Resolution 2023-082, rejecting all bids received for four Facility Renovation Projects, and directing staff to evaluate alternative contracting methods before re-advertising for bids

Adopt Resolution 2023-082, rejecting all bids received for four Facility Renovation Projects, and directing staff to evaluate alternative contracting methods before re-advertising for bids.

In June 2022, Council adopted Resolution 2022-048 approving the Capital Improvement Program (CIP) Budget for Fiscal Year (FY) 2022/23, which included six (6) Facility Renovation Projects described below. All funded by Measure C, the initial budget for these projects was $715,000.

These six facility renovations were bundled into one design and construction project with the intent that a larger, all facility maintenance-oriented project would attract more construction contractors, be more cost-effectiveness due to economies of scale, and be more efficient for our consultants, contractors, and staff by having to manage one consolidated construction contract rather than four or more separate contracts.

• City Hall Roof Replacement: The City Hall roof was last replaced in 1984 and is well past its warranty. Roof leaks have been increasing as the roof progressively deteriorates. The Project was initially funded with $100,000.

• Sunset Center Hazardous Materials Abatement and Exterior Painting: The exterior of the historic Sunset Center has not been painted in many decades. Prior to painting, lead paint must be remediated. An initial budget of $150,000 was established with the understanding that future project phases would be necessary.

• Sunset Center Cottage Window Repairs: This project would remediate asbestos and lead paint around the windows of the historic Sunset Center Cottages, and repair these imminently-failing windows. The project budget was set at $105,000.

• Harrison Memorial Library Renovations Exterior and Interior Painting: A City investment of $100,000 to paint the exterior of the library, plus $100,000 to paint the interior, (combined $200,000) was established to satisfy the City’s deferred and ongoing maintenance obligation for this historic building. This was planned to inspire private donations associated with a separate, longer-range Libraries Master Planning initiative and future renovations.

• Harrison Memorial Library – Carpet Replacement: An initial budget of $100,000 was established to replace the carpeting. During design development of this project, it became clear from the Libraries Master Plan Project, that it would be prudent to defer carpet replacement until the larger renovation projects and phases were developed.

• Harrison Memorial Library – IT Backup Generator: A budget of $60,000 was established to install a new generator to backup essential IT servers in the basement of the library. Several alternatives were evaluated before it was determined that the project would be infeasible from a Building Code perspective without significant impacts to the Library and/or much higher costs.

In August 2022, Council adopted Resolution 2022-065, awarding a Professional Services Agreement to Ausonio, Inc. for Project Management services for nine facility renovation projects, including these six projects. In February 2023, Council adopted Resolution 2023-041, approving Amendment No. 1 to the Professional Services Agreement with Ten Over Studio to design five of these projects for a fee of $78,900.

In June 2023, Council adopted Resolution 2023-067 approving the carry-over of 25 prior FY CIP projects, including the remaining Facility Renovation Projects with a carryover budget at $649,000, and approving a new CIP Contingency Fund with a budget of $500,000 to cover anticipated shortfalls due to rising construction costs.

In July 2023, Council adopted Resolution 2023-073 approving Amendment No. 1 to the Professional Services Agreement with Ausonio for a FY 2023/24 fee of $125,000, to continue to implement these, and other, facility renovation projects.

Project Development and Bidding Results:

The design plans and technical specifications for the initial six, and remaining four projects, were prepared by Ten Over Studio. M3 Environmental performed hazardous materials sampling and laboratory testing, and prepared remediation specifications. A local craftsman was hired to disassemble and reassemble one Cottage window to better understand exactly how they were assembled. Ausonio provided day-to-day project management, checked plans, assembled contract documents, and led the public bidding process. Historic evaluations were performed for the City Hall Roof and Cottage Windows by Planning staff and an historic preservation consultant. Representatives of Sunset Center, Library, Planning, Building, Facility Maintenance, Public Works, and IT were also very involved with project development. Finally, the project was deemed to be Building Permit-ready, and the Project was approved for construction.

The Project was extensively advertised for construction bids. Notices were published twice in the Carmel Pine Cone and Monterey County Weekly. Notices were also posted on the Central Coast Builders Association website, other public purchasing websites, and the City’s website. In addition, courtesy calls/emails were made to 38 building contractors, including painting, roofing, carpentry, and hazardous material abatement specialists.

