Loading...
HomeMy WebLinkAboutMin 07-14-05 (Special)MINUTES OF THE UKIAH CITY COUNCIL Special Joint Meeting of the Ukiah City Council And Ukiah Valley Sanitation District Thursday, July 14, 2005 The Ukiah City Council met at a Special Joint Meeting with the Ukiah Valley Sanitation District (UVSD) on July 14, 2005, the notice for which had been legally noticed and posted, at 4:00 p.m. in the Civic Center Council Chambers, 300 Seminary Avenue, Ukiah, California. Roll was taken and the following Councilmembers were present: Crane, McCowen, Rodin, Baldwin, and Mayor Ashiku. Staff present: City Manager Horsley, City Attorney Rapport, Public Utilities Director Ziemianek, and Recording Secretary Elawadly. Ukiah Valley Sanitation District Board Members present: Crane and Board Chairman Delbar. Absent: Board member Wattenburger. Aisc present: Chief Deputy County Counsel Zotter, Deputy Clerk of the Board/District Secretary Rau. 2. SPECIAL MEETING OF THE CITY COUNCIL OF THE CITY OF UKIAH AND THE BOARD OF DIRECTORS OF THE UKIAH VALLEY SANITATION DISTRICT FOR CONSIDERATION AND POSSIBLE ACTION ON THE KIEWIT PACIFIC COMPANY BID FOR THE WASTEWATER TREATMENT PLANT CONSTRUCTION PROJECT Utilities Director Ziemianek presented an overview of the Wastewater Treatment Plant Construction project and project update since the May 18, 2005, joint meeting of the Ukiah City Council and Ukiah Valley Sanitation District as follows: · Bids on the construction of the upgrade/expansion of the City's Waste Water Treatment plant were received from Kiewit Pacific Company and Slayden Construction, Inc. Although Kiewit Pacific Company's bid was the lowest, it was 25.6 percent above the average amount of the Engineer's Estimate. · Bartle Wells Associates were retained as sewer rate and bond issuance consultants to evaluate the impact of the increased construction cost on sewer rates. The consultants determined attempting to balance the additional cost of the plant with "acceptable" rates for the citizens would be a difficult challenge. · Because the bids were higher than estimated, a subcommittee was formed to look into specific information relevant to the bid by considering the overall design elements, construction costs, and the cost of borrowing money. ;> The subcommittee/design engineers reviewed the associated costs and benefits of accepting or rejecting the Iow bid. ;> The subcommittee also considered the option of re-bidding the project and the potential effects associated with project delay and costs. ;~ The subcommittee considered the economic feasibility of cost reductions related to design and materials. · The subcommittee recommends the City Council, in concurrence with the Sanitation District Board of Directors, reject all bids and plan for a re-bid Joint Meeting of the City Council And the Ukiah Valley Sanitation District July 14, 2005 Page 1 of 8 process. Staff was instructed to explore cost reducing modifications to the plans and specifications. Mr. Ziemianek corrected the staff report to state that the target date of December 2004 to re-bid the project should be 2005 with the bid opening scheduled for February 2006 rather than February 2005. Councilmember Rodin commented construction costs/materials would likely increase if the project were delayed and inquired concerning the degree the subcommittee considered whether a delay would be the most cost effective approach. Mr. Ziemianek stated the subcommittee in its analysis of the project fully considered the potential cost effects associated with a delay and understands that market rate conditions are difficult to project/determine. The subcommittee also understands that the data concerning market rate conditions for the construction industry for a specific time period will not be perfect for decision- making purposes. Mayor Ashiku, participating subcommittee member, addressed the subcommittee's project analysis concerning evaluation of the risk factor in delaying the project, and explained that overall there is greater benefit in waiting given the timeline that has already shifted into next year's construction cycle together with the engineering consultant's suggestions for modifications to the overall project design. Director Delbar inquired as to the potential interim measures other than the chemical treatment that might be available. He stated past discussions have considered using temporary/portable package plant systems for the interim until the project can be completed in terms of maintaining cost efficiency. His concern with the proposed construction timeline is whether alternative/interim systems are necessary for efficient operation of the facility. Mr. Ziemianek stated such interim systems/facilities have not been fully evaluated, since the element of maintaining such systems is a consideration. There