DATE:
TO:
FROM:
CONTACT:
SUBJECT:
Summary:
AGENDA RE PO RT City of Poway
March 1, 2022
Honorable Mayor and Members of the City Cou~il
Eric Heidemann, Director of Public Works f
Jessica Parks, Utilities Administrator, Public Works~
(858) 668-4703 or [email protected]
CITY COUNCIL
Approval of a First Amendment to the Agreement with JCI Jones Chemicals, Inc. and Hill Brothers Chemical Company for the Purchase of Water Treatment Plant Chemicals, RFB No. 21-023
The City of Poway owns and operates the Lester J. Berglund Water Treatment Plant, where raw water is treated and disinfected utilizing various chemicals in accordance with standards set forth by state and federal regulations and the American Water Works Association. On May 4, 2021, City Council awarded contracts to JCI Jones Chemicals, Inc. UCI Jones) and Hill Brothers Chemical Company (Hill Brothers), in the amount of $63,710.40 and $12,754.16 respectively, for the purchase of required chemicals. Since awarding the contracts, these two chemical vendors sent notices about product shortages and cost increases. Staff recommends approval of the attached amendments to address the cost increases for chemical purchases.
Recommended Action:
It is recommended that the City Council approve the First Amendment to the Contract for the Sale and Purchase of Goods and Materials to JCI Jones Chemicals, Inc. and Hill Brothers Chemical Company and authorize the City Manager to execute the necessary documents.
Discussion:
Chlorine Chemical Purchases: On June 2, 2021, JCI Jones notified the City of a cost increase for chlorine chemicals of $664 per ton (/ton) to $750/ton and then shortly followed up with a letter on June 10, 2021 declaring Force Majeure citing a serious shortage of chlorine nationwide. In August 2020, a fire destroyed a large chemical plant in Louisiana that produced much of the supply of chlorine (approximately 40%) to the nation. Additionally, due to the coronavirus pandemic, an increase in domestic chlorine demand occurred.
As chlorine is an essential chemical in the treatment process of drinking water, the force majeure and chlorine shortage were a concern. Poway, along with other water agencies, submitted an application 1 of 15
March 1, 2022, Item #3
to the United States Environmental Protection Agency (US EPA), Water Security Division pursuant to Section 1441 of the Safe Drinking Water Act, requiring action regarding the chlorine shortage to ensure Poway would receive the chemicals necessary to treat water. A letter from the US EPA was issued on June 30, 2021 to chemical manufacturers and suppliers requesting prioritization to water systems as customers of critical water treatment chemicals. JCI Jones notified Poway that the Force Majeure Declaration was cancelled on September 16, 2021.
While the prioritization of chlorine was given to water agencies that treat water, the cost of chlorine chemicals continued to increase. Poway received several follow up letters fromJCIJones that the price increased in August 2021 to $920/ton; November 2021 to $1, 150/ton; and January 2022 to $1,265/ton.
Staff anticipates that this is not the final amount and that there will be additional increases to chlorine this year.
Aqua Ammonia Chemical Purchases: On November 29, 2021, Hill Brothers notified the City of a cost increase for aqua ammonia due to a shortage of raw materials. The letter did not disclose the amount of the increase, but in a January 2022 email, Hill Brothers stated the increase would be from $0.705 per gallon (!gal) to $1.137 /gal.
As JCI Jones and Hill Brothers were the City's sole bidders and suppliers for these essential chemicals, staff contacted other chemical suppliers throughout California and nearby states for price quotes; however, as the shortage of materials is a nationwide issue, the cost for chlorine and aqua ammonia is either the same or higher in cost from other suppliers. Staff also contacted other water agencies that use these chemicals to treat water and found that they are paying the price increases to ensure deliveries of the chemicals.
The treatment of the City's water is essential, and to avoid any lapse in the delivery of chemicals, staff requests approval of amendments to the J(I Jones and Hill Brothers contract limits. Since we anticipate additional increases in the cost of chlorine and aqua ammonia, staff recommends an increase to the JCI Jones contract from a not-to-exceed limit of $63,710 to a not-to-exceed limit of $100,000, and an increase to the Hill Brothers contract from a not-to-exceed limit of $12,710 to a not to-exceed limit of $20,000.
Environmental Review:
This action is not subject to review under the California Environmental Quality Act (CEQA) Fiscal Impact:
There is sufficient funding available in the chemicals account (402060-45200) to authorize the amendments to the agreements.
