Going through the RFP process can be a major headache. As a consultant, you not only have to write the request, but then go through the lengthy proposals your bidders provide, trying to evaluate what they’re offering, if it will meet your site and budgetary requirements, and how it stacks up against all the other proposals on your desk.
It’s enough to make you long for the simple life, maybe as a carefree rocket scientist.
Just kidding. But wouldn’t it be great if this entire process could be simplified?
Luckily, there are ways to improve the RFP process. In the first installment of this two-part blog post series, I covered what technical information to include in the RFP to help you identify and select the best technology and approach for meeting your project’s goals. Today, I will address how to save money on your in situ thermal remediation (ISTR) project by requiring achievement of mission-critical criteria, and carefully considering whether secondary criteria and contract requirements provide added benefit for the cost. Let’s dive into five questions you need to ask about what is essential and delivers the best outcome.
What items add cost without direct project benefits?
Sometimes RFPs include very prescriptive items and criteria under the assumption that doing so will ensure project success. However, in many cases, being overly prescriptive adds unnecessary costs to a project without adding significant benefit. The following provides some examples of items that sound good or might be nice to include, but aren’t necessarily the best value:
- Automated flow measurements at the individual vapor recovery wells or other highly detailed instrumentation of the thermal wellfield and process treatment system. These are best made manually and periodically during operations on an as needed basis.
- Detailed geologic logging during installation of the thermal wellfield. This significantly slows system installation and can add significant costs to a project. If additional characterization is required, this is best performed as a pre-design effort.
- Collection of soil samples during installation of the thermal wellfield to establish final treatment area and depth. This can increase installation costs by over 50%, result in re-design of the thermal remedy, and result in substantial project delays. Better to perform additional site investigation, possibly using high resolution down-hole investigation tools, prior to finalizing system design.
- Requesting that the ISTR vendor prepare all project plans. While the vendors can prepare all project plans, it is often more cost effective for the consultant to prepare the overall Remediation Work Plan and prepare and submit any required permits. Have the ISTR vendor provide the thermal remedy specific design work plan and any heating-specific text and design calculations required in support of the permits.
- Performance goals that are not directly related to site cleanup, such as reaching an overly prescriptive subsurface temperature criteria or required time at temperature (e.g., all temperature sensors in the thermal treatment zone must achieve and maintain 100°C for 60 days). Temperature data should be used to evaluate the progression and uniformity of heating and determine when to start confirmatory sampling, but it is best to base performance/payment goals on achieving the required cleanup goals. Including a temperature goal, such as reaching 90°C in 90% of the temperature sensors, should be included to provide a clear and reasonable design basis and as a secondary criteria to ensure sufficient heating of the treatment zone.
- Setting cleanup goals for the thermal treatment zone that are orders of magnitude lower than concentrations in the surrounding areas not being treated (e.g., a 5 ug/L cleanup goal inside the thermal treatment area when the treatment zone only include areas >1,000 ug/L). This places excess risk on the thermal vendor, which requires over design and costing to try to account for the reality that contaminants will migrate into the thermal treatment area during and after operations and result in the inability to reach the cleanup goals. Better to acknowledge the potential for the migration of contaminant mass into the treatment zone from surrounding areas, and either establish reasonable cleanup criteria based on this and/or allow for assessment of contaminant migration from outside areas on a case-by-case basis when evaluating confirmation sampling results and thermal remedy performance.
What items should the client pay for directly?
A great way to save money on most projects is for your client or you to take on some of the tasks that are not thermal design or implementation specific. In many cases, it’s best if the client pays directly for the costs listed below to avoid risk premiums and administrative mark-ups.
- Permit fees for air and waste water discharge. Have vendors provide the supporting engineering calculations, but manage payment of the fees yourself
- Granular activated carbon (GAC). Have contractors estimate how much GAC will be required, but don’t ask them to provide a firm lump sum price as they will have to apply a significant risk premium to cover uncertainties. Instead, request a GAC usage estimate (and backup calculations) and firm total and unit costs for a specified contaminant mass. If the GAC usage is less, the client would receive a rebate, if the GAC usage and recovered contaminant mass are more, then the vendor would be entitled to additional compensation based on the GAC unit rate provided in the proposal.
