Cost Estimate Updated for FM Area Diversion Project

Calculator_2016_03_31_300The cost estimate for the FM Area Diversion Project, which will offer permanent protection to the Fargo-Moorhead area from serious flooding, has been updated to approximately $2.1 billion. The updated estimate was delivered to the Flood Diversion Board of Authority today.

The increase from the estimate of $1.8 billion issued in 2011 is based on rising construction costs due to inflation, scope increases related to in-town levees, and acquisition costs. Assuming a three percent inflation rate, the cost for the Diversion could continue to increase approximately $60 million per year if construction does not begin as scheduled.

“The updated cost estimate for the Diversion Project is just one key reason why we must forge ahead to build the project,” said Darrell Vanyo, Chairman of the Flood Diversion Board of Authority. “Seven years ago, almost to the day, the region experienced the highest flooding level in our history. We have made improvements since then, but we are still at risk of flooding, and we need this project. Also, FEMA has plans to remap the area’s 100-year floodplain within the next five years. With 19,400 homes in Fargo and 800 homes in Moorhead at risk of being placed in the floodplain, those homeowners may have to pay flood insurance premiums every year that we’ve seen range from 2,000-4,000 or more per home.”

In addition, a Project Partnership Agreement (PPA) with the U.S. Army Corps of Engineers (USACE) must be signed by August 31 for the Diversion Project to keep its federal “new start” status, which the Diversion Authority worked hard to achieve with the help of the federal delegation. Under federal and state law, the project requires a signed PPA for construction to begin. “Only six new starts were awarded in the U.S. this year and only eleven in the last six years. I think that speaks volumes about the quality of the research and design work conducted on the Diversion Project,” said Tim Mahoney, Mayor of Fargo. “This is the right project, and shovels need to start turning dirt soon.”

Thorough studies, planning and engineering has allowed the Diversion Project to clear several significant “quality-check” hurdles up until this point, including:

  • USACE selection of the Diversion Project as its preferred alternative in the Diversion Project’s Federal Feasibility Study
  • Project endorsement in the USACE Chief’s Report (Corps’ Report to Congress)
  • Record of Decision (Completion of Federal Environmental Review)
  • Congressional authorization in the Water Resources Reform and Development Act of 2014
  • Federal appropriations for construction and the “new start” designation (USACE 2016 Work Plan)

The Minnesota Department of Natural Resources (MNDNR) is currently preparing its Environmental Impact Statement on the project, which is expected to be completed in May.

USACE-led construction on the Diversion Project is slated to begin in the fall; however, in order to secure the “new start” designation and federal funding commitment, the federal funding commitment was reduced by the Office of Management and Budget (OMB) by $400 million, from $850 million to $450 million. With the release of the updated cost estimate, a project-specific financial plan is being completed, which will evaluate several options to cover costs through construction, long-term debt repayments, and operating costs.

The Diversion Authority continues to look for efficiencies and is planning to hold an additional “value engineering” workshop to explore where there may be cost-saving opportunities. Cost saving opportunities could involve tweaking preliminary designs of certain project features, while still maintaining the overall functionality of the federally authorized project.

Approved unanimously on September 2, 2015, a split delivery model would deliver the majority of the Diversion Project’s features through a Public-Private Partnership (P3) project, while the USACE intends to use traditional design-bid-build method. The P3 model will deliver the best value for the public’s money, provide performance guarantees and long-term warranties that otherwise would not be available, promote delivery innovation, and shorten the schedule to achieve flood risk reduction sooner than could be achieved otherwise.

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