DATE: January 19, 2021
SUBJECT: U.S COAST GUARD PHASE II TENANT IMPROVEMENTS PROJECT
Title
A) ORDINANCE AMENDING THE FISCAL YEAR 2021 BUDGET INCREASING THE EQUIPMENT OUTLAY AND OTHER CAPITAL PROJECTS APPROPRIATION BY $1,250,000 FOR AN INCREASE TO THE U.S. COAST GUARD PHASE II TENANT IMPROVEMENTS PROJECT TO BE FUNDED FROM THE OPERATING RESERVES. UPON COMPLETION OF THE PROJECT, OPERATING RESERVES WILL BE REPLENISHED FROM THE COAST GUARD/GENERAL SERVICES ADMINISTRATION (GSA) REIMBURSEMENT OF $844,308
B) RESOLUTION APPROVING PLANS AND SPECIFICATIONS AND AWARDING CONTRACT NO. 2019-38 TO SOLTEK PACIFIC CONSTRUCTION IN THE AMOUNT OF $2,889,091 FOR THE U.S COAST GUARD PHASE II TENANT IMPROVEMENTS PROJECT AS AUTHORIZED BY THE BOARD IN THE FY2021 EQUIPMENT OUTLAY AND OTHER CAPITAL PROJECTS BUDGET
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EXECUTIVE SUMMARY:
Staff recommends that the San Diego Unified Port District (District) Board of Port Commissioners (Board) approve the plans and specifications and authorize the award of an Equipment Outlay and Other Capital Projects construction contract to Soltek Pacific Construction in the amount of $2,889,091 for the U.S. Coast Guard Phase II Tenant Improvements project located at National Distribution Center, 1022 Bay Marina Drive, Suite 150, National City, CA.
The plans and specifications define the contract work, pursuant to Lease No GS-09P-LCA00367, including the remodel of existing warehouse space and construction of a new concrete loading ramp at the existing loading dock.
On October 6, 2020, the District received fourteen (14) bids ranging from $2,640,600 to $3,923,435.23. The lowest responsive and responsible bid was submitted by Soltek Pacific Construction in the amount of $2,889,091. Award to this bidder is recommended.
After including a construction contingency amount of 10%, soft costs for design, engineering, and project management, the total estimated Project costs are approximately $3,450,000. Although the total estimated Project costs exceed the original budget ($2,200,000) by $1,250,000, most of the additional costs (approximately $844,308) are reimbursable by GSA via a lump-sum payment at completion of construction.
Accordingly, Staff is requesting the Board increase the Fiscal Year 2021 Budget in the amount of $1,250,000 from the Operating Reserves to the Equipment Outlay and Other Capital Projects Appropriation to provide the budget necessary to award and construct the Project.
Although the Project costs exceed original estimates, the lease continues to provide substantial financial returns to the District by providing: (1) a lump sum payment upon lease execution of over $150,000 for retroactive rate increases for the existing space; (2) new incremental annual revenue of over $615,000 upon completion of the Project; and (3) an internal rate of return of 33% over the first ten years of the lease.
RECOMMENDATION:
Recommendation
Adopt an ordinance amending the Fiscal Year 2021 budget increasing the Equipment Outlay and Other Capital Projects Appropriation by $1,250,000 from the Operating Reserves for an increase to the U.S. Coast Guard Phase II Tenant Improvements Project. Upon completion of the project, Operating Reserves will be replenished from GSA reimbursement of $844,308.
Adopt a resolution approving plans and specifications and awarding Contract No. 2019-38 to Soltek Pacific Construction in the amount of $2,889,091 for the U.S. Coast Guard Phase II Tenant Improvements Project as authorized by the Board in the FY 2021 Equipment Outlay and Other Capital Projects budget.
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FISCAL IMPACT:
Approval of this action will amend the FY 2021 Budget Equipment Outlay and Other Capital Projects Appropriation increasing it by $1,250,000 with funding from the District’s Operating Reserves. However, upon completion of the project, Operating Reserves will be replenished from a GSA reimbursement of $844,308.
