The Board of Directors' (Board) authorization is required for purchases or agreements in an amount greater than $200,000. Due to the large-scale effort to initiate a full-scale demonstration of MABR technology, a Board resolution is needed to confirm and declare exemption from the competitive bid process for the demonstration and equipment purchase agreement.

The Steam and Aeration Blower Systems Renovation, District Project (DP) 7349 (Steam Project) was a significant effort resulting in additional projects to improve the secondary treatment system and related systems, including installation of new electric blowers, renovation of the aeration basins, and improvements to the steam system. A critical goal of the Steam Project was to maximize the treatment capacity of the existing aeration tanks to accommodate potential nutrient removal requirements, whether driven by a water recycling project or by the enforcement of nutrient discharge limits. MABR technology emerged as a leading candidate for addressing the treatment intensification challenge. However, its application posed some concerns as the technology was relatively new in the United States, and Central San’s secondary activated biological process has unique characteristics that could present compatibility issues.

In September 2023, HDR Engineering, Inc. (HDR) was hired under the Process Optimization and Efficiency, DP 100055 to assist Central San staff with piloting MABR technology. The pilot, completed in November 2024, demonstrated that the technology has strong potential to achieve nitrogen removal performance within Central San’s existing secondary process, comparable to that of full-scale facilities already in operation. On July 10, 2024, while the pilot was underway, the San Francisco Bay Regional Water Quality Control Board issued the third Bay Area Nutrient Watershed Permit, marking the most significant regulatory change for Central San’s wastewater treatment plant since the passage of the Clean Water Act in 1972. The permit mandates a seasonal average 40 percent total inorganic nitrogen (TIN) reduction compared to 2022 loads. Limits would be enforced starting in October 2034, and Central San would need to comply by the 2035 dry season (May 1 - September 30).

 
On April 3, 2025, to prepare for potential future nutrient regulations, the Board authorized an agreement with HDR for professional engineering services under the Nutrient Management, DP 100078 (Nutrient Project). Included in HDR’s scope of work is the implementation of a full-scale MABR demonstration and the exploration of additional process intensification opportunities. Although the MABR pilot produced promising results, full-scale demonstration testing is necessary to validate its performance within a fully operational aeration tank and to resolve key questions related to hydraulics, operations, and maintenance. The demonstration testing will generate process performance data to assist in the design of a system capable of meeting permit-required TIN reductions while maintaining flexibility to adapt to future changes, including stricter regulatory limits or population growth.
 
In preparation for the planned MABR demonstration in summer 2026, the Nutrient Project team has been coordinating with the construction team for the Aeration Basin Diffuser Replacement, Phase 1, DP 100019  to incorporate key support systems for the MABR equipment. As most of this work involves submerged components, completing it now will allow the MABR to be installed next year without taking the aeration tank out of service.

 
Veolia WTS Systems USA, Inc. (Veolia) manufactured and supplied the MABR system piloted in 2024. At that time, Veolia was the only company licensed to sell this technology in the United States and the only provider with an established track record of full-scale MABR installations at wastewater treatment plants. Although a second manufacturer has since entered the United States market, the Nutrient Project team recommends continuing with Veolia’s system for the next phase of testing. This demonstration will assess MABR performance under Central San’s unique operating conditions, including low solids retention time for carbon removal and treatment of cyanide from incinerator air pollution control scrubber water. Switching suppliers at this stage would eliminate the ability to compare performance data between the pilot and full-scale phases. Given the need to establish reliable performance criteria, and the potential for significant cost savings compared to conventional nutrient removal which would require extensive new aeration tanks and clarifiers, staff recommends proceeding with the full-scale demonstration testing using Veolia’s MABR system and services.

An agreement has been negotiated with Veolia that includes:

• engineering support for preparation of shop drawings and coordination with the Nutrient Project team;
• a supply of 44 cassettes for delivery by June 1, 2026; and
• installation support services in collaboration with the Nutrient Project team and the installation contractor.

