TO: City Council DATE: June 22, 2026 DEPARTMENT: Public Works/Engineering
PREPARED BY: Chantell O’Neal, Assistant Director; Engineering PRESENTER: Kevin McDannold, Engineering Technician AGENDA TITLE: Receive Report and Consider Adoption City Council Resolution Awarding the Raw Water Line Replacement Project, City Project No. WTR-00016, to Mercer-Fraser Company as the Lowest Bid, Authorizing City Manager to Execute Contract (Amount Not To Exceed $4,614,581.00), Subject to an Existing Mitigated Negative Declaration
RECOMMENDATION
Staff recommends that the City Council:
Adopt the Resolution awarding the Raw Water Line Replacement Project to MercerFraser Company as the lowest responsible bidder, including all four additive alternates, for a total contract amount of $4,614,581; and Authorize the City Manager to execute the construction contract.
BACKGROUND
The Raw Water Line Replacement Project (WTR00016) was originally awarded in February 2024 to T&S Construction for $5.96 million. Construction proceeded for approximately 1.5 seasons; however, work stalled due to:
Unsecured easements along Segment 3, including a reluctant landowner whose concerns centered on the pipeline alignment crossing forested terrain rather than the existing haul road.
Outstanding Lake and Streambed Alteration Agreements (LSAAs) with the California Department of Fish and Wildlife (CDFW), which prevented work in segments regulated by proximity to waterways.
Seasonal construction restrictions imposed by CDFW, the State Water Board, Army Corps of Engineers, and Mendocino Redwood Company (JDSF).
In late 2025, the Department of Water Resources (DWR) notified the City that the project was at risk of losing its grant funding due to the timely use of funds requirement. On January 27, 2026, DWR halted all reimbursements. As a result, the City terminated the construction and construction management contracts with T&S and SHN in February 2026.
Simultaneously, City staff worked with legislative partners to restore the funding. In April 2026, DWR notified the City that it would recommend reinstatement of the grant to the Department of Finance. The State Budget of June 15, 2026 reauthorized expenditures, restoring $5,104,392.55 in available construction funding.
During this same period, the City resolved the remaining project barriers:
LSAA Status
Men 49514 (Hare Creek & Covington Gulch)
Issued January 9, 2026
Escrow agreement executed June 11, 2026
Covers:
Hare Creek pipeline replacement (dewatering + hand excavation) Covington Gulch debris removal (881.5 cubic feet of debris) Men 31384 (Six Encroachments Along Pipeline Corridor)
Draft issued May 28, 2026
Final issuance expected late June 2026
Covers excavation, dewatering, backfill, compaction, and culvert armoring Easements
The final outstanding easement in Segment 3 was renegotiated by shifting the pipeline alignment onto an existing haul road. The landowner has agreed to execute the easement by the end of June 2026.
Design Adjustments
Lumos & Associates performed additional surveying and proposes to perform the remaining redesign work to support the revised alignment. A separate agenda item addresses their contract amendment.
With permits issued, easements secured, and funding reinstated, the project is now fully constructible for the 2026 summer season.
DISCUSSION AND ANALYSIS
Bid Opening
Bids were opened on June 4, 2026. Only one timely bid was received:
Bidder
Base Bid
Base + Alternates
MercerFraser Company
$4,039,581
$4,614,581
A second contractor attempted to submit a bid but it arrived after the deadline and the City Clerk rejected it as untimely.
Immaterial Bid Irregularity
MercerFraser’s bid acknowledged Addenda 1 and 2 but did not list Addendum 3 on the bid form. The City may waive bids failure to list Addendum 3 as long as the discrepancy is inconsequential:
Addendum 3 did not materially change quantities, scope, or pricing.
MercerFraser demonstrably received Addendum 3 (email distribution + planholder log).
No other timely bids were submitted.
The omission is therefore immaterial and may be waived.
Readiness to Proceed
All major constraints that halted the prior contract have now been resolved:
LSAA 49514 issued
LSAA 31384 pending final issuance but approved in draft Final easement execution scheduled
Biological monitoring requirements understood and implementable Construction window (June 15–October 15) aligns with permit conditions The project is ready for immediate mobilization upon award.
FISCAL IMPACT/FUNDING SOURCE
The reinstated DWR grant provides $5,104,392.55 for construction. The MercerFraser bid (including all alternates) totals $4,614,581, leaving a remaining balance of $489,811.55 for contingencies and construction management.
The project is funded through the reinstated DWR Urban & Multibenefit Drought Relief Grant. Awarding the contract to MercerFraser for $4,614,581 is fully within the available grant balance.
No General Fund impact or water enterprise fund impact for this portion of the project.
ENVIRONMENTAL ANALYSIS:
A Mitigated Negative Declaration (MND) was adopted by the City Council on May 23, 2022. The rebid and contract award have been evaluated and do not materially alter the project or introduce new environmental impacts. In fact, the realignment of a portion of the easement away from forested area to an existing haul road will reduce environmental impacts. No additional CEQA action is required.
STRATEGIC PLAN/COUNCIL PRIORITIES/GENERAL PLAN CONSISTENCY This action supports:
Goal 2 – Implement Resilient Infrastructure and Encourage Environmental Stewardship Ensures longterm water supply reliability
Advances climateready infrastructure
Protects aquatic resources through LSAA compliance
Goal 6 – Champion a Sustainable Municipal Organization
Demonstrates responsible grant management
Ensures continuity of critical capital projects
COMMUNITY OUTREACH
Project website
Bid documents publicly advertised
LSAA permitting included coordination with CDFW, JDSF, and affected landowners Easement negotiations conducted directly with property owners ALTERNATIVES:
Reject all bids and rebid the project
Would delay construction until 2027
Risks violating grant timelines
Not recommended
Negotiate a contract under FBMC 3.22.070(D)
Legally permissible but unnecessary given the City Attorney’s determination Could create perception of reduced transparency
Not recommended
Award the contract to Mercer‑Fraser (Recommended)
Lowest responsible bidder
Bid irregularity is immaterial
Project is time‑sensitive due to seasonal restrictions and grant deadlines ATTACHMENTS:
Draft Resolution
Bid Opening Summary
Mercer-Fraser Construction Contract
NOTIFICATION:
MercerFraser Company
DWR Grant Manager
AGENDA ITEM NO. 8C
CITY COUNCIL STAFF REPORT