HomeMy WebLinkAbout10. Authorize extension of sole-source services agreement with Solar Turbines Page 1 of 8
Item 10.
CENTRAL SAN BOARD OF DIRECTORS
POSITION PAPER
MEETING DATE: AUGUST 20, 2020
SUBJECT: ADOPT RESOLUTION NO. 2020-028 MAKING FINDINGSAND
AUTHORIZING THE GENERAL MANAGER TO EXTEND THE EXISTING
SOLE-SOURCE, LONG-TERM SERVICES CONTRACT WITH SOLAR
TURBINES, INC. FOR MAINTENANCE OF THE COGENERATION GAS
TURBINE SYSTEM FORA PERIOD OF FIVE YEARS ENDING AUGUST31,
2025, ATAN ESTIMATED COST OF $1,200,000, PURSUANTTO PUBLIC
CONTRACT CODE SECTION 3400(C)(3)AND DISTRICT PURCHASING
PROCEDURES MANUAL SECTION 5.3.15
SUBMITTED BY: INITIATING DEPARTMENT:
CLI NTSHIMA, SENIOR ENGINEER OPERATIONS-RELIABILITYENG INEERING
REVIEWED BY: NEIL MEYER, PLANT MAINTENANCE DIVISION MANAGER
ANN SASAKI, DEPUTY GENERAL MANAGER
Roger S. Bailey Kenton L. Alm
General Manager District Counsel
ISSUE
Board approval is required to authorize the General Manager to extend the existing sole-source, long-term
services contract with Solar Turbines, I nc., the original equipment manufacturer of Central San's
Cogeneration Gas Turbine System (Cogen System), for maintenance of the Cogen System for a term of
five years.
BACKGROUND
Central San's Cogen System is a Solar Turbines, I nc., Centaur 40 System that was pre-purchased in
1993 with startup in 1995. This gas turbine generator currently produces approximately 90 percent of the
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Treatment Plant's electrical energy and 35 percent of its steam demand. The Cogen System is the main
supply of power to the Treatment Plant and provides significant savings over purchasing electrical power from a
utility (PG&E). The Cogen System has saved Central San between $500,000 and $1,000,000 in electrical
energy costs per year over the past 25 years. Since 2015, the savings amount to $4,300,000. It is important to
note that the Cogen System is on its eighth engine, which averages to one overhaul every three years.
Maintenance of the Cogen 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
services contract with Solar Turbines, Inc. The contract was all-inclusive; it covered all repairs and
guaranteed availability and reliability of the Cogen System. I n 2011, Central San re-bid the contract and
changed service providers to the Wood Group. On March 29, 2012, the Cogen System suffered a
catastrophic failure caused by an explosion in the exhaust system. The Cogen System was re-
commissioned by Solar Turbines, I nc., and returned to service on October 3, 2012. The six-month outage
resulted in $1,641,000 in electric utility expenses, an increase of approximately$960,000. From 2012, the
Cogen System was maintained under a series of short-term services contracts with Solar Turbines, I nc.
As part of a long-term services contract, Solar Turbines, Inc. required that Central San replace and
upgrade the fuel and control systems. On September 5, 2013, the Board adopted a resolution authorizing
the General Manager to execute a sole-source contract with Solar Turbines, I nc. for the Cogen Controls
Upgrade Project, District Project(DP) 7308. The fuel and control system upgrades were completed in
April 2014, for a cost of$1,300,000.
On May 21, 2015, the Board adopted a resolution authorizing the General Manager to execute a sole-
source, long-term services contract with Solar Turbines, I nc., for maintenance of Central San's Cogen
System for a term of five years. The current contract began September 1, 2015 and will terminate August
31, 2020, unless extended. A portion of the monthly fees are applied towards future engine overhauls that
are recommended every 30,000 to 40,000 operating hours. Solar Turbines, I nc., utilizes condition
assessment reports and checklists to systematically monitor and evaluate the Cogen System's condition in
determining when engine overhauls are required. The contract had a provision to ensure that two
overhauls, which were completed in November 2015 and November 2019, were included in the pricing.
