Adopt Resolution #25-128 Approving Change Order No. 3 and Engineering Amendment No. 3 for Improvement Project #21-09, Centralized Water Treatment Plant

Purpose:
The purpose of this case is to adopt Resolution #25-128 approving Change Order No. 3 and Engineering Amendment No. 3 for Improvement Project #21-09, Centralized Water Treatment Plant.
 
Background:
Advanced Engineering and Environmental Services, Inc. (AE2S) was hired by the City of Ramsey to design and prepare final plans and specifications for the Water Treatment Plant (WTP).  AE2S was also hired by the city to provide construction services during construction.
 
Magney Construction, Inc. (Magney) was awarded the construction contract for construction of the WTP.
 
When the project was bid, bid alternate #1 was added in response to comments received from contractor’s during the pre-bid meeting that the project schedule was very tight and that adding several months to the project schedule may help reduce bid prices since contractors tend to increase their bid prices if they have concerns that liquidated damages may be assessed if completion deadlines are not met. Magney therefore submitted a bid deduction for bid alternate #1 in the amount of -$50,000 based on a 28-month construction schedule versus a 24-month schedule per the base bid.  When the city awarded the contract for construction, only the base bid was awarded meaning Magney has 24-months to complete the project.   
 
During construction, the city approved 2 Change Orders and 2 Engineering Amendments as follows.

• Change Order #1 – Increased project costs $794,153.71 to apply prevailing wages so awarded grant funds could be used.
• Change Order #2 – Extended completion dates by 88 days due to delays in obtaining DOLI and building permits.  No cost increase was associated with this CO.
• Engineering Amendment #1 – Increased construction services fees $225,100 due to construction schedule extension.
• Engineering Amendment #2 – Increased construction services fees $2,683.15 due to building permit requirement for as-built survey.  Also included $14,640.69 for engineering services due to plan revisions needed to address new DOLI code and city site plan review process.

 
City staff met with and held numerous conversations with staff from AE2S and Magney Construction regarding Change Order No. 3 and Engineering Amendment No. 3.  City staff felt there were generally three options for moving forward with these requests, as follows.

• Option #1 – Present Change Order #3 and Engineering Amendment #3 as is and request City Council approval.
• Option #2 – Agree to a more equitable distribution of costs across all parties resulting from these requests.
• Option #3 – Leave the schedule as is and apply liquidated damages through the contract, if needed.

 
City staff expressed that the city has endured significant project delays and cost increases during this project, and wanted to ensure that the requests were justified and held to an absolute minimum to both minimize delays and financial impacts to all parties.  Change Order #3 request by Magney Construction, Inc.
 
Through Change Order #3, Magney is requesting a time extension of 79 calendar days to the Substantial Completion date, and 64 calendar days to the Final Completion date.  If approved, this would result in a total project time extension of 167 calendar days to the Substantial Completion date, and 152 calendar days to the Final Completion date from the original construction schedule.  Magney is requesting this time extension based on their assessment of the current project schedule and discussions with their subcontracting partners regarding the time that will be needed to complete the project in full accordance with the approved plans and specifications.
 
Attached is a copy of Change Order #3, along with a cover letter from AE2S detailing the time extension requested by Magney Construction.    
 
Magney also submitted an email to staff providing the following justifications for their request and asked that these points be considered before any action is taken.  According to Magney;

• We value the continued spirit of collaboration on this project and remain committed to maintaining a strong and positive working relationship throughout the remainder of the project and beyond. 
• The 1^st time extension cannot and should not be a factor in this conversation. As previously expressed, it was neither a gift nor a benefit to us, but rather a justifiable, minimum, replacement of working days lost due to delays completely out of our control, including, but not limited to design, regulatory and/or permitting issues. 
• In hindsight, the 1st time extension was not equitable, as we traded summer working days (May, June & July) for winter working days on a 1:1 basis.  As previously explained, this led to a major disruption of our planned construction schedule, including the sequencing of structures to be built and ultimately led to delayed construction activity. 
• Magney Construction absorbed approximately $93,000.00 in winter construction costs (winter concrete charges, heater rentals, heating fuel, insulated blankets, temporary enclosures, and subcontractor’s winter work charges) that were attributable to the initial delay/1^st time extension. Please note, this does not account for the cost of lost worker productivity.
• We believe this current time extension request is reasonable and justified, as it is based on schedule impacts of past, current and future design changes/modifications/clarifications, and material availability.
• We also believe that the approval of the proposed completion dates would be in the best interest of the project and for all parties involved, as we work towards completion, including pending RFIs, design decisions, utility services connections, controls and instrumentation, and startup, training, and commissioning.

