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City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Utilities
Meeting Date: April 14, 2025
Report #:2502-4186
TITLE
Approval of Amendment No. 2 via Change Order No. 2 to Contract Number C22183580 with MP Nexlevel of California, Inc. in the Amount of $4,000,000 for a Total Not-to-Exceed Amount of $15,347,390, and Extending the Three-Year Term of the Contract for an Additional Four Months Through August 31, 2025 to Provide Substructure and Utility Trenching Construction Services for the Foothills Rebuild Wildfire Mitigation and Grid Modernization for Electrification Projects; CEQA Status: the Foothills Rebuild and Grid Modernization Project are Exempt Under CEQA Guidelines Sections 15302, 15303 and 15183
RECOMMENDATION
Staff recommends that City Council approve and authorize the City Manager or their designee to execute Change Order No. 2 to contract C22183580 with MP Nexlevel (Attachment A) for substructure installations, utility trenching, and conduit installations in support of the Foothills Rebuild and Grid Modernization projects, in an amount not-to-exceed $4,000,000, for a revised total contract amount of $15,347,390 and extending the term of the contract to August 31, 2025 for a total of three years and four months.
BACKGROUND
The City contracts substructure and trenching construction services because the amount of work varies year over year and use of contracted services allows for the most efficient and cost- effective use of resources for this variable timing. In 2022, MP Nexlevel was deemed the lowest responsible bidder of a competitive solicitation for utility trench and substructure installation (Staff Report 139531). The performance and quality of work delivered by MP Nexlevel has been satisfactory over the years. As part of the task order completion process, MP Nexlevel’s work is inspected and signed off by internal staff. The original Task Order Construction Contract C22183580 with MP Nexlevel of California, Inc., was approved by Council March 21, 2022 in the amount of $8,815,809 for Trenching and Substructure Installation and Materials and a contingency amount of $881,581, for a total not-to-exceed amount of $9,697,390 over three 1 City Council, March 21, 2022: Staff Report #13953
https://portal.laserfiche.com/Portal/DocView.aspx?id=59397&repo=r-704298fc
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years through April 30, 2025. For customer-related work, trenching and substructure work are reimbursed by the customers through the customer connection charges. Since FY 2023, the City has been reimbursed $4.5 million from customers for new service connections.
On October 7, 2024, Council approved change order #1 in the amount of $1,650,000 inclusive of $150,000 in contingency funding for the installation of fiber optic cable and fiber hut site preparation in support of the fiber-to-the-premises (FTTP) pilot project (Staff Report #2408- 33682). MP Nexlevel will install, lash, splice and test approximately 59,500 feet of fiber optic cable; build underground laterals and pad mounts for fiber distribution cabinets; and build a concrete pad to support the fiber hut and emergency generator including electric wiring, lighting, HVAC and security fencing. The FTTP pilot will inform the City the best mix of insource (internal staff) and outsource (contractors) staffing to construct and operate the new municipal Palo Alto fiber internet business. Change order #1 covers the FTTP Phase 1 pilot area only. Once the pilot area is complete and can inform the requirements for a competitive solicitation, staff will be requesting competitive bids for construction of the remainder of the FTTP Phase 1 scope.
ANALYSIS
As part of the City’s Wildfire Mitigation3 Plan, the Utilities Department is undergrounding eleven miles of overhead electric lines in the Foothills area. This project involves installing substructure work, including boxes for electric and fiber lines; removing electric lines and fiber lines from overhead poles; and installing padmount equipment where possible. Given the number of miles of undergrounding and steep terrain in the foothills, the project was divided into five phases over three years (FY 2022 – FY 2025). As of February 2025, three of five phases have been completed and the remaining two phases are underway with a planned project completion of June 30, 2025.
