City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Utilities
Meeting Date: October 6, 2025
Report #:2503-4382
TITLE
Approval of Construction Contract No. C26193446 with MP Nexlevel of California, Inc., in the Amount Not-to-Exceed $13,600,187 and Authorization for the City Manager or Their Designee to Negotiate and Execute Changes Orders Up to a Not-to-Exceed Amount of $1,060,018 for a Total Not to Exceed Amount of $14,660,205 Over Three Years to Provide Utility Trench and Substructure Installations; CEQA status: Exempt, CEQA Guidelines Section 15301, 15302, and/or 15303; for Fiber-to-the-Premises work, 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.
RECOMMENDATION
Staff recommends that the City Council:
1. Approve and authorize the City Manager or their designee to execute on-call construction Contract No. C26193446 with MP Nexlevel of California, Inc. in an amount not-to-exceed $13,600,187 (see Attachment A) to provide utility trenching and substructure installations and;
2. Authorize the City Manager or their designee to negotiate and execute change orders for related, additional but unforeseen work that may develop during the term in an amount not-to-exceed $1,060,018 for a total not-to-exceed amount of $14,660,205 over three years.
EXECUTIVE SUMMARY
Staff is requesting an authorized amount of $14,660,205 over the three-year contract term, for MP Nexlevel of California, Inc., to provide on-call utility trenching and substructure installation, labor and equipment. The contract total includes anticipated labor and equipment costs, reimbursement of related materials and contingency funding for related but unforeseen work that may develop during the contract term.
This contract provides for the routine work planned for electric and fiber operations,
maintenance and customer connections and expanded capacity for key capital projects including but not limited to Foothills Rebuild for Wildfire Mitigation (EL-21001); and Fiber-to-the-Premises (FO-24000).
Staff continue to make progress on the FTTP pilot construction, including recent approval of the fiber hut permit that will advance the start of construction of the fiber hut foundation and substructure work at the Colorado Receiving Station. MPNexlevel is completing their survey which will inform updates to the construction schedule and timing of pilot fiber service availability. Staff are also pursuing opportunities to serve new multifamily residential developments where cost-effective as part of the FTTP pilot.
BACKGROUND
Electric substructure installation and trenching services are contracted out; the City does not have qualified staff to perform this work. The volume of substructure and trenching services varies each year based on the level of construction and development activities occurring within the City. Staff are seeking to establish a multi-year contract with a qualified general contractor to provide trenching and excavation services for the installation of electric utility substructures (conduits, boxes, vaults, etc.) on an as needed basis. Work performed under this contract is smaller in scale than typical utility infrastructure projects and use of an on-call contract gains the City administrative efficiencies (typically work ranges from $2,000 to $100,000 per task order). The necessary trenching and substructures are for a variety of customer service installations (EL-890280), replacement of existing underground electric system equipment (EL- 98003), for the Grid Modernization Project (EL-24000) and Foothills Rebuild Project (EL-21001), and for the Fiber-to-the-Premise Project (FTTP) (FO-24000), street lighting, and communication services. For customer service installations, the costs are reimbursed by the customers. The existing three-year trenching and substructure contract with MP Nexlevel ended in August 2025 and a new contract is needed to maintain continuity of service.
ANALYSIS
The City of Palo Alto has contracted for the installation of electric substructure and trenching services for over 25 years. Ahead of the existing contract’s expiration, on April 7, 2025 City staff issued an Invitation for Bids (IFB) to complete substructure and trenching work for electric and fiber optic capital improvement projects and occasionally for routine maintenance work. While 3652 firms were notified, the City only received one bid from MP Nexlevel of California, Inc.
Table 1: Summary of Bid Process
Bid Name/Number Utility Trench & Substructure Installation/ IFB 193446 (FY26-FY28)
IFB Issued April 7, 2025
Proposal Due May 21, 2025
# of Firms Notified 3,652
Total Days to Respond to IFB 44
Non-Mandatory Pre-Bid Meeting Yes
Number of Bids Received: 1
Staff believe that due to prevailing market conditions and major construction works across the state, contractors did not bid on this project due to the uncertain nature of the “on-call” contract. Rebidding is not a viable option as it will significantly impact and delay on-going customer connections, system improvement, electric grid modernization projects, and an immediate need to maintain access to trenching and substructure contractors.
