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Home My WebLink AboutAgenda Item - 2026-09-01 - Number 09.1 - WWTF Cost Proposal 9.1 d os� COUNCIL REPORT c V O OREGON Subject: Overview of the Cost Proposal for the Lake Oswego Wastewater Treatment Facility. Meeting Date: 9/1/2026 Staff Member: Stefan Broadus, PE Director of Special Projects Report Date: 8/21/2026 Department: Public Works - Engineering Action Required Advisory Board/Commission Recommendation ❑ Motion ❑ Approval ❑ Public Hearing ❑ Denial ❑ Ordinance ❑ None Forwarded ❑ Resolution ❑X Not Applicable ❑ Information Only Comments: ❑X Council Direction ❑ Consent Agenda Staff Recommendation: Provide feedback and direction on the Cost Proposal and the Proposed Sewer Rate Adjustment for the Lake Oswego Wastewater Treatment Facility (LOWWTF). Recommended Language for Motion: N/A Project/ Issue Relates To: Collaborate with the City of Portland to make a financially and environmentally responsible long-term investment in a wastewater treatment facility. Issue before Council (Highlight Policy Question): ❑X Council Goals/Priorities ❑Adopted Master Plan(s) ❑Not Applicable EXECUTIVE SUMMARY A proposal to design, build, operate, and maintain (DBOM) the Lake Oswego Wastewater Treatment Plant has been negotiated by the project team and the contractor. This proposal provides a clear path to constructing the next multi-generational infrastructure project for the Lake Oswego community. This study session is to discuss the financial considerations of the facility. Respect er, Trust. 503-635-0215 380 A AVENUE PO BOX 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY Page 2 BACKGROUND The Existing Plant Located at 195 Foothills Road, Tryon Creek Wastewater Treatment Plant (TCWTP) was built in 1964 and is owned and operated by the Portland Bureau of Environmental Services (BES). The plant is reaching the end of its useful life and needs to be replaced. In 2017, the City of Lake Oswego and City of Portland began planning a replacement facility on an adjacent site. Beginning the Design Process Rate Typical From 2018 through 2023, Lake Oswego was delivering Year Increase Sewer Fee this project utilizing a Design-Build-Finance-Operate- 2005 0.0% $23.52 Maintain (DBFOM) model, also commonly referred to 2006 5.0% $24.69 as a P3 or Public Private Partnership. On July 14, 2020, 2007 10.0% $27.19 City staff presented the results of a utility rate study 2008 10.0% $29.93 that found "wastewater rates will need to be increased 2009 30.0% $38.93 by 3.9% per year as opposed to 3% in order to account 2010 30.0% $50.40 for the increase in payment schedule for wastewater 2011 17.3% $58.97 treatment at Portland's Tryon Creek plant when 2012 3.0% $60.74 factoring in upcoming and future capital upgrades." 2013 3.0% $62.55 The P3 project was then pursued with a targeted rate 2014 3.0% $64.42 increase of 3.9%, matching the expected increases to 2015 3.0% $66.37 retain the existing wastewater plant. For context of 2016 3.0% $68.39 recent history of Lake Oswego's wastewater rate, the annual rate increase since 2005 is included in the table 2017 3.0% $70.45 to the right. From 2007 through 2011, the sewer rate 2018 3.0% $72.56 was increased by an average of 20% annually to raise 2019 3.0% $74.72 capital for the Lake Oswego Interceptor Sewer (LOIS). 2020 3.0% $76.93 The following nine years after that (2012 through 2021 3.9% $79.97 2020), the sewer rate was raised at a constant 3% per 2022 3.9% $83.10 year. On July 1, 2021, the 3.9% sewer rate increase 2023 3.9% $86.32 went into effect. The rate has increased by 3.9% 2024 3.9% $89.72 annually since then per the recommendation from the 2025 3.9% $93.22 July 14, 2020 staff report. 2026 3.9% $96.83 In January 2024,the City decided to compensate the DBFOM Contractor(Epcor)for their services performed to date, but to not execute the Project Agreement to construct and operate the facility. Instead, the Lake Oswego Council directed staff to evaluate other procurement methods that could deliver this project. This decision was reached considering two primary factors; financing costs and competition. It was expected that replacing the private financing model with public financing in the form of loans and bonds would provide better long-term value to the community. It was also anticipated that an alternative delivery model could provide "market- driven, competitive pricing" and increase the confidence that the costs were "reflective of current market conditions." Respect. '.- -I ---- Trust. c .;,- 503-635-0215 380 A AVENUE PO BOX 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY Page 3 Pivot Away from Private Financing In May of 2024, City staff returned to Council recommending the Design-Build-Operate-Maintain (DBOM) delivery model. This approach would be very similar to the DBFOM procurement, with the key difference being a pivot away from private financing and instead use public financing with more favorable terms. Specifically, this plan sought to fund the capital construction via a loan from the Environmental Protection Agency's (EPA) Water Infrastructure Finance and Innovation Act (WIFIA) in combination with traditional municipal bonds. The City would pay off these borrowed public funds with utility revenue (as well as proportionate payments from the City of Portland) over the next thirty or so years. The DBOM procurement was structured in two distinct steps; a Request for Qualifications (RFQ) followed by a Request for Proposals (RFP). Statements of Qualifications (SOQ) in response to the RFQ were solicited in October of 2024. Despite extensive outreach to potential industry partners, only one qualified team submitted a Statement of Qualifications. Staff carefully evaluated the implications of restarting the