Governance
Committee for the Monterey Peninsula Water Supply Project |
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California American Water Monterey County Board of Supervisors Monterey Peninsula Regional
Water Authority Monterey Peninsula Water Management District EXHIBIT 1-A |
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DRAFT
MINUTES Special
Meeting Governance
Committee for
the Monterey
Peninsula Water Supply Project May 23, 2013 |
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Call to Order: |
The meeting was
called to order at 1:05 pm in the conference room of the Monterey Peninsula
Water Management District offices. |
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Members Present: |
Jason Burnett,
Chair, representing Monterey Peninsula Regional Water Authority (JPA) Robert S.
Brower, Sr., Vice Chair, representing Monterey Peninsula Water Management District
(Water District) Robert MacLean,
representing California American Water (Cal Am) |
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Members Absent: |
David Potter,
representing Monterey County Board of Supervisors |
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Pledge of Allegiance: |
The assembly
recited the Pledge of Allegiance. |
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Public Comments: |
No comments
directed to the Committee. |
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Agenda Items |
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The Chair
received public comment on each agenda item. |
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1. |
Adopt Minutes of April 22 and May 17,
2013 Committee Meetings |
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On a motion by
Brower and second of Burnett, minutes of the April 22, 2013 committee were
adopted on a vote of 2 – 0. |
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2. |
Review and Comment on Draft Design Build
Request for Proposals Prepared by California-American Water |
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A summary of
the discussion on this item follows. Representatives
from Cal Am asked for clarification from the JPA on the following issues. |
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a) |
Need comments on the evaluation criteria for both project sizes. Should bids be weighted identically for both the small
and large projects? |
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b) |
Cal-Am does not seek the lowest bid.
The intent is to select the lowest price for the desired build that
includes engineering, permitting, construction, power costs, and replacement and
maintenance over a 20-year period.
Cal-Am prefers an extended warranty period for project components such
as membranes, and has offered to meet with vendors on that issue. The cost
may be higher up front, but maintenance costs could be lower over time. Cal-Am
has estimated a 5% interest rate and 3% CPI for inflation. Does the committee
agree with that approach? |
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c) |
Bidders will be evaluated on the basis of 40% technical and 60% cost.
Comments? |
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d) |
Security is important; there must be a balance between the risk taken
on by the bidders and the ratepayers.
Security components in the RFP include bid bonding, performance and
payment bonds, $1 million letter of credit, insurance requirements, and
parental guarantee that are all common in bids to ensure the contractor will
deliver the project. |
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In response to these comments, Burnett stated that at the May 28, 2013
Governance Committee meeting, he would present written comments from the JPA
on the draft RFP. Brower noted that
the Water District had no issues with the RFP, but would not meet again until
June 17, 2013. No comments were
directed to the committee from members of the public. |
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Following the comments listed above, additional discussion occurred
regarding the RFP. This includes questions raised by members of the public. |
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e) |
Comment: The RFP could be
modified to include a bonus for early completion. Cal-Am response: The RFP includes a penalty for late
completion of the project. Cal-Am will
need to consider if a bonus for early completion would be appropriate. See additional discussion below under item
k. |
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f) |
Comment: How will valued
engineering be applied to this project?
Cal-Am response: The process
Cal-Am plans is different from value engineering. Cal-Am provides the basic requirements for
the project – a base bid that will be used to evaluate the bids that are
submitted. The bidders will show the
price difference between the base and what is submitted. Cal-Am will select the preferred bid; a
team of experts will then evaluate the design and make suggestions for improvements. The bidder will be required to provide cost
estimates for the proposed improvements. Cal-Am will then evaluate the response
and decide what changes should be implemented. This is a negotiated process between Cal-Am
and the bidder that can provide incentives to the bidder. For example, a proposed change could result
in $1 million savings and 20% of that savings could be returned to the
contractor. MacLean stated that if the
Committee wants to see value engineering savings shared, Cal-Am would need to
review and decide if it would be appropriate. |
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g) |
Comment: The SPI report assumed
that source water for the desalination project would not require pretreatment. Should bidders provide the project cost
under that assumption? Cal-Am
response: Determining the correct
pretreatment is critical to success of the project. Open ocean intake will require more treatment
than well water. The project team must
determine the source water and the quality of that source water in 20 to 30
years. It is assumed that the source
water quality will deteriorate in 5 to 10 years. Will the plant be constructed to operate
under the worst case scenario, or will it be built for a lower cost and then
expanded in 10 years when additional pretreatment is needed? Cal- Am needs to know if the bid should be
based on test well data; the Committee should provide feedback on the
preferred source water criteria. |
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h) |
Comment: Your RFP is very
specific as to the baseline requirements for a project. Will alternate proposals have enough detail
that Cal-Am can select an alternative project? Cal-Am response: We will make clear to bidders that we are
looking for creativity. Water quality
and performance standards must be met, even if the bidder proposes a process
different from what was suggested in the RFP. Cal-Am is open to suggestions
from the Committee on how the baseline could be made more robust. |
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i) |
Comment: Appendix 2, Design and
Construction Requirements is very detailed. The bidder could be discouraged from being
more creative in order to reduce costs.
