Concerned about growing construction costs at the Mitchell Park Library and Community Center, Palo Alto officials have hired engineering consultants and an attorney to examine the spike in change orders from the project contractor.
Though the project costs remain well below the $50 million budget, construction expenses have been rising in recent months as the city's contractor, Flintco Pacific Construction, submitted 10 change orders requesting additional funds. In September, members of the City Council were disappointed to learn about the growing costs, with Councilman Larry Klein conceding, "We're not doing as well as we hoped on this deal."
At the September meeting, the council had grudgingly agreed to raise the contingency budget -- funds used to cover unforeseen work -- from 10 percent to 20 percent of the base contract.
Now, the council and Public Works staff are taking a closer look at the change orders and considering the city's legal options. At a Monday discussion of the project, Public Works Department officials said the city has brought in three consultants to help evaluate the change orders and potential claims. The city's contract administrator, Turner Construction, also brought in a senior-level person to help the department manage and control the project, Interim Public Works Director Mike Sartor said.
The three consulting contracts total $65,000, out of which $6,700 has already been spent.
Since the September meeting, Flintco submitted two more change orders totaling about $280,000. The contractor requested the extra money for work relating to a basketball court at the community center, foundation for an art sculpture, curb installations and various waterproofing, plumbing and electrical system alterations. The city has already approved $1.3 million in change orders to Flintco, according to a report from Public Works Assistant Director Phil Bobel. The company had requested more than $4 million in change orders, according to Public Works data.
The 10 change orders submitted to date have raised Flintco's compensation from its base contract of $24.4 million to $25.7 million. This, however, remains well below the engineering estimate of $32 million that the city received before it went out to bid on the construction contract.
Council members said Monday that they remain concerned about the unusually high number of change orders, though they took solace in the fact that the bond-funded project remains below budget. The new Mitchell Park library is by far the largest of the three library-construction projects funded by a $76 million bond that the voters passed in 2008. The bond includes $50 million for the Mitchell Park Library and Community Center. The city currently estimates the new library to cost about $41 million.
Though Councilman Larry Klein joined his colleagues in September in approving more contingency funds for the project, he emphasized Monday that neither he nor his colleagues want to see all of these funds to be used.
"We'll be disappointed if they're all spent," Klein said. "It's a very, very large contingency."
Klein also said he wanted to correct an impression in the community that the project now exceeds its budget. For all of its recent problems, it remains more than $7 million below the city's engineering projections.
"We're still way under budget -- that needs to be clear over and over again," Klein said. "We're demonstrating as council and staff that we really care about all of the public's money and we'll be very, very careful to make sure it's wisely spent."
Council members also indicated that they would like reconsider how much the city is budgeting for contingency costs. Councilwoman Nancy Shepherd proposed lowering the contingency amount from 20 percent to 15 percent of the base contract. Councilman Pat Burt agreed that the council should consider a different contingency amount but advised against setting a specific number at this time. Lowering the contingency rate from 20 percent to 15 percent may create expectations that could turn out to be false, he said.
"I have some concern with setting expectations that can lead to disappointment," Burt said. "And I think we shouldn't get enamored with aiming for something and implying an outcome when that's not necessarily the case."
The council voted unanimously to accept the update on the library project and to schedule another one for January, at which time members will evaluate changing the contingency budget.