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HomeMy WebLinkAbout5I AMRS Contract Amendment Report Phone 952.447.9800 / Fax 952.447.4245 / www.cityofpriorlake.com 4646 Dakota Street SE Prior Lake, MN 55372 CITY COUNCIL AGENDA REPORT MEETING DATE: DECEMBER 3, 2018 AGENDA #: 5I PREPARED BY: JASON WEDEL, PUBLIC WORKS DIRECTOR/CITY ENGINEER PRESENTED BY: JASON WEDEL AGENDA ITEM: CONSIDER APPROVAL OF A RESOLUTION AUTHORIZING THE MAYOR AND CITY MANAGER TO AMEND THE CITY’S STANDARDIZED CONSTRUCTION CONSTRACT FOR THE 2018 AMRS REPLACEMENT PROJECT DISCUSSION: Introduction The City’s existing Automatic Meter Reading System (AMRS) was installed in 2002. The life expectancy of the Meter Transmitter Units (MTU’s) within that system is 20 years. The City is experiencing many of these MTU permanent batteries already expiring, which is making the collection of data for water billing purposes difficult. It was therefore necessary to move forward with a full city-wide replacement. The City included funds in the 2018 budget for this work. City staff sent out Requests for Proposals (RFP’s) to three different vendors that provide these types of improvements. The City Council selected Ferguson as the preferred vendor at the May 7, 2018 City Council meeting and directed staff to negotiate with Ferguson on the final contract amount and bring the contract back for consideration of approval and authorization to proceed with the work at a future meeting. The final contract was approved by the City Council on June 4, 2018. The work began on the project this fall and it has since been discovered that there were errors in the original proposal submitted by Ferguson. It is therefore necessary to revisit the contract and consider an amendment. History The City of Prior Lake’s water meter MTU’s are reaching the end of their useful lives. In 2002 the City installed an AMRS system consisting of MTU’s, and centralized data collecting units (DCU’s). Readings collected by the meter registers are transmitted to the central database once per day through a fixed radio system. The current AMRS collects meter reading data multiple times every day. However, there are meters that are not currently detected. The City has 14 DCUs spread throughout the City that read the signals coming from the MTU’s at each billing address. Unfortunately, some read locations remain undetectable to our DCUs. The options for picking up these locations is adding more DCUs or having an alternative method for obtaining readings from those locations such as a drive- by detection unit. With the increasing number of existing MTUs failing every day it was necessary to initiate the replacement this year. Delaying the replacement would have put the City in a position where we could not keep up with daily MTU replacements, which results in meters that go unread requiring Utility Billing to make estimates on the amount of water used by those accounts. The City received three proposals. The proposers included the City’s current provider Aclara as well as Winwater and Ferguson. The City Council selected Ferguson based on several factors including overall cost for MTU and water meter replacement, the company being local, and they were the only provider that offered a drive-by option for meter reading. The total proposed cost for both MTU and water meter replacement was originally presented to the City Council as follows: Ferguson $2,079,079.22 Aclara $2,834,885.00 Winwater $2,699,520.38 The City’s budget for the AMRS project in the CIP was $1,700,000 and was established solely for MTU replacement. However, it was decided later to include replacement of water meters at the same time as the MTUs for several reasons. 1.) Replacing the older water meters will result in more accurate water meter readings which will provide more revenue to the City due to older meters under reporting water usage. 2.) Replacing the water meters now will allow the City to only inconvenience our residents once rather than coming back in five years to replace the water meters. 3.) City staff will have one consistent water meter system throughout the City. It will therefore be much more efficient to maintain, because we will only have to stock one model of parts and we only need to train our staff on how to service one type of product. 4.) It is more cost effective to replace the MTUs and the water meters at the same time. The City Council directed staff to work with Ferguson to negotiate a final contract amount that was closer to the allocated funding. Staff subsequently worked with Ferguson to reduce the number of DCUs which resulted in a revised proposal cost of $1,476,324.07. The City Council approved a contract in this amount at the June 4, 2018 City Council meeting. Current Circumstances The project has subsequently begun, and we have discovered a mistake in the proposal and contract relating to the meter replacement program. The mistake is a result of Ferguson improperly completing the proposal form. The City requested prices for 26 different items, but items 1, 2 and 3 were to be alternates: 1) MTU’s, registers and meters 2) MTU’s and registers 3) MTU’s only This would allow the City to select all or just part of a new meter reading system. The City’s intent was that the City would select item 1 or 2 or 3 where item 1 would be the entire system, item 2 part of the system, or item 3 just the MTU’s. Depending on the prices, the City would select 1, 2 or 3, thereby rejecting the other two options. However, Ferguson read the three alternates as three separate parts of the system to be provided. Ferguson understood that the City could select 1, 2 or 3 but believed that the City could select more than one (i.e. 1 and 2 or 1, 2 and 3). Whichever items the City selected would be added up for the total price. Ferguson provided the pricing for the meters and registers as item 1 and the MTU’s as item 3. As a result of the mistake, the City believed the cost for the meters, registers and MTU’s was $633,164.95 while Ferguson was actually proposing that the meters and registers would cost $633,164.95 and the MTUs would cost an additional $662,494.82. ISSUES: The error was on Ferguson’s part. The proposal form did state what pricing should be included in items 1, 2 and 3. The other two proposers completed the proposal properly. In addition, the proposal form states: “Should Proposer fail to identify all items, Proposer shall be responsible for all associated costs after a determination of award has been made.” However, the City could have been clearer that item 1 was the entire system as opposed to items 1, 2 and 3 each being a part of the system. In addition, the City could have noticed the error and addressed this issue when the proposals were reviewed. At this point, City staff is hoping to reach a mutually agreeable solution with Ferguson for several reasons: 1.) The proposal still would have been the low proposal had it been completed accurately. 