City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Utilities
Meeting Date: June 16, 2025
Report #:2505-4653
TITLE
Approval of Change Order No. 3 to Contract C22183580 with MP Nexlevel of California, Inc., to reallocate funding from Change Order No. 2 to the Fiber-to-the-Premises (FTTP) Project and to incorporate FTTP into the Scope of Work extending through August 31, 2025; CEQA Status - For FTTP, Council action on this item is within the scope of the Final Initial Study and Mitigated Negative Declaration (IS/MND) for the Fiber-to-the-Premises Project, adopted on June 17, 2024; otherwise exempt.
RECOMMENDATION
Staff recommends that City Council approve and authorize the City Manager or their designee to execute Change Order No. 3 to contract C22183580 with MP Nexlevel (Attachment A) to reallocate funding from Change Order No. 2 the Fiber-to-the-Premises project from Change Order No. 1 and extending the FTTP scope of work through August 31, 2025 in line with Change Order No. 2, with no further change in the overall not-to-exceed amount or term of the contract.
BACKGROUND
The City of Palo Alto Utilities (CPAU) 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 1 City Council, March 21, 2022: Staff Report #13953
https://portal.laserfiche.com/Portal/DocView.aspx?id=59397&repo=r-704298fc
Installation and Materials and a contingency amount of $881,581, for a total not-to-exceed amount of $9,697,390 over three 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 adding $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). Under Change Order #1, MP Nexlevel would 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 is expected to inform the City of 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 covered 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.
On April 14, 2025, Council approved Change Order #2 in the amount of $4,000,000 for a total not-to-exceed amount of $15,347,390, and extending the initial three-year term of the contract for an additional four months through August 31, 2025 to provide ongoing substructure and utility trenching construction services for the following capital improvement projects (CIPs):
Foothills Rebuild Wildfire Mitigation (EL-21001), Grid Modernization for Electrification Projects (EL-24000) and Electric Customer Connections (EL-89028) (Staff Report #2502-41863). The second Change Order was intended to bridge the gap between the existing contract and any new task-order substructure construction contract following the new competitive solicitation.
Due to updated construction estimates for work previously included in Change Order 1 and the additional funding already including in Change Order 2, staff is recommending approval of Change Order 3 to reallocate a portion of the funding approved for Change Order 2 to the FTTP project scope of work and to extend that scope through August 31, 2025.
ANALYSIS
Under Change Order No. 1, Staff estimated $1,650,000 for FTTP construction and preparation of the fiber hut site at Colorado Power Station. Staff redesigned the network architecture for the pilot to reduce the amount of splicing required which resulted in a reduction of 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 City Council, April 14, 2025: Staff Report #2502-4186 https://cityofpaloalto.primegov.com/Portal/viewer?id=0&type=7&uid=de72efcd-fb3c-44b1-84ba-0717af707692 approximately $330,000 in construction labor. CPAU hired a civil engineering firm to perform geotechnical investigation and foundation engineering design for the fiber hut at Colorado Power Station. The proposed fiber hut is expected to be approximately 11.5 feet by 20 feet and approximately 10.5 feet in height. The structure is expected to have a dead weight of 55,000 pounds, which applied over the area of the structure yields a pressure of about 240 pounds per square foot. Due to geotechnical concerns of shallow groundwater and potential severe ground shaking during a major earthquake, the engineering firm recommended a structural slab supported on a drilled pier which extends to about 18 feet and grade beam foundation system extending below the fill and the upper liquefiable layer. The construction quote for the fiber hut site preparation and installation came in approximately $750,000 higher than staff had originally estimated prior to completion of the geotechnical investigation and engineering design of the pad mount. The quote includes site grading and bedrock, conduit and vault installation, fiber hut pad and structural pier supports, and anchoring the fiber hut and generator upon delivery.
Under Change Order No. 2, Staff requested an additional $4,000,000 to provide substructure and utility trenching construction services for the Foothills Rebuild Wildfire Mitigation, Grid Modernization, and Customer Connections. Based on recent estimates of pending construction work, Staff has identified about $450,000 that can be reassigned to FTTP from Change Order No. 2 without impacting the other major projects.
The City issued a competitive solicitation in April 2025 for upcoming substructure and trenching construction services 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
There is no funding or staffing impact for Change Order No. 3. The purpose of the change order is to allocate additional funding for Fiber-to-the-Premises CIP (FO-24000), which was previously allocated in Change Order No. 1, and extend that scope of work in line with Change Order No. 2 through August 31, 2025.
STAKEHOLDER ENGAGEMENT
Staff continues to share updates with the Utilities Advisory Commission at their public meetings, and taken community input on various aspects of the staff’s work to date.
Additionally, a project website is live and offers information and status updates of FTTP.
Project updates will continue to be provided at www.PaloAlto.gov/PaloAltoFiber.
ENVIRONMENTAL REVIEW
The FTTP Project, including construction of the fiber hut, has been assessed in accordance with the authority and criteria contained in the California Environment Quality Act (CEQA), the State CEQA Guidelines, and the environmental regulations of the City. A final Initial Study-Mitigated Negative Declaration (IS/MND) that incorporated revisions, as appropriate, based on public comments was adopted by Council Resolution on June 17, 2024 (Staff Report #2403-27134).
Other portions of work performed by MPNexlevel, including the Foothills Rebuild and Grid Modernization Project are Exempt Under CEQA Guidelines Sections 15302, 15303 and 15183.
ATTACHMENTS
Attachment A: MP NexLevel, Contract C22183580 Change Order No. 3 APPROVED BY:
Alan Kurotori, Director of Utilities
4 City Council, June 17, 2024: Staff Report #2403-2713
https://cityofpaloalto.primegov.com/Portal/viewer?id=0&type=7&uid=2b77638f-b16d-43a9-ae2a-4b57a96f813d