BOARD AGENDA MEMORANDUM
Government Code § 84308 Applies: Yes ☐ No ☒
(If “YES” Complete Attachment A - Gov. Code § 84308)
SUBJECT: Title
Approve a Sole Source Designation, Adopt Plans and Specifications and Authorize Advertisement for Bids for the Penitencia Water Treatment Plant Residuals Management Project, Project No. 93234044, Contract No. C0711 (San Jose, District 3).
End
RECOMMENDATION: Recommendation
A. Find that the Penitencia Water Treatment Plant Residuals Management Project is substantially complex and, therefore, requires construction contract retention of ten percent (10%);
B. Find that certain Supervisory Control and Data Acquisition (SCADA), electrical, and instrumentation components should be designated as sole source products to match other products already in use at the Penitencia Water Treatment Plant. Public Contract Code Section 3400(c)(2);
C. Adopt the Plans and Specifications and Authorize Advertisements for Bids for construction of the Penitencia Water Treatment Plant Residuals Management Project per the Notice to Bidders; and
D. Authorize the Designated Engineer to issue addenda, as necessary, during the bidding process.
Body
SUMMARY:
The objective of the Penitencia Water Treatment Plant Residuals Management Project (Project) is to address age, capacity, efficiency, and reliability issues with the plant’s existing Residuals Management System (RMS) to ensure that the plant efficiently and reliably provides potable water to retailers in Santa Clara Valley Water District’s (Valley Water) service area while meeting applicable regulatory standards. The scope of work for the Project includes improvements to the following components of the RMS: washwater handling and treatment, sludge handling and dewatering, and sedimentation basin sludge withdrawal.
Staff is recommending the Board find that the Project is substantially complex and requires a contract retention of 10% and that certain Supervisory Control and Data Acquisition (SCADA), electrical, and instrumentation components be designated as sole source products. Staff also recommends the Board adopt the Project Plans and Specifications and authorize staff to advertise for construction bids, per the Notice to Bidders (Attachment 1).
Project Background
The Penitencia Water Treatment Plant (PWTP), constructed in 1974, is the smallest of Santa Clara Valley Water District’s (Valley Water) three potable water treatment plants. The plant delivers up to 42 million gallons of water per day to retailers, businesses, and residents within Valley Water’s service area. The plant services the North San Jose and Milpitas areas, supplying safe drinking water to approximately 270,000 residential and commercial users.
The existing RMS facilities have become increasingly inefficient, less reliable, and labor intensive to operate and maintain. The original design of the RMS process makes it difficult to achieve current water quality standards and constrains existing plant operations. The Project is estimated to take five (5) years to complete with a construction cost estimated to be between $65 million and $75 million.
Construction Contract Retention
Public Contract Code (PCC) Section 7201 limits retention amounts for public works construction contracts to five percent (5%) of the total contract price. PCC Section 7201(b)(4) provides that retention proceeds on a project may exceed 5% where the Board makes a finding that the proposed project is “substantially complex” and, therefore, requires a retention amount greater than 5%.
To comply with the PCC in regard to increasing the retention to ten percent (10%), staff recommends the Board find that the Project is substantially complex based on the complexity and precision required to construct the work within an operating treatment plant that must remain operational at all times except for very brief shutdown periods. The number and length of planned plant shutdowns have to be kept to a minimum in order to minimize interruptions of water production and impacts to the water retailers and their customers. Contractor’s work during plant shutdowns typically involves multiple disciplines (civil, mechanical, electrical, control systems) that must be planned and executed meticulously. The level of precision and coordination required for this Project is unique and beyond what is customarily required.
Sole Source Justification
For a sole source product to be mandated by a public entity for a construction project, at least one of four criteria must be met as stated in Public Contract Code (PCC) Section 3400(c). For this Project, PCC Section 3400(c)(2) allows the awarding authority to make a finding that such designations are justified to obtain necessary items to match other products in use on a particular public improvement, either completed or in the course of completion.
To comply with the PCC in regard to use of sole source products for Project construction, staff recommends the Board find certain items as specified in the Plans and Specifications are necessary to match the existing equipment already in use at the Penitencia Water Treatment Plant and other Valley Water facilities using the supervisory control and data acquisition (SCADA) system.
Releasing certain information in the Plans and Specifications, including identification of the sole source products and details of the integration of the products into the existing information technology systems, to the public, may increase the potential for an attack on a Valley Water information technology system. To protect Valley Water’s information technology systems, all parties interested in accessing the Project Plans, Specifications, and Addenda must register as a vendor at the Valley Water Vendor Portal and submit a completed Non-Disclosure Agreement (NDA), FC 1650, to access the Contract Documents.
