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Home My WebLink About03.a. Review draft Position Paper authorizing the General Manager to amend an existing professional engineering services agreement with CDM SmithPage 1 of 5 CENTRAL SAN BOARD OF DIRECTORS I _ POSITION PAPER DRAFT MEETING DATE: NOVEMBER 27, 2017 SUBJECT: REVIEW DRAFT POSITION PAPER AUTHORIZING THE GENERAL SUBMITTED BY: Item 3.a. MANAGER TO AMEND AN EXISTING PROFESSIONAL ENGINEERING SERVICES AGREEMENT WITH CDM SMITH TO ADD SCOPE AND INCREASE THE COST CEILING FROM $97,900 TO $433,000 FOR PUBLIC- PRIVATE PARTNERSHIP (P3)ADVISORY SERVICES FOR CENTRAL SAN'S SOLIDS HANDLING P3 PROJECT, DISTRICT PROJECT 7358 INITIATING DEPARTMENT: MELODY LABELLA, PROGRAM MANAGER - ENGINEERING AND TECHNICAL SERVICES - RESOURCE RECOVERY PDS -RESOURCE RECOVERY REVIEWED BY: JEAN -MARC PETIT, DIRECTOR OF ENGINEERING AND TECHNICAL SERVICES ROGER S. BAILEY GENERAL MANAGER ISSUE Board of Directors' authorization is required for the General Manager to execute professional services agreements greater than $100,000. BACKGROUND Central San recently completed a Comprehensive Wastewater Master Plan that recommends a 20 -year planning roadmap for the treatment plant that includes a number of major solids handling and energy- related projects. Central San's Board of Directors is interested in exploring innovative project delivery methods that will bring an obvious and distinct business -advantage to ratepayers. To that end, on April 20, 2017, staff issued a Request for I nterest (RFI) in the formation of a public-private partnership (P3) for the development and implementation of a Bioenergy Facility, employing innovative technology, that would process a portion of Central San's wastewater solids and produce renewable energy. Under the P3 model, the facility would be designed, built, owned, operated, financed, and maintained by the private partner (Concessionaire) with an option for Central San to purchase and operate the facility in the future (e.g. after 10 years or longer of successful operation, or such mutually agreed upon time for the Concessionaire and Central San to achieve their business objectives, including proof of concept and return on investment). November 27, 2017 Special REEP Committee Meeting Agenda Packet - Page 3 of 25 Page 2 of 5 After reviewing and scoring the eight letters of interest received by the June 16, 2017, deadline, the following four teams (in alphabetical order) were shortlisted: Aries Clean Energy, CH2M, Denali-Cambi JV, and Element Carbon. The following table summarizes the proposed technologies for each concessionaire. Concessionaire Proposed Technology(ies) Aries Clean Energy Gasification CH2M Thermal Hydrolysis and Anaerobic Digestion followed by Gasification Denali-Cambi JV Thermal Hydrolysis and Anaerobic Digestion followed by I ncineration Element Carbon Gasification CH2M withdrewtheir interest, so the remaining three teams were invited to respond to a Pre -Interview Questionnaire and participate in a team interview. After scoring both the responses to the Pre -I nterview Questionnaire and the September 20, 2017 interviews, all three teams have been invited to the Request for Proposals (RFP) round, which was initiated on October 19, 2017. In considering both the information received from the teams throughout the procurement process so far, in addition to reviewing Central San's drivers for the project, the goal of the project has been refined for the RFP round to only include the solids handling demonstration aspect of the project. Moving forward, the project has been rebranded the "Solids Handling P3 Demonstration Project" (P3 Project) and will ultimately result in a multiyear service contract for processing and disposal of a minimum of five dry tons per day of a blend of undigested primary and thickened, waste -activated sludge originating from Central San's Wastewater Treatment Plant. Most agencies who end up executing a P3 agreement utilize external services to help structure such agreements. Central San needs expert assistance to effectively support the P3 Project transaction. On June 6, 