REPORT TO COUNCIL
SUBJECT
Title
Authorize Amending an Existing Contract with Carollo Engineers, Inc. for the Sunnyvale Cleanwater Program Headworks and Primary Treatment Project - Package 2 (F26-394) for Engineering Services During Construction; Award of Contract to Carollo Engineers, Inc. for Claim Management Support; Approve an Increase to the Construction Contingency in the Construction Contract with Ranger Pipelines Incorporated for the Sunnyvale Cleanwater Program Secondary Treatment and Thickening/Dewatering Site Preparation Project (PW21-25); Authorize Amending an Existing Contract with Carollo Engineers, Inc. for the Sunnyvale Cleanwater Program Plant Rehabilitation Project for Engineering Services During Construction (F26-404); and Approve Budget Modification No. 15
Report
REPORT IN BRIEF
Staff requests approval of seven actions:
1. A Ninth Amendment to the Consultant Services Agreement with Carollo Engineers, Inc. of Walnut Creek, in substantially the same format as Attachment 1 to the report, to increase the contract amount for the Water Pollution Control Plant (WPCP) Headworks and Primary Treatment Project - Package 2. This amendment pertains to Engineering Services During Construction and will increase the total contract amount by $677,502.43, from $15,153,720.00 to $15,831,222.43.
2. A new Consultant Services Agreement with Carollo Engineers, Inc. of Walnut Creek, in substantially the same format as Attachment 3 to the report for the WPCP Headworks and Primary Treatment Project - Package 2. This agreement pertains to Claim Management Support for a total contract amount of $482,304.41.
3. Approve a 10% contract contingency in the amount of $48,230.44.
4. An increase in the contingency for construction services for Ranger Pipelines Incorporated in the amount of $6,523,346.
5. A Second Amendment to the Consultant Services Agreement with Carollo Engineers, Inc. of Walnut Creek, in substantially the same format as Attachment 2 to the report, to increase the contract amount for the WPCP Existing Plant Rehabilitation Project. This amendment relates to Engineering Services During Construction and will increase the total contract amount by $812,340 from $8,262,197 to $9,074,537.
6. Approve a 10% contract contingency in the amount of $81,234.
7. Budget modification No. 15 in the amount of $6,182,494.
EXISTING POLICY
Pursuant to Chapter 2.09 of the Sunnyvale Municipal Code, City Council approval is required for construction contracts exceeding $250,000.
Pursuant to Chapter 2.08 of the Sunnyvale Municipal Code, City Council approval is required for the procurement of goods and/or services exceeding $250,000 in any one transaction.
Pursuant to Sunnyvale Charter Section 1305, at any meeting after the adoption of the budget, the City Council may amend or supplement the budget by motion adopted by affirmative votes of at least four members so as to authorize the transfer of unused balances appropriated for one purpose to another, or to appropriate available revenue not included in the budget.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(4) in that it is a fiscal activity that does not involve any commitment to any new project which may result in a potential significant impact on the environment.
BACKGROUND
Originally constructed in 1956, the City has periodically increased the WPCP’s treatment capacity as Sunnyvale’s population has grown and has incorporated new treatment systems to improve effluent water quality and meet regulatory standards. The City is implementing the largest capital improvement program in its history, known as the Sunnyvale Cleanwater Program (SCWP), to address aging infrastructure and make necessary upgrades to support continued and compliant operations. The requested actions included herein are related to three projects in the SCWP:
• WPCP Headworks and Primary Treatment Project - Package 2 (Project 824771)
• WPCP Secondary Treatment & Thickening/Dewatering Project-CAS Stage 1 (Project 833210)
• WPCP Rehabilitation Project (Project 833150)
DISCUSSION
Action No. 1: Ninth Amendment to the Consultant Services Agreement with Carollo Engineers, Inc. (Carollo) to increase the contract amount for the Water Pollution Control Plant (WPCP) Headworks and Primary Treatment Project - Package 2.
