Revenue Area 14. The excess of the purchase price over the assets' book value was $19,979,000 and was recorded as an intangible asset in Revenue Area 14. The excess of the purchase price over the assets' book value is being amortized over the remainder of the useful lives of the original assets acquired. As of June 30, 2012, after recognizing current year amortization of$657,709, the unamortized amount of the excess of purchase price over the assets' book value was $2,878,566. Annual Transactions IRWD entered into a separate agreement with Revenue Area 14 on January 1, 1986 whereby IRWD agreed to fund quarterly payments of Revenue Area 14's proportionate share of OCSD's joint capital outlay revolving fund budget requirements and certain capital improvements during the term of the agreement, which contribution of$3,677,786 was recorded in 2012. IRWD also agreed to fund the annual integration adjustment of Revenue Area 14's equity share in OCSD's Joint Works Treatment Facilities based on the flows discharged to OCSD. As the flows decreased during the year, a return of capital contributions of$4,615,468 to Revenue Area 14 was recognized and reported as contributions to other government in 2012. These capital contributions received from or credited to IRWD for their agreed-upon share of capital assets and equity share in OCSD's Joint Works Treatment Facilities are calculated as prescribed in the agreements. In addition, a separate agreement for transfer of IRWD's wastewater solids residuals to OCSD was entered on April 28, 2010. IRWD agreed to pay OCSD a charge for interim solids handling charge which include annual capital and quarterly operating expense components designed to compensate OCSD for IRWD's share of the cost of operating and maintaining the existing facilities for the treatment of solids. As a result, a total of $4,044,785 solids capital contribution was recorded in 2012. The total amount of joint capital outlay and solids capital contribution is $7,722,571 and is reported as contributions from other government for the year ended June 30, 2012. Any amounts credited to IRWD are not refunded in cash but are held as a credit to satisfy future contributions required of IRWD resulting in a balance due to other governmental agency of $47,659,381 as of June 30, 2012. 36 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2012 Annual Cash Reserve Requirement The cash reserve contribution requirement from IRWD at June 30, 2012; in accordance with Amendment No. 2 to the Agreement between IRWD and OCSD Acquiring Ownership Interests, Assigning Rights, and Establishing Obligations; is $9.8 million. This cash reserve requirement is recognized as a liability to IRWD. (9) Commitments and Due From Other Governmental Agency Secondary Treatment: On July 17, 2002, the Board of Directors Approved Resolution No. OCSD- 14, "Establishing the Policy for Level of Treatment of Wastewater Discharged into the Ocean". This resolution established OCSD's policy to treat all wastewater discharges into the ocean to secondary treatment standards thereby providing for continued public safety, marine ecosystem protection, and water reclamation opportunities. To implement this policy, OCSD staff was directed to immediately proceed with the planning, design, and implementation of treatment methods that will allow the agency to meet Federal Clean Water Act secondary treatment standards. Secondary treatment discharge standards are scheduled to be reached at the end of 2012. In the interim, OCSD will operate the plants to meet the requirements of the consent decree and the NPDES permit and will complete planning, design, construction, and operation of facilities per the schedule and the details of the consent decree. At the time the consent decree was issued, it was estimated that it would take a total of approximately eleven years and additional capital improvement costs of$623 million to reach secondary treatment discharge standards. As of June 30, 2012, remaining construction commitments totaled $164,237. Relocation of the Santa Ana Regional Interceptor: On June 29, 2010, the District entered into an agreement to lend the Orange County Flood Control District (OCFCD) 60 percent of the amount of the contract awarded to design and construct the relocation of the Santa Ana Regional Interceptor, but not to exceed $72 million. OCFCD agrees to repay the loan from any subvention funds received by OCFCD, with the total balance repaid by no later than July 1, 2022. Repayment installments will be made within 30 days equal to 60 percent of any subvention funds received by OCFCD. Interest shall accrue on the unpaid balance from July 1, 2018 at an annual interest rate of three percent until the unpaid balance has been repaid. As of June 30, 2012, $36 million has been loaned to OCFCD, of which $5,147,710 has been repaid leaving an outstanding loan balance of$30,852,290 at June 30, 2012. Litigation: Certain claims involving disputed construction costs have arisen in the ordinary course of business. Additionally, the District is a defendant in lawsuits. Although the outcome of these matters is not presently determinable, management does not expect that the resolution of these matters will have a material adverse impact on the financial condition of the District. (10) Subsequent Events Debt Financing Issued: On August 16, 2012, the District issued fixed rate Wastewater Refunding Revenue Obligations, Series 2012B (Series 2012B), in the amount of $66,395,000. The obligations were issued to refund the remaining $91,900,000 of outstanding Refunding Certificates of Participation, Series 2000A and 2000B (Series 2000A and 2000B). The debt was issued at a premium of 37 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2012 $15,965,000. The total proceeds of $82,360,000 along with $9,901,000 in Series 2000A and 2000B reserves were used to refund the entire outstanding Series 2000A and 2000B obligation. The interest rates on the Series 2012B obligations range from 3.00% - 5.00% and the final maturity date is February 1, 2026. 38 ORANGE COUNTY SANITATION DISTRICT SUPPLEMENTARY INFORMATION 39 ORANGE COUNTY SANITATION DISTRICT Combining Area Schedule of Net Assets June 30, 2012 With Comparative Totals for June 30,2011 Revenue Consolidated Totals Area No. 14 Revenue Area 2012 2011 Current assets: Cash and cash equivalents $ 12,520,057 $ 122,494,363 $ 135,014,420 $ 127,573,371 Investments 35,139,324 343,797,890 378,937,214 285,952,014 Accounts receivable, net of allowance for uncollectibles$7,693 - 9,452,589 9,452,589 10,411,347 Accrued interest receivable - 1,576,247 1,576,247 1,296,054 Connection fees receivable - 647,485 647,485 385,765 Property tax receivable - 1,542,223 1,542,223 1,408,477 Inventories - 5,596,197 5,596,197 5,366,513 Prepaid expenses - 858,826 858,826 623,907 Prepaid retirement - 14,937,778 14,937,778 14,463,000 Total current assets 47,659,381 500,903,598 548,562,979 447,480,448 Noncurrent assets: Restricted: Cash and cash equivalents - 36,541,736 36,541,736 120,419,824 Investments - 26,829,427 26,829,427 26,829,427 Accrued interest receivable - 239,070 239,070 210,010 Non-depreciable