KAILUA-KONA — Hawaii County on Friday awarded a bid for the Lono Kona sewer project to Honolulu-based contractor Nan Inc., which is now tasked with transitioning the neighborhood known locally as “Hamburger Hill” away from large-capacity cesspools.
The Department of Environmental Management (DEM) rebid the project in March after the initial round of bids all outpaced the budget allocated for the work. Now, after the second round of bids, the price has gone up almost $800,000.
In round one, the low bid to sewer Lono Kona was $7,740,943, according to numbers provided by DEM. The bid the county accepted from Nan Inc. Friday is $8,531,814.43.
Bill Kucharski, director of DEM, said the cost bump wasn’t the result of a negotiating tactic or penny pinching gone wrong, but rather that of legal requirements dictating the county’s standard operating procedure.
“We can not issue a contract unless we have money available to pay for that contract, and we did not have enough money approved by the council to go forward with taking the first bid,” Kucharski explained. “Now we have this construction boom, and all the contract prices just went up. Essentially, we’re just subject to the marketplace like everyone else.”
Based on DEM’s cost projections, the Hawaii County Council authorized an amount of just under $6.5 million for the project, which included a roughly $4 million grant from the U.S. Department of Agriculture.
Kucharski said because the area was designated an improvement district, the council also signed off on a $2.4 million general obligation bond to be repaid by property owners via surcharges on their sewer bills. The improvement district includes 145 assessment units on 110 lots that will switch from cesspools to sewer lines. Affected residents ultimately voted for that course of project financing.
The extra $2 million or so beyond DEM’s initial projection, which includes the amount the county’s allocation was short after the first round of bids as well as the price increase associated with round two, will not increase direct costs to property owners in the improvement district.
However, some of the extra funds required will ultimately be split among all taxpayers in the form of a loan taken out by the county.
“Because we have a fixed end date for this contract from USDA, we would not have time to go back to the residents and increase their share for the improvement district,” Kucharski said. “So the mayor said the county will pay for any overrun.”
The end date of December 2019, which the county can request be extended with cause, is tied to grant funds supplied by the USDA, not penalties from the U.S. Environmental Protection Agency. The EPA initiated a nationwide transition away from cesspools in 1999.
To fund the full project, the county went back to USDA and requested an additional grant, which it received to the tune of a little more than $1 million, Kucharski said.
Also approved by the USDA was a loan of $3.7 million. Based on the bid by Nan Inc., the county will only have to rely on about $1 million of the loan.