The first major project in the SCWP was the design and construction of a new headworks and primary treatment facility, which takes the raw sewage from the conveyance pipelines and removes solids and sediment before the secondary treatment process. In May 2013, the City hired Carollo to complete the design of this project as well as develop a Master Plan for the entire WPCP reconstruction (RTC No. 13-108). The primary treatment facility was constructed in two separate bid packages. The first package (Package 1) included demolition and all work required to prepare the site for the main headworks and primary treatment improvements (RTC No. 16-0456). The second package (Package 2), replaced the existing primary treatment facilities with new headworks and primary treatment facilities (RTC No. 17-0447). Package 2 was awarded in May 2017 with an anticipated completion date of March 2020. Carollo’s scope also included providing Engineering Services during Construction of Package 1 and 2 projects.
The new Headworks and Primary Treatment facility’s power demands necessitated an electrical service upgrade, which was originally scheduled for January 2020, but was significantly delayed during construction. Coordination delays between the contractor and PG&E were extended until the service was energized in March 2022. Additionally, during process startup, equipment malfunctions and programming discrepancies required troubleshooting and resolution through mid-2023, further delaying project completion. Functional testing of various components revealed control strategy issues, which were resolved in July 2023. The 30-day Clean Water Testing phase began in April 2023 and was successfully completed in July 2023. Package 2 for the headworks and primary treatment facilities was finally completed in October 2024. This series of delays resulted in approximately three (3) years of additional engineering services during construction that were not anticipated as part of Carollo’s contract for the Headworks and Primary Treatment Facilities project.
Carollo has continued working after exhausting the fee allocated for engineering services during construction on this package in order to keep the project moving forward to avoid further project delays. This Ninth Amendment for $677,502.43 will allow them to be reimbursed for their services to date, as well as for remaining closeout activities such as record drawing production.
This amendment will increase the total contract amount by $677,502.43, from $15,153,720.00 to $15,831,222.43. With this amendment, Carollo’s total fee for engineering services during construction would be less than 5% of the construction contract value, aligning with industry standards.
Action No. 2: A new Consultant Services Agreement with Carollo Engineers, Inc. for the WPCP Headworks and Primary Treatment Project - Package 2 for Claim Management Support for a total contract amount of $482,304.41.
Action No. 3: Approve a 10% contract contingency in the amount of $48,230.44
These actions are also related to the Headworks and Primary Treatment Project - Package 2. A separate Consultant Services Agreement for Claim Management Support will allow Carollo to be reimbursed for their technical services related to two past claims regarding delays on energization and control systems integration, as well as for ongoing claim management support related to an active claim.
Action No. 4: An increase in the contingency for construction services for Ranger Pipelines Incorporated in the amount of $6,523,346
This action is related to the Secondary Treatment & Thickening/Dewatering Project-CAS Stage 1 (Project 833210).
To ensure continued reliable treatment and meet pending changes in regulatory limits for nutrients (nitrogen), the City is augmenting existing secondary treatment facilities (including oxidation ponds, fixed growth reactors, and air flotation tanks) with conventional activated sludge (CAS) facilities. The new dewatering facilities will process activated sludge from CAS Stage 1 and will replace the existing contract sludge handling and dewatering operation. The CAS Stage 1 project is currently under construction, with commissioning and startup expected to be completed in early 2029.
Project 833210 includes two construction packages: the Site Preparation package and the main package for Secondary Treatment and Dewatering.
In 2021, Ranger Pipelines Incorporated (Ranger) was awarded the Site Preparation package contract (RTC No. 21-0756). The first Notice to Proceed (NTP1) was issued on September 30, 2021. Due to the delays (approximately three years) associated with PG&E coordination, startup, and commissioning of the Headworks and Primary Facilities Project - Package 2, the second Notice to Proceed (NTP2) for construction on the Site Preparation Package was also delayed due to project interdependencies and overlapping work areas, Ranger not being able to begin work per the contract.
NTP2 was issued to Ranger on June 3, 2024. The delays in issuing NTP2 resulted in materials and labor escalation, trucking escalation, increased overhead, and contractor/subcontractor construction inefficiencies. Ranger reached substantial completion on the Site Preparation package on February 17, 2026.
Ranger’s initial estimate of the delay costs was $11,315,101. After the City reviewed all the supporting documentation, Ranger’s reported costs for escalation and inefficiencies were reduced by almost $5 million, bringing it closer to the City’s internal estimate of these delay costs for the final amount of $6,523,346.
Action No. 5: A Second Amendment to the Consultant Services Agreement with Carollo Engineers, Inc. of Walnut Creek, in substantially the same format as Attachment 2 to the report, to increase the contract amount for the WPCP Existing Plant Rehabilitation Project. This amendment relates to Engineering Services During Construction and will increase the total contract amount by $812,340 from $8,262,197 to $9,074,537.
