Loading...
HomeMy WebLinkAboutStaff Report 350-06City of Palo Alto City Manager’s Report TO:HONORABLE CITY COUNCIL FROM:CITY MANAGER DEPARTMENT: PUBLIC WORKS DATE:SEPTEMBER 11, 2006 CMR: 350:06 SUBJECT:PROGRESS REPORT ON MILESTONE ACTIVITIES OF THE MOUNTAIN VIEW / MOFFETT AREA RECLAIMED WATER PIPELINE CONSTRUCTION PROJECT -CAPITAL IMPROVEMENT PROGRAM PROJECT WQ-04010 This is an informational report and no Council action is required. This report provides the progress report on the Mountain View/Moffett Area Reclaimed Water Project (Attachment A) to Council. DISCUSSION Staff has been working with the City of Mountain View on the design and implementation of the Mountain View / Moffett Area Reclaimed Water Pipeline project, which is partially funded by a State grant. The sunset date of the State grant is September 13, 2006. The project was issued for bid in June 2006 so a contract could be secured before the State grant expires on its sunset date. However, the rapidly escalating costs of goods and resources in recent years have created an extremely wild and inflationary bidding atmosphere, resulting in very high bids for the project ($26+ million, $6 million over the final estimate). The unexpected high bids illustrate the inflationary spiral of the construction market. Assuming the trend continues, the project will not be affordable in the future. It is therefore critical to pursue all avenues to construct the project as soon as possible so that future water supply options are maximized. Staff has consulted the State Water Resources Control Board staff and requested an extension of the grant sunset date in order to strategize and seek additional funding. The State project manager clearly believes that the project is a very good project and has proceeded to recommend an extension, plus other accommodations, for the project. The State project manager’s recommendations to the State Board are noted in his letter (Attachment B). Staff from the cities of Mountain View and Palo Alto agreed to reject all bids. Palo Alto’s Purchasing Division rejected all of the bids on August 17, 2006 in accordance with Palo Alto Municipal Code 2.300470 (b) -~ excessive cost over City budget. The attached project report provides a detailed discussion of the bidding process and the status of the State grant. The project report also examines the strategy to move forward with the project from two perspectives: Possibility of restructuring the project to reduce construction cost and to re-bid at a more favorable time of year. Potential grants and funding options, including the State Revolving Fund aad funding from regional water retailers. CMR:350:06 Page i of 2 City of Mountain View staff will forward the attached project report to its Cot~uciI on September 12, 2006. Staff ~ continue to work with City of Mountain View to pursue funding options and will return to Council with updates on the status of grants and fundirig oppo~ties. ATTACHMENT Attachment A: Mountain View-Moffett Area Reclaimed Water Pipeline Project Report Attachment B: State Water Resources Control Board letter of recommendations PREPARED BY: DEPARTMENT HEAD: Daisy Stark, Senior Engineer W’flliam D~ Miks, Manager R~WQCP ~L]~NN S. ROBERTS Director of Public Works CITY MANAGER APPROVAL: EMILY fiARRISON Assistant City Manager CMR:350:06 P~ge 2 of 2 ATTACHMENT A Mountain View/Moffett Area Reclaimed Water Pipeline Project Report August 2006 The Mountain View/Moffett Area Reclaimed Water Pipeline Project (Project) is a joint project between the cities of Palo Alto and Mountain View. This report documents the progress of the Project milestone activities to date, and the strategy to move forward. Background In July 2005, the State Water Resources Control Board (SWRCB) awarded a $3.8 million grant under the Water Recycling Funding Program (Prop 50, Chapter 7) for the Project design and construction. When the grant application was submitted in March 2004, the cost of the Project was estimated at $16.1 million in 2006 dollars. The City of Palo Alto, City of Mountain View, and the Palo Alto Regional Water Quality Control Plant (RWQCP) agreed to jointly fund the balance of the Project. The terms and funding arrangements were documented in an agreement entitled "Institutional and Operational Agreement between the cities of Palo Alto and Mountain View - Mountain View/Moffett Area Recycled Water Facility". Council of both cities approved the agreement in January 2005. Desig.q Since the grant award, Palo Alto and Mountain View staff worked with RMC Water and Environment to perform the Project design. The State grant requires that a construction contract for the Project be awarded by the stmset date, otherwise the grant award will expire. The original sunset date of the State grant was June 15, 2006, but was extended Project Report- Progress of milestone activities 1 