That the City Council:

A. Award a construction contract to Mike Bubalo Construction Co. Inc., of Baldwin Park, California, in the amount of $1,654,535 to complete the East Bishop Drive Storm Drain Improvements, City Project No.1-D-16, and reject all other bids; and
 
B. Authorize the City Manager to execute an agreement with Mike Bubalo Construction Co. Inc., to complete the East Bishop Drive Storm Drain Improvements, City Project No.1-D-16, and issue a purchase order in the amount of $1,819,989; which includes a 10 percent contingency; and,
 

C. Approve an appropriation of additional unencumbered American Rescue Plan Act (“ARPA”) funds in the amount of $1,836,222 to fully fund the additional construction, inspection and material testing services costs associated with the completion of the East Bishop Drive Storm Drain Improvements, City Project No.1-D-16.

On November 20, 2023, the City of La Habra (“City”) terminated a Public Works Agreement with AID Builders, Inc., (“AID”), the firm originally contracted to perform the East Bishop Drive Storm Drain Improvements, City Project No. 1-D-16 (“Project”). This action ratified the letter of termination that was issued to AID by the City on October 26, 2023. The termination of the agreement with AID was a result of poor performance and poor quality work that was deemed non-compliant with the Project contract documents, plans and specifications. Despite the City’s best efforts over several months to assist AID to properly complete the Project, AID proved unable to perform the work, failed to cure the project deficiencies, and ultimately defaulted on the contract. On November 20, 2023, as a result of AID failing to secure the project job site, the City Council authorized staff to continue with the emergency work deemed necessary to properly secure the project job site, and protect adjacent properties from potential damages that AID left unsafe.
 

Since October 10, 2023, staff from the City's Engineering Division and the City Attorney’s Office have been in regular communication with the Gray Casualty & Surety Company (“Surety”), AID’s bonding company, which has the responsibility to ensure the completion of the Project as a result of their principal’s failure to perform, per the Project’s agreement. On November 19, 2023, following consultation with the Surety’s representatives, staff prepared and issued a Request for Proposals (RFP) to four licensed and qualified contractors to bid on and complete the Project. The RFP listed the appropriate scope of the remaining work necessary to complete the Project and to properly restore the site.
 
On Monday, November 20, 2023, all four contractors submitted bids with the following results:

That same day, City staff submitted the four bids that were received to the Surety and their representatives for their review and approval. Following their review of the bids, the Surety had no objection with the bid pricing as submitted by Mike Bubalo Construction Co. Inc., (“Bubalo”) or with the City proceeding to contract with Bubalo to complete the Project.

The Surety’s agreement is conditioned on the understanding that the bid is all-inclusive with no exceptions, including warranty. It is also conditioned on additional information currently unknown, including a final accounting of any emergency work already performed, and the cost of any additional pipe needing to be purchased in order to complete the work. Once the Surety receives this additional information, and reserving all rights, the Surety has indicated it intends to tender completion of the remaining work to the City, utilizing Bubalo as the completion contractor. Representatives from the Surety have indicated that they intend to send the City a proposed tender settlement agreement once all incurred costs and a final accounting of this proposed contract, along with any outstanding change orders with AID, are completed. That said, the City is contractually entitled to reimbursement of all eligible costs associated with the emergency work and completion of the Project.

Staff has no objection with the Surety selecting Bubalo as the contractor to finish this Project, nor with the initial stipulated conditions of the proposed settlement agreement. The City Attorney's office will continue to work closely with staff and the Surety regarding the proposed settlement agreement until it is finalized. Bubalo was retained early in October 2023 to perform emergency services to secure the Project job site and has performed competently thus far. They are an experienced contractor qualified to undertake this type of Project and finish it according to the Project plans and contract specifications. Bubalo has recently worked with the City on other emergency storm drain repair projects such as the Coyote Creek Channel and a storm pipe on Ridgehaven Drive, and has demonstrated satisfactory work quality and professionalism. Therefore, staff recommends that the City Council award a construction contract to Bubalo to complete the East Bishop Drive Storm Drain Improvements, City Project No.1-D-16.

On November 21, 2022, the City Council approved a total Project budget in the amount of $2,250,000 to fund the construction, inspection, and material testing associated with this Project. To date, the City has incurred approximately $2,154,534 in Project related costs, including contract and emergency work combined. Of this amount, $402,271 has been encumbered to address stop notices the City received from authorized vendors and subcontractors originally contracted by AID that did not receive payment for the goods and services they provided on the Project. Staff recommends utilizing these encumbered funds from the original Project budget to pay these vendors directly, subject to agreement from the Surety.
 
The following is the breakdown of the Project budget and expenditures to date and inclusive of the proposed contract to complete the Project:
 

East Bishop Drive Storm Drain Improvements Project Budget & Expenditures
AID Builders Contract Work
Contract Work (Paid to AID)	$           558,790.00
Stop Notices from Vendors and Subcontractors (Unpaid)	$           402,270.80
Subtotal	$           961,060.80
Emergency Work
City expenditures during Hillary Storm Event (estimated)	$             20,000.00
Valverde Construction, Inc. (paid)	$             79,960.45
Mike Bubalo Construction Co. Inc. (partially paid and estimated cost)	$           965,400.00
Subtotal	$        1,065,360.45
Consultant Services (Inspection & Material Testing)
Inspections for Project work (incurred costs)	$           115,612.00
Inspections for Emergency work (estimate)	$             32,500.00
Subtotal	$           148,112.00
Total paid and/or owed to date (Contract & Emergency work)	$        1,247,162.45
Total unpaid or estimated costs (Stop Notices and Emergency Work)	$           907,370.80
Total Incurred Costs to Date	$        2,154,533.25
Originally Approved Project Budget	$        2,250,000.40
Remaining Available Project Budget	$             95,467.15
Additional Recommended Budget Appropriation
Bubalo Construction (bid to complete the Project)	$        1,654,535.00
10% Construction Contingency	$           165,453.50
Subtotal	$        1,819,988.50
Additional Consultant Services (Re-design, Inspection & Material Testing)
Inspection for Bubalo Construction Contract Work (estimated)	$           111,700.00
Subtotal	$           111,700.00
Additional Funds Needed to Complete the Project	$        1,836,221.35
Total Proposed Amended Budget	$        4,086,221.75

In order to complete the Project, staff is requesting an additional appropriation of $1,836,221.35 from available and eligible unencumbered ARPA funding. The additional funding is necessary for the payment of completed emergency work, the bid amount as submitted by Bubalo to complete the Project, as well as re-design costs and additional inspection services. If approved by the City Council, the total proposed amended budget for the Project will be $4,086,221.75.

As previously indicated, the City is entitled to reimbursement from the Surety, and any other insurance coverage pertaining to this Project, for all necessary costs associated with completion of the Project. Once those costs are calculated, finalized and negotiated, staff will bring a settlement agreement to City Council for consideration and approval at a future City Council meeting. Although staff is currently recommending additional appropriation of funding to complete this Project, staff and the City Attorney's office will continue to aggressively pursue reimbursement of all eligible costs and expenses associated with this Project, whether from the Surety, contractors, subcontractors, insurance companies or any other entities who are or may be responsible for project failures and the City incurring additional costs. Any reimbursed amounts will be returned to the City's ARPA fund for re-appropriation at that time.