City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Public Works
Meeting Date: October 20, 2025
Report #:2508-5114
TITLE
Approval of an Increase of Construction Contingency for Contract No. C24189237 with SAK Construction, LLC in the amount of $1,000,000, funded by the Wastewater Treatment Enterprise Fund for the Joint Intercepting Sewer Rehabilitation (Phase 1) Project (WQ-24000), and Approval of Addendum 13 to the Basic Agreement Between Mountain View, Los Altos, and Palo Alto for the Acquisition, Construction, and Maintenance of a Joint Sewer System to Increase the Maximum Authorized Project Funding of $8.9 million to $12.6 million; CEQA Status – Exempt under CEQA Guidelines Section 15301 (Repairs to Existing Facilities)
RECOMMENDATION
Staff recommends that the City Council:
1. Approve an increase in construction contingency for Contract No. C24189237 with SAK Construction, LLC in an amount not to exceed $1,000,000, for a total contract contingency amount not to exceed $3,534,770 for the Joint Intercepting Sewer Rehabilitation (Phase 1) Project (WQ-24000); and
2. Authorize the City Manager, or their designee, to execute Addendum No. 13 to the Basic Agreement between the City of Palo Alto, the City of Mountain View, and the City of Los Altos for the Acquisition, Construction, and Maintenance of a Joint Sewer System to increase the maximum authorized funding for the Joint Intercepting Sewer Rehabilitation (Phase 1) Project (WQ-24000) from $8.9 million to $12.6 million.
EXECUTIVE SUMMARY
Since 1968, the Cities of Palo Alto, Mountain View, Los Altos, and Los Altos Hills have shared rights to the Palo Alto Regional Water Quality Control Plant’s (RWQCP) treatment capacity and costs under a longstanding Basic Agreement. Under this framework, the City of Palo Alto manages capital projects including the Joint Intercepting Sewer Rehabilitation (Phase 1) Project, which addresses critical structural deterioration in a 72-inch trunk sewer that conveys
wastewater flows from Mountain View, Los Altos, Los Altos Hills and a portion of Palo Alto, which together comprise more than half of the influent to the RWQCP.
In December 2023, City Council approved Addendum No. 12 to the Basic Agreement, which established a maximum authorized project funding of $8.9 million, and concurrently awarded a $7,347,700 construction contract with SAK Construction, LLC. and approved a 10% construction contingency of $734,770.
During construction, unforeseen site conditions, contractor sequencing challenges, and necessary design clarifications required multiple change orders that exhausted the original contingency. In August 2025, City Council approved an increase of $1.8 million in contingency to allow isolation and evaluation of a major junction structure at the RWQCP.1 After evaluation and testing, two of the gates used to control wastewater flows to the RWQCP were corroded beyond repair and required full replacement. Based on the construction schedule associated with these gate replacements, staff anticipates additional costs of approximately $1,000,000 for extended time and contract close-out. Staff recommends increasing the contingency for Contract No. C24189237 with SAK Construction, LLC. by $1,000,000, bringing the total authorized contingency to $3,534,770 and the total potential contract not-to-exceed amount to $10,882,470.
The total project costs, including project delivery costs, are now projected to reach up to $12.6 million. Addendum No. 13 is required to increase the maximum authorized project funding accordingly and update partner funding obligations. This project is critical to RWQCP operations, as this junction structure conveys flows from all six partner agencies, and staff must retain the ability to isolate influent flows to ensure the integrity and reliability of plant infrastructure.
BACKGROUND
The Joint Intercepting Sewer (JIS) is a 72-inch diameter reinforced concrete trunk sewer constructed in 1972 that conveys wastewater from Mountain View, Los Altos, Los Altos Hills, and a portion of Palo Alto, representing more than half of the influent flow to the RWQCP. The JIS extends approximately 9,000 feet parallel to Highway 101, through the Baylands Nature Preserve and along the closed City landfill, before discharging into the RWQCP. Other sewer trunklines conveying wastewater to the RWQCP are maintained separately by the City of Palo Alto Utilities Department, Stanford University, and the East Palo Alto Sanitary District, and are not included within the scope of this Project.
A 2020 field investigation, which included closed-circuit television, sonar, and visual inspection, revealed corrosion, cracks, exposed rebar, and other structural defects. Based on those 1 City Council, August 11, 2025; Agenda Item #10; SR #2505-4733 https://portal.laserfiche.com/Portal/DocView.aspx?id=212556&repo=r-704298fc&searchid=04bc1591-7a68-4621- 94d3-b6f203e01141
findings, the highest-priority 2,364-foot section of pipe was selected for rehabilitation as Phase 1 of the JIS Rehabilitation Project.