Benefits of the 2015 Long-Term Services Contract: The existing long-term services contract with
Solar Turbines, I nc. ensured prompt field service response and minimized the length of unplanned
downtime for the Cogen System. Since 2018, availability of the Cogen System has been 96 percent, and
reliability, which excludes planned outages, has been 98.5 percent. Unplanned downtime has accounted
for less than two percent of elapsed time over the past two years. It is unlikely that a short-term services
contract or an aftermarket service provider could have provided the same level of reliability.
As part of the long-term service contract, Solar Turbines, Inc. provides their InSight Platform TM remote
monitoring system, which monitors over 3,200 diagnostics daily to optimize and improve asset
management. It collects, stores, and analyzes machine data which is transformed into actionable
information. The Fleet Manager and Central San staff receive early detection notifications of potential
issues as well as event summaries afterwards. It also provides dashboards available by handheld device.
Solar Turbines, Inc. is constantly improving the InSight Platform TM remote monitoring system with updates
every six to eight weeks to enhance features, increase speed, add new hardware, and incorporate new
technology. A third-party vendor cannot match the level of predictive diagnostics that Solar Turbines, Inc.
has established. Solar Turbines, Inc. leverages their expertise and knowledge to ensure equipment
reliability.
In 2016, a routine borescope inspection discovered a damaged first-stage tip shoe, a critical wear
component in the engine. Solar Turbines, I nc. dispatched their field repair crew to replace the tip shoe
and rebuild the engine combustion section. This repair was made at no additional cost to Central San
since it was covered by the contract. However, outside of the contract, the cost was estimated to have
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been $200,000. Upon completion of the repair, Solar Turbines, I nc. investigated the failure and provided a
Failure Analysis Report at no additional cost.
The Cogen System also saw multiple troubleshooting callouts, for which the parts and labor costs were
fully covered under the contract. Notable items for unscheduled troubleshooting and repair services
included: repair or replacement of water injection system components, combustion liner borescope
inspection, and replacement of the inlet guide vanes actuator and controller. Remote troubleshooting
services were also provided. The technicians noted and implemented several safety improvements within
the package.
The long-term services contract with Solar Turbines, Inc., has proven to be effective for overall
performance and reliability of the Cogen System and beneficial to Central San.
2020 Long-Term Services Contract Terms: The proposed five-year sole-source services contract
amendment would extend the 2015 contract terms through August 31, 2025. The total cost is expected to
be $1,200,000 over the next five years, starting at$230,000 annually and adjusted for escalation in
subsequent years. I n 2015, Central San paid an Existing Hours fee for the gap in coverage from 2011 to
2015, but that fee does not apply to the amendment. The monthly fee of$18,700 represents a 3.5
percent increase from 2015.
Under the long-term services contract, Central San would continue to be granted several priority
advantages. Our assigned Fleet Manager will coordinate, plan, and provide technical assistance. Central
San will have preferred status for scheduling and experience better emergency service response times.
The service includes call-outs for advanced troubleshooting with no additional costs for labor, travel, and
subsistence. Solar Turbines, Inc. would continue to repair or replace any malfunctioning component or
part within a reasonable timeframe using certified replacement parts, and would continue to provide remote
monitoring of the Cogen System with the Insight Platform TM. With the InSight Platform TM, Solar Turbines,
Inc. engineers can view operating screens in real-time, allowing for efficient machinery management to
mitigate unplanned downtime while extending the turbine package lifecycle. The limit of liability would
remain the same at$750,000.
Under the long-term services contract, the engine is completely covered for replacement as many times as
needed. The contract amendment has a provision to ensure that one overhaul is included in the pricing. If
the overhaul is not performed during the contract, Central San can receive the overhaul after the contract
term. The Cogen engine operating hours is currently over 6,100 hours; therefore, the next engine overhaul
is not expected until 2024.
California Environmental Quality Act(CEQA)
Staff has concluded that this action is exempt from 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.
