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Sept. 1,2009
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CITY OF SAN LUI S O B I S P O
FROM: Jay D. Walter, Director of Public Work
Prepared By: Daniel Van Beveren, Senior Civil Engine
SUBJECT: RAW WATER BYPASS,SPECIFICATION NO. 90802
FINAL PROJECT COSTS
RECOMMENDATIONS
1. Approve Contract Change Order#7 in the amount of$96,593 to resolve outstanding claims.
2. Approve an increase in the Construction Budget in the amount of$96,655.
3. Approve an increase in the Construction Management Budget in the amount of$31,000.
4. Appropriate$122,655 from Water Fund working capital to the project account: $91,655 for
construction and$31,000 for construction management.
DISCUSSION
The City's raw waterline delivers untreated water from the City's primary water supply, the Salinas
Reservoir. The Raw Water Bypass project is identified in the 2005-07 Financial Plan with an
overall objective of repairing a damaged and deteriorated pipeline in the vicinity of the City's
reservoir on Stenner Creek Road. The Raw Water Bypass project was awarded by City Council to
Vinciguerra Construction on October 21, 2008. Work began on December 1, 2008 and was
completed on July 31, 2009. During construction, there were a number of issues which arose, and
this report discusses these issues and the fiscal impact arising from them.
Early construction delay due to Nacimiento Pipeline Project
The project is located in Stenner Canyon, approximately one mile north of the City's water
treatment plant. A separate construction project, the County's Nacimiento Pipeline project, is also
located within the same vicinity, and was under construction at the time the City's contract was
awarded. The initial understanding was that the County project would coordinate with the City
project, and would "pull out from the area" so that our project could be built; however, permitting
restrictions and other scheduling issues resulted in the County project work continuing through the
end of March 2009. Stenner Creek Road was closed during construction of the County project, and
access to the Raw Water Bypass construction site was restricted. As a result of this limited access,
Vinciguerra Construction could not begin full-time construction activities until April 2009. This
limited access is considered to be a right-of-way delay. With the contractor's equipment on site and
idle during this delay, staff has determined the City is responsible for paying for delay costs
associated with the idle equipment..
Change in Pipe Material
The plans and specifications were prepared by Wallace Group under an on-call design service
agreement. The new raw water pipeline was designed to be welded steel pipe(WSP). WSP requires
the pipe segments and joints to be fabricated in an off-site location and does not provide the
contractor much flexibility in making field adjustments to the alignment or depth; since the pipeline
was fabricated off-site, it must be installed as designed.
Raw Water Bypass—Final Project Costs Page 2
At one location along the new raw waterline alignment, the plans showed the new raw waterline
crossing under two existing pipelines and over a third pipeline. In December 2008, the contractor
potholed this location to verify the accuracy of these existing pipelines. The potholing revealed
locations of the existing pipelines different from those shown on the plans. This discrepancy
required a design revision to the new raw waterline alignment and profile. This design revision was
performed by Wallace Group at no cost and completed on January 26, 2009.
Additionally, at a different location approximately 300 feet from the discovered utility conflict, the
contractor discovered a storm drain culvert which crossed under Stenner Creek Road. This culvert
was not shown on plans and conflicted with the designed alignment and profile of the new raw
waterline. Upon the contractor's discovery of the culvert, City staff met with the contractor to
discuss possible solutions. In these discussions, the contractor spoke of the construction limitations
of WSP and, given the unanticipated conflicts discovered thus far, recommended that the City
switch the pipe material to ductile iron pipe (DIP). DIP has the advantage of using standard joints
and fittings, and unlike WSP, can be field modified as needed to avoid underground obstructions.
With additional utilities expected within the project vicinity, and the potential for these utilities to
present future obstructions to the raw waterline installation, staff recognized the advantage of
switching to DIP. In February 2009, a no-cost contract change order was issued modifying the pipe
material from WSP to DIP. Although this change did not directly affect the cost of the project, it is
one of several factors which may support the contractor's position that a change in character of
work occurred with this on the project, as discussed later in this report.
Removal of the Culvert Crossing from the Project
As staff continued to evaluate the design options for crossing an existing storm drain culvert in the
project area, it became apparent the most feasible solution would involve crossing underneath the
culvert. With the culvert diameter approximately three feet across, and a depth to the top of culvert
of approximately three feet below ground, the crossing would have to be at a depth of
approximately eight to ten feet. The deep trench would require lateral bracing and shoring to
prevent the trench from caving in. Additionally, the natural high groundwater would require de-
watering and the proximity to an existing creek would require permitting from the State Department
of Fish and Game. In short,this work would have been costly. Because these costs would have been
outside of the City' control and they might have to be paid at the contractor's actual construction
costs, or"force account,"and would likely cost more than available in the project's existing budget.
