HomeMy WebLinkAboutStaff Report 2512-5756CITY OF PALO ALTO
CITY COUNCIL
Special Meeting
Monday, February 09, 2026
Council Chambers & Hybrid
5:30 PM
Agenda Item
5.Approval of an Increase of Construction Contingency for Contract No. C24189237 with
SAK Construction, LLC in the Amount of $800,000 and Amend the FY 2026 Budget in the
Wastewater Treatment Fund for the Joint Intercepting Sewer Rehabilitation (Phase 1)
Project (WQ-24000); CEQA Status - Exempt under CEQA Guidelines Section 15301
(Repairs to Existing Facilities)
City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Public Works
Meeting Date: February 9, 2026
Report #:2512-5756
TITLE
Approval of an Increase of Construction Contingency for Contract No. C24189237 with SAK
Construction, LLC in the Amount of $800,000 and Amend the FY 2026 Budget in the
Wastewater Treatment Fund for the Joint Intercepting Sewer Rehabilitation (Phase 1) Project
(WQ-24000); CEQA Status - Exempt under CEQA Guidelines Section 15301 (Repairs to Existing
Facilities)
RECOMMENDATION
Staff recommends that the City Council:
1. Approve an increase in construction contingency for Contract No. C24189237 with SAK
Construction, LLC in an amount not to exceed $800,000 for a total contract contingency
amount not to exceed $4,334,770; and
2. Approve an amendment to the Fiscal Year 2026 Adopted Capital Budget Appropriation
for the Wastewater Treatment Fund (requires a 2/3 vote) by:
a. Increasing the Joint Intercepting Sewer Rehabilitation (Phase 1) Project (WQ-
24000) appropriation by $800,000; and
b. Decreasing the Wastewater Treatment Fund balance by $800,000.
EXECUTIVE SUMMARY
The Joint Intercepting Sewer Rehabilitation (Phase 1) Project addressed critical structural
deterioration in a 72-inch trunk sewer that conveys wastewater flows from Mountain View, Los
Altos, Los Altos Hills, and a portion of Palo Alto. During construction, unforeseen site
conditions, necessary design clarifications, and contractor sequencing challenges required
multiple change orders that exhausted the original construction contingency. Staff recommends
increasing the contingency for Contract No. C24189237 with SAK Construction, LLC. by
$800,000, bringing the total contingency to $4,334,770 and the total potential contract not-to-
exceed amount to $11,682,470.1
1 SAK Inc., Construction Contract for the Joint Intercepting Sewer Rehabilitation Project C24189237;
https://paloalto.gov/files/assets/public/v/1/public-works/rwqcp/contracts/contract-c24189237_sak_signed.pdf
Delivery delays for the two replacement gates extended the duration of the bypass system
beyond what was originally anticipated, resulting in additional rental costs. Following
completion of the work, staff initiated final change order negotiations and reviewed the original
assumptions used to budget the bypass system. This review determined that the estimated
duration for rental equipment associated with gate installation was insufficient and did not
account for additional required rental (8 days) and associated costs. In addition, additional
contingency is required to complete remaining restoration work outside of the RWQCP allowing
for reopening of trails in Byxbee Park and to fully close out the project.
BACKGROUND
The Joint Intercepting Sewer Rehabilitation (Phase 1) Project rehabilitated 2,364 linear feet of
deteriorated 72-inch diameter concrete sewer pipe to address extensive corrosion in a critical
section of the Joint Intercepting Sewer (JIS) leading to the RWQCP. This section of the JIS
conveys most of the wastewater flow from Mountain View, Los Altos, Los Altos Hills, and Palo
Alto into the RWQCP. Construction began in winter 2024 but encountered unforeseen site
conditions and contractor schedule and sequencing challenges, resulting in delays, multiple
change orders, and an extension of field construction into the 2025 dry season.
In August 2025, City Council approved an increase of $1.8 million in contingency to allow
extension of a bypass system to isolate and evaluate a major junction structure to the RWQCP.3
The inspection and testing confirmed that two of the gates used to control wastewater flows to
the RWQCP were corroded beyond repair and required replacement. In addition, the junction
box’s protective concrete coating had deteriorated over the years, leaving concrete exposed in
the corrosive atmosphere. The entire box required concrete repair and recoating.
In October 2025, City Council approved an additional increase of $1 million to cover operation
of a bypass operation to install new gates and close-out of the project.4 The costs for this
portion of the bypass system included rental of additional pumps, mechanical piping manifolds,
valves and other appurtenances in addition to costs to operate the system. Rental rates of
equipment and operations costs were negotiated with the contractor and were subject to
extension if equipment deliveries or installation activities were delayed.
