City Council
Report
City Council Meeting: May 13, 2025
Agenda Item: 4.A
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To: Mayor and City Council
From: Rick Valte, Public Works Director, Public Works, Architecture Services Subject: Authorization of Third Modification to Contract 11365 with Swinerton Builders and Contract 11449 with Olympos Construction Inc. for the 2800 and 3200 Airport Avenue Renovation Projects
Recommended Action
Staff recommends that the City Council:
1. Adopt a finding of Categorical Exemption pursuant to Section 15301 (Existing Facilities) of the California Environmental Quality Act (CEQA) Guidelines;
2. Authorize the City Manager to negotiate and execute a third modification to agreement 11365 (CCS) in the amount of $500,000 with Swinerton Builders for additional project contingency associated with potential project cost escalation on the 3200 Airport Avenue Renovation Project for the Public Works Department.
This will result in an agreement with a new total amount not to exceed $12,584,792 (including a $100,000 contingency), with future year funding contingent on Council budget approval; and
3. Authorize the City Manager to negotiate and execute a third modification to agreement 11449 (CCS) in the amount of $500,000 with Olympos Construction Inc. for additional project contingency associated with potential project cost escalation on the 2800 Airport Avenue Renovation Project for the Public Works Department. This will result in an agreement with a new total amount not to exceed $8,058,350 (including a $100,000 contingency), with future year funding contingent on Council budget approval.
Summary
The uncertainty around newly implemented and proposed tariffs on steel, aluminum, and other imported construction materials have contributed significantly to market instability. These measures have resulted in material cost escalation, supply chain volatility, and longer procurement lead times that are impacting construction projects nationwide. Both the 3200 Airport Avenue Renovation and 2800 Airport Avenue 2 of 6
Renovation projects, collectively the Airport Avenue projects, are under construction to renovate the existing buildings to accommodate leasable area and increase revenue potential. Current lease agreements and ongoing lease negotiations require strict adherence to the project schedules and the uncertain policy environment has made it increasingly difficult to secure pricing and ensure timely delivery of required tenant improvements. To accommodate potential increased costs for the Airport Avenue projects, staff recommends allocating an additional $500,000 to each project in contingency funding to maintain project schedules, uphold lease commitments, and reduce the risk of future financial exposure for each project.
Staff recommends executing a third modification to construction contract 11365 (CCS) with Swinerton Builders in the amount of $500,000 for a new total amount not to exceed $12,584,792, and a third modification to construction contract 11449 (CCS) with Olympos Construction Inc. in the amount of $500,000 for a new total amount not to exceed $8,058,350. Allocating these funds would address potential cost escalation, extended lead times, and labor shortages that may impact project delivery. The increased project and contingency funding, if needed, would prevent delays, maintain full project scope, and allow both projects to meet revenue-generating lease obligations.
Discussion
The Airport Avenue projects are both currently in construction under existing Councilapproved contracts. Both projects include leasable area that recently added scope due to lease negotiations. The new design of the tenant improvements approved within lease negotiations was finalized concurrent to the introduction of tariffs and are therefore experiencing similar market-driven pressures that now threaten cost and schedule certainty.
The uncertainty around the timing and scale of the newly implemented and proposed federal tariffs on imported construction materials, including steel, aluminum, and key electrical components have the ability to significantly impact pricing and procurement timelines. Contractors for both projects have cited these tariffs as contributing to volatile bid pricing, longer lead times, and subcontractor hesitation to lock in pricing for the 3 of 6
duration of the work.
In addition to tariffs, ongoing supply chain disruptions and local labor shortages have further escalated project delivery risk. Specialty trades have become harder to secure, and certain equipment lead times have increased. Some portions of the work may require premium-time labor, also known as overtime or Saturday work, to meet leasedriven occupancy deadlines.
To mitigate these risks, staff recommends allocating additional project contingency funding to preserve project schedules, maintain scope, and avoid future contract disruptions or cost overruns.
Modifications to the Swinerton Contractual Agreement
The first modification was for an amount not to exceed $500,000 (including a $50,000 contingency) for unforeseen conditions and electrical upgrades.
