REPORT TO COUNCIL
SUBJECT
Title
Action on Amendment No. 2 to the Agreement with Mesa Energy Systems, Inc. for As-Needed HVAC and Chiller Inspection and Maintenance Services for Silicon Valley Power
Report
COUNCIL PILLAR
Deliver and Enhance High Quality Efficient Services and Infrastructure
BACKGROUND
On December 14, 2021, the City Council authorized the execution of the agreement (Agreement) with Mesa Energy Systems, Inc. (Mesa) for a maximum compensation of $750,000 over a five-year term, ending on December 31, 2026. Mesa provides as-needed maintenance, repair, and inspection services for the heating, ventilation, chiller, and air conditioning (HVAC) systems of the City’s Electric Utility, Silicon Valley Power (SVP). SVP owns and operates buildings equipped with electronically controlled equipment that rely on HVAC systems to maintain proper operating temperature.
This Agreement resulted from a competitive procurement process. The maximum compensation was primarily calculated based on as-needed repair services and maintenance, repair, and inspection services for the City’s three power plants. On February 22, 2024, Amendment No. 1 to the Agreement with Mesa was executed to include quarterly maintenance services for an additional 16 substation sites and adjust labor rates in accordance with the price escalation provisions of the Agreement.
DISCUSSION
Since the execution of the amendment, SVP has increasingly required Mesa’s services for (1) quarterly substation maintenance; (2) large ongoing projects such as the upgrade of the HVAC system at SVP’s 24X7 control room; and (3) maintenance of aging systems at the DVR power plant. In addition, SVP anticipates several new substations, which will be completed in the next few years, will also require Mesa’s services. Consequently, staff anticipates that the need for future services will exceed the original maximum compensation of $750,000 by mid-2024. To ensure uninterrupted services, staff recommends increasing the maximum compensation by $1,250,000 for a revised maximum compensation of $2,000,000.
Under the Agreement, quarterly maintenance services are based on fixed fees, while compensation for as-needed services is based on time and materials. Both fixed and time-and-materials rates are subject to an annual adjustment that must be substantiated by Mesa. In addition, Mesa submits a quote for each repair project in advance of starting work. The table below presents the amounts for scheduled quarterly maintenance services and the estimated amount for as-needed services.
Table 1 - Five Year Cost Estimates
|
Contract Costs |
Quarterly Amount (as of 1/1/24) |
Annual Amount (Estimate) |
Five-Year Total (Estimate) |
|
Fixed Maintenance Costs |
|
|
|
|
- Donald Von Raesfeld |
$10,156.00 |
$40,624.00 |
$203,120.00 |
|
- Fuel Gas Compressor |
$735.50 |
$2,942.00 |
$14,710.00 |
|
- Gianera |
$490.00 |
$1,960.00 |
$9,800.00 |
|
- Cogeneration Plan |
$489.50 |
$1,958.00 |
$9,790.00 |
|
- Substations |
$11,938.00 |
$47,752.00 |
$238,760.00 |
|
Subtotal (Fixed Costs) |
$23,809.00 |
$95,236.00 |
$476,180.00 |
|
Project Costs |
|
|
|
|
- As-Needed Services (5 years) |
N/A |
N/A |
$1,523,820.00 |
|
Subtotal (Project Costs) |
|
|
$1,523,820.00 |
|
Total |
|
|
$2,000,000.00 |
The Agreement term includes up to five one-year extension options through December 31, 2031. Staff seeks further authorization for the City Manager to negotiate and execute amendments to exercise those options to extend the term and to increase the maximum compensation by an additional $2,000,000 for a total maximum compensation not to exceed $4,000,000 over the maximum 10-year term of the agreement.
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 and 15302 of Title 14 of the California Code of Regulations in that work to be performed by Mesa consists of inspection, maintenance, repair, and replacement of existing SVP HVAC and chiller systems.
FISCAL IMPACT
The proposed Amendment No. 2 to the Agreement for Services with Mesa Energy Systems, Inc. would increase the maximum compensation by $1,250,000 from $750,000 to $2,000,000. Sufficient funds are available in the FY 2023/24 and FY 2024/25 Adopted Operating Budget in the Electric Utility Operating Fund for the asset requiring service, such as the specific power plant, substation, or other asset such as a building facility. Funding for future years will be requested through the normal 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) and 15302 (Class 2 - Replacement or Reconstruction) of Title 14 of the California Code of Regulations;
2. Authorize the City Manager to execute Amendment No. 2 to the Agreement for Services with Mesa Energy Systems, Inc., increasing the maximum compensation by $1,250,000 for a new maximum compensation of $2,000,000; and
3. Authorize the City Manager or designee to take any actions as necessary to implement and administer the Agreement as amended and negotiate and execute amendments to (a) add or delete services consistent with the scope of services; (b) adjust future rates to account for reasonable changes in labor and materials rates; (c) exercise up to five one-year option to extend the term of the Agreement through December 31, 2031; and (d) increase the maximum compensation by an additional $2,000,000 for a total maximum compensation not to exceed $4,000,000 over a 10-year term, subject to the appropriation of funds and the review and approval as to form by the City Attorney.
Staff
Reviewed by: Manuel Pineda, Chief Electric Utility Officer
Approved by: Jovan D. Grogan, City Manager
ATTACHMENTS
1. Agreement for Services with Mesa Energy Systems, Inc.
2. Amendment No. 1 to the Agreement for Services with Mesa Energy Systems, Inc.
3. Proposed Amendment No. 2 to Agreement for Services with Mesa Energy Systems, Inc.