C:kDocuments and Settings~kdaviskLocal Settings\Temporary Internet Files\OLK1C4~Project Report - Sept 2006.doc to September 13, 2006 at Mountain View’s request. City staff utilized the additional time to refine the cost estimate and review the funding options. The Project cost estimate was originally prepared in 2003, and escalated at 4% per year to $16.1 million in 2006 dollars. In view of the inflationary construction market environment in recent years, the consultant and a third-party estimator were instructed to update the cost estimate to account for the rapidly escalating costs of goods and to reflect the final design. The revised estimates valued the Project at approximately $20 million. Bid Process The Project was issued for bid on June 6, 2006. The invitation for bid was posted at the Palo Alto bid solicitation website and advertised in local newspapers. Plans and specifications were sent to ten Builders’ Exchanges, and twenty-four companies requested and received the bid documents. Potential bidders were encouraged to attend a non-mandatory pre-bid meeting, which was attended by representatives from eight companies. The bidding period was seven weeks and three bids, ranging from $20.8 to $26.8 million, were received on July 25, 2006. The contractor who submitted the lowest bid requested to withdraw it’s bid from consideration because of a multi-million dollar error. The two remaining bids are both over $26 million, substantially over the cities’ budget. The unexpected high bids illustrated the inflationary spiral of the construction market and significantly increased costs for pipe, concrete and material transportation costs. If the trend continues, the Project will not be affordable in the furore. It is therefore critical to pursue all avenues to construct the Project as soon as possible so that future water supply options are maximized. A meeting was held with SWRCB staff to discuss the bid result and to request an additional extension of the grant sunset date in order to strategize and seek additional funding. The State project manager affirmed the value of the Project as a drought-proof Project Report- Progress of milestone activities 2C:kDoeuments and SettingskkdaviskLocal Settings\Temp0rary Interact Files\OLK1C4~Project Report - Sept 2006.doc water supply, and responded favorably to cities’ request. Palo Alto and Mountain View staff agreed to reject, all bids, use the extension period to seek additional run’ling, re~ structure the Project to reduce costs, and re-bid at a more favorable time of year. On August 17, 2006, Palo Alto Purchasing Department rejected all bids in accordance with Palo Alto city code 2.30.470 (b) - excessive cost over city budget. State Grant Status The State project manager determined that the Project team has made a good faith effort to meet the deadline of the grant and recommended the following for the Project: 1. A 12 month extension for the grant sunset date 2. An increase of the grant amount from $3.8 million to the maximum-per-project amount of $4 million 3. The option of reducing the scope of the Project In addition, the SWRCB will accept City’s application for immediate consideration of a State Revolving Fund loan (SRF) for the Project. Strategy to Move Forward The strategy to move forward will include pursuing all avenues for additional grants and funding, and re-structuring the project to reduce cost. 1. Other Grants and Funding Several other grant/funding sources are potentially available to the Project. In two cases, application for funding for the Project has already been submitted. Project Report - Progress of milestone activities 3 C:LDocuments and Settings~kdaviskLocal Settings\Temporary Internet Files\OLK1CAkProject Report - Sept 2006.doc Program Prop 50, Chapter 8 Title XVI SRF Summary of Other Grant/Funding Application Submitted? Yes Yes No Type of Funding Grant Grant Loan (low or zero interest) Anticipated Amount $1.9 million $5 million Up to $25 million Anticipated Award date Dec ’06 / Jan ’07 Possibly 2008 funding cycle 4 - 5 months after application Proposition 50, Chapter 8 Grant - The grant program is administered by the SWRCB and the Department of water Resources. The Project was included in the Bay Area Integrated Regional Water Management Plan and was submitted in the summer of 2005 to compete for the FY 2006-2007 chapter 8 grant. Announcement of the award is currently scheduled for December 2006 - January 2007. If the Project is selected for the grant award, the Project will receive a maximum of approximately $1.9 million, which will reduce Mountain View’s share of the balance of the Project costs by approximately $1.27 million, and Palo Alto’s share by $0.63 million. Title XVI - The US Bureau of Reclamation (USBR) administers this grant program. The Project was included in the Bay Area Regional Water Recycling Program (BARWRP) and was submitted to USBR for feasibility determination in the winter of 2004. USBR determined that the Project has met all criteria except NEPA1 compliancel Staff has submitted the required documents and executed an agreement with USBR for NEPA compliance review, and NEPA review is presently underway. Concurrent with the NEPA effort, staff is working with other BARWRP members to 1 NEPA - National Environmental Policy Act Project Report - Progress of milestone activities 4CADocuments and Setfings~kdavis~Local Settings\Temporary Intemet Files\OLK1C4~Project Report - Sept 2006.doe pursue congressional authorization for funding through Title XVI. Congressman Miller (D - 7th Congressional Distric0 has agreed to introduce the Project along with five other feasible BARWRP projects for congressional authorization. Congressman Miller’s office is currently drafting legislation for the six BAWRP projects to be presented when congress is back in Session during the first week of September. The Project is submitted for a $5 million grant. Upon congress’ authorization, appropriations will be requested in the following funding cycle. Funding is retroactive so construction of projects could start after authorization and completion of NEPA. Congresswoman Eshoo has been informed of the Project.. State Revolving Fund (SRF) - The SRF loan program is administered by the SWRCB. The SRF provides a 20-year loan typically with an interest rate set at half of the State Bond General Obligation Rate (presently 2.5%), but the program also provides zero interest loans to qualified projects. In order to qualify to apply for a SRF loan, the project sponsor must have applied for placement on the SRF priority list. The RWQCP has submitted an application and it’s recycled water program, including this Project, is on the current priority list. The SWRCB normally places projects that address safety or .regulatory issues at a higher priority than recycled water or infrastructure projects. The State project manager recognizes the value of the Project to the water supply of the Bay area, and will accept a loan application for immediate consideration of a loan up to $25 million for the Project. An application package with required documents needs to be prepared for submission to the SWRCB for the SRF loan. Because the SRF program is partially funded by the Federal government, before approval of a loan, applicant must obtain environmental clearance and approval from SHPO2 and Federal agencies on the project. Review by SHPO and Federal agencies of the Project could be partly coordinated with the review that is currently underway for Title XVI. It is anticipated that approval of the environmental documents would not be an issue. The timeline for SHPO review could take four to z SHPO - State Historical Preservation Office Project Report - Progress of milestone activities 5 C:~Documents and Settings~kdavisLLocal Settings\Temporary Internet Files\OLK1C4~Project Report - Sept 2006.doc five months and is the critical path for the Project if the cities decide to obtain SRF loan for the Project. Under State guidelines, construction of a project that is funded by the SRF cannot start until SHPO clearance is obtained. Mountain View and Palo Alto are reviewing this funding option. 2. Re-structure the Project The bid document was prepared under an extremely tight schedule to meet the State grant deadline. The design team completed the final design based on the scope of work that was identified in the grant contract. Value engineering and refinements to the design had not occurred due to the time constraint, and the SWRCB has agreed that certain non cost- effective items could be removed from the Project. The grant extension period would allow the following cost reduction efforts to take place: Consultant to refine the design to minimize construction costs Consultant to remove non cost-effective items per SWRCB allowance Cities to evaluate possibilities of streamlining city requirements/restrictions to reduce construction costs Value engineering to ensure a cost effective project The goal of the cost reduction efforts is to reduce construction costs by up to $5 million reduction. The construction activities typically slows down during the winter months, and it is anticipated that re-bidding the Project in December 2006 or January 2007 could produce bids at $21 million - $23 million: The Next Step In summary, staff of cities of Mountain View and Palo Alto agreed to use the grant extension to: (1) pursue additional funds, (2) re-structure the Project to reduce costs, and (3) prepare for re-bid (December 2006 - January 2007). The next step requires the following tasks to be performed: Project Report-Progress of milestone activities 6C:kDocuments and Settingskkdavis~Loeal Settings\Temporary Internet Files\OLK1C4~Projeet Report - Sept 