City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Public Works
Meeting Date: August 11, 2025
Report #:2505-4733
TITLE
Approval of Increase of Construction Contingency for Contract No. C24189237 with SAK Construction, LCC in the amount of $1,800,000, Funded by the Wastewater Treatment Enterprise Fund for the Joint Intercepting Sewer Rehabilitation (Phase 1) Project (WQ 24000), and Approval of a Budget Amendment in the Wastewater Treatment Fund; CEQA Status - Exempt under CEQA Guidelines Section 15301 (Repairs to Existing Facilities)
RECOMMENDATION
Staff recommends that the City Council:
1. Approve an increase of construction contingency for Contract No. C24189237 with SAK Construction, LCC in an amount not to exceed $1,800,000 for a total contract contingency amount not to exceed $2,534,770; and
2. Approve an amendment to the Fiscal Year 2026 Adopted Capital Budget Appropriation for the Wastewater Treatment Fund (requires a 2/3 majority vote) by:
a. Increasing the Joint Intercepting Sewer Rehabilitation (Phase 1) project (WQ-24000) appropriation by $700,000; and
b. Decreasing the Wastewater Treatment Fund balance by $700,000.
EXECUTIVE SUMMARY
The Joint Intercepting Sewer Rehabilitation (Phase 1) Project will install a structural liner in a critical 72-inch sewer pipeline that conveys over half the influent flow to the Regional Water Quality Control Plant (RWQCP). The City awarded a $8.1 million construction contract to SAK Construction, LLC in December 2023, including a 10% construction contingency. During construction, significant unforeseen site conditions, contractor schedule and sequencing challenges, and necessary design clarifications required change orders that have nearly exhausted the original contingency.
While the main pipe rehabilitation work is complete, further work including bypass rerouting, manhole modifications, and structural evaluation of a major junction structure necessitates an
increase to the construction contingency. Staff recommends increasing the contingency by $1,800,000. If the contingency is fully utilized, the total contract not-to-exceed amount would be $9,882,470. Cost-sharing among RWQCP partner agencies will be reconciled based on final expenditures.
BACKGROUND
The Joint Intercepting Sewer Rehabilitation (Phase 1) Project rehabilitates 2,364 linear feet of deteriorated 72-inch diameter concrete sewer pipe using cured-in-place pipe (CIPP) lining, addressing extensive corrosion in a critical section of the Joint Intercepting Sewer (JIS) system leading to the RWQCP. This section of the JIS conveys most of the wastewater flow from Mountain View, Los Altos, Los Altos Hills, and Palo Alto to the RWQCP. There are other sewers leading to the RWQCP, but these are maintained by the Utilities Department, Stanford University, and the East Palo Alto Sanitary District and not included in the scope of this Project.
City Council awarded the design contract for the Project to Jacobs Engineering Group, Inc. on May 16, 2022, and the design was completed in August 2023.1 On December 11, 2023, City Council approved a funding agreement with partners, a construction contract with SAK Construction, LLC (SAK) for a base amount of $7,347,700 and a 10% contingency of $734,770, for a total not-to-exceed amount of $8,082,470, as well as an amendment to the construction management services contract with Tanner Pacific, Inc.2 Construction began in winter 2024 but encountered delays due to unforeseen site conditions, including difficult access and obstructions not visible during pre-construction investigations, as well as contractor schedule and sequencing challenges. These delays pushed field construction activities into the 2025 dry season.
On June 9, 2025, Council approved amendments to related contracts for Jacobs Engineering Group, Inc., Tanner Pacific, Inc., and Carollo Engineers, Inc. to support continued engineering and construction management services through the extended schedule.3
ANALYSIS
While the primary pipe rehabilitation (CIPP lining) was successfully completed, during the initial phases of construction, there were project delays due to unforeseen site conditions, as well as 1 City Council, May 16 2022; Consent Item #7; SR #14164, https://portal.laserfiche.com/Portal/DocView.aspx?id=59483&repo=r-704298fc&searchid=a6f7c657-de00-4160- 95a6-a70fb8afcd04
2 City Council, December 11, 2023; Consent Item #2; SR #2308-1879, https://portal.laserfiche.com/Portal/DocView.aspx?id=69362&repo=r-704298fc 3 City Council, June 9, 2025; Consent Item #11; SR #2504-4519, https://portal.laserfiche.com/Portal/DocView.aspx?id=182832&repo=r-704298fc&searchid=57c29364-e791-4eba- b05b-a0b2abdf9b23
contractor schedule and sequencing challenges. These delays pushed field construction activities into the 2025 dry season. Additional unforeseen work became necessary, including:
Excavation and backfill to construct pump pads at two additional locations Landfill cap material import and placement after landfill waste discovered during excavations
Replacement of a manhole base deemed structurally unsuitable Modifications to existing manholes to accommodate liner transitions Addressing complications with the bypass pumping system due to higher-than- anticipated flow variability.
Numerous change orders were issued to address these unforeseen conditions. The original contingency of $734,770 is 83% committed as of July 1, 2025.