- Payment for the power drop. if the thermal vendors are asked to provide firm pricing for the power supply (connection to the power grid and primary transformer), they have to add a significant risk premium along with administrative mark-ups to cover the uncertainty. In most cases, it is best to ask the thermal vendor for an estimated cost for the power drop and then to adjust project costs based on the actual cost from the utility once the design has been finalized and the application has been submitted. Have vendors provide ISTR system requirements in kilowatts (kVA) and ask them to provide costs to prepare an electrical 1-line drawing, load calculations, and other system descriptions as needed to secure the power drop.
- Electrical use. Have ISTR vendors provide an estimate of electrical use requirements in total kilowatt hours (kWh), including a breakdown of the electrical use for heating, and extraction and treatment.
- Natural gas connection and on-going natural gas use. Have your contractors estimate peak demand (pressure and flow) and total natural gas use for the project along with providing a cost for installation of the gas service, including the meter.
- Payment for waste water discharge. Have vendors estimate volume in gallon per minute and total gallons.
How long time does it take for thermal vendors to put a good response together?
After the site walk, (strongly recommended), thermal contractors need a minimum of three to four weeks to prepare their submittals for a formal RFP. This includes time for the consultants to respond to questions. To prepare, vendors must review the RFP and site data, develop the conceptual system design, obtain subcontractor bids, and prepare proposal text and pricing. Having sufficient time to get accurate and current pricing reduces the contingency a vendor has to apply to their costs.
Should price and performance guarantees be required?
Many thermal remediation providers are willing to offer a variety of guarantees to cover project performance—but are the guarantees worth it?
It is important to consider that once the contract is signed the contractor guarantees they will meet the terms and conditions, including specific performance criteria, stipulated in the contract and RFP. And most projects include specific performance goals related to:
- Temperature targets
- Uptime operational goals
- Schedule milestones
- Soil and/or groundwater remedial goals
Much like insurance plans, the foundation of additional thermal performance guarantees is a lump sum payment for assuming project risk. They are typically priced based upon the level of project uncertainty and the amount of risk the client is seeking to transfer to the contractor. Guarantee pricing can range from 15% to 50% of the project value.
To lower the costs and increase the value of a site remediation guarantee, we advise against simply asking for a blanket performance guarantee in your RFP. Instead, identify the actual, perceived and created risks associated with the project and present them in the RFP in a manner that results in the lowest guaranteed costs for the client.
Actual risks include costs for items such as the power drop and the amount of GAC that will be consumed. Most actual risks are outside of the control of your contractors. The most cost effective way to deal with actual risks is have the client take them on directly, thereby avoiding vendor risk premiums and lowering guarantee percentages.
Created risk are typically client driven and, in most cases, involve costs for aggressive project schedules and burdensome contract language. Through a cost-benefit analysis, the client can determine if any of the created risks can be softened or eliminated to achieve a lower guaranteed percentage. Additionally, your RFP could ask for two guarantees: one for the schedule and contract language, the second for vendor suggested changes to these risk factors. Perceived risks most often include a lack of confidence in the heating technologies to reach cleanup goals and can lead the client to purchase a level of performance insurance. Perceived risks, and the cost to guarantee them, can be reduced by identifying the perception and crafting a factual guarantee clause that addresses it.
How should bonding and retainage be handled?
Thermal contractors typically hold that performance bonding a project brings little to no value to the client. Because they are not in a position to take over an ISTR project, most sureties will not underwrite them and the few that will charge significant sums. Lower cost alternatives to providing performance bonding are the use of lien releases and retainage clauses in contractual agreements. Retainage is typically five to 10 percent, and can be set up to be released throughout the project as milestones are achieved.
There is a lot to consider when developing an RFP for a successful and cost-effective thermal remediation project, but hopefully this post can help you craft requests that make your process easier. If you have questions, please email me so I can help.
If you have upcoming brownfield projects and are considering thermal remediation, I can help you even more—register for next week’s webinar, Brownfield Success: How to Select the Right Remediation Technology For Your Budget and Timeline. I’ll be presenting alongside remediation experts Eliot Cooper and Marat Goldenberg, and would love to see you join us.