capital assets 28,190,418 1,258,986,458 1,287,176,876 1,277,484,094 Depreciable capital assets, net of accumulated depreciation 45,887,558 1,081,204,669 1,127,092,227 1,123,437,456 Deferred charges - 9,934,078 9,934,078 10,975,310 Due from other governmental agency - 30,852,290 30,852,290 36,000,000 Other noncurrent assets, net - 10,344 10,344 7,079,922 Total noncurrent assets 74,077,976 2,444,598,072 2,518,676,048 2,602,436,043 Total assets 121,737,357 2,945,501,670 3,067,239,027 3,049,916,491 Current liabilities: Accounts payable - 12,232,536 12,232,536 14,722,600 Accrued expenses 7,410,100 7,410,100 6,654,544 Retentions payable 2,045,987 2,045,987 2,260,426 Interest payable - 21,839,400 21,839,400 22,525,700 Due to other governmental agency 47,659,381 - 47,659,381 57,196,110 Current portion of long-term obligations - 185,784,283 185,784,283 188,948,106 Total current liabilities 47,659,381 229,312,306 276,971,687 292,307,486 Noncurrent liabilities: Noncurrent portion of long-term obligations - 1,184,450,407 1,184,450,407 1,247,122,884 Total liabilities 47,659,381 1,413,762,713 1,461,422,094 1,539,430,370 Net assets: Invested in capital assets, net of related debt: Collection system 19,116,647 498,462,335 517,578,982 495,641,055 Treatment and disposal-Land 406,846 4,068,905 4,475,751 4,475,751 Treatment and disposal system 54,554,483 1,837,659,887 1,892,214,370 1,900,804,744 Capital assets related debt (1,288,302,786) (1,288,302,786) (1,269,858,548) Subtotal 74,077,976 1,051,888,341 1,125,966,317 1,131,063,002 Unrestricted - 479,850,616 479,850,616 379,423,119 Total net assets $ 74,077,976 $ 1,531,738,957 $ 1,605,816,933 $ 1,510,486,121 40 ORANGE COUNTY SANITATION DISTRICT Combining Area Schedule of Revenues, Expenses, and Changes in Net Assets For the Year Ended June 30,2012 With Comparative Totals for June 30,2011 Revenue Consolidated Totals Area No. 14 Revenue Area 2012 2011 Operating revenues: Service charges $ 6,502,000 $ 252,988,532 $ 259,490,532 $ 244,464,692 Permit and inspection fees 8,767 1,021,562 1,030,329 784,458 Total operating revenues 6,510,767 254,010,094 260,520,861 245,249,150 Operating expenses other than depreciation and amortization: Salaries and benefits 1,292,451 74,349,316 75,641,767 73,112,286 Utilities 194,826 7,211,017 7,405,843 6,947,781 Supplies, repairs and maintenance 840,847 23,413,754 24,254,601 27,018,195 Contractual services 8,023,120 18,675,252 26,698,372 27,048,501 Directors'fees 20,139 125,423 145,562 152,377 Meetings and training 14,301 728,464 742,765 613,697 Feasibility studies 751,953 33,446,073 34,198,026 4,536,965 Other 56,078 3,176,457 3,232,535 3,958,695 Total operating expenses other than depreciation and amortization 11,193,715 161,125,756 172,319,471 143,388,497 Operating income(loss)before depreciation and amortization (4,682,948) 92,884,338 88,201,390 101,860,653 Depreciation and amortization 2,417,617 53,633,412 56,051,029 49,288,136 Operating income(loss) (7,100,565) 39,250,926 32,150,361 52,572,517 Non-operating revenues: Property taxes 1,894,442 65,987,630 67,882,072 64,307,594 Investment and interest income 1,889,475 13,858,018 15,747,493 10,092,102 Contributions from other government 7,722,571 - 7,722,571 9,708,267 Other 10,199 752,962 763,161 1,306,771 Total non-operating revenues 11,516,687 80,598,610 92,115,297 85,414,734 Non-operating expenses: Interest - 29,438,312 29,438,312 29,129,550 Contributions to other government 4,615,468 - 4,615,468 33,262,610 Loss on disposal of assets and other 80,565 3,736,534 3,817,099 5,981,829 Total non-operating expenses 4,696,033 33,174,846 37,870,879 68,373,989 Income(loss)before transfer and capital contributions (279,911) 86,674,690 86,394,779 69,613,262 Capital Contributions: Capital facilities capacity charges - 8,936,033 8,936,033 9,800,190 Change in net assets (279,911) 95,610,723 95,330,812 79,413,452 Total net assets-beginning 74,357,887 1,436,128,234 1,510,486,121 1,431,072,669 Total net assets-ending $74,077,976 $ 1,531,738,957 $ 1,605,816,933 $ 1,510,486,121 41 ORANGE COUNTY SANITATION DISTRICT Combining Area Schedule of Cash Flows For the Year Ended June 30,2012 With Comparative Totals for June 30,2011 Revenue Consolidated Totals Area No. 14 Revenue Area Eliminations 2012 2011 Cash flows from operating activities: Receipts from customers and users $ (3,025,962) $ 254,998,543 $ $ 251,972,581 $ 263,032,782 Payments to employees (1,312,590) (71,945,071) (73,257,661) (72,478,818) Payments to suppliers (9,217,299) (63,248,298) (72,465,597) (71,041,781) Net cash provided by(used in)operations (13,555,851) 119,805,174 106,249,323 119,512,183 Cash flows from noncapital financing activities: Proceeds from property taxes 1,894,442 65,853,884 67,748,326 64,939,187 Proceeds from various resources 34,185 695,286 - 729,471 - Net cash provided by noncapital financing activities 1,928,627 66,549,170 68,477,797 64,939,187 Cash flows from capital and related financing activities: Capital facilities capacity charges - 8,674,313 8,674,313 10,410,855 Additions to property,plant and equipment (2,906,083) (75,411,565) 4,456,180 (73,861,468) (159,563,286) Disposal of property,plant,and equipment 1,349,077 (1,349,077) - Disposal of other assets - - - - 1,266,387 Interest paid - (51,661,572) - (51,661,572) (46,543,583) Principal payments on debt obligation - (462,635,000) - (462,635,000) (191,760,000) Proceeds from debt issuances - 401,099,196 - 401,099,196 315,341,085 Debt issuance costs - (824,812) - (824,812) (495,978) Contribution from other government 3,107,103 - (3,107,103) Net cash provided by(used in)capital and related financing activities 201,020 (179,410,363) (179,209,343) (71,344,520) Cash flows from investing activities: Proceeds from the sale of investments 789,099,505 7,836,418,987 - 8,625,518,492 3,745,902,911 Purchases of investments (783,924,076) (7,926,343,429) (8,710,267,505) (3,723,593,143) SARI project(advance)/payments - 5,147,710 5,147,710 (36,000,000) Interest received 1,125,723 6,520,764 7,646,487 12,409,379 Net cash provided by(used in)investing activities 6,301,152 (78,255,968) (71,954,816) (1,280,853) Net increase(decrease)in cash and cash equivalents (5,125,052) (71,311,987) (76,437,039) 111,825,997 Cash and cash equivalents,beginning of year 17,645,109 230,348,086 247,993,195 136,167,198 Cash and cash equivalents,end of year $12,520,057 $ 159,036,099 $ $ 171,556,156 $ 247,993,195 Reconciliation of operating income(loss)to net cash provided by operating activities: Operating income(loss) $ (7,100,565) $ 39,250,926 $ $ 32,150,361 $ 52,572,517 Adjustments to reconcile operating income(loss)to net cash provided by operations: Depreciation and amortization 2,417,617 53,633,412 - 56,051,029 49,288,136 Bad debt expense(Net recoveries) - (29,691) (29,691) 17,368 Feasibility study amortization 663,826 28,315,356 28,979,182 4,536,965 (Increase)/decrease in operating assets: Accounts receivable - 988,449 988,449 2,640,967 Inventories 992,447 992,447 23,824 Prepaid and other assets (709,697) (709,697) 625,979 Increase/(decrease)in operating liabilities: Accounts payable (2,490,064) (2,490,064) (5,369,395) Accrued expenses 499,985 499,985 (605,963) Retentions payable (214,439) (214,439) 672,440 Due to other governmental agency (9,536,729) - (9,536,729) 15,142,665 Pension/OPEB payable 360,710 360,710 718,305 Compensated absences (212,750) (212,750) (115,481) Other payable 116,907 116,907 (1,037,481) Claims and judgments (696,377) (696,377) 401,337 Net cash provided by operations $(13,555,851) $ 119,805,174 $ $ 106,249,323 $ 119,512,183 Noncash Activities: Unrealized gain(loss)on the fair value of investments $ 763,752 $ 7,472,435 $ 8,236,187 $ (2,073,978) Contributions from(to)other government 3,107,103 - 3,107,103 (23,554,343) Capital facilities capacity contribution - 2,184,800 2,184,800 2,492,300 Feasibility studies with no cash effect 449,203 21,460,401 21,909,604 4,536,965 42 ORANGE COUNTY SANITATION DISTRICT STATISTICAL SECTION This part of the comprehensive annual financial report of the Orange County Sanitation District (OCSD) presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about OCSD's overall financial health. Contents Pages Financial Position and Trends These schedules contain current and trend information to help the reader understand OCSD's financial position and how OCSD's financial performance and well-being have changed over time. 44 -48 Revenue Capacity These schedules contain information to help the reader assess OCSD's most significant revenue source of sewer service fees. 49 - 51 Debt Capacity These schedules present information to help the reader assess the affordability of OCSD's current levels of outstanding debt and OCSD's ability to issue additional debt in the future. All of OCSD's debt is recorded in a proprietary fund; consequently, many 52 - 55 of the schedules which are applicable to governmental funds are not presented. Operating Information These schedules contain data to help the reader understand how the information in OCSD's financial report relates to the services it provides and the activities it performs. 56 - 59 Demographic and Economic Factors These schedules offer demographic information to help the reader understand the environment within which OCSD's financial activities take place. 60 -63 43 ORANGE COUNTY SANITATION DISTRICT Net Assets by Component (Dollars in Thousands) Last Ten Fiscal Years $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 -00 $200,000 $0 LQ, 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 o Invested in Capital Assets,Net of Related Debt ■Restricted for Debt Service&Capital Acquisition o Unrestricted Restricted for Invested in Capital Debt Service Assets, Net of &Capital Fiscal Year Related Debt Acquisition Unrestricted Total Net Assets 2002-03 $ 578,647 $35,182 $ 396,518 $1,010,347 2003-04 418,267 88,519 517,346 1,024,132 2004-05 558,391 64,514 418,342 1,041,247 2005-06 664,060 3,003 422,036 1,089,099 2006-07 886,463 3,904 299,370 1,189,737 2007-08 847,426 - 428,561 1,275,987 2008-09 948,869 - 399,452 1,348,321 2009-10 1,121,057 - 310,016 1,431,073 2010-11 1,131,063 - 379,423 1,510,486 2011-12 1,125,966 - 479,851 1,605,817 Source: Orange County Sanitation District's Financial Management Division. 44 ORANGE COUNTY SANITATION DISTRICT Revenues and Gross Capital Contributions by Source (Dollars in Thousands) Last Ten Fiscal Years $283,151 $259,555 $235,959 $212,363 $188,768 $165,172 $141,576 $117,980 $94,384 $70,788 $47,192 $23,596 $0 -$23,596 - 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 DOperating Revenue ■Non-Operating Revenue oContributed Capital Operating Revenue Non-Operating Revenue Permit& Total Fiscal Service Inspection Total Property Non- Capital Year Charges Fees Operating Taxes Interest Other Operating Contributions 2002-03 $ 88,640 $ 524 $ 89,164 $ 44,591 $ 25,889 $ 706 $ 71,186 $13,312 2003-04 101,995 332 102,327 46,943 6,786 928 54,657 18,243 2004-05 120,917 498 121,415 35,764 15,118 1,051 51,933 19,350 2005-06 154,291 874 155,165 39,958 10,426 3,477 53,861 32,990 2006-07 167,790 1,866 169,656 60,565 22,243 1,068 83,876 50,207 2007-08 184,180 1,196 185,376 65,210 20,235 13 85,458 35,408 2008-09 206,422 895 207,317 66,427 14,836 1,634 82,897 17,937 2009-10 225,059 629 225,688 64,759 19,166 6,939 90,864 (2,406) 2010-11 244,465 784 245,249 64,307 10,092 11,015 85,414 9,800 2011-12 259,491 1,030 260,521 67,882 15,748 8,485 92,115 8,936 Source: Orange County Sanitation District's Financial Management Division. 45 ORANGE COUNTY SANITATION DISTRICT Expenses by Type (Dollars in Thousands) Last Ten Fiscal Years $230,000 $220,000 $210,000 $200,000 $190,000 $180,000 $170,000 $160,000 $150,000 $140,000 $130,000 $120,000 $110,000 $100,000 $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 ■Operating Expense oNon Operating Expense Operating Non -Operating Fiscal Salaries& Maint& Depr& Total Interest Total Non- Year Benefits Utilities Other Amort Operating Expense Other Operating 2002-03 $ 38,733 $ 4,622 $ 36,314 $ 41,966 $ 121,635 $ 12,731 $ 2,922 $ 15,653 2003-04 48,711 5,408 41,284 44,412 139,815 15,524 6,102 21,626 2004-05 53,048 6,473 42,325 48,095 149,941 17,470 8,172 25,642 2005-06 53,246 7,563 44,823 49,887 155,519 20,078 18,567 38,645 2006-07 57,802 8,072 46,281 53,111 165,266 21,747 16,089 37,836 2007-08 67,629 8,092 56,169 47,767 179,657 22,517 17,818 40,335 2008-09 67,498 7,242 89,816 32,520 197,076 24,899 13,842 38,741 2009-10 69,652 6,934 61,499 52,036 190,121 27,537 13,736 41,273 2010-11 73,112 6,948 63,328 49,288 192,676 29,129 39,245 68,374 2011-12 75,642 7,405 89,271 56,051 228,369 29,438 8,433 37,871 Source: Orange County Sanitation District's Financial Management Division. 46 ORANGE COUNTY SANITATION DISTRICT Change in Net Assets (Dollars in Thousands) Last Ten Fiscal Years $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Ending Net Assets by Fiscal Year Fiscal Total Total Change in Beginning Ending Year Revenues Expenses Net Assets Net Assets Net Assets 2002-03 $173,662 $ 137,288 $ 36,374 $ 973,973 $ 1,010,347 2003-04 175,227 161,441 13,786 1,010,347 1,024,133 2004-05 192,698 175,583 17,115 1,024,133 1,041,248 2005-06 242,016 194,164 47,852 1,041,248 1,089,100 2006-07 303,739 203,102 100,637 1,089,100 1,189,737 2007-08 306,242 219,992 86,250 1,189,737 1,275,987 2008-09 308,151 235,817 72,334 1,275,987 1,348,321 2009-10 314,146 231,394 82,752 1,348,321 1,431,073 2010-11 340,463 261,050 79,413 1,431,073 1,510,486 2011-12 361,572 266,241 95,331 1,510,486 1,605,817 Source: Orange County Sanitation District's Financial Management Division. 47 ORANGE COUNTY SANITATION DISTRICT Cash and Investment Reserve Balances (Dollars in Millions) Last Ten Fiscal Years Capital Debt Cash Flow Self- Improvement Service Fiscal Year Contingency Insurance Program Requirements Total 2002-03 $ 100 $ 57 $ 237 $ 33 $ 427 2003-04 71 57 390 88 606 2004-05 71 57 242 65 472 2005-06 132 57 196 105 490 2006-07 132 57 104 79 372 2007-08 149 57 219 108 533 2008-09 172 57 172 133 534 2009-10 185 57 102 129 473 2010-11 187 57 176 141 561 2011-12 196 57 181 143 577 Notes: The Cash Flow Contingency Reserve is to fund operations, maintenance, and certificates of participation debt service expenses for the first half of the fiscal year, prior to the receipt of the first installment of the property tax allocation and sewer service user fees. The Self-Insurance Reserve is to provide requirements for property damage including fire, flood and earthquake, general liability and workers'compensation. The Capital Improvement Program Reserve is to fund annual increments of the capital improvement program with a target level at one half of the average annual capital improvement program through the year 2020. The Debt Service Required Reserves are monies held and controlled by a trustee pursuant to the provisions of certificates of participation issues, and the monies are not available for the general needs of the District. Source: Orange County Sanitation District's Financial Management Division. 