Under the contract structure, staff create a scope of work (task order) each time the contractor’s services are needed, and the contractor provides a not-to-exceed quote based upon their submitted bid prices. Staff must agree to the contractor’s quote and authorize the work prior to the start of construction. Payment is made upon completion and acceptance of the work, with payment made based upon the actual quantities competed in the field. Material necessary to complete the installation of substructure (conduit, boxes, vaults, sand, slurry, etc.) are either provided to the contractor by the City or the contractor is reimbursed their cost to purchase the material including a 10% administration fee. Under the contract structure, no minimum amount of work is required.
For customer-initiated work, trenching and substructure costs are reimbursed by the customer through the customer connection charges. These costs do not contribute to electric ratepayer expenses. Retention is not held for each individual task order as they have a limited scope and construction duration.
Staff reviewed the single bid submitted by MP Nexlevel of California, Inc. (MP Nexlevel) and recommend that the base bid of $10,600,187 submitted by MP Nexlevel be accepted and that MP Nexlevel be declared the responsible bidder. In addition to the base bid, Staff is recommending an additional $3,000,000 in the first year of the contract to complete the FTTP pilot and Foothills Rebuild for wildfire mitigation (EL-21001). Staff previously awarded this work to MP Nexlevel under the existing contract C22183580 expiring October 31. Due to delays in the fiber hut installation, material lead time for FTTP related materials, and biological and archaeological survey requirements within Midpeninsula’s open space, MP Nexlevel will not be able to complete this work under the existing contract. Staff is proposing to disencumber the remaining $3,500,000 in the original contract and reappropriate $3,000,000 to the new MP Nexlevel contract. Staff anticipates completion of the Foothills Rebuild and infrastructure necessary for FTTP pilot by early 2026. The City has contracted substructure work to MP Nexlevel for over 10 years and has been able to complete several projects through their services, most recently phases 1 – 4 of Foothills Undergrounding project.
The total bid pricing was based on the previous contract and adjusted for added quantities and labor rate escalations. For example, staff changed the scope of the contract to reflect actual bid quantities performed under the most recent contract increasing or decreasing number of hours for a skilled worker (e.g. foreman, equipment operator, truck driver) and types of equipment (e.g. dump truck, directional boring rig). Though the cost of equipment provided by MP Nexlevel was less than the previous bid, the bid’s labor costs increased by 35% due to high demand for construction workers and increasing market wages, thus resulting in a 17% difference between the staff estimate bid price and the bid price received.
The bid provided and contract requirement was labor and equipment costs only. Materials were not included as a bid item since they will be either supplied by the City or purchased by the Contractor with the contractor later reimbursed by the City. Material either supplied by the City or procured directly by the contract includes PVC conduit, boxes, vaults, sand, slurry fill, base rock, or other materials necessary to complete the installation of the substructure work.
The estimated reimbursement cost of Contractor supplied materials is $500,000 and is based on the previous year’s actuals. The contract base amount requested is $10,600,187, which is MP Nexlevel’s base bid price for labor and equipment, plus $500,000 for reimbursed material costs, and $3,000,000 reappropriation. Staff recommends an 8% contingency amount of $1,060,018 for additional unforeseen work that may develop during the three-year term for a total not-to-exceed amount of $14,660,205.
Staff confirmed with the Contractor's State License Board that the contractor has an active license on file. Staff checked references supplied by the contractor for previous work performed and found no significant complaints. The work by the contractor will be continually monitored and evaluated. Continued work under this contract will be subject to satisfactory performance by the contractor and appropriation of necessary funds in the respective fiscal years. If the contractor’s quality of work is not satisfactory and does not meet the City’s construction schedule, the City can terminate the contract at any time during the contract period.
