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Seeking Best Value during Equipment Procurement

The U.S. Army Corps of Engineers took an alternative approach to procuring equipment for rehabilitation of its 25-MW Cougar project. Because of the technical challenges involved, the Corps adopted a “best value ” approach, in which pre-qualified contractors proposed their best design and manufacturing options and the Corps chose the proposal that offered the best value, though not necessarily the lowest price.

By G. Charles Allen, Jr.

The “best value ” method is one of the alternative processes that can be used by the U.S. Army Corps of Engineers to procure hydroelectric equipment and services. Because of the technical challenges involved in the turbine-generator rehabilitation program planned for its 25-MW Cougar project, the Corps decided to adopt this alternative procurement approach for Cougar. This experience can provide valuable insight into the use of the best value method, its strengths and weaknesses, and the factors needed to be successful.

Background on the project

Cougar Dam is a 450-foot-tall rockfill dam on the South Fork of the McKenzie River in Oregon. From the time the two vertical Francis turbines in the 25-MW Cougar powerhouse began operating in 1964, the runners experienced significant cavitation damage. In the early 1980s, the runner buckets and crown also required significant crack repair. Because the Corps had to take the units out of service four times a year for inspections and repair, they decided to procure replacements.

The replacement runners, supplied by Voith Siemens Hydro Power Generation, were installed in 1987. The runners were weld fabricated from CA6-NM components. The welds were 100 percent full penetration, using matching chemistry weld wire. There was no rehabilitation or overhaul of the original Leffel turbines or Elliott generators.

After some minor modification, the replacement runners achieved the output and efficiency stated in the specification. For the first five years of operation, cavitation damage was minimal. However, by 2000, each bucket had a golf-ball-sized hole about 3 inches upstream of the bucket trailing edge and 6 inches from the band. The cavitation problem was exacerbated by two factors. First, the runner blades are thin (about 0.35 inch), making weld repair difficult. Second, the distance between adjacent blades (vent opening) is only about 2.5 inches in the area where the cavitation damage exists, offering limited access for repair. However, apart from this cavitation damage, the balance of the runner was in excellent condition.

Because the dam was built for flood control, the Cougar reservoir is cycled through a large head range. Normal operating head range for a runner of Cougar ’s specific speed is +/-15 percent of the design head. Cougar ’s head range is +/-25 percent. In addition, there is no predominant operating head at Cougar. The units operate a third of the time at heads between 400 and 438 feet (including 20 percent of the time in the top 10 feet of the head range) and a fifth of the time at heads between 270 and 310 feet. The balance of the time is spent any place in the middle of the range. This meant the Cougar runners needed to operate equally well throughout the range.

Compounding this difficulty, a minimum flow requirement of 300 cubic feet per second (cfs) means that the turbines will operate at 20 to 30 percent gate opening a large portion of the time. Historic records indicate that the turbines operate at 300 cfs about 30 percent of the time. The 300 cfs could occur at any head in the range, and there was no dominant head at which this happened.

In the late 1990s, the Corps decided to install a temperature control intake at Cougar Dam to help control the temperature of river flows downstream. The structure contains of a number of gates at different elevations that feed water to the turbines, depending on the desired temperature.

To install this structure, the reservoir at Cougar had to be lowered to an elevation below the turbine intakes for 32 months. Work on the temperature control tower took the powerhouse out of service, so the Corps decided to use the opportunity and overhaul the turbine-generator units. The scope of the overhaul included: physical model testing, new turbine runners, a major turbine overhaul, a generator rewind, and disassembly and reassembly of the units.

A new procurement approach

To deal with some of the largest (normalized) head and flow ranges in the world, it was apparent to the Corps that a state-of-the-art runner design was required. While the design requirements were very demanding, the Corps was not inclined to relax the requirements to facilitate an easier design.

Writing the specification

The Corps wrote the specification for the new runners to allow the bidders as much freedom as possible in creating a design that met the needs of the project. Some key aspects of the specification were:

– Peak turbine efficiency (turbine design point) could occur at a head ofthedesigner ’s choosing;


The powerhouse at the 25-MW Cougar project contains two vertical Francis turbines. Because of significant cavitation damage, the U.S. Army Corps of Engineers decided to replace the runners.
Click here to enlarge image

– Peak efficiency requirements were stated for five net heads spanning the operatingrange. These five heads had to achieve peak efficiencies of 85.5 to 90.7 percent. However, the designer would be allowed to choose which peak efficiency to associate with which of the net heads; and

– Four different maximum power requirementswere stated. Again, the designer would be allowedtochoose which requirement to associate with which of four stated heads.

In addition, the Corps had one more requirement for the specification, perhaps the most demanding of all: No visual cavitation would be allowed throughout the turbine operating range. The Corps would verify this requirement using a physical model test.

Setting procurement goals

The Corps has a long tradition, influenced by statute and regulation, of issuing a specification and then awarding the contract to the lowest bidder. In fact, the “lowest bidder ” method is the Corps ’ default scenario. For the Cougar project, the Corps recognized the technical challenges inherent in the runner design, and discussions ensued about how best to obtain equipment and designs that met these challenges. Realizing that the runners would need a state-of-the-art design and would perhaps push the bounds of the design envelope, both the contracting and legal departments of the Corps recognized that an alternative procurement method was needed.

