Even though unexpected costs, claims and delays have slowed down the Butterfield Boulevard southern extension project, the City still expects to keep the final price tag within the approved budget.
The construction contractor, Livermore-based RGW Construction, has already filed two notices of “potential claim” of more than $3.1 million. The City rejected those claims, but has increased the contract amounts for consultants on the project by about $355,000.
The extra costs are for unanticipated consultant work related to drainage, soil importation, utility conflicts and other costs, according to City staff. The work was performed by consultants Mark Thomas and Co., based in San Jose, and CSG Engineering, based in San Mateo. The addition of those costs bumps the total contracts for the consultants to about $2.1 million for Mark Thomas, and about $180,000 for CSG.
Still, Councilmembers aren’t fretting over the gaggle of delays, claims, change orders and additional costs.
“Every expense is a concern, and we look at it carefully,” Councilmember Marilyn Librers said. “In the world of construction – of anything – there’s always delays, and things that come up that need review.”
While the City’s construction contract with RGW remains at the amount approved last year of $14.1 million, the project has used more than half of the contract’s 5-percent contingency fund of about $708,000, according to City staff. The cost for 11 contract change orders and quantity overruns since construction kicked off in December 2011 totals about $395,000.
The change orders include demolition costs for structures that sat on the property before construction started. Installation of fencing, extending a sewer main, the installation of telephone line trenches and inspecting wells on the construction site, according to City staff.
Furthermore, the City has extended the original 360-day contract until Dec. 23, but staff does not think the road will be built by then. The delays are due to a lack of work by the contractor on certain aspects of the project.
City staff have said they will pursue “liquidated damages” from the contractor for each day the project is delayed beyond Dec. 23.
The additional costs and claims will not diminish the City’s effort to be “fiscally responsible” on the project, Councilmember Rich Constantine noted.
“We want to make sure the citizens aren’t paying for anything they don’t need to pay for,” Constantine said. “We don’t have the ability to pay any extra amounts. If there’s anything they’re asking for that’s not appropriate, we’re not going to give it to them.”
The road project will extend Butterfield Boulevard from its current terminus at Tennant Avenue in a southwesterly direction to Monterey and Watsonville roads. City staff and the contractor have described the project as a complicated one, due to the need to build a bridge over the Union Pacific Railroad tracks, and a large drainage field on site.
With the project close to being 70 percent completed, City staff thinks it will be finished by January.
Despite the additional $355,000 added to the consultants’ contracts, the project will remain within the total budget, according to Morgan Hill Project Manager Julie Behzad. That’s because the City did not spend as much as they expected to acquire about a dozen private properties along the route for the new road’s right-of-way.
Behzad did not know the exact amount of savings on those eminent domain property purchases, but she said it was “a substantial amount” that the City was able to transfer to the consultants’ contracts.
Those additional costs are the City’s responsibility because they cover work not included in the original “scope of work” defined by City staff when they put the project out to bid, Behzad explained. The unanticipated work is related to the construction change orders and claim notices, which resulted in additional work required by the consultants.
This work includes extra dirt that had to be imported, utility conflicts and other aspects of the project, Behzad said.
The fact the state Department of Finance refused to let the City use former redevelopment funds to finance the extra $355,000 further complicates the funding effort.
The original contracts for the project were funded with RDA money, but that money is now controlled by the state, which closed the RDA Feb. 1.
Since the original contracts were signed and approved by the Council before then, the state allowed RDA funds to go toward the Butterfield Boulevard extension. However, the state Department of Finance does not allow the use of those funds for contract amendments, or any new contracts proposed after Feb. 1.
Instead, the Council last week approved the use of a local fund – unappropriated drainage impact fee revenues – to finance the extra $355,000.
But the construction contractor claims the City owes them at least another $3.1 million and climbing, and filed two notices of potential claim with the City. One of these is for about $3 million and is related to extra costs for importing soil for the project, Behzad said.
When the contractor sought to import soil from its other construction sites in the area, the City said the material did not meet the project specifications, Behzad said. The contractor claimed the search for approved soils cost them extra.
The City has rejected that claim, as well as one asking for another $6,700 for grout installation that the contractor said was not included in the contract, Behzad said. More claims from the contractor are likely before the project is complete, which is “normal” for a project as big as this one, according to Behzad.
“With this size of a project, there are a lot of unforeseen conditions that come up,” she said. “In our project specifications we tell the contractor he does not have any rights to stop the project. In order to protect their interest, (the contractor) will go ahead and file their claims.”
The City and contractor will likely continue to disagree and negotiate on the current and upcoming claims after the project is complete.
RGW Construction Operations Manager Dave Kennedy declined to comment on any details related to claims and delays in the project.
“Since it’s in negotiations to get them resolved, it would not be productive or appropriate to comment,” Kennedy said. “I have every confidence we will get them resolved amicably.”
