REPORT TO COUNCIL
SUBJECT
Title
Increase Construction Contingency by $3,600,000 from $14,277,594 to $17,877,594 for the Civic Center Phase 1 Project and Authorize the City Manager or Designee to Execute Change Order Number 254 in the Amount of $4,394,208.92
Report
BACKGROUND
Regarding the Civic Center Phase 1 Project (“Project”), on October 27, 2020, Council awarded a construction contract to Hensel Phelps Construction Co. (Hensel Phelps) in the amount of $174,116,999.92 with an additional 8.2% construction contingency in the amount of $14,277,594. The bid was approximately 23% below the engineer’s estimate of $225,000,000. (RTC No. 20-0799).
A contract between Hensel Phelps and the City was executed on November 10, 2020. Construction began in December 2020 and is scheduled for final completion in December 2023.
EXISTING POLICY
Pursuant to Section 2.09.040 of the Sunnyvale Municipal Code, City Council approval is required for public works contracts exceeding $250,000 in any one transaction.
ENVIRONMENTAL REVIEW
The previous actions were taken by City Council related to the Civic Center Modernization Environmental Impact Report (EIR).
On September 25, 2018 (RTC No.18-0799), City Council adopted a resolution to:
a. Certify the EIR;
b. Make the Findings Required by the California Environmental Quality Act;
c. Adopt the Statement of Overriding Considerations and Mitigation Monitoring and Reporting Program.
On July 14, 2020 (RTC No. 20-0505), Council voted to approve changes to the Civic Center Modernization Project as described in the Addendum to the Civic Center Environmental Impact Report.
As the action being considered does not constitute any changes to the scope of the Project, no further environmental review is required.
DISCUSSION
Throughout the construction of the new City Hall, there were unexpected issues and events that have increased the total project construction costs as described below.
These costs can be divided into 3 main categories:
• COVID-19-Related Supply Chain/Material Issues: Specific issues include material delays and material substitutions due to products that are no longer being manufactured or companies that are no longer in business. These issues occurred many times over the course of the Project. One example that impacted cost significantly is the purchase and installation of the solar (PV) array. The product that the design was based around was available at bid time in 2020 but was no longer in production when procurement started in February 2021. This resulted in the selection of a new product which also required an extensive redesign of the structural steel support and canopy.
• City Requested Changes: The City requested changes to the technology components of the building, such as higher grade network cabling, screens and cameras for virtual meetings and enhancements to the Council Chambers to support hybrid meetings.
• PG&E Delays: Despite advance coordination with PG&E, delays were incurred by the Project as a result of PG&E’s inability to meet previously agreed upon schedules for disconnection and new services for both the Emergency Operations Center (EOC) and new City Hall. Additional costs were required to work around the PG&E delays to keep the Project moving while the team waited for PG&E to complete their work.
The City project staff together with Jacobs (Construction Manager) and Hensel Phelps have been actively partnering throughout the Project. The collective team has reviewed the remaining work needed to complete the entire Civic Center Phase 1 Project and have come to a mutual agreement that it can be completed for an additional $3,600,000. A change order would be issued to Hensel Phelps totaling $4,394,208.92. This includes the additional $3,600,000 plus the remaining unspent contingency amount of $737,208.92, and the unspent and unneeded balance of $56,500 for “Off Haul of Hazardous Soils.” The addition of the new funding would bring the total of the base contract plus contingency to $191,994,593.92.
Staff recommends adding $3,600,000 to the $14,277,594 construction contingency previously approved by Council. To date, approved change orders total to $13,540,385.08 of the original contingency. The new contingency amount would equal 10.3% of the base bid construction contract. A large sized project of this nature typically has a construction contingency allocation of 7% to 10%. In addition, the change order indemnifies the City from any claims related to the project, providing certainty to the final cost of the project.
Change Order No. 254 (Attachment 1) would cover all remaining identified pending change orders and potential claims to finish the Project. Pursuant to the attached letter from Hensel Phelps dated September 13, 2023 (Attachment 2), the Change Order would cover schedule extensions (primarily as a result of PG&E delays), identify deferred warranty items, and identify items that are to be included within the additional funding.
FISCAL IMPACT
This Project is budgeted in Project 831340 - Civic Center Modernization, which has sufficient funds remaining to cover the change order.
PUBLIC CONTACT
Public contact was made by posting the Council meeting agenda on the City's official-notice bulletin board at City Hall, at the Sunnyvale Public Library and in the Department of Public Safety Lobby. In addition, the agenda and this report are available at the NOVA Workforce Services reception desk located on the first floor of City Hall at 456 W. Olive Avenue (during normal business hours), and on the City's website.
ALTERNATIVES
1. Increase Construction Contract Contingency with Hensel Phelps Construction Co. by $3,600,000 from $14,277,594 to $17,877,594 for the Civic Center Phase 1 Project and authorize the City Manager or designee to execute Change Order Number 254 in the amount of $4,394,208.92.
2. Increase Construction Contract Contingency with Hensel Phelps Construction Co. by $1,764,955 to finish out the project and address each Claim and Potential Claim as they are filed.
STAFF RECOMMENDATION
Recommendation
Increase Construction Contract Contingency with Hensel Phelps Construction Co. by $3,600,000 from $14,277,594 to $17,877,594 for the Civic Center Phase 1 Project and authorize the City Manager or designee to execute Change Order Number 254 in the amount of $4,394,208.92.
JUSTIFICATION FOR RECOMMENDATION
There were a number of unexpected issues and events that were not anticipated at bid time that have increased the total project construction costs. An increase in the contract contingency and Change Order 254 address the costs associated with those issues and events. The change order also indemnifies the City of any claims against the project, which reduces any uncertainty for closing out the project once completed.
Staff
Prepared by: Allison Boyer, Assistant City Engineer
Reviewed by: Tim Kirby, Director of Finance
Reviewed by: Chip Taylor, Director, Public Works
Reviewed by: Jaqui Guzmán, Deputy City Manager
Approved by: Kent Steffens, City Manager
ATTACHMENTS
1. Draft Change Order number 254
2. Hensel Phelps letter dated September 13, 2023