City of Piedmont
COUNCIL AGENDA REPORT
DATE: September 6, 2022
TO: Mayor and Council
FROM: Sara Lillevand, City Administrator
SUBJECT: Consideration of a Tender Agreement with ARCH Insurance Company and Bay Construction Co. for Bay Construction to Perform the Contract for the Highland Guilford Steps and Handrail Project; Approval an Overall Construction Budget of $388,000, and a Determination that the Project is Exempt from the Requirements of the California Environmental Quality Act
RECOMMENDATION
By a single motion, take the following actions regarding the Highland Guilford Steps and Handrail Project:
1. Approve a Tender Agreement with ARCH Insurance Company and Bay Construction Co. for Bay Construction to perform the Contract for the Highland Guilford Steps and Handrail Project, based on Bay Construction’s submitted bid of $310,000 and ARCH Insurance Company’s agreement to pay the $84,536 increase over the originally approved HM Construction bid for the project.
2. Approve the overall Estimated Construction Budget of $388,000, which includes the construction cost, a 10% contingency of Bay Construction’s bid and monies for construction management, inspection, and testing.
3. Determine the project to be exempt from the requirements of the California Environmental Quality Act (CEQA).
BACKGROUND
In Piedmont Park, the Highland/Guilford steps are located at the southern entrance to the Cherry Walk and the Tea House. The revised configuration of the pathway and steps will meet current building code and ADA requirements for exterior steps and provide adequate exterior lighting in a highly utilized part of Piedmont Park. The project design was presented to the Park Commission on January 6, 2021, and was brought before the City Council on September 7, 2021, where Council gave authorization to publicly bid the project. The previously approved design remains unchanged.
This project was originally awarded at the November 15, 2021 Council meeting to HM Construction, Inc., based on their low bid of $225,464. At that time, Council approved an overall construction budget of $295,010. The City obtained a signed contract with HM Construction in December 2021 and issued a notice of award with a construction start date in 2 early January 2022. Despite City staff’s best efforts, HM Construction did not mobilize to start the project in January 2022 and they became unwilling or unable to provide communication to City staff. After several weeks without construction progress and numerous attempts to communicate with HM Construction, in consultation with the City Attorney’s Office, City staff proceeded with termination of the construction agreement per the terms of our signed contract, and the agreement with HM Construction was officially terminated in April 2022. The contractor did not contest the termination or attempt to repair the breach of contract. No work was performed by HM Construction, nor was any money paid to HM Construction.
Immediately following the termination of HM Construction, City staff filed a claim with ARCH Insurance Company (ARCH), the insurance and bonding surety company that provided the construction performance bond for HM Construction. A performance bond is a document the City requires as part of the construction agreement to protect us in the event a contractor fails to complete its contractual obligations. The surety has several alternatives to comply with its obligation under the performance bond, and in this case ARCH found another qualified contractor, Bay Construction, for the City to hire to complete the work at no additional cost to the City. The City is still responsible for the original HM Construction bid amount of $225,464, but ARCH is responsible for the additional costs of Bay Construction’s bid. Since Bay Construction’s bid is $310,000, ARCH will pay the additional $84,536 amount to the City under the Tender Agreement.
Re-Bid Process
The project was originally publicly bid in accordance with City Ordinances and the Public Contract Code. The original bids were opened on October 6, 2021 and eight bids were received. Bids ranged in price from $225,464 to $459,300. In order to perform under the performance bond and obtain the services of a qualified construction contractor that could complete the project, ARCH re-bid the project in July and August, 2022 and circulated the bid documents to the seven previous bidders. The low bid was Bay Construction, with a bid amount of $310,000. City staff believes Bay Construction is qualified to perform the project work, and therefore is willing to accept Bay Construction as the replacement contractor. Bay Construction will provide its own bonds and insurance, and ARCH will pay the City the difference between HM Construction’s original bid and Bay Construction’s new bid. Except for a different schedule which City staff believes is acceptable (see below), Bay Construction has agreed to perform the work under the same terms and conditions as originally agreed by HM Construction.
