BOARD AGENDA MEMORANDUM
Government Code § 84308 Applies: Yes ☐ No ☒
(If “YES” Complete Attachment A - Gov. Code § 84308)
SUBJECT:
Title
Accept the Work as Complete and Direct the Clerk to File the Notice of Completion of Contract and Acceptance of Work for the South County Recycled Water Pipeline Phase 1C Project, Cratus, Inc., Contractor, Project No. 91094009, Contract No. C0723 (City of Gilroy, Unincorporated Santa Clara County, District 1).
End
RECOMMENDATION:
Recommendation
A. Accept the work on the South County Recycled Water Pipeline Phase 1C Project, Project No. 91094009, Contract No. C0723 as complete; and
B. Direct the Clerk of the Board to sign the Notice of Completion of Contract and Acceptance of Work and submit for recording to the Santa Clara County Clerk-Recorder.
Body
SUMMARY:
The construction contractor, Cratus, Inc. (Contractor), has completed the South County Recycled Water Pipeline Phase 1C Project (Project).
Project Background
In 2004, the Santa Clara Valley Water District (Valley Water) and South County Regional Wastewater Authority (SCRWA), with the participation of the Cities of Gilroy and Morgan Hill, jointly prepared the South County Recycled Water Master Plan (2004 Master Plan). The 2004 Master Plan was updated in 2015 (2015 Master Plan Update) and approved by both the SCRWA Board and Valley Water’s Board of Directors (Board). The 2015 Master Plan Update carried forward the immediate and short-term capital investments that had been defined in the 2004 Master Plan and re-evaluated the long-term capital investments to expand the use of recycled water in Gilroy and Morgan Hill. The immediate-term facilities were completed in 2006. The short-term Phase 1 distribution facilities were split into Phases 1A, 1B, and 1C. The Phase 1A facilities were completed in 2012. At the request of the City of Gilroy, a portion of the Phase 1B facilities (Camino Arroyo Service Line) was completed in June 2015.
The remaining phases were bid and awarded under the South County Recycled Water Pipeline Short-Term Phase 1B/2A/1C/2B Project (Contract No. C0668), with Phase 1C included as a supplemental item. Phase 1B facilities, along with the Phase 2A facilities, were installed in August 2023. The work for Phase 2B is ongoing under Contract No. C0668. Unfortunately, Valley Water was not able to proceed with the Phase 1C work under Contract No. C0668 because easements were not secured in sufficient time. As the scope was removed from Contract No. C0668, the funds allocated for Phase 1C were disencumbered from the Fiscal Year 2024-25 (FY 25) adjusted budget and carried forward to the FY 2025-26 (FY 26) adjusted budget to allow for the scope to be re-bid under the Project (Contract No. C0723).
This Project completes the short-term Phase 1 distribution system facility improvements in the 2015 Master Plan Update to help resolve the current recycled water distribution system’s operational deficiencies, improve the system’s reliability, expand the system to serve new customers, and allow increased use by existing customers.
Relevant Prior Board Actions
On October 13, 2015, the Board held a Public Hearing on the Engineer’s Report and adopted Resolution No. 15-64 approving the Engineer’s Report.
On September 14, 2021, the Board considered the First Addendum to the South County Recycled Water Master Plan Program’s Environmental Impact Report for the Phase 1C alignment and adopted the plans and specifications and authorized advertisement for bids for construction of the South County Recycled Water Pipeline Short-Term Phase 1B/2A/1C/2B Project.
On December 14, 2021, the Board awarded a construction contract to Steve P. Rados, Inc. (Contract No. C0668) for the South County Recycled Water Pipeline Short-Term Phase 1B/2A/1C/2B Project, ratified addenda to the contract documents, and approved a construction contingency of $3,446,200.
On August 12, 2025, the Board adopted the Project plans and specifications and authorized advertisement for bids for construction.
On September 23, 2025, the Board ratified Addenda No(s). 1, 2, 3, and 4 to the Contract Documents for the Project, awarded the Construction Contract to Cratus, Incorporated, in the sum of $3,270,000, and approved a contingency sum of $490,500 and authorized the Chief Executive Officer or designee to approve the individual change orders up to the designated amount.
Contract Change Orders
A total of four (4) contract change orders totaling a net increase of $154,339.85 were executed for this contract to address various issues, including modifications to the pipeline alignment and profile, unforeseen groundwater issues, City of Gilroy backfill requirements, Valley Water requested changes, and credits back to the contract for deleted items of work.
These changes included:
A. $21,442.40 for modifying the HDPE pipeline alignment to avoid conflicts with a telecommunication company’s utility pole and additional potholing.
B. $200,000.00 for dewatering (pumping and discharging) groundwater including monitoring, pH, and turbidity testing, and reporting to State Waterboards for SWPPP compliance.
