CITY OF SAN MATEO
CITY OF SAN MATEO
Agenda Report
City Hall
330 W. 20th Avenue
San Mateo CA 94403
www.cityofsanmateo.org
Agenda Number: 14 Section Name: {{section.name}} Account Number: 72-4671 File ID: {{item.tracking_number}} TO: City Council
FROM: Alex Khojikian, City Manager
PREPARED BY: Public Works Department
MEETING DATE: August 19, 2024
SUBJECT:
Wastewater Treatment Plant Upgrade and Expansion Project Owner-Controlled Insurance Program – Policy Extension RECOMMENDATION:
Approve an extension to the City’s Owner-Controlled Insurance Program policy with Old Republic General Insurance Corporation to extend coverage for construction of the Wastewater Treatment Plant Upgrade and Expansion Project in an amount not to exceed $1,069,153, for a revised total not to exceed cost of $10,569,153; approve a contingency reserve in the amount of $350,000 for potential additional extensions; and authorize the City Manager to approve the policy extension in substantially the form presented and additional policy extensions within the contingency amount.
BACKGROUND:
The City is currently under a Regional Water Quality Control Board Cease and Desist Order requiring improvements to its sewer collection system and Wastewater Treatment Plant (WWTP) to eliminate sanitary sewer overflows and unauthorized discharges of untreated or partially treated wastewater to San Francisco Bay. The Clean Water Program (CWP) includes several capital improvement projects that are currently under construction and intended to comply with the Cease and Desist Order. The WWTP Upgrade and Expansion Project (Project) is one of these projects, which will result in a new treatment plant for processing wastewater.
Construction of the Project by Sundt Construction, Inc. (Sundt) has been underway since May 2019. The Project is being delivered in three construction packages:
Package 1 - Site Preparation: Work was substantially completed in July 2022 Package 2 - Foundation Piles: Work was substantially completed in January 2022 Package 3 - WWTP Process Facilities, Administration Building, and Maintenance Warehouse: In progress Insurance is a significant cost and risk management component of every Public Works construction project. Typically, the City specifies its certain insurance requirements in the construction contract, and the general contractor/subcontractors are responsible for obtaining insurance policies consistent with those requirements. Contractors' insurance premiums are considered part of the cost of the work and are therefore borne by the City.
For the Project, CWP staff (in coordination with the City Attorney's Office and Alliant Insurance Services, the City's insurance broker) opted for an Owner-Controlled Insurance Program (OCIP). Under an OCIP, the City assumes direct responsibility for purchasing the various insurance policies to cover the contractor/subcontractors' activities, such as commercial general liability, excess liability, and worker’s compensation. The OCIP also includes builder's risk/property coverage insurance. The OCIP is offered through the California State Association of Counties - Excess Insurance Authority (CSAC-EIA), a joint powers authority established for the purpose of developing and administering insurance and self-
CITY OF SAN MATEO
insurance programs, including OCIPs, for its member entities throughout California.
On June 3, 2019, City Council adopted a resolution to join the CSAC-EIA, approved the Joint Powers Agreement and Memorandum of Understanding Master Rolling OCIP with CSAC-EIA, designated the City Manager to serve as City's representative for all matters relating the City’s obligations as a member public entity of CSAC-EIA, and approved an agreement with Old Republic General Insurance Corporation in an amount not to exceed $9.5 million for OCIP coverage for the Project. This amount reflected the premiums for the various insurance policies covering all three construction packages of the Project. Also, the premiums were based on the original total construction value of $430,694,973 awarded for the three packages and set to expire on the original contractual Final Completion date of September 12, 2024.
On February 5, 2024, staff presented City Council with Project progress updates and shared key reasons that have caused cost increases and schedule delays. Based on information known at the time, staff reported the estimated construction cost to be approximately $471.6M at the completion of the Project anticipated to be in August 2025. Consequently, the OCIP policy needs to be updated for the cost and schedule changes, as applicable. This is typically done through a new endorsement to the existing policies in alignment with standard procedures for OCIP policy extension on construction projects. A sample policy extension endorsement is provided in Attachment 2.
The policy extension considers the estimated cost for the facilities that are still under construction and their associated completion dates. As noted above, Packages 1 and 2 are substantially completed, while Package 3 is still in progress. For Package 3, the current estimate for the total cost at completion is approximately $436 M; further cost and schedule breakdown is provided in Attachment 1. Based on these assumptions, Alliant Insurance Services submitted a proposal with additional premiums in the amount of $1,069,153 to extend the current OCIP policy through July 30, 2025. Staff, in coordination with the City Attorney's Office, find the proposal to be reasonable and recommend approval.
At the February 2024 Council meeting, staff clarified the current contractual Final Completion date for the Project is January 23, 2025 but with the delays, the latest anticipated project closeout for the Project is August 2025. At the same meeting, staff shared the estimated budget required to address the delays and complete the project. The requested OCIP policy extension is still aligned with the August 2025 timeframe and within the estimated budget, however, the Contractor is currently forecasting that project completion may be delayed to October 2025. In accordance with contract specifications and at the request of the project team, Sundt has provided a recovery schedule to attempt to meet the previously anticipated August 2025 project completion. However, the City’s OCIP may need to be updated and/or extended beyond July 30, 2025, should the schedule delays and cost increases materialize. In consultation with the City’s insurance broker, staff is recommending approval of a contingency reserve in the amount of $350,000 to account for potential additional policy extensions due to delays in final completion and/or increases in the construction costs.
BUDGET IMPACT:
Funding for the amendment will come from WWTP and Flow Management Upgrade and Expansion Project (46t003), which contains sufficient funds.
ENVIRONMENTAL DETERMINATION:
For the WWTP Project, the City prepared a Final Programmatic Environmental Impact Report (Final PEIR) in accordance with the California Environmental Quality Act (CEQA) (SCH No. 2015032006). The PEIR was certified by City Council on June 6, 2016. In accordance with CEQA, the Final PEIR serves as the primary environmental compliance document for implementation of the Clean Water Program. The City prepared an Addendum to the Final PEIR that were approved on July 16, 2018 (Addendum 1) and April 15, 2019 (Addendum 2).
NOTICE PROVIDED
All meeting noticing requirements were met.
ATTACHMENTS
Att 1 – OCIP Policy Extension Proposal
Att 2 – Sample Policy Extension Endorsement
CITY OF SAN MATEO
STAFF CONTACT
Thomas Ruark, Project Manager II
[email protected]
650-522-7280
Deryk Daquigan, Deputy Director of Public Works
[email protected]
650-522-7287
Matt Fabry, Director of Public Works
[email protected]
650-522-7309