HomeMy WebLinkAboutReso 93-240 - To proceed with the Staffing of the Redding Power Plant & the Industrial Power Technlogy Projects with COR Employees RESOLUTION NO. 93-240
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF REDDING
TO PROCEED WITH THE STAFFING OF THE REDDING POWER PLANT
AND THE INDUSTRIAL POWER TECHNOLOGY PROJECTS WITH CITY
OF REDDING EMPLOYEES.
WHEREAS, at its regular meeting on January 19, 1993 , the
City Council directed staff to have a consultant prepare a
Request for Proposal (RFP) and a cost estimate for City operation
of the Redding Power Plant and the Industrial Power Technology
( IPT) Projects; and
WHEREAS, the RFP was prepared by Henwood Energy Services,
Inc. , and was issued by the City on April 30, 1993 , as RFP No.
2767 ; and
WHEREAS, R. W. Beck and Associates was retained by the City
to review the four proposals received in response to said RFP,
and to compare them to the cost estimate for City operation as
prepared by Henwood Energy Services, Inc. ; and
WHEREAS, the results of that comparison are contained in the
Report of R. W. Beck and Associates and the Executive Summary
which accompany the attached Report to City Council; and
WHEREAS, the results of the Report indicate that the least
cost of operation—a savings estimated at $3 . 0 million (net
present value) over a five-year period--would be for the City to
operate the projects with City staff;
IT IS, THEREFORE, RESOLVED that the City Council of the City
of Redding hereby:
1 . Affirms that, based upon the Report of R. W. Beck and
Associates, it is beneficial for the City to staff and operate
the Redding Power Plant and the IPT Projects with City staff.
2. Directs staff to begin preparation of job descriptions
and salary surveys; and to bring a staffing plan to the City
Council for its consideration as soon as possible in order that
recruitment and training can begin in a timely manner.
3 . Authorizes staff to negotiate with the responsive
proposers to RFP No. 2767 for a contract to provide start-up
services for the Redding Power Project, and for the assistance of
a contractor that staff believes necessary in order to achieve a
timely start-up of the Redding Power Plant.
4. Authorizes the City Manager to execute the necessary
contract documents, upon approval of the City Attorney, on behalf
of the City Council.
I HEREBY CERTIFY that the foregoing Resolution was
introduced and read at a regular meeting of the City Council of
the City of Redding on the 15th day of June, 1993 , and was duly
adopted at said meeting by the following vote:
AYES: COUNCIL MEMBERS: Anderson, Dahl, Kehoe, Moss and Arness
NOES: COUNCIL MEMBERS: None
ABSENT: COUNCIL MEMBERS: None
ABSTAIN: COUNCIL MEMBERS: None
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CARL ARNESS, Mayor
City of Redding
A EST:
CONNIE STROHMAYER, dty Clerk
FOW APPROVED:
RA6ALL A. HAY , City Attorney
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CITY AFEDDING
ITEM NO.
MEETING DATE REPORT TO CITY COUNCIL
APPROVED BY DATE: June 10 , 1993
DEPARTMENT DI ECTOR Sam ndley
FROM: Director - Electric Department
N SUBJECT: Resolution Re: Redding Power
Plant Staffing Plan
Background
At the regular meeting of the City Council on January 19, 1993 , the
City Council, through Agenda Item 9-5(B) , directed the City staff
to have a consultant prepare a Request for Proposal (RFP) for
outside contractors to operate the Redding Power Plant and the IPT
Projects. It further directed staff to have the same consultant
prepare a cost estimate for City operation of the same projects.
At the March 16 , 1993 meeting, as Agenda Item 4-9-5(C) , City
Council authorized the staff to issue the RFP as soon as it was
prepared by the consultant in order to allow as much time as
possible for the processing of the Request by the various
contractors and to give City staff time to analyze the results and
bring it to the Electric Utility Commission.
The RFP, as prepared by Henwood Energy Services, was issued by the
City on April 30, 1993 as RFP No. 2667. The proposals that were
generated in response to this Request, as well as the cost estimate
for City operation of the Redding Power Plant and IPT Projects,
were opened at 3 p.m. Thursday, May 20, 1993 , by the City Clerk at
City Hall. Six contractor responses were received. One was deemed
non-responsive because it did not contain prices. One was deemed
non-responsive because it did not respond to the base RFP. The RFP
stated that the response must first reply to the Request for
Proposal; and then, any alternates would be evaluated thereafter.
The second proposal did not meet that condition and was returned to
the proposer. Of the four remaining proposals that were received,
compliance with the Request appeared to be good at the time of the
opening. Further review indicated that University Technical
Services (UTS) had provided estimates only and was not a firm
quote. There were three responses that were responsive to the RFP.
R. W. Beck and Associates was retained by the City to review the
four proposals that appeared to be responsive and compare them to
the cost estimate for City operation as prepared by Henwood Energy
Services , Inc. The results of R. W. Beck' s analysis were presented
to the Electric Utility Commission at the regular meeting of the
EUC on June 4, 1993 . The UTS proposal was discovered to be non-
responsive after the R. W. Beck contract was in place. The results
of that comparison are contained in the R. W. Beck report and the
Executive Summary which accompanies this item.
The results of the R. W. Beck report indicate that the least cost
of operation would be for the City to operate the projects with
City staff. The City would, in all likelihood, draw from the same
labor pool as the contractor. The wage rates are expected to be
City Council 2 June 10 , 1993
nearly equal. The difference in costs, approximately $3 million
net present value over five years appears to be in the profit and
taxes which the contractor must make and pay, respectively. No
significant advantage that the City or the contractor would have in
purchase of materials, supplies or services is evident.
