HomeMy WebLinkAbout03. Authorize sole-source contract to Solar Turbines for long-term maintenance of Cogeneration Gas Turbine SystemCentral Contra Costa Sanitary District 36
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POSITION PAPER
Board Meeting Date: May 21, 2015
subiect: ADOPT A RESOLUTION MAKING FINDINGS AND AUTHORIZING THE
GENERAL MANAGER TO EXECUTE A SOLE-SOURCE, LONG-TERM SERVICES
CONTRACT WITH SOLAR TURBINES, INC., FOR MAINTENANCE OF THE
DISTRICT'S COGENERATION GAS TURBINE SYSTEM FOR A TERM OF FIVE YEARS
Submitted By: Initiating DeptlDiv.:
Clint Shima, Provisional Senior Engineer Plant Operations / Maintenance
REVIEWED AND RECOMMENDED FOR BOARD ACTION:
N. Meyer, Maintenance Division Manager
A. Sasaki, Deputy General Manager K. Alm Roger S. Bailey
Counsel for the District General Manager
ISSUE: Board approval is requested to authorize the General Manager to enter into a sole-
source, long-term services contract with Solar Turbines, Inc., the original equipment
manufacturer of the District's Cogeneration Gas Turbine System (Cogen System), to
maintain the Cogen System for a term of five years.
RECOMMENDATION: Find that the project is exempt from the California Environmental
Quality Act (CEQA) and authorize the General Manager to execute a sole-source, long-term
services contract with Solar Turbines, Inc., to maintain the District's Cogen System for a
period of five years at an initial cost of $216,720 per year with an adjustment for inflation in
subsequent years, at an estimated total cost of $1,600,000.
FINANCIAL IMPACTS: The five-year value of the contract is approximately $1,600,000.
This amount includes $216,720 per year for five years of maintenance services with an
additional Existing Hours Fee of $494,690. The Existing Hours Fee accounts for the Solar
Turbines, Inc., coverage gap from 2011. The sole-source, long-term services contract
includes provisions for two engine overhauls and provides coverage for additional engine
overhauls at no additional cost. The costs are proposed to be included in the FY 2015-16
O&M Budget.
ALTERNATIVES/CONSIDERATIONS: Sole-source requests bypass the competitive
bidding process. In 2012, the District experienced a catastrophic failure of its Cogen
System when maintenance was performed by an aftermarket service provider. Following
the previous maintenance contract with Wood Group, staff recommended that future
maintenance of the Cogen System not be competitively bid as the design of the equipment
is proprietary and only the manufacturer has the unique product knowledge to safely and
economically maintain the recommissioned Cogen System.
,;Page 1 of 4
POSITION PAPER
Board Meeting Date: May 21, 2015
Subject: ADOPT A RESOLUTION MAKING FINDINGS AND AUTHORIZING THE
GENERAL MANAGER TO EXECUTE A SOLE - SOURCE, LONG -TERM SERVICES
CONTRACT WITH SOLAR TURBINES, INC., FOR MAINTENANCE OF THE
DISTRICT'S COGENERATION GAS TURBINE SYSTEM FOR A TERM OF FIVE YEARS
BACKGROUND: The District's Cogen System is a Solar Turbines Inc., Centaur 40 System
that was pre - purchased in 1993 with startup in 1995. This gas turbine - generator currently
produces approximately 80 percent of the Treatment Plant's electrical energy and 30
percent of its steam demand. The Cogen System provides significant savings over
purchasing electrical power from a utility (Pacific Gas and Electric Company4PALand has
saved the District between $500,000 and $1,000,000 in electrical energy costs per year
over the past 20 years.
Failure /Recommissioning of Cogeneration Gas Turbine System: The Cogen System
was commissioned for full -time operation in November 1995. From the initial startup to
2011, the Cogen System was maintained under a long -term maintenance contract with
Solar Turbines, Inc. The contract was all- inclusive, covered any repair, and guaranteed
availability of the Cogen System. In 2011, the District changed service providers to Wood
Group. On March 29, 2012, the Cogen System suffered a catastrophic failure caused by an
explosion in the exhaust system. Following the explosion, the District cancelled the
maintenance contract with Wood Group. The Cogen System was recommissioned by
Solar Turbines, Inc., the original equipment supplier, and was restored to service on
October 3, 2012. The six -month outage resulted in an increase in utility expenses of
approximately $960,000, for which the District has been fully reimbursed. The
recommissioning of the Cogen System was hampered by the age of the fuel valves and
control system. In addition, the fuel valves and control system were suspected as
contributing factors to the explosion.
