Evaluated Bids – Sometimes valid, sometimes rigged….

In the past few months I have bid two projects that each used a 20-year Present Worth calculation

to evaluate and select the winning bids. For one of the projects I think it was a reasonable evaluation criterion where two different technologies were being compared, one with high capital and low operating costs and other the opposite. In this case it was a fair way to evaluate the bids.

For the other project however, this evaluation was a farce where bids were for a pre-designed RO system, including pre-selected membranes. The equipment manufacturers were also preselected. Assuming the preselection process for the manufacturers ensured that bidders had the capability and experience to build the specified equipment to the high quality required, and they were all bidding to build exactly the same piece of equipment, what was the point of doing an evaluated bid?

Where membranes have been preselected (and everyone is using the same projection program) and system arrays, recoveries and pumps are tightly specified, how could there be any difference in energy consumption, antiscalant dose and membrane replacement cost, which are the major operating cost inputs for a present worth calculation? Manufacturers will likely vary in their estimates in membrane cleaning and replacement frequencies because that is almost totally dependent on how well the owner operates the system and any pretreatment – so this is at best an educated guess, assuming optimum operating conditions and hoping for the best.

When everyone is bidding to build the same piece of equipment, operating cost comparisons should not be used to compare bids. If there is concern about the quality of an OEM’s equipment and the subsequent impact on operating costs, this should be dealt with in the prequalification phase through checking references, etc., so that the OEMs are vetted at this point. The reality for this particular project is that the evaluated bid process was used so that the owner and/or engineer had the ability to subjectively use the numbers to select their preferred OEM. A claimed membrane replacement frequency that was 2 years longer than the other OEMs brought this higher capital cost bidder’s 20-year present worth back to the other bidders and allowed subsequent selection. Note that OEMs were not required to back up their nominated replacement frequency with a pro-rated warranty for this period so other than using this number to decide the winning bidder, it was worthless to the end user.

I am not saying evaluated bids should not be used for RO/NF systems. In cases where the system design is not finalized and OEMs are given latitude to provide a system that will meet a performance specification, that opens up the potential for innovation and variations in factors that impact operating costs, system footprint, recovery rates, etc. where a 20-year PW evaluation is very valid. But when everyone is bidding to build the same piece of equipment, if the engineer or owner wants a way to award to a certain OEM they should accomplish this through the pre-qualification phase rather than waste a lot of OEM’s time through the bidding process.

In Memory of Hung Nguyen – The Father of MIEX®

At the AWWA Annual Conference in Denver in June a past colleague from my days at ICI/Orica told me that Dr. Hung Nguyen had recently passed away due to cancer. Hung had left Orica about 5 years ago and as far as I am aware had mostly cut his ties with the water industry, doing some consulting work in other industries. Thus his passing went largely unnoticed in the water community. Hung deserves more than to quietly depart the world without recognition of his significant contribution to the advancement of the water industry in Australia and the US, so I thought I would document his major achievements while I worked with him for about 15 years at ICI Australia/Orica, namely in bringing the MIEX® Technology to market.

The development of the MIEX® resin and water treatment process is well documented as a team effort between the Commonwealth Scientific and Industrial Research Organisation (CSIRO) who developed the resin, South Australian Water Corporation who developed the water treatment application and ICI Australia (later to become Orica after divestment by ICI PLC) who commercialized the technology. I was working with ICI Australia’s Watercare Division in the early 90s when Division General Manager Murray Winstanley was convinced by Prof. Don Bursill of SA Water to have ICI step in and help bring Don’s dream to reality - an ion exchange process using CSIRO’s magnetized resin to remove dissolved organic carbon from drinking water supplies, a major inhibitor of good water quality in Don’s home state. Murray knew he needed to bring in a manager who could crack the whip on the researchers from CSIRO and SA Water and turn this good idea into a commercial proposition.