Staff has considered the amount of work necessary to complete
before the RPP can begin commercial operation. We believe it is
necessary to retain a contract power plant operations company to
assist City staff with preparation of the RPP physical plant as
well as various administrative functions during initial start-up.
Some of the areas that we believe we will require assistance with
due to lack of existing City staff and the time constraint are as
follows:
Preparation of technical manuals
Employee training in operating procedures
Water treatment, waste water testing and reporting
Air quality tests and reports
System physical parameter reports
Safe start-up and shutdown procedures for the plant
Periodic maintenance
Emergency response procedures
Safety program, encompassing clearance and lock-out
procedures, hazard material handling, confined space entry and
fire safety.
Additional assistance will be required to develop a material
control program, establish a work order system, set up the Power
Plant warehouse, and establish a minimum and maximum level
requirement for spare parts and a procedure for drawing and
replacing spare parts from the warehouse..
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Issue I'
Should the City of Redding staff the RPP and IPT projects with City
employees or should the staffing be accomplished by contract with
a power plant contract operation company?
Alternatives and Implications
1 . The City can staff the power plant with City employees and
operate the plant with City employees. The implication is that the
Council believes that the savings available the City by the City I'
operating the plant outweigh the possible intangible benefits of N
contract operation of the plant.
2. The City can contract for the operation of the power plant and
the IPT projects. The implication is that the City Council
believes that it is worth the estimated $3 . 0 million extra expense
over a 5 year period to contract the operation of the power
projects.
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Conclusion and Recaammendation
The Electric Department and the Electric Utility Commission have
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City Council 3 June 10 , 1993
concluded that it is beneficial to the City to staff and operate
the RPP and the IPT projects with City staff. Therefore, the
Electric Department and the EUC recommend that the Council direct
staff to immediately begin preparation of job descriptions and
salary surveys and bring a staffing plan when developed to the City
Council for consideration as soon as possible so that recruitment
and training can begin in a timely manner. The Electric Department
further recommends that Council authorize staff to negotiate with
the responsive proposers to RFP 2667 for a contract to provide
start-up services for the Redding Power project and for the
assistance that staff believes will be necessary from a contractor
in order to achieve a timely start-up of the Redding Power Plant.
If Council concurs with these recommendations, staff requests that
Council adopt the attached Resolution which provides the authority
for staff to accomplish these recommendations.
FR\100
Attachments
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RESOLUTION NO. 93-
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A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF REDDING
TO PROCEED WITH THE STAFFING OF THE REDDING POWER PLANT
AND THE INDUSTRIAL POWER TECHNOLOGY PROJECTS WITH CITY {'
OF REDDING EMPLOYEES.
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WHEREAS, at its regular meeting on January 19 , 1993 , the
City Council directed staff to have a consultant prepare a
Request for Proposal (RFP) and a cost estimate for City operation
of the Redding Power Plant and the Industrial Power Technology j
( IPT) Projects ; and
WHEREAS, the RFP was prepared by Henwood Energy Services,
Inc. , and was issued by the City on April 30 , 1993 , as RFP No.
2667 ; and
WHEREAS, R. W. Beck and Associates was retained by the City
to review the four proposals received in response to said RFP, g
and to compare them to the cost estimate for City operation as
prepared by Henwood Energy Services , Inc. ; and
WHEREAS, the results of that comparison are contained in the 'I
Report of R. W. Beck and Associates and the Executive Summary h
which accompany the attached Report to City Council; and
WHEREAS, the results of the Report indicate that the least
cost of operation—a savings estimated at $3 . 0 million ( net d
present value) over a five-year period—would be for the City to
operate the projects with City staff; I'II
IT IS, THEREFORE, RESOLVED that the City Council of the City
of Redding hereby:
1 . Affirms that, based upon the Report of R. W. Beck and
Associates , it is beneficial for the City to staff and operate
the Redding Power Plant and the IPT Projects with City staff.
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2 . Directs staff to begin preparation of job descriptions
and salary surveys ; and to bring a staffing plan to. the City
Council for its consideration as soon as possible in order that
recruitment and training can begin in a timely manner.
3 . Authorizes staff to negotiate with the responsive
proposers to RFP No. 2667 for a contract to provide start-up
services for the Redding Power Project, and for the assistance of
a contractor that staff believes necessary in order to achieve a
timely start-up of the Redding Power Plant.
4. Authorizes the City Manager to execute the necessary
contract documents , upon approval of the City Attorney, on behalf
of the City Council.
I HEREBY CERTIFY that the foregoing Resolution was
introduced and read at a regular meeting of the City Council of
the City of Redding on the day of , 1993 , and was duly
adopted at said meeting by the following vote:
! AYES: COUNCIL MEMBERS:
NOES: COUNCIL MEMBERS:
ABSENT: COUNCIL MEMBERS:
ABSTAIN: COUNCIL MEMBERS:
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CARL ARNESS, Mayor
City of Redding
ATTEST:
CONNIE STROHMAYER, City Clerk
FORM APPROVED:
RANDALL A. HAYS, City Attorney
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RW
BECK
AND ASSOCIATES
Point West Gardens,Suite 223■ 1851 Heritage Lane■Sacramento,California 95815-4926■USA
PO Box 255468■Sacramento,California 95865.5468■USA
Telephone(916)929-3653■Fax(916)929-1710
WK-1400-AA3-AX June 10, 1993
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Mr. Frank Ryan
City of Redding
760 Park Avenue
Redding, CA 96001
Dear Mr. Ryan:
Subject: Executive Summary - Evaluation of Bids
for O&M Services for the RPP
In accordance with your request, R.W. Beck and Associates has summarized below
our evaluation of the bids for the O&M services on the Redding Power Project ("RPP").