Action 6: Approve a 10% contract contingency in the amount of $81,234.
These actions are related to the WPCP Existing Plant Rehabilitation Project.
In 2017, AECOM, a consulting firm, conducted a condition assessment of the WPCP facilities that were to remain in long-term operation. AECOM identified extensive degradation and assets in poor condition. In 2019, the City selected Carollo Engineers (RTC No. 19-0706) to design repairs for the highest-priority deficiencies identified during AECOM’s study. When this contract was awarded, Carollo based their fee on a project with an assumed construction value of approximately $30 million and an assumed construction duration of approximately two years. The work was expected to focus on mechanical equipment replacement and structural repairs.
As design progressed, the nature of the project evolved to focus on electrical equipment replacement, which is more technically complex and has longer procurement lead times, extending the project construction duration to nearly four years. This has three impacts on engineering services during construction: (1) project management services are required for a longer period, (2) annual bill rate increases are compounded over this longer duration, and (3) the number of requests for information (RFIs) and submittals increases with the technical complexity of the work.
In 2023, Walsh Construction Company II, LLC, was awarded the construction contract (RTC No. 22-0975), for a fee of over $64 million. This cost increase relative to the initial estimate of $30 Million was about equally attributable to the noncompetitive bidding pool as well as the increase in project complexity. Supply chain volatility that began in 2020 has continued throughout the rehab project. As specified materials become unavailable, the contractor finds alternatives, requiring the engineer to review a new submittal package and verify that the ”or-equal” product meets the original standard. Sometimes the alternatives require minor adjustments to the original design, which must be resolved through RFIs and additional engineering effort.
Additionally, the nature of performing construction work on operating facilities has required more frequent construction progress meetings and work resequencing, which generates additional RFIs and engineering review.
Carollo has responded to submittals and RFIs within the benchmark for efficiency that their fee was originally based on, but the significantly higher volume of workload cannot be accommodated within their existing contract.
To control the size of this amendment, City staff worked with Carollo to identify and agree on several tactics for cost-effective delivery, including:
• Reallocating fee from unused or underspent tasks
• Streamlining required Operations & Maintenance manual documentation
• Consolidating factory witness testing support with the program management consultant
The proposed amendment of $812,340 is a reduction from Carollo’s initial request of $940,314.
With this amendment, Carollo’s total fee for engineering services during construction is 5% of the construction contract value, aligning with industry standards.
FISCAL IMPACT
For Action 1, the budget for the original contract of $15,153,720 with Carollo Engineers for the WPCP Headworks and Primary Treatment Project was appropriated in Fund 6081 - Wastewater Management Fund under Project 824771 - SCWP Primary Process Design and Construction and the now-closed Project 830250- SCWP Master Plan. The additional needed funds of $939,930.44 is proposed to be added to Project 824771.
For Actions 2 and 3, a separate contract of $482,304.41 (plus a 10% contingency of $48,230.44) with Carollo for Claim Support Management is proposed to be appropriated under Project 824771. Because of the three-delay in completing Project 824771, the project was also overcommitted by $785,270.00 due to large non-contract costs, including an extension of Builder’s Risk insurance, miscellaneous costs associated with energization delays (e.g. temporary power and permit extensions), and attorney fees. Therefore, this overcommitted amount must be replenished, This results in a total proposed budget amendment of $1,993,307.28 to Project 824771 to cover funds needed for Action 1, 2, 3 and to replenish the overcommitted amount.
For Action 4, the budget for the Construction Contract with Ranger Pipelines Incorporated was appropriated under Project 833210-Secondary Treatment & Thickening/Dewatering-CAS Stage 1. The current appropriation to cover the additional recommended contingency of $6,523,346 is insufficient by $4,189,187. Therefore, a budget amendment to Project 833210 for $4,189,187 is proposed. This project is funded in part through a Water Infrastructure Finance and Innovation Act (WIFIA) loan, and the additional costs are eligible for inclusion under the WIFIA loan.
