title
APPROVE FINDINGS JUSTIFYING AN EXCEPTION TO THE COMPETITIVE BIDDING PROCESS TO ALLOW SMG TO ENTER INTO A CONTRACT WITH AMERICAN CHILLER SERVICE FOR THE REPAIR OF THE HVAC AT THE STOCKTON ARENA
recommended action
RECOMMENDATION
It is recommended that the City Council adopt a resolution:
1. Approving findings for an exception to the competitive bidding process to allow SMG to enter into a contract with American Chiller Services (ACS) in the amount of $87,500 for the rebuild and repair of one of the two chillers at the Stockton Arena; and
2. Authorizing a budget amendment and transfer of $46,036 from the Repairs and Improvements - Arena, Ball Park, and Theater project (PW1319) in the 301 General Capital Fund and $5,900 from the 086 Entertainment Venues operating budget to the Arena Upgrades and Maintenance Program project (ED8601) in the 086 Entertainment Venues Fund to pay for repairs in the amount of $87,500; and
3. Authorizing the City Manager, or his designee, to take all necessary and appropriate actions to carry out the purpose and intent of this resolution.
body
Summary
There are two, twelve-year old chillers installed at the Stockton Arena that are used to maintain the interior temperature at the facility. In 2014, one of the two chillers (Chiller #2) failed and Council approved funding to have it rebuilt. The second of the two chillers has now failed (Chiller #1), and is in need of a rebuild in order to return to operation. Failure to complete this repair, leaves the arena reliant on just one chiller and in jeopardy of an inability to control the temperature of the facility, especially critical during the hot summer months.
SMG, the Facility Manager for four downtown Stockton entertainment venues (Stockton Arena, Stockton Ballpark, Bob Hope Theatre and Oak Park Ice Rink), is responsible for repairs, maintenance, and capital improvements at the venues. The Capital Improvement Plan Budget approved by Council included repairs and maintenance projects for the entertainment venues. Staff recommends that Council approve findings for an exception to the City’s competitive bidding process to allow a contract between SMG and the American Chiller Services (ACS) in the amount of $87,500 in accordance with the Stockton Municipal Code 3.68.070.
DISCUSSION
Background
The Stockton Arena opened in 2005. On January 25, 2011, the City Council approved a Facilities Management Agreement via Resolution 11-0022 with SMG for the operation and maintenance of four Downtown Entertainment Venues in Stockton. Following the approval of the FY 2013-2014 Capital Improvement Project Budget, Council amended the CIP to include an emergency repair by American Chiller Systems (ACS) for the variable frequency drive (VFD) repair to Chiller #2. A VFD is a mechanism that controls how hard the HVAC unit must run in order to obtain and/or maintain the desired temperature within the facility. In Fiscal Year 2015-2016, $295,000, was approved for repairs and improvements at all four of the entertainment venues, specifically $50,000 was placed in the Arena Upgrades and Maintenance Program which covers the HVAC system. The current CIP funding is still available as no major repairs of a capital nature have yet been required, meanwhile routine maintenance of the mechanical equipment has been completed using funding from the operating budget.
Present Situation
In September of 2015, the VFD of Chiller #1 at Stockton Arena failed. With the failure of Chiller #1, #2 is the sole cooling unit for the Arena, eliminating any building cooling redundancy. Timing was not ideal to complete the repair in the midst of the hockey season, however now that the season has ended and as the hot summer months approach, this is the appropriate time to complete the rebuild. Failing to complete the needed repair will leave the Arena without any cooling capability, should the existing chiller have any load or mechanical issues.
A VFD can fail for many reasons, but it can usually be pinned down to four main reasons:
• VFD is not adequate for the piece of machinery it is paired with.
• Lack of maintenance. (Like most pieces of electronic equipment, a VFD must be kept cool, clean and dry.)
• End of equipment life cycle.
• A spike or surge of the power grid.
There is no concrete evidence of why either failure occurred, however the VFDs are adequate for the chillers they are paired with and rebuilding of the VFD allows the chillers to remain within their useful life cycle.
SMG has conducted recommended quarterly and annual maintenance including testing, inspections, and cleaning since taking over management services in early 2011. While the maintenance records prior to 2011 are not available, there is anecdotal evidence that some maintenance was conducted on an inconsistent basis during the first five years of the VFD’s operation. Most manufacturer’s state that a VFD will last 8-12 years under normal operating conditions and up to 20 if consistently maintained; Chiller #1, is in year 11 of operation.
