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Lake Mead Intake Project Wins Insurance Award, Recoups Costs

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It’s smart to hedge high-risk bets, especially in Las Vegas. The Southern Nevada Water Authority did just that by buying a builder’s risk policy prior for the $817 million third intake project at Lake Mead. Backed by a half dozen reinsurers, the policy offers up to $650 million in loss coverage on a $10 million premium. The water authority bought it from Lloyd’s of London through Marsh LLC, New York City, after a year of discussion and research.

Insurance proved a prudent bet as the project has grappled with flooding delays, cost overruns and a worker fatality. The agency last month revealed a $35 million insurance award after an arbitration case, consisting of two years of depositions, documentation and deliberations. That comes atop a prior $14.2 million insurance payout. The money helps defray unexpected project expenses that include a $39.5 million change order in 2011.

“We don’t typically purchase insurance policies for construction projects,” says SNWA engineering project manager Erika P. Moonin. “But this was underground job, so we handled it differently."

The water authority knew it would be a tough job, which is why a $40 million contingency cushion was built into the project budget. Those monies have yet to be exhausted. The undertaking calls for a three-mile-long tunnel that will draw water from 860 ft., deeper than the two existing Lake Mead intakes which could soon run dry amid a crippling drought ravaging the west. Southern Nevada has seen lake levels plummet 113-ft. since 2000, leaving the region’s main water source half full.

Vegas Tunnel Constructors LLC, as a result, began work on a deeper lake intake in 2008 as an insurance policy to keep water flowing. The design-build contractor, a joint venture of S.A. Healy Co., Lombard, Ill., and Impreglio S.p.A., Sesto San Giovanni, Italy, is using a custom-built $25-million Herrenknecht tunnel-boring-machine to carve-out a 20-ft-dia tunnel lined with 2,500 concrete rings. Each ring is made-up six 17-ton precast segments that form 6-ft. of tunnel.

The project has seemingly overcome early hurdles, namely repeated flooding between 2010 and 2011 that ruined some mining equipment. The joint-venture team, which includes geotechnical consultants Brierley Associates LLC, Denver, and Arup, New York, spent months pumping out water and stabilizing rock fractures with grout. It eventually abandoned a 200-ft-long starter tunnel and drilled a drier direction. Construction has seeming hit its stride, with the tunnel reaching 58% completion, Moonin says. However, work is nearing a worrisome area that passes 50 ft. underneath the old Las Vegas Wash channel, now at the bottom of Lake Mead.

Barring any additional incidents, the project should finish in the summer 2015 or about two years later than initially planned. Other affiliated work, done under separate contracts by different firms, has progressed more smoothly, including a 600-mgd pumping station; a 14-ft-wide, 16-ft-tall connection to the second intake; a 120-in.-dia. discharge pipeline from the pumping station to the 600-mgd Alfred Merritt Smith Water Treatment Plant; and, a large power substation and lines.


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