Short -Term Maintenance Contract: Since being placed back into service in 2012, the
Cogen System has been maintained under short -term maintenance contract with Solar
Turbines, Inc. The short -term contract is for routine maintenance only and does not cover
unscheduled repairs. It provides only for labor and does not cover any parts or provide any
guarantees for availability. This proposed sole- source, long -term service agreement
provides superior financial and operational protection for the District.
Controls Upgrades for the Long -Term Maintenance Contract: At the
October 4, 2012, Board meeting, staff stated they would pursue a long -term services
contract with Solar Turbines, Inc. However, Solar Turbines, Inc., stated at the time that they
would not enter into a long -term services contract unless the fuel and control systems were
upgraded. The obsolescence of the equipment made it impossible for them to provide a
reasonable response time for equipment repair /replacement and the Modicon -based
controls are no longer supported by Solar Turbines, Inc.
Page 2 of 4
POSITION PAPER
Board Meeting Date: May 21, 2015
subiecr. ADOPT A RESOLUTION MAKING FINDINGS AND AUTHORIZING THE
GENERAL MANAGER TO EXECUTE A SOLE - SOURCE, LONG -TERM SERVICES
CONTRACT WITH SOLAR TURBINES, INC., FOR MAINTENANCE OF THE
DISTRICT'S COGENERATION GAS TURBINE SYSTEM FOR A TERM OF FIVE YEARS
On September 5, 2013, the Board adopted a resolution making findings and authorizing the
General Manager to execute a sole- source contract with Solar Turbines, Inc., for the Cogen
Controls Upgrade Project, District Project No. 7308. Carollo Engineers and District staff
prepared plans and specifications for the project. Amp Electric installed interconnecting
wiring between the turbine, control console and District equipment. Solar Turbines, Inc.,
completed the remaining fuel and control system upgrades in April 2014.
Long -Term Maintenance Contract: District Staff and legal counsel have held numerous
meetings and conference calls with Solar Turbines, Inc., to negotiate the terms and
conditions of the sole- source, long -term services contract. Ultimately, the indemnity,
insurance and limit of liability do not satisfy District requirements for service contracts.
However, Solar Turbine, Inc., takes the position that the sole- source, long -term contract
shares risk appropriately, in part due to the fact that the District's insurance carrier has filed
a lawsuit against Solar Turbines, Inc., and Wood Group to attempt to recover the amount
paid to the District from the 2012 incident.
The sole- source, long -term services contract's monthly fee of $18,060 includes routine
semi - annual and annual maintenance inspections. It also includes call outs for advanced
troubleshooting where Solar Turbine, Inc., field service labor, travel and subsistence is
provided by Solar Turbines, Inc., at no additional cost. Lastly, Solar Turbines, Inc., shall
repair or replace any malfunctioning component or part within a reasonable time using
certified replacement parts. The $494,690 Existing Hours Fee pays for the first engine
overhaul scheduled for November 2015. A portion of the monthly fee goes towards future
engine overhauls, which are recommended every 35,000 to 40,000 operating hours. The
contract has a provision to ensure at least two overhauls are included in the contract. If the
second overhaul is not performed, the District receives an overhaul credit.
Long -term service customers are granted several advantages: They are designated a Fleet
Manager for coordination /planning and technical assistance, given preferred status for
scheduling, and experience better emergency service response times. The long -term
services contract along with the upgraded control system will allow Solar Turbines, Inc.'s,
Engineers to view operating screens in real -time, which allows for efficient machinery
management to mitigate unplanned downtime while extending the turbine package lifecycle.
Their Insight° System provides remote monitoring and diagnostics capability that collects,
stores, and analyzes operational data. Solar Turbines, Inc., has the proprietary engineering
skill, product information, knowledge and parts to safely perform the long -term services
contract.
Page 3of4
POSITION PAPER
Board Meeting Date: May 21, 2015
Subject ADOPT A RESOLUTION MAKING FINDINGS AND AUTHORIZING THE
GENERAL MANAGER TO EXECUTE A SOLE - SOURCE, LONG -TERM SERVICES
CONTRACT WITH SOLAR TURBINES, INC., FOR MAINTENANCE OF THE
DISTRICT'S COGENERATION GAS TURBINE SYSTEM FOR A TERM OF FIVE YEARS
Other Considerations: The Cogen System has been operating for 20 years. The age of
the equipment, as well as related risk factors, warrants an evaluation for replacement.
However, until the Comprehensive Wastewater Master Plan and subsequent design work is
finalized, the Cogen System will be relied upon for the foreseeable future.
