City Council Memorandum
TO: HONORABLE MAYOR AND CITY COUNCIL DATE: OCTOBER 6, 2026 FROM: PUBLIC WORKS DEPARTMENT WARDS: ALL
SUBJECT: AUTHORIZE THE TERMINATION OF CONTRACT FOR BID NO. 8183 TO SERVITEK ELECTRICAL INC. OF NORWALK, CALIFORNIA, FOR A CONSTRUCTION CONTRACT FOR HIGHWAY SAFETY IMPROVEMENT PROGRAM (HSIP) CYCLE 11 CITYWIDE RETROREFLECTIVE BACKPLATES AND RIGHT-TURN OVERLAP, IN THE AMOUNT OF $3,126,989 AND AUTHORIZE STAFF TO RE-BID THE CONSTRUCTION PROJECT ISSUE:
Authorize staff to terminate the existing contract for Bid No. 8183 for the construction of Highway Safety Improvement Program (HSIP) Citywide Retroreflective backplates and right-turn overlap with Servitek Electrical Inc. of Norwalk, California, in the amount of $3,126,989 for the citywide traffic safety improvement project and authorize staff to re-bid the construction project.
RECOMMENDATIONS:
That the City Council:
Authorize the City Manager, or designee, to terminate the existing construction contract for Bid No. 8183 for the construction of Highway Safety Improvement Program (HSIP) Cycle 11 Citywide Retroreflective Backplates and Right-Turn Overlap with Servitek Electrical Inc. of Norwalk, California, in the amount of $3,126,989 for the citywide traffic safety improvement project; and Direct staff to re-bid the construction project for the construction of Highway Safety Improvement Program (HSIP) Cycle 11 Citywide Retroreflective Backplates and Right-Turn Overlap.
BACKGROUND:
The purpose of the Federal Highway Safety Improvement Program (HSIP) is to achieve a significant reduction in traffic fatalities and serious injuries on all public roads. Agencies are eligible to receive up to $10 million through this program. The HSIP provides federal funding for the implementation of Proven Safety Countermeasures identified by the Federal Highway Administration (FHWA).
On May 9, 2022, Caltrans announced the HSIP Cycle XI Call for Projects with applications due September 12, 2022. HSIP Cycle XI included approximately $210 million in federal grant funding. Projects were selected based on a Benefit Cost Ratio Analysis, with some projects funded through set-aside programs. The maximum award available to an individual agency was $10 million.
On September 6, 2022, the City Council authorized the submittal of a traffic safety grant application to Caltrans for citywide signalized intersections and roadway safety improvements as well as pedestrian and bicycle safety improvements.
On March 9, 2023, Caltrans notified the Public Works Department that the City’s HSIP Cycle 11 grant application had been successful. On May 2, 2023, the City Council authorized the Public Works Department to accept the HSIP Cycle 11 grant funding through Caltrans.
On February 4, 2026, the City awarded Bid No. 8183 for the construction of the Highway Safety Improvement Program (HSIP) Cycle 11 Citywide Retroreflective Backplates and Right Turn Overlap to Servitek Electrical Inc. of Norwalk, California, in the amount of $3,126,989 plus a 10% contingency, for the citywide traffic safety improvement project for a total amount of $3,439,688.
DISCUSSION:
On March 5, 2026, Servitek submitted proposed traffic signal equipment for City review. City staff did not approve the proposed equipment because it was not consistent with the City’s existing traffic signal equipment standards, including differences in equipment dimensions and materials. Maintaining standardized traffic signal equipment is important for maintenance and interchangeability. Section 7-1.02 of the bid specifications provides that the Engineer has final authority to determine whether substitute equipment or materials conform to the intent of the specifications and are acceptable for use.
On April 24, 2026, Servitek submitted a change order request in the amount of $551,631 for costs associated with providing traffic signal equipment consistent with City standards. City staff subsequently proposed a change order of up to $270,000 within the previously authorized construction contingency. Servitek's requested change order, when added to the original contract amount of $3,126,989, would have resulted in a total contract amount of $3,678,620, which exceeded the second and third lowest bids received. Because the construction contract had already been awarded, the City’s procurement procedures did not allow staff to negotiate with or move to another bidder.
On May 21, 2026, Servitek declined the city’s proposed $270,000 change order. The city conducted several meetings, discussed alternatives, and presented an option for a draft Termination of Agreement by Mutual Consent for consideration.
On July 15, 2026, the city received two claims from Servitek seeking compensation for alleged lost profits, bond costs, insurance expenses, bid preparation costs, and labor hours associated with the project. The city has not issued a Notice-To-Proceed (NTP) for construction of the project.
Despite efforts to resolve the matter, the parties have not reached an agreement that would allow the project to proceed under the existing contract.
Consistent with Section 6-8 of the 2021 Edition of Standard Specification for Public Works Construction, staff is seeking City Council authorization to terminate the existing construction contract agreement for Bid 8183 and re-bid the HSIP Cycle 11 construction project.
Following termination of the existing contract, staff intends to re-bid the HSIP Cycle 11 construction project and return to City Council at a future meeting for award of a new construction contract.
FISCAL IMPACT:
There is no cost associated with terminating the existing construction contract agreement for Bid 8183 and providing city staff authority to re-bid the construction project. The terminated bid amount with the contractor was $3,126,989. The total fiscal impact of the existing contract is unknown currently due to the ongoing claims.
Prepared by: Philip Nitollama, City Traffic Engineer
Approved by: Nathan Mustafa, Public Works Director
Certified as to
availability of funds: Julie Nemes, Finance Director
Approved by: Kris Martinez, Assistant City Manager
Approved as to form: James Johnson, City Attorney
Attachment: Agreement
Authorization to Terminate Existing Contract Agreement for Bid 8183 and re-bid the construction project ● Page 2