Schedule of Construction
Under the Tender Agreement and accepted Bay Construction bid, Bay Construction will have 84 calendar days to complete the work. If approved, the work is estimated to start in mid to late October and be completed in early February 2023, subject to adjustment due to weather.
Agenda Report Page 2
3 FISCAL CONSIDERATIONS
Project Costs
Based on ARCH and Bay Construction’s Tender Agreement, staff is proposing the following overall budget (original budget also shown for reference):
11/15/2021 9/6/2022
Construction Costs $225,464 $310,000
Construction Contingency (10%) $22,546 $31,000
Estimated Construction Management & Inspection $40,000 $40,000 Estimated Testing Cost $7,000 $7,000
TOTAL ESTIMATED CONSTRUCTION
BUDGET $295,010 $388,000
Project Funding
Thanks to the generosity of the Piedmont Beautification Foundation who exceeded their original $50,000 pledge to this project, the proposed Facilities Capital Fund expenditure will be approximately $23,000 less than originally allocated.
11/15/2021 9/6/2022
Facilities Capital Fund $240,010 $216,464
Donation Piedmont Beautification Fund $50,000 $82,000
Piedmont Garden Club $5,000 $5,000
ARCH Surety $0 $84,536
TOTAL PROJECT FUNDING $295,010 $388,000
ENVIRONMENTAL REVIEW
This project is exempt from the California Environmental Quality Act pursuant to CEQA Guidelines section 15301(c), in that the project concerns the repair of existing facilities such as “…sidewalks, gutters, bicycle and pedestrian trails, and similar facilities (this includes road grading for the purpose of public safety, and other alterations such as the addition of bicycle facilities, including but not limited to bicycle parking, bicycle-share facilities and bicycle lanes, transit improvements such as bus lanes, pedestrian crossings, street trees, and other similar alterations that do not create additional automobile lanes).”
CITY ATTORNEY REVIEW
The City Attorney has reviewed and approved the Tender Agreement as to form and legality.
By: Daniel Gonzales, Public Works Director
John Wanger, City Engineer
ATTACHMENTS
A. Tender Agreement
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TENDER AGREEMENT
This Tender Agreement ("Agreement") is made and entered into effective ______________ ("Effective Date"), by and between the City of Piedmont ("Owner"), Arch Insurance Company, a Missouri corporation ("Surety"), and Mark Lee & Yong Kay Inc. DBA Bay Construction Co ("Contractor").
RECITALS
WHEREAS, on or about November 15, 2021, HM Construction, Inc. ("HM") entered into a written contract attached hereto as Exhibit A ("Contract") with Owner to furnish all labor and material and to perform all work for a certain work of improvement commonly referred to as Highland Guilford Steps and Handrail Project ("Project"). The “Contract” shall be deemed and defined to include all Contract Documents as set forth in Article 7 of the Contract.
WHEREAS, shortly thereafter, Surety issued payment and performance bonds (Bond Number SU 1167273) in the sum of $225,464.00, on behalf of HM, as principal, in connection with HM's work on the Project. The bonds described in this paragraph are the "Payment Bond" and "Performance Bond," respectively, and collectively are the "Bonds" and copies of the Bonds are attached hereto as Exhibit B.
WHEREAS, by letter dated April 22, 2022, Owner sent a letter informing HM that Owner was terminating HM for default. Owner subsequently demanded that Surety complete the Project.
WHEREAS, the balance of the Contract as of the Effective Date is $225,464.00 (the "Contract Balance"). Contractor has agreed to complete the Project in exchange for payment in the total amount of $310,000.00 (“Completion Cost”).
WHEREAS, Surety has agreed, and hereby agrees, to tender the Contractor to Owner, and the Owner has agreed to accept the tender of the Contractor to complete the Contract, provided that Contractor commits itself to complete the work set forth in the Contract upon the terms and conditions set forth in the Contract and as stated in this Agreement.