procurement process and concluded that moving forward with the Request for Proposals phase was in the City's best interest, as described in the November 8, 2024 Council memo (Attachment 1). Most recently in April of 2026, the Technical and Price proposal from the DBOM Contractor (Jacobs) was received. Moving Toward a Design/Build/Operate Contract On June 16, 2026, the project team presented the Technical Proposal to City Council, which included the preliminary site layout of the treatment components as well as connections to the incoming sewage collection systems and to the existing treated flow outfall to the Willamette River. The technical proposal addresses key project challenges, including reliable treatment during peak wet-weather events, minimizing impacts to the floodplain, efficient pumping and hydraulic performance,on-site stormwater management,seismic resilience, and integration with the surrounding Foothills District. Key features of the plant design include: - Proven, Traditional Treatment Technology - Meets or Exceeds Water Quality Requirements (Environmental Regulations) - Energy Efficiency & Redundancy - Seismic Resiliency - Odor Control - Quiet Operations - Expandable for Future Capabilities including Sustainability Efforts - Safe Operations to Facility Staff and General Public - Coordinated with Foothills District Plan Update The technical proposal provides for a wastewater treatment facility that is effective and efficient in meeting the design criteria. With that said, there are some notable differences between this design and the facility that was being previously proposed by City's former contractor, Epcor. Compared with the facility previously proposed by Epcor, the current proposal uses a more Respect. Excellence. Trust. Service 503-635-0215 380 A AVENUE PO BOX 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY Page 4 conventional treatment approach, provides a higher level of seismic resilience, and is structured to return the facility to the City in a stronger long-term condition at the end of the contract term. DISCUSSION Price Proposal Components As the complementary component to the aforementioned Technical Proposal, The Jacobs Cost Proposal for the LOWWTF includes several elements detailing the costs and timing for construction and operating the facility. These various line items are shown in the table below. Component Cost 1. Fixed Design-Build Price $369,621,065 2. Owner-Controlled Account $15,000,000 3. Year 1 Annual Operation & Maintenance Charge $5,056,000 4. Annualized Major Repair& Replacement Schedule $600,767 5. Inflation Index Factor Index Linked 6. Solids Handling $508 per dry ton 7. Guaranteed Maximum Energy Utilization Flow-based Formula 1. Fixed Design-Build Price: This is the price to advance the preliminary design concept to a complete set of engineering plans and specifications, and then permit, construct, and commission (startup) the designed facility. 2. Owner-Controlled Account: This line item is an amount to help the City manage impacts after contract execution from owner-driven scope changes, unforeseen site conditions, and cost escalation of materials. Carrying these funds outside of the base contract gives the City more control of cost variances and reduces risk premium. 3. Year 1 Annual Operation & Maintenance (O&M) Charge: The annual O&M charge is the price to operate the facility in the first year after construction is complete. The Inflation Index Factor is used to determine the annual O&M charge for subsequent years though the end of the contract term. 4. Annualized Major Repair & Replacement (MR&R) Schedule: The MR&R schedule in this contract serves as the long-term roadmap and financial mechanism for preserving asset integrity and operational performance over the multi-decade lifecycle of this facility. The MR&R schedule identifies, projects, and schedules the major overhaul, rehabilitation, or complete replacement of capital assets (such as pumps, blowers, and filters) that reach the end of their useful service life during the operating term. By tying these anticipated costs to a City-managed reserve, the schedule ensures that the facility is handed back at the end of the contract term in excellent condition. 5. Inflation Index Factor:This factor is used in the formula to calculate the escalated Annual O&M Charge after the first year of operating the facility.The Annual O&M Charge is based Respect. .. .> ';,, Trust. 503-635-0215 380 A AVENUE PO BOX 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY Page 5 on several cost drivers, including labor, equipment maintenance, chemicals, consumable materials, and solids transportation. The City's owner's advisor, Carollo Engineering, has developed a custom composite of indices that proportionately reflect these factors. This weighted composite index will be used in the formula to determine the Annual O&M Charge in year 2 and beyond through the end of the 10 year O&M term. 6. Solids Handling: Biosolids are the byproduct of the conventional activated sludge wastewater treatment process that will be utilized by this facility. The biosolids will be hauled to the City of Portland's Columbia Blvd Wastewater Treatment Plant where it will be treated in preparation for secondary, beneficial use. The amount of solids generated is difficult to predict and dependent on the flow characteristics coming into the plant, which can be highly variable. The City will pay a unit price of solids hauling per dry ton as opposed to an annual fee. Paying by the unit price for the actual volume hauled eliminates overly conservative predictive pricing from the Contractor. 