City Council Agenda Report
Meeting Date: August 15, 2023
From: Todd Dusenberry, General Manager of Public Utilities Department: Public Utilities
Submitted by: Adriana Ramos, Administrative Analyst
Subject
Services Agreements with A.M. Ortega Construction, Inc. and Energy Experts International, Inc. for Natural Gas Project Design, Construction and Repair Services Recommendation
A. Find that the proposed action is categorically exempt from California Environmental Quality Act (CEQA) review, in accordance with CEQA Guidelines Section 15301, because the contracted services consist of the maintenance, repair or minor alteration of existing facilities and equipment and involve negligible or no expansion of an existing use; and B. Approve and authorize the City Administrator to execute two separate three-year Services Agreements for Natural Gas Project Design, Construction and Repair Services for which a combined amount of costs incurred shall not-to-exceed $690,000 over the term of the agreements, with:
1). A.M. Ortega Construction, Inc., in substantially the same form as submitted for a total amount not-to-exceed $690,000, for a three-year term; and
2). Energy Experts International, Inc., in substantially the same form as submitted, for a total amount not-to-exceed $690,000, for a three-year term.
Background
The Natural Gas Division of the City’s Public Utilities Department (VPU) was established in 2006 with a large distribution system and transmission system to serve the City’s robust industrial sector. The City provides natural gas service to approximately 125 commercial and industrial customers and has the infrastructure to serve about 900 customers within the City’s service area.
Although Vernon may be a small city with a gas utility, it is one of the largest municipal gas providers by volume in the United States.
As a small gas utility, Vernon maximizes the operational efficiency of its gas system by using fulltime employees to handle daily operating requirements while using outside expertise for other periodic or otherwise specialized requirements. This strategy maintains efficiencies, keeps internal costs competitive, and ensures that expertise and experience are available and applied when needed. VPU currently utilizes A.M. Ortega Construction, Inc. (AMO) for natural gas project design, construction, and repair services. AMO assists the VPU Natural Gas staff with several unpredictable factors, such as new customer connections, technical engineering, project design, pipeline safety assessments, compliance with new and pending regulations, and potential repairs due to system leaks and mechanical failures.
However, the existing Services Agreement with AMO is set to expire on August 30, 2023. To avoid a lapse in this essential service, staff issued a Request for Proposals (RFP) for Natural Gas Operational and Compliance Support Services on May 15, 2023 in accordance with Vernon Municipal Code Section 3.32.080. The RFP was advertised on the City's Planet Bids platform.
The RFP identified services needed such as welding of steel gas pipe, the fusion of polyethylene (PE) distribution line, pressure testing of steel and PE pipe, excavation and installation of steel or PE pipe, shoring of trenches and pits above gas lines, technical and maintenance support of regulator stations, pipeline damage repair, and emergency support services.
Three companies responded to the RFP by the June 1, 2023 deadline. A qualified panel thoroughly examined each proposal utilizing criteria to measure experience, work plan, references, and cost. Staff concluded that the proposals of AMO and Energy Experts International, Inc. (EEI) demonstrated the best expertise, experience, and comprehensive approach to the services requested in the scope of work detailed in the RFP.
Additionally, for technical design and engineering support services, as detailed in the RFP scope of work, contracting both AMO and EEI will allow the City to compare the costs and availability of each contractor. VPU intends to utilize the services of AMO for construction and/or repair support services, but when project technical design and engineering support services are required, VPU will request informal bids from both AMO and EEI and issue a service order to the contractor that best fits the project.
Therefore, staff recommends that the City Council approve a three-year Services Agreement with both AMO and EEI for natural gas operational project design, construction, and repair services, each for a total amount not to exceed $690,000 (or $230,000 annually). While the total of each contract is set at $690,000, any amount paid to either AMO or EEI shall count towards the combined total which shall not exceed $690,000. The proposed Services Agreements have been reviewed and approved as to form by the City Attorney’s Office.
Fiscal Impact
The fiscal impact for both contracts is a combined not-to-exceed $690,000 for the term of the three years. The forecast of the not-to-exceed amount of $690,000 for the three-year term or $230,000 per year is based on historical expenditures and market inflation.
The contractors’ fees will be based on actual work performed. Sufficient funds to cover the costs of the services are available in the Gas Enterprise Fund, Repairs & Maintenance Account No. 056-060-600-529000, and Professional Services-Technical Account No. 056-060-600-529225 for the current fiscal year and will be budgeted in subsequent fiscal years.
Attachments
1. Services Agreement – A.M. Ortega Construction, Inc.
2. Services Agreement – Energy Experts International, Inc.