On May 16, 2022, Council approved a contract with Jacobs Engineering Group for design services.3 On December 11, 2023, City Council approved Addendum No. 12 to the Basic Agreement between Palo Alto, Mountain View, and Los Altos, which set a maximum authorized project funding of $8.9 million, authorized execution of a construction contract with SAK Construction, LLC in the amount of $7,347,700 with a 10% contingency of $734,770, and amended the construction management contract with Tanner Pacific, Inc.4 Construction began in winter 2024 using cured-in-place (CIPP) lining to rehabilitate the designated section of pipe. During construction, the contractor encountered unforeseen site conditions, including difficult access, bypass pumping complications, obstructions not identified during pre-construction investigations, as well as contractor schedule and sequencing challenges. These issues caused delays, required multiple change orders, and pushed field activities into the 2025 dry season. On June 9, 2025, City Council approved amendments to related contracts with Jacobs Engineering Group, Inc., Tanner Pacific, Inc., and Carollo Engineers, Inc. to support continued engineering and construction management services through the extended schedule.5
To complete the final portion of the rehabilitation, the contractor installed a partition plate to isolate wastewater flow at Junction Box No. 0 (JB-0), a 25-foot-deep concrete structure that receives the 72-inch and 42-inch sewer pipelines before discharging into the RWQCP. After installation of the partition plate, a suspected bottom slab failure at JB-0 was discovered, preventing completion of the remaining pipelining segment. At that time, additional unforeseen work at JB-0, including deteriorated gates that isolate influent flows to the RWQCP’s pump stations, required extended bypass operations, structural evaluation, and design of corrective measures. To address these conditions, on August 11, 2025, City Council approved an increase to the construction contingency in the amount of $1,800,000, for a total contingency not-to- exceed $2,534,770.6
ANALYSIS
C24189237 Construction Contract with SAK, LCC Additional Contingency 3 City Council, May 16, 2022; Agenda Item #7; SR #14164, https://portal.laserfiche.com/Portal/DocView.aspx?id=59483&repo=r-704298fc&searchid=a6f7c657-de00-4160- 95a6-a70fb8afcd04
4 City Council, December 11, 2023; Agenda Item #2; SR #2308-1879, https://portal.laserfiche.com/Portal/DocView.aspx?id=69362&repo=r-704298fc 5 City Council, June 9, 2025; Agenda Item #11; SR #2504-4519, https://portal.laserfiche.com/Portal/DocView.aspx?id=182832&repo=r-704298fc&searchid=57c29364-e791- 4ebab05b-a0b2abdf9b23
6 City Council, August 11, 2025; Agenda Item #10; SR #2505-4733, https://portal.laserfiche.com/Portal/DocView.aspx?id=212556&repo=r-704298fc&searchid=b483acf8-dc35-49c9- a95a-79d5f754ddd1
During the initial inspection and testing at JB-0, staff determined that interior concrete coating had deteriorated, particularly in the upper half of the box where surfaces are exposed to a corrosive atmosphere. Further inspection and testing of concrete cores revealed that the coating had failed in most areas throughout JB-0 and that upper concrete surfaces have experienced acid attack typical of wastewater conveyance systems. Additionally, these inspections identified that two existing gates that control the flow into the RWQCP’s influent pump stations were severely corroded and required replacement. The RWQCP’s On-Call Emergency Construction contractor mobilized to enter JB-0 to determine if any repair work could be done to salvage the gates, but corrosion was so advanced that further work risked rendering the gates inoperable. Although the additional contingency authorized on August 11, 2025 anticipated the cost of inspections and recoating, subsequent investigation confirmed that full gate replacement was necessary.11
Procurement and installation of the new gates will be performed under the RWQCP’s On-Call Emergency Construction contract. However, associated work inside JB-0, including gate manufacturing and installation, requires that a section of the temporary bypass system used during the main relining phase of the Project remain in operation to keep JB-0 isolated. Because the bypass system is already installed under the SAK contract, staff recommends extending bypass operations under SAK’s existing contract. This approach reduces contractor mobilization costs and avoids duplicative future expenses associated with reinstalling temporary bypass facilities.
Based on the construction schedule for the installation of these new gates, staff anticipates that continued operation of the bypass system and related contract close-out will cost approximately $1,000,000, consisting of a $800,000 estimate to run the bypass system and $200,000 to cover any additional unforeseen work to be completed during the installation of the gates.
Staff recommends increasing the total authorized contingency for Contract No. C24189237 with SAK Construction, LLC by $1,000,000 to $3,534,770, resulting in a revised total potential not-to- exceed contract amount of $10,882,470. Funding is available in the Wastewater Treatment Fund Adjusted Capital Budget Joint Intercepting Sewer Rehabilitation (Phase 1) project (WQ- 24000). This additional contingency amount of $1,000,000 will cover the repair work of JB-0 and the operation of the temporary bypass within the RWQCP.
