City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Public Works
Meeting Date: June 1, 2026
Report #:2603-6129
TITLE
Approval of Contract Change Order No. 2 in the Amount of $1,000,000 to Contract No.
C23186274 with Monterey Mechanical Company for On-Call Emergency and Critical Construction Services at the Regional Water Quality Control Plant, for a Revised Not-To-Exceed Amount of $4,000,000, and Approval of Contract Amendment No. 1 to Contract No. S24190553 with Carollo Engineers Inc. for On-call Engineering Services at the Regional Water Quality Control Plant to Increase Compensation by $995,000 for a Revised Total Not-to-Exceed Amount of $1,250,000, and to Extend the Contract Term Through December 31, 2028; CEQA Status – Exempt Under CEQA Guidelines Section 15301
RECOMMENDATION
Staff recommends that the City Council:
1. Approve and authorize the City Manager or their designee to execute Change Order No. 2, adding $1,000,000 to Contract No. C23186274 with Monterey Mechanical Company for on-call emergency and critical construction services at the Regional Water Quality Control Plant, for a revised total not-to-exceed amount of $4,000,000 over a five year term; and
2. Approve and authorize the City Manager or their designee to execute Contract Amendment No. 1 to Contract No. S24190553 with Carollo Engineers Inc. for on-call engineering services at the Regional Water Quality Control Plant, increasing compensation by $995,000 for a revised total not-to-exceed amount of $1,250,000 and extending the contract term through December 31, 2028 for a total contract term of four and a half years.
EXECUTIVE SUMMARY
The Regional Water Quality Control Plant (RWQCP) is an essential wastewater treatment facility undergoing significant and complex rehabilitation to modernize aging infrastructure and ensure continued regulatory compliance and service reliability. RWQCP treats wastewater from six regional partner agencies, including the City of Palo Alto.
The City relies on two on-call contracts to address urgent construction needs and critical engineering support. These on-call contracts enable the efficient execution of required work, avoiding the delay and processing of individual contracts and the need to familiarize new contractors with each project.
The City’s on-call construction contract with Monterey Mechanical Company (MMC), originally approved for $1.5 million in 2023 and increased by $1.5 million in 2025, has been heavily utilized to respond to equipment failures, infrastructure deterioration, and emergency repair needs. MMC has completed four work orders and is actively completing two more, with total expenditure and commitments of approximately $2.8 million to date. Similarly, the on-call engineering services contract with Carollo Engineers, approved in 2024 with a maximum of $85,000 per year and a total not-to-exceed of $255,000, has been used for essential structural and process design work. Carollo has completed or is performing three task orders totaling $143,000, with an additional task order under way and a forthcoming Phase 2 effort estimated at $400,000. Together, current and anticipated engineering needs total approximately $540,000, exceeding the existing contract limits. Additional contract authority is required to ensure continuity of critical construction and engineering support for RWQCP operations.
BACKGROUND
The RWQCP is a wastewater treatment facility serving Palo Alto, Mountain View, Los Altos, East Palo Alto Sanitary District, Stanford, and Los Altos Hills. Much of the plant’s infrastructure is aging and requires ongoing repairs and rehabilitation to maintain reliable operations and regulatory compliance.
On-Call Emergency and Critical Construction Services
Following a competitive bid, the City executed a $1.5 million on-call construction contract with Monterey Mechanical Company (MMC) in March 2023, with an additional $1.5 million approved in May 2025 due to significant emergency repair needs.1 MMC has completed four work orders and is currently performing two additional work orders addressing high-priority failures and deteriorated infrastructure.2,3 Total expenditures and commitments under this contract are approximately $2.8 million to date.
1 City Council, March 6, 2023; Agenda Item #5; SR #2212-0703 https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=2302&dbid=0&repo=PaloAlto&searchid=4614e017- 4da3-4c55-8250-863be8f1606c
2 City Council, May 5, 2025; Agenda Item #9; SR #2502-4128 https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=6085&dbid=0&repo=PaloAlto&searchid=5faafc3b- 72e0-4c8c-8f8c-ec4c514e442c
3 City Council, October 20, 2025; Agenda Item #5; SR #2508-5114 https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=83645&dbid=0&repo=PaloAlto On-Call Engineering Services
Following a Request for Proposal process conducted in June 2024, the City executed an on-call engineering services contract with Carollo Engineers with a maximum of $85,000 per year and a total not-to-exceed amount of $255,000 through 2027. Carollo has completed or is performing three task orders totaling $143,000, with an additional task order underway and a forthcoming Phase 2 design effort estimated at $400,000. Including anticipated work, total engineering needs are approximately $540,000, exceeding the current contract limits.
ANALYSIS
System failures at the RWQCP require immediate, specialized response due to the complexity and critical nature of the operations. Some failures require the use of heavy construction equipment and the resources of a licensed contractor. In these cases, licensed contractors are required to provide on-call emergency and critical construction services. As part of its ongoing maintenance strategy, the City has relied on on-call emergency contracts since 1997. Along with ongoing capital improvements to replace aging infrastructure, this type of contract has been a vital component of keeping the RWQCP in compliance with federal, state, and local regulations.
To prepare for another critical or emergency situation and because there are still approximately two years remaining on this current on-call construction contract, staff recommends that City Council approve $1,000,000 in additional funds to be available through the contract end date of March 15, 2028, for a new contract total of $4,000,000. A new contract for on-call construction services will be solicited in late 2027.
