Chastened by recent experiences with the Mitchell Park Library, Palo Alto officials on Monday questioned the unexpectedly high bids for the soon-to-commence reconstruction of California Avenue before agreeing to reduce the amount budgeted for unforeseen costs.
The City Council voted 8-0 on Monday, with Pat Burt absent, to approve a $6.2 million construction contract with Redgwick Construction Company for the dramatic reconstruction of California Avenue, a project that includes reducing lanes, creating two new plazas, replacing water infrastructure, widening sidewalks, installing new street lights, and adding benches, newsracks and various landscape improvements. But the council balked at approving a staff request for another $931,700 in unforeseen (or "contingency") costs, a number that totals 15 percent of the construction budget. Instead, members lowered the amount to 10 percent, or $621,133.
The vote came after several council members, most prominently Larry Klein, questioned the discrepancy between the cost estimates submitted by the engineer and the ones in the winning bid submitted by Redgwick. Overall, the Redgwick bid was about $1.2 million higher than the staff had estimated.
Chief Transportation Official Jaime Rodriguez attributed the high bids to both the expansion of the project's scope (most notably the replacement of water mains on California Avenue that will take place concurrent with the streetscape work) and changes in the construction climate, which he said has heated up.
"The bid climate has really changed when the project first started three years ago and even form where we finalized the engineer's estimate in the fall," Rodriguez told the council.
Even so, members were surprised by the divergence between bid numbers and city estimates. Klein observed that for replacement of the fountain on California Avenue, the city's estimated cost was about $70,000, while the contractor's was $647,000. In the "general" category, Redgwick's estimate of $952,000 towered above the city's projection of $190,000. As for the water line, Redgwick's estimate of $1.2 million was roughly three times what the city had expected.
The explanation from Rodriguez -- that Redgwick is still waiting for information from its subcontractors in these categories and had "just dumped" the cost estimates into the bid for further refinement later -- did little to comfort the council.
"I'm more concerned now than ever that they'll just dump things in the general category," Klein said. "That's almost a $750,000 differential."
Is staff satisfied, Klein asked, that it is "fair and appropriate" for a company to "just drop a number in there?"
"Are we OK with the idea that they might end up making a pretty good profit in that category?"
The council's approval came after Mayor Nancy Shepherd and and Vice Mayor Liz Kniss made a case for reducing the contingency amount. Kniss cited the city's frustrating experiences with the construction of the new Mitchell Park Library and Community Center, a project that is far behind schedule and that has been hobbled by a years-long dispute between the city and its recently fired contractor, Flintco Pacific.
"I'm particularly concerned about this, knowing that Mitchell Park is on the minds of everyone in this community and they're wondering what happened," Kniss said. "It's up to us, who hold taxpayers money, to make sure that we hold the contingency to what we believe is a reasonable amount on this."
Shepherd, who made the proposal to reduce contingency funding, said that 10 percent corresponds to what was in the city engineer's estimate. She said staff can always come back to the council if more funds are needed.
Her colleagues agreed, especially after Rodriguez said he expects the contractor to change up the estimates during the course of the construction, with funding going up in some categories going up and down in others. Staff, he said, was more focused on the total budget for the project, which was lower in Redgwick's bid that in the three others that the city had received. Klein said this uncertainty only reinforces the need to keep an eye on contingency.
"Contingency might be less appropriate here than it might be in some of the other contracts," Klein said.