Public Notification:
None.
2 of 15
March 1, 2022, Item #3
Attachments:
A. Letters from JCI Jones and Hill Brothers regarding the increase in chemical costs B. First Amendment to the JCI Jones Chemicals, Inc. Contract C. First Amendment to the Hill Brothers Chemical Company Contract Reviewed/ Approved By:
Assistant City Manager
3 of 15
Reviewed By:
Alan Fenstermacher
City Attorney City Manager
March 1, 2022, Item #3
June
2, 2021
Amelia
Dominguez
City
of
Poway
Public
Works
Department
14467
Lake
Poway
Road
Poway
, CA
92064
Phone:
858-668-4757
E-mail
:
adominguez@poway
.org
Via
E-Mail
Subject:
PRICE
INCREASE
Dea
r Amelia
Dominguez:
Due
to
the
increase
in
cos
t of
raw
materials,
we
find
it
necessary to
increase
yo
ur price
of
Chlorine
Tons
from
its
curren
t price
of
$664.00
I Ton
to
$750
.00
/ Ton
.
New
price
will
be
effective
Ju
ly
1 ,
2021
.
Enclosed
are
supporting
documentation
.
Thank
you
for
your
cooperation
and
understanding
.
We
will
do
everything
in
our
power
to
keep
any
increases
to
a
minimum
.
I would
like
to
thank
you
for
the
continued
partnership
that
exist
between
the
City
of
Poway
and
JCI
Jones
Chemicals
Inc
.
If
you
have
any
questions
or
requ
ire
additional
information
, please
feel
free
to
contact
me
at
your
convenience.
Respectful
~
y~urs,
Cris
Blomg
en
Sales
Coordinator
I Office
Manager
JCI
Jones
Chemicals
Inc
.
Phone:
310-523-1629
, Ext.
26 1
E-mail
:
[email protected]
Enclosures Torrance
Bran
ch•
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Blvd.•
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rance
, CA
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4of
15 ATTACHMENT
A
March 1, 2022, Item #3
June
I 0
th
202
I
Dear
Customer
.
There
have
been
widespread
news
releases
regarding
the
serious
shortage
of
ECU
(Chlorine
/Caustic
Soda)
supply
in
the
United
States.
The
attached
letter
from
our
main
supplier
of
product,
Westlake
Chemical,
is
their
notice
sent
to
us
declaring
Force
Majeure
.
Due
to
their
action,
JCI
has
no
choice
but
to
also
dec1are
Force
Majeure,
effective
immediately.
It
is
confirmed
that
most
other
ECU
producers
have
taken
similar
supply
action.
We
will
continue
to
do
everything
in
our
power
to
secure
supply
of
raw
materials
for
our
customers.
We,
like
you
are
ill-effected
by
this
supply-demand problem
with
the
producers.
Unfortunately,
producer
operations
are
completely
beyond
our
control.
We
appreciate
your
business
and
your
understanding.
Ryan
C.
Jones
President,
Chief
Operating
Officer
JCI
Jones
Chemicals
Inc.
RC
/sm Corporate
Offices•
1765
Ringling
Blvd.
• Sarasota,
Florida
34236
• teleplzone
: 941.330.1537
• fncs1111ile:
941.330.9657
• 800.477.
1078
Branch
Locntious
• Warwick,
NY
• Caledonia,
NY
• Barberton,
OH
• Riverview,
MI
• Merrimack,
NH
• Charlotte,
NC
Jacksonville,
FL
• Beech
Grove,
IN
• Milford,
VA
• Tacoma,
WA
• Torrance,
CA
www.jcichemicals.com
s
of
15 March 1, 2022, Item #3
September
16,
2021
Re:
JCI
Force
Majeure
Declaration
dated
May
11,
2021
JCI
Force
Majeure
Declaration
dated
June
10 2021
Dear
Customer
Due
to
JCI
Jones
Chemicals
Inc.
's
supplier
of
raw
materials
canceling
their
force
majeure
declaration,
effective
immediately
and
in
accordance
with
those
certain
terms
and
conditions
under
which
JCI
Jones
Chemicals
Inc.
sells
Chlorine,
Sodium
Hypochlorite,
Liquid
Caustic
Soda,
and/or Sodium
Bisulfite
manufactured
and
shipped
from
its
various
locations
listed
below,
JCI
Jones
Chemicals
Inc.
hereby
cancels
the above-referenced
force
majeure
declarations.