48 ORANGE COUNTY SANITATION DISTRICT Sewer Service Fees Single Family Residence Rate Last Nine Fiscal Years and Next Fiscal Year Sewer service fees are comprised of three categories: residential customers, commercial customers, and industrial customers. Although the majority of sewer service fee revenues are from residential and commercial customers (see the schedule of Number of Accounts and Revenues by Customer Class), the fee paid by each residential and commercial customer is less than the individual fees paid by industrial customers. The rates for commercial and industrial customers are derived from the base sewer service fee charged for a single-family residence and are based on the type of business and the strength and volume of waste that is discharged into the sewer system. Due to the complexity of the rate structure for commercial and industrial customers and since the rates are derivatives of the single-family residence rate, only the single-family residence rate is presented within the statistical section. Sewer Service Fiscal Year Charge 2003-04 $ 100.00 2004-05 115.00 2005-06 151.00 2006-07 165.80 2007-08 182.00 2008-09 201.00 2009-10 221.00 2010-11 244.00 2011-12 267.00 2012-13 294.00 Annual Sewer Service Fees Single Family Residence 350 300 m LL 250 m c 200 c Q E 150 co 100 50 0 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Fiscal Year Source: Orange County Sanitation District's Financial Management Division. 49 ORANGE COUNTY SANITATION DISTRICT Number of Accounts and Revenues by Customer Class (Dollars in Millions) Last Ten Fiscal Years Residential/Commercial Industrial Number of Total Percentage Total Percentage Equivalent Sewer Svc. of Sewer Number of Sewer Svc. of Sewer Single-Family Charge Service Charge Customer Charge Service Charge Fiscal Dwellings Revenue Revenues Accounts Revenue Revenues 2002-03 897,757 77.0 92% 603 6.3 8% 2003-04 860,156 86.0 92% 530 7.5 8% 2004-05 860,634 99.0 90% 568 10.5 10% 2005-06 872,859 132.0 92% 557 12.2 8% 2006-07 867,035 143.8 91% 531 13.4 9% 2007-08 875,739 159.4 93% 520 12.1 7% 2008-09 882,747 177.4 95% 515 9.9 5% 2009-10 875,442 193.5 95% 487 10.8 5% 2010-11 874,130 213.3 95% 479 10.1 5% 2011-12 869,709 232.2 96% 516 9.5 4% $300,000,000 $250,000,000 $200,000,000 $150,000,000 $100,000,000 $50,000,000 $0 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 ■Reside ntial/Commercial Users ■Industrial Users Source: Orange County Sanitation District's Financial Management Division. 50 ORANGE COUNTY SANITATION DISTRICT Principal Sewer Service Customers For the Current Fiscal Year and Nine Years Ago Fiscal Year Ended 6/30/12 Fiscal Year Ended 6/30/03 Industrial Industrial Permittee %to Total Permittee %to Total Service Service Charge Service Service Charge User Charges Rank Revenue Charges Rank Revenue Stremicks Heritage Foods, LLC $ 958,066 1 0.37% $ 564,646 1 0.64% Kimberly-Clark Worldwide, Inc. 872,777 2 0.34% 244,106 6 0.28% MCP Foods, Inc. 764,660 3 0.29% 309,590 4 0.35% House Foods America Corp. 719,741 4 0.28% 284,033 5 0.32% Pulmuone Wildwood, Inc. 550,742 5 0.21% Dean Foods Co. of CA Inc. 498,750 6 0.19% Schreiber Foods Inc. 428,853 7 0.17% Jazz Semiconductor 382,420 8 0.15% Pepsi-Cola Bottling Group 368,506 9 0.14% Cargill, Inc. 316,631 10 0.12% Alstyle Apparel-A&G Inc. 488,492 2 0.55% Disneyland Resort& Park 374,719 3 0.42% Royalty Carpet Mills, Inc. 211,966 7 0.24% Nor-Cal Beverage Co. Inc. (Main) 191,326 8 0.22% Seven-Up Bottling Company 186,113 9 0.21% Knotts Berry Farm Foods 180,651 10 0.20% $ 5,861,146 2.26% $ 3,035,642 3.43% Although the majority of sewer service fee revenues are from residential and commercial customers (see the schedule of Number of Accounts and Revenues by Customer Class), the fee paid by each residential and commercial customer is less than the individual fees paid by industrial customers. Consequently, this schedule shows the largest sewer service fee customers. Source: Orange County Sanitation District's Financial Management Division. 51 ORANGE COUNTY SANITATION DISTRICT Ratio of Annual Debt Service to Total Expenses (Dollars in Thousands) Last Ten Fiscal Years 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Ratio of Debt Total Service to Total Fiscal Principal Total Debt Operating Operating Year (1) Interest Service(3) Expenses(2) Expenses 2002-03 $ 11,025 $ 11,433 $ 22,458 $ 79,669 28.19% 2003-04 11,610 22,508 34,118 95,403 35.76 2004-05 12,040 25,871 37,911 101,846 37.22 2005-06 12,755 29,563 42,318 105,632 40.06 2006-07 13,465 32,673 46,138 112,155 41.14 2007-08 11,025 36,484 47,509 131,890 36.02 2008-09 21,305 40,840 62,145 164,556 37.77 2009-10 24,030 46,052 70,082 138,085 50.75 2010-11 25,895 49,426 75,321 143,388 52.53 2011-12 14,370 50,975 65,345 172,318 37.92 Notes (1) - Excludes principal reductions due to advanced refunding. (2) - Excludes depreciation and amortization expense. (3) -All debt consists of certificates of participation. Source: Orange County Sanitation District's Financial Management Division. 52 ORANGE COUNTY SANITATION DISTRICT Debt Coverage Ratios (Dollars in Millions) Last Ten Fiscal Years The Orange County Sanitation District has no legal debt limits as imposed by State legislation. The District does have contractual covenants within the existing Certificates of Participation indenture agreements which require minimum coverage ratios of 1.25. The coverage ratio is calculated as the ratio of net annual revenues available for debt service payments to total annual debt service requirements. 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Fiscal Year Ending June 30, 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Operating&Non-operating Revenues: Service Charges,Net of Refunds-Regional $ 77.0 $ 86.0 $ 99.0 $ 132.0 $ 143.8 $ 159.4 $177.4 $ 193.5 $ 213.3 $ 232.2 Service Charges,Net of Refunds-Local - - - - - - 5.6 5.6 5.7 5.7 Industrial Sewer Service Charges 6.3 7.5 10.5 12.2 13.4 12.1 9.9 10.8 10.1 9.5 Revenue Area No.14 Fees 3.2 5.8 6.9 5.3 5.2 7.1 10.3 10.2 21.4 18.0 Ad Valorem Taxes 44.6 46.9 35.8 40.0 60.6 65.2 66.4 64.8 64.3 67.9 Interest Earnings 25.9 6.8 15.1 10.4 22.2 20.2 14.8 19.2 10.1 15.7 Other Revenues 13.5 13.0 6.1 9.2 8.3 6.9 5.8 12.5 5.7 3.6 Total Revenues 170.5 166.0 173.4 209.1 253.5 270.9 290.2 316.6 330.6 352.6 Operating Expenses(1) 79.7 95.4 101.8 105.6 112.2 131.9 164.6 138.1 143.4 172.3 Net Revenues $ 90.8 $ 70.6 $ 71.6 $ 103.5 $ 141.3 $ 139.0 $125.6 $ 178.5 $ 187.2 $ 180.3 Debt Service Requirements Principal Payments 11.0 11.6 12.0 12.8 13.5 11.0 21.3 24.0 25.9 14.4 Interest Payments 11.7 16.8 25.9 29.1 35.3 31.8 36.3 43.1 46.5 51.0 Total Debt Service Requirements $ 22.7 $ 28.4 $ 37.9 $ 41.9 $ 48.8 $ 42.8 $ 57.6 $ 67.1 $ 72.4 $ 65.4 Coverage Ratios 4.00 2.49 1.89 2.47 2.90 3.25 2.18 2.66 2.59 2.76 Ending Reserves(2) $ 394.0 $ 518.0 $ 407.0 $ 385.0 $ 293.0 $ 425.0 $401.0 $ 344.0 $ 420.0 $ 434.0 Notes (1)-Operating expenses exclude depreciation and amortization expenses. (2)-Excludes debt service reserves in accordance with the District's reserve policy. Source:Orange County Sanitation District's Financial Management Division. 