SFPUC Commission Meeting
May 26, 2026
Approve an Increase to Cost Contingency for
Contract HH-1000R
Mountain Tunnel Improvements Project
Presented by: Randy Anderson, PM
2 Mountain Tunnel Overview - Location
Project Scope
Early Intake Adit
Flow Control
Facility and
New Priest
Adit
Tunnel Repairs &
Contact Grouting
Roadway
Improvements
19-Mile-Long
Tunnel
Flow Control Facility
Building
4 Flow Control Facility Shaft
and Valves
5 Priest Adit
6 Repairs of Defective
Concrete Tunnel Lining
7 Construction Cost Contingency
Increase
• Due to operational needs a delayed start and early finish to Outage No. 5 occurred
• Ongoing delay to initial commissioning of the Flow Control Facility due to upgrading critical equipment
• Ongoing delays to the final commissioning of the flow control valves due to additional work needed due to the descoping of the South Fork Siphon
• Anticipated additional funds to resolve outstanding
potential change orders, that are being negotiated, for work previously performed
8 Cost Contingency Increase
• Original Contract Amount: $138,973,189
• Original 10% Cost Contingency: $13,897,318
• Approved Increase in Cost Contingency: $13,029,702
• Modification Nos. 1 through 16 Amount Change: $9,630,106 • Modification No. 17 through Resolution No. 25-007: ($15,727,083) • Modification Nos. 18 through 27 Amount Change: $12,802,609 • Total Current Contract Amount: $145,678,821
• Current Cost Contingency: $4,494,305
• Proposed Additional Cost Contingency: $15,000,000
• Total Proposed Contract Cost Limit: $165,173,126
9 Questions
10 AGENDA ITEM
Public Utilities Commission
City and County of San Francisco
DEPARTMENT: Infrastructure Division
AGENDA NUMBER: 9
MEETING DATE: May 26, 2026
Calendar: Regular Calendar
Project Manager: Randy Anderson
Approve Increase to the Cost Contingency for Contract No. HH-1000R, Mountain Tunnel Improvements Project
Summary of
Proposed
Commission
Action:
Approve an increase of $15,000,000 to the existing cost contingency for Contract No. HH- 1000R, Mountain Tunnel Improvements Project , with Mountain Tunnel Constructors, Inc., for a revised cost limit of $165,173,126, to address additional costs resulting from a delayed start and earlier end to Outage No. 5 in 2025-26, delayed initial commissioning of the Flow Control Facility due to design changes to critical electrical equipment, delayed final project commissioning due to additional work required from the descoping of South Fork, and anticipated additional costs to resolve outstanding potential change orders, with no change to the contract duration limit.
Background: The San Francisco Public Utilities Commission (SFPUC) Water Enterprise’s Mountain Tunnel conveys Hetch Hetchy water supply approximately 19 miles from Kirkwood Powerhouse to Priest Reservoir.
The tunnel, which is horseshoe- shaped, is approximately 15 feet tall and 15 feet wide. It delivers 100 percent of the Hetch Hetchy water supply, and thus it is a critical, non -redundant link in the Hetch Hetchy water system.
Having been in service since 1925, sections of the tunnel’s original lining have deteriorated due to age, original construction deficiencies, and deferred maintenance, resulting in vulnerabilities to meeting water quality and delivery reliability level -of-
service objectives. The Mountain Tunnel
Improvements Project (Project) is a multi-year project to perform rehabilitation and improvements to extend the life of this critical water conveyance facility.
On October 13, 2020, by Resolution No. 20- 0210, this Commission awarded Contract No. HH-1000R, Mountain Tunnel Improvements Project, to Michels Tunneling, in the amount of $138,973,189 and with a duration of 2,160 consecutive calendar days.
On June 13, 2023, by Resolution No. 23-0110, this Commission approved the assignment of Contract No. HH-1000R, Mountain Tunnel Improvements Project, from Michels Tunneling to Mountain Tunnel Constructors, Inc., a wholly owned Michels Corporation affiliate.
On January 14, 2025, by Resolution No. 25 -0007, this Commission Agenda Title: HH-1000R, Mountain Tunnel Improvements Project Commission Meeting Date: May 26, 2026
approved Modification No. 17, decreasing the contract amount by $15,727,083, to remove scope of work related to the South Fork location, and increas ing the cost contingency by $13,029,702, to fund additional potential change orders related to the increased scope for the tunnel lining repair, final lining in the New Priest Adit, temporary water filtration plant, changes to the contract outage start and end dates, and additional roadway improvements for Rickson Road.