Total contingency was amended to a not-to-exceed amount of $3,534,770, as documented in
Staff Reports #2505-4733 and #2508-5114.2,3
3 City Council, August 11, 2025; Agenda Item #10; SR #2505-4733
https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=83528&dbid=0&repo=PaloAlto
4 City Council, October 20, 2025; Agenda Item #5; SR #2508-5114
https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=83654&dbid=0&repo=PaloAlto
3 City Council, August 11, 2025; Agenda Item #10; SR #2505-4733,
https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=83528&dbid=0&repo=PaloAlto
ANALYSIS
Staff recommends increasing the total authorized contingency for Contract No. C24189237 with
SAK construction, LLC by $800,000 to $4,334,770, resulting in a revised total not-to-exceed
contract amount of up to $11,682,470. From the total additional contingency amount of
$800,000, approximately $125,000 will cover the additional repair work in Byxbee Park and the
remaining $675,000 will be used to cover for the discrepancy in the estimate for the operation
of the temporary bypass system within the RWQCP and remaining change order items still
under discussion.
To allow isolation of Junction Box No. 0 (JB-0) inside RWQCP, to evaluate structural conditions,
remove the deteriorated box concrete coating, perform concrete repairs followed by recoating
of the concrete, and replace two severely corroded gates that control influent flows, two
Contingency increases were previously approved. The contractor was requested to remove
accumulated grit in the box and in the RWQCP Influent Pump Station wet well over three
consecutive weekend nights to protect the downstream pumps and other equipment from
damage. Procurement and installation of the new gates were performed under the RWQCP’s
On-Call Emergency Construction contract. Installation of the gates inside JB-0 required that a
portion of the temporary bypass system used during the main relining phase of the Project
remain in operation to keep JB-0 isolated.
The design and cost assumptions for the temporary bypass system accounted for the
operational complexity of the work, including the requirement for continuous 24/7 monitoring
by qualified personnel to ensure system performance and protect public health and safety,
particularly important during periods of inclement weather or elevated wastewater flows.
Because the bypass system was already installed under the SAK contract, staff extended bypass
operations under SAK’s existing contract to minimize mobilization costs.
Subsequent delays in the delivery of the replacement gates extended the period during which
the temporary bypass system was required to remain in operation beyond the duration
originally assumed. As a result, additional equipment rental (8 days) and associated costs were
incurred. In November 2025, the replacement gates were successfully installed, and the bypass
system was subsequently removed. The RWQCP resumed normal operations on November 12,
2025.
Following completion of the construction work, staff initiated final change order negotiations
and determined that the estimated duration for rental equipment required to support gate
installation was insufficient. The original assumptions allowed eight weeks for gates fabrication
and shipment; however it was nine weeks until the gates arrived on site, resulting in daily rental
costs of eight more days until the actual work to install the gates began. As a result, additional
construction contingency is required to close out the project.
In addition to bypass system rental costs, additional restoration work outside the RWQCP is
required including trail restoration from the East Bayshore Road entrance to Byxbee Park and
along the JIS alignment next to Byxbee Park hill. The total estimated cost for the trail
restoration work is $125,000.
FISCAL/RESOURCE IMPACT
The Joint Intercepting Sewer Rehabilitation (Phase 1) Project (WQ-24000) is a cost-shared
capital improvement project among the four primary partner agencies — Palo Alto, Mountain
View, Los Altos, and Los Altos Hills— based on previously approved cost- sharing percentages,
as shown in Table A-1 of Attachment A.
Expenses for bypass pumping required inside the RWQCP to complete the work at JB-0 are
allocated across all six partner agencies— Palo Alto, Mountain View, Los Altos, Los Altos Hills,
Stanford University, and East Palo Alto Sanitary District—because the RWQCP uses the JIS to
convey plant-wide internal return flows to the headworks (Table A-2 of Attachment A). Palo
Alto’s share of these expenses inside the RWQCP is estimated to be approximately 36%, and
the other five agencies’ share is approximately 64%.