Sincerely, ~ Ryan
C.
Jones
President
and
Chief
Operations
Officer
JCI
Jones
Chemicals
Inc.
Corporate
Offices•
1765
Ringling
Blvd.•
Sarasota,
Florida
34236
• telephone:
941.330.1537
• facsimile:
941
.330.9657
• 800
.477.1078
Bm11cli
Lorntio11s
• Warwick,
NY
• Caledonia,
NY
• Barberton,
OH•
Riverview,
MI
• Merrimack,
NH•
Charlotte, NC
Jacksonville,
FL•
Beech
Grove,
IN•
Milford,
VA•
Tacoma,
WA•
Torrance,
CA
www.jcichemicals.com
6 of
15 March 1, 2022, Item #3
August 24, 202 l
City of Poway
PO Box 789
Poway, CA 9207 4
Dear Customer:
PLEASE SIGN AND RETURN BY 8/27/21
TO A VOID POSSIBLE SHIPMENT DELAYS
Raw material cost increases were recently issued by the Producers of chlorine and sodium hydroxide (caustic soda). These materials are also used to manufacture sodium hypochlorite (bleach) and sodium bisulfite. It is necessary for us to pass those increases on to our customers.
Effective September is• 2021 your chlorine price must increase from $750.00 per ton to $920.00 per ton. All other terms & conditions will remain the same.
Please know that while we do everything in our power to keep increases to a minimum, we have no control over Producer operations or raw material cost increases.
Please also note that supply remains tight-we will do our best to maintain service of your full requirements.
Thank you for your cooperation and understanding.
Sincerely,
JC/ Jones Chemicals, Inc
JCJ Jones Chemicals, Inc
1765 Ringling Blvd
Sarasota, FL 34236
Please sign below and return via email to [email protected] or return via fax to (310) 523-2944.
Date: 'd -Z, r -2-I ·
March 1, 2022, Item #3
November 1, 2021
City of Poway
PO Box 789
Poway, CA 9207 4
Dear Customer:
PLEASE SIGN AND RETURN BY 11/12/21
TO A VOID POSSIBLE SHIPMENT DELAYS
Raw material cost increases were recently issued by the Producers of chlorine and sodium hydroxide ( caustic soda). These materials are also used to manufacture sodium hypochlorite (bleach) and sodium bisulfite. It is necessary for us to pass those increases on to our customers.
Effective November 15th 2021 your chlorine price must increase to $1,150.00 per ton. All other terms & conditions will remain the same.
Please know that while we do everything in our power to keep increases to a minimum, we have no control over Producer operations or raw material cost increases.
Please also note that supply remains tight-we will do our best to maintain service of your full requirements.
Thank you for your cooperation and understanding.
Sincerely,
JC/ Jones Chemicals, Inc
JCI Jones Chemicals, Inc
1765 Ringling Blvd
Sarasota, FL 34236
Please sign below and return via email to [email protected] or return via fax to (310) 523-2944.
Accepted by: _________________ _ Date:
8 of 15
March 1, 2022, Item #3
January 27, 2022
City of Poway
PO Box 789
Poway, CA 92074
Dear Customer:
PLEASE SIGN AND RETURN BY 2/14/22
TO A VOID POSSIBLE SHIPMENT DELAYS
Raw material cost increases were recently issued by the Producers of chlorine and sodium hydroxide ( caustic soda). These materials are also used to manufacture sodium hypochlorite (bleach) and sodium bisulfite. It is necessary for us to pass those increases on to our customers.
Effective February 15th• 2022 your chlorine price must increase to $1,265.00 per ton. All other terms & conditions will remain the same.
Please know that while we do everything in our power to keep increases to a minimum, we have no control over Producer operations or raw material cost increases.
Please also note that supply remains tight-we will do our best to maintain service of your full requirements.
Thank you for your cooperation and understanding.
Sincerely,
JC/ Jones Chemicals, Inc
JCI Jones Chemicals, Inc
1765 Ringling Blvd
Sarasota, FL 34236
Please sign below and return via email to [email protected] or return via fax to (310) 523-2944.