53 ORANGE COUNTY SANITATION DISTRICT Computation of Direct and Overlapping Debt June 30, 2012 2011-12 Assessed Valuation(Land&Improvements Only): $269,668,276,190(after deducting 39,022,673,309 Redevelopment Incremental Valuation) OVERLAPPING TAX AND ASSESSMENT DEBT(Based on redevelopment adjusted all property assessed valuation of$273,998,241,405} Total Debt District's Share of 6/30/12 %Applicable(1) Debt 6/30/12 Metropolitan Water District of Southern California $196,545,000 15.170% $ 29,815,877 Coast Community College District 317,803,867 99A62 316,094,082 North Orange County Joint Community College District 206,464,001 96.946 200,158,590 Rancho Santiago Community College District 302,555,660 99.145 299,968,809 Brea-Olinda and Laguna Beach Unified School Districts 51.884,029 99.955&14.918 25,941,403 Garden Grove Unified School District 128,500,160 100. 128.500,160 Los Alamitos Unified School District School Facilities Improvement District No.1 68,721,127 98.823 67,912,279 Newport Mesa Unified School District 246.399,150 100. 246,399,150 Placentia-Yorba Linda Unified School District 268,181,187 98.648 264,555,377 Saddleback Valley Unified School District 131,925,000 11.959 15.776,911 Sarda Ana Unified School District 302,027,117 100. 302,027,117 Tustin Unified School District School Facilities Improvement District No.2002-1 57,675,577 99.955 57,649,623 Tustin Unified School District School Facilities Improvement District No.2008-1 49,000,000 99.955 48,977,950 Anaheim Union High School District 110,073,955 100. 110,073,955 Fullerton Joint Union High School District 55,152,910 90.243 49,771,641 Huntington Beach Union High School District 225,384,998 98.839 222,768,278 School Districts 367,772,752 97.071-100. 366,990,832 City of Anaheim 3,185,000 99.069 3,155,348 Irvine Ranch Water District Improvement Districts 540,820,240 Various 540,818,950 Rossmoor Community Services District Special Tax Obligations 415,000 100. 415,000 Bonita Canyon Community Facilities District No.98-1 38,330,000 100. 38,330,000 Irvine Unified School District Community Facilities Districts 399.750,838 100. 399,750,838 Tustin Unified School District Community Facilities Districts 251,987,675 100. 251,987,675 City of Tustin Community Facilities Districts 78,620,000 100. 78,620,000 Other Community Facilities Districts 372.494,700 98.935-100. 372,414,283 Orange County Assessment Districts 93,328,295 100. 93,328,295 City of Irvine 1915 Act Bonds 807,707,210 100. 807,707,210 Other 1915 Act bonds 20,475,000 100. 20,475,000 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $5,360,384,633 DIRECT AND OVERLAPPING GENERAL FUND DEBT: Orange County General Fund Obligations $233,751,000 72.722% $ 169,988,402 Orange County Pension Obligations 214,405,353 72.722 155,919,861 Orange County Board of Education Certificates of Participation 16,000,000 72.722 11.635,520 Coast Community College District General Fund Obligations 20,240,000 99A62 20,131,109 Brea-OHmdaUnified School District Certificates of Participation 25,525,000 99.955 25,513,514 Orange Unified School District Certificates of Participation and Benefit Obligations 138,420,000 98287 136,048,866 Placentia-Yorba Linda Unified School District Certificates of Participation 108,410,670 98.648 106,944,958 Santa Arta Unified School District Certificates of Participation 50.672,741 100. 50,672,740 Other Unified School District Certificates of Participation 58,334,337 Various 57,786,089 Union High School District Certificates of Participation 119,409,185 Various 116,545,042 School District Certificates of Participation 63,955,000 Various 63,423,433 City of Anaheim General Fund Obligations 563,032,465 99.069 557,790,633 City of Costa Mesa General Fund Obligations 33,910,000 100_ 33,910,000 City of Garden Grove General Fund Obligations 18,970,000 100. 18,970,000 City ofHuntimgton Beach General Fund and Judgment Obligations 53,814,000 99.974 53.800,009 City of La Habra General Fund Obligations 19,595,000 100. 19,595,000 City of Santa Ana General Fund Obligations 95,015,000 100. 95.015,000 Other City General Fund Obligations 251,692,551 Various 230.012,869 Orange County Sanitation District 0 100. 0 (2) Irvine Ranch Water District Certificates of Participation 77,190,000 90.001 69,471,772 Municipal Water District of Orange County Water Facilities Corporation 12.145,000 67,859 8,241,476 Yorba Linda County Water District Certificates of Participation 8,965,000 97.704 8 759 164 TOTAL GROSS OVERLAPPING GENERAL FUND DEBT $2,010,175,457 Less: City of Anaheim self-supporting obligations 546,808,834 Other City self-supporting obligations 32,100,771 MWDOC Water Facilities Corporation(100%self-supporting) 8241. M TOTAL NET OVERLAPPING GENERAL FUND DEBT $1,423,024,376 GROSS COMBINED TOTAL DEBT $7,370,560,090 (3) NET COMBINED TOTAL DEBT $6,783,409,009 (1) Percentage of overlapping agency's redevelopment adjusted all property assessed valuation located within boundaries of the district- (2) Excludes wastewater revenue certificates of participation. Previously classified certificates of participation have been reclassified as district revenue supported issues and are no longer included as direct debt in the debt statement. (3) Excludes tax and revenue anticipation notes,enterprise revenue,mortgage revenue and tax allocation bonds and non-bonded capital lease obligations.Qualified Zone Academy Bonds are included based on principal due at maturity- Ratios to: Total Overlapping Tax and Assessment Debt Gross Combined Total Debt Net Combined Total Debt Adjusted Land and Improvement Assessed Valuation 1.74% 2.73% 2.69% Adjusted All Property Assessed Valuation N/A 2.52% 2.48% STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/12: $0 Source: CalifoniaMunicipalStatistics 54 ORANGE COUNTY SANITATION DISTRICT Ratios of Outstanding Debt Last Ten Fiscal Years (5) Debt as a Total (3) Percentage Outstanding Median of Median (4) Debt Fiscal COP Family Family Population per Year Debt Income (1) Income Estimate (2) Capita 2002-03 $ 364,975,000 $ 70,000 0.019% 2,408,050 151.56 2003-04 633,365,000 74,200 0.012% 2,441,350 259.43 2004-05 621,325,000 75,700 0.012% 2,467,850 251.77 2005-06 808,570,000 78,300 0.010% 2,481,540 325.83 2006-07 801,785,000 78,700 0.010% 2,505,180 320.05 2007-08 1,082,420,000 84,100 0.008% 2,522,820 429.05 2008-09 1,241,530,000 86,100 0.007% 2,539,990 488.79 2009-10 1,287,250,000 87,200 0.007% 2,563,170 502.21 2010-11 1,407,155,000 84,200 0.006% 2,457,571 572.58 2011-12 1,335,965,000 85,300 0.006% 2,472,122 540.41 Notes & Data Sources (1) - Data is for the entire County of Orange. (2) - Data is for the estimated population served by the Orange County Sanitation District. (3) - Data Source: U.S. Department of Housing and Urban Development. (4) - Data Source: Demographic Research Unit, California Department of Finance. (5) - Data Source: Orange County Sanitation District. 