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sr-012412-3m10 twwm City of Santa molrica City Council Report City Council Meeting: January 24, 2012 Agenda Item: To: Mayor and City Council From: Martin Pastucha, Director of Public Works Subject: Revised Design -Build Contract for Civic Auditorium Remodel & Seismic Upgrade Recommended Action Staff recommends that the City Council: 1. Authorize the City Manager to negotiate and execute a revision to the previously approved Design -Build Contract No. 9396 (CCS) with Morley Construction Company, a California -based company, in an amount not to exceed $51,944,432 (includes a 5% contractor contingency, a 10 % owner contingency, and allowances). This not to exceed amount of $51,944,432 includes the previously Council approved amount ($35,000,000), preconstruction and design fee ($5,000,000), added scope ($4,000,000) and City's owner contingency and allowances ($7,944,432). 2. Appropriate budget increases as outlined in the Financial Impacts and Budget Actions section of this report. 3. Authorize the Director of Public Works to issue any necessary change orders to complete the work within budget authority. Executive Summary The City has contracted with Morley Construction Company for preconstruction and construction services that are required to remodel and seismically upgrade the Civic Auditorium facility. A Request for Bids was issued in April 2011, and upon evaluating bids, City staff recommended Morley Construction Company in June 2011. In error, the recommendation was for an amount not to exceed $35,000,000 based on the budget solely for construction services and exclusive of preconstruction and design services. At this time staff recommends adding $5,000,000 for preconstruction and design services; and $4,000,000 for construction to include additional scope of work which was removed in preliminary design due to cost constraints, but will serve to improve the facility's future financial viability. Additionally, staff recommends an additional $7,944,432 to fund the City's cost of implementing this project during the construction phase. This includes an owner's contingency of an additional 7% ($3,080,000) and allowances for inspections, testing, monitoring, geotechnical services and abatement costs ($4,864,432). The new contract amount will not exceed $51,944,432. This is a phased agreement with the final contract amount being modified by a construction Guaranteed Maximum Price amendment. Background The Civic Auditorium was designated as a City Landmark by the Landmarks Commission on November 12, 2001. That decision was upheld by Council on April 9, 2002. The designation included both the exterior of the building as well as specific character - defining features of the interior public spaces. On June 9, 2009, Council approved a list of Redevelopment Agency funding priorities that included $25,000,000 specifically for remodel and seismic upgrade of the Civic Auditorium. Subsequently, on June 23, 2009, Council adopted the FY2009 -10 Budget including this capital improvement project. On March 8, 2011, Council approved the business terms and authorized the City Manager to execute a presenting agreement with the Nederlander Organization to act as partner with the City once the Civic Auditorium improvements are completed. Council continued a May 24, 2011, City Council, Public Financing Authority and the Redevelopment Agency joint meeting considering Redevelopment Agency immediate funding opportunities. On May 26, 2011, following discussion on the possible uses of funding proposed for the Civic Auditorium, Council voted to amend their funding priorities and include the full development cost for the project in the amount of $46,800,000, including the $25,000,000 previously allocated. On June 21, 2011, Council adopted FY2011 -12 budget which formally allocated funds for the project. On June 28, 2011, Council approved Design -Build Contract No. 9396 (CCS) in an amount not to exceed $35,000,000 with Morley Construction Company, for preconstruction and construction services of the Civic Auditorium Remodel & Seismic Upgrade Project. In error, the recommendation of $35,000,000 was based on the budget solely for construction services and not preconstruction and design services. After further assessment by staff on the scope of work and project phasing priorities, the approved Design -Build Contract No. 9396 (CCS) with Morley Construction Company 2 was not executed. Instead, the City and Morley Construction Company agreed to enter into Professional Services Agreement No. 2270, in the amount of $48,200, exclusively for program development service to conduct a full analysis of the building and systems, including assessment of the relevant existing documents, drawings, tests, and reports. Upon completing the analysis, Design -Build Contract No. 9396 (CCS) previously approved by Council on June 28, 2011 with Morley Construction Company would be executed. Now that program development service is