7. Guaranteed Maximum Energy Utilization (GMEU): Electricity use is also a function of the flow coming to the plant, which is highly variable. This contract manages electricity as a pass-through cost from Jacobs, which means that the City will only pay for the actual electricity used in the facility up to the amount specified in the GMEU.The Contractor will pay for any electricity usage above that amount. Value Engineering & Price Validation Efforts The cost proposal received was higher than anticipated. The project team carefully reviewed the proposal and began negotiating the terms and conditions with the Contractor.The goals of these efforts were to (1) find areas where the cost could be reduced with acceptable consequences and (2) validate that the cost ultimately presented for approval was reasonable and appropriate for the scope of work being performed. This task included: 1. Pricing Out Shorter Term Options—the original cost proposal included an Operations & Maintenance term of 30 years as requested. With a term of such a long duration, comes a significant amount of uncertainty which equates to risk for contractor which equates to cost to the City.The term has been reduced to only 10 years,which optimizes the balance of risk to the contractor and efficiency in operations to create the lowest O&M cost to the City. At the end of 10 years, the City will have the option to extend the term with the Contractor to another long term agreement, initiate a new procurement for contract operations of the facility, or explore operating the facility with City staff.The 10 year term is a great balance of stability and flexibility. 2. Detailed Line Item Review — the Contractor provided hundreds of individual line items required to construct the new facility. The project team was able to review the approximate quantity and proposed unit prices based on the preliminary design plans included in the proposal compared against recent industry data. Line items that the team found to be excessive became the focus of negotiations.A similar process was performed Respect. Excellence. Trust. Service 503-635-0215 380 A AVENUE PO BOX 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY Page 6 for the Operations & Maintenance costs. While there are line items that the project team believes to be higher than typical, the proposal as a whole was found to be reasonable and appropriate. 3. Comparable Peer Efforts—wastewater treatment facilities have a long useful life, so data regarding costs of new construction is fairly limited. With that said, there are similar projects that can be used for price comparison. Wilsonville recently completed a plant upgrade in 2014 at a lower cost than the proposal Jacobs submitted, but that scope of work also included significantly fewer treatment components. We also compared projects in Oak Harbor(WA), Spokane, and Ventura, amongst others. It's difficult finding true peer comparables as all plants are different in terms of influent characteristics, average flow rates, peaking factors, level of treatment required, solids handling, etc. After normalizing available data for inflation, treatment requirements, flow capacity, and other major variables, staff concluded that the Jacobs proposal is generally consistent with the costs observed on comparable wastewater treatment projects The chart below further shows this evaluation. $1,800 $1,600 • Seattle,WA $1,400 • San Mateo,CA up .• o$1,2000. t.•.. N �; •Salt Lake City, UT ▪$1,000 $800 Ft. Lewis,WA r Oak Harbor, WA Denver, CO • $600 Spokane,WA•.•'' 0 i • Tucscon,AZ U $400 LOWWTF _ •_- Ventura, CA $200 •• ♦— St. Augustine, FL r Estacada, OR •• Molalla,OR $- — 0 5 10 15 20 25 30 35 40 45 50 Design Capacity(mgd) Respect. Excel'enEe. Trust. Service 503-635-0215 380 A AVENUE PO BOX 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY Page 7 4. Regional Utility Infrastructure Challenges — in researching comparable projects and the corresponding rate increase enacted by the utility provider, a common theme emerged. Major infrastructure in our region (and beyond) is in need of replacement and the escalating cost of capital construction significantly outweighs fund balance reserves which require rate increases for the utility to stay solvent.The table on the following page shows other utility agencies in our region and recent rate increases passed. Rate Increase City/Provider Utility Year(s) Percent Monthly Wilsonville Stormwater 2026 48.3% $5.75 Beaverton Water 2025 16.5% $13.25 Portland Water 2025 14.2% $17.90 Hillsboro Water 2026 10.4% $6.40 PGE Electric 2019-2026 8.5% $10.50 NWN (Wa.) Natural Gas 2027 19.0% $12.96 Clark Public Utilities Water 2026 24.4% $6.70 Washougal I Sewer 2019 ' 30.5% ' $13.60 This trend is also supported by an analysis of the Consumer Price Index (CPI) relative to the Engineering New-Record (ENR) Sewage Treatment Plant (STP) cost index that is more reflective of construction projects similar to the proposed facility. These two indices had historically tracked closely together, but in the mid-2000s started to diverge. The Heavy Civil index began to increase well above the rate of the CPI, which was further exacerbated by COVID related inflation from 2021 to 2023. The chart below shows these two indices, and how costs for heavy civil projects have spiked relative to consumer goods. Heavy Civil Construction Costs vs. CPI 300% 250% 200 150% 100 2000 2005 2010 2015 2020 2025 CPI —Water/Sewer Heavy Civil — Respect -,- Trust. 