was general discussion concerning the viability of the plant being able to operate effectively should a decision be made to delay the improvements/update. Mr. Ziemianek commented that a delay would allow the City the opportunity "in- house" to thoroughly evaluate the existing and proposed new design elements/criteria. The process would be essentially a three-fold approach to include analysis of the engineering design, the City Council/District Board members/subcommittee/design engineer's recommendations relative to "value- engineering," and City staff's overall assessment. The information process and recommendations take time. Joint Meeting of the City Council And the Ukiah Valley Sanitation District July 14, 2005 Page 2 of 8 Director Delbar referred to the three possible solutions provided by Kiewit Pacific Company: 1. To delay the decision to reject bids to allow the Council more time to find additional funding. 2. Ask for a 60-day extension on their bid to allow for value-engineering and design change options. 3. Award the contract to Kiewit Pacific and negotiate the value- engineering/scope of the proiect relative to potential cost reductions and terminate the contract if the City budget cannot be met. Director Delbar suggested Attorney Rapport further elaborate on any potential legal ramifications/implications associated with choosing one of these options. Brad Kaufman/David Jack, Kiewit Pacific Company representatives, referred to their Power Point presentation, commented on the following topics relative to costs and delay factors: · Current treatment plant market and their corresponding treatment plant work schedule · Statistical cost information regarding materials price indexes for such materials as asphalt/cement/piping/water tubing, etc. · Statistical data pertinent to recent Iow bid versus Engineers Estimate for comparison purposes. · Example of a city's timeline for update to their wastewater treatment plant awarded to Kiewit Pacific. · Information concerning Ukiah's bid pricing for materials, systems, landscaping site work, electrical, and other relevant equipment necessary for the project. · The three possible solutions referenced above. Councilmember McCowen inquired regarding the comment made by Kiewit Pacific representatives that it is likely they could save between 10 or 15 percent off the bid price. Dave Kaufman desires his company have the opportunity to demonstrate a reduction. Councilmember McCowen asked how the bid for Ukiah's project could have come in over the Engineer's Estimate, which was assessed as reasonable. Mr. Kaufman stated he has not seen the details of the estimate and is not surprised that the engineering industries/companies typically support their estimates. Councilmember Baldwin commented it appears to be a contractor's market and inquired how this factor affects Kiewit's profit margin. Mr. Kaufman stated in past experience with six or seven bidders in competition, their profit margins bid would typically be 25 percent less. Joint Meeting of the City Council And the Ukiah Valley Sanitation District July 14, 2005 Page 3 of 8 Mayor Ashiku inquired whether Kiewit is familiar enough with Ukiah's plant that items proposed could be eliminated without substantially affecting the outcome in terms of the quality of the wastewater and discharge ability. Mr. Kaufman replied his company has a list of approximately 50 or 60 items that could be eliminated. Councilmember Baldwin questioned in terms of cost reduction of the 50/60 items, and whether the longevity and/or durability of the project would be affected. Mr. Kaufman stated the items referred to pertain to alternative construction techniques and alternate materials and would still be able to maintain the quality and longevity of the project and design. Councilmember Baldwin inquired why Kiewit is able to provide a list of the items that could be eliminated as a potential cost reduction that the value- engineering consultant could not provide. Mr. Kaufman commented the design value-engineering consultants have the ability to design effectively, but they do not have the cost perimeters associated with a project. Mayor Ashiku inquired whether Kiewit has the ability/knowledge to recommend changes in design to enhance a particular process/system should it be necessary/beneficial in terms of cost reduction etc., as opposed to just having the ability to assess the cost of materials. Mr. Kaufman replied his company has the ability to modify construction techniques. City Attorney Rapport commented on the City's legal aspects concerning the options, and stated Option 3 particularly has potential legal risks. State law requires that a process be implemented for developing/awarding a city public works project of this magnitude. The requirements are intended to prevent