Scope of
Contract:
The objective of the Project and Contract No. HH-1000R is to improve the reliability and control of water flow, water quality, and maintenance access through the rehabilitation of the Mountain Tunnel and related improvements. The work includes concrete lining repairs, contact grouting, a large flow control v alve facility , new tunnel adit and access portals, access
road stabilization and improvements, environmental mitigations, and other site work and restoration.
Modifications
to the Contract:
Modification Nos. 1 to 27: Staff issued Modification Nos. 1 to 27, increasing the contract amount by $6,705,632, within the cost contingency approved under Resolution No. 25- 0007, for a total contract amount of $145,678,821, with no change to the contract duration.
Proposed Increase to Cost Contingency: Staff recommends the Commission approve an increase of $15,000,000 to the existing cost contingency, for a revised cost limit of $ 165,173,126. These adjustments are necessary to address additional costs resulting from a delayed start and earlier end of Outage No. 5 in 2025-26; ongoing delays to the initial commissioning of the Flow Control Facility due to design changes to critical electrical equipment; ongoing delays to the final project commissioning due to the descoping of South Fork; and anticipated additional costs to resolve outstanding potential change orders for completing project scope.
Funding and
Costs:
Funding Source: Project No 10014114, Mountain Tunnel Improvements Project
Original Contract Amount: $138,973,189
Original 10% Cost Contingency: $13,897,318
Approved Increase in Cost Contingency: $13,029,702
Modification Nos. 1 through 16 Amount Change: $9,630,106 Modification No. 17 through Resolution No. 25-007: (15,727,083) Modification Nos. 18 through 27 Amount Changes: $12,802,609 Total Current Contract Amount: $145,678,821
Current Cost Contingency: $4,494,305
[Proposed] Additional Cost Contingency: $15,000,000
Total [Proposed] Contract Cost Limit: $165,173,126
Schedule: Notice-to-Proceed Date: January 29, 2021
Original Contract Duration: 2,160 consecutive calendar days Original 10% Duration Contingency: 216 calendar days
Modifications Nos. 1 through 27: 0 calendar day
Agenda Title: HH-1000R, Mountain Tunnel Improvements Project Commission Meeting Date: May 26, 2026
Total Current Contract Duration: 2,160 consecutive calendar days Current Duration Contingency: 216 calendar days
Additional Duration Contingency: 0 days
Total Duration Limit: 2,376 consecutive calendar days
Environmental
Review:
On October 23, 2019, the San Francisco Planning Department issued the Final Mitigated Negative Declaration (MND) for the Mountain Tunnel Improvements Project (Case No. 2017- 014249ENV) under the California Environmental Quality Act (CEQA).
On November 12, 2019, by Resolution No. 19- 0213, this Commission adopted the Final MND, CEQA Findings contained in Resolution No. 19- 0213, and Mitigation Monitoring and Reporting Program, as required by the CEQA, and approved the Project.
This action is within the scope of the project evaluated in the Final MND.
View the Final MND , Resolution No. 19- 0213 and Mitigation Monitoring and Reporting Program here.
Local Business
Enterprise
Utilization and
Non-
Discrimination
in Contracting:
The Contract Monitoring Division (CMD) established a 3% Local Business Enterprise (LBE) subcontracting requirement for this Contract. The contractor committed to 5.347% LBE subcontractor participation with its bid submittal, and this amount remains unchanged.
