REPORT TO COUNCIL
SUBJECT
Title
Authorize the City Manager to (1) Issue Purchase Orders to Atlas Copco Rental for the Rental of an Air Compressor at the Donald Von Raesfeld Power Plant and (2) Execute Amendment No. 1 to the Agreement for Services with Gavin D. Yates Doing Business as Northwest Industrial Engine & Compressor Co., to Provide Gas and Air Compressor Preventative Maintenance Services, Both to be Funded by Silicon Valley Power
Report
COUNCIL PILLAR
Deliver and Enhance High Quality Efficient Services and Infrastructure
BACKGROUND
The City of Santa Clara’s Electric Department, Silicon Valley Power (SVP), operates two power plants in Santa Clara, the Donald Von Raesfeld Power Plant (DVR) and the Gianera Generating Station (Gianera), as well as other power generating assets. These facilities rely on air compressors to supply clean, dry air that is essential for controlling critical equipment, including turbines, pumps, and pressure vessels.
At DVR, two air compressors are integral to ensure optimal operation. In August 2023, one of these air compressors failed. To address this urgent issue, staff secured a rental air compressor to maintain operations. SVP is now seeking City Council authorization for actions necessary to maintain operational continuity, including securing services and equipment, until a new air compressor can be procured and installed.
DISCUSSION
Authorization to Issue Purchase Orders to Atlas Copco Rental
Following the failure of one of the air compressors at DVR in August 2023, SVP has been renting an air compressor from Atlas Copco Rental (Atlas Copco), the original equipment manufacturer (OEM) for DVR’s compressors. Atlas Copco is the sole vendor offering trailer-mounted air compressors for rental. This rented unit is critical to ensuring redundancy for DVR’s instrument air systems and maintaining uninterrupted operations. The current monthly rental cost is $15,000 for this unit.
To date, SVP has spent $195,000 on rental costs which is within the City Manager’s approval authority of $250,000. To allow for sufficient time to complete the solicitation and installation process for a new air compressor, staff requests City Council authorization for the City Manager to issue purchase orders to Atlas Copco in an amount not to exceed $600,000, which includes rental expenses previously incurred ($195,000 through September 2024), projected rental costs for an additional 24 months ($360,000), and additional contingency for potential rent increases or unanticipated expenses ($45,000). This authorization is anticipated to cover rental expenses through September 30, 2026.
Amendment No. 1 to the Agreement for Services with Gavin D. Yates Doing Business as Northwest Industrial Engine & Compressor Co. (Northwest)
In June 2023, the City entered into an agreement with Gavin D. Yates Doing Business as Northwest Industrial Engine & Compressor Co. (Northwest) for gas and air compressor preventative maintenance services, testing, and repairs. The agreement resulted from a formal Request for Proposal (RFP) conducted pursuant to City Code Section 2.105.140(c) and awarded based on “best value.” The RFP was published on the City’s e-procurement system and viewed by 23 companies. Three companies demonstrated interest, but only one proposal was received from Northwest.
The agreement with Northwest has a current maximum compensation not to exceed $150,000, which is within the City Manager’s approval authority of $250,000 and has an initial term of five years ending on June 30, 2028, with a one-year option to extend the term through June 30, 2029.
Given the anticipated increased demand for these services primarily associated with aging equipment, staff is now seeking approval to execute Amendment No. 1 to increase the maximum compensation by $850,000, for a revised maximum compensation of $1,000,000. Based on the current spending trajectory, the requested funds will be sufficient for the term of the agreement plus the 1-year option.
The proposed maximum compensation of $1,000,000 under Amendment No. 1 of this agreement is based on past usage of the services and known projects. Future requirements for the services may increase due to unanticipated repairs or regulatory changes. In addition, the solicitation included an optional one-year extension of term.
ENVIRONMENTAL REVIEW
Staff recommends that the City Council determine that the proposed actions are exempt from the California Environmental Quality Act (“CEQA”) pursuant to sections 15301 and 15302 of Title 14 of the California Code of Regulations as the proposed actions involve (1) the operation, maintenance, and repair of existing mechanical equipment; and (2) the replacement of utility equipment with negligible or no expansion of capacity.
FISCAL IMPACT
Sufficient funds are available in the FY 2024/25 Operating Budget in the Electric Utility Operating fund and may be included in capital projects budget where appropriate. Budget for future years will be requested through the biennial process.
COORDINATION
This report has been coordinated with the Finance Department and the 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> or at public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
1. Determine that the proposed actions are exempt from CEQA pursuant to Sections 15301 (Existing Facilities) and 15302 (Replacement or Reconstruction) of Title 14 of the California Code of Regulations;
2. Authorize the City Manager or designee to issue Purchase Orders to Atlas Copco Rental for the rental of an air compressor at the Donald Von Raesfeld Power Plant in an amount not to exceed $600,000, until approximately September 30, 2026, to be funded by Silicon Valley Power;
3. Authorize the City Manager or designee to execute Amendment No. 1 to the Agreement for Services with Gavin D. Yates Doing Business as Northwest Industrial Engine & Compressor Co., for gas and air compressor preventative maintenance for a five-year term ending on June 30, 2028, to increase the maximum compensation of $150,000 by $850,000 for a revised maximum compensation amount of $1,000,000; to be funded by the SVP Operating or Capital Fund as applicable, subject to the review and approval as to form by the City Attorney; and
4. Authorize the City Manager or designee to negotiate and execute further amendments to the agreement with Gavin D. Yates Doing Business as Northwest Industrial Engine & Compressor Co to (a) add or delete services consistent with the scope of services, (b) adjust future rates to account for reasonable changes in labor and material rates, (c) exercise a one-year option to extend the term through June 30, 2029, and (d) increase the compensation by up to $500,000 for a total maximum compensation of $1,500,000 over a six-year period, subject to the appropriation of funds and the review and approval as to form by the City Attorney, to be funded by the SVP Operating or Capital Fund as applicable.
Staff
Reviewed by: Manuel Pineda, Chief Electric Utility Officer
Approved by: Jovan D. Grogan, City Manager
ATTACHMENTS
1. Agreement with Gavin D. Yates doing business as Northwest Industrial Engine & Compressor Co.
2. Proposed Amendment No. 1 with Gavin D. Yates doing business as Northwest Industrial Engine & Compressor Co.