substantially complete, and with new discoveries, staff is returning to Council recommending a revision to the previously approved Design -Build Contract No. 9396 (CCS) with Morley Construction Company. Discussion Preconstruction and Design Fee — The City is now prepared to execute Design -Build Contract No. 9396 (CCS) with Morley Construction Company to include a preconstruction and design fee in the amount of $5,000,000 (inclusive of the $48,200 from Professional Services Agreement No. 2270 for program development service and would be rolled into this contract) which was excluded in error from the previously approved $35,000,000 for construction. The preconstruction and design fee of $5,000,000 includes a locked -in mark -up percentage of 2% for profit and overhead. Construction Cost — During the recently completed program development and investigative phase of the project, the scope of work required for seismic retrofit and ADA improvements was determined to be larger than previously known. This discovery required the elimination of additional restrooms, elevator access to the 2nd floor balcony, and theatrical amenities from the project. Staff proposes to increase the Design -Build Contract No. 9396 (CCS) by $4,000,000 to allow the inclusion of these elements back into the scope of work. The additional features are deemed extremely important to the future financial success of the facility. The revised construction cost would be $39,000,000 (previously approved $35,000,000 by Council on June 28, 2011 plus this additional $4,000,000). The revised construction cost of $39,000,000 includes an 8% contingency (5% contractor contingency, 3% owner contingency), a locked -in mark -up percentage of 2% for construction profit and overhead, thereby providing a fixed profit K, margin for the project duration with the not -to- exceed construction Guaranteed Maximum Price cap obtained through a transparent, competitive bid process for subcontractor selections. City Project Cost - On August 10, 2010, by adopting Resolution Nos. 10519 (CCS) and 527 (RAS), the City Council and Redevelopment Agency authorized the execution of the Cooperation Agreement for Payment of Costs Associated with Certain RDA Funded Capital Improvement and Affordable Housing Projects ( "Master Cooperation Agreement" or "MCA ") pertaining to the construction and /or implementation of numerous Capital Improvement Projects and Affordable Housing Projects (referenced therein as "Tier One" and "Tier Two" improvements). Section II of the MCA obligates the Agency to pay the City an amount equal to the cost for the City to carry out the Tier One and Tier Two Capital Improvement Projects, including costs for planning, financing, development, permitting, design, site testing, bidding, construction and construction management. Section IV of the MCA contains an equivalent provision for the Tier One and Tier Two Affordable Housing Projects. The Civic Auditorium is listed as a Tier One Capital Improvement Project. Staff has determined that the City's cost of implementing each of these projects during the construction phase is approximately seven percent (7 %) of the project's total construction costs, which is $3,080,0000. These costs were not included in the original budget appropriations for this project. Therefore, staff proposes to add these costs, along with other required contract adjustments, to the budget appropriations for this project and include these costs in the City's design -build contract for this project. The adjusted contract amount allocated for payment of the City's project costs will include a 7% charge of the total contract amount, which amount will be deemed as owner's contingency, to be drawn down by the City as project costs are incurred during the course of construction. Additionally, allowances will be added for testing, inspection services, hazardous material monitoring and abatement, geotechnical services and utility connections which will not exceed $4,864,432. 2 In summary, revision to the previously approved Design -Build Contract No. 9395 (CCS) to be awarded to Morley Construction Company is as follows: Preconstruction and design fee: $ 5,000,000 Construction cost (includes added scope): $ 39,000,000 Added owner contingency of 7 %: $ 3,080,000 Allowances: $ 4,864,432 TOTAL CONTRACT APPROPRIATION AMOUNT: $ 51,944,432 Financial Impacts & Budget Actions Revision to the previously approved Design -Build Contract No. 9396 (CCS) to be awarded to Morley Construction Company is $51,944,432 (includes 5% contractor contingency, 10% total owner contingency and allowances). Funds are available in account R01405317.589000, Civic Auditorium Renovation. The award of contract requires additional appropriation of $5,146,432 to account R01405317.589000 to fund the City's cost of implementing this project during the construction phase. Prepared by: Voneelya Simmons, Project Manager Approved: 5 Forwarded to Council: Rod Gould City Manager Reference Contract No. 9396 (CCS).