REPORT TO COUNCIL
SUBJECT
Title
Action to Authorize the City Manager to Negotiate and Execute Amendments to the Agreement with Intertek USA, Inc., to Provide Non-Destructive Examination, Consulting, and Engineering Services for Silicon Valley Power, for a Total Not-to-Exceed Compensation of $1,050,000
Report
BACKGROUND
Silicon Valley Power (SVP), the City of Santa Clara’s electric utility, operates and maintains electric generation facilities and associated critical equipment that require specialized technical services to support safe, reliable, and efficient operation. This equipment includes pumps, piping systems, pressure vessels, turbines, generators, and condensers.
In January 2024, staff issued a formal competitive solicitation for non-destructive examination, consulting, and engineering services to support inspection and condition assessment of critical power generation equipment at SVP facilities. The solicitation sought qualified firms capable of performing specialized inspection and testing services, including visual inspections, ultrasonic testing, radiographic testing, dye penetrant and magnetic particle testing, hardness testing, and other diagnostic methods used to detect material degradation, cracking, corrosion, and structural defects. The scope also included engineering consulting services such as equipment condition assessments, piping and heat recovery steam generator (HRSG) inspections, flow-accelerated corrosion evaluations, and technical analysis to support maintenance planning and reliability of plant equipment. Following an evaluation process, staff selected Intertek USA, Inc. (Intertek) to provide these services at the Donald Von Raesfeld and Gianera power plants.
In October 2024, the City Manager executed an agreement with Intertek for a maximum compensation amount of $250,000, in accordance with Section 2.105.300(a) of the Santa Clara City Code, which authorizes the City Manager to execute agreements on behalf of the City in amounts up to and including $250,000. The agreement established an initial five-year term beginning October 1, 2024, and ending September 30, 2029, with one option to extend the term through September 30, 2030.
Under the agreement, Intertek provides specialized non-destructive examination services to evaluate the integrity of critical equipment. Nondestructive examination refers to a group of analysis techniques used to evaluate the properties of materials, components, or systems without causing damage. These services examine internal and external condition of equipment and components to detect anomalies, damage, and structural weaknesses. Intertek also provides engineering support and field assessment services to evaluate the condition and design of existing equipment in order to develop recommendations for the equipment maintenance plan.
The non-destructive examination and engineering support services provided by Intertek allow SVP to assess the condition of critical equipment and support ongoing maintenance planning for its power generation facilities.
DISCUSSION
The original agreement with Intertek was executed with a not-to-exceed amount of $250,000, which has funded services performed during approximately the first 18 months of the agreement term. SVP continues to require specialized non-destructive examination, consulting, and engineering services to support ongoing inspection, assessment, and maintenance of critical power generation equipment.
Accordingly, staff is requesting City Council approval for the City Manager to negotiate and execute amendments to the agreement to increase the maximum compensation by up to $800,000, for a revised total not-to-exceed amount of $1,050,000. Because this increase would raise the total compensation above the $250,000 authority delegated to the City Manager under Section 2.105.300(a) of the Santa Clara City Code, City Council approval is required. A summary of the agreement’s not-to-exceed maximum compensation is provided in Table 1 below.
Table 1 - Agreement Compensation Summary
|
Term Period |
Amount |
|
Previously Authorized Amount under City Manager Authority (covering services from October 1, 2024, to March 31, 2026) |
$250,000 |
|
Additional Authorization Requested (covering services from April 1, 2026, through September 30, 2030, including the optional one-year extension if exercised) |
$800,000 |
|
Total Not-to-Exceed Maximum Compensation |
$1,050,000 |
The agreement is structured on a time and materials basis using fully burdened hourly rates for various labor classifications. In addition to labor charges, the agreement includes unit rates for laboratory services and specialized testing and inspection equipment. Rates established in the agreement are subject to reasonable annual increases after the initial fixed period of three years. Any rate increase must be approved by the City and substantiated by the contractor to the City’s satisfaction.
Approval of the recommendations in this report would increase the agreement’s maximum compensation to a revised not-to-exceed amount of $1,050,000, as necessary to support ongoing operational needs. The total not-to-exceed amount represents cumulative maximum compensation over the full term of the agreement, including the one-year extension if exercised. Annual expenditures may vary depending on service needs; however, total compensation will not exceed the authorized maximum compensation.
ENVIRONMENTAL REVIEW
Staff recommends that the City Council determine that the actions being considered are exempt from the California Environmental Quality Act (“CEQA”) pursuant to section 15301 (Existing Facilities) of Title 14 of the California Code of Regulations as the services involve maintenance and repair of existing facilities and mechanical equipment.
FISCAL IMPACT
The maximum compensation for the agreement with Intertek USA, Inc., will not exceed $1,050,000 over the contract term and a one-year optional extension through September 30, 2030. For current year costs, sufficient funds are available in the FY 2025/26 Operating Budget in the Electric Utility Operating Fund. 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 that the proposed action is exempt from CEQA pursuant to Section 15303 (Class 1 - Existing Facilities) of Title 14 of the California Code of Regulations; and
2. Authorize the City Manager or designee to (a) negotiate and execute amendments to the agreement with Intertek USA, Inc. (Agreement) for non-destructive examination, consulting, and engineering services for Silicon Valley Power to: (i) increase the maximum compensation to $1,050,000; (ii) add or delete services associated with the services; (iii) adjust rates in accordance with the Agreement’s rate adjustment provisions; and (iv) make de minimis changes; and (b) take any actions as necessary to implement and administer the Agreement, subject to the appropriation of funds and the review and approval as to form by the City Attorney.
Staff
Reviewed by: Reviewed by: Nico Procos, Director of Silicon Valley Power
Approved by: Jovan Grogan, City Manager
ATTACHMENTS
1. Agreement for Services with Intertek USA, Inc.