• Based on a comparison of the evaluated and adjusted bids, the City's cost estimate
on a net present value basis is approximately $3,000,000 lower than the next
lowest bidder over the five year evaluation period used. There will be a savings
to the City to operate and maintain the RPP even if the City uses specialized
contract services as planned for and deemed appropriate.
In addition, we believe that the RFP which was issued and the bids which were
received each gave sufficient information to adequately scope and cost the O&M
services and result in competitive bids.
• We recommend the City continue to refine their cost estimate as well as the scope
of work or activities envisioned through the start-up period. This process may
identify areas of cost not currently being included prior to actual operation such as
the implied cost of self insurance directly applicable to the RPP and technical
engineering support services. However, we believe that future adjustments to the
City's cost estimate will not result in the lowest competitive bidder being less l
expensive than the City.
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• In the event the City decides to operate and maintain the RPP, we recommend
consideration be given to a "phased in" approach whereby the City hire an O&M
contractor on a consultant basis, to provide training and startup support. Again,
we believe that the additional costs incurred will not cause the City's cost estimate
to change position in the cost ranking based on the already significant savings
shown in the evaluation for the City to operate and maintain the RPP.
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Austin,TX■Boston.MA■Columbus,NE■Denver,CO■Indianapolis.IN■Irvine,CA t Minneapolis,MN
Nashville,TN■Orlando,FL■Phoenix.AZ■Sacramento,CA■San Jose,CA■Seattle.WA
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Mr. Frank Ryan -2- June 10, 1993
This Executive Summary is based on our letter report issued June 2, 1993, of which the
reader is referred to for more details.
Very truly yours,
R. W. BECK AND ASSOCIATES
Ken . Mellor
Partner and Sr. Director of Client Services
TAT:jm (D:ITEXTIB011400.003)
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R.W. BECK
AND ASSOCIATES
Point West Gardens,Suite 123■ 1851 Heritage �.
Line�Sacramento,California 95815-4926�USA
PO Box 255468■Sacramento,California 95865-5468■USA
Telephone(916)929.3653■Fax(916)929-1710
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WK-1400-AA3-AX June 2, 1993
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Mr. Frank Ryan
City of Redding
760 Parkview Avenue
Redding, CA 96001 r
SUBJECT: Evaluation of Bids for O & M Services for the RPP
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Dear Mr. Ryan: �I
R.W. Beck and Associates (R.W. Beck) was retained by the City of Redding (City) to evaluate
the bids received for furnishing Operation and Maintenance (O&M) services for the Redding
Power Plant (RPP). The scope of Beck's review was to:
• evaluate the responsiveness of the bids to the RFP datauests;
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• compare bidder scopes;
• discuss the bidder's experience and qualifications;
• compare bidder costs;
• identify exceptions in the bids and the impacts of those exceptions;
• identify options in the bids and discuss the benefits/disadvantages of those options; and
• identify key issues to be considered in future contract negotiations based on the bids I'
received. "
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The primary focus was on the comparison of bidder scopes and associated costs. However, the
other items, within the limitations of the budget and available data, were included because of the
benefits of this type of information to the City in evaluating the bids and in subsequent activities.
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Austin,TX is Boston.MA■Columbus.NE a Denver,CO■Indianapolis,IN■Irvine.CA■Minneapolis,MN
Nashville.TN■Orlando.FL■Phoenix.AZ is Sacramento.CA■San Jose,CA■Suttle.WA
This letter report provides a brief summary of R.W. Beck's evaluation of the bids consistent with
the above items.
Four bids were received and evaluated by R.W. Beck:
Bonneville Pacific Services Company, Inc. (Bonneville)
Delmarva Operating Services Company (DOSC)
JWP/University Technical Services Company (UTECH)
Operational Energy Corporation (OEC)
In addition, the City provided the cost estimate, developed for the City by Henwood Energy
Services, Inc., for City staff to provide the O&M services to the RPP. R.W. Beck included the
City's cost estimate in the comparison with the four bids to the extent possible with the
information provided in the City's cost estimate document.
The RPP will consist of two boilers feeding an extraction steam turbine, with a capacity of 30.5
MW being used in load following, and three combustion turbines, specifically GE Frame 5's,
generating a rated 26.7, 26.7, and 19.8 MW, respectively, to be used for peaking applications.
j Natural gas will be the primary fuel for the purposes of the bids, although wood and LPG may
be considered as alternative fuels for the boilers.
The O&M services requested are for 5 years, with an option to terminate services at 3 years.
Responsiveness to RFP Data Requests
The RFP requested specific information from the bidders on their background and approach to
provide the necessary O&M services. The more important data request items are portrayed in
Table 1. This table also references the location of the response in the bidders' documents, if
provided. The subsequent discussion highlights the responsiveness of each bid. Later discussion
addresses exceptions taken by bidders.
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Bonneville. Qualifications and experience were addressed although no specific individual
references were provided for their project experience. Approach and task descriptions for the
Pre-Operational Phase were provided. No specific discussion of their approach and tasks were
included for the Operational Phase and Emergency Services. The project organizational chart, i
and brief job descriptions were included. Specific on-site personnel were not designated. The
resumes for Company management and plant staff from other projects were provided.