corruption and/or undue influence relative to the bidding process. State law requires that the bids be put out in a prescribed manner where the lowest bid from a responsible bidder is accepted or, all bids are rejected and re-bid. State law is clear in that renegotiation of a change order before entering into a contract or to expect a contract be awarded with the implied understanding that it is not the project being awarded is not an option, since the project is to be significantly modified in order to get cost reductions after the award. However, there is a section of the Public Contract Code that allow "bid alternates/deductive bid alternates/additive bid alternates" to be conducted in the actual bid proposal so it becomes part of the written bid when the bid goes out. From a contract law standpoint, if an offer to bid a project, as designed, where the bidder in response Joint Meeting of the City Council And the Ukiah Valley Sanitation District July 14, 2O05 Page 4 of 8 submits a proposal to build the project to the public agency's specifications and the public agency accepts that bid, they have explicitly agreed to build the project as bid. And, if the public agency enters into a post-bid negotiation process and the proposed design is not completely satisfactory, the public agency may not legally be able to terminate the contract. Mayor Ashiku inquired whether there are other risks involved from another contractor suing for improper bidding. City Attorney Rapport agreed that potential liability/risk factors, as well as the potential for cause of action exist for another contractor involved in the bidding process to claim the public agency undermined the bidding process and awarded a contract at an unfair advantage. A general discussion followed regarding the risk factors associated with the proposed options and with deferring the project. Councilmember Baldwin addressed the proposed new sewer rate structure, and inquired regarding the potential for lawsuits resulting from a major spill or malfunction of the treatment plan facility if the improvement project were delayed. Mr. Ziemianek does not anticipate a treatment plant spill, but a detrimental malfunction of the equipment/system could occur. Mayor Ashiku had the opportunity to tour the treatment plant facility, including the newly repaired areas, to better understand how the equipment/system functions/operates. The subcommittee discussed the concepts regarding potential risks and whether they could be exceptional if the project were delayed. From his observations, potential catastrophic events can only occur in a few places. Mr. Ziemianek is confident that staff over the next 12 months can effectively maintain the existing facility in its present condition until the improvements can be made. City Attorney Rapport commented on other project legal issues, and stated if the contract were awarded, compliance with Proposition 218 is necessary. A notice of the hearing concerning a sewer rate increase must be given to remain within the 90-day bid period to accept the bid. A scenario that would not be favorable would be if the bid is awarded, and notice is given to raise the rates assuming that the rates would be increased to the bid amount of $56,000,000. Because of the corresponding factors concerning the bid period, rate increase, and notice of hearing, and other procedural bid requirements, construction could not begin until the winter, and this would not be favorable. The primary focus for tonight's discussion is to address the time period for the Iow bid that has already run 45 days in order to comply with Proposition 218. Joint Meeting of the City Council And the Ukiah Valley Sanitation District July 14, 2005 Page 5 of 8 A Kiewit Pacific representative addressed Option 3, and understands the argument concerning the termination clause. However, he does not necessarily agree with the probability of the second bidders' ability to be able to strengthen their case and whether they would have recourse in the event Kiewit were awarded the contract where Kiewit potentially ends up with change orders that go down rather than up. A general discussion followed regarding the "out clause" option on the City's part and the associated concerns expressed from a legal standpoint, and whether an addendum or alternative agreement could be created that strengthens/clarifies the "out clause" that Kiewit agrees to. Chief Deputy County Counsel Zotter commented on the legal issues regarding contracts and potential causes of action with breach/violation thereof. The legal contract issues basically pertain to offer and acceptance. City Attorney Rapport is not sure whether Kiewit would be legally required to accept such an agreement if the City awarded the bid to them, since they are entitled to the contract as