Board Adoption of Plans and Specifications and Addenda Authorization
Board adoption of plans and specifications and Board authorization to advertise is recommended in order to proceed to advertise the Project for construction. Authorizing the Designated Engineer to issue addenda during the procurement allows for modifications to the construction Contract Documents, if necessary, during the bidding period and before the contract is awarded.
The Project Plans, Specifications, and justification for the recommended sole source products were provided by separate communication to Valley Water’s Board of Directors for their review, prior to adopting them for bid advertisement. Addenda will be provided to the Board pursuant to the same communication protocols. The Notice to Bidders informs interested parties they must register as a vendor at the Valley Water Vendor Portal and submit a completed Non-Disclosure Agreement in order to access the Plans, Specifications, and Addenda.
Previous Board Actions
On March 25, 2025, the Board adopted a Resolution setting the time and date of a Public Hearing on the Final Mitigated Negative Declaration (MND) and Engineer’s Report for the Project, to be held on April 8, 2025.
On April 8, 2025, the Board conducted a Public Hearing on the Final MND and Engineer’s Report for the Project, adopted a Resolution approving the Final MND and the Mitigation Monitoring and Reporting Program (MMRP) for the Project, adopted a Resolution approving the Engineer’s Report for the Project, and approved the Project.
Permits
Permits to be obtained by the Contractor during the construction of this Project include but are not limited to the following:
1. Hazardous Materials Permit(s) from the City of San Jose Fire Department
2. Fire Alarm and Sprinkler Permit(s) from the City of San Jose Fire Department
3. Short Term Wastewater Discharge Permit from the City of San Jose Environmental Services Department
Outreach to Bidders
The Notice to Bidders (Attachment 1) will be sent to the following recipients: approximately 26 plan rooms; 83 minority businesses, and 44 Chambers of Commerce, as well as, small business groups and certified small business contractors; local and regional firms that have the appropriate license for this type of work; and the Santa Clara and San Benito Counties Building and Construction Trades Council, which maintains contacts with at least 1048 contractors and 70 union representatives, for distribution to their members. The total number of entities to be notified in Planet Bids is 1322.
Public Outreach
As the proposed Project involves replacing and upgrading the existing treatment plant facilities, their impacts on the surrounding community are anticipated to be relatively modest. The construction contract documents include requirements and measures to minimize impacts during construction. Neighbors will be informed of potential issues, as appropriate.
Next Steps
If the Board approves the recommendations, Valley Water staff will proceed to advertise for bids for Project construction. Staff anticipates recommending the Board award the construction contract in October 2025.
ENVIRONMENTAL JUSTICE IMPACT:
There are no environmental justice and equity impacts associated with the recommended action for the Project. The recommended action is unlikely to or will not result in any significant adverse effect upon the environment because mitigation measures have been incorporated into the Project to avoid, minimize, and reduce potential impacts to less-than-significant; and/or is not associated with an equity opportunity.
FINANCIAL IMPACT:
The Penitencia Water Treatment Plant Residuals Management Project, Project No. 93234044, is included in the Capital Improvement Program (CIP) Fiscal Years (FY) 2026-30 Five-Year Plan and in the FY 2026-27 Adopted Budget. The estimated construction cost is between $65 million and $75 million. Based upon current estimates, there are adequate funds in the Project’s Board-Adopted FY 2026-27 adopted budget to encumber the planned expenditures for the construction contract during this fiscal year. Funds to cover each subsequent fiscal year anticipated Project costs will be included in the biennial budget process and recommended by staff during the annual fiscal year budget process or through budget adjustment(s), if needed. The Project is funded by the Water Utility Enterprise Fund (Fund 61), with 100% of the costs allocated to Zone W-2 (North County).
CEQA:
A Final Mitigated Negative Declaration (MND) and Mitigation Monitoring and Reporting Program (MMRP) for the Penitencia Water Treatment Plant Residuals Management Project was adopted by the Board on April 8, 2025. A Notice of Determination has been prepared and filed with the County of Santa Clara Office of the Clerk-Recorder on April 23, 2025.
ATTACHMENTS:
Attachment 1: Notice to Bidders
Attachment 2: Project Delivery Chart
Attachment 3: Map
UNCLASSIFIED MANAGER: Manager
Emmanuel Aryee, 408-630-3074