2006.doc 1. Initiate/obtain SHPO and NEPA clearances 2. Prepare and submit an application package for the SRF loan including resolutions from Council to apply for the loan 3. Brainstorm cost reductions and re-structure bid document 4. Revise the Institutional and Operational Agreement between cities of Palo Alto and Mountain View to incorporate new Project terms and needs 5. Prepare to re-bid in December 2006 - January 2007 Project Report- Progress of milestone activities 7 C:kDocuments and Settings~kdaviskLocal Settings\Temporary Intemet Files\OLK1C4kProject Report - Sept 2006.doc Linda S. Adams Secretmyfor Envh’onmental Protection State Water Resources Control Board Division of Financial Assistance ATTACHMENT B .1001 1 Street, Sacramento, California 95814 (916) 341-5700 Arnold Schwarzenegg~Mailing Address: P.O. Box 944212, Sacramento, California 94244-2120 GovernorFax (916) 341-5707 http://wwxv.waterboards.ca.gov _ 2006 Mr. William D. Miks, plant Manager Palo Alto Regional Water Quality Oontrol Plant 2501 Embarcadero Way Palo Alto, CA 94303 Dear Mr. Miks: , SUNSET DATE EXTENSION REQUEST; CITY OF PALO ALTO (CITY); MOUNTAIN VIEW/MOFFETT AREA RECLAIMED WATER PIPELINE PROJECT (PROJECT); WATER RECYLING FUNDING PROGRAM (WRFP) PROJECT NO. 3212-030 Thank you for your August 3, 2006; request for a second extension of the "Notice-to-Proceed" (NTP) deadline sited in the grant agreement (No. 05,705-550-0) for the above Project. In accordance with the grant agreement, executed on March 13, 2006, which stated that the grant agreement shall terminate if the Distdct did not issue a "Notice-to-Proceed" (NTP) to construction by June 15, 2006, unless the Distdct requested a 90-day extension. On March 27, 2006, the City requested approval for a 90-day extension to the NTP deadline due to delays dudng the design process. The Division of Financial Assistance (Division) issued an approval for the extension on Apd! 6, 2006. The current deadline is September 13, 2006 for issuance of NTP for the project. The City is requesting a second extension toissue the NTP because ofthe following reasons: 1. The City received three bids for the project ranging from $20.6 to 26.3 million, which exceeded the estimated project cost of $16.1 million; 2. To finance the increase in construction costs of the project the City intends to apply for a State Revolving Fund (SRF) loan. The City requested additional time to allow processing of their loan application, and; 3.Due to the high bids received the City intends to evaluate a redesign of the project for potential reductions in construction costs. The City also requests the following project considerations: 1.The City requests a one-year extension to the current project schedule; 2.The option to eliminate approximately 31 acre-feet of recycled water deliveries which would provide savings of up $1 million, and; 3.The City request that the sunset date be changed from issuance of NTP to submittal of Final revised Plans and Specifications (P&S)for the project. The City has provided a revised project cost estimate and has begun preparing the SRF loan application package for submittal. Based on my review of the August 3, 2006 request and further discussions with the City, I have made the following conclusions and recommendations: The City advertised and received three bids for the Project. All the bids were over the estimated project cost of $16.1 million. The increase in construction costs are outside the bontrol of the City and the City has made a good faith effort to meet the current NTP schedule. The one-year extension is reasonable and should be granted to allow processing of the SRF loan application. California Environmental Protection Agency O Recycled Paper Mr. William D. Miks -2 - 2.A requirement of the SRF program is the completion of a Value Engineering Study for all projects with construction costs above $10 million. Due to the high bids received, the City’s request to evaluate a redesign of the project for potential reductions in construction costs is recommended and a requirement of the SRF Loan funding process. 3. Recommend that the Deputy Director of the Division increase the City’s grant funding for the project from $3,802,475 to $4,000,000, due to the increased eligible project construction costs. 4. ¯ In accordance with the WRFP guidelines, recommend that the new sunset date milestone be changed from issuance of NTP to submittal of Final P&S. If you have any questions regarding this letter, please contact me at (916) 341-5828 or by email at rpontureri@waterboards.ca.gov. Robert Pontureri, Project Manager Project Development Unit 1B Ms. Daisy Stark, P.E. Senior Engineer Pato Alto Regional WQCP . Ms. Yousra Tilden Senior Project Manager RMC Water and Environment 2290 North First Street, Suite 212 San Jose, CA 95131 California Environmental P~otection Agency ~Recycled Paper