PUC deadlocks on Lake Merced pump-station award after protests over LBE credits

The San Francisco Public Utilities Commission failed to act on a disputed contract for the Lake Merced Pump Station on March 24 after protests from competing bidders and objections from labor representatives about how Local Business Enterprise (LBE) credit was calculated.

Assistant General Manager for Infrastructure Harlan Kelly told the commission that engineering estimates for contract WD2548 ranged from $52 million to $60 million but that bids came in between about $29.9 million and $40 million; the apparent low bidder later withdrew, and the second-lowest bidder, Western Water, faced protests alleging it did not meet Human Rights Commission (HRC) compliance. "The engineering estimate was $52,000,000 to $60,000,000," Kelly said, then explained staff and HRC had reviewed technical and compliance issues.

Why it matters: the award would advance a major seismic- and capacity-upgrade project on a central PUC asset and unlock subcontracting opportunities for local firms. Several small contractors and union representatives said the outcome could create precedent affecting hundreds of millions in WESIP spending across the region.

HRC contract and compliance staff described how crediting rules are applied and said the HRC director has discretion to deem bids responsive when firms fall narrowly short of percentage goals. The staff account focused on a disputed LBE credit for pumps supplied by Link International (sometimes referenced in the record as "Infravalu/ValueFire" for a subcontract role), and on whether bid-day documentation and subsequent submissions justified crediting.

Public commenters included Cynthia Gutierrez of GSE Construction, who said LINC International’s incorporation in South San Francisco raised questions about meeting San Francisco LBE requirements, and Alex Lansberg of the Carpenters, who warned the commission the procurement created "an opportunity to essentially game the system" and questioned whether claimed subcontractor capacity and storage (he cited about "250 square feet") matched the scope of the pump work.

Western Water representatives defended their bid and local participation. "We have over 85% of all the labor hours going into this project out from local subcontractors," said John McGarva, Western Water’s president, urging the commission that the bid represented a strong price for the owner and would support local workers.

Commission action: a motion to award the contract was moved and voted on but did not secure a clear three-vote majority and failed. A subsequent motion to reject the bids and authorize staff to re-advertise was moved and seconded; several commissioners recorded conflicts or no votes. San Francisco’s city attorney advised that, because the commission consists of five members and three affirmative votes are required to act, "lacking three votes there is no action of the commission" and the matter "dies" for this meeting and will be re-agendized.

What’s next: Because the commission did not reach the three-vote threshold on either motion, the PUC will return the contract for further consideration at a future meeting after additional review of HRC findings, bidder documentation, and any outstanding protests. Staff offered to convene further discussions with unions, contractors and the HRC to clarify compliance and capacity questions before the item returns to the docket.

The commission’s deliberations highlighted tensions common to large public works procurements: balancing aggressive low bids, strict local participation goals, and documentary evidence of subcontractor capacity. The item will be placed on a future agenda for renewed action.