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$3.5 Million Dollars Could Be Added to the Kings River Pipeline Tab Because of a Change Order

Fresno City Hall

$3.5 Million Dollars Could Be Added to the Kings River Pipeline Tab Because of a Change Order

Kings River Pipeline project contractor, Garney Pacific Inc., seeks a $3.5 million addition because a change of conditions in the subsurface materials as found in the excavations when compared to the project’s geotechnical report.

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It’s the most basic of questions when trying to unravel an institutional dispute: Who knew what, and when did they know it?

That question could soon be front and center for Fresno City Hall’s Capital Projects Oversight Board.

At issue is a change order request submitted to the city’s Department of Public Utilities by a contractor involved in the huge Recharge Fresno project.

What we’re talking about is the possibility of an extra $3.5 million being added to the final tab of the Kings River pipeline job.

Recharge Fresno, of course, is the half-billion-dollar reform of Fresno’s water system. There are many parts to the project, including the new Southeast Surface Water Treatment Facility, new pipelines to bring in water from the San Joaquin and Kings rivers, and expansion of the “purple pipe” recycled water infrastructure.

A project this big and complex inevitably generates a steady stream of change order requests. Generally, this means a contractor asking for more money. The reason: Unforeseen events cause the scope of work to grow beyond what everyone agreed upon in the original contract.

The Oversight Board, composed of experts in the ways of construction and/or government, was born over the course of several months in 2015. Council Members Lee Brand (now Fresno’s mayor) and Clint Olivier (still on the council) were key to the board’s creation. In addition to Recharge Fresno, the board’s focus has been the Bus Rapid Transit and Fulton Corridor projects.

BRT and Fulton are done. Recharge Fresno is almost done.

The Oversight Board is an advisory group; the final authority for spending more money resides with the City Council. The board’s monthly meetings usually are tepid affairs. That’s because the change orders, already vetted by Public Utilities staff, are almost always for relatively modest amounts.

City officials like to say Recharge Fresno is coming in “on budget and on time.” That claim carries a lot of political weight – the long effort to get ratepayers and the City Council to approve Recharge Fresno’s funding formula was full of controversy.

To an outsider like me, it looks like the Oversight Board’s lifespan is winding down. Perhaps the board (its members are civic-minded volunteers) will meet a fitting end in September when everyone gathers for the grand opening of the Southeast treatment plant.

Then came Monday’s board meeting.

The agenda was light, just one discussion item and three proposed change orders. Chairman Joe Garcia had to wait a few minutes before convening the meeting so a fifth board member could show up to create a quorum.

It was during those few minutes, while everyone was shooting the breeze, that the change order request in question came up. As I recall, it was Member Brian Whelan (who’s in the November runoff for the District 7 council seat) who first raised the subject with DPU Interim Assistant Director Michael Carbajal.

Keep in mind that Carbajal and his team at these meetings do a great job of providing to the public supporting documents on Recharge Fresno’s progress. One of those information-only documents at Monday’s meeting was titled “Kings River Pipeline Project: Construction Contract Change Item Descriptions (CID).”

The main contractor for $46.3 million Kings River Pipeline project is Garney Pacific Inc. According to city documents made available at Monday’s meeting, Garney has submitted a change order request for $3,477,588. This request was not part of Monday’s formal agenda.

The public document stated: “Change In Conditions Cost Recovery: Contractor claims a change of conditions in the subsurface materials as found in the excavations when compared to the project’s geotechnical report. Beginning in the cobble zone which begins close to the CID Lone Tree crossing on Belmont Avenue and continues east along Belmont Avenue to Trimmer Springs Avenue and ending at the KRP Diversion Site (Intake). Contractor (says) the change in conditions adversely affect pipeline installation (and) lead to delays and additional cost.”

No one from Garney Pacific was in the audience. I was the only person in the room who wasn’t a board member or part of city staff.

The Kings River pipeline is 13 miles long. The pipe is 72-inches in diameter. The pipeline will deliver Kings River water to the Southeast treatment plant. This plant when fully online will be able to treat 54 million gallons per day. With future planned expansion, the plant’s capacity will grow to 80 million gallons per day.

The Southeast treatment plant and the Kings River pipeline are pivotal to Recharge Fresno’s long-term goal of making Fresno truly drought resilient.

The pre-meeting talk had a simple hook: What’s with this $3.5 million change order request? The result was some vague chatter.

A portion of the actual meeting dug into same issue for the record. Board members Ann Kloose and Al Solis along with Whelan and Chairman Garcia carefully questioned Carbajal.

Said Carbajal: “We’re currently evaluating that claim to determine merit.”

Carbajal said the procedure for such a review could lead to mediation if Garney Pacific isn’t happy with the city’s decision.

“If it’s not resolved in mediation, the contractor could then proceed with litigation,” Carbajal said.

Carbajal said the city is currently in mediation with Garney Pacific on change order requests connected to the recycled water project.

Said Kloose of the Kings River change order request: “I would like for us to keep close tabs on it.”

Carbajal noted that companies other than Garney Pacific could find themselves involved in this dispute. One of those could be the company that did the geotechnical report, he said.

Garcia went to the heart of the matter. Garcia noted that the pipeline project is essentially finished. The pipeline is already delivering water to the Southeast treatment plant. Garcia said he has many unanswered questions, such as why this change order request was submitted now when workers apparently had been digging in the disputed dirt for a long time.

“I’m hoping the City of Fresno is doing their due diligence in following the contract and making sure that they (Garney Pacific) did meet their notification requirements for this differing site condition all the way through the contract,” Garcia said. “I’ll be looking for things like that if this comes back to the board.”

The board decided to continue discussion of the $3.5 million change order request at its next meeting, scheduled for July 23.

Carbajal during the meeting said it’s typical for total approved change orders to boost a project’s original estimated cost by 1% to 3%.

Should Garney Pacific prevail, the $3.5 million change order alone would raise the Kings River pipeline project’s cost by 7.5%.

Carbajal told me after the meeting that, should Garney Pacific prevail, the entire Recharge Fresno project would still be within budget. He said savings in other parts of the Recharge Fresno project would cover the $3.5 million.

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George Hostetter

George Hostetter is a contributor to CVObserver.

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