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City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Utilities
Meeting Date: October 20, 2025
Report #:2505-4735
TITLE
Approval of Contract Number C25194217 with Veteran Pipeline Construction in the Amount of $8,962,204 for the Gas Main Replacement Project 25 (GS-15000) in the Duveneck/St. Francis, Leland Manor, Midtown, and Palo Verde neighborhoods; Authorization for the City Manager to Negotiate and Execute Related Change Orders Not-to-Exceed of $896,221 for a Total Not-to- Exceed Amount of $9,858,425; NEPA status - B5.4 categorical exclusion; CEQA status — Exempt under CEQA Guidelines 15302 (Replacement or Reconstruction of Existing Facilities).
RECOMMENDATION
Staff recommends that the Council:
1. Approve and authorize the City Manager or their designee to execute contract C251942171 with Veteran Pipeline Construction in an amount not-to-exceed $8,962,204 for the Gas Main Replacement 25 project (GS-15000) in the Duveneck/St. Francis, Leland Manor, Midtown, and Palo Verde neighborhoods.
2. Approve and authorize the City Manager or their designee to negotiate and execute one or more changes to the contract with Veteran Pipeline Construction for related additional but unforeseen work, which may develop during the project, the total value of which shall not exceed $896,221 or 10% of the contract amount.
The total authorized not-to-exceed expenditure amount is $9,858,425 which includes the contract base amount of $8,962,204 and a 10% contingency amount of $896,221. This Project was selected for Federal grant funding.
EXECUTIVE SUMMARY
The Gas Main Replacement (GMR) 25 project (GS-15000) is part of the Council-approved Capital Improvement Program (CIP) designed to ensure reliable gas service for the City of Palo 1 Veteran Pipeline Construction, Gas Main Replacement Project 25 Contract No. C25194217 https://www.paloalto.gov/files/assets/public/v/1/agendas-minutes-reports/agendas-minutes/city-council- agendas-minutes/2025/october-20/veteran-pipeline-construction-gas-main-replacement-project-25-contract-no.- c25194217.pdf
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Alto residents and customers. The project targets the replacement of polyvinyl chloride (PVC) and black-wrapped steel pipe (BWP) distribution main and service pipes that are near or past their operational life expectancy with polyethylene (PE) pipelines. Work will be done in the Duveneck/St. Francis, Leland Manor, Midtown, and Palo Verde neighborhoods. The City anticipates starting construction in January 2026 and completing construction in August 2027.
The Gas Main Replacement 25 project (GS-15000) project was selected by the Department of Transportation (DOT) for the Natural Gas Distribution Infrastructure Safety and Modernization (NGDISM) Federal Grant Program. The Federal grant program was established to help community-owned utilities improve the safety and reliability of their natural gas pipeline systems. The grant is a reimbursable grant at 100% of approved project cost.
BACKGROUND
Over time, PVC pipe material becomes embrittled and is susceptible to cracking during excavation and earth movements, which result in gas leaking from the pipelines. Steel pipe material has an increased chance of becoming corroded and eventually leaking when isolated from the cathodic protection system or receiving low cathodic protection current. Repairs on PVC and steel pipelines require specialized tooling and can be very time-consuming, disruptive, and difficult. PVC and steel pipelines are typically replaced with polyethylene (PE) pipelines, which have greater elastic properties and do not require cathodic protection.
Replacing the gas distribution system with PE will enhance the reliability of the gas distribution system, make the system more resilient against corrosion and earth movements, eliminate potential leaks, reduce maintenance costs, and extend the useful life of the gas distribution system. In addition, unlike PVC gas main and services, the new PE pipelines will be installed with a metallic tracer wire, which increases the pipeline locating accuracy and reduces pipe damage during excavation.
There are six active Grade 3 gas leaks in the Project Area, four along Ross Road and two on Northampton Drive. Grade 3 leaks are non-hazardous at the time of detection and can be monitored until repaired. The replacement of pipelines on this project will eliminate these gas leaks. Replacement of PVC and corroded steel distribution main and services is required to maintain the City's planned CIP replacement schedule and minimize greenhouse gas emissions from leaking or damaged PVC and steel pipelines, having a positive impact on the environment.
