REPORT TO COUNCIL
SUBJECT
Title
Action to Delegate Authority to the City Manager to Negotiate and Execute Amendment No. 2 to the Software Maintenance Agreement with Hitachi Energy USA, Inc.
Report
COUNCIL PILLAR
Deliver and Enhance High Quality Efficient Services and Infrastructure
BACKGROUND
The City of Santa Clara’s Electric Utility, Silicon Valley Power (SVP), operates a Supervisory Control and Data Acquisition (SCADA) system to monitor and control its electric utility infrastructure. SCADA is computer-based control system that allows staff to remotely control operations, monitor equipment status, and analyze historical and real-time data.
SVP monitors the system 24/7, and it is operated in accordance with the Critical Infrastructure Protection (CIP) Reliability Standards of the North American Electric Reliability Corporation (NERC). The system is operated by North Electric and Water System Operators who are NERC certified.
The SCADA system was originally procured in 1997 and supplied by ABB Enterprise Software (ABB). On October 10, 2017, the City Council approved a Software Maintenance Agreement with ABB to provide maintenance and support for the SCADA system (Agenda Item 13.B2). Under the agreement, ABB provides hardware and software support for third party software, access to the support portal, remote diagnostic services, and data debugging.
On October 17, 2020 (RTC #20-940), the City Council authorized an amendment to the Software Maintenance Agreement to extend the term for five years from September 1, 2020, through August 31, 2025. This amendment included the transfer of ABB’s software division to Hitachi Energy USA, Inc. (Hitachi), which now serves as the current software maintenance services provider.
The current agreement for the SCADA software maintenance and support services is set to expire on August 31, 2025.
DISCUSSION
The Purchasing Division Manager has determined this procurement to be exempt from the sole source prohibitions under 2.105.280(b)(2) of the Santa Clara City Code as this is an extension of an existing agreement that is necessary to ensure continued operation and function of existing systems currently in use by the City.
To maintain uninterrupted software maintenance and support services for the SCADA system, staff recommends that the City Council authorize the City Manager to negotiate and execute a second amendment to extend the agreement with Hitachi for an additional five years, from September 1, 2025, through August 31, 2030.
Under the proposed amendment, Hitachi will continue to provide hardware and software support for third party software, access to the support portal, remote diagnostic services, and data debugging. Hitachi will also include up to 50 support hours to maintain system reliability, cybersecurity compliance, and operational performance. These services will be provided at a fixed annual fee with approximately 3% annual price escalation.
The proposed amendment also allows for additional support services at hourly rates established in the agreement to address unanticipated needs during the term. While SVP has not historically required additional support hours, staff recommend authorization for additional services so that SVP can respond quickly in the event that additional hours are needed such as due to software updates, regulatory changes, or cybersecurity issues. This matter is still pending further negotiation as staff may wish to negotiate a lesser number of hours or a fixed price for a specific project. Authorization of specific services at a fixed price or an alternate hourly rate could be done using a future amendment to the Agreement and staff requests that authorization by the City Council be delegated to the City Manager to negotiate and execute such amendments up to the maximum compensation of $2,500,000.
The proposed amendment increases the total maximum compensation amount under the agreement from $1,372,657 to $2,500,000 (an increase of $1,127,343) for the full contract term from September 1, 2017, to August 31, 2030.
Table 1 - Compensation Summary
|
Description |
Amount |
|
Software Maintenance & Support (2017 - 2018) |
$154,440 |
|
Software Maintenance & Support (2018 - 2019) |
$158,745 |
|
Software Maintenance & Support (2019 - 2020) |
$163,179 |
|
Software Maintenance & Support (2020 - 2021) |
$177,215 |
|
Software Maintenance & Support (2021 - 2022) |
$172,464 |
|
Software Maintenance & Support (2022 - 2023) |
$177,215 |
|
Software Maintenance & Support (2023 - 2024) |
$182,145 |
|
Software Maintenance & Support (2024 - 2025) |
$187,254 |
|
Subtotal - Maintenance Services (2017 - 2025) |
$1,372,657 |
|
|
|
|
Software Maintenance & Support (2025 - 2026) |
$187,722 |
|
Software Maintenance & Support (2026 - 2027) |
$193,353 |
|
Software Maintenance & Support (2027 - 2028) |
$199,154 |
|
Software Maintenance & Support (2028 - 2029) |
$205,128 |
|
Software Maintenance & Support (2029 - 2030) |
$211,282 |
|
Subtotal - Maintenance Services (2025 - 2030) |
$996,639 |
|
Authorization for Additional Services (2025 - 2030) |
$130,704 |
|
|
|
|
Total Maximum Authorization (2017 - 2030) |
$2,500,000 |
ENVIRONMENTAL REVIEW
The actions being considered do not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to pursuant to Section 15061(b)(3) of Title 14 of the California Code of Regulation in that it can be seen with certainty that there is no possibility that the proposed actions may have a significant effect on the environment.
FISCAL IMPACT
The cost of the proposed Amendment is $996,639 for the period of September 1, 2025, through August 31, 2030, for the maintenance service fees. Funding to cover the maintenance fees in year one and year two of the proposed Amendment is available in the Electric Utility Operating Budget for FY 2025/26 and FY 2026/27. If needed, the amendment also allows for purchase of additional support hours at an estimated cost of $46,200 for 100 man-hour blocks in Year 1 and escalating in cost by about 3.25% per year in Years 2-5 (pending further negotiations). At this time, staff does not anticipate needing additional support hours, but if additional support hours are needed, staff will use budgeted funds allocated to unanticipated maintenance.
Funding for Years 3 through 5 is subject to budget appropriations and will be incorporated into 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 <mailto:clerk@santaclaraca.gov> or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
1. Delegate authority to the City Manager or designee to negotiate and execute Amendment No. 2 to the Software Maintenance Agreement with Hitachi Energy USA, Inc. to continue providing maintenance and support services for Silicon Valley Power’s SCADA System, increasing the total maximum compensation from $1,372,657 to an amount not to exceed $2,500,000, and extending the term through August 31, 2030, subject to the appropriation of funds and review and approval as to form by the City Attorney; and
2. Authorize the City Manager or designee to take any actions necessary to implement and administer the Software Maintenance Agreement as amended and negotiate and execute future amendment(s) to (i) add or delete services associated with the SCADA system, (ii) adjust future rates based on market conditions, and (iii) make de minimis changes, subject to the maximum authorization of $2,500,000, budget appropriations, and the review and approval as to form by the City Attorney.
Staff
Reviewed by: Nico Procos, Director of Silicon Valley Power
Approved by: Jovan D. Grogan, City Manager
ATTACHMENTS
1. Original Software Maintenance Agreement with ABB, Inc.
2. Amendment to the Software Maintenance Agreement with ABB Enterprise Software, Inc.