title
APPROVE FINDINGS AND EXECUTE A CONTRACT WITH KEMIRA WATER SOLUTIONS FOR THE PURCHASE OF FERRIC AND FERROUS CHLORIDE FOR WASTEWATER TREATMENT AND AMEND FISCAL YEAR 2021-22 ANNUAL BUDGET
recommended action
RECOMMENDATION
It is recommended that the City Council adopt a resolution:
1. Approving findings which support and justify an exception to the competitive bidding process.
2. Authorize the City Manager to execute a five-year contract with Kemira Water Solutions (Exhibit 1 to the Resolution) for the purchase of Ferric Chloride and Ferrous Chloride for wastewater treatment.
3. Appropriate funds in the amount of $210,000 from the Wastewater Utility Fund balance to the Wastewater Treatment Plant Operations, Maintenance & Repairs Services account.
It is also recommended that the Council action authorize the City Manager to take appropriate and necessary actions to carry out the purpose and intent of the resolution.
body
Summary
Ferric and ferrous chloride are chemicals used to control hydrogen sulfide production at the Regional Wastewater Control Facility (RWCF). Elevated hydrogen sulfide levels can be dangerous and are regulated under a permit with the San Joaquin Valley Air Pollution Control District. In July 2021, the contracted provider of ferric chloride, Thatcher Company of California, declared force majeure which prevented any further chemical supply deliveries under their contract. After additional investigation, it was found that Kemira Water Solutions, Mohave, CA is the only available chemical supplier able to provide sufficient ferric and ferrous chloride supplies to the RWCF. This company possesses its own production facility and is not dependent on other manufacturers.
The Council action will approve findings of an exception to the competitive bidding process and will authorize the City Manager to execute a five-year contract with Kemira Water Solutions (Kemira) for the purchase of ferric chloride and ferrous chloride for wastewater treatment at the price of $1,117.12 per ton and $1,224.32 per ton, respectively.
DISCUSSION
Background
Various chemicals are used in the wastewater treatment process to induce changes in the wastewater that reduce hazardous conditions and remove specific impurities. These chemical and physical changes are necessary to meet wastewater permit requirements.
Ferric and ferrous chloride are used to control hydrogen sulfide production at the RWCF Headworks and Anaerobic Digesters. Hydrogen sulfide production at the digesters is regulated under the San Joaquin Valley Air Pollution Control District (Air Board) permit for the operation of the RWCF Co-generation engines. These permits set limits on the amount of hydrogen sulfide contained in the methane gas produced by the digesters and fed to the co-generation engines. The permit limits both the methane fuel content and the exhaust from the engines. Hydrogen sulfide production is effectively controlled by chemical addition and has been the operational standard for the RWCF for several years. The RWCF’s infrastructure was designed and constructed to dose ferric or ferrous chloride.
In May 2021, Council approved a contract to purchase ferric chloride from Thatcher Company of California (Thatcher) as part of the Bay Area Chemical Consortium (BACC) bid process. In July, Thatcher informed the MUD their supplier had declared force majeure on their production of ferric chloride due to a nationwide shortage of hydrochloric acid, a catalyst compound necessary in their production of ferric chloride. A contract change order was executed in August 2021 to allow for the purchase of a substitute chemical, ferrous chloride. Other BACC bidders were contacted, but no new contracts were issued until supplies could stabilize throughout the industry.
On September 28, Thatcher informed the MUD they would not be able to deliver either ferric or ferrous chloride. MUD again contacted the other BACC respondents to explore contract options. Only Kemira responded and confirmed they were willing to enter into a contract with the City and had supplies of both ferric and ferrous chloride available at the quantities needed by the RWCF. An emergency purchase order up to the City Manager’s spending limit was approved in October 2021.
Present Situation
Kemira is located in Southern California and owns its chemical production facility. Because they are not dependent on by-products from other industries, the company is able to reliably produce both ferric and ferrous chloride at the volumes needed by the RWCF to control the production of hydrogen sulfide. Kemira was the only company willing to offer a contract to the City when Thatcher could not meet its contractual obligations.
The funds from the emergency purchase order are insufficient to fund supplies through the end of FY 2021-22. If approved, this action will authorize the execution of a contract for the supply of ferric or ferrous chloride from Kemira for the remainder of FY 2021-22 through December 31, 2026.
Findings
Stockton Municipal Code Section 3.68.070(A)(4) provides an exception to the competitive bidding requirements when City Council approves findings that support and justify the purchase through a sole source vendor.
Proposed findings to support this purchase are:
1. Thatcher Company of California is unable to provide the chemicals needed by MUD under its contract.
2. The Air Board requires control of the formation of hydrogen sulfide in the digesters. The RWCF cannot control hydrogen sulfide production without adding either ferric or ferrous chloride and could be in violation of their permit.
3. The other respondents from the BACC bid were contacted to enter into a contract. Only Kemira responded to the staff inquiries.
4. There are no other companies capable of, or willing to, provide ferric or ferrous chloride to the RWCF.
5. Kemira owns its production facility and is not dependent on by-products from other industries.
6. Kemira has a previous history of reliable service to the City.
FINANCIAL SUMMARY
The table below shows the cost and projected usage for the entire 5-year term of the contract:
|
|
Ferric Chloride |
Ferrous Chloride |
Total |
|
Cost/ton |
$1,117.12 |
$1,224.32 |
|
|
Estimated Annual Quantity (tons) |
100 |
425 |
525 |
|
FY 2022 (partial) |
$37,237 |
$173,445 |
$210,682 |
|
FY 2023 |
$115,063 |
$535,946 |
$651,009 |
|
FY 2024 |
$118,515 |
$552,024 |
$670,539 |
|
FY 2025 |
$122,071 |
$568,585 |
$690,656 |
|
FY 2026 |
$125,733 |
$585,643 |
$711,376 |
|
FY 2027 (through 12-31-2026) |
$64,752 |
$301,606 |
$366,358 |
|
Total |
$583,371 |
$2,717,249 |
$3,300,620 |
The quantities listed above are estimates only. The actual quantities purchased may vary depending on treatment needs and will be purchased at the contracted rates. The not-to-exceed amount represents the total expense throughout the potential 5-year contract term and includes a 3% annual escalation per year starting in FY 2023.
A budget appropriation in FY 2021-22 is recommended in the amount of $210,000 from the Wastewater Utility Fund Balance account to the Wastewater Treatment Plant Operations, Chemicals account. With this appropriation, there will be sufficient funds in the proposed contract for the remainder of FY 2021-22. Future purchases will be budgeted in the same account in subsequent fiscal years and subject to Council approval during the annual budget development process.
There is no impact to the General Fund, or any other unrestricted funds, from this action.