COMMITTEE AGENDA MEMORANDUM
Capital Improvement Program Committee
Government Code § 84308 Applies: Yes ☐ No ☒
(If “YES” Complete Attachment A - Gov. Code § 84308)
SUBJECT: title
Receive and Discuss Information Regarding the Anderson Dam Seismic Retrofit Project Proposed Contingency Fund and Delegated Authority Levels for Contract Change Orders.
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RECOMMENDATION: Recommendation
Receive and discuss information regarding the Anderson Dam Seismic Retrofit Project proposed contingency fund and delegated authority levels for contract change orders.
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SUMMARY:
On September 23, 2025, the Board of Directors adopted the Plans and Specifications and authorized advertisement for bids for construction of Anderson Dam Seismic Retrofit Project (ADSRP), including authorization for the Designated Engineer to issue addenda during the bidding process. The procurement process is ongoing for ADSRP, with bid opening scheduled for June 24, 2026, and Board consideration of contract award scheduled for July 2026.
In preparation for contract award, staff has developed a recommended approach for contingency funding and delegated authority for change orders. Due to the unprecedented scale and complexity of ADSRP, staff recommends a modified approach to contingency funding that differs from Valley Water standard practice.
Project Background
The Anderson Dam Seismic Retrofit Project (ADSRP) is a critical infrastructure project that will correct seismic deficiencies and otherwise meet all current Federal Energy Regulatory Commission (FERC) and California Department of Water Resources, Division of Safety of Dams (DSOD) dam safety design standards. The full reservoir capacity will be restored upon completion of the Project.
Implementation of ADSRP will result in a more seismically safe dam that will allow Valley Water to refill Anderson Reservoir and better carry out water supply and groundwater recharge activities. The ADSRP will remove and replace most of the existing dam with a well-compacted, zoned embankment dam; construct a new low-level outlet and a new high-level outlet to meet DSOD requirements for emergency drawdown of the reservoir; remove, replace, and extend the existing concrete spillway to safely pass the probable maximum flood; and make other improvements to Anderson Dam.
ADSRP is a uniquely complex project with a seven-year construction duration (2027 to 2033), followed by a two-year plant establishment and maintenance period.
Contingency Funds
As noted in the Notice to Bidders, the estimated construction cost for ADSRP is projected to range from approximately $1.2 billion to $2 billion. While the procurement process is ongoing, the final contract amount is not yet known. For most Valley Water capital projects, the Board typically approves a contingency amount equal to 10% of the construction contract value. Applying this standard approach to ADSRP would result in a contingency ranging from approximately $120 million to $200 million at the time of award.
Given the magnitude of the Project and the uncertainty of the pending final contract value, staff recommends a different approach by approving a lower initial contingency amount than the standard 10%.
Staff recommends the Board approve an initial contingency fund of $50,000,000 for ADSRP. This approach will allow staff to quickly address unforeseen or changed site conditions and other unanticipated occurrences without causing unnecessary delays or additional costs to the Project. This approach will also avoid over-encumbering funds at the time of contract award given the large contract value. Considering the long duration of the Project, this approach allows the Board to maintain oversight and provides flexibility to consider additional contingency, if needed, as construction progresses.
The recommended contingency of $50,000,000 represents approximately 4.2% of a $1.2 billion construction contract, or 2.5% of a $2 billion contract for ADSRP.
The recommended contingency amount is based on an estimate of known and unknown risks, such as:
1. Unanticipated variances in quantities and cost of various lump sum items estimated in the Bid Proposal;
2. Differing site conditions;
3. Concealed field conditions or ones that differ from the baseline or as-built information used in the preparation of Project Contract Documents; and
4. Mandatory coordination processes and consultation with regulatory agencies overseeing the Project.
In addition to the risks mentioned above, construction costs could exceed the contingency amount approved by the Board, based on additional circumstances including:
1. Design changes required by regulatory agencies (FERC and DSOD)
2. Permit compliance changes from the environmental regulatory agencies
3. Changes due to unforeseen conditions and impacts during construction requiring resequencing and acceleration of work to maintain the Project schedule.
4. The Contract includes a $25 million incentive for the Contractor if the critical Year 4 milestone of dam reconstruction is achieved on time. This would be issued as a Contract Change Order, presented to the Board of Directors prior to approval.
Given the scale, complexity, duration, and regulatory oversight of ADSRP, it is likely that additional contingency may be required in the future. Any additional funding requests would be brought to the Board for consideration at the appropriate time.
Delegated Approval Authority
Based on recent Valley Water projects, delegated authority levels have varied depending on project size and complexity. Given the scale of ADSRP, staff recommends the following delegated authority levels for approval of individual construction change orders:
Unit Manager: Up to $500,000
Assistant Operating Officer: Up to $1,000,000
Deputy Operating Officer: Up to $1,500,000
Assistant Chief Executive Officer: Up to $5,000,000
Chief Executive Officer: Up to $10,000,000
The recommended delegated authority levels reflect the scale, complexity, and regulatory environment of ADSRP and are intended to support timely decision-making. Additionally, the Board retains control through approval of the overall contingency amount, and any additional contingency would require Board approval.
For comparison, Table 2 below summarizes delegated authority levels approved by the Board for recent large construction projects valued over $100,000,000.
As shown above, the proposed delegated authority levels for ADSRP exceed those approved for previous projects. These higher thresholds are appropriate due to the following factors:
Project Scale and Proportionality
Due to the overall size of the construction contract, ADSRP will incur significantly higher monthly construction expenditures than previous Valley Water projects of similar duration. Even when spread over multiple years, the magnitude of work results in substantially larger dollar values being expended on a routine basis. As a result, individual change orders are also likely to be larger in value, supporting the need for higher delegated approval authority to maintain efficient project delivery.
Schedule Sensitivity and Cost Control
Construction of ADSRP involves highly sequenced and interdependent activities, including dam excavation, embankment reconstruction, tunnel and shaft excavation with final concrete lining, and spillway replacement, all performed under strict regulatory inspection requirements. Certain work activities cannot proceed until inspections are completed and required modifications are addressed.
Delays in approving change orders can halt work, disrupt construction sequencing, and impact the overall schedule. For a project of this scale, even minor impacts or delays can result in significant cost impacts. Higher approval thresholds allow staff to respond promptly, minimize disruptions, and control overall project costs.
Regulatory Oversight and Complex Construction Risks
The Project is subject to ongoing oversight by FERC and DSOD, which may require timely modifications during construction. In addition, ADSRP includes major excavations, dam modifications, and demolition of the existing spillway and other structures under variable site conditions, increasing the likelihood of unforeseen conditions that require timely responses to maintain progress and safety.
These adjustments are necessary to ensure timely decision-making in the field and to avoid delays that could increase overall project costs.
ENVIRONMENTAL JUSTICE IMPACT:
There are no environmental justice impacts associated with this item.
ATTACHMENTS:
None
UNCLASSIFIED MANAGER:
Manager
Ryan McCarter, 408-630-2983