This project is included in the Fiscal Year 2021 Equipment Outlay and Other Capital Projects appropriation with an allocated budget of $2,200,000 to complete the construction. The above budget amendment will increase the budget to $3,450,000 to include construction contingency amount of 10%, soft costs for design, engineering, and project management. Approval of this agenda item will authorize the construction contract expenditure of $2,889,091 from the Equipment Outlay and Other Capital Projects appropriation.
Compass Strategic Goals:
Award of this construction contract will implement the Equipment Outlay and Other Capital Projects, approved by the Board to be in alignment with the District’s vision, mission and strategic goals.
This agenda item supports the following Strategic Goal(s).
• A thriving and modern maritime seaport.
• A Port that is a safe place to visit, work and play.
• A financially sustainable Port that drives job creation and regional economic vitality.
DISCUSSION:
The Board approved a new lease agreement (Lease No GS-09P-LCA00367) at the July 2020 BPC meeting with the United States Coast Guard (Coast Guard) at the District’s National Distribution Center (NDC) located at 1022 Bay Marina Drive in National City. NDC is home to the Maritime Security Response Team West of the Coast Guard (MSRT West) which is a highly capable maritime tactical unit able to conduct short-notice maritime response and advanced interdiction operations around the globe. The Coast Guard has identified NDC as their preferred location for MSRT West operations. The new lease requires the District to initially fund and construct the leasehold improvements in accordance with Coast Guard specifications, which is typical of GSA leases. After the District has completed construction of the leasehold improvements, GSA would repay $1.5 million of the applicable construction costs over the initial ten-year term of the lease at a seven percent (7%) interest rate and would pay any remaining T.I. costs (approximately) $844,308 via a lump-sum payment at the completion of construction.
Contract work will include remodel of existing warehouse space, demolition of an existing warehouse restroom, construction of new restroom and locker room facilities, and construction of a new concrete loading ramp at existing loading dock bays.
The Contract Documents including plans NC-2019-04 and specifications 2019-38 were issued for advertisement on August 27, 2020. On October 6, 2020, the District received 14 bids ranging from $2,640,600.00 to $3,923,435.23. The bid amounts are as shown in the table below:
Based on a review of the bids, the lowest responsive and responsible bid was determined to be submitted by Soltek Pacific Construction in the amount of $2,889,091. The three lower bidders were deemed nonresponsive because their bids did not meet each and every Small Business Enterprise (SBE) goal and sub-goals as required by the Specification and GSA. The engineer’s construction cost estimate was $2,200,000
Although the total estimated project costs exceed the original budget by $1,250,000, most of the additional costs (approximately $844,308) are reimbursable by GSA via lump-sum payment at completion of construction. The estimated shell components which are not reimbursable by GSA, were bid at $788,417. This exceeded the engineer’s estimate of $650,000 by $138,417.
Staff reviewed the bids and determined the reason for the difference between the low bid and the engineer’s Shell estimate of $650,000 was primarily attributed to the Finishes bid item. Finishes bid prices for Shell costs received from the top three (3) responsive and responsible bidders ranged from $30,993 to $258,938, the engineer’s estimate was $36,000 for the Shell portion. The lowest bid for T.I. costs exceeded GSA’s estimate by $575,000. GSA developed their original T.I. portion of the cost estimate back in 2017 and was based on their preliminary design. GSA did not provide a breakdown of their cost estimate, but staff believes the rise in construction costs from their 2017 cost estimate was the main contributor in the difference in the T.I. portion of the bids. Approximately $844,308 will be reimbursed by GSA via lump-sum payment at completion of construction.
The table below summarizes the total estimated Project costs and reimbursable costs:
Although the Project costs exceed original estimates, the lease continues to provide substantial financial benefits to the District by providing: (1) a lump sum payment upon lease execution of over $150,000 for retroactive rate increases for the existing space (31,614 square feet); new incremental annual revenue of over $615,000 upon completion of the Project; and (3) an internal rate of return of 33% over the first ten years of the lease. Upon substantial completion of the project approximately $844,308 is reimbursable by GSA which will be paid by a lump-sum. The $844,308 GSA reimbursement only includes the increase in T.I. bid costs and does not include any contingency costs. However, should contingency costs occur during construction, GSA will reimburse the District for their fair share of the T.I. related costs.