Therefore, Palo Alto’s share of the recommended increase in construction contingency is
approximately $288,000 (36%) of the $800,000 (Table A-3 of Attachment A). While a decrease
in the Wastewater Treatment Fund reserve is recommended to support the increased
contingency, the reserve will be replenished with revenue from the partners for their 64% share
of costs during a true-up in the next fiscal year. Palo Alto’s overall share of the entire Project—
including work both inside and outside the RWQCP— is approximately $3,429,000, or 26%,
reflecting the combination of cost allocation methodologies applied to different components of
the Project. Tables A-2 and A-3 in Attachment A provide detailed breakdowns of the bypass
expenses inside the RWQCP and the updated not-to-exceed project costs by partner agency.
The recommendations in this report will increase the authorized contract contingency with SAK
and authorize one or more change orders to the contract. Should additional funding be
required beyond the amount authorized by this action, it would be subject to City Council
approval through a future budget appropriation process.
STAKEHOLDER ENGAGEMENT
This Project is part of the RWQCP’s major capital improvement program funded by the City of
Palo Alto and its five partners. The five partner agencies are regularly consulted regarding both
the need for and the progress of wastewater treatment capital work. With respect to Palo Alto
itself, the open meetings on the budget process serve as the main vehicle for engaging the
community on both new projects such as this and associated rate impacts. Staff also responded
to public inquiries throughout the Project’s duration.
In addition, staff has coordinated with the Community Services Department and other Public
Works Department staff to coordinate construction activities, bypass pumping, access, and trail
detours in the park and at the closed landfill. The Byxbee Park trail restoration effort concluded
on December 22, 2025.
ENVIRONMENTAL REVIEW
Council action on this item is exempt from review under the California Environmental Quality
Act (CEQA) under CEQA Guidelines Section 15301, subsection (b) as it involves the repair and
maintenance of an existing publicly-owned utility used to provide sewerage treatment services
with no expansion on the existing facility.
ATTACHMENTS
Attachment A: Partner Agencies Cost Share Summary for Construction (Revised December
2025)
APPROVED BY:
Brad Eggleston, Director Public Works/City Engineer
Attachment A ‐ Partner Agencies Cost Share Summary for Construction Phase (Revised December 2025)
Table A‐1: Project Costs during Construction (Less Bypass Pumping Inside The Plant)
Initial Estimated Project
Cost (2023)
Estimated Cost Fixed Cost Share Current Project
Increase Cost
Estimated Cost
December 2025AgencyOct 2025 %
City of Mountain View
City of Palo Alto
City of Los Altos
Town of Los Altos Hills
Subtotal:
$4,398,734
$1,283,727
$1,055,696
$299,818
$4,808,985
$1,403,454
$1,154,156
$327,780
62.50%
18.24%
15.00%
4.26%
$0
$0
$0
$0
$0
$4,809,000
$1,403,000
$1,154,000
$328,000
$7,037,975 $7,694,376 100.00%$7,694,000
Table A‐2: Cost for Bypass Pumping during Construction inside The Plant
Initial Estimated Project
Cost in (2023)
Estimated Cost
Oct 2025
Est. Cost
Share %
Current Project
Increase Cost
Estimated Cost
December 2025Agency
City of Mountain View
City of Palo Alto
$760,885
$663,379
$206,393
$38,699
$1,917,000
$1,738,000
$504,000
$97,000
41.50%
36.01%
7.94%
$332,000
$288,080
$63,520
$16,160
$46,240
$54,000
$800,000
$2,249,000
$2,026,000
$568,000
$113,000
$314,000
$364,000
$5,634,000
City of Los Altos
Town of Los Altos Hills
East Palo Alto Sanitary District
Stanford University
Subtotal:
2.02%
$104,904
$122,736
$1,896,995
$268,000
$310,000
$4,834,000
5.78%
6.75%
100.00%
Table A‐3: Not‐to‐Exceed Cost for Partners during Construction (Sum of Table A‐1 and A‐2)
Initial Estimated Project
Cost (2023)
Estimated Cost
Oct 2025
Overall Increase
Cost Share %
Current Project Estimated Cost OctAgencyIncrease Cost 2025
City of Mountain View
City of Palo Alto
$5,159,619
$1,947,106
$1,262,089
$338,516
$6,726,000
$3,141,000
$1,658,000
$425,000
41.50%
36.01%
7.94%
$332,000
$288,080
$63,520
$16,160
$46,240
$54,000
$800,000
$7,058,000
$3,429,000
$1,722,000
$441,000
City of Los Altos
Town of Los Altos Hills
East Palo Alto Sanitary District
Stanford University
Total, Not‐to‐Exceed:
2.02%
$104,904 $268,000 5.78%$314,000
$122,736 $310,000 6.75%$364,000
$8,934,970 $12,528,000 100.00%$13,328,000