set forth in the bid document. The City could ask for such an agreement, but Kiewit would not necessarily have to comply. The legal risks lie in how the bidder stands by the contract, as written. It is essentially the bidder's choice. Mayor Ashiku reiterated that Option 1 or Option 2 is also available as alternate to Option 3. Councilmember McCowen inquired whether there is anyone other than the contractor in a position to pursue a lawsuit, if Option 3 is chosen. City Attorney Rapport stated a lawsuit could occur, but it is unlikely. Councilmember McCowen inquired whether a bidder could waive any right to initiate a lawsuit. City Attorney Rapport acknowledged that this could happen. MaYor Ashiku commented that Option 2 would allow staff in-house and the subcommittee the opportunity to further review the design and determine what changes may be necessary/conducive to the project as opposed to Option 3 that has contract and/or other risk factors. Board Member Crane commented on the decision-making process, and stated the subcommittee reviewed certain criteria before looking at viable solutions. Cost is a component of the project criteria. Councilmember McCowen stated some allowance/thought can be given to redesigning the plant plans as the process moves forward at the concurrence of Joint Meeting of the City Council And the Ukiah Valley Sanitation District July 14, 2005 Page 6 of 8 the bid contractor. Option 3 rather implies that if a bid is awarded at the contact price, it carries a prearranged understanding that the bid agreement would be negotiated at a 10 or 15 percent reduction. Aisc, such a prearranged understanding implies that if the target budget reduction is not achieved, the City can walk away, . which may have legal repercussions. Alternatively, the bid could be awarded to Kiewit with the understanding that a 60-day extension is part of the agreement for the purpose of exploring value-engineering options. He inquired if at the end of this time period, the City has the option of awarding the bid at the contract price with the hope that the contractor would work with the City as the process moves forward to achieve cost reductions, and whether this approach is a legal option. City Attorney Rapport stated the above-referenced "promise" would not likely be enforceable. Councilmember McCowen stated the matter pertains to a bid award rather than a promise. The intent is to award the bid and hope that the bidder will work with the City relevant to potential plan changes to achieve cost reductions as the project moves forward. City Attorney Rapport stated this type of agreement could be construed as an appeal, which is not likely enforceable from a legal standpoint. A summary of the project issues were discussed as follows prior to providing direction: . . , . ! . Two bids are within two percent of one another. The other bidder may look at what changes could have been made that contributed to their bid coming in higher. If the project were reduced to eliminate those costs items that happened to make their bid higher, does this say, in effect, that this bidder was given a lesser opportunity to make those same changes themselves in order to benefit. This matter may have potential legal ramifications. Consider the option of not rejecting the bid from Kiewit and request the 60- day extension to allow time to decide whether suitable changes are necessary. Award the contract to Kiewit and hope to be able to negotiate necessary changes that are found. Language in the contract provisions allow for negotiating change orders. Consider Proposition 218 noticing issue concerning the 60-day extension option in conjunction with the 45-day time period that has already run. Allow time for legal staff to evaluate options concerning the two bidders. Consider all risks involved concerning the bids and project needs relevant to making an appropriate decision. Review value-engineering proposals made by design consultant in terms of cost reductions and whether the results were realistic. Joint Meeting of the City Council And the Ukiah Valley Sanitation District July 14, 2005 Page 7 of 8 . . Consider all change orders and potential cost overruns and meet in 20/30 days. Consider the tight time line for construction schedule and project phasing. It was the consensus of the Ukiah City Council and the Board of Directors of the Ukiah Valley Sanitation District to request a 60-day extension from Kiewit on their bid to allow for value-engineering and design change options. 3. PUBLIC EXPRESSION No discussion of this agenda item. 4. ADJOURNMENT OF JOINT MEETING There being no further business, the meeting was adjourned at 6:13 p.m. Cathy L:flawadly, Rec(~rding Secretary Joint Meeting of the City Council And the Ukiah Valley Sanitation District July 14, 2005 Page 8 of 8