Item Number: 10
City Council / Board of Directors
Written Communications
Meeting of: May 21, 2024
Submitted By:
Doug Mathews, Director of Public Works and Water
Subject:
Amendment No. 6 to the General Services Provider Standard Agreement between the Victorville Water District and Ferguson Enterprises, Inc.
Recommendation:
That the Honorable Victorville Water District Board of Directors (Board) approve:
1. Amendment No. 6 to the General Services Provider Standard Agreement with Ferguson Enterprises, Inc. for the provision of warehouse inventory supplies and water meters essential for water and field operations, thereby increasing the total compensation by $569,100 for a total amount not to exceed $1,439,100; and
2. A General Services Provider Standard Agreement with Ferguson Enterprises, Inc. for the procurement of Neptune 360 software for an amount not to exceed $45,769.22.
Fiscal Impact:
Acting in accordance with the staff recommendation to increase the supply agreement compensation will result in a fiscal impact of $569,100. No additional appropriation is required, and the increased expense will be funded from the following accounts:
Budget Account No. Description Amount
410-16100 Inventory Materials and Supplies $444,700.00
4100530-52446 Meter Services Changeouts $124,400.00
Total: $569,100.00
Acting in accordance with the staff recommendation for the software upgrade will result in a fiscal impact of $45,769.22. No additional appropriation is required, and the increased expense will be funded from the following account:
3 6
2 4
Budget Account No. Description Amount
4100530-55050-74379 Advanced Metering Infrastructure $45,769.22 Total: $45,769.22
Strategic Plan Goal:
This item is in accordance with Goal E in the 2023-2026 Strategic Plan, Invest in Infrastructure, as this will allow for continued operations of the Victorville Water District (District). The District relies on necessary inventory supplies to operate and sustain daily operations, ensuring the provision of a safe and reliable water supply for the community.
This in turn aligns with the goal to create a healthy and livable community by maintaining the City's assets through investment in infrastructure and innovations.
Background:
The District selected Neptune meters as their standardized water meter through a thorough solicitation and vetting process by Engineering and Water District staff a decade ago. Ferguson Enterprises, Inc. (Ferguson) is the sole source distributor of Neptune products (hardware and software) for the area. Ferguson also routinely responds to requests for quotes for materials and supplies for inventory items that are not Neptune products.
Amendment No. 6 to the General Services Provider Standard Agreement Amendment No. 6 to the agreement with Ferguson is essential to address unforeseen expenses that surpass contract amounts approved in previous amendments. The expenses stemming from this adjustment are primarily due to new home developments, resulting in an increased demand for meters, and the procurement of essential supplies necessary for maintaining inventory levels crucial for regular water operations and supporting the transition from Advanced Meter Reading (AMR) to Advanced Metering Infrastructure (AMI) technology. Currently, the City is dependent upon Ferguson for Neptune meters, software, and AMR/AMI technology, while also utilizing this vendor as a major supplier for other inventory and operational supplies essential for maintaining District operations. While staff attempts to adjust the contract amount for Ferguson every year based on growth projections and historical costs, the number bids won by Ferguson and development that actually occurs during the year can vary significantly.
The District has also continued to encounter obstacles in acquiring essential inventory items in the current economic climate, experiencing challenges in sourcing and acquiring goods. These hurdles have resulted in extended lead times for many essential supplies and inventory items, increased costs, and price fluctuations across vendors. Ferguson, in particular, has been significantly affected by delays in inventory acquisition, stemming from prolonged lead times and difficulties in parts procurement from their manufacturers.
Consequently, these challenges have also affected District operations. These factors have led to a need to keep more inventory in stock.
The District currently manages approximately 35,300 residential meters and typically replaces around 100 meters per month due to various reasons like new installations, meter exchanges, and testing. In order to provide for sufficient continuity of service, the 3 6
2 4
recommended inventory level of residential meters is approximately 400 meters, which equates to about 1% of the total meter accounts in the District. This quantity acts as a crucial buffer to ensure seamless operations in case of emergencies, unexpected growth, and supply chain issues. However, maintaining this recommended inventory level of about 400 meters has proven challenging due to prolonged lead times, increased meter usage by field staff, and the unpredictability of development which affects forecasted meter demands.
As a result of these acquisition delays, the District currently has several open purchase orders from Ferguson, some of which have not been fully received or are only partially fulfilled. The total value of goods received to date amounts to $883,666, surpassing the current contract amount of $870,000 by $13,666. Additionally, there are still four outstanding purchase orders expected to be either partially fulfilled by the end of the fiscal year or sometime during the next fiscal year, along with one outstanding requisition for proprietary meter boxes needed to replace old boxes, and also installed with new meters in recently developed housing tracts. The bulk of these remaining orders, totaling approximately $555,426, will likely be received after the close of the current fiscal year as only 62% of the goods ordered have been received to date. Amendment No. 6 is necessary to accommodate these purchase orders.
