Adopt Resolution #23-061 Accepting Bids and Awarding Contract for Improvement Project #21-09, Centralized Water Treatment Plant

Purpose:
The purpose of this case is to adopt Resolution #23-061 accepting bids and awarding a Contract for construction of Improvement Project #21-09, Centralized Water Treatment Plant, to Magney Construction, Inc. in the amount of $31,528,500. 
 
Background:
In early 2019, the Minnesota Department of Health detected manganese concentrations above recommended health guidelines in several of Ramsey's city wells. Since then, the following actions have been completed.

• Letters outlining the new manganese issue and the City's short and long-term plans to address the issue were mailed on 5/15/2019 to approximately 5,600 Ramsey households.
• A public meeting was conducted at City Hall on May 30, 2019, explaining manganese issues and addressing public concerns.
• Wells #5, 6 and 7 have been exclusively utilized since as these wells have the lowest concentrations of manganese.  Unfortunately, these three wells also have the largest concentrations of Iron leading to increased rusty water complaints.
• Wells #1, 3, 4 and 8 have Manganese concentrations above MDH guidelines. These wells have only been utilized when water demand increases beyond the capabilities of wells #5, 6 and 7.
• A Manganese hot line was established and Staff spoke to 88 concerned residents regarding Manganese and Iron in Ramsey's municipal water supply.
• Several articles on this issue were published on Facebook and in the Ramsey Resident.
• Staff collects and tests 15 random water samples monthly and publishes the test results on the City website showing Manganese concentrations from each of the sample sites.
• SEH, Inc. completed a pilot plant study on Wells #3 and #4 to determine the best filtering process to remove Manganese and Iron from Ramsey's municipal water supply system.
• SEH, Inc. completed a water treatment plant Feasibility Study.
• SEH, Inc. prepared final plans and specifications for required raw and finished water trunk lines needed to serve the proposed water treatment plant. Final plans were advertised for bids but all bids were rejected as they significantly exceeded the engineer’s estimate.
• AE2S prepared final plans and specifications for the proposed WTP and administered the bid process.
• AE2S will provide construction administration and inspection services upon award of project.

.
The proposed City of Ramsey Water Treatment Plant (WTP) project generally consists of constructing a new 10 million gallons per day (MGD) gravity filtration WTP.  In general;

• Building construction consists of cast in place concrete and concrete masonry units.
• Processes include a backwash reclaim basin, conventional dual-media gravity filters, a clear well, a reservoir, general process piping ranging in size from 3 to 30-inches, numerous valves, fittings, and appurtenances.
• Chemical feed systems include chemical storage tanks, containment, and feed equipment for chlorine, permanganate, phosphate, hydrofluorosilicic acid, and polymer; high service pumps; general mechanical work including HVAC work, ductwork, drain, waste, and vent piping; and other mechanical equipment and appurtenances.
• Electrical systems consist of electrical circuits and controls including lighting, power, instrumentation and controls, and associated conduit and wiring.
• A standby generator sized to meet emergency and load management electrical requirements.
• Sitework includes grading, seeding, influent water main, sanitary sewer, storm sewer, piping appurtenances, an asphalt access road and parking lot, and a stormwater filtration basin.

AE2S completed plans and specifications in January.
 
Advertisements for bids were published in the Anoka County Union Herald and in Finance & Commerce on Friday, January 27, and Friday, February 3, 2023. The project was also advertised and bid electronically through QuestCDN.  Three addenda were issued while plans were advertised for bids.  Three (3) bids were received and publicly opened on March 9, 2023.  Attached is the project bid tabulation.  
 

Notifications are not required for this case.   

Observations:
The WTP trunk watermain improvements, which are needed to connect the six (6) municipal water wells in The COR to the WTP and to push treated water out to the water supply distribution system, are proposed to be bid in the Summer/Fall of 2023 with construction anticipated to occur in 2024.  Construction of the trunk watermain improvements is estimated to take 3 to 4 months to complete. Constructing these improvements in 2024 (or early 2025) will allow the WTP to be commissioned in June of 2025 when peak water use season typically begins.
 
A non-mandatory pre-bid meeting was held on February 15th.  Representatives from all 3 of the bidders attended. During that meeting several items were discussed including that the bidders recommended allowing more than 24 months for completion of construction from the date a contract is awarded.  The bidders stated that it generally takes 3 to 4 months to execute contracts with their subcontractors and to order materials before physical construction can begin in earnest.  This only leaves the contractor 20 to 21 months to construct the WTP, meaning the contractors will likely increase their bids to account for the risk of financial penalties for not meeting specified completion deadlines.
 