2017, staff issued a RFP, seeking technical, financial, and legal P3 advisory services to assist Central San in successfully delivering this project. The RFP was advertised on PlanetBids from June 6 to June 30, 2017, and six proposals were received from the following teams: Proposing Teams The Sperry WSP USA, Lead ARUP Concourse CDM Smith PFAL Capital/KPMG Inc. Group Arup PERC WSP Technical Advisory, Arcadis CDM Smith Water HDR, Inc. Parsons I nc. Brinckerhoff Ernst and Project Jones Lang Arup The Young Financial Sperry Capital Lasalle and Financial Advisory, Concourse Infrastructure Advisory and KPMG Raftelis Inc. Group, LLC Advisors, Limited Financial LLC (PFAL) Consultants Kutak Hawkins Manatt,Ashurst, LLC Legal Rock, Kutak Rock, Delafield & Phelps, and Ruta & Nossaman, LLP LLP Wood, LLP Philips, Tucker, LLC LLP LLP An internal evaluation panel was established, which included Central San's three Department Directors, in addition to the Planning & Development Division Manager, and the Resource Recovery Program Manager. The panel evaluated the proposals and short-listed the following three teams (in alphabetical November 27, 2017 Special REEP Committee Meeting Agenda Packet - Page 4 of 25 Page 3 of 5 order): 1) CDM Smith; 2) Sperry Capital/KPMG; and 3) WSP USA, Inc., which were invited to interview on July 13, 2017, to present their team approach and qualifications. The evaluation panel selected CDM Smith's team as they provided the overall, most qualified team, which is comprised of experts familiar with the wastewater industry and experienced in P3 energy and solids handling projects. To keep the P3 Project moving forward, staff has executed an initial contract with CDM Smith within the General Manager's signature authority. The project is now to the point that additional scope and budget are needed to continue forward progress. I n order to reach a decision and complete the team selection process on the P3 Project by the end of the calendar year, Central San staff and CDM Smith are working together to quickly complete the following tasks: Define the proposed solution and its impact(s) on existing facilities. • Determine how the proposed solutions will go from pilot to full-scale. o Define impacts on the treatment plant, including adverse impacts, how they will be mitigated and their associated risks and costs. o Define the integration plan for each proposed solution. • Address the list of concerns from each team (technical, financial, legal, permitting, etc.) 2. Complete lifecycle cost analyses of the following scenarios. • Reference baseline: this includes the cost of our current solids handling operation plus implementation of the Master Plan (anaerobic digestion and fluidized bed incineration). • Gasification (Aries) — Phase 1 Pilot (15 DTPD fluidized bed gasifier) in parallel to incineration then Phase 2 full scale (two 60 DTPD units for redundancy and no incineration) — includes mitigation such as loss of steam under Phase 1. • Gasification (Element Carbon) — Phase 1 Pilot (10 DTPD downdraft fixed bed gasifier) in parallel to incineration then Phase 2 full scale (three 40 DTPD units for redundancy and no incineration) — includes mitigation such as loss of steam under Phase 1. • Thermal Hydrolysis and Digestion (Denali-Cambi) — (60 DTP digestion plus food waste for production of biogas). Digested sludge to incinerators and includes mitigation such as side - stream treatment of centrate to result in no net nitrogen loading to Central San. • Combine Thermal Hydrolysis with Anaerobic Digestion and Gasification — includes mitigation. Drafts of the baseline case and each team -specific lifecycle cost analysis will be shared with each proposer, so they can provide input specific to their offering, maintaining confidentiality between the three teams. 