503-635-0215 380 A AVENUE PO BOX 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY Page 8 5. Additional External Funding Sources — While not technically reducing the cost of the proposal, securing more external funding could have a similar net effect. As previously described,the project's funding plan includes public financing in the form of a WIFIA loan through the EPA as well as traditional municipal bonds. Additional loans would not help the financial impact of this project on the community, but grants would. Unfortunately, federal or state grant programs to help fund infrastructure projects such as this are becoming exceedingly rare. The Brookings Institute found that in 1977, federal grants covered about 54% of capital costs for local transportation and water projects. By 2023, that number has dropped to only 28%, with local agencies forced to account for the difference. Despite the reduction in opportunities, the project team has researched and applied for grants that appeared applicable, but were unfortunately not selected. This effort will continue as the project proceeds, but obtaining grant funds appears unlikely. Utility Rate Unfortunately, the City's sewer utility fund does not have nearly enough money to pay for the project with the existing balance. As with almost every public infrastructure project of similar scale, the LOWWTF must be financed. The previously acquired WIFIA loan from the EPA in the amount of $123.5m as well as traditional municipal bonds are public financing tools with favorable terms for the City. With that said, the targeted utility rate schedule will not generate sufficient revenue to pay the debt service (interest and principal payments) of the loan and bonds. Utility rates must be increased to pay off the financing. The City's detailed sewer rate model has been utilized to identify the minimal utility rate schedule to adequately manage the City's wastewater utility including paying off this project as well as maintaining and rehabilitating the collections system (pipes and pump stations) that conveys the flow from all of the individual services locations to the new treatment plant. There are two rate increase options to consider for funding this project: 1. Single Year Increase -the sewer rate model has found that a rate increase of 28% is necessary to keep the sewer utility fund in good standing. This rate increase would be effective July 1, 2027. Once implemented, the utility rate schedule can return to the targeted rate of 3.9% annually. 2. Multi Year Increase - alternatively, a lower rate increase of 8% per year is possible to make minimum payments, but would need to be repeated annually for 10 years before finally returning to the targeted rate of 3.9% annually. This schedule reduces the initial rate increase from any one year to the next, but ultimately requires the rate to be higher than the larger, single year increase. Respect. Excellence. Trust. Service 503-635-0215 380 A AVENUE PO BOX 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY Page 9 See the graph below to see how these two rate schedules compare. The rates shown are based on typical use for a single-family home as described in the Lake Oswego Master Fees and Charges booklet. Also included the graph, is the historical sewer rate dating back to 2005 including the adjustments to fund the Lake Oswego Interceptor Sewer (LOIS) project. Lake Oswego Sewer Utility Rate $250 3.9% $20u - ---- ,' 8%/yr for 10 years I / / N ,/ 28%One-Time Rate $150 � — Increase3.9% LOIS \\ , $100 - 0% 300/0 17% o% - $50 - 10 o — -- LO Sewer Rate J $- - 2005 2010 nr1.1 c 2020 2025 2030 204( FISCAL IMPACT The Jacobs Cost Proposal includes the cost to design and construct the facility as well as the various elements of operating it including the primary operating fee, solids handling, electricity pass-through, and major repairs and replacement of equipment. The capital construction fee is specified as $369,621,065. The annual operations charge is $5,0560,000. The City will use System Development Charges (SDCs) and existing wastewater utility fund balances to pay towards the capital construction cost. However, these funds have insufficient balance to pay the entire amount as incurred. Instead, the project will need to be financed by drawing on the WIFIA loan ($123.5 Million) secured in September of 2025 as well as municipal bonds. To pay the debt service for this financing, the City will utilize a combination of proportionate payments from the City of Portland and utility billing. The project's funding plan is summarized in the table on the following page. As discussed above, the existing utility rates are Respect. �,._ , ,,, Trust. 503-635-0215 380 A AVENUE PO BOX 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY Page 10 insufficient to cover the debt service payments. Raising the wastewater utility rate is necessary to pay for the project. Funding Source Type Primary Purpose WIFIA Loan Financing Capital Construction Payment Municipal Bonds Financing Capital Construction Payments System Development Charges Existing Balance Capital Construction Payments LO Sewer Fund Balance Existing Balance Capital Construction Payments Portland Cost Share Payments Revenue Debt Service Payments, Operations Fee LO Utility Billing Revenue Debt Service Payments, Operations Fee RECOMMENDATION Participate in the staff presentation and provide feedback and direction on the Cost Proposal and proposed Sewer Rate Adjustment for the LOWWTF. ATTACHMENTS 1. Memo to Council RE: DBOM RFQ Results, 11/8/2024. 2. Jacobs Best and Final Offer Proposal for the LOWWTF, 8/18/2026. Respect. .. .> ';,, Trust. 