Accepted by: _________________ _ Date: ______ _
9 of 15
March 1, 2022, Item #3
HILL
BROTHER
CALIFORNIA
REGIONAL
SALES
OFF
ICE
3000
EAST
BIRCH
STREET
•
SUITE
108
•
BREA,
CALIFORN
IA
92821-6261
(714)
579
-3333
•
FAX
(714)
579-3399
•
ORDER
DESK
(800)
322
-4119
http://hi
llbroth,2rs.com
November
29,
2021
Re:
Purchase
of
Aqua
Ammonia
-Price
Increase
Notice
Dear
Customer,
Throughout
2021
it
has
become
common
knowledge
in
the
industry
of
the
raw
material
shortages
for
anhydrous
ammonia,
at
the
manufacturers
level.
These
shortages
have
a direct
effect
on
the
supply
and
pricing
of
the
aqua
ammonia
we
manufacture
for
you.
Demand
for
raw
materials
has
returned
to
pre
COVl
D
levels,
but
producer
orders
are
severely
backlogged,
and
manufacturer
operating
rates
continue
to
be
lower.
We
have
multiple
supply
sources
of
raw
materials
at
Hill
Brothers
and,
we
hav
e
been
not
ified
by
our
suppliers
and
all
manufacturers,
of
significantly
higher
costs
effective
December
1,
2021,
with
tight
supplies
of
anhydrous
ammonia
going
forward.
Foreign
manufact
urers
of
anhydrous
ammonia
that
is
typically
export
ed
to
the
U
S
or
other
parts
of
the
world
have
been
significantly
reduced
due
to
their
high
cost
of
natural
gas.
This
has
increase
d the
demand
from
other
global
producers
including
the
US
.
The
result
is
a
large
spike
in
ammonia
pric
es b
ot
h
internationally
and
dome
stically
and
creating
a
worldwide
supply
shortage.
This
situation
may
take
months
for
manufacturers
ru1d
supply
chains
to
recover
and
thus
force
domestic
an
d
im
ported
raw
material
prices
higher
in
the
meantime
.
Un
fort
unately,
we
do
not
know
the
duratio
n
of
this
situat
ion,
but
we
anticipate
it
could
last
for
most
of
2022
.
This
situation
forces
us
to
adjust
prices
upward
effective
December
1,
2021,
and
at
the
very
least
be
reviewed
on
a monthly
basis
ongoing
until
this
situation
stabili
zes,
and
raw
material
producers
can
finn
prices
.
Due
to
these
delays
and
skyrocketing
costs,
we
would
like
to
discuss
with
you
how
to
address
these
issues
going
forward
. These
events
are,
unfortunately,
beyond
our
reasonable
control.
Pursuant
to
our
obliga
tion
s
under
our
agreement
with
you,
we
will
continue
to
use
all
diligent
efforts to
end
the
delay
of
our
performan
ce as
soon
as reasonably
practicable
and
secure
the
best
rea
so
nabl
e
prices
for
our
cu
stomers,
ensure
that
the
effects
of
the
pandemic
are
minimized,
and
resume
performance
and
standard
pr
ices
promptly
upon
the
cessation
of
the
effects
of
the
pandemic
on
our
economy
. However,
due
to
the
nature
of
the
COVID-19
pandemic,
we
are
unable
to
quantify
the
extent
or
duration
of
its
impact
on
our
perfomrnnce
under
the
agreement
at
this
time
.
Please
do
not
hesitate
to
contact
your
local
rep
with
any
questions
relating
to
the
foregoing
.
J~
John
Padilla
, Jr
.
Director,
Sales
&
Marketing
Hill
Brothers
Chemical
Company
10 of
15 SO.
CALIFORNIA
•
SAN
JOSE
•
PHOENIX
•
TUCSON
•
NORTH
SALT
LAKE
March 1, 2022, Item #3
From:
To:
Cc:
Subject:
Date:
Attachments:
Tom Baird
Jessica Parks
California Sal~; Frank Alari
Aqua Ammonia relief
Thursday, January 20, 2022 11:29:28 AM
Ammonia Green Market Index 2 year.xlsx
Ammonia Market watch 1-15-22.pdf
You don't often get email from [email protected]. Learn why this is important
EXTERNAL EMAIL
Jessica,
Thank you for reaching out for clarity regarding this issue. I have attached the latest Green Market Index which tracks
the price of Ammonia. Currently we are paying roughly three times as much for Ammonia than we did last year. It is for this reason along with the rising cost of freight that we are asking for relief.