Some of the procurement goals were:

– Prequalification requirements would help the Corps ensure that bidders had successfully designed for similar demanding conditions;

– Bidders may have non-traditional ways to design and manufacture the runners, so the proposal evaluation needed to be flexible enough to allow consideration and evaluation of unique methods;

– The low bidder may not present the best value for this project. A higher-cost bidder might better meet the project goals, and the proposal evaluation needed to allow consideration of these factors; and

– The driving challenge for this project was the turbine runner design. Therefore, proposal evaluation for the generator and field work would be set at threshold levels, while the turbine evaluation would contain the deciding discriminators.

Processing the bids

After discussion among the contracting, engineering, and legal departments, the Corps decided that the needs of the Cougar project would be best served by using a two-stage, best value approach for award of the contract. The process would unfold as follows:

– Prospective bidders would submit information regarding their experience in designing for conditions similar to those at Cougar;


The contract for the rehab of the 25-MW Cougar project – which included disassembly and reassembly of the turbine-generator units – was awarded using a “best value ” approach. The U.S. Army Corps of Engineers chose the proposal that offered the best value, not necessarily the lowest price. (Photo courtesy GE Energy Hydro Installation)
Click here to enlarge image

– The Corps would evaluate this information against a pre-established set of criteria stated in the specification. The bidders who ranked most favorably would be invited to submit proposals containing price and technical information;

– The technical information submittal would include an oral presentation that focused on the bidder ’s experience in providing successful hydraulic designs for operating conditions similar to those at Cougar;

– The bidder ’s price and technical proposal, including the oral presentation, would be evaluated against additional criteria that was specific to the new technical information provided (this criteria also was stated in the specification); and

– The contract would be awarded to the bidder offering the best value. By this definition, all evaluation factors (not only price) would be considered whendetermining the winner.

When the Corps released the specification and invitation to submit proposals in December 2002, the reaction from the supplier community was mixed. Some reactions: “This project is very technicallychallenging. Let ’s partner together to develop the best solution. ” “This is a relatively small dollar project with a big technical risk. We will not be submitting a bid. ” “We can do that. Here is our proposal. ”


New turbine runners were installed as part of the rehabilitation of the two turbine-generator units at the 25-MW Cougar project. (Photo courtesy GE Energy Hydro Installation)
Click here to enlarge image

With a response time of about four weeks, three suppliers submitted information about their experience. The process of reviewing the supplier experience information and inviting the selected suppliers to submit technical and price proposals took about one month. The Corps invited all three to submit technical and price proposals, but one declined. In the end, the Corps evaluation team judged that the proposal from General Electric Hydro in Montreal, Qué bec, Canada, offered the best value. GE was not the low-cost bidder. The company was chosen based on the strength of the technical proposal.

Rehabilitating Cougar

The contract was awarded in May 2003, and both units were disassembled by November 2003. Following successful model testing by GE in December 2003, the rehabilitation of the turbine components took place between June and December 2004. Reassembly of the units then began and was completed in March 2005.

The rehabilitated turbines appear to have achieved all the goals of the project. Visual monitoring of the units for cavitation damage will continue for some time, but none is yet evident. The rehabilitated units run smoother and quieter throughout their operating range than they did before the work.

This best value approach to procurement worked well for the situation at Cougar Dam, but it probably is not the best method to use in most cases. For routine procurements, with no unique technical or commercial challenges, awarding the contract to the lowest bidder probably is appropriate.

For the best value approach to work well, two specific conditions need to exist. The first is an anticipation that, even among the most experienced suppliers, some will have a better ability to address the specific needs than will others. The second is the strong probability that there will be post-bid discussions with each bidder that explore the bidder ’s proposal, the skills the bidder can bring to bear on the problems to be solved, and the bidder ’s approach to fulfilling the requirements of the specification.

Lessons learned

The Corps learned several valuable lessons during this application of the best value procurement process:

– It is important to recognize early on the technical difficulty of a project. Once the Corps ’ engineering staff noted the technical difficulty, they met with representatives from the contracting and legal departments and made the case for an alternative procurement process.

– Certain factors naturally will be more important than others. It was absolutely necessary for the Corps to identify evaluation criteria for this project that would allow differentiation between the various potential suppliers. For Cougar, this was the supplier ’s experience in designing cavitation-free runners over similar head and flow ranges. Because these conditions are rarely encountered, the suppliers that did have the experience could be identified and an evaluation made as to the relative strengths and weaknesses of that experience.

– Evaluation criteria must be clearly identified and published. The proposal evaluation criteria, including the relative importance of each item being evaluated, must be stated clearly. By knowing how their proposals were going to be judged, bidders can focus their presentation on the areas of importance to the evaluation team.

– The evaluation team must have the in-depth, detailed technical knowledge that enables them to discern the differences in technical competence offered by the various bidders.

The best value procurement approach is one of a number of strategies available to the Corps. When used properly, it can be an effective tool in facilitating the procurement of equipment and services that provide high value and meet the user ’s needs. The success of the process used for Cougar is encouraging effective use of the best value process, where appropriate, in the future.

Mr. Allen may be reached at U.S. Army Corps of Engineers, 333 Southwest First Avenue, P.O. Box 2946, Portland, OR 97208; (1) 503-808-4296; E-mail: charlie.allen@nwp01.usace.army.mil.

Acknowledgment

The author thanks the following personnel from the Portland District of the U.S. Army Corps of Engineers: Melanie Hubbard and Carmen Grace, contracting division; John Breiling, office of counsel; and Ron Wridge, engineering and construction division. Their support, skill, and guidance made the Cougar procurement a success.

Charlie Allen, Jr., P.E., is a turbine specialist for the Hydroelectric Design Center (HDC) of the U.S. Army Corps of Engineers and was the technical lead for the Cougar turbine overhaul.


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