Hung Nguyen was the ideal man for the job, having worked at ICI when the company tried to commercialize the Sirotherm process in the 70s, a similar magnetic ion exchange resin developed by CSIRO for brackish water treatment that was mothballed after unsuccessful field trials. I think Hung had a role in ICI’s mothballing decision, so Murray knew he would call a spade a spade and kill the technology if he thought it would not be viable at full-scale. Hung moved over to the Watercare Division as Technical Manager and became my manager. While I was not immediately working on the MIEX® project (at that time the technology was called MIER by CSIRO), I heard all about Hung’s dealings with CSIRO and SA Water as we all know Hung liked to chat to his colleagues on every detail of his business conquests. He reeled in a lot of the tangential research (such as using chromium as the magnetic component which would never fly in drinking water) and got the CSIRO’s researchers to focus on producing a resin that could be used in a conventional type water treatment process and therefore could be easily scaled up. He also secured a significant Federal research grant that allowed a large scale reactor to be built at the CSIRO’s Clayton campus which sped up the scale-up of the production process as well as produced the resin for the first full-scale MIEX® installations.

Hung was also one of the first board members on the Cooperative Research Center for Water Quality and Treatment and through this international network of water industry experts, was able to facilitate the first introductions of the MIEX® technology to the United States through the AWWA Research Foundation, Universities of North Carolina and Colorado, etc. - connections that helped me a lot when I first moved to the United States in 2000 to introduce the technology here.

Hung may have rubbed some researchers the wrong way speaking his mind but he got job done and was one of those rare people that could successfully bridge the gap between research and industry. Without Hung’s input, MIEX® may not have been anything more than another research project and good idea.

In recent years Hung had little involvement with the mainstream water industry in Australia and the United States. So I couldn’t let Hung’s memory fade away without recognizing his significant contribution into developing one of the most innovative new water treatment technologies in the past decade, with now over 30 systems installed in the USA and others in Australia, the UK and Asia. I am also very grateful to Hung for his positive influence on my career and involvement in the water industry.

ACE Gets its Mojo Back in 2013

2013 AWWA Annual Conference & Exposition in Denver a Return to Good Old Days

I know I am not alone in saying that over the last 4 or 5 years the AWWA Annual Conference and

Exposition has been slipping in attendance and overall energy compared to WEFTEC which seems to have benefited from attendees having to make a choice between the two conferences in tougher economic times. I know sales reps and some manufacturers have for many years wished that both conferences be combined to avoid the expense and time of having to attend both and the economic downturn of 2008 was a trigger to select one to attend. The choice has usually been WEFTEC which has more of a wastewater focus where a larger percentage of water industry equipment sales are made. Well, after the renewed energy, increased attendance and overall buzz of ACE13 in Denver, I think talks of a merger will be put to rest for at least a few more years.

As one of the exhibitors who are an important source of funding for ACE, I was very happy with the increased flow of attendees through the exhibit hall this year. The increased traffic was apparent on Sunday which in recent years has been dead, with more families in particular walking the floors (that attendees had brought on vacation) - I can't remember so many families for perhaps 6-8 years. And on Wednesday, the last day of the show and traditionally the slowest, I was busy talking to people at the booth all morning. I didn't get to see a single presentation as I was so busy at the booth and at meetings during the show.

Why was this ACE probably the best since ACE08 in Atlanta? Being in AWWA's home town of Denver, the organization certainly put in an extra special effort in revamping the schedule and events and in pre-show marketing. It was about time that some effort was put in to updating the program as I do think it had stagnated in recent years and lost ground to WEFTEC. I believe Denver's more central location, affordability and attractiveness as a destination for a larger spread of AWWA members also was a factor in the sucess of ACE13. Perhaps also it is a sign of improving economic conditions - I certainly heard of more new projects in the works compared to recent years.

Should ACE and WEFTEC merge? I can see the point of view of sales reps and the larger manufacturers who have to role out the marketing, booths, client entertainment and all the other expenses required for two shows that may have a big overlap in their customers. As a smaller manufacturer of primarily drinking water treatment equipment we can still get pretty good exposure at the ACE exposition which is located in a single exhibit hall, while I wonder if anyone would find us tucked away at the back of a secondary hall at WEFTEC? We certainly would have trouble competing for some time with our customers and sales reps versus the lavish functions put on by the larger multi-national OEMs (heck, I didn't even see some of our reps at ACE...). And I am sure there would be less room in the technical program for potable presentations which would impact engineers, utilities and researchers focussing on just drinking water. I therefore think the two shows should not merge to allow the smaller specialty OEMs and engineering firms as well as researchers have a say in the water industry rather than be made insignificant at a mega-water show.