503-635-0215 380 A AVENUE PO BOX 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY E ATTACHMENT 1 O O�� MEMORANDUM /1O OREGO\4 TO: Honorable Mayor and Councilors CC: Martha Bennett, City Manager Erica Rooney, PE, Public Works Director/City Engineer Evan Boone, Deputy City Attorney FROM: Stefan Broadus, PE, Director of Special Projects Public Works SUBJECT: Wastewater Treatment Facility— Results of Request for Qualifications DATE: November 8, 2024 Background In January 2024, the City and EPCOR Foothills Water Partners completed the work under the Preliminary Services Agreement but were not able to reach agreement on the terms of a Project Agreement for a new Wastewater Treatment Facility (WWTF). The Council directed staff to explore competitive procurement methods for final design, construction, operation and maintenance of a new WWTF. On May 7th 2024, Council approved Resolution 24-19 (amending Resolution 18-55) authorizing a special procurement for a new Design, Build, Operate, and Maintain (DBOM) procurement for the WWTF project. The DBOM procurement was developed with two steps; a Request for Qualifications (RFQ) followed by a Request for Proposals (RFP) with a fixed price. RFQ Development and Responses To gauge interest and to help develop the contents of the RFQ, a notice of market sounding conferences was publicly advertised on June 3rd. Throughout June, these conferences were held with six potential respondents. Based on those conversations and the level of interest expressed, the project team was anticipating a strong response to the RFQ. Additionally, an honoraria stipend was approved by Council on July 16 to further incentivize participation. The RFQ was advertised on July 19th. A pre-submittal meeting and site tour was held on August 15th and was well attended. The RFQ closed on October 11th, with one submittal received from Jacobs. Respect. Fv.''i prr� Trust. 503-675-3984 380 A AVENUE PO BOX 369 LAKE OSWEGO, OR 97034 WWW.LAKEOSWEGO.CITY Page 2 of 2 Next Steps The project team met on October 15th to evaluate options moving forward. After comparing a few alternatives, continuing with the second step of the Procurement (RFP) offers the most advantages to the City. Representatives on the project team from the City of Portland Bureau of Environmental Sciences have been consulted on this as well and concur with this conclusion. The reduction in competition by only having one proposal can be minimized or even offset by conducting a series of workshops with Jacobs to facilitate and expedite final design decisions, terms of the eventual agreement, and to right-size the risk transfer. This would be more difficult with multiple bidders. The overall procurement schedule is unchanged, as is the schedule for the project as a whole. The project team will conduct these workshops in the coming weeks, and then provide time for Jacobs to prepare a final design and fixed price proposal. The expected execution of the project agreement is still fall 2025 with construction anticipated to start in 2026 and the plant to be online by the end of 2028 (based on current assumptions). While one submittal was not the outcome of the RFQ the project team anticipated, the two-step DBOM procurement is still the approach most likely to result in a high quality, cost-efficient, and timely delivery of the proposed treatment facility. Staff intend to return to Council with a formal update in the spring to discuss the status of the procurement effort. Respect. Excellence. Trust. Service. ATTACHMENT 2 Jacobs. Best and Final Offer Design-Build-Operate-Maintain Services for the Lake Oswego Wastewater Treatment Facility f` - _ _ �-- Submitted to the City of Lake Oswego +� 4 . - ,go, . ...si A,U;....x•411, ;... Y1 ��l Ile .. �/�Alli tie � 140, � 1` v 1 E 147411-1 mJ . k'• .4010644aw . yy7 icM _ C 1 , T 1y • .o.s l w. r <- - w 14:;?4v.. — _ /_ TABLE OF CONTENTS Contents A. BAFO Proposal Overview and Narrative 2 B. DB Price Modifications 2 1. Scope Changes 2 2. Escalation Increase 2 3. Jacobs Reductions 3 4. City Escalation Allowance 4 C. O&M Price Modifications 4 1. Escalation 4 2. Obsolescence Risk 4 3. Major R&R 4 4. O&M Staffing 4 5. Adjustment of Annual O&M Charge/MR&R allocation 5 6. Guaranteed Maximum Energy Utilization (GMEU) 6 7. Inflation Index 6 D. BAFO Documentation 8 1. Proposal Cost Submittal Form 8 2. DBOM Agreement 8 3. Technical Memoranda and Drawings 11 4. Project CPM Schedule 11 Attachment 1 — Escalation Buildup Detail 11 Attachment 2— DBOM Agreement and Appendices 11 Attachment 3—Technical Memoranda and Drawings 11 Attachment 4— Project CPM Schedule 11 Attachment 5— Draft Commissioning Plan 11 LAKE OSWEGO WWTF DBOM BAFO PRICING SUMMARY A. BAFO PROPOSAL OVERVIEW AND NARRATIVE We are pleased to submit our Best and Final Offer(BAFO) Proposal for the Lake Oswego Wastewater Treatment Facility(LOWWTF) Design-Build-Operate-Maintain (DBOM) Project. The purpose of this document is to provide reviewers with a summary and explanation of the revised DBOM pricing. The subsequent sections describe the basis for changes from our original proposal, as well as document the basis for our revised DBOM Proposal. B. DB PRICE MODIFICATIONS Exhibit 1 summarizes our original DB and BAFO Pricing, along with the basis for changes—primarily related to delay in contract award. Jacobs original proposal was valid through July 6, 2026. This BAFO is updated and valid through November 16, 2026. Exhibit 1 -DB Price Comparison Original Proposal Change Basis BAFO $367,377,807 Fixed DB Price ($1,710,949) Scope Changes $6,954,207 Escalation increase $369,621,065 Subcontractor Risk Jacobs reductions, (GCs, Fee, $15,000,000 ($18,000,000) (unallocated) Contingency, Subcontractor Risk) $11,400,000 Escalation Risk $2,100,000 City Allowance/Escalation Bucket $13,500,000 (unallocated) increase $393,777,807 TOTAL ($10,656,742) TOTAL $383,121,065 1. SCOPE CHANGES Scope changes to the base project are limited to two items: • The City opts to carry the contract for third-party inspections.Therefore, Jacobs has removed the cost for that effort ($1,910,949)from our BAFO pricing. • The City opts to include a main-tie-tie-main configuration for the main electrical gear. Jacobs has added $200,000 to our BAFO pricing to accommodate this change. 