For Actions 5 and 6, budget is available under Project 833150 - SCWP Existing Plant Rehab-Split Flow to fund the proposed amendment E, so a budget modification is not needed for this action
Budget Modification No. 15 has been prepared to:
1. Transfer $1,993,307.28 from Project 835500 - Cleanwater Program Reserve to Project 824771 - SCWP Primary Process Design and Construction to fund project delay-related costs.
2. Transfer $4,189,186.00 from Project 835500 - Cleanwater Program Reserve to Project 832210 - Secondary Treatment & Thickening/Dewatering CAS Stage 1 to fund project delay-related costs.
Budget Modification No. 15
FY 2025/26
|
|
Current |
Increase/ (Decrease) |
Revised |
|
Wastewater Enterprise Fund |
|
|
|
|
Expenditures |
|
|
|
|
Project 824771 - SCWP Primary Process Design and Construction |
$130,230,407 |
$1,993,307 |
$132,223,714 |
|
|
|
|
|
|
Project 833210 - Secondary Treatment & Thickening/ Dewatering-CAS Stage 1 |
$365,406,544 |
$4,189,187 |
$369,595,730 |
|
Project 835500 - Cleanwater Program Reserve |
$38,403,465 |
($6,182,494) |
$32,220,972 |
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 City Hall 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.
STAFF RECOMMENDATION
Recommendation
Take the following actions:
1. Approve a Ninth Amendment to Consultant Services Agreement in substantially the same format as Attachment 1 to the report to increase the contract amount to a new not-to-exceed amount of $15,831,222 for Carollo Engineers, Inc. of Walnut Creek and authorize the City Manager to execute the Ninth Amendment to Consultant Services Agreement when all conditions have been met;
2. Approve a Consultant Services Agreement in substantially the same format as Attachment 3 to the report for a contract not-to-exceed amount of $482,304 and authorize the City Manager to execute the Consultant Services Agreement when all conditions have been met;
3. Approve a 10% contract contingency in the amount of $48,230;
4. Approve a $6,523,346 increase to the contract contingency in the Construction Contract with Ranger Pipelines, Incorporated. for the Water Pollution Control Plant Site Preparation Project (PW21-35) to fund additional costs due to delays;
5. Approve a Second Amendment to Consultant Services Agreement in substantially the same format as Attachment 2 to the report to increase the contract amount to a new not-to-exceed amount of $9,074,537 for Carollo Engineers, Inc. of Walnut Creek and authorize the City Manager to execute the Second Amendment to Consultant Services Agreement when all conditions have been met; and
6. Approve Budget Modification No. 15 in the amount of $6,182,494.
Levine Act
LEVINE ACT
The Levine Act (Gov. Code Section 84308) prohibits city officials from participating in certain decisions regarding licenses, permits, and other entitlements for use if the official has received a campaign contribution of more than $500 from a party, participant, or agent of a party or participant in the previous 12 months. The Levine Act is intended to prevent financial influence on decisions that affect specific, identifiable persons or participants. For more information see the Fair Political Practices Commission website: www.fppc.ca.gov/learn/pay-to-play-limits-and-prohibitions.html
An “X” in the checklist below indicates that the action being considered falls under a Levine Act category or exemption:
SUBJECT TO THE LEVINE ACT
___ Land development entitlements
___ Other permit, license, or entitlement for use
_X_ Contract or franchise
EXEMPT FROM THE LEVINE ACT
___ Competitively bid contract*
___ Labor or personal employment contract
___ Contract under $50,000 or non-fiscal
___ Contract between public agencies
___ General policy and legislative actions
* "Competitively bid" means a contract that must be awarded to the lowest responsive and responsible bidder.
Staff
Prepared by: Marlon Quiambao, Assistant City Engineer
Reviewed by: Dennis Ng, Assistant Director, Public Works
Reviewed by: David Battaglia, Purchasing Officer, Finance
Reviewed by: Matt Paulin, Director, Finance
Reviewed by: Ramana Chinakotla, Interim Director, Public Works
Reviewed by: Connie Verceles, Deputy City Manager
Approved by: Tim Kirby, City Manager
ATTACHMENTS
1. Draft Amendment to Consultant Services Agreement, Carollo Engineers, Inc. (Headworks and Primary Treatment)
2. Draft Amendment to Consultant Services Agreement, Carollo Engineers, Inc. (Existing Plant Rehabilitation)
3. Draft Consultant Services Agreement, Carollo Engineers, Inc. (Claim Management Support)