DOSC. Qualifications and experience were addressed although no specific individual references
were provided for their proje^t experience. Technical approach and task descriptions were
presented. No specific discussions of emergency services were included. The project
organization discussion was provided on company management, without presentation of a project
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organization chart, job descriptions nor on-site staff designations. Various exceptions were
presented and are discussed in other sections of this letter report.
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UTECH. Qualifications and experience were addressed with some specific references. The
general approach and task descriptions were presented, althoughlimited in regard to routine
O&M activities. No specific discussions of emergency services were included. A project
organization chart and job descriptions were provided. No specific on-site plant staff were
designated. Resumes were provided for the company management. Price for the variable costs I!
and major inspections and overhauls were not firm quotes, but only estimates.
OEC. Qualifications and experience were addressed, with specific references. General approach it
and tasks were identified. No specific task discussions for equipment maintenance, routine �I
service, and purchasing of consumables were presented, although their presence is implied in the
presentation of costs. A project organization chart and staff job descriptions were included, and
the proposed RPP plant manager was identified. Other resumes for company management were
presented.
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Comparison of Bidder's Scones
Table 1 also portrays the referenced discussion, if available, from each bidder for each of the
RFP-specified scope of work tasks. The following discussion provides a summary of the
pertinent scope as contained in the bids, including approach, tasks, exceptions and extras. R.W.
Beck also reviewed the bid cost sections to assist in understanding bidder scopes.
The RFP describes the primary duties and responsibilities of the contractor, and provides the
following task categories as part of proposed contractor scope:
Staffing
Pre-Operational
Routine O&M
Emergency Services
Purchasing
Records and Reporting
Bonneville. Staffing and Pre-Operational services discussions are generally consistent with the
staff needs of the City as specified in the RFP. Bonneville proposed two-person shifts and a total
on-site staff of 18. No discussion of Routine O&M, Emergency Services, Purchasing or Records
and Reporting is provided. However, job descriptions and cost line items include these general
O&M activities. Routine maintenance costs are limited to repair and not replacement of major
hardware.
DOSC. Staffing and Pre-Operational services discussions are generally consistent with the needs
of the City as specified in the RFP. They proposed twelve hour shifts with a total of 22 on-site
plant staff. Use of an existing RPP Maintenance Management System is also proposed. Several
important exceptions are noted in the otherwise generally consistent Routine O&M scope:
Deviation from manufacturers inspection/maintenance schedule, and fewer reports. The only
specific discussion of Emergency Services is reflected in the cost exceptions, noted to limit
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contractor costs to less than $10,000, instead of the RFP request of less than $25,000.
Purchasing is not directly addressed although reflected in costs, with clarification exceptions for
certain tools. Records and Reporting is included, although with exceptions noted for fewer
numbers of reports than requested in the RFP.
UTECH. An on-site staffing of 15 is proposed, two fewer than requested in the RFP. Otherwise i.
staffing discussion is generally consistent with the RFP requests. Pre-Operational services are
generally cons-,, 1with the RFP. Discussion of the scope for the Routine O&M is very general
without speciuic -; -identified nor discussed, thus making it difficult to understand if their
scope is consistent. The cost estimates and the job descriptions did imply some of the specific
tasks to be performed in the proposed service contract. Design review support is included in the
bid. Emergency Services and Purchasing scope is discussed and is generally consistent with the
RFP request. Records and Reporting tasks are acknowledged,although not specific to the reports
listed in the RFP.
OEC. Staffing and Pre-Operational services discussions are generally consistent with the needs
of the City as specified in the RFP. Staff job descriptions provide general responsibilities and
skills. They prcnosed twelve hour shifts with a total on-site plant staff of 17. The discussion
of Routine O&M addresses implementation of operational programs, with only general
presentation of tasks. No specific discussion of Emergency Services is made. Likewise, no'
specific discussion of Purchasing is made; however suggestive cost line items are provided in the
bid. Records and Reporting activities are generally consistent with the RFP requests.
Oualifications and Experience !,
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Bonneville. Bonneville operates or manages 23 facilities. Of these, the following combustion
turbine/steam turbine facility O & M services are identified:
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Facility Fuel Can MW Equipment
Watsonville Gas 305 22.5 MW LM 2500, 8 MW Shin Nippon STG
Santa Maria Gas 9 9 MW Solar Mars Cr. Struthers WHRSG
American Atlas Gas 80 3-Frame 5 CT, Vogt HRSG,35 MW GE STG
Black Mountain Gas 85 3-LM2500, 3 Coen Fired Zuni HRSG,30 MW GE STG
Garnet Valley Gas 85 3-225 MW LM2500, 3-Coen Fired Zurn HRSG, 30 MW GE STG
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i Performance of the American Atlas Santa Maria, and Watsonville Cogeneration Facilities have
averaged better than a 95% on peak availability factor. Their staffing at these facilities is
comparable to the proposed staff for the RPP.
Two of the cogeneration facilities are operated within California by Bonneville and have exposed
Bonneville to the local and state regulatory agency requirements in Central and Southern
California. While permit compliance problems have arisen at the Santa Maria Facility, we
understand Bonneville has been able to manage these problems effectively. This exposure to
local compliance needs could enhance the O&M of the RPP in the event that similar facility
operating problems occur. Based on Bonneville's prior applicable experience, we view them
capable of performing to the O&M contract services, however they lack direct O&M exposure
to wood fuel handling systems in the event wood fuel is used in the RPP.