There are two options to remedy Chiller #1’s failure. The VFD can be replaced at a cost of approximately $140,000 installed, including a one-year warranty; or the current one can be remanufactured/rebuilt for $87,500. The remanufacturing process allows the entire drive to be inspected, any damaged parts tested and replaced, and will carry a one-year warranty. Given that there is technically no limit as to how many times a VFD could be rebuilt and the substantial difference in cost, staff recommends that the VFD of Chiller #1 be re-built.
Capital and Maintenance Expenditures
Capital project contracts under SMG operate somewhat differently than the standard City process. The City Council-approved Facilities Management Agreement gives SMG the duty and responsibility to negotiate, execute, and perform all contracts/use agreements for operation of the facility; select and coordinate maintenance; and enter into material contracts with City approval. It is the City’s responsibility to exercise oversight and review internal controls when large expenditures for repairs and capital projects are planned at the entertainment venues. It is not intended for the City to directly manage the process as SMG is the building manager and industry specialist. It is expected that SMG will follow a competitive process in line with City purchasing requirements. City Economic Development and SMG facility staff work cooperatively throughout the Capital Improvement Plan process from project proposal through bidding and completion.
SMG has the authority to enter into vendor contracts and exercised its authority by entering into a regular maintenance contract with ACS for routine maintenance and needed repairs including warranty of such work. Contracting with ACS for this repair will allow for weekly and/or monthly maintenance to monitor these repairs and simplify any situations in which the warrantee must be relied upon. With the loss of efficiencies, wear and tear on equipment, and potential failure of the HVAC system; it is necessary to move forward with repairs. Given the knowledge of the equipment and system by ACS and its ability to complete repairs, staff recommends that an exception to the competitive bidding process be granted.
Findings
Stockton Municipal Code section 3.68.070 allows exceptions to the competitive bidding process where the City Council has approved findings which support and justify exceptions to the competitive bidding process.
The findings to support an exception are as follows:
1. SMG has a duty and obligation to manage the facility and enter into material contracts with City oversight approval;
2. SMG conducted a competitive process to establish a maintenance agreement with ACS pursuant to the Management Agreement;
3. ACS currently holds warranties for repairs completed last year which will be void if work is conducted by another vendor;
4. It is prudent to move forward with necessary repairs to avoid complete HVAC system failure, to avoid unnecessary wear and tear and to manage utility and staffing costs; and
5. ACS has unique knowledge, expertise, and availability to complete the necessary repairs.
FY 2014-18 Capital Improvement Plan (CIP) Budget
Large repair and capital improvement projects are included in the City’s annual CIP Budget to maintain the City’s oversight of large projects at City-owned facilities. The FY 2015-2016 CIP appropriations for the entertainment venues, listed in the 2015-2020 Adopted Capital Improvement Plan Budget, consisted of $295,000 for prioritized projects and contingencies, including $50,000 for Arena Upgrades and Maintenance Program which encompasses this type of upgrade/retrofit to the HVAC energy management system at the Arena.
FINANCIAL SUMMARY
SMG solicited a proposal from ACS to repair the HVAC and received a quote in the amount of $87,500. A budget of $50,000 was in FY 2015-2016 for Arena Upgrades and Maintenance Program by project number ED8601. The project has a balance of $35,631. Previous resources allocated in project number PW1319 for Repairs and Improvements - Arena, Ball Park, and Theater has a remaining balance of $46,036.
It is recommended the chiller repairs be funded by consolidating the following resources into a single capital project appropriation:
Arena Upgrades and Maintenance Program (ED8601) 086-3020 640 $35,631
Repairs and Improvements - Arena, Ball Park, and
Theater (PW1319) 301-3091-640 $46,036
Entertainment Venues Operating Budget 086-1711-510 $ 5,900
Total Funding $87,567
Per budget resolution authority, City Council approval is needed to move appropriation between capital projects. The proposed action authorizes the transfer of funds and capital appropriation of $46,036 from the Repairs and Improvements - the Arena, Ball Park, and Theater (PW1319) account number 301-3091-640 in the 301 General Capital Fund to the Arena Upgrades and Maintenance Program project (ED8601) account number 086-3020-640. PW1319 will be closed following the transfer of funds. In addition, the proposed action also authorizes the transfer of $5,900 from the FY 2015-16 Entertainment Venues operating budget account number 086-1711-510 to the Arena Upgrades and Maintenance Program project ED8601 086-3020-640.