Upon Board authorization, construction is expected to commence in February 2021 and be completed by July 2021.
Staff recommends that the Board adopt an ordinance to increase the FY 2021 budget, approve the plans and specifications, and award Contract No. 2019-38 to Soltek Pacific Construction, in the amount of $2,889,091 for the construction of the U.S. Coast Guard Phase II Tenant Improvements project.
General Counsel’s Comments:
The Office of the General Counsel has reviewed and approved this agenda and proposed ordinance and resolution as to form and legality.
Environmental Review:
The proposed Board actions, including without limitation, an ordinance amending the fiscal year 2021 budget and a resolution approving plans and specifications and awarding a contract for the U.S. Coast Guard improvements space are Categorically Exempt pursuant to California Environmental Quality Act (CEQA) Guidelines Sections 15301 (Existing Facilities), 15302 (Replacement or Reconstruction), and 15303 (New Construction or Conversion of Small Structures), and Sections 3.a., 3.b., and 3.c. of the District’s Guidelines for Compliance with CEQA because the project would consist of storage and associated minor exterior and interior improvements for the purpose of Coast Guard related operations that would involve a negligible expansion of use beyond that previously existing; would not result in a change in the existing use; would not result in a significant cumulative impact due to continuation of the existing use; would be located on the same site as the existing lease area; and would have substantially the same purpose and capacity. A CEQA Exemption was previously issued for this project on July 16, 2020. The District has determined none of the six exceptions to the use of a categorical exemption apply to this project (CEQA Guidelines Section 15300.2). Pursuant to Section 15378(c) of the State CEQA Guidelines, the term “project” refers to the activity being approved, which may be subject to several discretionary approvals of governmental agencies and does not mean each separate governmental approval. Accordingly, the proposed Board actions are a subsequent discretionary approval of a previously approved project. No further action under CEQA is required.
The proposed Board actions comply with Sections 21, 35, and 87 of the Port Act, which allow the Board to pass resolutions and to do all acts necessary and convenient for the exercise of its powers, and which authorizes the use of tidelands for the construction, reconstruction, repair, maintenance, and operation of wharves, docks, piers, slips, quays, and all other works, buildings, facilities, utilities, structures, and appliances incidental, necessary, or convenient, for the promotion and accommodation of commerce and navigation. The Port Act was enacted by the California Legislature and is consistent with the Public Trust Doctrine. Consequently, the proposed Board actions are consistent with the Public Trust Doctrine.
The proposed Board actions are considered “excluded development” pursuant to Sections 8.a. (Existing Facilities), 8.b. (Replacement or Reconstruction), and 8.c. (New Construction or Conversion of Small Structures) of the District’s Coastal Development Permit Regulations because the project would consist of storage and associated minor exterior and interior improvements for the purpose of Coast Guard related operations that would involve a negligible expansion of use beyond that previously existing and would involve no change of existing use of the property. A “Coastal Act Categorical Determination of Exclusion” was previously issued for this project on July 16, 2020, therefore, issuance of a Coastal Development Permit or subsequent Exclusion is not required for the proposed Board actions.
Equal Opportunity Program:
A 12% SBE goal was established for this Contract, which was further divided into subgroups to include Veteran, Service-Disabled Veteran, HubZone, Small Disadvantaged, and Women-owned businesses in accordance to GSA requirements. Soltek Pacific Construction exceeded the 12% overall goal and each of the goals in the subgroups.
PREPARED BY:
Devon Beach
Senior Engineer, Engineering-Construction
Attachment(s):
Attachment A: Location Map
Attachment B: Tabulation of Bids, Specification 2019-38, U.S. Coast Guard Phase II Tenant Improvements project, National City, CA