Cal-Am response: We will bring
this back to the team for review. |
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j) |
Comment: Is there a risk that by
providing such detailed requirements, the design/build firm could place the
responsibility with Cal-Am if the project does not operate successfully?
Cal-Am response: That should not be an
issue because the bid is clear as to where the responsibility lies to achieve
results; however, the team will review this again. |
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k) |
Comments: (1) Suggest adding a clause
in section 5.2.2 that would offer an incentive for early delivery. Caltrans has standard language in its
contracts that Cal-Am could include. (2)
Be aware that the Division of Ratepayer Advocates may disagree with the
inclusion of cost caps and paying out incentives. Cal-Am response: Bidders are required to develop the project
construction schedule. However, we
don’t want them to pad their schedule in order to receive a bonus for early
completion. The team will consider if
a completion date should be established. |
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l) |
Comment: The warranty clauses
state that the first step in dispute resolution is mediation. If mediation is not successful, the binding
arbitration process is used and the parties will agree on the arbitrator. Is
this correct? Is there agreement on
that? Response from Cal-Am: We will review the arbitration process
outlined in the RFP. The Committee
will provide input on this issue at the next meeting. |
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m) |
Comment: What are the licensing
requirements? Will foreign firms be required to be licensed in
California? Response from Cal-Am: Contractors must meet all of California’s
licensing requirements, and will be required to provide proof of licensing at
appropriate stages in the process.
Cal-Am will review the licensing language in the RFP and may modify it
for clarity. |
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n) |
Comment: The cost of electricity
is set at 10 cents per kilowatt hour.
Is that accurate? Response from
Cal-Am: The model could be changed to
.09 which is one of three current PG&E tariff rates. Cal-Am will review to determine the
appropriate rate to specify. |
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o) |
Comment: Should the requirement
to hold the bid for 365 days be changed, and should an escalator be included? Response from Cal-Am: It could be changed; a 120 day hold is not
uncommon. Let us know if you have a
preference. |
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p) |
Comment: Page 2-8, section 2.6,
should provide maps that show roads, property lines, and test well and
production facility sites. Page 2-12, add a statement that the design/build contractor will
coordinate with separate contractors such as those laying pipelines. Page 2-19, if Federal funds will be spent on this project a
section on compliance with the Davis-Bacon Act should be included. Response from Cal-Am: Expressed no objection. |
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q) |
Comment: Page 3-3, paragraph 13
refers to Cal-Am conducting public hearings.
Suggest that Governance Committee be specified as forum for those
public hearings. Response from
Cal-Am: That may be in conflict with
the Governance Committee Formation Agreement that specifies the role and
responsibilities of the Governance Committee.
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r) |
Comment: Page 3-4, sections 3.5
and 3.6 should clearly state that any response to a bidder’s inquiry will be
provided to all proposers in the form of an addendum or other communication. |
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3. |
Status Report on Development of Term
Sheet for Power Sales Agreement with Monterey Regional Waste Management
District for Use of Landfill Gas Generated Electricity for the Proposed
Desalination Plant |
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Bill Reichmuth reported that a committee has been formed to
develop the term sheet whose members are William Merry with the Monterey
Regional Waste Management District (MRWMD), Keith Israel of the Monterey
Regional Water Pollution Control Agency, Richard Svindland
with Cal-Am, David Stoldt of the Water District, and Reichmuth. Svindland has
provided the committee with the power needs for both sizes of the
desalination plant. Merry will redraft
the term sheet for discussion by the committee. The next step is to develop a |
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power sharing agreement. It is expected that MRWMD could provide the
6.2 megawatts of electricity needed to operate the desalination plant. The cost would be approximately 8.5 cents
per kilowatt, which is less than the PG&E rate, and Cal-Am could earn
renewable energy credits. The
Committee will need to discuss how the renewable energy credits should be
handled, should they be retained or sold?
Comment from Cal-Am: A search
has begun to identify a firm that can develop an analysis of the power costs
and the best way to monetize renewable energy credits. There is a question about the ability of
MRWMD to provide enough energy to power up the plant’s 15-horsepower motors. |
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4. |
Discussion of Items to be Placed on
Future Agendas |
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No new items suggested. |
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5. |
Adjournment |
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The meeting
adjourned at 2:45 pm. |
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