ANALYSIS
Project Description
The work to be performed under this contract C25194217 is to replace approximately 25,500 linear feet of natural gas mains and services with polyethylene (PE) pipe in the Duveneck/St.
Francis, Leland Manor, Midtown, and Palo Verde neighborhoods (see Attachment B). The main sizes being installed are 2-inch, 4-inch, and 6-inch in diameter and the associated installation of services and reconnects are 1-inch and 2- inch in diameter. The PVC gas facilities were 7 4
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installed in the mid 1970’s and the steel gas facilities were installed in the 1920’s through the early 1950’s. These sections of main were prioritized to further the replacement of PVC pipelines and address leak prone steel pipelines in the gas system. Portions of this project replace mains installed on major streets and take a proactive approach to minimize impacts to the community in the event of a leak.
Notifications and Work Restrictions
The city anticipates starting construction in January 2026. The construction hours for this project are 8:00 AM to 4:00 PM, Monday through Friday. Streets with non-standard construction hours start at 9:00 AM and end at 4:00 PM, which applies to a small section of work on Middlefield Road.
Contractor must schedule work to avoid working on City-specified school routes during the first week of school in August of 2026 and 2027. The Contractor will coordinate with the property owners, apartment managers, and businesses throughout the project scope to facilitate the installation of the new gas pipelines and minimize disruption to businesses. Prior to construction, there will be coordination and delivery of project notices and maps to each resident and business a minimum of 30 days prior to beginning the project. Project information will be maintained on the City’s website too.
Bid Process
On June 26, 2025, the City posted a notice inviting formal bids (IFB) for the GMR 25 project on the City's electronic procurement system, OpenGov. Bids were due July 31, 2025. This included an additional week at the request of the contractors, to allow sufficient time to review the project bid documents and federal grant requirements, the City agreed.
Bid Name/Number Gas Main Replacement Project 25
(GS-15000)
Proposed Length of Project 386 working days
Number of Venders notified through OpenGov 3,555
Number of Builder’s Exchanges notified through OpenGov 4 Number of Bid Packages Downloaded by Venders 51
Total Days to Respond to Bid 35
Pre-Bid Meeting? Yes (Mandatory)
Number of Venders at Pre-Bid Meeting 16
Number of Bids Received: 4
Bid Price Range From a low of $8,962,203 to a
high of $15,165,184
*Bid summary provided (see Attachment C).
Staff reviewed the submitted bids, and all four bids were responsible and responsive. Staff recommend Veteran Pipeline Construction be awarded the contract as the low bidder listed 7 4
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in the attached Bid Summary (see Attachment A). The contingency amount of $896,221, which equals 10% of the total contract, is requested for additional unforeseen work that may develop during the project. Additional work is common with construction projects because during construction there may be previously unknown obstructions and ground conditions that require changes in how construction will proceed, leading to change orders that may create additional costs.
Staff confirmed with the Contractor's State License Board that Veteran Pipeline Construction and their listed subcontractors have active licenses on file. Veteran Pipeline Construction has never worked on a city project, but Staff checked their references for previous work performed and found no significant complaints. Staff also confirmed that Veteran Pipeline Construction and their listed subcontractors are registered and in good standing with the Department of Industrial Relations (DIR). After issuing the Notice of Intent to Award the City held a preliminary kickoff meeting on August 27, 2025, with Veteran Pipeline to discuss City’s process, staff roles, and Veteran Pipeline Construction approach to the project.
FISCAL/RESOURCE IMPACT
Funding is available in the Gas Main Replacement 25 project (GS-15000) as part of the Fiscal Year 2026 Adopted Gas Fund Capital Budget.
Staff applied for a Department of Transportation (DOT); Pipeline and Hazardous Materials Safety Administration (PHMSA) grant in FY2023 for GS-15000 (GMR25) and was selected to receive a portion of funding in the Natural Gas Distribution Infrastructure Safety and Modernization (NGDISM) Federal Grant Program. The grant is a reimbursable grant at 100% of approved project cost beginning July 2, 2024 (PHMSA’s pre-award letter – see Attachment D).
