Inside208

Water Storage Tanks: Do your Due Diligence When it Comes to Maintenance

Posted on March 5, 2014 by John LaMacchia

Storage tank painting contractors have developed storage tank maintenance plans, often called “asset management plans”. Under these plans the contractor inspects the tank, defines the scope of work, prepares the specifications, submits a non-competitively bid quote for the work, inspects their own work, and then certifies to the owner that the work is satisfactorily completed.  The contract then calls for the owner to make annual installment payments for future work to be completed usually at 10 year frequencies. The contractor is paid in full for the future work before he returns to do it.

Potential attraction for municipalities to this approach include: The contractors offer financing usually over 4 years.  So a $300,000 project is paid off at $75,000 per year, which makes short term budgeting more manageable. The annual payments provide cost certainty for future work, there are no unknowns or general estimates for future work, which helps with long term budgeting. Turning over this work to the contractor eliminates the responsibility for managing tank maintenance, essentially it is now “out of sight and out of mind” as long as the check is sent in every year.

There are drawbacks to this approach as well that include: tank painters often recommend work be performed that is not needed.  In fact it is a rare occurrence when a tank painter inspects a tank and tells the owner it doesn’t need painting. The painters prepare the specifications for the work, often substandard and designed to minimize their cost as opposed to what is best for the tank. Unneeded additional services are sold as required including expensive mixing equipment and “biofilm” removal treatments. The price for the work is typically 50-75% higher than if the work was bid competitively to Michigan based painting contractors. There is no independent inspection of the work, and the owner may have no idea if the work, particularly on the inside of the tank was done properly, or even done at all. By making annual payments to the contractor for future work, the owner loses leverage if they are dissatisfied with the 10 year repainting project.  As the contractor has already been paid, there is no effective way to require defective work to be repaired.

The League believes it is critical for municipalities to fully investigate and perform their due diligence before entering into these contracts. The majority of owners currently under these contracts, have never had their tanks independently inspected, and have no idea if they got what they paid for. Most also never compared the cost of the contract to competitively bid results for tanks similar to theirs. Many never realized they paid for work that didn’t need to be done, removing perfectly good coatings, just to replace them (allegedly) with the same coatings.

John LaMacchia is a Legislative Associate for the League handling transportation and infrastructure issues. He can be reached at jlamacchia@mml.org or 517-908-0303.

Locations
Headquarters
1675 Green Road,
Ann Arbor MI 48105
 
Capitol Office
208 N. Capitol Ave.,
1st Floor Lansing, MI 48933
©2022 Michigan Municipal League LLC. All rights reserved