Addendum 13 to Basic Agreement Between Palo Alto, Mountain View and Los Altos Addendum No. 13 (Attachment A) is necessary to increase the maximum authorized project funding from $8.9 million, as established in Addendum No. 12 (approved December 2023), to a new total of $12.6 million, reflecting the updated estimated cost to complete the project.
The revised maximum authorized project funding amount incorporates:
11 City Council, August 11, 2025; Agenda Item #10; SR #2505-4733, https://portal.laserfiche.com/Portal/DocView.aspx?id=212556&repo=r-704298fc&searchid=b483acf8-dc35-49c9- a95a-79d5f754ddd1
The previously approved $1.8 million increase in construction contingency (August 2025);
The previously approved $0.8 million increase in project delivery costs for engineering and construction management services by Jacobs Engineering Group, Tanner Pacific, and Carollo Engineers (June 2025); and
The currently recommended $1.0 million increase in contingency to support continued bypass operations and contract close-out.
Staff from the partner agencies have coordinated regarding the increased costs and are recommending approval of Addendum No. 13. The cities of Mountain View and Los Altos have Addendum No. 13 scheduled for approval by their city councils on October 14, 2025. The City’s agreement with Los Altos Hills does not require separate approval for capital improvement projects. Once approved, Addendum No. 13 will formalize the updated project budget and funding obligations under the Basic Agreement. Without this addendum, the three cities would lack the necessary budget authority to complete the Project.
FISCAL/RESOURCE IMPACT
The Joint Intercepting Sewer Rehabilitation (Phase 1) Project is a cost-shared capital improvement project among the four primary partner agencies—Palo Alto, Mountain View, Los Altos, and Los Altos Hills—based on previously approved cost-sharing percentages as shown in Table B-1 of Attachment B. Certain project expenses, including bypass pumping required inside the RWQCP to complete the rehabilitation and subsequent work at JB-0, are allocated across all six partner agencies—Palo Alto, Mountain View, Los Altos, Los Altos Hills, Stanford University, and East Palo Alto Sanitary District—because the RWQCP uses the JIS to convey plant-wide internal return flows to the headworks (Table B-2 of Attachment B).
Palo Alto’s share of these expenses inside the RWQCP is estimated to be approximately 37%, and the other five agencies’ share is approximately 63%. Therefore, Palo Alto’s share of the recommended increase in construction contingency is approximately $367,000 (37%) of the $1,000,000.
Palo Alto’s overall share of the entire Project—including work both inside and outside the RWQCP—is approximately $3,141,000, or 22%, reflecting the combination of cost allocation methodologies applied to different components of the Project. Tables B-2 and B-3 in Attachment B provide detailed breakdowns of the bypass expenses inside the RWQCP and the updated not-to-exceed project costs by partner agency.
In addition, the Joint Intercepting Sewer Rehabilitation project is one of the projects that receives funding from the Cost-Sharing Agreement with Santa Clara Valley Water District Guiding Principle 5 Program funding and the increased costs to Palo Alto are therefore covered under the cost-sharing agreement.13
STAKEHOLDER ENGAGEMENT
This Project is part of the RWQCP’s major capital improvement program funded by the City of Palo Alto and its five partner agencies. The partner agencies are regularly consulted regarding both the need for and progress of wastewater treatment capital work. With respect to Palo Alto itself, the open meetings on the budget process serves as the principal vehicle for community engagement regarding new projects and associated rate impacts.
In addition, staff has coordinated with the Community Services Department and other Public Works Department staff to manage construction activities, bypass pumping, site access, and trail detours in parkland and at the closed landfill. Staff provided formal briefings to the Parks and Recreation Commission (PRC), including a February 25, 2025, presentation on construction progress and the planned closure of the Byxbee Park Western Trail between March 30, 2025, and November 30, 2025.14 On July 22, 2025, staff provided an update to the PRC via a Departmental Report.
Public communications included on-site signage and detour maps for trail closures in Byxbee Park, along with updates posted to the City’s Joint Intercepting Sewer Rehabilitation – Phase 1 Project webpage. Environmental coordination ensured wildlife-friendly fencing and related mitigations during construction. Staff also responded to public inquiries throughout the Project’s duration.
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: Addendum No. 13 to the Basic Agreement between the City of Palo Alto, the City of Mountain View, and the City of Los Altos
Attachment B: Partner Agencies Cost Share Summary for Construction (Revised October 2025) APPROVED BY:
Brad Eggleston, Director Public Works/City Engineer
13 City Council, June 3, 2024; Agenda Item #6; SR 2404-2877, https://portal.laserfiche.com/Portal/DocView.aspx?id=72164&repo=r-704298fc&searchid=5ab6f737-3e27-4d88- bfbc-4c2ecb4ad5e5
14 Parks and Recreation Commission, February 25, 2025; Agenda Item #3; SR# 2502-4115, https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=16875