The staff decision at the time was to remove the portion of the project in the vicinity of the culvert
crossing from the scope of work so that additional design options could be evaluated in a future
project. In April 2009 a contract change order was issued reducing the scope of work, eliminating
the culvert crossing portion of the project and establishing a new point of connection of the new
pipeline to the existing pipeline. This change removed a long, straight section of pipe from the
project, but kept the more labor-intensive curved alignment in the project. The contractor has stated
that this change contributed to a change in character of work affecting his bid unit cost for laying
pipe.
Change in Character of Work
According to the State's Standard Specifications, if an ordered change to a public construction
project materially changes the work involved, payment to the contractor shall be made on a force
account basis. With the numerous changes involved in the project, and the delay starting the project,
the contractor has maintained the position that the entire project is subject to the Change in
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Raw Water Bypass—Final Project Costs Page 3
Character of Work clause and that payment should be based not on his initial construction bid, but
rather on the force account analysis of the project once completed. The City did not concede this
issue to the contractor during construction, but rather, agreed to track the project costs during
construction so that a determination could be made at a later date.
Claim Resolution
The construction bid by the contractor for this project was $318,416. Upon completion of the
project, the Force Account analysis revealed a true project cost of approximately $515,000. This
higher cost was due in part to the costs of idle equipment during the right-of-way delay, the
additional challenges of the underground tie-in to the existing pipeline, and the inefficient nature of
installing ductile iron pipe along a curved alignment instead of in straight stretches, and other
inefficiencies.
On July 31, 2009, Public Works staff met with the Assistant City Attorney to discuss the Change in
Character of Work issue and to weigh options regarding how to proceed. In this meeting, staff
considered the subjective nature of a Change in Character of Work claim, the strength of the City's
position, and estimated the legal cost and risk involved with unsuccessfully defending such a claim.
The contract inspector, present in this staff meeting, had also been discussing the issue with the
contractor and had negotiated a tentative agreement which waived equipment minimum daily rental
fees and reduced the total force account calculation to $445,071.16. After a thorough discussion,
staff concluded that it would be in the City's best interest to settle with the contractor at this
negotiated amount.
On August 13, 2009, the contractor met with Public Works staff and preliminarily agreed to the
negotiated amount. The recommended Council action includes the approval of Contract Change
Order #7, which facilitates the negotiated amount with the contractor. Contract Change Order #7
establishes the final project costs, and includes payment for Right-of-Way delays which occurred at
the start of the contract, and actual contractor costs as calculated through a force account analysis of
the actual work performed. The change order also states that the contractor accepts this negotiated
amount and waives the right to compensation for any additional claims. A copy of this change order
is included as Attachment 1 to this report.
Construction Management Contract
The daily project supervision and inspection for this project was performed by Penfield and Smith,
an engineering firm out of San Luis Obispo. Because the project's construction costs were tracked
by force account, a process which requires meticulous record keeping and full-time inspection, the
time required of the construction manager exceeded the amount initially estimated as well as the
budgeted amount. Additionally, significant time was spent in the negotiation with the contractor
and in follow up meetings with Public Works staff. As a result of the increased time spent on the
project, the final billings from Penfield and Smith have exceeded the approved budget of$60,000
by approximately $31,000. At the time this report was prepared, the City has not yet received all
billings; $31,000 is the estimated amount which will be needed to cover these additional costs. The
recommended Council action approves an increase in the construction management budget and
transfers the necessary funds to cover these additional costs of construction management.
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Raw Water Bypass—Final Project Costs Page 4
CONCURRENCES
The Utilities Department and the City Attorney's office have been consulted regarding the
proposed agreement and support the recommended action.
FISCAL IMPACT
The project, as approved by Council, contains a total construction budget of $418,416. Upon
Council-approval of this contract change order, the final project costs will be$541,071. A budget
increase of$122,655 is required to meet final project costs. A breakdown of those final costs is
shown in the following table:
Proposed Actual Difference
Construction Contract(including contingencies) $348,416 $445,071 $96,655
Construction Management $60,000 $91,000 $31,000
Testing and other Misc Costs $10,000 $5,000 -$5,000
Total $418,4161 $541,0711 $122,655
Funding to increase the project budget is not currently available within budgeted resources
without deferring other water capital projects, which is not recommended. As such, staff
recommends appropriating $122,655.16 from Water Fund working capital to the project account.