What we are proposing is to adjust our price to the City of Poway to $1.137 /Gal.
We are hoping to enact this ASAP. We appreciate your consideration and await your permission to follow through on this.
Kind Regards,
Thomas Baird
Sales Representative
Hill Brothers Chemical
Phone:619-871-9523
Fax:714-579-3399
Email: [email protected]
Order Desk Phone:800-322-4119
Order Desk Email" [email protected]
11 of 15
March 1, 2022, Item #3
12 of 15
FIRST AMENDMENT TO CONTRACT
FOR THE SALE AND PURCHASE OF GOODS AND
MATERIALS
THIS FIRST AMENDMENT TO AGREEMENT, is made and entered into effective this 1st day of March, 2022, by and between the CITY OF POWAY (hereinafter referred to as "City"), and Hill Brothers Chemical Company, (hereinafter referred to as "Seller").
RECITALS
1. City and Seller entered into that certain "Contract for the Sale and Purchase of Goods and Materials," dated July 1, 2021, (the "Agreement"), by which City and Seller established the terms and conditions for providing goods and services to City.
2. On November 29, 2021, Seller notified the City again that its cost for goods subject to this Contract have increased, outside of Seller's control.
3. Now the City and Seller agree to increase the contract from a not-to-exceed limit of $12,710 to a not-to-exceed limit of $20,000.
NOW, THEREFORE, IT IS MUTUALLY AGREED THAT CITY DOES HEREBY RETAIN CONTRACTOR ON THE FOLLOWING TERMS AND CONDITIONS:
Section 1. Except as otherwise amended by this First Amendment, all other terms and conditions of the Agreement shall remain in full force and effect.
ATTACHMENT B
March 1, 2022, Item #3
IN
WITNESS
WHEREOF,
the
parties
hereto
have
duly
executed
this
First
Amendment
on
the
date
first
above
written.
CITY
OF
POWAY
By:-------------
Chris
Hazeltine,
City
Manager
Date:
------------
ATTEST: Carrie
Gallagher,
CMC,
City
Clerk
APPROVED
AS
TO
FORM:
Hill
Brothers
Chemical
Company
By:------------
Frank
Alari,
Regional
Sales
Manager
Date:
------------
By:--------------
Alan
Fenstermacher,
City
Attorney
13 of
15 March 1, 2022, Item #3
FIRST AMENDMENT TO CONTRACT
FOR THE SALE AND PURCHASE OF GOODS AND
MATERIALS
THIS FIRST AMENDMENT TO AGREEMENT, is made and entered into effective this 1st day of March, 2022, by and between the CITY OF POWAY (hereinafter referred to as "City"), and JCI Jones Chemicals, Inc., (hereinafter referred to as "Seller").
RECITALS
1. City and Seller entered into that certain "Contract for the Sale and Purchase of Goods and Materials," dated July 1, 2021, (the "Agreement"), by which City and Seller established the terms and conditions for providing goods and services to City.
2. On June 2, 2021, Seller notified the City in a Force Majeure Declaration that its cost for goods subject to this Contract have increased since the submittal of their bid, outside of Seller's control. On September 16, 2021, the Force Majeure Declaration was cancelled.
3. On November 8, 2021, Seller notified the City again that its cost for goods subject to this Contract have increased, outside of Seller's control.
4. Now the City and Seller agree to increase the contract from a not-to-exceed limit of $63,710 to a not-to-exceed limit of $100,000.
NOW, THEREFORE, IT IS MUTUALLY AGREED THAT CITY DOES HEREBY RETAIN CONTRACTOR ON THE FOLLOWING TERMS AND CONDITIONS:
Section 1. Except as otherwise amended by this First Amendment, all other terms and conditions of the Agreement shall remain in full force and effect. 14 of 15 ATTACHMENT C
March 1, 2022, Item #3
IN WITNESS WHEREOF, the parties hereto have duly executed this First Amendment on the date first above written.
CITY OF POWAY
By: __________ _
Chris Hazeltine, City Manager
Date: ------------
ATTEST:
Carrie Gallagher, CMC, City Clerk
APPROVED AS TO FORM:
JCI Jones Chemicals, Inc.
By:-----------
Cris Blomgren, Sales Coordinator
Date: ------------
By:------------
Alan Fenstermacher, City Attorney
15 of 15
March 1, 2022, Item #3