City Council Memorandum
TO: HONORABLE MAYOR AND CITY COUNCIL DATE: FEBRUARY 15, 2022 FROM: FINANCE DEPARTMENT WARDS: ALL SUBJECT: APPROVE AN INCREASE TO CENTRAL STORES ANNUAL PO 221326 FOR COPPER PIPE TO FERGUSON WATERWORKS OF RIVERSIDE, CALIFORNIA FOR A TOTAL OF $550,741.55 AND A NOT TO EXCEED 30% ALLOWANCE FOR PRODUCER PRICE INDEX INCREASES UNTIL END OF FISCAL YEAR ENDING JUNE 30, 2022 ISSUE:
Approve an increase to Central Stores Annual PO 221326 for copper pipe to Ferguson Waterworks of Riverside, California for a total of $550,741.55, and a not to exceed 30% allowance for Producer Price Index increases until end of fiscal year ending June 30, 2022.
RECOMMENDATIONS:
That the City Council:
Approve an increase to Central Stores Annual PO 221326 for copper pipe stock to Ferguson Waterworks of Riverside, California in the total amount of $550,741.55; and Approve a not to exceed 30% allowance for Producer Price Index increases until the end of the current fiscal year, ending on June 30, 2022; and Authorize the City Manager, or designee, to execute all documents necessary to issue the purchase order and make minor and non-substantive changes.
BACKGROUND:
On January 13, 2020, the Riverside Public Utilities Board approved the capital expenditure for Work Order No. 2016734 in the amount of $750,000 for the Fiscal Year (FY) 2019/20 Water Service Lateral Replacement Program, a lateral replacement program that targeted neighborhoods prone to leaks. The planned approach saves money by repairing and replacing service laterals before they become emergencies. Through the program, City field forces can replace five service laterals when planned as compared to one service lateral replaced during an emergency event.
The Water Service Lateral Replacement Program is funded as part of the normal budgeting process in subsequent years at a rate of $750,000 per year for FYs 2019/20 to 2022/23.
On March 2, 2021, the City Council approved the award of RFB 7804 for copper pipe for Central Stores stock inventory, which supplies the requests from the Water Service Lateral Replacement Program.
On June 28, 2021, the Riverside Public Utilities Board approved the expenditures for 16 FY 2021/22 Annual Purchase Orders for Central Stores for orders benefiting Electric and Water operations, with an estimated amount of $10,718,982, with Ferguson Waterworks being allocated $369,109 of the total budget.
On July 6, 2021, the City Council approved the Central Stores annual purchase orders for FY 2021/22 in the total amount of $10,718,982.
DISCUSSION:
RPU’s Water Lateral Replacement Program is currently in progress and requiring an average of 49,000 feet of 1-inch copper pipe per fiscal year. The current FY 2021/22 annual purchase order has a total of 20,460 feet of copper pipe on order, and now requires the quantity to be increased to 55,000 accommodate the RPU work schedule.
COVID-19 is causing unprecedented market volatility and major supply chain disruptions. Extended lead times and lack of product availability is being seen across the market since late in the year 2020. For the period of October 2020 to March 2021, the U.S. Bureau of Labor Statistics Producer Price Index (PPI) shows a monthly average of 5.91% increases, with a total increase of 35.47% for copper materials. Per the standard RFB language, price adjustments are only allowed on a quarterly basis, however Central Stores is experiencing price increases every 30-60 days. Vendors are being asked to maintain pricing set in the contract terms, however, new bids are being issued more frequently since vendors are unable to hold pricing or do not have products available.
Since Purchase Order 221326 was issued on July 28, 2021, pricing has increased by 8%. On January 11, 2022, the vendor contacted staff with another 5% price increase. As the market fluctuates, anticipated increases at an average rate of 6% per month will need to be applied to the annual purchase order before the end of FY 2021/22.
Purchasing Resolution 23812, Section 1104 (c) states, “Unless otherwise specifically authorized by the Awarding Entity, Change Orders which cumulatively exceed the following will require Awarding Entity approval [when] 10% of the original contract price for Contracts and/or Purchase Orders previously approved by the Awarding Entity and the total Change Order amount will not exceed $150,000.” The Purchasing Manager concurs that this request is compliant with the Purchasing Resolution No. 23812, Section 1104 (c).
STRATEGIC PLAN ALIGNMENT:
This item contributes to Strategic Priority No. 6 - Infrastructure, Mobility & Connectivity and Goal 6.2 to maintain, protect, and improve assets and infrastructure within the City’s built environment to ensure and enhance reliability, resiliency, sustainability, and facilitate connectivity.
This item aligns with each of the five Cross-Cutting Threads as follows:
Community Trust – Water Lateral Replacement Program is a vital function of Riverside Public Utilities to maintain both safety and reliability of the water systems which help build community trust and result in the greater public good.
Equity – The City endeavors to provide safe and reliable municipal utility services to all its customers. Since water systems play a critical role in day to day living, investments made to prevent utility conflicts improve the reliability of the overall systems, thereby providing an equitable benefit to all customers.
Fiscal Responsibility – The lowest price for the material and thereby the best value for RPU’s customers was ensured through a competitive RFB process, as per Purchasing Resolution 23812.
Innovation – The replacement of laterals is a proactive approach to reduce repeat outages resulting in time and money savings.
Sustainability & Resiliency – The Water Lateral Replacement Program will help avoid utility conflict across the City of Riverside’s water systems and thereby will reduce the possibility of emergency repairs.
FISCAL IMPACT:
The total fiscal impact of this action is $550,741.55. Sufficient funds are available in Central Stores Fund, Inventory Account No. 0000640-141000.
Prepared by: Jennifer McCoy, Purchasing Manager
Certified as to
availability of funds: Edward Enriquez, Chief Financial Officer/City Treasurer Approved by: Kris Martinez, Assistant City Manager
Approved as to form: Phaedra A. Norton, City Attorney
Attachments:
Ferguson Quote
Producer Price Index Data
Board of Public Utilities Staff Report from January 13, 2020 Agenda Board of Public Utilities Minutes of January 13, 2020 Meeting Purchase Order 221326
Ferguson Waterworks PPI Increase ● Page 2