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TRASH PLANT COST ON THE RISE

Climbing equipment and materials prices may drive the bill up another $13-million.

Hillsborough commissioners characterized it as a no-brainer when they unanimously approved one of their most costly no-bid construction projects ever three years ago.

But the "maximum" price of expanding the county's waste-to-energy plant keeps going up.

Commissioners will decide today whether to shift as much as $13.6-million toward the eastern Hillsborough County project. A favorable vote will increase its expected cost to $139.7-million, up more than 35 percent from an original estimate of about $102-million in June 2004.

Those involved with the project say it should still cost less than if commissioners had sought competitive bids for the work or locked in a guaranteed price. But at least one commissioner is skeptical.

"The bottom line is, we don't know that because we didn't go out (for bids)," said Commissioner Brian Blair, who joined the board after the initial approval, and has voiced objections to it since.

Residential customers won't have to pay for the increase through rate hikes. The money will come from reserves and by delaying part of another project.

Only two commissioners remain from the board that initially approved the no-bid approach, Jim Norman and current Chairman Ken Hagan. Neither returned phone calls seeking comment.

County officials and their consultants say the lack of competing bids has nothing to do with the price runup. They say the project has faced a perfect storm of rising skilled labor and construction materials costs that have hit power plant construction particularly hard.

"The base price of equipment is just costing us through the nose," said Dan Strobridge, a vice president with the county's independent consulting engineer, Camp Dresser & McKee. "Add to that, the power industry is just booming worldwide, meaning the companies that build the pumps and motors are just overloaded with work."

That prices for this project have gone up only as much as they have is good news, he said.

Beth Leytham, a spokeswoman for Covanta Hillsborough Inc., which is building the expansion, echoed his assessment.

Indeed, industry reports indicate power plant construction costs have gone up by about 25 percent in the past year alone. Specialized plants have gone up even more, county officials say.

"What happened here is truly unprecedented in the energy construction industry," said Barry Boldissar, director of the county's Solid Waste Management Department. "Prices have gone through the roof, way beyond what any prudent financial advisor would have estimated."

A roughly 18-month delay also contributed to the spike due to inflationary price adjustments guaranteed to Covanta since initial approval of the contract.

The county first hired what was then known as Ogden Martin Systems of Hillsborough County Inc. to build and run a garbage incinerator in 1984 after seeking competitive bids. Ogden Martin, now Covanta, uses heat from the trash burning to generate enough electricity for about 15,000 homes.

In looking to expand the plant by 50 percent, county garbage officials recommended sticking with Covanta to build and run it, describing the company as a "bird in hand."

They reasoned that they had had few problems with Covanta. Plus, the company owns rights to the main component of its furnace, meaning other bidders would likely have had to pay Covanta to do the expansion work.

In inking the deal, commissioners took a calculated risk: Rather than seek a guaranteed price, they accepted a lower offer from Covanta that gave the company financial incentives if it hit the lower price point.

Covanta submitted what was called a "maximum expansion price" that, despite the description, was not guaranteed.

The company will now forgo those incentives.

Strobridge, the county consultant, still thinks Hillsborough made the right call. Had the project gone to bid, the delay would have allowed companies to see the dramatic spikes in labor and materials costs, and would have adjusted offers accordingly.

" The county, I'm sure, would have gotten a price that made its eyes rolls back in its head, the prices would have been so high," Strobridge said. "So I think the county made the right decision."

Bill Varian can be reached at varian@sptimes.com or (813) 226-3387.

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