Palo Alto's effort to rebuild Mitchell Park Library and Community Center -- the centerpiece of the city's $76 million bond package -- is facing heavy scrutiny from city leaders because of escalating costs and possible errors by project architects. (View a live video feed of the construction).
The City Council approved early Tuesday morning (Sept. 13) a request by Public Works to increase the construction and design contracts for the library project by $3.7 million. But while the council voted 7-0 to approve the change order, council members expressed great frustration about the rising costs for the project, which now has an estimated price tag of about $41 million.
Though the project remains on schedule and well within the budget, its price has risen after the city's contractor, Flintco Pacific Construction, Inc., requested a change order from the city. Officials from Turner Construction Inc., the city's construction manager, said Monday night (Sept. 12) that some of the rising costs could be attributed to details that were missing from the plans at the time that Flintco entered its $24 million bid. The bid was about 25 percent below the city's expectations.
The design plans, created by Group 4 Architects (the firm charged with designs for all three libraries in the bond) specifically did not include any details about the steel that would be needed to support various elements of the building's exterior, including stone cladding and window openings, said Greg Smith, the field supervisor for the project.
"The steel needed is not shown on any plan and is not shown on structural drawings," Smith said.
After realizing that it would need more steel to finish the project, Flincto submitted a change order requesting more money. Mike Sartor, the city's interim director of Public Works, told the council that staff is recommending increasing the contract to "keep the project moving on schedule and to avoid claims down the road."
During the course of their hour-and-a-half discussion, council members expressed frustration at the rising costs, the apparent errors and the fact that they were not alerted earlier about the problems at Mitchell Park Library. Councilman Larry Klein said he's "not happy with where we are" and told Sartor that he should have approached the council earlier and that he should have been more candid.
"We have to be frank with ourselves," Klein said. "We're not doing as well as we expected on this deal."
The council also agreed to increase the "contingency costs" for the project -- the costs that are tagged on to the price tag to account for unexpected developments and complications. Initially, the Mitchell Park project carried with it a contingency cost of 10 percent. The council agreed to raise the contingency cost to 20 percent, short of the 25 percent staff was requesting.
Councilwoman Nancy Shepherd scrutinized the details of staff's request and said she was "shocked" by the rising costs. City officials had expected the project to fall far below budget because of the tight construction climate.
"Quite frankly, I've been a construction accountant for about 25 years and I've never seen a 25 percent contingency factor in a construction project -- especially of this size," Shepherd said. "I'm deeply concerned."
Meanwhile, the city attorney's office is mulling a claim against Group 4 because of the errors in the design plans. Klein, an attorney, said it seemed like "we have a very serious claim against Group 4." Sartor agreed. He said the firm has "accepted the fact that the plans have problems" and has added staff to address these problems as quickly as possible.
"Whether its at the level of errors and omissions or not, we have not determined," Sartor told the council.
Group 4 did not return a request from comment Tuesday.
In approving the change order, the council tacked on a series of conditions strengthening its oversight of the project. The council directed staff to provide monthly reports on all change orders over the project and asked City Attorney Molly Stump to provide monthly reports regarding potential claims the city should file against Group 4 or other contractors working on the Mitchell Park project.
"We have to exercise a lot more oversight into what's going on to make sure the city is getting its money's worth and that we're being sufficiently aggressive," said Klein, who crafted the motion with the added oversight provisions. "If Flintco thought they'd be able to recoup their low bid just by putting in change orders, one of our answers will be that we won't let them do that unless where it's appropriate."
Stump told the Weekly Tuesday that her office is reviewing the roles of the various contractors do determine whether the city should file any claims.
Though errors in the design plans contributed to the rising cost, Flintco's low bid also played a part, Sartor said. The construction climate had prompted contractors to submit low bids and then look for ways to raise costs.
"We had an extremely low bid in a very tight construction climate, which has created a situation where this contractor and other contractors we've been working with in the last couple of years really squeezed every opportunity they can to identify potential changes," Sartor said.
The city has received about $4 million in change-order requests from contractors, Smith said, and has settled requests totaling about $1.25 million.
The explanation did not entirely satisfy Councilman Pat Burt, who said he's concerned whether "we've been gamed and how aggressively we're willing to push back on a contractor who it seems like they low-balled us and they're coming back with change orders that on a fixed bid shouldn't be that big."
Sartor assured the council that he does not expect any other major additions to the contract. Staff, he said, does not take the contract adjustments lightly. He told the council he was "freaked out" about the latest changes, but said he is confident the increased contingency would be sufficient to pay for the project and to complete the project by fall of 2012.
"There's a lot riding on this project, particularly considering future potential bond elections," Sartor said.
The Mitchell Park Library and Community Center is one of three library projects that are funded by a bond voters passed in 2008. The Downtown Library was renovated and reopened in July, while the renovation of the Main Library is scheduled to begin once the new Mitchell Park Library reopens.