ALTERNATIVES/CONSIDERATIONS
Sole-sourcing is an exemption to the competitive bidding process, which does not foster competition;
however, staff believes sole-sourcing is appropriate in this case. In 2012, Central San experienced a
catastrophic failure of its Cogen System when maintenance was performed by an aftermarket service
provider. Subsequently, 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 Cogen System.
The following alternatives were reviewed:
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1. Enter into a Beneficial Use Services Contract with Solar Turbines, I nc.
Under this alternative, Central San would contract with Solar Turbines, I nc. for maintenance only with no
engine overhauls. The monthly fee would be $11,800 per month, and approximately$750,000 over five
years with escalation. All required engine overhauls would be paid by Central San as needed. This
alternative would initially reduce costs by$450,000 by avoiding paying monthly for a future engine
overhaul. However, when the cost of an engine overhaul is incorporated, the cost of the Beneficial Use
Services contract is comparable to the proposed long-term services contract, but would not cover any
premature overhauls due to unanticipated breakdowns. The Cogen System is on its eighth engine;
therefore, it is anticipated that at least one overhaul will be required during the five-year term of the
maintenance contract. The terms and conditions would be similar; however, the limit of liability will be
reduced from $750,000 possibly down to the standard limit of$141,600. The total estimated cost of this
alternative would be $1,200,000 (includes cost of engine overhaul).
The cost to overhaul the engine will depend on the number of run hours at the time. The service fee is
currently$8.96 per hour, with a minimum charge of 3,500 hours, and subject to the same annual escalation
as other fees. Unexpected engine overhauls over$200,000 requires Board approval causing potential
delays in repairs, and adversely affecting the Operations and Maintenance budget.
The Beneficial Use Services contract is recommended if the existing Cogen System is not part of Central
San's future plans, but that decision has yet to be determined. The Steam and Aeration Blower System
Renovation Project, DP 7349 is currently evaluating options in pre-design. There is no buy-in fee changing
from a long-term services contract to a Beneficial Use Services contract. If it is determined that the
existing Cogen System is not part of Central San's long-term plans, the contract will be changed to a
Beneficial Use Services contract to reduce costs and the Board will be notified of this change.
2. Enter into Short-Term Services Contracts with Solar Turbines, Inc.
Central San could continue using short-term services contracts. However, the disadvantage is that these
contracts do not provide the remote monitoring and diagnostics services provided with the long-term
services contracts, which could increase the risk for more frequent and prolonged outages. If a prolonged
outage were to occur, Central San would need to import electrical power from PG&E and would incur
significant demand charges. Also, repair costs could range widely in magnitude and would be difficult to
budget. The terms and conditions would remain the same.
3. Bid the Contract and Seek Another Vendor
Central San could seek an alternate vendor. This approach was taken in 2011 and Central San entered into
a long-term services contract with Wood Group for$208,800. This alternative is not recommended as it is
not anticipated that the pricing will be lower than the proposed contract. The bid received in 2011 is
comparable to the cost of the proposed contract when escalated to today dollars. It is uncertain as to
whether the terms and conditions would be significantly better given the age of the Cogen System and its
past history with the 2012 explosion. This alternative is not recommended.
4. Import PG&E Power
Shutting down the Cogen System when it needs repairs (on an as-needed basis) and relying on PG&E as
the main power source removes a layer of redundancy for Central San's power system, and increases
steam and electricity costs. The Standby Power Facility(existing 2-2 MW diesel generators)will become
the only backup to PG&E and reduces resiliency at the Treatment Plant. The auxiliary boilers will need to
generate the makeup steam. The six-month outage in 2012 resulted in an increase in utility expenses of
approximately$960,000. Due to the higher cost, loss of reliability/redundancy, and additional risk
associated with this option, this alternative is not recommended.
Other Considerations: The Cogen System has been operating for 25 years. The age of the equipment,
as well as related risk factors, warrants an evaluation for replacement. However, until the Steam and
Aeration Blower System Renovation Project, DP 7349 design work is finalized, it is anticipated that the
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existing Cogen System will need to be relied upon for at least the next five or more years.
I n November 2017, an evaporative cooler and carbon monoxide catalyst were installed under the
Treatment Plant Cogeneration Unit Optimization Project, DP 7320. The new ducting was designed with
room to accommodate an additional catalyst element for removal of future regulated compounds, such as
formaldehyde.