Summary of Project Costs for GMR 25 Project (GS-15000)
Pre-Design/Design Costs prior to the Pre-award (July 2nd, 2024) $17,632 Pre-Design/Design Costs after the Pre-award (July 2nd, 2024) to signed Grant award (July 31st, 2025)
$199,993
Material (gas regulators and gas meters)) $213,317
Construction Costs (Veteran Pipeline Construction Bid) $8,962,204 10% Contingency $896,221
Staff Time (Includes Engineering, Operations, & Inspection) $1,739,662 Trench Cut Fees $970,000
Soil Compaction Testing $20,000
Total Project Cost $13,019,029
PHMSA Approved Grant Funding $16,519,8793
Anticipated Remaining Grant Funding After Total Project Cost $3,500,850 GS-15000 Budget Available $16,728,324
3 PHMSA Approved Grant Funding https://www.usaspending.gov/award/ASST_NON_693JK32540006NGDI_6957 7 4
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The size of this project significantly exceeds the City's in-house construction resources, making it necessary to contract out the work.
During the grant application process, Staff estimated that the total cost of the GMR25 construction project would be $16,474,416 and the cost to purchase methane reducing equipment would be $45,463 for a total estimate of $16,519,879. PHMSA reviewed the application and supporting documentation and approved the total grant amount. The construction portion of the grant required a National Environmental Policy Act (NEPA) review and PHMSA issued a Tier 2 Environmental Assessment pre-award authorization (see Attachment D) of $240,768 on July 2 nd, 2025 for staff time dedicated for work related to the National Environmental Policy Act (NEPA) application. This amount was authorized to be charged against the grant prior to the execution of the grant agreement between the City and PHMSA. The grant agreement5 was executed on April 30, 2025 and all costs incurred from this date forward will be charged against the grant.
The selected lowest bidder, Veteran Pipeline Construction (VPC), submitted a bid of $8,962,204 which is $3,699,168 lower than the City’s engineering estimate of $12,661,372.
An amount of $12,661,372 has been allotted from the NGDISM grant fund to Gas Main Replacement 25, reflecting the City’s engineering estimate. The difference of $3,699,168 between Veteran Pipeline Construction’s bid and the City’s engineering estimate reflects VPC’s accelerated schedule of project completion and the efficient approach to construction compared to the past Gas Main Replacement Projects. The anticipated remaining $3,699,168 in grant funding cannot be used to increase the project size, as the GMR25 project has already been processed through a NEPA categorical exclusion. Therefore, these funds are not available for additional pipeline replacement projects.
The City will submit a request, for approval by PHMSA, to purchase additional methane reducing equipment.
STAKEHOLDER ENGAGEMENT
Utilities infrastructure work has been coordinated with Public Works street paving activities to comply with City’s pavement moratorium and to avoid cutting into streets that have been paved within past 5 years. Staff’s GMR25 project communications will include project notifications mailed to residents and business within the vicinity of the three project areas, in the Duveneck/St. Francis, Leland Manor, Midtown, and Palo Verde neighborhoods at least 30 days prior to the commencement of work. Veteran Pipeline Construction will distribute project notifications to each property a minimum of 15 days and again 24 hours prior to beginning work. No Parking signs will be posted a minimum of 72 hours prior to any construction activities. A link to the city website for the GMR 25 project will be included in the mailed project notifications. Additional communications will be distributed to the subscribers through the city online social media accounts using Twitter, Facebook, Instagram, and 5 PHMSA Grant Agreement https://www.paloalto.gov/files/assets/public/v/1/agendas-minutes-reports/agendas- minutes/city-council-agendas-minutes/2025/october-20/phmsa-grant.pdf 7 4
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Nextdoor. The construction is expected to commence in January 2026 and be completed by August 2027.
ENVIRONMENTAL REVIEW
The project received a National Environmental Policy Act (NEPA) Categorial Exclusion B5.4 7 for repair or replacement of pipelines and is categorically exempt from the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section 15302, replacement or reconstruction of existing utility systems or facilities.
ATTACHMENTS
Attachment A: GMR25 Project Map
Attachment B: GMR25 Bid Summary
Attachment C: GMR25 Tier-2 EA Pre-Award Authorization
APPROVED BY:
Alan Kurotori, Utilities Director
Staff: Kim Rasay, Associate Engineer
7 NEPA Categorial Exclusion B5.4 https://www.phmsa.dot.gov/sites/phmsa.dot.gov/files/2024-12/PHMSA-Final-CE- Palo-Alto-Ver4-approved.pdf