Staff has concluded that this action is exempt from the CEQA under the CEQA Guidelines
Section 15301 since it involves maintenance to an existing public facility involving no
expansion of use. Approval of this action will establish the Board's independent finding that
this project is exempt from the CEQA.
COMMITTEE RECOMMENDATION: This matter was reviewed by the Engineering and
Operations Committee on May 12, 2015. The Committee recommended
RECOMMENDED BOARD ACTION:
1. Authorize the General Manager to enter into a sole- source, long -term services
contract for a duration of five years at an estimated amount of $1,600,000 with Solar
Turbines, Inc., for the long -term maintenance of the District's Cogeneration Gas
Turbine System, pursuant to Public Contract Code Section 3400(c)(3) and District
Purchasing Procedures Manual Section 5.3.15; and
2. Find that:
A. The long -term services contract is exempt from CEQA;
B. The public interest is best served by utilizing the unique technology and
proprietary knowledge that Solar Turbines, Inc., the original equipment
manufacturer, has developed to maintain the Cogeneration Gas Turbine
System; and
C. Under the circumstances, Solar Turbines, Inc., is the only qualified supplier to
maintain the rebuilt Cogeneration Gas Turbine System equipment and that it is
in the best interest of the District to proceed with a sole- source contract with
Solar Turbines, Inc.
Attached Supporting Document:
1. Proposed Resolution
Page 4 of 4
U• -FT
RESOLUTION NO. 2015-
A RESOLUTION OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT
APPROVING A SOLE - SOURCE CONTRACT WITH SOLAR TURBINES, INC.,
FOR LONG -TERM MAINTENANCE SERVICES OF THE
COGENERATION GAS TURBINE SYSTEM
WHEREAS, Section 3400(c) of the California Public Contract Code sets forth certain
conditions under which a particular material or product or service may be purchased
without the necessity of competitive bidding;
WHEREAS, the Central Contra Costa Sanitary District's (District) Purchasing Procedures
Manual Section 5.3.15 provides that, in those cases involving a unique or novel product
application required to be used in the best public interest, the District may specify such
unique or novel product as an appropriate sole source;
WHEREAS, the District upgraded its Cogeneration Solar Centaur 40 Gas Turbine System
and is in need of long -term maintenance services;
WHEREAS, Solar Turbines, Inc.'s, proprietary technology is utilized and incorporated in
the District's upgraded Cogeneration Gas Turbine System, thereby extending the service
life of the turbine and increasing reliability and maintainability; and
WHEREAS, District staff has evaluated alternative long -term maintenance service
providers in the past and concluded no other service providers offer the same knowledge,
experience, and resources.
NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Central Contra
Costa Sanitary District (the Board) as follows:
1. THAT the Board hereby adopts the recitals set forth above as the basis of its
findings.
2. THAT that the contract is exempt from the California Environmental Quality Act
(CEQA) under the CEQA Guidelines Section 15301 since it involves maintenance
to an existing public facility involving no expansion of use.
3. THAT the Board finds the public interest is best served by utilizing the unique
technology and proprietary knowledge that Solar Turbines, Inc., has developed to
maintain the upgraded Cogeneration Gas Turbine System.
4. THAT, in accordance with Section 3400(c) of the California Public Contract Code,
the Board finds that the proprietary technology offered by Solar Turbines, Inc., shall
be utilized in the District's treatment plant to maintain the Cogeneration Solar
Central Contra Costa Sanitary District
Resolution 2015 -
Sole- Source Contract — Solar Turbines, Inc.
Page 2 of 2
Centaur 40 Gas Turbine System, and that a sole- source contract with Solar
Turbines, Inc., meets the criteria set forth in that section.
5. THAT the Board authorizes the General Manager to enter into a sole- source, long-
term services contract for a term of five years with Solar Turbines, Inc., at an
estimated amount of $1,600,000 for maintenance of the upgraded Cogeneration
Gas turbine System.
PASSED AND ADOPTED this 21St day of May, 2015, by the Board of Directors of the
Central Contra Costa Sanitary District by the following vote:
AYES:
Members:
NOES:
Members:
ABSENT:
Members:
Michael R. McGill, P.E.
President of the Board of Directors
Central Contra Costa Sanitary District
County of Contra Costa, State of California
COUNTERSIGNED:
Elaine R. Boehme, CIVIC
Secretary of the District
Central Contra Costa Sanitary District
County of Contra Costa, State of California
Approved as to form:
Kenton L. Alm, Esq.
Counsel for the District