The second modification was for an amount not to exceed $2,500,000 (including contingency) for costs associated with the additional scope required for tenant improvements related to lease negotiations at 3200 Airport Avenue for the Public Works Department.
Modifications to the Olympos Construction Inc. Agreement The first modification authorized an amount not to exceed $1,746,250 (including contingency) for costs related to the seismic retrofit of the building, as well as miscellaneous repairs to the mobile trailers and exterior painting of the kiln building at the project site located at 2800 Airport Avenue. The original bid included a $500,000 allowance for the seismic retrofit; however, additional structural investigation during construction revealed the need to remove and replace the roof, significantly increasing the cost of the seismic work. The conversion of the on-site mobile trailers into artist studios for the Ruskin Theater was added due to an executed lease agreement.
Additionally, the exterior painting of the kiln building and addressing deferred maintenance issues were incorporated into the scope of work to expedite project 4 of 6
completion, minimize additional mobilization costs, and consolidate all construction activities under one contractor at 2800 Airport Avenue.
The second modification was for an amount not to exceed $2,500,000 (including contingency) for costs associated with additional scope due to water intrusion issues, structural modifications, and adaptive reuse of existing buildings for cultural uses.
Environmental Review
The agreement modifications are categorically exempt from the California Environmental Quality Act (CEQA) under Section 15301. Section 15301 of the CEQA State Guidelines provides Class 1 (existing facilities) exemption for projects that consist of the operation, repair, maintenance, leasing, licensing, permitting, or minor alteration of existing public or private structures, facilities, mechanical equipment, or topographical features, involving negligible or no expansion of the existing or former use. The agreement modifications would provide for tenant improvements and real estate leasing services at 3200 Airport Avenue and 2800 Airport Avenue and therefore, would not expand or materially change existing facilities or operations. Therefore, the award agreements are categorically exempt as set forth in Section 15301 of the CEQA State Guidelines.
Past Council Actions
Meeting Date Description
02/28/2023
(Attachment A)
Award Bid SP2486 to Swinerton Builders for the 3200 Airport Ave Renovation Project
07/25/2023
(Attachment B)
Award Construction Contract for the 2800 Airport Avenue Renovation Project
03/19/2024 5.A
(Attachment C)
Approval of First Modification to Agreement with Olympos Construction Inc. for 2800 Airport Avenue Renovation Project 03/19/2024 5.E
(Attachment D)
Approval of First Modification to Agreement with Swinerton Builders for 3200 Airport Avenue Renovation Project
08/27/2024
(Attachment E)
Approval of Second Modification to Agreement with Olympos Construction Inc. for 2800 Airport Avenue Renovation Project 12/17/2024
(Attachment F)
Approval of Lease with NEON Rated for 3200 Airport Ave and Associated Contract Modifications with Corporate Realty Group 5 of 6
and Swinerton Builders
Financial Impacts and Budget Actions
Staff seeks authority to approve available funding from the Airport Fund to increase the amount of the contracts with Swinerton Builders and Olympos Construction Inc. for the 2800 Airport Avenue Renovation and 3200 Airport Avenue Renovation Projects.
Contract Modification Request
Agreement
#
Vendor Current
Authorized
Amount
FY 2024-25
Modified
Request
Amount
CIP Account # Total
Revised
Contract
Amount
11365 Swinerton $12,084,792 $500,000 C5704690.689000 $12,584,792 11449 Olympos $7,558,350 $500,000 C5704690.689000 $8,058,350 Prepared By: Sebastian Felbeck, Senior Construction Manager Approved Forwarded to Council
Attachments:
A. February 28, 2023 Staff Report (Web Link)
B. July 25, 2023 Staff Report (Web Link)
C. March 19, 2024 Item 5.A Staff Report (Web Link)
D. March 19, 2024 Item 5.E Staff Report (Web Link)
E. August 27, 2024 Staff Report (Web Link)
F. December 17, 2024 Staff Report (Web Link)
G. Swinerton - Oaks Form
H. Swinerton Contract
I. Swinerton Levine Act Form
J. Swinerton Change Order 1
K. Swinerton Change Order 2
L. Olympos - Oaks Form
M. Olympos Contract
N. Olympos Levine Act Form
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O. Olympos Change Order 1 and 2