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connections to DWS's northernmost mauka-makai connector going through the Palamanui project. <br /> Part of these improvements are aimed at better serving DWS's existing customers like the airport and <br /> the Natural Energy Laboratory Authority of Hawaii (NELHA). Mr. Lim said that is why Kohanaiki <br /> wants to be able to have that negotiation at the end of the day, because otherwise Kohanaiki would just <br /> write the check--and have no protection. Kohanaiki is pretty comfortable with the design and does <br /> not expect anything else to come up, but Mr. Lim said he wants to protect his clients from exposure to <br /> undue cost. <br /> Mr. Taniguchi asked for an example of what would constitute a reasonable fair share, and he asked <br /> what might cause Mr. Lim to advise his client that it is not a reasonable fair share. <br /> Mr. Lim gave the example of an additional connecting transmission line that DWS wants to put in, <br /> where some of the line would get water to Kohanaiki, but where the lion's share would service the <br /> entire northern Kona system. That would be the kind of scenario where Kohanaiki would want to be <br /> able say, for example,the cost is $300,000.00, but Kohanaiki's share should be only$100,000.00; <br /> Kohanaiki would want to negotiate that number, Mr. Lim said. Mr. Lim said he was perfectly willing <br /> to do this; Kohanaiki wants to have the project go forward, and has a timetable that it wants to go <br /> forward on. He mentioned the County park at Kohanaiki Shores that is dependent on the water system <br /> going in, which Kohanaiki is very interested in doing. <br /> Mr. Greenwell asked for the Manager-Chief Engineer to comment. <br /> The Manager-Chief Engineer said that DWS always tries to be fair, and has no problems with the true <br /> concept of fair share. He said that he thought that the language was reasonable, and DWS has always <br /> tried to treat developers fairly. If something is the developer's fault,then the developer pays for it. If <br /> something is not the developer's fault,then the developer is not going to pay for it—it is plain and <br /> simple, he said. <br /> Mr. Inaba said that either agreement would have been fine. He said he understands that Kohanaiki <br /> wants protection. <br /> The Manager-Chief Engineer expressed confidence that DWS has been really fair with Kohanaiki, and <br /> that Mr. Lim knows that. <br /> Mr. Lim said he agreed with this, on the record. <br /> Mr. Meierdiercks noted that with construction contracts, DWS usually has a 10 percent contingency, <br /> but he did not see a contingency in this agreement. <br /> Mr. Inaba explained that the contingency is built into the contractor's estimate at this point. <br /> Mr. Meierdiercks said that this was still an estimate, but he did not see a 10 percent contingency here. <br /> Mr. Inaba said that this is a final change order cost, noting that this is a design-build project. In the <br /> cost breakdown, it shows that this is the leeway they have to work with. <br /> Mr. Meierdiercks asked if it was already in there. <br /> Mr. Inaba said that it is to account for things like minor design flaws. <br /> Mr. Meierdiercks asked if this was the maximum, and whether it may come in cheaper than this. <br /> Mr. Inaba said no,that is the cost, and Kohanaiki is taking some risk with it because it is a design-build <br /> project. Kohanaiki would be responsible for any changes to the original design(i.e., due to something <br /> in the original design that does not work). He said that Mr. Lim was referring to possible changes <br /> Page 4 of 21 10-25-11—Water Board Minutes js <br />