WWith a water supply shortfall looming, the city of Corpus Christi, Texas, shut down design work on a planned desalination plant in September, halting early work and terminating a $50 million design contract awarded to Kiewit.
The reason? With the design only 10 percent complete, the city learned that Kiewit and the Corpus Christi engineering consultant had recently projected the final cost of the plant at $1.2 billion. Just 10 months earlier, after Kiewit had won a three-way competition for the design-build contract, the city and its engineers were using $757 million as a price estimate. More design work was needed before a final contract with a guaranteed price could be signed.
Price quotes before the burst of construction inflation after 2019 and before a planned plant capacity expansion had put the cost at just $220 million.
Now the council, other elected officials and city-owned water company Corpus Christi Water are scrambling to find solutions that include securing water from other water districts, drilling new water sources and reportedly restoring the canceled contract.
The increases baffled and upset city council members and local residents who discussed the matter at an emotional meeting on September 2. “I can’t wrap my head around $1.2 billion,” he said Councilor Eric Contu, who voted in favor of the dismissal. “Whoever decided to go into design and construction made a mistake. They could charge whatever they want at 30, 40 or 60 percent.”
Other council members said they were unhappy that Kiewit, with his contract suspended, chose to send only observers rather than testify at the meeting. But other local residents, council members and Corpus Christi Water officials did not point to the delivery method, the type of contract or Kiewit.
The price of the project had increased in part because of rapid inflation in recent years, Corpus Christi Water officials said, and the capacity added to the original desalination plant concept. Taxpayers will pay more no matter which course is taken, and canceling the desalination plant project will increase costs.
Drew Molly, Corpus Christi Water’s former chief operating officer, wrote to City Manager Peter Zononi in August that the cancellation would leave the city “without a fully permitted alternative,” adding that the timing of new permits is unpredictable and that the higher water rates would fall on individual ratepaying homeowners, starting with an increase of about $96 a year.
Molly, a licensed engineer, recently resigned from her position at Corpus Christi Water to take a new job in Houston.
Drew Molly, former chief operating officer of Corpus Christi Water, testified at the emotional council meeting that resulted in a vote to terminate Kiewit’s contract.
Some residents were already upset about the city’s decision to locate the plant in the Hillcrest section. Other residents, some wearing blue “Water for People, No Pollutants” T-shirts, pointed out that industrial companies were consuming much of the city’s available water supply and wanted even more.
Faced with bleak alternatives, several speakers and councilors soughtas some say, to cut their losses, while others thought it wiser to restore Kiewit’s contract until 60% of the design was achieved next year.
The inclusion of the runner-up in the competition for desalination plants would delay the completion of the design by another three or four months, Zononi said.
Several citizens and some council members suggested that at 60%, the design done by Kiewit could be bid out to another company in hopes of getting a better price. It is not clear if this is possible.
Corpus Christi city council members were shown a slide about the choice they had to decide whether to continue or terminate the city’s agreement with Kiewit.
Mayor Paulette Guajardo, who is advocating for the project to continue, said terminating Kiewit’s contract — which the city had already suspended the previous month — would be throwing $50 million “down the toilet.” The comment implied that the money had already been paid or obligated only for the use of the desalination project.
A year ago, the project still didn’t have a set price. But the city selected Kiewit Infrastructure South Co., which beat out two competitors to design and build the Inner Harbor desalination plant. Local leaders estimated the cost of the project at $757.6 million.
The seawater desalination plant would have a capacity of 30 million gallons per day. Corpus Christi Water planned to build the plant on a site next to the Inner Harbor Ship Channel, which connects the Port of Corpus Christi to the Gulf of Mexico. The plant will extract and discharge to the channel.
The contract with city-owned Corpus Christi Water called for the project to be delivered under a progressive design-build approach, where close cooperation during design development culminates in a fixed price at 60% of the design.
What the $50 million in design development was paying for could be seen in presentations to city hall and in Kiewit’s description of the costs of the delay. With no work done by Kiewit in August, 30% design development was scheduled for mid-November. 60% design would not be achieved until the end of February 2026 and the council review would not occur until March.
In late August, while his contract was suspended, Kiewit filed a case to continue the contract and avoid a delay or costly interruption of his work.
In an email to Corpus Christi Water, the company listed the consequences of the delay. One of the biggest costs is the work disruption of other utility employees currently working on the project. Kiewit stated in an email that at the time of the memo, it had more than 100 managers, engineers and craft employees assigned to the project. This was reported to Brett Van Hazel, Corpus Christi Water project office manager.
The engineering firms working on the project, including Arcadis and GHD, employed a further 50 people dedicated to the project. The engineering firm’s staff would lose efficiency and continuity with another work stoppage, Kiewit said. With the Texas market booming, Kiewit staff should be quickly assigned to other projects, the company wrote.
Arcadis noted that design and cost validation under a progressive design-build was intended to be carried out in a “safety step”.
A demonstration plant also had to be built as part of the design and cost planning. Any delay in ordering long-term lead items from a variety of specialty equipment companies would also push completion of the project further back and likely lead to higher prices, Kiewit warned.
