REPORT TO COUNCIL
SUBJECT
Title
Action on Agreements for Services with Stephens Mechanical Corporation, Axis Mechanical Group, Inc, and Performance Mechanical, Inc. for Millwright Services
Report
COUNCIL PILLAR
Deliver and Enhance High Quality Efficient Services and Infrastructure
BACKGROUND
Silicon Valley Power (SVP), the City’s Electric Utility Department, operates three gas fired power generation facilities within the City limits. These power plants are critical to SVP’s continued energy generation operations. As peak power demand in the City continues to grow, these generators become more important to maintain grid stability and reliability and support load growth in the City.
The Donald Von Raesfeld Power Plant (DVR), the main facility, is a 2x1 combined cycle power plant rated at 147 Megawatts of electrical power. It is powered by two 50-Megawatt General Electric (GE) LM6000PC gas turbine engines and one Mitsubishi steam turbine rated at 47 Megawatts. The steam turbine and associated equipment require routine inspection, maintenance, and repair services in order to keep them operating at an optimal level. Major overhauls typically occur after 40,000 - 50,000 hours of service (approximately four to five years), based on routine inspections. These services are only performed by millwright or mechanical contractors with extensive experience providing maintenance and overhaul services on steam turbines and associated equipment.
The Gianera power plant uses two General Electric Frame 5 gas turbine engines (Unit 1 and Unit 2). These turbines were installed in 1986 and SVP completed major overhauls on both engines in 2021 and 2022. In addition, SVP purchased a spare rotor for Gianera in 2022. Like the equipment at DVR, these engines and associated equipment require routine inspection, maintenance, repair, and overhaul services in order to keep them operating at an optimal level. These services are required to be performed by millwright or mechanical contractors with extensive experience providing maintenance and overhaul services of General Electric Frame 5 gas turbine engines.
DISCUSSION
The City published a Statement of Qualifications (SOQ) #21-22-63 to solicit proposals from qualified firms for as needed millwright support including turbine inspection, maintenance, repair, and overhaul services. The SOQ was published using the City’s bid notification system, and three proposals were received from Stephens Mechanical Corporation (SMC), Axis Mechanical Group, Inc. (AMG), and Performance Mechanical, Inc. (PMI).
Evaluation Process: Proposals were evaluated by a three-member evaluation team against the criteria published in the SOQ. Staff determined that all three firms met the minimum requirement specified in the SOQ.
Award Recommendation:
Staff recommends the award of three master agreements to SMC, AMG, and PMI for millwright services. At such time that services are required, staff will initiate a secondary bid process and issue task order(s) for specific scopes of work, with award based on factors such as experience with specific equipment, schedule availability, and price.
Notice of Intended Award: A Notice of Intended Award announcing the City’s recommended vendor was issued on June 8, 2022.
Term of Agreement: The term of the proposed agreement will be five years. The City reserves the right to exercise up to five (5) one-year options to extend the agreement, for a total of ten years.
Summary of Agreement:
The proposed agreement will include a high-level scope of services. Specific projects with defined work scopes will be authorized using a work authorization process outlined in the final agreement.
In order to complete an overhaul at DVR, staff executed an Agreement with SMC within staff’s contract authorization threshold to support the fall 2022 maintenance outage. Staff requests authorization for the City Manager to negotiate and execute Amendment No. 1 to the Agreement increasing maximum compensation from $125,000 to $1,000,000. Staff seeks authorization for the City Manager to negotiate and execute Master Agreements for Services with AMG and PMI.
Services performed by SMC, AMG, and PMI may be performed at the plant or at the contractor’s depot and include:
• Borescope and visual inspections, to be performed every six months or as needed such as when the engine operations indicate a fault.
• Package inspections and calibrations: air filter inspections; foreign object debris (FOD) inspections; accessory inspections; and checks and calibrations on all instrumentation that drive the sequencing and operation of the engine. Package inspections are typically performed every six months and package calibrations are typically performed annually.
• Swapping engines such as swapping the spare engine for an engine needing major service or repair.
• Engine overhauls.
• Other field repairs and modifications to the engines to be performed in accordance with Original Equipment Manufacturers (OEM) recommendations, inspection findings, and recommended service bulletins.
• Project management and other associated services.
The initial term for each agreement will be five years, with five additional one-year options to extend the Agreements at the discretion of the City. Compensation shall be paid on a per-project basis and shall not exceed an aggregate maximum amount of $15,000,000 during the initial five-year term. Staff from SVP and the City Attorney’s Office will coordinate in negotiating additional specific terms and conditions with each contractor. In order to best manage the aggregate maximum compensation, staff recommends executing initial agreements with a maximum compensation of $1,000,000 each, and then amending those agreements as needed for specific projects.
The master agreement approach aligns with SVP’s new proactive maintenance approach and also with the recent Council approved maintenance master agreements for the turbines at DVR and Cogen.
ENVIRONMENTAL REVIEW
Staff recommends that the City Council determine that the actions being considered are exempt from the California Environmental Quality Act (“CEQA”) pursuant section 15301 of Title 14 of the California Code of Regulations as the services involve operation, maintenance, and repair of existing facilities and mechanical equipment.
FISCAL IMPACT
The total proposed authorization in the Master Agreements is $15,000,000 over a five-year period. In addition, there are five one-year options to extend the terms of the agreements with an increase in the maximum compensation to $30,000,000 over a ten-year period. The costs associated with these proposed agreements are primarily budgeted as part of SVP’s capital budget with smaller maintenance intervals as well as unanticipated services budgeted in the operations budget associated with each power plant.
For Fiscal Year 2022 / 2023 sufficient funding is available in SVP’s capital budget in project 2127 - Major Engine Overhaul and Repair.
Funds required for these agreements in future years will be included in proposed budgets for corresponding years.
COORDINATION
This report has been coordinated with the Finance Department and City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov>.
RECOMMENDATION
Recommendation
1. Determine the proposed actions are exempt from CEQA pursuant to Section 15301 of Title 14 of the California Code of Regulations;
2. Authorize the City Manager to negotiate and execute Amendment No. 1 to the Agreement with Stephens Mechanical Corporation for as needed millwright services increasing the maximum compensation to $1,000,000 for a five-year term ending on October 31, 2027;
3. Authorize the City Manager to negotiate and execute Agreements for Services with Axis Mechanical Group, Inc. and Performance Mechanical Inc. for as needed millwright services with a maximum compensation of $1,000,000 each and a five-year term ending on or around March 31, 2028;
4. Authorize the City Manager to negotiate and execute amendments to these agreements to (a) add or delete services consistent with the scope of services for the agreements (b) adjust future rates subject to the appropriation of funds; (c) increase maximum compensation up to an aggregate maximum compensation of $15,000,000 over a five-year period; and (d) extend the term of the agreements and increase maximum compensation by $15,000,000 for an aggregate compensation of $30,000,000 over a ten-year period, subject to the annual appropriation of funds; and
5. Authorize the City Manager to take any actions as necessary to implement and administer the agreement
Staff
Reviewed by: Manuel Pineda, Chief Electric Utility Officer
Approved by: Office of the City Manager
ATTACHMENTS
Agreement with Stephens Mechanical