Audit on the Department of Environmental Protection’s Progress in Constructing the Croton Water Treatment Plant

Audit Report In Brief

We performed an audit of the Department of Environmental Protection’s (Department’s) effectiveness in carrying out the mandate in a 1998 Consent Decree to construct the Croton Water Treatment Plant (Plant).  The purpose of the Plant is to filter drinking water from the City’s Croton water system in order to comply with the federal Safe Drinking Water Act, the Surface Water Treatment Rule, and the National Primary Drinking Water Regulation.

The Consent Decree was executed after the federal government alleged in 1997 that the City had failed to safeguard the quality of Croton water, thereby violating federal drinking water regulations. The federal government and New York State executed the Consent Decree with the City in 1998 in which the City agreed to construct and place into operation a water treatment plant for the Croton water system by 2007.  Supplements to the Consent Decree were issued in 2002 and 2005, which extended the completion date from 2007 to October 31, 2011.  The Second Supplement contains 44 design and construction milestones that the Department must fulfill between 2003 and 2011 in order to complete the Plant on schedule.  Failure to attain these milestones and complete the Plant on time will subject the City to monetary penalties.  In 2003, the estimated cost to build the Plant was $992 million. The current estimated construction cost to build the Plant is more than $2 billion.

Audit Findings and Conclusions

While much of the work completed to date is in accordance with established timeframes, and the Department has an effective management system to carry out construction, the Department will not be able to complete overall construction of the Plant and commence operations in accordance with the terms of the Consent Decree.   The Department has already missed certain milestone dates for which it was penalized $4.7 million.  Moreover, the City may be liable for more than $10 million in additional penalties (almost $15 million overall) because the Department will not commence Plant operations until April 2012—six months later than the required milestone date of October 31, 2011.

The Plant will not be completed by the stipulated Consent Decree timeframe—October 31, 2011—for the following reasons.  A contractual problem extended the start of the Plant’s construction, and the Department lagged in completing designs and awarding construction contracts for required improvements (i.e., off-site facilities) that are near the site of the Plant and are needed to deliver treated drinking water from the Plant to the City’s water distribution system.  Moreover, the delay in awarding off-site facility contracts has hindered the Department’s ability to complete required Plant testing by October 31, 2011.

The Department has a project management system to carry out the Plant’s design and construction.  However, the Department did not effectively adhere to its system to carry out required work associated with the designs and procurement of the off-site facilities.

Audit Recommendations

This report makes a total of 10 recommendations.  The major recommendations are that the Department should:

• Immediately complete any outstanding designs, solicit bids, award contracts, and commence work for all remaining off-site facility construction contracts.
• Incorporate construction schedules for off-site facility work in the overall Plant progress schedule.
• Effectively plan and manage the critical off-site facility work to ensure its completion within sufficient time to undertake adequate Plant testing operations.
• Ensure that it completes all required work in accordance with the timeframes prescribed in the Consent Decree.
• Consult with the New York State Department of Health and seek a waiver for any assessed and potential penalties.
• Ensure that the work of design consultants is properly supervised and tracked.