December 21, 2004

SUBJECT:      Rejection of Single Proposal Received in Response to Request for Proposals No. F0407-05 to Design, Furnish and Install a New Heating, Ventilating and Air Conditioning System at the Sunnyvale Office Center

REPORT IN BRIEF

Staff requests that Council reject the single proposal received in response to Request for Proposals No. F0407-05 to design, furnish and install a new heating, ventilating and air conditioning (HVAC) system at the Sunnyvale Office Center, 505 West Olive Avenue.

BACKGROUND

In July 2002, the City purchased the seven-building office complex located at 505 West Olive Avenue.  Each building incorporates approximately 5,000 square feet for a total square footage of 35,000. Originally, this site was to be incorporated in the City’s long-term space plan for the Civic Center complex, beginning in Fiscal Year 2005-06. It was the thought that the City would need the land (not the buildings) to expand the Civic Center complex. With the current economic climate in the Bay Area and the financial situation of the City, the long-term space plan for the Civic Center complex has been placed on hold; and in fact, workforce reductions have reduced the need for the Civic Center expansion at this time.  However, the City continues to rent the facilities to NOVA and other private tenants and receives approximately $600,000 per year in rental income.

Beginning shortly after taking ownership of the buildings, there have been ongoing problems with the heating, ventilating and air conditioning system (HVAC) at the Sunnyvale Office Center. Numerous attempts to repair the system have been unsuccessful.  Because of the age of the equipment, parts have been either difficult to find or unattainable, making it necessary for staff to look at alternatives for the provision of heating and cooling to the Sunnyvale Office Center site.

For the past several months, cooling has been provided to the buildings by connecting rented, self-contained package units to the existing air handlers; and on October 26, 2004, Council awarded a contract to Newcomb Mechanical to continue to provide temporary HVAC equipment for the Complex through June 30, 2005 (RTC 04-383).

DISCUSSION

Although the immediate need for cooling was satisfied by the rental of temporary HVAC equipment, staff continued to seek a long-term solution to the problem. Request for Proposals No. F0407-05 was prepared by Purchasing and Facilities Management staff, seeking proposals from qualified HVAC contractors to design, furnish and install a new HVAC system for the Sunnyvale Office Center.

One responsive proposal was received from Thermal Mechanical, Inc., of Santa Clara who proposed a design that included package heat pump unit systems in each of the seven buildings at a cost of $474,920. Subsequent negotiations reduced proposal pricing to $444,592.  Nevertheless, the cost of the proposed design is still significant, taking into consideration the overall condition of the buildings and the uncertainty of the City's future needs.

Staff is currently reviewing all of the City's land holdings, including the Sunnyvale Office Center, in light of the current and projected economic situation in the Bay Area.  Staff is investigating cost effective, short-term solutions to the facility's heating and cooling problems, including the purchase of temporary cooling equipment similar to that currently being rented.  Staff, therefore, recommends that no decision be made about a more expensive, long-term solution to the HVAC problems at the Sunnyvale Office Center until this review is complete. 

FISCAL IMPACT

Rejection of the proposal from Thermal Mechanical will make it necessary to continue to rent temporary HVAC equipment at a cost of approximately $9,000 per month until a more suitable, short-term alternative is identified.  Council has, however, already authorized this expenditure through the end of FY 2004/2005.  It is anticipated that a review of the City's land holdings will be completed and a decision made about the future of the Sunnyvale Office Center within the next few months.

RECOMMENDATION

It is recommended that Council reject the single proposal received in response to Request for Proposals No. F0407-05.

Prepared by:

Elaine Wesely

Purchasing Officer

Reviewed by:

Mary J. Bradley

Director, Finance

Reviewed by:

Robert Walker

Director, Parks and Recreation

Approved by:

Amy Chan

City Manager