REPORT TO COUNCIL
SUBJECT
Title
Action to Authorize the City Manager to Negotiate and Execute Amendment(s) to the Agreement with Performance Mechanical, Inc. for As-Needed Boilermaker and Pipefitter Services for Silicon Valley Power for Additional Compensation Not-to-Exceed $2,611,903, for a Total Maximum Compensation Not-to-Exceed $4,611,903, Inclusive of $2,000,000 Previously Authorized by the City Council
Report
BACKGROUND
Silicon Valley Power (SVP), the City of Santa Clara’s electric utility, owns and operates two gas-fired power generation facilities within the city limits, as well as remote power generation facilities. Equipment at these facilities includes large industrial systems such as Heat Recovery Steam Generators (HRSG), high-pressure steam and water piping, pressure vessels, and other critical mechanical equipment. These systems operate under high temperatures and pressures and require specialized inspection, welding, fabrication, repair, and replacement to maintain safe, reliable, and efficient operations.
To perform this specialized work, SVP contracts with qualified firms that provide certified boilermaker, pipefitter, welding, and related mechanical maintenance services. These services support both planned maintenance outages and emergency repairs necessary to keep generation equipment operating safely.
On July 13, 2021, the City Council authorized the City Manager to execute an agreement with Performance Mechanical, Inc. (PMI) for as-needed boilermaker and pipefitter services following a competitive formal solicitation process (RTC 21-725, Attachment 1). The agreement includes an initial five-year term beginning July 1, 2021, through June 30, 2026, with up to five additional one-year options to extend the agreement through June 30, 2031 (Attachment 2). The maximum compensation authorized for the initial five-year term was $2,000,000.
Subsequent amendments to the agreement updated terms associated with work authorization, warranty, payment, and updated rates. Amendment No. 1 updated terms associated with work authorization, warranty, and payment (Attachment 3). Amendment No. 2 updated the work authorization process, schedule of fees, payment provisions, and rates (Attachment 4). Amendment No. 3 (Attachment 5) and Amendment No. 4 (Attachment 6) updated labor rates. All amendments were executed within the City Council authorized maximum compensation.
DISCUSSION
Since contract execution in 2021, PMI has provided specialized mechanical maintenance and repair services supporting SVP’s generating facilities, including certified welding, piping and pipe hanger repairs, tank and HRSG repairs, insulation removal and repair, fabrication and installation of boiler and piping components, and other mechanical repair work necessary to maintain safe and reliable power plant operations.
The maximum compensation established at the beginning of the initial five-year term was based on the maintenance and repair needs reasonably anticipated at the time the agreement was executed. However, the actual level and scope of work required over the term exceeded those initial estimates. Mechanical maintenance at generating facilities can vary based on equipment condition, operating history, planned outage scopes, and unanticipated repair requirements. In some cases, additional repairs are identified after work begins, resulting in individual work authorizations or purchase orders exceeding their initial estimates.
Over the initial five-year contract term, the cumulative amount of planned maintenance, outage-related work, and additional repairs resulted in greater use of the agreement than originally anticipated. During spring maintenance services, additional repair needs were identified as work progressed and needed to be completed to safely return the affected equipment to operational service. As a result, expenditure under the agreement exceeded the authorized maximum compensation. Expenditures during the initial term totaled $2,111,903, exceeding the City Council-authorized amount by $111,903. Staff is requesting that the City Council ratify these expenditures.
As part of its 2021 action, the City Council authorized the City Manager to exercise five one-year options to extend the term through June 30, 2031, subject to the appropriation of funds. Accordingly, staff requests authorization to execute Amendment No. 5 (Attachment 7) to exercise the first one-year option to extend the term through June 30, 2027, and increase the agreement’s maximum compensation from $2,000,000 to $2,611,903. The $611,903 increase consists of $111,903 to ratify expenditures incurred and $500,000 for services anticipated during the first option period.
In addition to the Amendment No. 5 maximum compensation, SVP will require an additional $2,000,000 for the remaining optional periods through June 30, 2031, with a total not-to-exceed amount of $4,611,903. Table 1 below provides a summary of actual expenditures during the initial term and anticipated expenditures for the five option periods.
Table 1 - Cost Summary
|
Description |
Amount |
|
Initial Five-Year Term (7/1/21 - 6/30/26) |
$2,111,903 |
|
Option 1 (7/1/26 - 6/30/27) |
$500,000 |
|
Option 2 (7/1/27 - 6/30/28) |
$500,000 |
|
Option 3 (7/1/28 - 6/30/29) |
$500,000 |
|
Option 4 (7/1/29 - 6/30/30) |
$500,000 |
|
Option 5 (7/1/30 - 6/30/31) |
$500,000 |
|
Total Not-to-Exceed Maximum Compensation |
$4,611,903 |
Actual annual expenditures may vary for each option period from the table above depending on maintenance schedules, outage work, inspection findings, and operational needs; however, total compensation under the agreement will not exceed the authorized maximum amount.
ENVIRONMENTAL REVIEW
Staff recommends that the City Council determine that the proposed action is exempt from the California Environmental Quality Act (“CEQA”) pursuant to sections 15301 of Title 14 of the California Code of Regulations in that work to be performed consists of inspection, maintenance, repair, and replacement of existing facilities and equipment.
FISCAL IMPACT
The total cost of the agreement with Performance Mechanical, Inc. is not anticipated to exceed $4,611,903 over the term of the agreement. Sufficient funds are available in the FY 2026/27 Operating Budget in the Electric Utility Operating Fund Contractual Services account. Funds required for future years will be requested through the regular budget process.
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 or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
1. Determine the proposed actions are exempt from CEQA pursuant to Sections 15301 (Class 1 -Existing Facilities) of Title 14 of the California Code of Regulations;
2. Authorize the City Manager or designee to execute Amendment No. 5 to the agreement with Performance Mechanical, Inc. (Agreement) for as-needed boilermaker and pipefitter services to exercise the first one-year option to extend the Agreement through June 30, 2027, and increase the maximum compensation by $611,903, from $2,000,000 to $2,611,903, subject to the approval as to form by the City Attorney;
3. Ratify previous expenditures made under the Agreement in the amount of $111,903 for the period from July 1, 2021, through June 30, 2026; and
4. Authorize the City Manager or designee to take any actions necessary to implement and administer the Agreement as amended, and to negotiate and execute future amendment(s) to: (a) exercise up to four additional one-year options to extend the term through June 30, 2031, (b) add or delete related services, (c) adjust rates consistent with the terms of the Agreement, (d) increase the total not-to-exceed maximum compensation by up to an additional $2,000,000 for a total not-to-exceed maximum compensation of $4,611,903, and (e) make de minimis changes, provided that the total compensation does not exceed the authorized maximum compensation and subject to the approval as to form by the City Attorney.
Staff
Reviewed by: Nico Procos, Director of Silicon Valley Power
Approved by: Jovan Grogan, City Manager
ATTACHMENTS
1. RTC 21-275
2. Agreement with Performance Mechanical, Inc.
3. Amendment No. 1 to Agreement with Performance Mechanical, Inc.
4. Amendment No. 2 to Agreement with Performance Mechanical, Inc.
5. Amendment No. 3 to Agreement with Performance Mechanical, Inc.
6. Amendment No. 4 to Agreement with Performance Mechanical, Inc.
7. Amendment No. 5 to Agreement with Performance Mechanical, Inc.