Additionally, to support a streamlined process for implementing specialized studies and in- house process improvement projects, the RWQCP has used on-call engineering services for over a decade. The RWQCP has five in-house engineers who support various capital improvement projects, planning efforts, and operations and maintenance, as needed. Typically, the RWQCP utilizes an engineering firm with technical expertise and capabilities to provide design services for these projects, while plant engineers serve as project managers. Additionally, the contract may support specialized HVAC repair and replacement design services necessary to maintain regulatory compliance and operational continuity within critical facilities such as the laboratory.
Since there is over a year remaining on this current on-call engineering services contract, staff recommends that City Council approve additional funds totaling $955,000 be available through the contract end date of June 30, 2027. The $995,000 is added to the existing contract of $255,000, for a new contract total of $1,250,000, and eliminating the yearly cap of $85,000 per contract year that restricts the amount of design work completed in a fiscal year. Furthermore, the contract is recommended to be extended for an additional year and a half through December 31, 2028, at the anticipated construction completion for Task Order 3. This will allow the RWQCP to leverage the existing on-call engineer’s knowledge to support project consistency and efficiency. A new, three-year contract for on-call engineering services will be solicited in early 2027.
For context, the Sunnyvale Water Pollution Control Plant utilizes four on-call engineering services contracts totaling $1,900,000 over four years (2022 - 2026) with an option to extend an additional year.7 This equates to a yearly average of $475,000 over four years or $380,000 over five years, if the contract is extended. Sunnyvale’s on-call engineering services agreements are utilized in the same manner as the RWQCP; however, the higher contract amount enhances their ability to perform the design services needed. Increasing the on-call engineering contract value will align the RWQCP with nearby treatment plants and funding authorization, while improving the efficiency of related projects.
FISCAL/RESOURCE IMPACT
The recommendations in this staff report will approve a change order increasing the authorized contract amount with MMC and will also amend Carollo’s contract. Sufficient funding is available within the Wastewater Treatment Fund Adopted Fiscal Year 2026 Capital Budget Plant Repair, Retrofit, and Equipment Replacement capital project (WQ-19002).
This project utilizes a multi-year, multi-contract funding approach. Projected expenditures are incorporated into the RWQCP’s long-range financial forecast to determine the revenue requirements for partner agencies in future fiscal years. RWQCP treats combined wastewater from Palo Alto, Los Altos, Los Altos Hills, Mountain View, Stanford University, and East Palo Alto Sanitary District (collectively, the partners). Palo Alto’s share of this project is approximately 37%, and the other five agencies’ share is approximately 63%, based on the volume and strength of wastewater contributions of each partner.
The Fiscal Year 2026 budget for WQ-19002 approved by Council is $7.9 million. The contracts listed in Table 1 represent some major components of the project and are encumbered across multiple fiscal years, with the expenditures billed in accordance with partner agreements.
Table 1: Examples of Major Projects funded from WQ-19002 Project Description Total Cost Palo Alto Share Estimated Time 12 kV Electrical Distribution8 $12.3 million $4.6 million* FY2025 – FY2027 Long Range Facilities Plan9 $2.7 million $1.0 million FY2025 – FY2027 On-call Emergency and Critical
Construction
$3.0 million
($4.0 million)
$1.1 million
($1.48 million)
FY2024 – FY2028
7 Sunnyvale City Council, May 6, 2025; Agenda Item #1.E; File #25-0423 https://sunnyvaleca.legistar.com/LegislationDetail.aspx?ID=7361254&GUID=5023E7FC-C29C-4450-8CC2- 7F9BFB7750AC&Options=&Search=
8 City Council, October 28, 2024; Agenda Item #5; SR #2408-3389 https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=6505&dbid=0&repo=PaloAlto 9 City Council, June 10, 2024; Agenda Item #6; SR #2405-2993 https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=6487&dbid=0&repo=PaloAlto Table 1: Examples of Major Projects funded from WQ-19002 Project Description Total Cost Palo Alto Share Estimated Time On-call Engineering Services
$0.26 million
($1.25 million)
$0.09 million
($0.46 million)
FY2025 – FY2027
(2028)
*Palo Alto’s share of the project is being reimbursed by Valley Water by the Guiding Principle Five (GP5) grant.13 If additional funds are required, they will be subject to Council approval through the City’s standard appropriation process.
Recommendations included in this staff report are shown in parentheses for reference.
STAKEHOLDER ENGAGEMENT
This project is part of the RWQCP’s minor capital improvement program funded by the City of Palo Alto and its five partner agencies who use the RWQCP for wastewater treatment. The five partner agencies are regularly updated on both the need for and progress of wastewater treatment capital work. Updates are provided annually and at other periodic meetings to inform partner agency staff on the major capital improvement program. With respect to Palo Alto, public meetings associated with the City’s budget process serve as the primary venue for engaging the community on new projects and associated rate impacts.
ENVIRONMENTAL REVIEW
Council action on this is exempt from review under the California Environmental Quality Act pursuant to CEQA Guidelines Section 15301 (b), which includes maintenance of existing publicly owned wastewater facilities involving negligible or no expansion in use.
ATTACHMENTS
Attachment A: Contract C23186274, Change Order No. 2 with Monterey Mechanical Company Attachment B: Contract S24190553, Amendment No. 1 with Carollo Engineers Inc.
APPROVED BY:
Brad Eggleston, Director Public Works/City Engineer
13 City Council. June 3, 2024; Agenda Item #6; SR #2404- 2877 https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=6462&dbid=0&repo=PaloAlto