The primary objective of the Foothills Rebuild and Fire Mitigation project is to mitigate fire risk due to electric equipment by relocating the overhead electric and fiber lines to underground in higher fire risk areas on Arastradero and Page Mill Roads. Other community benefits are electric grid resilience, enhanced communication for public safety and other departments, and improved risk management. According to Cal Fire’s Fire Hazard Severity Zone4 map, the Foothills region is a mix of high and very high hazard zones. The City’s goal is to complete the Foothills Rebuild project by the end of Fiscal Year 2025 and before wildfire season begins. Over the past three years, the City has spent approximately $6.3 million for substructure work, trenching, and conduit installation through the MP Nexlevel contract. Staff estimates an 2 City Council, October 7, 2024: Staff Report #2408-3368 https://cityofpaloalto.primegov.com/Portal/viewer?id=0&type=7&uid=1136b122-5ea9-447e-8a85-48c161ef99d4 3 Wildfire Mitigation Plan https://www.cityofpaloalto.org/files/assets/public/v/1/utilities/safety-information/cpau- wildfire-mitigation-plan-2024-update.pdf
4 Fire Hazard Severity Zone https://experience.arcgis.com/experience/6a9cb66bb1824cd98756812af41292a0 6 5
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additional $3 million is required in the contract to complete the remaining undergrounding phases.
In addition, MP Nexlevel is supporting the electric grid modernization project (grid mod) by performing underground trenching for pole replacements. Utilities replaced approximately 80 utility poles in the grid mod pilot area to create additional capacity for the new equipment and/or due to the poor condition of the existing pole. The pilot consists of 908 homes to test the feasibility, time, cost, risk, and performance of various materials and processes and to identify any potential issues for a full-scale rollout. The estimate completion date of the pilot is March 2025. Staff estimates an additional $1 million is required to maintain the momentum of grid mod from the pilot into Phase 1 and stay on schedule with planned customer connections including Palo Alto Unified School District until a new substructure and utility trenching contract is in place.
The existing contract has $1.4 million remaining, most of which is earmarked for the FTTP pilot, and the contract is scheduled to end on April 30, 2025. This second amendment will bridge the gap between the existing contract and any new task-order substructure construction contract following the new competitive solicitation. The City has issued a competitive solicitation in March 2025 and anticipates awarding the contract in August 2025. Under the solicitation, staff is considering pre-qualifying more than one vendor to perform substructure work and utility trenching. This will provide the City flexibility and resources to work on multiple high priority projects concurrently.
FISCAL/RESOURCE IMPACT
Funding for this contract amendment is available in the Fiscal Year 2025 Capital Improvement Plan budget under Foothills Rebuild/Fire Mitigation (EL-21001), Grid Modernization for Electrification (EL-24000) and Electric Customer Connections (EL-89028).
STAKEHOLDER ENGAGEMENT
Staff continues to share updates through the Utilities Wildfire Mitigation webpage5 and Grid Modernization for Electrification webpage6.
ENVIRONMENTAL REVIEW
The Foothills Rebuild Wildfire Mitigation and Grid Modernization for Electrification projects are categorically exempt from California Environmental Quality Act (CEQA) review under CEQA Guidelines section 15303 (construction and location of limited numbers of new, small facilities or structures; installation of small new equipment and facilities in small structures), section 15302 (replacement or reconstruction of existing structures and facilities), and for the the grid 5Utilities Wildfire Mitigation webpage https://www.cityofpaloalto.org/Departments/Utilities/Utilities-Services- Safety/Safety/Utilities-Wildfire-Mitigation
6Grid Modernization for Electrification webpage https://www.cityofpaloalto.org/Departments/Utilities/Utilities- Services-Safety/Utilities-Projects/Grid-Modernization-for-Electrification 6 5
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modernization project, section 15183 (projects consistent with a general plan, community plan, or zoning) since it is consistent with the Environmental Impact Report (EIR) Addendum to the City of Palo Alto Comprehensive Plan Final Environmental Impact Report Council approved on June 5, 2023.
ATTACHMENTS
Attachment A: MP NexLevel Change Order 2
APPROVED BY:
Kiely Nose, Interim Director of Utilities
Staff: Dave Yuan, Utilities Strategic Business Manager