On August 1^st, 14 contractors attended the pre-bid meeting and toured all four facilities. A Public Bid Opening was held on August 22, 2023, at which time two bid proposals were received and read aloud. The table below includes the key results:

When the project was advertised for bids, the construction cost estimate was $675,000, approximately half the cost of these bids. While both bid proposals were responsive, certain bid prices in both bids are unreasonable. With additional funding, Council does have the option to award the project to the low bidder, Pro-Ex Construction, but due to the high bids, staff is recommending that both bids be rejected.

 Bid Evaluation:

Ausonio and staff are currently scrutinizing these bid prices to gain a better understanding of why such high bids were proposed, and to consider potential cost-cutting measures prior to re-advertising for bids. The following lists the preliminary results of this exercise.

1.    The project was bid in the summer. Contractors in our region are already very busy and may not be aggressively seeking more jobs. Bidders may be more inclined to “sharpen their pencils” in the off season when there is less work.

2.    There is a construction labor shortage in our region, and in most areas of California. Contractors are paying increasingly higher wages to retain crews.

3.    Material prices continue to escalate due to inflation and supply chain issues.

4.    While there were many subcontractors at the pre-bid meeting, a majority were painters. Only three general contractors attended the pre-bid, and two submitted bids. We need to attract more general contractors or split the project out to allow painters and roofers to directly bid those portions. However, the downside of splitting projects would be more funds needed for project management and architectural consultants, as well as a longer timeline to execute all projects.

5.    For example, the City Hall roof replacement project budget was based on a preliminary quote we received less than two years ago for under $100,000. We will consider extracting the roof as a stand-alone project to seek more competition directly from roofing contractors and cut out the general contractor’s overhead costs.  

6.    The City Hall roof bid was based on upgraded, cedar shingles with alternates to compare with less-costly composition shingles. However, the bidders did not provide reasonable cost reductions for the composition roof, and, in fact, one bidder actually increased their bid using the less costly roofing materials. When re-bid, only composition shingles should be specified.

7.    We have reason to believe that at least two quotes submitted by specialty subcontractors, such as for painting Sunset Center’s north wing and the City Hall roof replacement, may have been marked up substantially by the general contractors.

8.    During the pre-bid meeting, several contractors expressed concerns that all of the buildings were historic and would be occupied during the work. Phasing the work with reduced occupancy where feasible should be considered.

9.    The City should remove the hazardous materials testing and reporting duties out of the bid documents, and hire a qualified consultant directly to reduce general contractor markups.

10.  The contract documents and specifications manual were complete and met the City, architects, and industry standards, but was an onerous 407 pages long. Ausonio and staff should remove every general and special conditions that is not essential to achieving a high-quality end product. 

Council initially appropriated $715,000 for these projects in FY 2022/23 with $649,00 carried over into the FY 2023/24 CIP. The total project development costs expended and encumbered to date for these projects, excluding construction, are listed below.

The maximum combined amount that could be available to award this construction contract would be the $715,000 initial project budget plus the full, $457,622 contingency balance, less the total project development costs of $172,816, totaling = $999,806. Even at this upper budget limit, the low bid is out of reach without an additional General Fund allocation of $274,211, plus another, say 5%, or $63,700, for construction contingencies, for a total of $337,911.

Original Project funding, plus the Contingency Fund, are both in CIP Account Number 301-311-00-43008.

Budgets for these construction projects will likely need to be increased with the Mid-Year Budget Adjustment process, or sooner, to more accurately reflect the adjusted cost estimates and/or bids available at that time.

In June 2022, Council adopted Resolution 2022-048 approving the CIP for FY 2022/23, which included six Facility Renovation Projects.

In August 2022, Council adopted Resolution 2022-065, awarding a Professional Services Agreement to Ausonio for Project Management services for nine facility renovation projects. In February 2023, Council adopted Resolution 2023-041, approving Amendment No. 1 to the Professional Services Agreement with Ten Over Studio to design five of these projects for a fee of $78,900.

In June 2023, Council adopted Resolution 2023-067 approving the carry-over of 25 prior FY CIP projects, including the remaining Facility Renovation Projects with a carryover budget at $649,000, and approving a new CIP Contingency Fund with a budget of $500,000 to cover anticipated shortfalls due to rising construction costs.

In July 2023, Council adopted Resolution 2023-073 approving Amendment No. 1 to the Professional Services Agreement with Ausonio for a FY 2023/24 fee of $125,000, to continue to implement these, and other, facility renovation projects.