Gilroy council rejects $144,774 HVAC design contract for Old City Hall

The Gilroy City Council voted 7–0 to reject awarding a $144,774 contract to Advanced Design Consultants Inc. for HVAC and mechanical design services at Old City Hall (Project No. 25 RFP ASD‑505).

The contract before the council covered project management, preliminary and 30/60/100 percent design packages, regulatory permit preparation, bid‑package development and construction support. Leanne McPhillips, the city’s administrative services director, told the council the firm was the scoring committee’s pick based on experience, qualifications and methodology. Staff recommended approval of the design contract; construction would be a separate phase and would be brought back to the council for authorization once actual construction bids were received.

McPhillips said the HVAC system at the Old City Hall building — on the historic register and leased to Old City Hall Restaurant — is more than 35 years old, has required frequent repairs (about $40,000 in the past 2½ years) and was included in the FY 2024–25 capital improvement program. She told council the CIP included $360,700 in the facilities fund for the project’s design phase; the proposed design contract was $144,774 (staff included a 15% contingency in the staff estimate for a total design phase cost of $144,774). Using a rule‑of‑thumb assumption (15% design-to-construction), staff estimated construction could be “in the neighborhood of $800,000” and said the remaining FY25 CIP budget of about $215,926 likely would not cover construction.

Council members expressed concern about committing to the design contract while the long‑term plan for the building and tenant status remain uncertain. Council members also questioned whether the city could solicit direct contractor estimates rather than pay for a separate design contract. Staff and the facilities superintendent, Walter Dunkel, explained public works bidding rules require a design package for a public construction project and that the consultant is an engineering/design firm that would not perform construction work themselves. The consultant would produce the construction documents the city must use to put the job out to bid.

Several council members said they were uneasy spending the city’s limited one‑time funds on a project that could trigger a near‑$1 million total cost and urged city leaders to consider the council’s recently adopted strategic planning priorities and possible economic development alternatives for the property. Council members also noted the current restaurant tenant is month‑to‑month and that past discussions about selling or changing tenants contributed to reluctance to proceed immediately.

After discussion, a motion to reject the contract award passed unanimously. Staff said the rejection was without prejudice and the council could revisit the project in the future. If council later decides to proceed, staff said the design contract would be returned for council consideration; construction would require a separate bidding and approval process.

The council did not approve any new design or construction expenditure for Old City Hall at the meeting.