55 ORANGE COUNTY SANITATION DISTRICT Comparison of the Volume of Wastewater Treated With Revenues and Expenses Last Ten Fiscal Years Millions of Gallons of Collection, Waste- Treatment water &Disposal Total Total Total Total Treated Cost per Operating Non-Operating Operating Non-Operating Fiscal Per Million Costs Costs Revenues Revenues Year Day Gallons (In Thousands) (In Thousands) (In Thousands) (In Thousands) 2002-03 239 880.25 $ 121,635 $ 15,653 $ 89,164 $ 71,186 2003-04 238 1,068.43 139,815 21,626 102,327 54,657 2004-05 243 1,095.79 149,941 25,642 121,415 51,933 2005-06 235 1,216.77 155,519 38,645 155,165 53,861 2006-07 229 1,268.38 165,266 37,836 169,656 83,876 2007-08 221 1,541.18 179,657 40,335 185,376 85,458 2008-09 211 1,576.67 197,076 38,741 207,317 82,897 2009-10 196 1,588.72 190,121 41,273 225,688 90,864 2010-11 207 1,816.62 192,676 68,374 245,249 85,414 2011-12 201 1,871.47 228,369 37,871 260,521 92,115 A Facilities Master Plan to the year 2030 was completed in December 2009 that projects wastewater treatment flows to increase to 279 millions of gallons per day(mgd) in 2020, to 286 mgd in 2025, and to 294 mgd in the year 2030. The anticipated need to meet the projected flows is included in the overall CIP program of$2.0 billion out to 2021-22. Total expenses in FY 2011-12 increased $128.9 million, or 93.9 percent since FY 2002-03, primarily as a result of(1) OCSD's decision beginning in FY 2002-03 to maximize existing secondary treatment facilities as OCSD moves from a 50/50 mix of primary and secondary effluent treatment to meeting secondary treatment standards by December 31, 2012, and (2) OCSD's decision to eliminate most bacteria from the ocean outfall discharge by disinfecting the effluent beginning in FY 2002-03 at an additional cost in chemicals of$7 million annually. Maintenance, chemicals, utilities, and other operating costs represent 43 percent of the increase, primarily due to the increase in the levels of treatment referred to above and an increase of feasibility study in FY 2011-12. Depreciation expense represents another 11 percent of the increase as a result of the previous expansion in capital facilities and the financing associated with the expansion. In FY 2011-12, personnel expenses rose 3.5 percent over the prior year. This increase is mainly due to increases in health insurance and retirement premiums. The full-time equivalent positions authorized decreased by 4 in FY 2011-12. As depicted from the chart above, actual wastewater treatment flows have generally remained between 229 mgd and 243 mgd in the past. Due to unusually dry weather conditions during the last five years, FY 2007-08, FY 2008-09, FY 2009- 10, FY 2010-11 and FY 2011-12 had flows of only 221 mgd, 211 mgd, 196 mgd, 207 mgd and 201 respectively. Source: Orange County Sanitation District. 56 ORANGE COUNTY SANITATION DISTRICT Authorized Full-time Equivalents by Function Last Ten Fiscal Years 300 250 200 150 100 - L�q 50 0 lit, Im V 4, 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 aGeneral Management ■Human Resources oAdministrative Services ■Facilities Support Services ■Technical Services ■Engineering ■Operations and Maintenance Fiscal Year Ending June 30, 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 General Management 17 17 17 2 25 30 30 15 15 13 Human Resources 21 25 27 28 19 16 16 17 27 20 Administrative Services 86 91 96 117 83 82 81 92 85 111 Facilities Support Services 54 61 62 62 51 57 68 71 70 84 Technical Services 94 100 112 114 119 109 107 105 102 - Engineering 79 80 95 99 98 93 98 96 112 128 Operations and Maintenance 218 224 220 222 249 247 241 245 230 281 Total FTE's 569 598 629 644 644 634 641 641 641 637 Source: Orange County Sanitation District's Financial Management Division. 57 ORANGE COUNTY SANITATION DISTRICT Biosolids Produced Last Ten Fiscal Years 320,000 270,000 220,000 170,000 100 120,000 70,000 20,000 -Itlk Itttitt) 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 o Wet Tonnage ■Dry Tonnage Fiscal Year Wet Tonnage Dry Tonnage 2002-03 214,600 47,631 2003-04 239,426 50,519 2004-05 246,194 51,700 2005-06 233,996 49,554 2006-07 236,460 49,184 2007-08 248,717 50,884 2008-09 249,202 51,342 2009-10 245,668 50,799 2010-11 253,557 49,133 2011-12 280,572 47,556 Source: Orange County Sanitation District's Environmental Compliance& Regulatory Affairs Division. 58 ORANGE COUNTY SANITATION DISTRICT Capital Asset Statistics Last Ten Fiscal Years Miles of Number Primary Secondary Trunk& of Treatment Treatment Fiscal Subtrunk Pump Capacity Capacity Year Sewers Stations (1) (1) 2002-03 650 20 276 200 2003-04 650 20 276 170 2004-05 620 18 306 170 2005-06 584 16 366 200 2006-07 581 16 372 200 2007-08 568 17 372 200 2008-09 582 17 372 212 2009-10 579 17 372 212 2010-11 587 17 372 212 2011-12 572 17 372 332 Notes (1) - Capacity is presented as million gallons treated per day. Source: Orange County Sanitation District 59 ORANGE COUNTY SANITATION DISTRICT Demographic Statistics Covering The Entire County of Orange(1) Last Ten Fiscal Years Total (5) (6) (2) Personal Per Capita Median Public (7) Fiscal Population Income Personal Family School Unemployment Year Estimates (in thousands) Income Income Enrollment Rate 2002-03 2,979,000 $ 122,427,855 (3) $ 41,097 $ 70,000 512,000 4.0% 2003-04 3,017,000 130,621,396 (3) 43,295 74,200 517,000 3.6% 2004-05 3,047,000 139,408,948 (3) 45,753 75,700 514,000 3.9% 2005-06 3,072,000 150,598,354 (3) 49,023 78,300 510,114 3.7% 2006-07 3,090,000 153,446,600 (4) 49,659 78,700 503,955 3.9% 2007-08 3,108,000 155,068,400 (4) 49,893 84,100 503,492 5.3% 2008-09 3,135,000 148,372,600 (4) 47,328 86,100 504,136 9.3% 2009-10 3,166,000 153,098,600 (4) 48,357 87,200 502,239 9.5% 2010-11 3,030,000 159,007,100 (4) 52,478 84,200 502,903 9.2% 2011-12 3,056,000 166,345,500 (4) 54,432 85,300 502,195 7.9% Notes and Data Sources (1) - The Orange County Sanitation District services 471 square miles or 59% of the total 799 square miles that make up the boundaries of the County of Orange. (2) - Data Source: Demographic Research Unit, California Department of Finance. (3) - Data Source: Bureau of Economic Analysis, U.S. Department of Commerce. (4) - Data Source: Anderson Center for Economic Research, Chapman University. (5) - Data Source: U.S. Department of Housing and Urban Development. (6) - Data Source: California Department of Education, Educational Demographics Unit. (7) - Data Source: State of California, Employment Development Department as of June 30 of each fiscal year. (8) - Forecasted number 60 ORANGE COUNTY SANITATION DISTRICT Estimated Populations Served by the Orange County Sanitation District June 30, 2012 Population as of January 1, 2012 Anaheim 343,793 Brea 40,932 Buena Park 81,460 Costa Mesa 110,757 Cypress 48,273 Fountain Valley 55,810 Fullerton 137,481 Garden Grove 172,648 Huntington Beach 192,524 Irvine 223,729 La Habra 60,871 La Palma 15,700 Los Alamitos 11,557 Newport Beach 85,990 Orange 138,010 Placentia 51,084 Santa Ana 327,731 Seal Beach 24,354 Stanton 38,498 Tustin 76,567 Villa Park 5,867 Westminister 90,677 Yorba Linda 65,777 Subtotal City(1) 2,400,090 Estimated Population Served in Unincorporated Areas (2) 72,032 2,472,122 Data Sources: (1) Demographic Research Unit, California Department of Finance. (2) Orange County Sanitation District Financial Management Division. 