DOSC. Delmarva Operating Services Company y (DOSC) is a wholly owned subsidiary of
Delmarva Power and Light (DP&L) and was formed in 1987. DOSC's qualifications and
experience, either directly through DOSC or indirectly through DP&L, includes:
Facility Fuel Cap MW Equipment - O & M
RPP Wood 30 30 MWGE STG/B&W boiler(DOSC)
Burney Wood 24 24 MW STG/Boiler(DOSC)
Madison St Gas 11 11 MW GE Frame 5 CTG,(DP&L) Peaking Service
P -W Gas 102 Six 17MW CT's, Peaking Service(DP&L)
Christiana Gas 36 MW Two GE Fram 5 CTG, (DP&L)Peaking Service
STAR Cogen Coke 131 MW Three Boilers,One STG(DOSC/DP&L)Topping Cycle
R.W. Beck is not aware of Delmarva's prior performance record on the RPP, however, they state
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on-peak availability was 98%. DOSC's other California project, the Burney Forest Products
Power Plant has achieved high availabilities in the past. DOSC's indirect experience through
DP&L includes two Frame 5 CT facilities in peaking service similar to the RPP. Delmarva states
that personnel from DOS are from DP&L who are specifically selected for their experience and
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capabilities.
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Based on the above ties within DP&L,DOSC appears to be capable of operating and maintaining
the RPP contractual obligations if selected.
LTTECH. UTECH's O&M experience includes the following:
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Facility Fuel Cap MW Equipment - O & M
Santa Fe Energy Gas/ 9 Solar Mars, Struthers WHRSG
EOR Gas
Bent' Petroleum Gas 37 GE Frame 6 CT, Deltak HRSG, Savis Duct Butner
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Rhor Gas 9 No data available
Panda Gas 200 No data available
Megan Racine Gas 50 GE LM 5000 Wtr/Stag C'8 mw Elliot ST, Deltak HRSG
Operation of these five facilities spans three states of which the Santa Fe Energy and Barry I,
Petroleum sites are located in California and hence, have exposed them to state and local
regulatory requirements. UTECH identifies the Project availability factors, for each of the sites
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in which they are the O & M contractor, as better than 95%. No data is given if these factors
are on-peak, annual, etc. UTECH's operating experience does not include projects with
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conventional boiler technology which would burn wood waste, gas, or other. While they lack
such direct experience with conventional boiler technology and equipment, they have sufficient
exposure to gas and steam turbine equipment. Their proposed staff level of 15 would indicate
possibly that they are not anticipating problems.
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OEC. OEC operates four facilities, most of which are biomass. OEC facilities include the
following:
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Facility Fuel Can MW O&M Equipment
Martell Wood 18 Zuni Boiler,Turbodyne 20 MW ST
Wadham Straw 28 Zum Boiler,ABB 30 MW VAX ST
Honey Lake Wood 30 Zum Boiler,GE 35 MW ST
Pedricktown Gas/Oil 117 Frame 7 STIG Cr,Zum HRSG&Aux Boiler,GE 40 MW ST.
Availability of the facilities are listed from year of startup and can be found in Section 1 of the
bid, in the description of the facilities. Operating availabilities of these facilities have,in general,
been greater than 92% in the last most recent years and indicates OEC has managed the
development of difficult biomass fuel technologies. Their one identified gas fired combined cycle
cogeneration project has achieved utility availabilities more near the average of 86% within the
utility industry. Based on the above information, we believe OEC has established experience
with topping cycle technologies and should be capable of performing to the requirements of the
O&M contract should they be selected.
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Redding. R. W. Beck did not review the qualifications of City Staff for providing O&M
services.
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We note that R.W. Beck did not specifically investigate the financial backgrounds of any of the
bidders, and therefore cannot offer an opinion on their financial viability to enter into a contract
with the City.
Comparison of Bidder Costs
Cost for each of the four bids and the City's estimate are summarized in Table 2. The following
discussion addresses the comparison of the proposed costs by each major category: Pre-
Operational, Annual Fixed, Annual Variable, Major Inspection and Rebuilds, and Administrative
Costs. Adjustments made to the bids, based on R.W. Beck's evaluation of bidder scopes are also
shown; these adjusted costs are only for comparison purposes and are not binding on any parties.
The following discusses each specific price category:
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Pre-Operational Costs. Bids and the City's estimate ranged for $594,981 to $951,153. The
highest bid was Bonneville, a primary consequence of heavier labor loading earlier in the
schedule, higher costs for operations and training manuals, and higher consumables for tools and
office equipment. DOSC and UTECH are slightly less, with lower labor costs than Bonneville,
but with higher cost in staffing relocation (DOSC) or miscellaneous and additional costs (DOSC �I
and UTECH). The higher cost in the latter category reflects management fees not included in
other bids. OEC has the lowest bid. OEC does not appear to include facility consumables
(chemicals and materials) during the Pre-Operational period. This has been adjusted based on
R.W. Beck exrerience, assuming $50,000. The City's estimate is lower than all of the bids, a
result of lower estimated labor costs but with some offset by higher O & M manual and plan
development costs. In all bids, tools and other equipment expenses were adjusted to fit into the
miscellaneous and additional costs line items, for consistency. In the four bids, training costs
appear to be included in staff costs or miscellaneous and additional costs, but were adjusted into
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the miscellaneous and additional cost line item for consistency.