To ensure the MABR cassettes arrive by June 1, 2026, the contract and notice to proceed must be finalized by the end of November 2025. This schedule provides adequate time to complete shop drawings and release them for fabrication by December 1, 2025. With a lead time of approximately 26 weeks, the cassettes are expected to be delivered by June 1, 2026, which will enable Central San staff to capture nutrient removal during the dry season. In advance of this delivery, Central San will issue bid documents and present an installation contract to the Board for approval.

   
Veolia’s cost proposal for the equipment and associated services is $5,511,686, including $275,686 in tariffs. Staff recommends including a contingency of $288,314 (5.2 percent) for a total authorized agreement amount of $5,800,000. The contingency would be held separate from the other negotiated costs and would cover potential needs such as:

• additional components that may need to be included in the equipment supply; 
• supplemental controls and instrumentation engineering during shop drawing review and installation; and
• any additional installation support services requested by Central San.

Central San staff acknowledges that the contingency amount of $288,314 is below the typical 10 percent planned for a complex construction project, as this is primarily an equipment purchase. However, given that this is a demonstration project with multiple variables and evolving geopolitical conditions, staff will bring forward a change order if necessary.

California Environmental Quality Act (CEQA)

Staff has concluded that this equipment purchase agreement is exempt from CEQA under the following CEQA guidelines:

• Section 15301 since it involves maintenance, minor alterations, operation, and repair to an existing public facility involving no expansion of use;
• Section 15302 since it involves replacement or reconstruction of existing structures or facilities;
• Section 15303 since it involves installation of small new equipment and facilities in structures;
• Section 15304 since it involves minor alterations to the condition of water;
• Section 15061(b)(3) because it can be seen with certainty that there is no possibility the contract may have a significant effect on the environment.

Approval of these actions will establish the Board's independent finding that this equipment purchase agreement is exempt from CEQA.

The Board could choose to defer this equipment purchase and include it in the installation contract; however, this approach is not recommended as it would extend equipment lead times and delay the MABR demonstration testing to 2027, postponing critical results needed to advance preliminary design efforts and comply with TIN reduction permit requirements by 2035. Timely results from the full-scale MABR demonstration are essential to identify the most cost-effective nutrient mitigation strategy.

The costs associated with each element of MABR full-scale demonstration testing are outlined below:

• MABR structural materials and large bubble mixing equipment: $1.4 million (M)
• MABR-related professional engineering services fees and staff: $1.4M
• MABR structural installation labor: $1.5M
• Surface wasting, large bubble system (excluding equipment), MABR air and process piping: $4.5M
• MABR cassettes and special services (start-up and commissioning), with contingency (District-furnished contract planned): $5.8M ($5.512M equipment, $0.288M contingency)
• Installation of MABR equipment after equipment delivery; implementation contract to be issued: $2.0M (estimated)

• Total MABR full-scale demonstration testing estimated costs: $16.6M

Nutrient Project planning-phase outlays are currently allocated at $9M in the Fiscal Year (FY) 2025-26 Capital Improvement Budget. Based on the anticipated expenditures listed above, future project budget adjustments may be required to cover the listed costs. At this time, staff is not recommending a budget amendment as most MABR-related spending will occur later in the fiscal year and likely extend into FY 2026-27. Staff will continue to closely monitor project and overall capital program spending before recommending any budget adjustments to the Board. This approach will help manage fiscal year carryover and identify funding sources such as contingency reserves or reorganization of other capital projects. Once the exact adjustment and funding source are determined, staff will return to the Board for approval.

The Engineering and Operations Committee reviewed this matter at its meeting on September 10, 2025, and recommended approval.

Staff recommends the following Board action:

1. Adopt Resolution No. 2025-039 making findings to confirm and declare exemption from the competitive bid process to fulfill and implement the MABR full-scale demonstration; 
2. Authorize the General Manager to execute an equipment purchase agreement with Veolia WTS Systems USA, Inc. in an amount not to exceed $5,800,000 for MABR equipment for the Nutrient Management, District Project 100078; and
3. Find the Agreement exempt from the California Environmental Quality Act.