WHEREAS, Surety has not received any claims of subcontractors and suppliers of HM, however Surety will process such claims, if any, made pursuant to the terms of its Payment Bond.
WHEREAS, Surety is desirous of satisfying its alleged obligations in accordance with the terms and conditions of its Performance Bond.
THEREFORE, Owner, Surety, and Contractor agree as follows:
Attachment A Agenda Report Page 4
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Section 1.01 Surety agrees:
(a) Within five business days of complete execution of this Agreement, receipt of Owner’s W-9 and a physical address for Owner’s receipt of payment, to pay to Owner $84,536.00, which represents the different between the Completion Cost and the Contract Balance.
(b) To tender Contractor to Owner to effectuate the completion of the Project. (c) To pay all valid Payment Bond claims, if any, in accordance with the terms and conditions of the Payment Bond issued by Surety for the Project, and applicable law. This Agreement does not affect the terms, conditions or obligations of Surety pursuant to its Payment Bond which shall remain in full force and effect. (d) To defend, indemnify and hold Contractor and Owner harmless from and against any losses, liabilities, costs, expenses, attorneys’ fees, claims, disputes, arbitration or litigation brought or commenced by HM, or any subcontractor or supplier of HM of any tier, or any worker or union trust fund of HM, or any other third party claiming a right to payment relating to the Project for work performed prior to the Effective Date of this Agreement.
(e) To defend, indemnify and hold Owner harmless from and against any losses, liabilities, costs, expenses, attorneys’ fees, claims, disputes, arbitration or litigation or any claims of delay brought or commenced by any trade contractor, subcontractor (of any tier), or any third party arising from the default and termination of HM. Owner agrees that Surety will be allowed to investigate the validity of any such claims presented to it by the Owner pursuant to this section and prior to the Surety’s acknowledgement of any obligation owing to Owner hereunder. The Surety and Owner agree that the obligations of the Surety under this paragraph are limited by the penal sum of the Performance Bond and are not to be construed to be waived in any manner under Section 1.03.
Section 1.02 Contractor agrees:
(a) To furnish and pay for all labor, materials, tools, supplies, equipment, services, and all other things necessary to complete the Project, in accordance with the terms and conditions of the Contract, for payment of the Completion Cost. Contractor agrees it is substituted for HM in the Contract for purposes of Contract completion such that Contractor's relationship to Owner with respect to Contract completion is the same as if Contractor was the original contracting party with Owner in lieu of HM. Contractor agrees it will perform all requirements of the Contract. Provided, however, Contractor will not be responsible for the following items to the extent caused in whole or in part by HM: warranty work, latent defects, attorneys' fees or unpaid materials, suppliers, subcontractors or other bills, costs or expenses of HM. All work will be performed in a workmanlike manner and in accordance with all plans, specifications, terms and conditions of the Contract.
Attachment A Agenda Report Page 5
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(b) In addition to, and not as a replacement of or substitution for any indemnification provisions contained within the Contract, to indemnify the Owner and Surety against any and all losses, liabilities, costs, expenses and attorneys’ fees on account of any injury or claimed injury to persons or property damages incurred in respect to or arising out of the work of Contractor under the Contract and this Agreement.
