BOARD AGENDA MEMORANDUM
Government Code § 84308 Applies: Yes ☐ No ☒
(If “YES” Complete Attachment A - Gov. Code § 84308)
SUBJECT: Title
Approve a Budget Adjustment in the Amount of $3,945,234 and Approve an Increase of $2,500,000 to the Construction Contract Contingency Sum for the Anderson Dam Federal Energy Regulatory Commission Order Compliance Project, Coyote Creek Stream Augmentation Fish Protection Measure: Chillers Plant Project, Project No. 91864008, Contract No. C0701 (Morgan Hill, District 1).
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RECOMMENDATION: Recommendation
A. Approve a Fiscal Year 2026 budget adjustment in the amount of $3,945,234 to the Coyote Creek Stream Augmentation Fish Protection Measure: Chillers Plant Project; and
B. Approve an increase of $2,500,000 to the construction contract contingency sum, bringing the total contingency sum to $7,804,592 for the Coyote Creek Stream Augmentation Fish Protection Measure: Chillers Plant Project.
Body
SUMMARY:
The objective of the Coyote Creek Stream Augmentation Fish Protection Measure: Chillers Plant Project (Project) is to decrease the temperature of imported water and deliver the chilled water to the Coyote Creek functional cold-water zone.
Project Background
Santa Clara Valley Water District (Valley Water) is undertaking the Federal Energy Regulatory Commission (FERC) Order Compliance Project (FOCP) as a result of the February 20, 2020, directive from the FERC to implement interim risk reduction measures at Anderson Dam. In addition to lowering the reservoir at Anderson Dam to its lowest point, Valley Water collaborated with environmental regulatory agencies to develop additional measures to reduce impacts from the lowered reservoir. One of those measures is the Coyote Creek Stream Augmentation Fish Protection Measure, which is intended to maintain suitable aquatic habitat for native species, and to provide habitat sufficient for rainbow trout (Oncorhynchus mykiss) survival within the creek’s functional cold-water zone, during the implementation of this FOCP measure.
The Project entails installing a Modular Chillers Plant (MCP), at the southwest corner of the existing Coyote Pumping Plant, which consists of three 1,500-ton capacity water-cooler packaged chillers, with one of the three being used as a redundant chiller unit. The Coyote Pumping Plant is located at 18300 Peet Road, Morgan Hill as shown in the Project Map (Attachment 1). A new 24-inch pipe will be installed to connect to an existing 36-inch nozzle on the Cross Valley Pipeline, to allow the chillers to receive imported water. The imported water would be chilled by the chiller system to the required temperature, before being released into the creek to maintain the suitable aquatic habitat.
Previous Board Actions
On June 9, 2020, the Board adopted Resolution No. 20-57 setting the time and place of the public hearing on the Engineer’s Report and CEQA exemption determination for the FOCP.
On June 23, 2020, the Board approved the CEQA emergency exemption determination for the FOCP; adopted Resolution No. 20-59 approving the Engineer’s Report for the FOCP; and approved the Project.
On July 12, 2022, the Board adopted Plans and Specifications and authorized advertisement for bids for construction of the Anderson Dam Federal Energy Regulatory Commission Order Compliance Project, Coyote Creek Stream Augmentation Fish Protection Measure: Chillers Plant Project, Project No. 91864008, Contract No. C0684, per the Notice to Bidders; and authorized the Designated Engineer to issue addenda, as necessary, during the bidding process.
On October 11, 2022, the Board ratified Addenda 1, 2, 3, 4 and 5 to the Contract Documents; received report of bids; and rejected all bids for construction.
On June 27, 2023, the Board adopted the Plans and Specifications and authorized advertisement for bids for the construction of the Anderson Dam Federal Energy Regulatory Commission Order Compliance Project, Coyote Creek Stream Augmentation Fish Protection Measure: Chillers Plant Project, Project No. 91864008, Contract No. C0684, per the Notice to Bidders; and authorized the Designated Engineer to issue addenda, as necessary, during the bidding process.
On September 12, 2023, the Board ratified Addenda No. 1 through 4 to the Contract Documents for the Coyote Creek Stream Augmentation Fish Protection Measure Chillers Plant Project; awarded the Contract to AES Industrial, located in San Leandro, CA in the sum of $5,363,944; approved a contingency sum of $804,592 and authorized the Chief Executive Officer or designee to approve individual change orders up to the designated amount.
On January 14, 2025, the Board approved a budget adjustment in the amount of $5,000,000 and approved an increase of $4,500,000 to the construction contract contingency sum for the Anderson Dam Federal Energy Regulatory Commission Order Compliance Project.
Project Design Revisions
At the time of bid advertisement and contract award in September 2023, final product specifications for the owner-furnished Modular Chiller Plant (MCP) units and associated electrical substation were not fully complete. As a result, continued coordination between the equipment suppliers and the design team was required during procurement to finalize technical details.
Due to the unique and complex nature of the Project, a comprehensive electrical system study was not completed during the initial design phase. Once the system study was performed during switchgear procurement in late 2024, it identified the need to modify the electrical bus length connecting to the Western Area Power Administration (WAPA) substation. This requirement resulted in additional electrical design revisions, coordination with the supplier, and further schedule impacts.
