The winter of 2013-14 offered up a perfect storm of natural gas price spikes and threats to electric reliability. Expect more of the same.
Planning a Fossil Teardown
Decommissioning and remediation of coal- and oil-fired plants.
cost estimates. Often the first step after assembling a detailed plan is to engage an OR-OE to effectively manage the internal and external resources needed to accomplish the project. The OR-OE then develops the technical specifications for the demolition, which, in turn, form the basis of the request for proposal (RFP) going out to competitive bidders. The OR-OE might then subsequently act as the owner’s on-site representative to oversee the actual demolition process.
In addition to the specifications, quantity estimates, existing environmental reports, permits, and approvals that will be pulled together by the OR-OE or the internal team, the RFP also needs to incorporate many of the various business details. To avoid significant time delays, and sometimes even the need to either make significant concessions on the business terms or to pass over the first choice bidder, the RFP should include the draft commercial contract terms and the requirement that any requested changes to the draft contract be included in the proposal. This way, the ability to reach agreement on the contract terms becomes a selection criterion during the bid evaluation, rather than an item that gets negotiated after the owner selects the bidder and loses its negotiating leverage.
The owner should consider utilizing a two-phase process to pre-qualify bidders in terms of their specific relevant industrial or power plant demolition expertise. This step avoids having to deal with unrealistic low-ball bids coming from less experienced bidders that can complicate the rate recovery process. Inexperienced contractors can lead to cost overruns, add-ons, or work scope changes while the work is in progress.
To ensure that the cost of the proposal is clearly expressed, and to enable quick and accurate comparisons between bids, the RFP also should contain a bidding sheet that clearly describes how costs are to be presented in the submitted proposal by all responders and non-conforming bids should be excluded. The owner also should consider how it might attach business confidentiality protection to certain bid documents. Doing so might help ensure the most competitive procurement. Most states have a process for preserving confidentiality even in matters that undergo regulatory review by state utility regulators for rate recovery purposes.
Once a detailed bid specification has been developed and prospective bidders have been carefully pre-qualified, it should be relatively straightforward to evaluate, analyze, and compare bids. The most experienced demolition contractors will be able to produce the most accurate—though not necessarily the lowest—bids, particularly with respect to calculating and estimating salvage value and remediation cost. If a fixed price or GMP is required, a negotiated pricing process that leads into a GMP during the pre-demolition phase might be necessary.
The project manager, whether employed by the owner or retained, is critical to the success of the project. Here again, prior experience with power plant demolition can make a big difference. Experience with the owner’s procurement and contracting process is also extremely useful. If the OR-OE has continued into the owner’s representative role following the bidding process, it can assist in monitoring the remediation and demolition, coordinating requests for information and change orders,