August 19, 2014

Merced council again sets tighter restrictions on construction change orders

Merced City Council seemed to reaffirm its position on Monday to shrink the amount of contingency dollars spent on construction projects without approval. They said contractors abuse the contingency and should draw up more accurate plans when dealing with tax money.

City leaders again changed the city manager’s authority over construction costs on a city project, saying that contractors should not try to abuse the system.

Merced City Council awarded more than $800,000 in contracts to two separate companies that will perform maintenance on sewer mains. The council also directed staff to allow the city manager to approve additional funds, or change orders, of 10 percent or less.

The city’s common practice was to allow up to 25 percent in change orders without asking for council approval. The tighter restrictions mark the second time this month that the council departed from its common standard in what could set new precedence for public works contracts.

The first departure was on Aug. 4, when a $3 million project at the wastewater treatment plant drew scrutiny from the council. The council set that project’s change order standard at 10 percent.

Some leaders have expressed the desire to make 10 percent a permanent standard.

Mayor Stan Thurston said that contractors should make a greater effort to keep costs down. “It has to involve people tightening up their bids and knowing that there isn’t a lot of slop, if you will,” he said. “We all know change orders are abused.”

City Attorney Greg Diaz said the traditional 25 percent standard comes from “The Greenbook,” a commonly used book on public works standards.

The councilmen have expressed willingness to call special meetings as a way to cut down on potential delays. Under the Brown Act, meeting agendas and announcements require a 72-hour notification period. Special meetings require at least 24 hours.

Work done on the weekends, at night or while a councilman is out of town could all be pitfalls for the city. Delays could be costly, as contractors might hold the city accountable for stopping the project before a council vote, Diaz said. “There’s lots of opportunity for bad things to happen,” he said.

The council agreed during the meeting to sit through a workshop on the potential pros and cons of setting the 10 percent standard before making it official.

City Manager John Bramble said the council must have further policy discussions of the potential ramifications of making 10 percent the new standard. “There are some situations where we may not want to delay a project because of the need for change-order dollars,” he said.

The two sewer-main projects were awarded to out-of-state companies. The first contract for $528,965 was given to Chesterfield, Mo.-based Insituform Technologies LLC for work at Highway 59 and Cooper Avenue. The second contract, worth $281,546, went to Michels Pipeline Construction of Salem, Ore.

John Sagin, the city’s principal architect, said the work to be done was too specialized to draw local bids. Only one company in California would have been qualified, he said, but the San Diego firm did not bid.

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