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: 8 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: July 28, 2025
SUBJECT:
Wastewater Treatment Plant Upgrade Construction Services – Contingency Increase RECOMMENDATION:
Approve an increase in the amount of $19,500,000 to the City’s contingency budget for its contract with Sundt Construction, Inc. for construction of the Wastewater Treatment Plant Upgrade and Expansion Project; and authorize the Public Works Director to issue change orders 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.
Due to the size and complexity of the Project and construction demand in the Bay Area, a Construction Manager at Risk (CMAR) delivery approach was selected and approved by City Council on May 16, 2016. Sundt Construction, Inc. (Sundt) was the selected CMAR for the Project.
Construction of the Project by Sundt has been underway since May 2019. Three construction packages were awarded:
• 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.
On February 5, 2024, staff provided Council with details of the WWTP Project, which included construction progress updates, causes for delays and budget increases, and updated schedules. At that time, the WWTP Project budget and estimate at completion was $572.5 million. On February 18, 2025, staff presented to Council progress updates informing that due to risks, changes, delays, and unknowns identified over the past year, the WWTP Project’s estimate at completion has increased by approximately $25 million to $597.5 million, which is still subject to change. Construction has been challenging while still progressing forward.
The Project has required several significant changes, including changes related to the emergency generators fuel storage system, the fire suppression system in the new Administration Building, the chemical piping system, the aeration piping system, piping in the Biological Nutrient Removal Basin due to corrosion from dissimilar metals, timing issues related to the completion of leak testing of the concrete basins, and delays in remote monitoring system programming. To minimize impact on the construction schedule of the Project, the Contractor has worked overtime and on Saturdays to complete
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additional work from these approved change orders. As a result of the realized and potential change orders, as well as schedule challenges, construction expenditures are going to exceed the previously anticipated estimate at completion for the Project. The construction estimate table, previously shown in the February 2025 presentation, is shown again below:
Package # - General
Description
Award
Date
Awarded
Contract
Amount
Council
Authorized
Contingency
Potential
Contingency
Needed in Future
Potential
Cumulative
Contingency
Potential
Construction
Contract Amount
1 – Site Preparation May 2019 $33,098,178 $1,725,000 $0 $1,725,000 2 – Foundation May 2020 $17,716,049 $1,645,000 $0 $1,645,000 3 – Process Facilities Sep 2020 $379,880,747 $37,550,000 $19,507,000 $57,057,000 TOTALS $430,694,974 $40,920,000 $19,507,000 $60,427,000 $491,122,000
9.5%a 14.0%b
a – The previously authorized $40,920,000 contingency equates to 9.5% of the total awarded contract amount. b – The potential cumulative $60,427,000 contingency equates to 14.0% of the total awarded contract amount.
Note: For CIP Construction Contracts, a contingency amount equal to 10% of the construction contract is typically authorized. For contracts with higher risks, contingencies of 20% have been authorized.
At the February 2025 Council meeting, staff forecasted the potential need to increase contingency by $19,507,000, which would increase the total contingency amount to $60,427,000; this total contingency amount issued for construction contracts is within the typical 10-20% range of construction contract value for similar projects.
As of June 2025, the previously authorized $40,920,000 contingency has been utilized to issue construction contract change orders, leaving a remaining contingency balance of approximately $4,138,000. Contract change orders are issued to increase the contract value to address unknown conditions or issues beyond the original construction contract scope and understanding. For every change request submitted by the contractor, the project team thoroughly evaluates each request prior to issuing any contract change order, which results in changes being accepted, negotiated, or rejected.
As forecasted in the February 2025 Council meeting, the project team currently still forecasts the need to increase contingency by $19,500,000 (rounded). This contingency increase request accounts for potential changes identified by the project team, a recommended contingency reserve for unknown issues, and the remaining contingency balance, as shown below:
Description Amount
Identified potential changes $21,094,000
Recommended contingency for unknown issues + $2,544,000 SUBTOTAL CONTINGENCY required to cover identified and unknown issues $23,638,000 Remaining Contingency Balance - $4,138,000
TOTAL REQUESTED CONTINGENCY INCREASE $19,500,000
To ensure there is sufficient funding to complete the WWTP Project, staff proposed a $25 million budget increase in the Fiscal Year 2025-26 Capital Improvement Program to fund the completion of the project. The proposed budget increase was approved by Council on June 16, 2025. This increase will align the budget committed to the project account with the WWTP Project’s estimate at completion of $597.5 million. This $25 million increase includes costs associated with the construction contract ($19.5 million) and extended soft costs ($5.5 million). The $19.5 million budget request associated with the construction contract is inclusive of known changes and risks, delay costs, potential future risks and changes, and contingencies. The $5.5 million budget increases associated with the extended soft costs include project management, construction management, specialty inspections, owner-controlled insurance program, and engineering services during construction. The $25 million budget increase is based on information known today and is subject to change as the project progresses closer to completion.
Construction Package 3 is approximately 96% complete and in its final stages. Construction of the new Administration
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Building and the Maintenance Warehouse is completed and occupied. Construction of the new treatment facilities is anticipated to be complete in mid-summer 2025. Clean water testing began in January 2025 and will be ongoing until the whole new plant is ready for process startup. Process seeding, startup, and performance testing is expected to occur in the July - August 2025 timeframe. The new WWTP is anticipated to be in full service by September 2025. Once liquids treatment operations are fully transitioned from the existing to the new WWTP, the remaining scope of work includes conversion of the existing aeration basins to wet weather flow equalization basins, and miscellaneous sitewide improvements including site lighting, landscaping, paving, signage, site security, etc. Currently, final completion and project closeout is forecasted to be at the end of May 2026. Over the remaining project duration, staff will continue to closely monitor costs and potential changes, evaluate and challenge the Contractor’s anticipated schedules and change requests, and work to manage the overall cost impact within the approved contingency budget.
BUDGET IMPACT:
Sufficient funds are available in the WWTP and Flow Management Upgrade and Expansion Project (46t003) to increase the contingency reserve.
ENVIRONMENTAL DETERMINATION:
The City prepared a Final Programmatic Environmental Impact Report (Final PEIR) in accordance with the California Environmental Quality Act (CEQA) (SCH No. 2015032006). Council on June 6, 2016, certified the PEIR. In accordance with CEQA, the Final PEIR serves as the primary environmental compliance document for the implementation of the Clean Water Program. The City prepared Addenda to the Final PEIR that was approved on July 16, 2018 (Addendum 1) and April 15, 2019 (Addendum 2). This work is within the scope of the Project evaluated in the PEIR and Addendum.
NOTICE PROVIDED
All meeting noticing requirements were met.
ATTACHMENTS
None
STAFF CONTACT
Thomas Ruark, Senior Project Manager
[email protected]
650-522-7280
Tom Williams, Engineering Manager
[email protected]
(650) 522-7307
Matt Fabry, Director of Public Works
[email protected]
(650) 522-7309