2. ESCALATION INCREASE We engaged several key equipment vendors to assess market conditions and pricing trends over the preceding four months, given ongoing volatility in commodity markets. Overall, impacts were limited, with a few notable exceptions: • Vendors whose products are heavily dependent on resin-based materials reported significant cost increases driven by recent global market conditions. Specifically, the grit concentrator and polymer aging tank pricing was adjusted given significant recent impacts. • The disc filter and RDT manufacturers noted increases in commodity-related costs. 121 LAKE OSWEGO WWTF DBOM BAFO PRICING SUMMARY Across approximately$27 million of process equipment purchase agreements, the cumulative pricing impact was less than 2%. To further mitigate escalation concerns, the DBOM Contractor has elected to assume the risk of future process equipment price increases, and associated process equipment escalation has been removed from the escalation log. We reviewed pricing from approximately 20 major subcontractors to evaluate current pricing conditions and potential escalation risks. Key findings included: • Subcontractors generally identified rebar, miscellaneous metals, and certain piping materials as the areas most affected by recent market volatility. Conversely, pricing for cast-in-place concrete, precast concrete, and drilled pier concrete has remained relatively stable. • Based on current market conditions, Tapani's pricing was adjusted to reflect increases in rebar, fuel, and select piping materials. The most significant adjustment was an approximately$1.0 million increase in installed rebar costs. Most other pricing elements experienced minimal change.The escalation log has been updated accordingly. • Christensen provided updated electrical pricing reflecting continued escalation in electrical equipment markets. Electrical gear costs increased by approximately$800,000, and their subcontract value was adjusted to reflect current market pricing. • Labor cost increases were significant for both Tapani and Harder. Tapani reported wage increases in several crafts that increased its composite labor rate by approximately 5% between March and July, resulting in an estimated $600,000 cost impact. Harder's prior pricing was based on assumptions made while union labor negotiations were ongoing. Final negotiated wage increases exceeded initial assumptions by approximately 12%, accounting for the majority of Harder's pricing adjustment. To provide pricing certainty moving forward, Jacobs will assume the risk of future labor rate increases, and labor escalation has been removed from the escalation register. 3. JACOBS REDUCTIONS Subsequent to submitting our Price Proposal in April, Jacobs provided extensive supporting detail to enable the City to conduct a comprehensive, line-item review of project costs. Although the City generally found our overall costs to be reasonable, several individual line items were identified as being on the higher end of expectations. Taking this feedback seriously and in the spirit of the constructive and good-faith negotiations with the City,Jacobs has implemented a 12%reduction in contingency and Jacobs-related project costs, reducing in an overall project cost reduction of nearly 5%. LAKE OSWEGO WWTF DBOM BAFO PRICING SUMMARY 4. CITY ESCALATION ALLOWANCE A full escalation buildup detail is included in Attachment 1.We have refined this list to reflect an appropriate risk allocation between the City and Jacobs, with an eye towards balancing administrative simplicity with opportunity for owner savings. For those items that Jacobs can influence escalation cost via multiple factors (e.g. design modifications, design and construction approaches, etc.)we have included these within our BAFO pricing. For those items over which Jacobs has limited control(e.g. material costs), we have included these within the City Escalation Allowance bucket. C. O&M PRICE MODIFICATIONS At the request of the City,we submitted contract pricing for a 10-year term on June 11, 2026. This offering provides significant advantages as compared to the 20- and 30-year pricing presented in our original Price Proposal.The following documents the basis for changes from our original Price Proposal 1. ESCALATION Because increases in O&M pricing due to escalation are addressed within the DBOM Agreement through escalation indices, there is no change to our O&M pricing as a result of the delay to project start. December 2025 indices continue to serve as the basis for our pricing. 2. OBSOLESCENCE RISK Our proposal contemplates Jacobs managing and incurring the costs associated with equipment obsolescence for this 10-year term period. 3. MAJOR R&R The Major R&R scheduled for the first 10 years is significantly lower than the 30-year average, reducing the associated contract value from $79.2M to $9.2M, with approximately 2/3 of the 10- year major repair and replacement activity timed in year 10. Under the 30-year proposal, our average annual maintenance cost reflected 6.1% of our total equipment costs, installed -well within the expected industry range for this life cycle period. Since the 10-year proposal does not extend beyond the full life cycle of much of the equipment, the cost is reduced markedly. 4. O&M STAFFING Our team has considered staffing levels and is confident that our approach provides the appropriate level of resources to ensure reliable, proactive performance and maintenance of the City's assets while aligning with industry-standard staffing levels (Exhibit 2).We take seriously our role as the City's representative, safeguarding public health and protecting the community's investment in this vital infrastructure. 