FIBER-TO-THE-PREMISES UPDATE
On December 19, 2022, City Council directed staff to proceed with the Fiber Expansion Plan to implement the Fiber Rebuild project and Phase 1 of the FTTP project without debt financing.
Under Phase 1, staff identified specific areas in the City with lowest cost to build, high density, least competition, and highest demand from the community broadband survey.
Staff deployed a pilot to determine how to align electric grid modernization with FTTP to help streamline utility engineering design and pole replacements and minimize noise disruption, and construction activity in neighborhoods. Thus far, the pilot has been successful in consolidating the type of work, sharing costs and resources when possible, and minimizing construction activity and disruption in the neighborhoods.
Since housing is one of the Council’s top priorities for 2025, staff has been engaging with developers on permit reviews and their interest in Palo Alto Fiber internet. Developers have expressed interest in offering Palo Alto Fiber as another internet service provider to their new housing. FTTP construction costs for new developments are significantly lower than existing facilities because costs are either assumed by the developers or shared with the City and other communication providers.
As these new housing opportunities arise, staff explore project details to determine whether the developments are located in the Phase 1 area and/or near the City’s existing dark fiber backbone. Staff is evaluating the cost/benefit to serve developments outside the Phase 1 boundary and pursue connection where cost-effective within the existing budget and expected to benefit the pilot phase of FTTP implementation.
FTTP Pilot Construction Update
Staff continue to make progress on the FTTP pilot construction, including recent approval of the fiber hut permit that will advance the start of construction of the fiber hut foundation and substructure work at the Colorado Receiving Station. MPNexlevel is completing their survey which will inform updates to the construction schedule and timing of pilot fiber service availability. The fiber hut is built and will be delivered after the foundation is completed. Fiber cables, cabinets, and materials are on order and temporary perimeter fencing extended for the new fiber facility with a permanent security wall to follow.
FISCAL/RESOURCE IMPACT
Funding for this contract will be appropriated over the next three fiscal years based on Council approval of the Electric and Fiber Optic Capital Budgets. The first-year funds are available in the FY 2026 Capital Budget, and $14,660,205 of the total contract amount will be allocated to six projects as outlined below. The cost allocation is based on projected CIP construction work for the Electric and Fiber funds over the next three years.
Expected Contract Distribution by Fiscal Year
Description FY 2026 FY 2027 FY 2028 Total
Labor and Equipment $6,235,580 $3,365,003 $3,499,604 $13,100,187 Materials $166,000 $167,000 $167,000 $500,000
Contingency $340,158 $353,200 $366,660 $1,060,018
Total $6,741,738 $3,885,203 $4,033,264 $14,660,205
Contract Distribution by Project (WBS)
Project Split FY 2026 FY 2027 FY 2028 Total
EL-89028 – Elec Cust Connections 35% $1,646,365 $1,709,490 $1,774,636 $5,130,491 EL-98003 – Elec Sys Improvement 35% $1,646,364 $1,709,489 $1,774,636 $5,130,489 EL-21001 – Foothills Rebuild 6% $800,000 $0 $0 $800,000 FO-10000 – Fiber Cust Connections 3% $149,670 $155,408 $161,331 $466,409 FO-10001 – Fiber Sys Improvement 6% $299,339 $310,816 $322,661 $932,816 FO-24000 – Fiber-to-the-Premises 15% $2,200,000 $0 $0 $2,200,000 Total 100% $6,741,738 $3,885,203 $4,033,264 $14,660,205
ENVIRONMENTAL REVIEW
The on-call work contemplated under this contract is either categorically exempt from the California Environment Quality Act (CEQA) under California Code of Regulations Title 14, sections 15301 (repair or maintenance of existing facilities), 15302 (replacement or reconstruction of existing facilities) and/or 15303 (new construction or conversion of small structures); additionally, for work related to City’s Fiber to the Premises (FTTP) project, 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.
ATTACHMENTS:
Attachment A: MPNexlevel Contract, C26193446
APPROVED BY:
Alan Kurotori, Director of Utilities
Staff: Terry Crowley, Assistant Director of Utilities, Electric Engineering and Operations