MEMORANDUM

FROM: Akin Okupe, M.B.A., P.E., General Manager, East Palo Alto Sanitary District

To: District Board of Directors

SUBJECT: District Savings Due to Restructuring after October 23, 2017

DATE: May 14, 2018

Background

The District Board of Directors removed the District Engineer and appointed the General
Manager to act as interim District Engineer on February 8, 2018. In addition, the Maintenance
Supervisor retired from the District on January 8, 2018 and the position has not been filled since
his retirement. Pursuant to this, the District hired four temporary workers to fill vacant
positions. These workers have been trained by West Bay Maintenance Division and outside
Consultants on the following activities:

 Operation of the Vactor Truck

 Operation of the Rodding Machine
 Operation of the CCTV Truck

The structural change had resulted in significant savings for the District.

According to the District Code Article III, the duties of the District Engineer include without
being limited to:

 The preparation of plans and specifications for District Projects

 The checking of all plans and specifications prepared by an installer’s engineer.

Other duties include the following:

1. The management of Capital Improvement Program (CIP) including engineering studies

and construction inspection
2. The presentation of technical information to staff and District Board
3. The preparation of multi-year Capital Improvement Program
4. The coordination of permitting and mapping
5. The preparation and management of professional contract
6. The review and approval of collection system map for new development
7. The management of the District’s hydraulic modeling
8. The presentation of Civil Engineering mathematical calculations
 9. The coordination with Regulatory Agencies on District Program
10. The implementation and interpretation of applicable Federal, State and Local
Regulations.
11. The management of CIP Contracts.

Discussion

As the General Manager/District Engineer, I have assumed all the duties of the District Engineer
listed above. Indicated on Table 1 below is a summary of the cost savings as a result of the
changed strategy:

Table 1, Summary of Direct Cost Savings

Cost Categories Cost ($) Before Cost ($) After Savings ($)
District Engineer 200,000 75,000 125,000
Maintenance Supervisor 150,000 75,000 75,000
Total Cost of Non Quality XXX XXX
Total Savings $(XXX+200,000)

Note: X is the total cost incurred by the District that can be avoided, these costs are referred to
above as the total cost of non-quality.

The avoidable cost includes expenses on change orders, improper negotiations, improper
design strategy and improper contract management. Examples of such cost are indicated on
Table 2 below:

Table 2, Avoidable Cost

Cost Driver Cost ($) Probable Cost ($)

Demeter Pipeline 25,000 0
Siphon Project Tie-in 80,000 50,000
Siphon Project Soft Cost 140,000 0
Annual Pipeline Replacement 50,000 40,000
Project
Bay Road Pipeline 1,000,000 0
Siphon Project Cost Share 700,000 0
Total Cost 1,995,000 90,000
The former District Engineer’s contract amount was not to exceed $150,000. As indicated in the
attached summary invoice, the District has paid the sum of $155,007.08 in FY 17/18 with
$82,238 still outstanding, this brings the total invoiced to $238,245.10.

Due to the restructuring strategy that reassigned the General Manager as District Engineer, the
District should save in excess of $200,000 per annum in direct cost. The bulk of the savings is in
the avoidable expenses as indicated on Table 2 above.

Conclusion

Pursuant to the above analysis, we can conclude that the changed strategy would save the
District in excess of $200,000 per annum. This savings would lessen the burden of future Capital
Projects costs on our rate payers.