3. Complete a preliminary risk allocation matrix for each of the proposed solutions. The following aspects will be considered in the risk matrices: o Develop a risk matrix and prepare a mass and energy balance for each of the proposed technologies (gasification and thermal hydrolysis with digestion). o Identify, quantify, and assess the likelihood of occurrence of risks, mitigation strategies, and potential benefits of each of the technologies. o Develop nonmonetary impacts such as environmental, social, and operational impacts. • I nclude such factors as integration plan, risk allocation, permitting, schedule, operating responsibilities, use of the site, etc. Drafts of each risk matrix will be shared with each proposer, maintaining confidentiality among the three teams. After the team selection is made, staff will work with the P3 advisors to complete the more complex and difficult process of developing the details and specifics of a potential project and contract with options for November 27, 2017 Special REEP Committee Meeting Agenda Packet - Page 5 of 25 Page 4 of 5 "off -ramps" by either party to preserve our right to make a go/no go decision. ALT ERNAT IVES/CONSIDERAT IONS 1. Reject all proposals. 2. Reduce the scope of work and renegotiate the agreement, which could delay implementation of the P3 Project. 3. Have staff develop the P3 Project RFP and negotiate the long-term P3 contract without any technical, financial, or legal consulting assistance. All three alternatives are not recommended by staff. FINANCIAL IMPACTS This agreement will be funded under the Innovative Bioenergy Facility Project, District Project 7358. Central San's Capital I mprovement Budget (CI B) has $200,000 budgeted for the project in the current Fiscal Year (FY). The estimated total budget to complete the selection, risk allocation, and contracting is $1,458,000. With CDM Smith's initial contract of $97,900, staff is requesting an additional $335,100 to complete the team selection and planning phase this FY. I n addition, funds are needed for the financial and legal advisors. Staff anticipates spending approximately half of the total budget of $1,458,000 this FY and is recommending transferring $500,000 from the Server Room Relocation Project, District Project 8243, to cover the additional budget required, which can be done under the General Manager's authority. Changes to the two project budgets will be reflected and adjusted for in the proposed FY 2018-19 C I B. The Server Room Project will be designed and bid this FY with construction scheduled to begin next FY. The project budget includes the following elements: (*) Does not include management time. COMMITTEE RECOMMENDATION The Real Estate, Environmental, and Planning Committee reviewed this project at its meeting on November 27, 2017, and the Committee supported/did not support approval of the Board actions recommended in this position paper. RECOMMENDED BOARD ACTION November 27, 2017 Special REEP Committee Meeting Agenda Packet - Page 6 of 25 P3 Team Contract Advisory Entity Contracted Selection Negotiation Total Services to Date and (Estimated) Budget Planning Technical CDM $ 97,900 $ 335,100 $ 200,000 $ 633,000 Smith Financial Ernst and $ 0 $ 50,000 $ 100,000 $ 150,000 Young Legal Hawkins $ 0 $ 95,000 $ 280,000 $ 375,000 Meyers $ 0 $ 50,000 $ 50,000 $ 100,000 Nave Staff (*) Central $ 0 $ 50,000 $ 150,000 $ 200,000 San $ 97,900 $ 580,100 $ 780,000 $1,458,000 (*) Does not include management time. COMMITTEE RECOMMENDATION The Real Estate, Environmental, and Planning Committee reviewed this project at its meeting on November 27, 2017, and the Committee supported/did not support approval of the Board actions recommended in this position paper. RECOMMENDED BOARD ACTION November 27, 2017 Special REEP Committee Meeting Agenda Packet - Page 6 of 25 Page 5 of 5 Authorize the General Manager to amend an existing Professional Engineering Services Agreement with CDM Smith to add scope and increase the cost ceiling from $97,900 to $433,000, for P3 Advisory Services under the P3 Project, District Project 7358. Strategic Plan Tie -In GOAL FIVE: Maintain a Reliable Infrastructure Strategy 2 - Facilitate Long-term Capital Renewal and Replacement GOAL SIX: Embrace Technology, Innovation and Environmental Sustainability Strategy 2 - Evaluate Business Processes and Optimize Business Operations November 27, 2017 Special REEP Committee Meeting Agenda Packet - Page 7 of 25