Contractor agrees to indemnify the Owner and Surety against any and all claims, suits or liability on account of any act or omission of the Contractor, or of its officers, agents, employees or servants. Contractor’s indemnity obligation commences on the Effective Date. Provided, however, in no event shall Contractor be obligated to defend or indemnify Owner or Surety with respect to any losses, liabilities, costs, expenses or attorneys' fees arising from HM's performance or failures of performance under the Contract. Contractor agrees to maintain insurance of the same type and in the same amounts as required under the Contract and to cause the Owner and Surety to be named as Additional Insureds thereon. Prior to commencing work pursuant to this Agreement, Contractor agrees to deliver to the Owner and Surety a certificate of insurance showing such insurance to be in full force and effect, which policies shall provide that such insurance may not be canceled except upon ten (10) days written notice from the insurer to the Owner and Surety. Prior to commencing work pursuant to this Agreement and prior to issuing the Notice to Proceed as referenced below, Contractor agrees to deliver to the Owner all other required information and documents required under the Contract. (c) All completion deadlines applicable to Contractor are subject to the time extension provisions stated in the Contract. Without limitation to any other provisions of the Contract, Contractor will be responsible for liquidated damages as provided for in the Contract for failing to Substantially Complete (as defined in the Contract) the Project in accordance with its proposal, which is attached hereto as Exhibit C. Owner agrees to waive and release any claims for liquidated damages against Surety, HM and Contractor only to the extent that any such delays supporting a claim for liquidated damages arose during HM’s tenure on the Project or before this Agreement. (d) Payment for all sums due the Contractor for work performed pursuant to this Agreement and the Contract will come from the Owner, and Surety shall have no payment obligations to Contractor under this Agreement. The Owner shall pay Contractor in accordance with the procedures provided for under the Contract. (e) Contractor has familiarized itself with the Project, the work in place, remaining work, and the nature of the work to be performed, the availability and suitability of materials (on the site or otherwise), all required allowances, as well as the conditions of the work, Project and the site, and Contractor acknowledges that it is not relying upon any representation of the Owner, Surety or their respective agents and representatives in determining the quantity of the work remaining to be performed or the quality of the work previously performed. Except as set forth in Section 1.02 (a) above, Contractor agrees that it shall be solely responsible for full and final completion of all work required under the Contract regardless of what work was previously performed or not performed by HM or any other party.
Attachment A Agenda Report Page 6
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(f) Contractor is not relying upon any warranties or representations of the Owner or Surety, their respective agents or representatives, concerning the current status of progress on the Project including, but not limited to, what work was or was not completed by HM, any materials stored on site (if any), either as to the quantity, quality or suitability of any such material for use in the completion of construction, or any other conditions of the Project, but Contractor is relying upon its right granted by the Owner to inspect all conditions of the Project and site as of the Effective Date and to take possession and use any stored material belonging to HM in the prosecution of the work if any such material is deemed to be suitable by the Owner. Surety has provided Contractor an inventory of materials belonging to HM on hand for use in completing the Project, and Surety and Owner warrant that said materials belonging to HM can be used by Contractor pursuant to this Agreement.
(g) Contractor recognizes that Surety is, through this Agreement, acting in its capacity as surety to HM and that by executing this Agreement, Surety is not assuming any obligations for liabilities beyond those set forth in its Performance Bond and this Agreement. In the event of any breach or default in the performance by Owner, Contractor agrees to make demand and look solely to Owner. Contractor shall make no demands and assert no claims against Surety under the Bonds or this Agreement. (h) Prior to commencing work pursuant to this Agreement, Contractor will provide a Performance Bond and a Payment Bond, for its completion of this Agreement from an agreed upon surety company. The Performance Bond shall have a sum equal to 100% of the Completion Cost, and the Payment Bond shall have a sum equal to 100% of the Completion Cost. The bonds shall be in the form as set forth and required in the Contract, name the Owner as obligee, and shall comply with any other requirements set forth in the Contract.
Section 1.03 The Owner agrees:
(a) To pay Contractor the Completion Cost for the completion of the Contract using the Contract Balance and funds provided by Surety per Section 1.01(a), in accordance with the Contract and this Agreement.
(b) Surety is, through this Agreement, acting in its capacity as surety on the behalf of HM and that by executing this Agreement, Surety is not assuming any obligations for liabilities beyond those set forth in its Performance Bond and this Agreement. In the event of any breach or default in the performance by Contractor, Owner agrees to make demand and look solely to Contractor and Contractor's performance and payment bonds for the Project and any other remedies which may be available to Owner. Owner shall make no further demands and assert no further claim against Surety under the Bonds.
(c) Owner shall deliver to Surety the original Performance Bond upon execution of this Agreement, and upon such delivery, the Performance Bond shall forever become null and void for all purposes and shall have no legal effect therefrom.