2.) Staff still would have recommended proceeding with the full project at the higher proposal price. 3.) The City has been very pleased with Ferguson regarding working with staff and residents, especially compared to the prior contractor whose customer service was poor. If we do not reach a mutually agreeable solution, Ferguson could walk away or we could end up in court. If we end up in court, we don’t have a guaranteed victory and we could harm an important long-term relationship. Although the error was Ferguson’s and our language makes clear any error is at Ferguson’s cost, the court may find that Ferguson’s error was reasonable and/or that the City is receiving a benefit and thus should pay the cost of the benefit received regardless of our understanding. Staff recommended that the City Council include the water meter replacement alternative along with the MTU replacement. There is an additional cost for doing this; however, there are several benefits for doing both at the same time as described earlier. FINANCIAL IMPACT: To show good faith, Ferguson has offered to eliminate a portion of their professional services costs which results in a discount of $50,250. They have also conceded their share (50%) of the brass recycling revenue from recycling the old water meters which increases the City’s revenue by $10,000. We discussed pushing for more of a discount but reconsidered. Ferguson already lost approximately $70,000 due to a sales tax issue which Ferguson is covering. The City is exempt from paying sales tax for goods and services that are inputs used to provide government services. Ferguson thought they had this covered but discovered after they entered into the contract with the City that their process for completing the installations made them ineligible for the exemption. Based on the combination of all these items it means that Ferguson’s profit has likely already been reduced to zero. We are also hoping to find some additional savings in placing DCU’s on the water towers. This had not been done with the old system. Hopefully having the DCU’s at a greater height will allow the City to install fewer DCU’s which could result in additional savings. Initial results have been promising and once additional water meters have been installed throughout the City we will have a better understanding of how many DCU’s will be needed. The total cost associated with installing all 13 DCU’s is $126,176.57. Elimination of any DCU’s will help reduce this cost. The proposed contract amount based on these changes would be $2,230,590.79. The next lowest proposal was from Winwater which was $2,699,520.38 and included 13 DCU’s as well. The revised Ferguson contract would be $468,929.59 below that proposal. The City’s budget in the CIP for replacement of the MTU’s is $1,700,000. Earlier this year the City sold bonds to cover the cost of this project. The costs included in the bond sale for the AMRS project was based on the original contract amount of approximately $1,500,000. The revised contract which includes replacement of the water meters as well as the MTU’s would be $730,590.79 over what was included in the bond sale. When the City first presented this project to the Council on May 7, 2018, one of the advantages of replacing the water meters was more accurate meter readings. The City has a significant number of meters that are old and no longer read accurately. We estimate that this costs the City $177,165 per year in under reported water usage. The added cost of Including the water meter replacement with this project will pay for itself fully, just based on accurate reporting, in a little over 4 years. The City will also have ongoing annual savings due to the current annual budget including $190,000 for water meter purchases. Once this work is completed that annual expense will be reduced to $120,000 per year, resulting in a savings of $70,000 per year. This brings the pay back period to 3 years. The funding for the additional project cost is proposed to come from the water enterprise fund. This fund is currently capable of covering the additional cost. ALTERNATIVES: 1. Motion and second as part of the consent agenda a resolution authorizing the Mayor and City Manager to execute an amendment to the City’s Standardized Construction Contract for the 2018 AMRS Replacement Project. 2. Motion and second removing this item from the consent agenda for additional discussion. RECOMMENDED MOTION: Alternative #1 4646 Dakota Street SE Prior Lake, MN 55372 RESOLUTION 18-xxx A RESOLUTION AMENDING THE CITY’S STANDARD CONSTRUCTION CONTRACT FOR THE 2018 AMRS REPLACEMENT PROJECT (WTR17-000004) Motion By: Second By: WHEREAS, The replacement of the City’s AMRS was identified in the 2018 Capital Improvement Program; and WHEREAS, Proposals were received, opened, and tabulated according to law; and WHEREAS, Proposals were received from three vendors: Ferguson, Aclara, and Winwater; and WHEREAS, Ferguson was determined to be the lowest responsible vendor for replacement of both the MTUs and the water meters; and WHEREAS, WHEREAS, The City directed staff to renegotiate costs with Ferguson and the revised proposal amount was $1,476,324.07 for both MTU and water meter replacement. It was determined that the proposal form was incorrectly submitted by Ferguson and the actual contract amount for both the MTU and water replacement is $2,230,590.79, which is still below the proposals received from the other vendors. NOW THEREFORE, BE IT HEREBY RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, MINNESOTA as follows: 1. The recitals set forth above are incorporated herein. 2. Ferguson is the lowest responsible vendor. 3. The Mayor and the City Manager are authorized to amend the City’s Standardized Construction Contract with Ferguson for an amount of $2,230,590.79. 4. Funding for this work will be from Acc ounts 601-49400.00-55530.00 and the 2019 budget will be amended to reflect this contract change . PASSED AND ADOPTED THIS 3rd DAY OF DECEMBER 2018. VOTE Briggs McGuire Thompson Braid Burkart Aye ☐ ☐ ☐ ☐ ☐ Nay ☐ ☐ ☐ ☐ ☐ Abstain ☐ ☐ ☐ ☐ ☐ Absent ☐ ☐ ☐ ☐ ☐ ______________________________ Frank Boyles, City Manager