141 LAKE OSWEGO WWTF DBOM BAFO PRICING SUMMARY Exhibit 2-O&M Staffing benchmarking comparison 35 30 • Salem,OR 25 Hillsboro,OR• N • 45 Clark County,WA• 20 Vancouver,WA• E Z Tucscon,AZ • = 15 • Gresham,OR ti= Spokane,WA .••• Eugene,OR co Woonsocket,RI • LOWWTF Z Lincoln,CA • 06 10 • 0 • Portland,OR(Tryon Creek) • • Wilsonville,OR 5 Hood River,OR The Dalles,OR 0 0 5 10 15 20 25 30 Design Capacity(mgd) 5. ADJUSTMENT OF ANNUAL O&M CHARGE/MR&R ALLOCATION As part of ongoing contract negotiation discussions, the team identified a misalignment in how Jacobs'costs were allocated between the Ordinary Operations and Maintenance Charge and the Annual Capital Maintenance Charge as compared to how the DBOM Agreement envisioned that allocation.We have realigned our costs for consistency with the DBOM Agreement, as shown in Exhibit 3. This reallocation does not change the total O&M cost. Exhibits 3 and 4 highlights pricing revisions to reflect this reallocation. Exhibit 3—O&M Price Comparison 30-year 10-year BAFO (10-year term w/ Term Term MR&R reallocation) Ordinary Operation and Maintenance $5,308,000 $4,670,000 $5,056,000 Component Major MR&R Component (10-yr total) $79,225,109 $9,249,446 $6,007,668 Sludge Trucking Cost (per dry ton) $508 $508 $508 LAKE OSWEGO WWTF DBOM BAFO PRICING SUMMARY Exhibit 4- MR&R Schedule Revisions Original Price Proposal BAFO Price Proposal Asset Grouping Yrs 1-5 Yrs 6-10 Yrs 1-5 Yrs 6-10 Pumps 264,367 1,694,138 0 1,541,916 _ Blowers 60,174 305,493 0 0 Screens 120,473 484,009 0 484,009 Grit 98,896 379,537 68,306 379,537 Aeration 40,814 102,035 0 0 Clarifiers 203,949 509,872 203,949 509,872 Disk Filters 226,324 1,028,671 212,921 1,028,671 _ UV Disinfection 141,239 294,504 0 160,521 _ HVAC 29,143 239,283 0 0 RDTs 74,949 292,948 _ 0 263,394 _ Odor 83,811 108,240 83,811 83,811 Valves 0 97,200 0 0 Gates 0 274,251 0 0 Piping 0 0 0 0 VFDs 0 614,405 0 308,729 Electrical Gear 174,675 437,257 55,000 270,000 _ Generators 67,036 201,108 0 201,108 _ LCPs 0 0 0 0 PLCs 40,633 234,323 0 30,293 _ Network SCADA 18,836 59,532 0 27,021 Tanks 0 0 0 0 Buildings 52,035 146,885 0 94,800 Structures 0 0 0 0 Site 0 48,403 0 0 TOTALS 1,697,352 7,552,094 623,987 5,383,682 6. GUARANTEED MAXIMUM ENERGY UTILIZATION(GMEU) The City requested a modification to the structure of the GMEU to be tied to influent flows and loads as compared to a static value, based on project design criteria. Jacobs proposes utilization of the following relationship, upon which our BAFO is based: 145 x Average Annual BOD (lb/d)+ 166,944 x Average Annual Flow(MGD) + 2,003,317 7. INFLATION INDEX The City requested a basket of indices to account for inflation. We propose the following relationship and definitions: 161 LAKE OSWEGO WWTF DBOM BAFO PRICING SUMMARY "Index-Linked" means, with respect to an amount expressly identified as being subject to adjustment, that the amount is adjusted as of each July 1 commencing July 1, 2027 by: Index-LinkedN = (0.572 x(ECI-TCN/ECI-TCN_,) + 0.316 x(PPI-GMEN/PPI-GMEN_,) + (0.054 x (PPI-ICN/PPI-ICN_,) + (0.004 x(PPI-WCN/PPI-WCN1) + (0.014 x(PPI-TTLN/PPI-TTLN_,) + 0.01632) x Index-LinkedN_, Where, N =the period from the immediately preceding June to the previous June, (except that for the initial July 1, 2027 adjustment, it will be for June 2027 to December, 2025) N-1 =the same calendar period one year earlier "Inflation Index" is a weighted blend of indices and means the amount determined as follows: [Inflation Index= (0.572 x ECI-TC) + (0.316 x PPI-GPME) + (0.054 x PPI-IC) + (0.044 x PPI-WC) + (0.014 x PPI-TTL) + 0.01632 Where, ECI-TC = Employment Cost Index(ECI), total compensation for private industry workers in the utilities industry, for the 2nd quarter of the calendar year, as reported by the Bureau of Labor Statistics of the US Department of Labor in the CPI Detailed Report Series ID: CIU20144000000001 (with the value reported for: (a)the 2nd quarter of each calendar year being used for purposes of clause (1) of the definition of"Index-Linked, and (b) the 1St quarter of 2026 being used for purposes of clause (2) of the definition of"Index-Linked). PPI-GPME = Producer Price Index(PPI), general purpose machinery and equipment, as reported by the Bureau of Labor Statistics of the US Department of Labor in the CPI Detailed Report Series ID: WPS114. PPI-IC= Producer Price Index(PPI), industrial chemicals, as reported by the Bureau of Labor Statistics of the US Department of Labor in the CPI Detailed Report Series ID: WPU061. PPI-WC = Producer Price Index(PPI), solid waste collection, as reported by the Bureau of Labor Statistics of the US Department of Labor in the CPI Detailed Report Series ID: PCU562111562111. PPI-TTL= Producer Price Index(PPI), truck, truck trailer and RV leasing, as reported by the Bureau of Labor Statistics of the US Department of Labor in the CPI Detailed Report Series ID:WPU442102.] I 7 I LAKE OSWEGO WWTF DBOM BAFO PRICING SUMMARY D. BAFO DOCUMENTATION 1. PROPOSAL COST SUBMITTAL FORM Exhibit 5, consistent with the Cost Submittal Form line items documented in the RFP, summarizes our BAFO Price Proposal. Exhibit 4-BAFO Proposal Cost Submittal Form Item RFP Description Value # Section 2 _ 4.1 Fixed Design-Build Price-Project Option 2 _ $369,621,065(1) 7 4.3 Year 1 Annual Operation and Maintenance Charge $5,056,000 -Project Option 2, 10-year Term 10 4.4 Guaranteed Maximum Energy Utilization—Project Refer to Item C.6 above Option 2 11 4.5 Inflation Index Factor Refer to Item C.7 above 12 4.6 Major Repair and Replacement Refer to Item C.5 above 13 4.1 Maximum Drawdown Schedule To be finalized prior to Contract Award 14 4.33 Sludge Trucking Cost $508 per Dry Ton (1) Value does not include City's Escalation Allowance 2. DBOM AGREEMENT We appreciate the diligent efforts on the part of the City to drive contract discussions to resolution over the