Adopt Resolution #HRA-13-06-107 Accepting Bids and Awarding Contract for COR TWO (Sunwood Retail) Stage 1 Improvements

The COR TWO (Sunwood Retail) Stage 1 (common) improvements project area is bounded by Armstrong Boulevard to the west, Sunwood Drive to the east and north, and the initial COR development to the south.  The Stage 1 improvements include minor site grading and construction of private bituminous access drives and utility trunk and service lines to serve the three platted commercial parcels.  On-site stormwater treatment improvements, both temporary and permanent, are also proposed.

On October 16, 2012, the HRA approved a work order with Landform Professional Services, LLC to prepare plans and specifications for the COR TWO Stage 1 improvements.  The plans and specifications for the Stage 1 improvements were completed and delivered to city staff on May 17, 2013, and the project was advertised for bids from May 17th through June 6th in the Anoka Union and in Finance and Commerce, as well as on-line using QuestCDN.  One addendum was issued during the time the project was out for bids to address city staff’s review comments.  The addendum included the addition of two missing bid items, bituminous material for tack coat and premium topsoil, modified the bid unit for aggregate base class 5 from cubic yards to tons, and modified several turf establishment bid items, most notably by specifying hydroseeding instead of seeding and mulching.

No notifications were provided in regards to this item.

As was discussed at the April 9th and May 14th regular HRA regular meetings, one of the three platted parcels includes the proposed McDonald’s USA, LLC development in the northwest corner of the project site.  McDonald’s informed the city that they wish to develop the site this year, with the intent of opening for business this fall.  To allow McDonalds to meet this schedule, the HRA accepted plans and specifications and authorized advertising for bids on May 14th.

Staff is now requesting the HRA to accept the two bids received on Friday, June 7, 2013, which were checked for errors and omissions by the design engineer, and to award a contract for the COR TWO Stage 1 improvements to the lowest responsible bidder, Douglas-Kerr Underground, LLC of Mora, Minnesota, in the amount of $241,875.50 for the base bid, or in the amount of $311,993.55 for the base bid plus alternate bid.  Substantial completion of the project is anticipated to occur on or before August 2nd, with final completion on or before September 13th.  As was discussed previously, McDonald’s development team has indicated they are agreeable to these milestones.

The HRA is being asked to consider whether to approve construction of the temporary above-ground ponds, or the permanent below ground storage chamber stormwater improvements at this time.  Based on the lowest responsible bid, the cost to construct the temporary at-grade ponding improvements per the base bid will be $70,118.05 less than the permanent stormwater improvements per the alternate bid.  The temporary improvements can be constructed at this time, then once a development proposal is received for the south parcel and/or the Sophia Ramsey site the permanent stormwater treatment improvements can be constructed at a later date with little sunk cost.

Alternatives

Alternative #1 - Accept bids and award contract to the lowest responsible bidder, Douglas-Kerr Underground, LLC of Mora, Minnesota in the amount of $241,875.50 for the base bid improvements only.  Based on the knowledge that these improvements need to be constructed (with some potential for parallel construction) before McDonald's will close on the parcel, and since construction of the temporary stormwater improvements as reflected in the base bid will allow for the greatest flexibility in development options in the future and will better allow us to meet the timelines specified in the existing real estate contract, this is staff's preferred option.

Alternative #2 - Accept bids and award contract to the lowest responsible bidder, Douglas-Kerr Underground, LLC of Mora, Minnesota in the amount of $311,993.55 for the base bid plus alternate bid improvements. This alternative also addresses the fact that these improvements need to be constructed (with some potential for parallel construction) before McDonald's will close on the parcel, and it will still meet the timelines specified in the existing real estate contract.  However, construction of the permanent stormwater improvements reflected in the alternate bid will provide the least flexibility in development options in the future.  Therefore, this is staff's second preferred option.

Alternative #3 - Do not accept bids or award a contract at this time. This is not staff's recommended alternative. Per the real estate contract, McDonald's possesses a right to cure provision so if the HRA does move forward with the improvements, McDonald's could essentially choose to still proceed to closing, hold land sale proceeds in escrow (at 1.5 times the cost of completing the improvements), and could choose to complete the improvements using said escrow funds.  In addition, the real estate contract does specify that the HRA shall construct the improvements.  Staff therefore advises the HRA, after discussion with legal counsel, that Alternative #1 or #2 will provide the HRA the most security and control over the installation of the improvements.

Staff recommends that the HRA adopt Resolution 13-06-107 accepting bids and awarding a contract for the COR TWO (Sunwood Retail) Stage 1 improvements for the base bid improvements only, which provides for construction of the temporary stormwater improvements at this time which will reduce initial construction costs by over $70,000 while allowing for the greatest flexibility for future site development proposals.

The lowest responsible bid for the base bid improvements is $241,875.50, while the lowest responsible bid for the base bid plus alternate bid is $311,993.55.  Ultimately, funding for the improvements will come from land sale proceeds but at this time only McDonald's USA, LLC, has committed to purchasing a parcel so the project will require an interim funding source.  Per the Real Estate Contract with McDonald's USA, LLC, the HRA must begin construction on the improvements prior to closing with McDonald's so an interim funding source must be identified at this time. The interim funding source is proposed to be the COR Revolving Fund.  Based on this interim loan, the interim funding will experience a negative interest.  The HRA can then pay itself back through additional land sales of the two remaining COR TWO parcels, with the intent being to split the construction costs for the Stage 1 improvements between the three parcels on a pro-rata basis, which McDonalds has previously consented to.

Motion to adopt Resolution #HRA-13-06-107 accepting bids and awarding a contract for the COR TWO (Sunwood Retail) Stage 1 improvements to the lowest responsible bidder, Douglas-Kerr Underground, LLC of Mora, Minnesota in the amount of $241,875.50 for the base bid improvements only, or in the amount of $311,993.55 for the base bid plus alternate bid improvements.