To complete relining of the last portion of the JIS, the contractor installed a partition plate intended to isolate the wastewater flow at Junction Box #0 (JB-0), a large concrete structure that receives all JIS flows before discharge into the RWQCP. After installation of the partition plate, the contractor uncovered a suspected slab failure at JB-0, which prevented completion of the final pipe lining segment. Additional unforeseen work at JB-0 now required includes:
Isolation and structural evaluation of a critical junction box (JB-0), which was previously inaccessible
Additional temporary bypass rerouting to enable safe inspection of JB-0 and repair This is very significant, impactful work, and based on initial negotiations with the contractor on the change order, staff anticipates the cost being approximately $1,500,000. The contingency usage will go beyond the City’s typical “10% of the construction contract amount” contingency authorization with this work. Staff recommends increasing the contingency by $1,800,000 ($1.5 million estimate plus an additional $300,000 in contingency), bringing the total authorized contingency to $2,534,770, and the total potential contract not-to-exceed amount to $9,882,470.
The recommended increase ensures the project retains flexibility to address potential remaining unknowns that are typical in plant infrastructure work of this scale and complexity.
This increase will ensure sufficient contingency is available to complete all required work safely and in compliance with environmental and regulatory requirements, while also supporting any final change orders through project closeout in fall 2025.
FISCAL/RESOURCE IMPACT
The recommendation in this report will approve an increase to the authorized contract contingency with SAK and authorize one or more change orders to the contract. To fund the increased contingency of $1.8 million, this report recommends a budget amendment to increase the Wastewater Treatment Fund’s Joint Intercepting Sewer Rehabilitation (Phase 1) project (WQ-24000) by $700,000 (there is currently $1.1 million available in the project), from $12.4 million to $13.1 million.
The JIS Project is a cost-shared capital improvement program project among four RWQCP partner agencies, including Mountain View, Palo Alto, Los Altos, and Los Altos Hills. Project costs are allocated based on previously approved partner cost-sharing percentages shown in Table 1 of Attachment B.
Some of the project expenses included in the original total project costs were to cover for work (i.e. bypass pumping) inside the RWQCP and thus these project expenses were allocated to all six partner agencies because the RWQCP continues to use the JIS to convey RWQCP plant-wide internal return flows to the headworks. The additional contingency funds will cover the isolation and structural evaluation of junction box JB-0 and temporary bypass pumping within the RWQCP. Given that all flow from the Partner Agencies passes through JB-0 before entering the treatment plant, this additional cost will be also shared among all six RWQCP partner agencies, per established cost-sharing agreements.
Palo Alto‘s share of these inside-the-RWQCP project expenses is estimated to be approximately 37%, and the other five agencies’ share is approximately 63% based on the volume and strength of wastewater contributions of each partner. Thus Palo Alto‘s share of the increased construction contingency is approximately $666,000 (37%) of the $1.8 million. This 37% share applies only to the additional work located within the RWQCP, where cost-sharing is based on plant flow contributions for all partners.
Final total project cost allocations will be reconciled based on actual construction costs and each agency’s proportional contribution of flow and strength to the RWQCP. Attachment B reflects estimated project not-to-exceed costs by each partner in greater detail. For the full project, including work both inside and outside the RWQCP, Palo Alto’s overall share is approximately $2,744,000, or 24%, reflecting different cost allocation methods based on which portions of the JIS system each agency uses.
STAKEHOLDER ENGAGEMENT
This project is part of the RWQCP’s major capital improvement program funded by Palo Alto and the five additional partner agencies who use the RWQCP for wastewater treatment. The five partner agencies are regularly consulted regarding both the need for and progress of the wastewater treatment capital work. With respect to Palo Alto itself, the open meetings on the budget process serve as the main vehicle for engaging the community on projects and associated rate impacts.
Public communications included on-site signage and detour maps for trail closures in Byxbee Park, as well as updates posted to the City’s Joint Intercepting Sewer Rehabilitation – Phase 1 project webpage. Environmental coordination ensured wildlife-friendly fencing and mitigations during construction.
Project notices and updates have been shared with the Parks and Recreation Commission and through City newsletters, with staff responding to public inquiries and keeping stakeholders informed throughout key milestones. On February 25, 2025, staff briefed the Parks and Recreation Commission (PRC) on construction progress and on Byxbee Park Western Trail Temporary Closure from 3/30/2025 to 11/30/2025 for the Sewer Pipe Rehabilitation.4 On July 22, 2025, staff provided an update to the PRC during the Departmental Report.
ENVIRONMENTAL REVIEW
Council action on this item is exempt from review under the California Environmental Quality Act (CEQA) under CEQA Guidelines Section 15301, subsection (b) as it involves the repair and maintenance of an existing publicly-owned utility used to provide sewerage treatment services with no expansion on the existing facility.
ATTACHMENTS
Attachment A: Site Map Showing the Pipe Alignment and Project Phases Attachment B: Partner Agencies Cost Share Summary
APPROVED BY:
Brad Eggleston, Director Public Works/City Engineer
4 Parks and Recreation Commission, February 25, 2025; Agenda Item #3; SR# 2502-4115, https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=16875