REPORT TO THE CITY COUNCIL June 8, 2017 FROM: THOMAS C. ESQUEDA, Director Department of Public Utilities BY: MICHAEL CARBAJAL, Planning Manager Department of Public Utilities - Utilities Planning & Engineering GLENN A. KNAPP, P.E., Professional Engineer Department of Public Utilities - Utilities Planning & Engineering SUBJECT ..Title Approve Change Order No. 9 to the construction contract for the City of Fresno's Southeast Surface Water Treatment Facility to increase the lump sum scope of work by $543,385 (Citywide) ..Body RECOMMENDATION Staff recommends that City Council approve Change Order No. 9 to the construction contract for the City of Fresno's (City) Southeast Surface Water Treatment Facility (Facility) to increase the lump sum scope of work by $543,385 for the addition of a calcium hydroxide feed system. EXECUTIVE SUMMARY On November 19, 2015, City Council awarded a contract to W.M. Lyles Company (Contractor) for construction of the Facility in the amount of $158,766,000. Notice to Proceed (NTP) with construction was issued on December 31, 2015. To date, the City has executed eight (8) contract change orders (CCOs) for a net total increase to the contract value of $1,126,615. This change order, incorporates a calcium hydroxide feed system for alkalinity adjustment, pH adjustment, and calcium addition at the Facility. BACKGROUND On February 26, 2015, the City Council adopted a five-year water utility rate plan to finance the construction of a five-year water capital plan totaling approximately $429 million. The five-year capital plan included the construction the Facility to allow the City to more effectively use its existing surface water allocations and entitlements from Millerton Lake and Pine Flat Reservoir. Consistent with Council-approved rate plan and capital plan, the Facility will be constructed with a permitted capacity of 54 Million Gallons per Day (MGD), and the City will petition the State to allow the Facility to be re-rated to 80 MGD through a one-year performance demonstration testing procedure. On September 10, 2015, the City Council approved acceptance of a $195,489,000 State Revolving Fund (SRF) Low Interest Loan through the State Water Resources Control Board (SWRCB) for construction of the Facility. The construction contract is fully funded through this loan. W.M. Lyles Company submitted the low bid price of $158,766,000 on October 13, 2015, a contract to construct the Facility was awarded on November 19, 2015, and NTP was issued on December 31, 2015. The Facility is currently scheduled complete construction in September 2018. Subsequent to NTP, a total of eight (8) CCO's have been executed to date, resulting in a net total increase to the contract value of $1,126,615 which includes the following: * Value engineering cost reductions totaling $2,963,192; * Addition of a supplemental allowance of $1,000,000; * Addition of supervisory control and data acquisition (SCADA) work, which was included in the construction budget but planned to be performed through a separate contract, totaling $2,493,750; and * Miscellaneous other added and deleted work, totaling $596,057. During calendar year 2016, the Department of Public Utilities (DPU) conducted treatment trials using calcium hydroxide at the existing Northeast Surface Water Treatment Facility (NESWTF). Mitigation measures were implemented during the trials to address previously encountered challenges with the use of calcium hydroxide for alkalinity adjustment, pH adjustment, and calcium addition. The mitigation measures implemented by DPU at the NESWTF during calendar year 2016 proved successful, and DPU is now installing a permanent calcium hydroxide feed system into the treatment processes at the NESWTF. In early summer 2016, it was determined it would be in the best interest of the City to implement a calcium hydroxide feed system at the new Facility to allow for a common water chemistry strategy for both the Facility and the NESWTF for ease of operation. The goals for implementation included minimizing additional costs to below $1,000,000 while maintaining the current construction schedule. The implementation plan identified ten specific activities for sequential issuance to the contractor in parallel with preparing final definitions of the overall design criteria and treatment schemes. The intent was to make changes without delaying or undoing any aspect of the construction process. With the cooperation of all team members, the calcium hydroxide feed system is being successfully implemented resulting in a final increase in the lump sum cost of $543,385 with no increase to contract time. These increased costs will be covered by contingencies within the project budget, and funded through the above noted SRF Low Interest Loan. This Change Order No. 9 incorporates the ten specific activities into the contract resulting in a new total contract value of $160,805,972. ENVIRONMENTAL FINDINGS Action related to the approval of a change order for an existing construction contract is not a "project" for the purposes of the California Environmental Quality Act (CEQA), as it is a funding mechanism or other government fiscal activity, and does not involve commitment to any specific project which may result in a potentially significant physical impact on the environment as contemplated by CEQA Guidelines Section 15378(b). LOCAL PREFERENCE Local preference was not implemented because this action pertains to an existing construction contract. FISCAL IMPACT There is no impact to the General Fund. This work will be funded by the SRF Low Interest Loan through the SWRCB. The cost of debt service for this state low interest loan was incorporated into the water rate model used to create the five-year utility rate plan that was adopted by City Council on February 26, 2015. Attachment: Change Order No. 9