Agenda Title: HH-1000R, Mountain Tunnel Improvements Project Commission Meeting Date: May 26, 2026
Location Map
Mountain Tunnel Improvements Project
PUBLIC UTILITIES COMMISSION
City and County of San Francisco
RESOLUTION NO. __________________
WHEREAS, The San Francisco Public Utilities Commission (SFPUC) Water Enterprise’s Mountain Tunnel requires improvements to address deterioration to its original lining due to age, original construction deficiencies, and deferred maintenance, resulting in vulnerabilities to meeting water quality and delivery reliability level -of-service objectives, and to extend the life of this critical water conveyance facility; and
WHEREAS, On October 13, 2020 , by Resolution No. 20-0210, the Commission awarded Contract No. HH- 1000R, Mountain Tunnel Improvements Project to Michels Tunneling; and
WHEREAS, The original contract amount was for $138,973,189, and the original contract duration was 2,160 consecutive calendar days; and
WHEREAS, The construction Notice-to-Proceed date was January 29, 2021; and
WHEREAS, On June 13, 2023, by Resolution No. 23- 0110, this Commission approved the assignment of Contract No. HH -1000R to Mountain Tunnel Constructors, Inc., a wholly owned affiliate of Michels Corporation; and
WHEREAS, On J anuary 14, 2025, by Resolution No. 25-0007, the Commission approved a decrease of $15,727,083 to the contract amount, for a revised total contract amount of $123,246,106, to remove scope of work , and approved an increase of $13,029,072 to the existing cost contingency, for a revised cost limit of $150,173,126 , with no change to the contract duration, to fund additional potential change orders related to the increased scope for the tunnel lining repair, final lining in the New Priest Adit, temporary water filtration plant, changes to the contract outage start and end dates, and additional roadway improvements for Rickson Road; and
WHEREAS, Staff issued Modification Nos. 1 to 27, increasing the contract amount by $6,705,632, within the cost contingency as approved under Resolution No. 25-0007, for a total contract amount of $145,678,821, with no change to the contract duration; and
WHEREAS, Staff recommends this Commission approve an increase of $15,000,000 to the existing cost contingency , for a revised cost limit of $165,173,126, and no change to the contract duration. These adjustments are necessary to address additional costs resulting from a delayed start and earlier end of Outage No. 5 in 2025- 26; ongoing delays to the initial commissioning of the Flow Control Facility due to design changes to critical electrical equipment; ongoing delays to the final project commissioning due to the descoping of South Fork ; and additional anticipated costs to resolve outstanding potential change orders; and
WHEREAS, Contract Monitoring Division established a Local Business Enterprise (LBE) subcontracting participation requirement of 3% for this contract , and Mountain Tunnel Constructors, Inc., committed to an LBE subcontractor participation of 5.347% with the bid submittal, and this remains unchanged; and
WHEREAS, Funds are available from Project No. 10014114, Mountain Tunnel Improvements Project; and
WHEREAS, On October 23, 2019, the San Francisco Planning Department issued the Final Mitigated Negative Declaration (MND) for the Mountain Tunnel Improvements Project (Case No . 2017- 014249ENV) under the California Environmental Quality Act (CEQA); and
WHEREAS, On November 12, 2019, by Resolution No. 19-0213, this Commission adopted the Final MND, CEQA Findings contained in Resolution No. 19- 0213, and Mitigation Monitoring and Reporting Program, as required by the CEQA , and approved the Project, and this action is within the scope of the project evaluated in the Final MND; and
WHEREAS, The Planning Department is the custodian of records located in File No. 2017-014249ENV at 49 South Van Ness Avenue, Suite 1400, San Francisco, California 94103, and staff has made the Project files available for review by this Commission and the public, and those files are part of the record before this Commission; and
WHEREAS, This Commission has reviewed and considered the information in the Project files, including the Final MND, CEQA Findings contained in Resolution N o 19- 0213, and Mitigation Monitoring and Reporting Program, and all written and oral information provided by the Planning Department, the public, relevant public agencies, SFPUC, and other experts, and the administrative files for the Project; now, therefore, be it
RESOLVED, This Commission has reviewed and considered the F inal MND and the record as a whole and finds that the Final MND is adequate for its use as the decision- making body for the Project and incorporates the CEQA Findings contained in Resolution No. 19-0213 by this reference thereto as though set forth in this Resolution; and be it
FURTHER RESOLVED, This Commission further finds that since the Final MND was finalized, there have been no substantial Project changes and no substantial changes in Project circumstances that would require major revisions to the Final MND due to the involvement of new significant environmental effects or an increase in the severity of previously identified significant impacts, and there is no new information of substantial importance that would change the conclusions set forth in them; and be it
FURTHER RESOLVED, That this Commission hereby approves an increase of $15,000,000 to the existing cost contingency for Contract No. HH -1000R, Mountain Tunnel Improvements Project, with Mountain Tunnel Constructors, Inc., for a total cost contingency of $41,927,020, with no change to the contract duration limit; and, be it
FURTHER RESOLVED, That this Commission hereby authorizes the General Manager, or the General Manager’s designee, to consider, and, if appropriate, to approve modifications to the contract, up to a total cost limit of $165,173,126.
I hereby certify that the foregoing resolution was adopted by the San Francisco Public Utilities Commission at its meeting of May 26, 2026.
__________________________________
Director of Commission Affairs
San Francisco Public Utilities Commission