Attachment A Agenda Report Page 7
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(d) Upon full execution of this Agreement by all parties hereto, and except for the obligations set forth in, created by, arising out of or reserved by this Agreement, the Owner and Surety, on behalf of their respective board, divisions, departments, successors and assigns, does hereby fully and forever release, discharge, each other, and all of their respective current and former officers, directors, fiduciaries, shareholders, parents, subsidiaries, affiliates, agents, servants, attorneys, consultants, managers, predecessors, successors, subcontractors, suppliers, assigns, employees, insurers, and co-sureties from any and all claims, rights, demands, suits, actions or causes of action, losses, costs, obligations, liabilities, expenses, debts and duties of every kind or nature, known or unknown, suspected or unsuspected, asserted or unasserted, fixed or contingent, at law or in equity, made in, arising out of or relating to (i) the Project, (ii) the Contract, and (iii) the Performance Bond, including without limitation any and all claims for interest, attorneys’ fees, costs, punitive damages, penalties, statutory penalties, whether arising in contract, tort or by statute. Owner and Surety hereby expressly waive and relinquish all rights and benefits that they may have against one another under Civil Code section 1542, related to (i) the Project, (ii) the Contract, and (iii) the Performance Bond. Section 1542 presently provides as follows:
A general release does not extend to claims which the
creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her
settlement with the debtor.
Section 1.04 All parties agree:
(a) This Agreement, including exhibits, represents the entire and integrated agreement between the parties hereto and supersedes prior negotiations representations or agreements, either written or oral.
(b) That this Agreement is solely for the benefit of the Owner, Contractor, and Surety. This Agreement does not create any rights or increase the rights of third-party beneficiaries, nor shall extend to or increase the rights of third-party claimants. (c) That Surety is entering into this Agreement and making payments as specified in this Agreement in order to satisfy its obligations as surety under the Performance Bond and the Payment Bond. Accordingly, it is expressly recognized that any payments made and costs incurred by Surety have been and are incurred to satisfy its obligations, and it is agreed that Surety’s rights to be equitably subrogated, but only as it relates to HM, for all costs and expenses incurred and/or paid in connection with its Performance Bond and its Payment Bond are unaffected by this Agreement. (d) Any notice or communication to the Owner under this Agreement shall be addressed to:
City of Piedmont
120 Vista Avenue
Attachment A Agenda Report Page 8
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Piedmont, CA 94611
(e) Any notice or communication from Owner to Surety under this Agreement shall be addressed to:
Susan D. Neff, Esq.
Senior Surety Counsel
Arch Insurance Group, Inc.
550 S. Hope Street, Suite 2600
Los Angeles, CA 90071
[email protected]
Any notice or communication to Contractor under this Agreement shall be addressed to:
Mark Lee and Yong Kay
Bay Construction Co.
4026 Martin Luther King Jr. Way
Oakland, CA 94609
Email: [email protected]
(f) That each party hereto has reviewed this Agreement, and had the opportunity to revise this Agreement. Also, its legal counsel has had an opportunity to review and revise same. . The rule of construction that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement, or any amendments or exhibits hereto.
(g) That the persons executing this Agreement on its behalf are fully authorized by the party to do so.
(h) This Agreement may be executed in multiple counterparts and by facsimile signature or scanned signature, each of which when taken together shall constitute a single document.
[Signatures on following page.]
Attachment A Agenda Report Page 9
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date.
Dated: ___, 2022 CITY OF PIEDMONT
By:
Theodora Gray King
___________________________________
Its:Mayor
Attest:
John Tulloch, City Clerk
Aproved as to Form:
Michelle Marchetta Kenyon, City Attorney
Dated: ___, 2022 ARCH INSURANCE COMPANY
By:
Susan D. Neff
Its:
Dated: ___, 2022 Mark Lee & Yong Kay Inc. DBA
BAY CONSTRUCTION CO.
By:
Its:
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EXHIBIT A
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EXHIBIT B
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EXHIBIT C
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