Consider Recommendation for City Council to Reject Bids for Water Treatment Plant Trunk Watermain Improvements, Improvement Project #21-08

Purpose:
The purpose of this case is to consider a recommendation for the City Council to reject bids for the Water Treatment Plant Trunk Watermain Improvements, Improvement Project #21-08. 
 
Background:
On March 9, 2021, the Ramsey City Council adopted Resolution #21-061 awarding a contract to SEH Inc. to prepare plans and specifications for Improvement Project #21-08, Water Treatment Plant Trunk Watermain Improvements. A copy of this resolution is attached.
 
Plans were prepared with a base bid and an alternate bid.

• Base bid – Specifies a combination of construction methods whereby open trenching of plastic (PVC) watermain is specified along the south side of Bunker Lake Boulevard and the north side of 143^rd Avenue, while directional drilling of plastic (PVC) watermain is specified at intersections, through Cottonwood Park, under Sunwood Drive, and under the stormwater pond between Hoya and Anderson Dahlen north of 143^rd Avenue.
• Alternate bid – Specifies directional drilling of plastic (PVC) watermain across as much of the project area as feasible.

 
Copies of the title sheet and general layout are attached for reference and the general layout shows all locations of the proposed open trenching and direction drilling for the base bid.
 
Bids were publicly opened on Tuesday, January 4, 2022, at 10:00 a.m.  A total of two (2) bids were received.  Bids ranged from a high of $8,391,994.66 to a low of $6,737,287.45 across two bid schedules.  Schedule 1 reflected the base bid (combination of open trench and horizontal directional drilling (HDD) installation methods), while Schedule 2 reflected the alternate bid (only HDD installation method).  Below is a table showing the two bids received.
 

Contractor	Total Schedule 1 Bid	Total Schedule 2 Bid
Park Construction Co.	$6,737,287.45	$7,059,102.16
Forest Lake Contracting, Inc.	$7,652,529.55	$8,391,994.66
Engineer's Estimate	$4,875,068.50	$4,916,194.50

 
The low bid received is reflected in the Schedule 1 bid and was submitted by Park Construction Company, of Minneapolis, MN in the amount of $6,737,287.45. This bid was approximately 38% higher than the Engineer’s Estimate of $4,875,068.50 due mainly to highly inflated PVC pipe costs, which is reflected in both bids.  
 

Staff anticipates 15 minutes will be required to present and discuss this case.  

Observations:
The bidding environment for utility pipes has grown increasingly volatile since 2020.  This is due to an overall shortage of pipe and appurtenant materials for various material types. The 2020 winter ice storms caused refineries in Texas to shut down for an extended period of time, which resulted in a shortage of resin needed to manufacture plastic pipe that continues to this day. In addition, a general shortage of pipe and appurtenant materials exists due to continued supply chain disruptions caused primarily by a shortage of drivers resulting from the pandemic, as well as from previous shipping lane blockages and extreme weather events. All this is resulting in inflated pipe costs and long delays between the time materials are ordered and the time they are delivered.
 
The attached memo from SEH’s project manager Chad Setterholm further details the reasons for the volatile pipe bidding environment and goes on to say that at this time it is not known when this volatile bidding environment may subside.
 
This project was ultimately bid to allow an extended bidding window of 2 months, and to allow bidders to substantially complete their work by mid-2023 to allow the trunk watermain to be operational before the new Water Treatment Facility is proposed to be commissioned in October of 2023.  This was done to allow bidders as much time as possible to work with materials suppliers to receive the best bid prices possible.
 
Unfortunately, both bids that were received were significantly higher that the engineer’s estimate, with the low bid being $1,862,218.95 (38-percent) higher. Because of this and the other reasons noted in the attached bid rejection recommendation letter, the design engineer recommends rejecting both bids and not awarding a contract at this time to allow material and construction costs to be monitored during 2022 in anticipation that bidding the project again later in 2022 or in early 2023 will present more favorable bids and additional bidders to help reduce project costs.
 
Since bids came in high for this project it is not unreasonable to expect inflated bids for the Water Treatment Facility as well. Staff therefore believes it is prudent to work to reduce costs for the both the Trunk Watermain Improvements and the Water Treatment Facility projects to avoid a need to either spend down the sewer and water enterprise funds, or to have to bond for a portion of the improvements.  
 
Alternatives:
Alternative #1 – Motion to recommend that the City Council reject bids for the Water Treatment Plant Trunk Watermain Improvements, Improvement Project #21-08.
 
Alternative #2 – Motion of other.   

SEH’s fees for designing the trunk watermain improvements and preparing plans and specifications = $235,895.
 
The preliminary construction cost estimate per the feasibility study was $3,424,750.
 
Construction cost estimates based on final plans and specifications for the base and alternate bids are;

• Base bid        = $ 4,875,068.50
• Alternate bid = $ 4,916,194.50

 
The $1.4+M difference in costs between the preliminary construction cost estimate and estimated construction costs based on final plans and specification is due to the inflated unit bid prices for PVC pipe materials.
 
Funding for this project is proposed to come from sewer and water enterprise funds.  For almost two decades, municipal water users have been contributing to a future water treatment plant, which includes off-site trunk watermain improvements required to provide the plant with raw water, and to transport treated (finished) water out to the distribution mains.  

Staff and SEH recommend approving alternative #1.  Upon approval from the Public Works Committee, Staff will present a case to the City Council to reject bids on January 25, 2022.  
 

Motion to recommend that the City Council reject bids for the Water Treatment Plant Trunk Watermain Improvements, Improvement Project #21-08.