Staff discussed the contractor’s comments with AE2S and an addendum was subsequently issued to include an alternate bid to extend the project completion deadline by 4 months at an overall project cost savings to the City. Below are the base bid and alternate bid project completion deadlines.
 
Base Bid Completion Dates:
1. Substantial Completion by May 1, 2025.
2. Final Completion by August 1, 2025
 
Bid Alternate No. 1 Completion Dates:
1. Substantial Completion by September 1, 2025.
2. Final Completion by December 1, 2025
 
On March 21, 2023, the Public Works Committee considered a recommendation to the City Council to accept the three (3) bids and award a contract for construction to the low bidder, Magney Construction, LLC.  During the meeting it was discussed whether bid alternate #1 should be accepted.  After discussing the amount of -$50,000 submitted by Magney Construction for bid alternate #1, and the fact that the required inspections during the additional 4 months may cost more than $50,000 and would put a strain on existing infrastructure, the Public Works Committee passed a motion to recommend City Council acceptance of bids and award of a construction Contract for Improvement Project #21-09, Centralized Water Treatment Plant, to Magney Construction, Inc., rejecting Bid Alternate #1. 


Alternatives:
Alternative #1:
Motion to adopt Resolution #23-061 accepting bids and awarding a Contract for construction of Improvement Project #21-09, Centralized Water Treatment Plant, to Magney Construction, Inc. for their Base Bid and Section 01 21 00 Allowances in the amount of $31,528,500.  

Alternative #2:
Motion of other.  

The 2023-2032 CIP lists total project costs for all required WTP improvements at $47,600,000.  This includes costs for both the WTP and the trunk watermain improvements.
 
Currently, total project costs for all required WTP improvements are estimated at 42,500,000.  The low bid submitted by Magney Construction, Inc. for construction of the WTP, minus bid alternate #1, is $31,528,500.  The total estimated project cost is $34,680,000 assuming 15-percent indirect costs.  Estimated project costs for the WTP trunk watermain improvements is currently $7,820,000.
 
Funding for all WTP project improvement costs is proposed to come from the following sources:

• $33,500,000 from sewer ($8,900,000) and water ($24,600,000) utility funds
• $9M from bonding (TBD…based on WTP trunk watermain improvements low bid)

 
Based on these funding amounts, Staff proposes to increase water and sewer rates by 10% in June of 2023.  Staff also proposes to issue the $9M bond in December of 2023 with a 15-year term.  Assuming a true interest rate of 3.9-percent, this will carry an estimated annual debt service of $798,000 resulting in a total interest payment of slightly less than $3M.  
 
The amount of actual bonding needed will be determined after bids are received for the WTP trunk watermain improvements in late 2023. The actual bonding amount will determine how much sewer and water rates will need to increase.  A 10% rate increase for sewer and water was originally calculated, but this may need to be increased based on the final bonding amount.  In the meantime, construction of the WTP can be funded solely from sewer and water utility funds. 
 
The City also recently submitted 2023 Legislative Session requests related to the WTP project including $20 million in State Bonding as well as sales and use tax exemptions (HF1177 & SF1197).  Any funds received from the legislative session will have the direct result of reducing bonding needs and the possible reduction of double-digit utility rate increases.  The status of these legislative requests is not yet known.
 
Staff also explored available grant funding opportunities.  The City would not qualify as a disadvantaged City and would therefore not be eligible for a forgivable grant under the Public Facilities Authority (PFA) Drinking Water Revolving Fund (DWRF) loan program. However, Staff did place our WTP project on the 2022 DWRF Project Priority List (PPL) in hopes of receiving a low interest loan.  In the end, our project did not rank high enough on the PPL to receive funds because of the City of Ramsey’s excellent financial status.   
 
AE2S is also requesting a $225,100 amendment to the attached original construction phase services contract, which was based on a construction schedule of 18-months.  Since the schedule was extended to 24-months an additional 6 months of engineering construction services is required. Attached is a copy of the AE2S contract amendment.  This additional cost will be approved upon adoption of Resolution #23-061.   

Staff and AE2S recommend alternative #1.  See attached Letter of Recommendation from AE2S.
 
At their regular meeting on March 21, 2023, the Public Works Committee passed a motion recommending City Council acceptance of bids and award of a construction Contract for Improvement Project #21-09, Centralized Water Treatment Plant, to Magney Construction, Inc. in the amount of $31,528,500, rejecting Bid Alternate #1.   

Motion to adopt Resolution #23-061 accepting bids and awarding a Contract for construction of Improvement Project #21-09, Centralized Water Treatment Plant, to Magney Construction, Inc. for their Base Bid and Section 01 21 00 Allowances in the amount of $31,528,500.