 
Magney’s email also stated they recognized that extending the schedule has both direct and indirect costs on all parties. They also stated they will likely incur between $150,000 - $200,000 in general conditions costs by extending the construction schedule, but they believe it is the right decision for the project.  Magney said they have no intention of requesting or recovering the $240,000 - $300,000 in unanticipated costs, but in turn, they would like for these costs to represent their good faith effort to both AE2S and the City of Ramsey as their share in the equitable distribution of costs.  Lastly, they said they will do everything in their power to expeditiously close out this project with an unwavering commitment of collaboration and quality. 
 
Staff requested that a representative from Magney attend the City Council meeting but at the time this case was published staff had not yet received a response.
 
Engineering Amendment #3 request by AE2S
 
AE2S emailed city staff stating they remain fully committed to the success of this project and to supporting the city in delivering a high-quality outcome, and that they believe that their amendment is justified based on the scope, complexity, and project circumstances to date.  They also said their amendment request accurately and transparently reflects the effort required to successfully complete the work without compromising quality or introducing risk, and that they will support city staff in clearly communicating the rationale and necessity behind these requests to Council, and that they remain open to continued dialogue and remain committed to working collaboratively to reach a path forward that respect everyone’s constraints and responsibilities.
 
Attached to this case is a slide deck prepared by AE2S that outlines previously approved project costs and completion deadlines as justification for AE2S’s request for an additional $184,300 through Engineering Amendment #3.  One or more representatives from AE2S will attend the City Council meeting to formally present their request and respond to questions, if needed.  
 

Notifications are not required for this case.   

Observations:
Both requests must be addressed concurrently.

Approving Change Order #3 would result in the Substantial Completion date being revised from July 28, 2025, to October 15, 2025, and the Final Completion date being revised from October 28, 2025, to December 31, 2025.  The requested time extensions would not adversely impact municipal water users as water use is not in high demand during Fall and Winter months.
 
Additionally, the requested time extensions would dovetail well with Fall watermain flushing, which occurs during the month of October. As soon as staff finishes flushing the water supply distribution system, substantial completion of the WTP will have just occurred and the commissioning process will have just started, which is when water will first be fed into the WTP to allow the new processes to be started, run and tested prior to feeding finished water into the municipal water supply distribution system upon final completion of the WTP at the end of December. 
 
Alternatives:
Alternative #1 – Motion to adopt Resolution #25-128 approving Change Order No. 3 and Engineering Amendment No. 3 for Improvement Project #21-09, Centralized Water Treatment Plant.   
 
Alternative #2 – Motion to reject Change Order No. 3 and Engineering Amendment No. 3 for Improvement Project #21-09, Centralized Water Treatment Plant, as presented, and to direct staff to work with Magney and AE2S to reduce the additional time and funds requested and present amended requests on July 22, 2025.  
 
Alternative #3 – Motion to reject Change Order No. 3 and Engineering Amendment No. 3 for Improvement Project #21-09, Centralized Water Treatment Plant, and to complete the project as currently approved.   

Change Order #3 does not include a direct request for additional funding.
 
Engineering Amendment #3 includes a request for additional funding in the amount of $184,300.  If approved, Sewer and Water Funds would pay for the additional construction services provided by AE2S.   

City staff recommend approval of Alternative 1 or Alternative 2.

City staff support Alternative #3 but are concerned that in order to achieve the current Substantial and Final Completion deadlines, the contractor and/or their subcontractors may complete their work with minimal coordination and/or direction from AE2S and city staff, which could result in the need to make future modifications to the WTP that may cost more than the requests presented tonight.

Dependent on discussions.