61 ORANGE COUNTY SANITATION DISTRICT Principal Orange County Employers (1) For the Current Fiscal Year and Nine Years Ago Fiscal Year Ended 6/30/12 Fiscal Year Ended 6/30/03 Percentage of Percentage of Number of Total County Number of Total County Employers Employees(2) Rank Employment(3) Employees (2) Rank Employment(4) Walt Disney Co. 22,000 1 1.48% 21,275 1 1.45% University of California, Irvine 21,291 2 1.43% 14,981 3 1.02% County of Orange 17,321 3 1.16% 17,741 2 1.21% St. Joseph Health System 12,048 4 0.81% 9,435 6 0.64% Boeing Co. 7,700 5 0.52% 11,179 4 0.76% BankAmerica Corp. 6,300 6 0.42% 4,813 10 0.33% YUM! Brands Inc. 6,300 7 0.42% Kaiser Permanente 5,968 8 0.40% Target Corp. 5,527 9 0.37% 4,878 9 0.33% Cedar Fair LP 5,200 10 0.35% Albertsons Inc. 9,500 5 0.65% Tenet Healthcare Corp. 8,389 7 0.57% SBC Communications, Inc. 7,100 8 0.48% Total 109,655 7.36% 109,291 7.44% Notes& Data Sources (1)- Data is for the entire County of Orange. (2)- Data Sources: Orange County Business Journal Book of Lists, County of Orange (3)- Data Source: State of California, Employment Development Department. - Percentage is calculated by dividing employees by total employment of 1,491,000 as of June 2012. (4)- Data Source: State of California, Employment Development Department. - Percentage is calculated by dividing employees by total employment of 1,469,800 as of June 2003. 62 ORANGE COUNTY SANITATION DISTRICT Operating Indicators June 30, 2012 District Organization: The Orange County Sanitation District is one consolidated district made up of two revenue areas which service unincorporated county areas and twenty-three cities and related special districts, as follows: Consolidated Revenue Area County of Orange (unincorporated areas) Cities: Anaheim Huntington Beach Santa Ana Brea Irvine Seal Beach Buena Park La Habra Stanton Costa Mesa La Palma Tustin Cypress Los Alamitos Villa Park Fountain Valley Newport Beach Westminster Fullerton Orange Yorba Linda Garden Grove Placentia Special Districts: Midway City Sanitary District Costa Mesa Sanitary District Revenue Area No. 14 County of Orange (unincorporated areas) Cities: Irvine Orange Tustin Special District: Irvine Ranch Water District Governing Body: 25-member Board of Directors Authorized Full-Time Equivalent Employees: 637 Operational Date: July 1, 1954 Authority: California Health & Safety Code Section 4700 et. seq. Services: Wastewater collection, treatment, and disposal Service Area: 479 square miles Population Served: 2.5 million Total Miles of Sewers (including force mains): 572 miles Number of Pumping Stations: 17 Wastewater System Treatment Capacities (Million Gallons per Day) Existing Primary Existing Secondary Planned Secondary Actual Flows Treatment Capacity Treatment Capacity Capacity by 2020 Plant 1 96 204 182 182 Plant 2 105 168 150 150 Total 201 3-L2 332 332 Source: Orange County Sanitation District's Financial Management Division. 63 (THIS PAGE INTENTIONALLY LEFT BLANK) 64 ORANGE COUNTY SANITATION DISTRICT OTHER DATA&TRENDS Information within this section consists of other data and trends including additional annual disclosures as required by the Sanitation District's Certificates of Participation debt covenants beyond what is allowed to be reported in the Statistical Section. 65 ORANGE COUNTY SANITATION DISTRICT Cash and Investment Portfolio As of June 30,2012 Cost Market Value Net Unrealized Gain/Loss Shares Par Base Base %of Total Base INVESTMENT PORTFOLIO: CASH&CASH EQUIVALENTS(U.S.DOLLAR): CASH EQUIVALENTS $ 104,812.50 $ 104,812.50 $ 26,203.13 0.01% $ (78,609.37) REPURCHASE AGREEMENTS 183,900,000.00 183,900,000.00 183,900,000.00 37.67% SHORT TERM INVESTMENT FUNDS(US REGULATED) 1,371,900.94 1,371,900.94 1,371,900.94 0.28% TREASURY BILLS- LESS THAN 1YR 126,900,000.00 126,734,746.22 126,734,746.22 25.96% PENDING TRADES (86,082,604.70) (86,082,604.70) -17.64% SUBTOTAL-CASH&CASH EQUIVALENTS 312,276,713.44 226,028,854.96 225,950,245.59 46.29% (78,609.37) FIXED INCOME SECURITIES(U.S.DOLLAR): ABS-HOME EQUITY 1,207,623.68 1,094,536.64 1,144,175.94 0.23% 49,639.30 ABS-SMALL BUSINESS ADMINISTRATION 568,100.16 568,100.16 633,408.95 0.13% 65,308.79 ABS-STUDENT LOANS 654,128.78 652,677.87 645,016.00 0.13% (7,661.87) AUTOMOBILES&COMPONENTS 1,545,000.00 1,763,478.45 1,656,147.30 0.34% (107,331.15) BANKING&FINANCE 51,972,000.00 52,254,394.43 50,964,803.64 10.44% (1,289,590.79) CMO-US AGENCIES 111,151.38 111,151.38 111,990.57 0.02% 839.19 COLLATERALIZED MORTGAGE OBLIGATION 753,912.88 755,856.57 764,015.31 0.16% 8,158.74 COMMIT TO PURCHASE FNMA POOLS (3,600,000.00) (3,814,312.50) (3,831,192.00) -0.78% (16,879.50) FDIC GUARANTEED BANK&FINANCE 6,350,000.00 6,467,278.15 6,352,349.50 1.30% (114,928.65) FHLMC MULTICLASS 2,738,964.41 3,008,868.43 3,142,594.30 0.64% 133,725.87 FHLMC POOLS 7,068.15 6,895.87 7,492.52 0.00% 596.65 FNMAPOOLS 5,545,421.90 5,556,349.73 5,926,469.90 1.21% 370,120.17 FNMAREMIC 3,351,705.57 3,403,398.04 3,461,340.90 0.71% 57,942.86 FOOD PRODUCTS 2,600,000.00 2,940,824.00 2,950,994.00 0.60% 10,170.00 GNMA MULTI FAMILY POOLS 450,130.91 449,975.02 466,693.26 0.10% 16,718.24 HEALTH CARE 1,000,000.00 996,290.00 1,035,560.00 0.21% 39,270.00 INFLATION INDEXED SECURITIES 30,574,160.00 33,513,033.57 33,965,088.59 6.96% 452,055.02 INSURANCE 5,610,000.00 4,694,792.00 5,753,211.60 1.18% 1,058,419.60 MUNI-MEDICAL 500,000.00 508,595.00 601,805.00 0.12% 93,210.00 OIL&GAS 100,000.00 100,000.00 100,840.00 0.02% 840.00 TAXABLE MUNICIPALS 17,440,000.00 17,738,875.89 20,965,666.80 4.30% 3,226,790.91 TECHNOLOGY 3,200,000.00 3,200,000.00 3,193,024.00 0.65% (6,976.00) US AGENCIES 16,565,000.00 16,811,275.08 16,618,934.55 3.40% (192,340.53) US GOVERNMENTS 92,600,000.00 92,544,698.42 95,991,693.30 19.67% 3,446,994.88 UTILITY-ELECTRIC 5,097,000.00 5,310,583.61 5,952,997.16 1.22% 642,413.55 UTILITY-TELEPHONE 2,020,000.00 2,084,034.00 2,460,966.00 0.50% 376,932.00 WHOLE LOAN-CMO-COLLATERALIZED MTG OBLIG 1,141,123.67 1,141,118.42 1,141,477.42 0.23% 359.00 SUBTOTAL-FIXED INCOME SECURITIES 250,102,491.49 253,862,768.23 262,177,564.51 53.71% 8,314,796.28 TOTAL INVESTMENT PORTFOLIO $562,379,204.93 479,891,623.19 488,127,810.10 100.00% $81236,186.91 DEMAND DEPOSITS AND CASH ON HAND 5,155,163.91 5,155,163.91 MONIES HELD WITH FISCAL AGENTS 63,371,163.29 63,371,163.29 MONIES WITH THE LOCAL AGENCY INVESTMENT FUND 20,643,482.19 20,668,659.87 TOTAL CASH AND INVESTMENTS $569,061,432.58 $577,322,797.17 Source: BNY Mellon Trust and Orange County Sanitation District's Financial Management Division. 