past several months. We believe we have navigated the bulk of the outstanding items to successful resolution. Attachment 2 includes the current, marked-up version of the DBOM Agreement and associated Appendices upon which our BAFO Proposal is based,with the status of items which have not been confirmed to be closed noted in Exhibit 5.These documents reflect work by both Parties to introduce additional clarity and modify the terms of the DBOM Agreement to enhance Project value. While the City and Jacobs are in agreement on the bulk of these revisions, there are a few items that are not yet fully resolved.These are documented below. Exhibit 5-Outstanding DBOM Agreement Items Article Description Markup Status Action Agreement 1 Indices Captured in markup City to review and acceptor comment 5.2 Access to TCWTP Site Captured in markup City to review and acceptor (C, D) comment 8.9 Access to TCWTP Site Captured in markup City to review and acceptor comment 9.3 (H) Deductions for Odor No change, subject to City to review and accept or Citations acceptance of Jacobs other comment comments related to odor I 8 I LAKE OSWEGO WWTF DBOM BAFO PRICING SUMMARY Article Description Markup Status Action 9.3 (L) Deductions for No change, subject to City to review and accept or Sustained Odor acceptance of Jacobs other comment Conditions comments related to odor 9.3 (M) City Termination Rights No changes here. Issue City to review and accept or based on Failure to captured in markups to comment Meet Odor Guarantee Agreement Article 21.1.A 9.4 Guaranteed Maximum Not captured in markup; City to review and acceptor Energy Consumption described in Item C.6 above comment; revise Agreement 9.6 (E) Sludge and Scum Off- Captured in markup City to review and accept or loading comment 11 Contract Term and Not captured in markup City to prepare draft language. Extensions Jacobs' understanding is that renewal terms are negotiable upon extension(s) and that sufficient time will be incorporated to allow for implementation of End of Term requirements. 11.6 Capital Modifications Not captured in markup City to prepare draft language. (F) for Future Nutrient Jacobs understands Nutrient Removal Removal will be implemented implementation at a future date and managed as a Capital Modification 17.5 Requisitions against Captured in markup Jacobs refined markup to (E) MRR Account reflect intent 21.1.A DBOM Contractor Captured in markup City to review and accept or Events of Default comment Defined Appendices 1.1 (d) Easements Not captured in markup City needs to add description of easements for completeness, and address ROW vacation on SW corner of Project Site (not addressed in Jacobs BAFO). 1, Design-Build Project Captured in markup City to review and acceptor Att. 1A Site Plan comment 1, Operations and Captured in markup City to review and accept or Att. 1B Maintenance Project comment Site Plan 4 Codes and Standards Captured in markup City to review and accept or comment I 191 LAKE OSWEGO WWTF DBOM BAFO PRICING SUMMARY Article Description Markup Status Action 4.1(m) Cybersecurity Not captured in markup. City to review and acceptor Jacobs proposed language comment; revise Agreement is captured in TM 8. 4.5 Sludge requirements Captured in markup City to review and acceptor (a, b) comment 4.10 Cut/Fill requirements Captured in markup City to review and acceptor comment 4.11 Codes and Standards Captured in markup City to review and accept or comment 7.5.7 Traffic Control Not captured in markup. City to comment on whether Parameters Jacobs approach is Jacobs'approach is documented in Price acceptable; revise Agreement Proposal and is inconsistent accordingly. with current language. 8 Commissioning Captured in markups to City to review and acceptor (acceptability to BES) Attachment 5 - comment Commissioning Plan 11.3.1 Odor Control Standard Captured in markup City to review and accept or comment 11.3.3 Odor Test Protocols Captured in markup City to review and accept or comment 11.3.4 Odor Tests Captured in markup City to review and accept or comment 13.3 Determination of an Captured in markup City to review and acceptor Odor Incident for comment Purposes of the Odor Guarantee 13.4.2 Sludge and Scum Captured in markup City to review and accept or comment 13.4.3 Sampling Captured in markup City to review and accept or comment 13.4.4 Reporting Captured in markup City to review and acceptor comment 14 Service Fee Calculation Captured in markup City to review and acceptor comment 19 Approved Captured in markup City to review and accept or Subcontractors comment I -1oI LAKE OSWEGO WWTF DBOM BAFO PRICING SUMMARY 3. TECHNICAL MEMORANDA AND DRAWINGS Technical Memoranda and Drawings are included for completeness as Attachment 3. Given the limited changes in scope, these have not been updated since submission of our Technical Proposal on April 2, 2026. However, we have updated our Assumptions, Clarifications, Discussions and Inclusions (ACDC) and incorporated into the Technical Memoranda as TM 8.This TM serves to provide additional clarity related to our BAFO. 4. PROJECT CPM SCHEDULE Attachment 4 includes the full project CPM. Given our significant reduction in project contingency, we have added 30 days of float between our Acceptance Date and Scheduled Acceptance Date, which is the point of time when Liquidated Damages would be assessed. ATTACHMENT 1 —ESCALATION BUILDUP DETAIL ATTACHMENT 2-DBOM AGREEMENT AND APPENDICES ATTACHMENT 3-TECHNICAL MEMORANDA AND DRAWINGS ATTACHMENT4-PROJECTCPM SCHEDULE ATTACHMENT 5-DRAFT COMMISSIONING PLAN *41 I I11I Michelle Green, PE, DBIA Jacobs I DBOM Project Manager P: (503) 475-8748 E: Michelle.Green@Jacobs.com x�, ." ay , ,.,, �` 116. P° 1 ' [ '7,7•,,,-'k"r .....r.,... ., mi; ...."1.„ Icy .. 4r. $y r F