Palo Alto is paying $8 million to end a prolonged construction dispute with Swinerton Builders over the city's new public safety building at 250 Sherman Ave.

The settlement, executed Thursday, Sept. 10, closes a years-long fight over the $120 million headquarters that houses the police department, Fire Department administration and the Office of Emergency Services. Swinerton had sought $24.7 million. The City Council approved the $8 million figure during a closed session Aug. 17, according to Palo Alto Online.

Public Works Director Brad Eggleston said city staff disputed most of Swinerton's claims and believed the contractor's figures were inflated. Experts hired by the city developed scheduling analyses showing most delays were Swinerton's responsibility, according to Eggleston's report.

No public response from Swinerton Builders to the settlement was available as of publication.

But city officials conceded one key error: incorrect insulation material in the city's plans had to be replaced after installation. That changed the calculus. The admission created legal exposure heading into binding arbitration, Eggleston said, and staff recommended settling rather than risking a larger payout.

Swinerton launched construction in 2021 with a target completion of September 2023. Instead, the project dragged on for years. Swinerton cited flaws in the city's construction plans and accused Palo Alto of breaching its contract by declining to approve about 300 change order requests totaling roughly $21.5 million. The city countered that Swinerton had submitted more than 1,000 change orders in total and at one point threatened to charge the contractor $14,000 per day for unexcused delays.

The Council had previously approved three increases to the construction budget, adding $5 million to the initial $8.4 million contingency.

Under the settlement, Swinerton agreed to complete work on critical building systems, extend warranties on certain systems and drop all claims against the city, according to a city press release. The city's Public Works Department deemed the project complete July 31.

The building officially opened with a ribbon-cutting Nov. 16, 2025, but full occupancy took months longer. Patrol officers completed their move between Aug. 18 and Aug. 27. City Manager Ed Shikada told the Council at its Aug. 24 meeting that residents near California Avenue would "see additional police activity in the Cal Ave. area," adding, "this is their new home."

Emergency dispatchers are expected to complete their move by Oct. 1. The old police headquarters on Forest Avenue has closed.

The dispute is also prompting changes to how Palo Alto manages large construction projects. New policies include hiring third parties to review designs before construction begins, requiring formal partnering agreements between contractors and city staff, and organizing resources for faster review of change orders. The city is also evaluating alternatives to its traditional design-bid-build method, including design-build and construction-manager-at-risk approaches, which give contractors more involvement in the design phase.