C. $60,231.11 for off-haul and disposal of the City of Gilroy’s soil along with the purchase of aggregate base (Class 2) for trench backfill.
D. <$127,333.66> credit for unused or partially used bid items (Bid Item #5, #16, #18, and #21), and unused supplemental bid items (Bid Item #23, #24, #25, and #26). This contract change order also includes compensation to the Contractor for changes to the air-release valve (ARV) and steel pipe, pipe bedding material, and installation of additional telemetry conduit.
Table 1 presents a summary of the construction contract and contingency amounts.
TABLE 1
SUMMARY OF CONSTRUCTION CONTRACT
AND CONTINGENCY AMOUNTS
|
|
Contract Amount |
Contingency Amount Remaining |
|
Original Contract and Board-Approved Contingency |
$3,270,000.00 |
$490,500.00 |
|
Change Order No. 1 (Staff approved) |
$21,442.40 |
$469,057.60 |
|
Change Order No. 2 (Deputy approved) |
$200,000.00 |
$269,057.60 |
|
Change Order No. 3 (Staff approved) |
$60,231.11 |
$208,826.49 |
|
Change Order No. 4 Final (Staff approved) |
$136,162.34 |
$72,664.15 |
|
Contingency Amount Spent on COs 1-4 and Remaining |
$417,835.85 |
$72,664.15 |
|
Change Order No. 4 Final (Staff-approved Contract Credit) |
($263,496.00) |
|
|
Reduced Contract Amount with Credit |
$3,006,504.00 |
|
|
Final Contract Amount with Change Orders and Credit |
$3,424,339.85 |
|
Acceptance of the Work and Recording Notice of Completion of Contract
The California Civil Code allows an owner or agent to execute a Notice of Completion of Contract after acceptance of the work by the Board. The Notice of Completion of Contract and Acceptance of Work is included in Attachment 1. The Designated Engineer has determined that the work has been completed, to the best of their knowledge, in accordance with the plans and specifications, and recommends acceptance. The Designated Engineer’s recommendation of construction acceptance is included in Attachment 2. The Project Completion Letter is included as Attachment 3. Photos of the completed Project are included in Attachment 4. The Project Delivery Process Chart is included in Attachment 5.
Construction Contract Retention
California law requires Valley Water to release contract retention in accordance with certain time frames, which will commence once the Notice of Completion is recorded. Interest payment on retention due to the contractor may be avoided by meeting the requisite deadlines.
Valley Water is currently withholding retention funds totaling five percent (5%) of the contract items ($171,216.99) in accordance with the Public Contract Code. Per the Contract Documents, Valley Water is required to release retention funds associated with the contract 35 days after recording the Notice of Completion of Contract and Acceptance of Work, subject to any withholds required by law or the contract.
Total Project Expenditures
As indicated in the Summary of Construction Contract and Contingency Amounts (Table 1), the original contract amount of $3,270,000.00 has increased by $154,339.85 to $3,424,339.85, an increase of approximately 4.72 percent.
ENVIRONMENTAL JUSTICE AND EQUITY IMPACT:
There are no environmental justice impacts associated with this item. This action is unlikely to or will not result in adverse impacts.
FINANCIAL IMPACT:
The South County Recycled Water Pipeline Phase 1C Project, Project No. 91094009, is included in the Capital Improvement Program (CIP) FY 2027-31 Five-Year Plan and in the FY 2026-27 Adopted budget. The Project was funded by the Water Utility Enterprise Fund (Fund 61), with 100% of the cost allocated to Zone W-5 (South County).
Transfer of Remaining Balances
The original contract amount of $3,270,000.00, combined with the Board-approved contingency encumbrance of $490,500.00 totals $3,760,500.00, for construction of the Project. The original contract amount of $3,270,000.00 was reduced by ($263,496.00) with Change Order #4’s contract credit, resulting in a reduced contract amount of $3,006,504.00. When combined with the contingency amount spent on Change Orders 1-4, totaling $417,835.85, the final contract amount with all change orders and credit is $3,424,339.85.
The total approved for construction of the Project of $3,760,500.00, less $3,424,339.85 (the final contract amount with all change orders and credit), results in a positive balance of $336,160.15. Upon Project completion and close-out, any remaining funds will be released to Project reserves for the South County Recycled Water Pipeline - Short-Term Implementation Phase 1B (91094009).
CEQA:
The recommended action does not constitute a project under CEQA because it does not have potential for resulting in direct or reasonably foreseeable indirect physical change in the environment.
ATTACHMENTS:
Attachment 1: Notice of Completion and Acceptance of Work
Attachment 2: Construction Contract Acceptance
Attachment 3: Project Completion Letter
Attachment 4: Construction Photos
Attachment 5: Project Delivery Process Chart
UNCLASSIFIED MANAGER:
Manager
Emmanuel Aryee, 408-630-3074