Annual Fixed Costs. Bids and the City's estimate ranged from $879,891 to $2,469,720. DOSC r
and Bonnevilic. :~ >l the highest annual cost bids. DOSC had significantly more staff(22 versus
typical 17 or 18), a higher management fee and higher insurance costs. DOSC also took
exception to some items in the RFP bid which would likely increase their price if included in the
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bid (e.g. septate maintenance and telephone lines). Bonneville's high bid cost resulted from
higher labor (significant overtime assumed and slightly higher labor rates), higher insurance,
higher contractor services, and higher training costs. UTECH and OEC are significantly.lower,
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each with lower labor and insurance costs in their bids. UTECH costs were adjusted upwards
to reflect 17 staff, based on adding one maintenance person and one utility staff. The adjustment
basis is that using 17 staff is the minimum level of staff to operate the facility, as well as the
minimum requested in the RFP. Based on R.W. Beck's experience we would support a minimum
level of 17 staff for the RPP as described to us. The City's annual fixed cost estimate again is
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lower than the bids, reflecting lower labor costs and no management fee. Insurance costs of
$80,000 were added to the City's estimate for operation of the RPP, based on information
received from the City. Contract services to provide technical support is shown in the back-up
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of the City's estimate, as warranted to assist the City in their O&M services given the City's
limited power plant experience. A contractor has a pool of resources available, whereas the City
would probably not readily have the specialty skills to handle emergency situations. At this time
no adjustments were made, even though the estimated level of contract services appears low.
Annual Variable Costs. Variable costs ranged from $294,914 to $1,307,000, with associated
cost per equivalent operating hour (EOH) ranging from $14.86/EOH to $50.00/EOH for the
combustion turbines and$9.40/EOH to$95.20/EOH for the steam turbine and boiler. DOSC was
the highest, however, little information is provided to evaluate how this number was developed.
Also, DOSC made exception to items which would likely increase the price if included in the bid
(e.g., Emergency Services limit of $10,000 versus $25,000). Bonneville was a close second
highest in cost, again with little breakdown for further evaluation. It is not clear if consumable
costs include SCR chemicals in the Bonneville and DOSC bids; no adjustments were made for
the purposes of this review due to the small overall comparative impact. UTECH and OEC were
significantly lower than the DOSC and Bonneville bids. UTECH did not bid their cost as a firm
price, but as an estimate of costs. The City's estimate is lower than the four bids. There is no
obvious reason that the City's cost would be lower than a contractors cost for these cost
categories, other than the City has indicated that water consumption as a result of STIG of the
combustion turbines was not provided for in the $/EOH figure. We have estimated this
additional cost to be $4/EOH.
Based on data and information which R.W. Beck has available, a comparison of the variable
costs can be made for similar facilities within the United States.
Our data indicates that for similar facilities up to 100 MW's which use steam/water injected
simple cycle gas turbines and conventional dual fuel fired boiler/steam turbine equipment,
variable costs of operating and maintaining (exclusive of major inspections/rebuilds) the various
facilities from $2.47 to $4.26 per KWH, with an average being $3.00/KWH.
The data assumed nonfuel costs exclusive of fixed charges, such as, fixed administrative fees,
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labor, insurance, taxes, capital purchases, etc. For the purpose of analysis and based on
presentation of the data available, it is difficult to separately identify what variable costs are
associated with the steam turbine and what costs are associated with the gas turbine. Therefore,
R.W. Beck compared the total annual variable cost exclusive of the major inspections/rebuilds
(see below) in the bids to the above identified range of costs. Based on the assumption that the
RPP will operate the STG approximately 152,500 MWH (5,000 operating hours) and the CI'G's
approximately 260,000 MWH's (10,000 operating hours) per year for a total of 412,500
MWF/year generation, the equivalent variable costs are:
$/KWH
Redding* .81
Delmarva 3.16
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UTECH 1.05
OEC 1.07
Bonneville 2.91
*As adjusted to account for STIG water consumption.
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Each bid is on the low end of the range, with Delmarva's and Bonneville's being most near the
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average.
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Many factors can contribute to this low end estimate of variable costs, the primary of which is
an accurate estimate of product consumption and market pricing for consumables such as water,
lube oils, gaskets, chemicals, etc. We are assuming in the analysis that sufficient data was
available to accurately quantify such and that no adjustment is made up or down to the bids with
the exception of the adjustment to the City estimate for the consumptive use of water and
demineralization for STIG, as previously identified. In addition, several of the bidders also chose
to allocate some consumables (variable costs) used in major inspections/rebuild to the major
inspections/rebuilds line item. See discussion below.
Major Inspections and Rebuilds. Bids and the City's estimate ranged from $522,680 to
$918,000,in 1994 dollars. UTECH had the higher cost, with the largest differences in the 48,000
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hour inspection/overhaul ($449,000 versus $300,000 and$197,400) and the steam turbine/boiler
($320,000 versus $300,000 and $225,000. UTECH also took exception to the lump sum bid
price, noting that their submittal is only an estimate, not a firm bid. DOSC had the second
highest bid, with a relatively higher price for the steam turbine overhaul ($300,000) and the
48000 inspection/overhaul ($300,000). OEC was the third highest bid,reflecting a higher 48000
hour inspection/overhaul cost ($300,000). The City's estimate was lower than the bids, with a
notably lower cost for the steam turbine rebuild. An adjustment of $90,000 was made to the
City's cost based on our understanding of minimum steam turbine rebuild costs. There is no
obvious reason why the City's cost for rebuild will be lower than with an O&M contractor,
assuming the City will have to also subcontract out work for special skills needed for the
rebuilds.
Again, for comparison purposes, R.W. Beck's database on other similar facilities within the U.S.
indicates that these costs range between $1.46 to $8.26 per KWH for major inspections and
! rebuilds.