The Water Fund, which ended 2008-09 in a favorable position with expenditure savings and
revenues slightly greater than projections, has adequate working capital available for this request.
Staff is in the process of negotiating participation by the design engineer in the cost of the claim
resolution.
ALTERNATIVES
The alternative to approving the Contract Change Order is to reject the proposed negotiation
between the City and Contractor, and provide payment based on the initial contract unit prices. This
is not recommended as stated in the Discussion section of this report.
ATTACHMENT
Proposed Contract Change Order#7
G:\Staff-Reports-Agendas-MinutesLCAR\2009\CIP\90802 Raw Water Bypass\90802 Raw Water Bypass-Final project costs.doc
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ATTACHMENT
CITY OF SAN LUIS OBISPO,CALIFORNIA
CONTRACT CHANGE ORDER
Change Order No.: 7 Sheets: 1 of 2
Date: 8/13/09 Project Raw Water Bypass
To: Vinciguerra Construction Specification No.: 90802
As requested by. City of San Luis Obispo
Resolution of Outstanding Claims
This contract change order represents the negotiated agreement between the City and the Contractor, and
addresses all outstanding claims which remained at the time of project completion.
Contract Items shall be paid as follows:
1. Contract Item No. 1 (Mobilization/Demobilization&Site Clean up)shall be paid at 100%
($22,000.00).
2. Contract Item Number 2,3,4, 5,6 and 7 shall not be paid through the contract line items. Instead,
payment will be based on a force account analysis of the actual work performed per Section 9-1.03A
Work Performed by Contractor,with the following exception:
Equipment Rental time shall be limited to actual time of operation instead of at a 4-hour minimum
charge as specified in paragraph one of State Standard Section 9-1.03A(3a);
The elimination of the contract items number 2, 3,4, 5, 6&7 payment represents a reduction of the
contract in the amount of$296,416.00. The force account analysis yields a calculated amount of
$373,359—a net increase of$76,943.00 from the contract amount.
3. Contract Change Orders 1, 3, 4, 5&6 shall be paid as previously written. The total amount of these
change orders is$30,062.16.
4. All terms included in Contract Change Order#2 shall remain in effect except for the reduction in
working days and the amount of compensation. There shall be zero reduction in working days and
the compensation shall be as described in item#2(above)of this contract change order.
5. City shall pay$19,650.00 to Vinciguerra Construction on this change order as compensation for costs
associated with right of way delays as described in contractor's Notice Potential Claim dated January
26,2009 and Supplemental Notice of Potential Claim dated February 23,2009.This contract change
order resolves the right of way delay claims.
6. Upon acceptance of this Change Order#7 by Vinciguerra Construction and subsequent approval of
this Change Order#7 by City Council, Vinciguerra Construction shall waive the right to compensation
for any additional claims:payment indicated in this contract change order provides for full and
complete settlement of all claims on this contract.
7. Final total compensation payable to Vinciguerra Construction shall be$445,071.16, itemized below:
Contract Item#1 $22,000.00
Contract Items#2 through#7 $0.00
CCO1 $0.00
CCO 2(payment as described herein) $0.00
CCO 3 $5,979.30
CCO 4 $20,021.22
CCO 5 $2,979.49
CCO 6 $1,082.15 "
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CCO 7 $393,009.00
Total Compensation $445,071.16
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ATTACHMENT
8. Payment on this change order shall be the calculated value of Items 2 and 5 above:
($373,359.00+$19,650.00)=$393,009.00. This amount represents a net increase of$96,593.00.
We,the undersigned contractor, have given careful consideration to the changes proposed and hereby agree,
if this proposal is approved,that we will provide all equipment,furnish all materials, except as may be noted
above and perform all services necessary for the work above specified, and will accept as full payment
therefore the prices shown above.
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Accept b . ontractor uthorized Agent Date accepted
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SGAitted W. Resident Engineer Date submitted
'Submitted by.Project Manager Date submitted
Approved by:City Engineer Date approved
Change Order over$25,000 or funding required Change Order over$100,000 or funding required
Date Approved: Date approved by City Council:
By:City Administrative Officer
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