66 ORANGE COUNTY SANITATION DISTRICT Property Tax Rates- Direct and Overlapping Governments Last Ten Fiscal Years Tax Rate OCSD 1958 OCSD's General Average Fiscal Basic Obligation Total Share of Year Levy Bonds Tax Rate Basic Levy 2002-03 1.00% 0.00% 1.00% 1.71% 2003-04 1.00% 0.00% 1.00% 1.68% 2004-05 1.00% 0.00% 1.00% 1.67% 2005-06 1.00% 0.00% 1.00% 1.65% 2006-07 1.00% 0.00% 1.00% 1.65% 2007-08 1.00% 0.00% 1.00% 1.63% 2008-09 1.00% 0.00% 1.00% 1.64% 2009-10 1.00% 0.00% 1.00% 1.63% 2010-11 1.00% 0.00% 1.00% 1.64% 2011-12 1.00% 0.00% 1.00% 1.64% Notes In 1978, California voters passed Proposition 13 which set the property tax rate at a 1.00% fixed amount of assessed value. This 1.00% is shared by all taxing agencies within which the subject property resides. In addition to the 1.00% fixed amount, property owners were charged taxes as a percentage of assessed property values for the payment of OCSD general obligation bonds (which were paid in full in fiscal year 1998-99). Source: County of Orange Auditor-Controller's Office. 67 ORANGE COUNTY SANITATION DISTRICT Assessed and Estimated Actual Value of Taxable Property Last Ten Fiscal Years $350,000,000 $300,000,000 $250,000,000 $200,000,000 $150,000,000 $100,000,000 $50,000,000 $0 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 ■Secu red O U nsecu red Percent Change in Fiscal Assessed Year Secured Unsecured Total Value 2002-03 183,223,000 5,657,000 188,880,000 8.91% 2003-04 197,143,000 4,309,000 201,452,000 6.66% 2004-05 214,529,000 4,743,000 219,272,000 8.85% 2005-06 236,826,573 5,023,423 241,849,996 10.30% 2006-07 264,241,033 6,452,111 270,693,144 11.93% 2007-08 288,051,467 4,681,838 292,733,305 8.14% 2008-09 301,717,479 5,894,003 307,611,482 5.08% 2009-10 299,038,654 6,116,530 305,155,184 -0.80% 2010-11 298,099,034 6,238,834 304,337,868 -0.27% 2011-12 302,526,970 6,163,979 308,690,949 1.43% In 1978, the voters of the State of California passed Proposition 13 which limited property taxes to a total maximum rate of 1% based upon the assessed value of the property being taxed. Each year, the assessed value of property may be increased by an inflation factor which is limited to a maximum increase of 2%. With few exceptions, property is only reassessed at the time that it is sold to a new owner. At that point, the new assessed value is reassessed at the purchase price of the property sold. The assessed valuation data shown above represents the only data currently available with respect to the actual market value of taxable property and is subject to the limitations described above. Consequently,the assessed and estimated values are the same. Source: Orange County Auditor-Controller's Office. 68 ORANGE COUNTY SANITATION DISTRICT Property Tax and User Fee Levies and Collections (Dollars in Thousands) Last Ten Fiscal Years $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $_ W7,1 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 OTotal Tax and User Fee Levy ■Total Tax and User Fee Collection Current Tax Total Tax %of Total Tax and User Percent of Delin- and User %of Total O/S Delinquen- Fiscal and User ERAF III Fee Levy quent Fee Collection Delinquen- cies to Tax Year Fee Levy Deduction Collection Collected Collection Collection to Levy cies Levy 2002-03 $ 122,450 $ $ 122,210 99.80 $ 98 $ 122,308 99.88 $ 332 0.27 2003-04 134,389 134,132 99.81 94 134,226 99.88 241 0.18 2004-05 153,187 (16,198) 152,745 99.71 92 152,837 99.77 257 0.17 2005-06 191,711 (16,198) 191,290 99.78 122 191,412 99.84 421 0.22 2006-07 209,766 209,206 99.73 215 209,421 99.84 560 0.27 2007-08 228,622 - 228,635 100.01 329 228,964 100.15 (13) (0.01) 2008-09 254,092 - 254,106 100.01 395 254,501 100.16 (14) (0.01) 2009-10 272,050 - 272,110 100.02 226 272,336 100.11 (60) (0.02) 2010-11 292,646 - 292,689 100.01 120 292,809 100.06 (43) (0.01) 2011-12 314,077 - 317,249 101.01 121 317,370 101.05 (3,172) (1.01) Source: Orange County Auditor-Controller's Office. 69 ORANGE COUNTY SANITATION DISTRICT Property Value and Construction Covering The Entire County of Orange (1) (Dollars In Thousands) Last Ten Fiscal Years Non- Assessed Residential Residential Property Value(2) Constr. (3) Construction (3) Total Fiscal Calendar No. of Construction Year Value Year Value Units Value Value (3) 2002-03 $ 269,684,864 2003 $ 1,005,547 9,311 $ 2,076,976 $ 3,082,523 2003-04 287,923,828 2004 1,132,848 9,322 2,243,642 3,376,490 2004-05 311,802,395 2005 1,494,759 7,206 2,100,436 3,595,195 2005-06 342,576,859 2006 2,400,569 8,371 2,316,948 4,717,517 2006-07 381,007,391 2007 2,005,198 7,072 1,792,270 3,797,468 2007-08 412,669,779 2008 1,439,120 3,159 1,037,713 2,476,833 2008-09 428,809,224 2009 952,480 2,200 855,193 1,807,673 2009-10 422,965,596 2010 1,151,929 3,091 1,029,407 2,181,336 2010-11 420,751,575 2011 1,300,019 4,807 1,236,973 2,536,992 2011-12 424,769,642 2012 (4) 1,381,116 6,118 1,574,992 2,956,108 Notes and Data Sources (1) - The Orange County Sanitation District services 480 square miles or 60% of the total 799 square miles that make up the boundaries of the County of Orange. (2) - Data Source - Orange County Auditor-Controller's Office. (3) - Data Source-"The Chapman University Economic& Business Review." (4) - Forecasted numbers. 70 ORANGE COUNTY SANITATION DISTRICT Insurance in Force As of July 1, 2012 Type Insurer Deductible Limit All-Risk Property Fire and Other Perils Public Entity Property $250,000 per $1 billion/occurrence Insurance Program occurrence (Lexington and others) Flood Public Entity Property $100,000 per $300 million/occurrence Insurance Program occurrence Earthquake Not Applicable Not Applicable Self-insured Boiler&Machinery Public Entity Property $25,000 to $100 million/occurrence Insurance Program $350,000 (Lexington and others) Crime Insurance National Union Fire $25,000 $5 million Excess Security National Insurance $250,000 $30 million/occurrence General Liabilitv (first$10 million layer); $500,000 for and annual aggregate Starr Indemnity& Liability EPLI ($20 million layer excess$10 million) Travel &Accident Chubb Group of Insurance None Accidental Death & Dismemberment: Companies Class 1: Elected Officials, $500,000 per occurrence Class 2: Employees, 10X annual salary, up to$500,000 per occur. Excess Workers' CSAC Excess Insurance $750,000 Unlimited statutory coverage Compensation Authority Program Each Accident each accident, each employee $4.5 million employer's liability Pollution Liability CSAC Excess Insurance $100,000 $10,000,000 per loss Authority Program Watercraft Liability Northern Assurance Co. of Am. $15,000 $10 million Hull & Machinery Northern Assurance Co. of Am. $15,000 $1.3 million Pollution Liability Great American Ins. Co, None $5 million OCIP Main Basket("OCIP" = Owner Contolled Ins. Program for Construction) Workers Comp. Liberty Mutual $250,000/occur. Unlimited statutory coverage General Liability Liberty Mutual $250,000/occur. $2 million/occurrence; $4 million agg. OCIP Excess Liability AIG $10,000 $100 million OCIP Pollution Liability Liberty Surplus $250,000 $15 million Source: Orange County Sanitation District's Risk Management Office. 71 (THIS PAGE INTENTIONALLY LEFT BLANK) 72 ORANGE COUNTY SANITATION DISTRICT FINANCIAL MANAGEMENT DIVISION 10844 Ellis Avenue Fountain Valley, California 92708-7018 714.962.2411 www.ocsewers.com 06/30/12