Based on 412,500 MWF/year total generation, the bid costs for this category are: ,
Bidder $LKWH
Redding 1.26
Delmarva 1.85
UTECH 2.23
OEC 1.66
Bonneville 1.47
Again, each bidder is on the low end with UTECH's being most near the average. Based on a
review of the limited data available and our knowledge of steam turbine rebuild/major overhauls
every five years, we believe that the City of Redding's estimate for parts on the steam turbine
5 year rebuild is low. We would expect the costs for parts to be on the order of$100,000 verses
the $10,000 indicated in the City's estimate. We have also assumed that a value of$100,000 is
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sufficient to repair/rebuild the boiler and related components at the same time. To adjust the
Redding Steam turbine overhaul account by +$90,000 will result in an equivalent major
inspection/rebuild cost of $1.48/KWH, very near that of the other bidders.
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It is important to compare the "all in" variable costs with that of other similar projects with
which R.W. Beck is familiar. Therefore, category 3 and 4 were combined and result in the "all f
in" variable costs as follows:
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Total Variable Cost
Bid $/KWH
Redding * 2.30
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Delmarva 5.02 II
UTECH 3.28
OEC 2.78 i.
Bonneville 4.38
Industry Average: 6.01
*as adjusted
While these variable costs are in the low end of the range of$2.93 to $12.52 per KWH, we see
no reason at this time to further adjust them other than for reasons previously identified.
Administrative Fees. Fees for the mark-up of reimbursable goods ranged from 0 to 15 percent.
Bonneville and DOSC presented a 15 percent fee. OEC presented 7 percent. UTECH waived
a fee for the purchase of reimbursable goods. The City would not have a mark-up.
Summary of Proposed Costs. DOSC has the highest bid price, at $5,440,943, without
adjustments for exceptions noted in their bid which would likely increase their bid price if those
exceptions were included. Bonneville is second highest, at$5,237,494. UTECH is third highest,
at $3,890,000, noting that the Annual Variable Cost and Major Inspection and Rebuild Costs are
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only estimates. OEC is the lowest bid of the four bids received by the City, at $3,251,417 from
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which to evaluate against the City's estimate. The City's total estimate was $2,292,466,
excluding adjustments. When adjusted, the City's estimate is $2,422,446.
Also note that the cost escalation factors ranged from 3.5 percent to 5 percent between the
bidders, and on a fixed cost contract will lead to different fixed costs in the later four years. This
can be a negodated item with a final bidder.
Identification of Exceptions
Several bidders noted exceptions to RFP items. The following discussion highlights the pertinent
exceptions, and provides a brief comment on the impact of the exception. Further technical
evaluation may be warranted if further interest is being pursued. No legal interpretation is being
made by R.W. Beck as part of this evaluation.
Bonneville. The designation of on-site staffing was excepted,pending award decision. This does
not have an impact on cost or scope, assuming eventual staff would be technically capable
consistent with other power plant operations. Bonneville also requests changes in the hold
harmless clause, which would require legal evaluation.
DOSC. Exception was noted that DOSC would not guarantee the availability levels as presented
in the RFP. An alternative availability guarantee was noted. Note that DOSC was the only
bidder to discuss availability guarantee of the RPP. The RFP did not specifically tie availability
targets to contractor performance. Other notable exceptions are:
Septate maintenance - Likely impact, if included in bid, is higher bid cost.
Removal of Employees - Possible difficulties to control/direct corrective actions
if problems occur in operation and maintenance of RPP.
Emergency Services limited to $10,000 - Likely impact, if this condition is
included in the bid, is higher bid cost.
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Termination only for material breach - Needs legal assessment.
Deviation from Manufacturers Recommendations - May cause question of
responsibility if problem occurs in operation/performance of RPP. Likely
impact, if included in bid, is higher bid cost.
Designation of personnel- no impact assuming eventual staff would be technically
capable.
No water injection for NOX control - DOSC stated that additional costs would be !'
incurred if water injection is used. If included, this would likely result in
a higher bid price.
Reciprocal Hold harmless clause from City - Needs legal assessment.
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Waste water disposal in ponds - The management of waste water is the
responsibility of operator, and scope should cover this responsibility. This
exception could increase bid cost if reinstated into scope.
Fewer Reports - If include in scope, would likely increase bid price.
Large tools provided by City - Would need clarification, but could increase bid
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price if inconsistent with available tools and intent of City.
Telephone Lines on Site - If included in scope, would likely increase bid price.
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These exceptions would likely increase a bid price if included in the bid. f
UTECH. Pre-Operational consumables, Variable costs and Major Inspection and Rebuild costs j
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were provided only as estimates, not firm quotes. Impact would possibly lead to higher bid price
if requested firm quotes are provided.
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OEC. OEC took exception to the unlimited cost liability for O&M Contractor-induced(i.e., fault
or negligence) Emergency Services. If provided, this could result in a higher bid price by OEC.
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Identification of Oations
Several of the contractors provided alternative approaches to the contract. These are listed below
with a brief discussion of the benefit and disadvantages of each, in no particular order. For
reference, the bid that addressed the option is contained in parentheses.
Performance Incentives (OEC, DOSC). Incentive and penalty clauses could be part of the
contract for performance to availability targets. This provides financial incentives and can be
used to reduce the risk to the contractor while reducing the cost of the contract to the City. We
recommend this be considered in the O&M contract. This is a typical bonus/penalty arrangement
within the IPP/cogeneration industry.
Initial Stock/Tools Purchased on Cost Reimbursable Basis (OEC). Purchase of materials
would not duplicate those already available at site, and retain after termination. Need to clarify
as this may be already included in contract philosophy, but may be reflected in differences in bid
prices depending on assumptions of the different bidders.