Can AWWA generate some momentum from ACE13? I don't know. AWWA certainly needs to continue to review the conference program, get feedback from exhibitors and attendees and continually improve for ACE14. ACE14 in Boston will be a challenge being in an expensive city on the far east coast. My suggestion is AWWA should look at WEFTEC which has selected a limited number of locations that are popular for a wider range of attendees. Certainly, ACE should be in Denver every 5 years at least based on the success of ACE13!

Universal MF/UF Module Systems all the Rage at AMTA/AWWA Membrane Technology Conference

Without question, the buzz at the AMTA/AWWA Annual Membrane Technology Conference in San Antonio TX in late February was all about universal Module MF/UF Systems. It appears that sometime in the past 12 months the tipping point was reached and consultants and municipalities are finally embracing the concept of bidding multiple UF/MF modules, with multiple qualified OEMs open to use any of these. This is very similar to the model I mentioned in my post in October 2012 (Dow and Toray UF Modules Level Bidding Playing Field).

What was the buzz?

What has led me to make this statement is as follows:

• For a start, I had three consultants from national engineering firms drop by my booth and ask if we could build a MF/UF skid that either has interchangeable UF modules (i.e. has an adjustable header for different module configurations) or whether we could bid to a spec that qualified a number of MF/UF modules from different suppliers.
• Degremont used the show to promote a newly developed ‘SmartRack^TM’ that can accommodate different brands of UF modules (their brochure was passed to me by someone at a bar one night).
• A paper was presented by Carollo Engineers detailing an existing system in Utah that has decided to retrofit with membrane racks designed for interchangeability so that in the future multiple membrane suppliers could bid for the replacement membranes. A factor in this decision was the fact that the installed membranes had not lasted as long as expected and the utility did not want to remain locked in to one membrane supplier. I had a few engineers say to me at the show that the MF/UF membranes in many existing systems are nearing the end of their life causing some concern to the owners that they are locked in to the original membrane supplier while they would prefer to bid out the replacement.

Summing up the mood of the show was a comment I heard at a bar late one night from a Senior VP from one of the Big Three MF/UF OEMs that “If you just want to buy the membranes, we’ll sell you the membranes….”

Now don’t think I was just hanging out at the bars at the conference, but any seasoned conference attendee will tell you that is where all the real news and developments are discussed at these events!

Walking the Talk!

To prove all of the buzz was not just hot air, in the past 3 months there have already been some significant developments. West Basin Municipal Water District just put out a RFQ for OEMs to build a pilot system that can interchange MF/UF modules from different suppliers so that that the District can evaluate different modules for future installations. I have also been passed a draft specification to review from a national engineering firm for a significant sized system that will prequalify several OEMs and MF/UF modules as per the example in my previous post. I have also been asked to provide budget pricing from another major engineering firm for a MF/UF system in a reuse application where the owner also wishes to bid this as a universal MF/UF system.

I do have to clarify that most of the above projects are reuse applications which are perhaps seen as a lower risk to launch the universal module model, but with the involvement now of the major consulting firms and significant size water utilities, it will not be long before we see a lot more drinking water projects using the same model.

Siemens Saying Uncle?

As I was about to finish this post, I read an article in Global Water Intelligence’s May newsletter that Siemens Water Technologies’ (SWT) CEO Lukas Loeffler has predicted a shift to horizontal integration in the MF/UF market with increased commoditization in the component business (read MF/UF modules). As a result, Siemens is planning on separately selling the Memcor membrane production facility in Australia from the rest of the Siemens water business. Loeffler said he did not think the commoditization will happen in the next 2 years but maybe over the next 10-15 years.

Obviously I agree with SWT’s assessment of the direction of the market but I don’t agree with the predicted gradual rate of change. Based on the developments in just the past 3 months, I predict we will see commoditization in 5 years or sooner. Not to the extent we see with the Reverse Osmosis market, but certainly bids for universal MF/UF module systems will become more and more common.

Still Only Specifying the Big Three MF/UF OEMs - Ignorant or Irresponsible?

By now any engineers that claim they do not know about OEMs offering credible MF/UF systems other than the Big Three (Pall, Siemens and GE) are either ignorant; in that they are not aware that many of the new skid mounted installations over the past few years have used either Toray or Dow UF modules in systems built by OEMs other than the Big Three; or they are too lazy to revise their 5-10 year old boiler plate specs (I say that is irresponsible as it is the consultant’s responsibility when engaged by a municipality to select the most technically and economically feasible solution to meet their needs). A year ago I would have cut the engineers some slack where the first municipal systems using Toray and Dow UF modules had only been operating for about 12 months and there had not been a lot of data presented on these systems. But now after another year with more and more presentations at trade shows and publicity about these systems, for an engineer to claim they didn’t know there was an alternative to the Big Three or they didn’t know enough about the alternatives to include them in a spec, is just downright lazy and this engineer does not deserve to be hired by a small system.