Below is a list of the open pending orders with Ferguson Enterprises, Inc.:
Purchase Order Description Amount
20246771 WD Inventory $102,442.50
20245208 WD Inventory $328,217.52
20241379 Meters $105,512.96
20240991 Meters $1,128.55
Requisition Meter Boxes $17,711.50
Total: $555,425.59
General Services Provider Agreement for Neptune 360
The AMI technology for interfacing with Neptune meters requires an upgraded software provided by Neptune that is a proprietary product for the Neptune meters that are exclusively deployed throughout the District. This software allows the meters and end points to communicate with the cloud-based program (commonly referred to as SaaS, or software as a service) for meter reading, data collection, and billing purposes. The new SaaS was budgeted and planned for as part of the AMI project (74739) identified in the City’s latest Strategic Plan.
In September 2023, the City of Victorville faced a cyber security breach, disrupting access to crucial financial and billing systems. This unforeseen event necessitated an accelerated transition from the existing AMR Meter Data Management Platform (Neptune’s N_Sight software) the City was using prior to the breach, to Neptune’s AMI Meter Data Management Platform (Neptune 360) required for the AMI project. The urgency to implement the new software stemmed from significant challenges encountered by field staff in accessing essential meter reading information required for billing 3 6
2 4
purposes, and the inability to restore functionality of the existing N_Sight software to resume meter reading and billing operations.
To swiftly address operational disruptions caused by the breach, it was believed that the new cloud-based software was the best option to restore essential services.
Unfortunately, staff contacted Ferguson to expeditiously upgrade and implement the new software prior to the approval and execution of an agreement for the software. This oversight has led to the vendor payment being unable to proceed.
Discussion:
Amendment No. 6 to the General Services Provider Standard Agreement Contract Amendment No. 6 would increase the total compensation for Ferguson by $569,100, and ensure that the District can make all necessary payments in a timely manner and within the bounds of the revised contract limit. This approach is in line with the recommendations of our Purchasing staff, who advise that cumulative vendor compensation should not exceed the total contract amount, whether or not a singular purchase is below certain allowable thresholds. Increasing contract limits provides for better transparency for cumulative spending and also streamlines the purchasing process for smaller awards of bids for non-proprietary materials and supplies.
General Services Provider Agreement for Neptune 360
Ferguson serves as our contracted provider for AMR/AMI solutions and has been designated as the exclusive sole source vendor for Neptune products. This designation is due to the proprietary nature of the software essential for our Neptune meter products.
The Neptune software plays a vital role in seamlessly integrating our AMR/AMI systems with our cloud-based platform. By facilitating real-time access to crucial data, it allows staff to maintain operational efficiency and accuracy in water utility operations.
To formalize this emergency procurement and ensure continued meter reading and billing operations, a new General Services Provider Agreement for Neptune 360 is being requested. This agreement acknowledges the critical role the Neptune 360 software plays in restoring access to vital billing information and provides for the establishment of a new contract term to reflect the ongoing use of this software solution.
Approval of a new General Services Provider Standard Agreement with Ferguson for the procurement of Neptune 360 software will facilitate ongoing operations with the company and enable the City to establish a contractual arrangement to address outstanding financial obligations, particularly related to past due invoices stemming from the transition to the cloud-based infrastructure following the cyber attack.
Article II, Contract Authority under Chapter 2.28 – Purchasing system of the City of Victorville’s Municipal Code outlines the City’s procurement and purchasing process.
Article II – Contract Authority, establishes certain responsibilities and actions that the City Council has specifically relating to Victorville Municipal Code 2.28.100(a)(6), which states that the City Council shall have the authority to award and execute a contract for purchase of supplies and equipment or general services with a cost in excess of one hundred 3 6
2 4
twenty-five thousand dollars. The proposed amendment and agreement combined exceed the City Manager's authority and therefore require the approval of the Board.
Procuring the Neptune 360 software is a critical step in integrating all meters in the City into an AMI system with cloud-based infrastructure. This integration is essential for ensuring the continuous and secure management of our utility operations, as well as for maintaining compliance with regulatory standards and contractual obligations. Therefore, staff recommends that the Board approve a new General Services Provider Standard Agreement with Ferguson Enterprises, Inc. for the procurement of Neptune 360 software for an amount not to exceed $45,769.22.
Approval of Amendment No. 6 to the General Services Provider Standard Agreement between the Victorville Water District and Ferguson Enterprises, Inc. will enable the City to meet its outstanding financial commitments for the remainder of the fiscal year. This contract amendment covers all remaining open purchase orders and requisitions with Ferguson, as well as any anticipated expenses crucial to successfully concluding the fiscal year. The aim is to ensure adequate funding upon receipt of awaited inventory items and prevent a situation where inventory is received but payment obligations cannot be met as per contract terms. This underscores the importance of including all necessary expenses as a precaution against unforeseen delivery delays and prolonged lead times.
Therefore, staff recommends that the Board approve Amendment No. 6 to the General Services Provider Standard Agreement with Ferguson Enterprises, Inc. for the provision of warehouse inventory supplies and water meters essential for water and field operations, thereby increasing the total compensation by $569,100 for a total amount not to exceed $1,439,100.
Attachments: A. General Services Provider Standard Agreement Amendment No 6 B. General Services Provider Standard Agreement with Ferguson Enterprises, Inc. for the procurement of Neptune 360 software.
C. VMC 2.28.100