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SPU

Alternatives Analysis at Morse Lake
Seattle Public Utilities

Seattle, Washington

PROJECT

BIS Consulting worked as part of a team comprising technical experts, cost estimators, and value engineers to provide alternatives analysis related to a large capital improvement to Seattle Public Utilities’ water supply system. SPU gets the majority of the City’s water from Chester Morse Lake on the Cedar River. The existing intake system cannot draw the reservoir all the way down, which creates a risk that in extreme drought SPU will be unable to meet demand even though there is still water available. SPU had begun design of a large pump station that would address this contingency, however questions were raised as to whether the avoided risk was sufficient to justify the large cost.

The alternatives analysis considered two pump station options and a gravity tunnel solution, as well as doing nothing. Our role was risk assessment and economic analysis, which included quantifying uncertainty around all the major cost streams. For example, there is considerable uncertainty about the likelihood of needing to curtail supply, and if curtailment is needed how costly it is to the customers. Curtailment depends on the total water available in a given year as well as the timing of the start of fall rains, when the reservoir begins to refill.

Another significant source of uncertainty was the construction cost for all the options. BIS facilitated a workshop with the cost estimators, tunneling experts, and other technical stakeholders to estimate not only the expected cost for each option but also the width of the probability distribution, i.e., how likely is it that the construction cost may turn out to be much higher than anticipated. Through this effort we determined that the standard uncertainty ranges based on the level of design work were far too small to capture the actual uncertainty.

RESULTS

BIS developed a Monte Carlo model, which quantifies the expected cost for each alternative, the range of possible costs, and the expected risk from selecting any alternative based on the data available. This work led SPU to reconsider the need for any major capital project at all. The risk due to possible supply curtailments appears to be small compared to the cost of any of the alternatives, although some smaller-scale improvements appear to be justified. Aborting the project represents a capital saving to SPU and its ratepayers of nearly $50 million.

Date Completed: 2010

Highlights
Alternatives analysis for pumping station. Monte Carlo simulation of alternatives.
Reference
Terry Martin
Strategic Asset Manager
(206) 615-1744
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