The design for the Solids Handling Facilities Improvements Project, DP 7348 is currently being finalized.
Capital Projects is examining various construction sequences and scenarios, including shutdown of the
entire Solids Conditioning Building. The latest scenario considered is to continue operating the Cogen
System during construction of the project. The Steam and Aeration Blower Systems Renovations Project,
DP 7349 is in the pre-design phase. The condition assessments have been completed and alternatives
are being developed to evaluate the future of the Cogen System. Design for this project is expected to
start next year.
After a review of the alternatives, staff recommends that it is in the best interest of Central San to extend
the sole-source, long-term contract with Solar Turbines, I nc. The Cogen System is critical to the
operation of the Treatment Plant. Solar Turbines, Inc., has the operational knowledge of the Cogen
System and they have proven that they understand what is takes to keep the Cogen System maintained
and operational. Since 2015, Solar Turbines, I nc., has demonstrated to be a beneficial asset under the
long-term services contract. Solar Turbines, Inc., has the proprietary engineering skill, product information,
knowledge, and parts to safely perform the long-term services contract and ensure long-term reliability of
the Cogen System.
Staff has concluded that this action 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. Approval of this action will establish the Board's independent finding that this project
is exempt from the CEQA.
FINANCIAL IMPACTS
The five-year value of the contract amendment is approximately$1,200,000. This amount includes
$230,000 per year for five years of maintenance services and escalation for inflation. The costs are
included in the FY 2020-21 Operations and Maintenance Budget.
COMMITTEE RECOMMENDATION
The Engineering and Operations Committee reviewed this matter on August 4, 2020, and recommended
Board approval.
RECOMMENDED BOARD ACTION
Adopt the proposed resolution:
1. Authorizing the General Manager to extend the existing sole-source, long-term services contract with
Solar Turbines, I nc. for maintenance of the Cogeneration Gas Turbine System for a period of five
years ending August 31, 2025, at an estimated cost of $1,200,000, pursuant to Public Contract
Code Section 3400(c)(3) and District Purchasing Procedures Manual Section 5.3.15; and
2. Finding that:
• The long-term services contract is exempt from California Environmental Quality Act (CEQA);
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• 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
• Under the circumstances, Solar Turbines, I nc., is the only qualified supplier to maintain the
rebuilt Cogeneration System equipment and that it is in the best interest of Central San to
proceed with a sole-source contract with Solar Turbines, I nc.
Strategic Plan Tie-In
GOAL FIVE:Infrastructure Reliability
Strategy 1—Manage assets optimally to prolong their useful life
GOAL SIX:Innovation and Optimization
Strategy 2—Improve and modernize operations through technology and efficiency measures
ATTACHMENTS:
1. Proposed Resolution
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Attachment 1
RESOLUTION NO. 2020-
A RESOLUTION OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT
APPROVING EXTENSION OF 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 (Central San) 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, Central San may
specify such unique or novel product as an appropriate sole source;
WHEREAS, Central San upgraded its Cogeneration Solar Centaur 40 Gas Turbine
System and is in need of continued 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, Central San staff has evaluated alternative long-term maintenance service
providers in the past and concluded that 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 the contract is exempt from the California Environmental Quality Act under
the California Environmental Quality Act 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 Central San's Treatment Plant to maintain the Cogeneration Solar
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Central Contra Costa Sanitary District
Resolution 2020-
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 extend the existing sole-
source, long-term services contract with Solar Turbines, Inc. for maintenance of the
upgraded Cogeneration Gas Turbine System for a period of five years, ending
August 31, 2025, at an estimated cost of $1,200,000.
PASSED AND ADOPTED this 20th day of August, 2020, 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:
Katie Young
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
CAProgram Files(x86)\neevia.com\docConverterPro\temp\NVDC\32208BCB-F96E-44CA-8E1C-752F9548A8B4\Central Contra Costa
Sanitary District.7799.1.Proposed_Resolution_-_Solar_Turbines_08-20-2020.docx
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