Cost plus fixed Fee (Bonneville, UTECH). With projects that have a significant uncertainty
associated with the ability of the contractor to perform, the contractor adds costs into the bid to
minimize the cost risk with that project. This results in higher bids, thus the potential benefit is
reduced bid costs. The disadvantage is that the contractor loses his incentives to reduce costs.
This can be mitigated to some degree with an incentive/penalty on the fee, although defining the
measurement of that incentive/penalty can become challenging. Would need to clarify issues and
terms with your legal department.
Start-up Support beyond On-site Staff (DOSC, UTECH). The benefit is the familiarity
between on-site staff and start-up staff, resulting in potential for smoother communications and,
thus, smoother start-up. Would require clarification of current EPC contractor responsibilities
for further evaluation.
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Performance Testing (DOSC). Routine 'special' testing of equipment and system performance
over time provides proactive data base for minimizing downstream problems. Need to clarify
as this may already be intended as part of testing in the routine O&M services, but may be
reflected in differences in bid prices which depends on the assumptions of the different bidders.
O&M Services Transfer to City (UTECH). The City staff would be trained as part of the
O&M services z -,_� ract to enable the City staff to operate the RPP. Depending on skills of City
staff, support contract may be necessary to ensure long term operation of facility. Would need
to define plan and barriers, such a duplicate staff or &.e transfer of staff from contractor to city
employment status. If the City chooses to do all of the O&M themselves, we strongly
recommend some form of training/turnover be contracted for to "phase in" operating and
maintenance knowledge. To do this may, however, cause the City to lose their price advantage
against the bids.
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Key Issues for Contracting
Several issues should be resolved prior to the final contract is signed. Obviously the evaluation
of the exceptions and options noted above are primary. Of special note are:
It is paramount that the definition of responsibility for the O&M staff during start
up be further defined.
Since there is consideration of future operations being performed by the City staff,
the timing and planning of such needs to be considered at the time of contracting
with the near-term O&M contractor to maximize the benefits to the City.
Although not discussed in the RFP and associated bids, clarification of the use of
wood in the boilers and impact on performance might need to be addressed in the
O&M contract.
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The burden of resolving EPC Contractor punch list actions could impact the O&M
contractor. Approaches to compensate the O&M contractor for extra activity due
to punch list items beyond normal O&M activities should be developed.
Conditions of liquidated damages need to be defined and related to specific
performance measurements,based on our understanding that the liquidated damage
clause was deleted from the RFP by the City. Specific availability targets are one
form of performance measurements. This could possibly also tie to performance
incentives.
Summary
The scope of work task descriptions were generally missing or vague in all of the proposals,
leaving the reader to infer, based on job descriptions, cost back-up data, example documents,
and/or exceptions, the specific tasks that would be performed. However, it appears that all of
the bidders have scopes which are consistent with the needs of the City, barring specific
exceptions which would have to be negotiated. Those exceptions could have cost implications.
The specific tasks should be defined as pan of the contract with the selected bidder, especially
with start-up support, emergency services, equipment maintenance and reports.
Summarizing the costs, the evaluated bid costs are as follows:
As bid Evaluated NPV
Proposer Cost Cost* Cost (& 3.5%
Redding $2,292,466 $2,507,466 $6,781,260
DOSC 5,440,943 5,440,943 20,437,281
UTECH 3,890,000 3,998,400 12,025,218
OEC 3,251,417 3,301,417 10,788,611
Bonneville 5,237,494 5,237,494 19,327,711
* adjustments included as indicated
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The City of Redding estimate (as adjusted) is $793,951 lower than the next lowest
bidder.
Based on the information presented in the proposals, sufficient information on scope and/or
exceptions are contained within each bid to result in competitive bids. However, UTECH did
not bid based on the minimum level of staff and DOSC took many exceptions to the scope.
Based on qualifications and experience DOSC, OEC, and Bonneville have adequate experience
with the various technologies and are capable of performing to the obligations of the Project.
While UTECH has adequate combustion turbine qualifications and experience, we believe their
dual fuel conventional boiler knowledge/experience is lacking. This is not to say they are not
capable of performing to the obligations, we merely believe this should be considered in the
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analysis.
We recommend the City of Redding proceed as follows:
0 Determine if the City is capable of operating and maintaining the RPP at the
estimated price. A further review could identify areas of cost being missed prior
to actual operation.
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• On a parallel path, clarify and discuss the cost, scope, and exceptions of the
lowest bidder. To the extent that new cost items emerge with the low bidder that
increases the bid to higher than the second lowest bidder, the second lowest bidder
should be invited to clarify his bid.
• In the event the City decides to operate and maintain the RPP, we recommend
consideration be given to a "phased in" approach whereby the City hire an O&M
contractor for an interim period or hire on a subconsultancy basis to provide
training and/or turnover assistance. If requested, we can discuss various options
based on what has been previously done for other projects.
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R.W. Beck can be of additional assistance to the City of Redding through providing further
review, contracting assistance, start-up/coordination, and contractual third party performance test
witness support.
This letter report completes the summary evaluation of the bid responses to the City of Redding
for O&M services for the RPP. Please feel free to contact the undersigned or Mr. Tom Tinucci
should there be any questions or additional support we can provide the City in developing the
RPP. We have enjoyed providing consulting services to the City and look forward to our next
opportunity to work with City staff.
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Very truly yours,
R. W. BECK AND ASSOCIATES
Phipps
Supervising Engineer
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