The original construction contract established a June 2024 completion date for the project. As COVID-related supply chain disruptions affecting the owner-furnished equipment and subsequent design revisions emerged, the contract completion date was extended through change orders and Time Impact Analysis (TIA) No. 1 to April 2025, allowing continued progress while critical equipment and revised design details were finalized.
The MCP units were delivered to the site in August 2025, and installation activities were completed shortly thereafter. While the major equipment is now installed, additional electrical modifications, system integration, testing, and commissioning activities remain outstanding and are contingent upon the completion of the revised electrical scope.
These evolving design requirements, combined with coordination of interfaces with other concurrent projects and existing infrastructure, resulted in additional design revisions and schedule impacts addressed under TIA No. 2. Based on the current status of the remaining work, the Contractor is forecasting Project completion in late August 2026, representing an approximate 16-month extension beyond the TIA No. 1 contract completion date.
The Contractor has submitted an estimated $2,500,000 for extended overhead and schedule-related costs associated with the extended duration of the construction project. The project team has completed an initial review of the submission and determined that further detailed analysis of the updated schedule, critical path impacts, and supporting cost documentation is required. This evaluation is currently underway, and any contract time or cost adjustments will be subject to further review, negotiation, and formal change order execution in accordance with the Contract.
Contract Change Orders
A total of eighteen (18) Contract Change Orders, totaling a net increase of $5,062,361, have been executed to date for this contract to address various issues, including unforeseen site conditions, Valley Water requested changes, and post-design clarifications.
Table 1 presents a summary of the current construction contract and contingency amounts.
TABLE 1
SUMMARY OF CONSTRUCTION CONTRACT
AND CONTINGENCY AMOUNTS
Budget Adjustment Recommendation
The delayed Project completion is forecasted for August 2026 and necessitates additional funding for Valley Water staff labor, services and supplies costs, and anticipated further change orders including for the Contractor’s delay impact costs. Staff recommend a budget adjustment as detailed in the Financial Impact below.
Increased Construction Contingency Recommendation
The remaining contract contingency of $242,231 is insufficient to complete the Project as designed. The Project was originally scheduled for completion in April; however, the Contractor has continued working beyond the contract completion date without recovery of overhead costs. To compensate the Contractor for extended performance, address known and anticipated change order work, accommodate future unknown changes that may arise during construction, and cover estimated delay-related cost impacts, staff recommends increasing the Project contingency to a total amount of $7,804,592.
The recommended incremental increase to the contingency is $2,500,000, with no revisions to the previously approved delegated authority limits for the Engineering Unit Manager, Deputy Operating Officer, Assistant CEO, and Chief Executive Officer, up to the full amount of the increased contingency. This increase will allow staff to continue advancing the work without administrative delays and to complete and close out the Project in time for operation in fall 2026.
An increase in the contingency sum would allow staff to immediately fund the negotiated contract adjustments, execute known and future change orders, and promptly address additional unanticipated conditions during construction without causing unnecessary delays or consequential cost impacts to the Project.
Following a comprehensive evaluation of the Contractor’s updated schedule, delays incurred to date, and associated delay-related costs, staff will negotiate and execute the necessary contract change orders to complete the work and close out the Project as expeditiously as possible.
ENVIRONMENTAL JUSTICE IMPACT:
There are no environmental justice impacts associated with this item.
FINANCIAL IMPACT:
The Coyote Creek Steam Augmentation Fish Protection Measure: Chillers Plant Project, Project No. 91864008, as part of the Anderson Dam FOCP, is included in the Capital Improvement Program (CIP) FY 2026-30 Five-Year Plan and in the FY 2025-26 Adopted budget.
Approval of Recommendations A and B would increase the Total Project Cost (TPC) reflected in the CIP’s FY 2026-30 Five-Year Plan by $3,945,234. An FY 2025-26 Budget Adjustment of $3,945,234 is recommended to transfer funds from Operating and Capital Reserve to accommodate the increase to FY 2026 planned expenditures, which would leave a remaining balance in the Fund 61 Operating and Capital Reserve of $68,163,232. Funding from the budget adjustment will allow adequate funds to increase the labor budget by $1,191,206; services and supplies budget by $254,028; and construction contract contingency by $2,500,000 to pay the proposed and potential change orders needed to complete the Project. These updates will be incorporated into the CIP’s Draft FY 2027-31 Five-Year Plan.
The Project is funded by the Water Utility Enterprise Fund (Fund 61) with 81.67% of the Fund 61 costs allocated to Zone W-2 (North County), 7.53% to Zone W-5 (South County), and 10.80% to Zone W-7 (South County).
CEQA:
The recommended action does not constitute a project under CEQA because it does not have a potential for resulting in direct or reasonably foreseeable indirect physical change in the environment.
ATTACHMENTS:
Attachment 1: Map
Attachment 2: PowerPoint
UNCLASSIFIED MANAGER: Manager
Ryan McCarter, 408-630-2983