To further my point, at the AMTA/AWWA Annual MembraneTechnology Conference a few weeks ago (Feb 25-28), our booth was approached by three engineering firms, two of which were national firms, about real projects where they are looking at building UF systems with interchangeable UF modules, and obviously the Big Three would not be interested in building these. Any engineer at this show with any membrane experience could not have missed the buzz about a shift to systems that can use different UF modules. I will write a separate post specifically on this topic shortly.

I will accept if an engineer and his client says they did look at the alternatives but their selection criteria required installations with say 5-years' of operational experience, particularly for large systems where the newer UF modules have not yet been in service for long enough. I would however suggest these engineers talk to some of the users of the Big Three MF/UF systems with over 5 years’ experience and ask if they are happy with their systems – I am sure many will not be happy – and then I would question why these OEMs are qualified ahead of other OEMs that may not have had installations operating for as long, but have had only one or two membrane fiber breakages over a 2-year period (many have had none). I bet if you picked any 2-year period for at least two of the Big Three OEMs’ systems operating for 5-10 years, the performance of these systems in terms of membrane integrity would not come close to the first 2-years’ performance of the systems using Toray and Dow membranes.

I’m sorry about this rant but I just spoke to an engineer at who’s firm I had presented a brown bag 2-years ago on our Toray UF installations, and where I had also spoken to other engineers at his firm in the past 12 months about our systems, and then he says sorry he did not know enough about our UF system in time for a spec he just wrote for a ~1MGD installation in which he just specified the Big Three. I hadn’t made contact with this specific engineer but for this firm to be not willing to consider any other OEMs for this small system is just plain ignorance and will probably end up costing a small City at least $200K. I am sure that is not the outcome this City wanted when it hired this engineering firm….

How do you build the Best Commercial RO Membrane System?

Recently I was talking to a consulting engineer about the membrane systems we build and he said “so you don’t actually manufacture any of the components, you just assemble the system?” I was a little taken aback with this comment as this is pretty much what all membrane OEMs do. Either the engineer didn’t understand how membrane systems are put together or he had been sold on one of the few OEMs that manufacture a few of the components used to build the membrane system. I look at a bill of materials for a RO system and there are over 300 different components …… So if out of all of these an OEM manufactures the feed pump and pre-filters is that going to be a better RO system?

The beauty of being a completely independent OEM (Original Equipment Manufacturer) is that you can select the best available components to build a membrane system for a specific application.
You can choose a pump that is most energy efficient and perfectly sized for a skid, rather than one OEM that must use multiple feed pumps per skid because of limitations in pump sizes that it manufacturers. When new components become available, the independent OEM (typically the smaller more nimble OEMs) can quickly incorporate these into a system design to the benefit of the end user.

And next time I see a spec that says the Reverse Osmosis OEM must also manufacture the membrane I will feel sorry for the end user who will have been duped into overpaying for a product no better than what they could have bought from an independent OEM. RO membranes are a commodity and there are several suppliers such as Toray, Dow/Filmtec, Hydranautics and CSM that sell to OEMs, offer very good technical support and provide prorated warranties for the membranes of up to 5-years depending on the application. I was actually visiting a manufacturing facility of one of the aforementioned membrane companies and was surprised to see a stack of boxed membranes private labeled for an OEM who claimed to make their own membranes…. Even if the company did make its membranes, with the ability to purchase from multiple RO membrane vendors, the independent OEMs can choose the best membrane available for an application, get very competitive pricing and pass on a more economical RO system to the end user.

Smaller systems are often the biggest losers when purchasing a membrane system when they or their engineer are convinced that larger OEMs that also manufacture some of the components will provide a more reliable system with better technical service. In reality, the larger OEMs may be encumbered with outdated equipment they have to use which is more expensive than components available from other independent suppliers. And don’t start me on the technical service….Just talk to a small system that has purchased equipment from a large OEM recently and see what they say!