October 26, 2004

SUBJECT:      Authorization for Additional Expenditures for the Rental of Temporary Cooling Equipment at the Sunnyvale Office Center and Approval of Budget Modification No. 12 (F0410-17)

REPORT IN BRIEF

Since mid-2002, there have been ongoing problems with the central heating, ventilating and air conditioning (HVAC) system at the Sunnyvale Office Center.  In late Spring 2004, the problem became so critical that it was necessary to install temporary HVAC equipment so the buildings would be habitable through the summer months.  This equipment has been provided on a rental basis by Newcomb Mechanical, Inc., of Foster City under the City Manager's contract awarding authority.

Approval is now requested to increase expenditures for the rental of this equipment until the ongoing problems with the HVAC system at the Sunnyvale Office Center are resolved.  To date, expenditures for equipment rental, including the October invoice, total approximately $49,000.  It is anticipated that additional expenditures of nearly $9,000 per month will be required, possibly through the end of this fiscal year, making total expenditures of $130,000 to Newcomb Mechanical, Inc.  Approval is also requested for Budget Modification No. 12 to appropriate funds for this project from reserves set aside for these types of expenditures.

BACKGROUND

Shortly after taking ownership of the Sunnyvale Office Center in July 2002, the central heating, ventilating and air conditioning (HVAC) system failed.  Facilities Management staff have done everything they can to resolve ongoing problems at this complex, including replacing the cooling tower and compressor by August 2003.

In late Spring 2004, a catastrophic failure of the rebuilt compressor made it necessary to bring in temporary cooling equipment to ensure that the temperature within the buildings would be tolerable for building occupants.  At this time, building occupants include approximately 100 City employees and ten private tenants, including NOVA.  The City receives approximately $600,000 per year in rental income.

During the following two or three months, Facilities Management staff attempted to resolve the HVAC problems at the Sunnyvale Office Center; and in mid-July, staff determined that the best course of action is to abandon the existing HVAC system and explore alternative solutions.

DISCUSSION

In July 2004, a Request for Proposals (RFP) was issued to design, furnish and install an entirely new HVAC system at the Sunnyvale Office Complex.  Staff is currently evaluating the results of this RFP, and it will be necessary to continue to rent temporary HVAC equipment until a decision is made and construction of the new system, if determined to be feasible and cost effective, is completed. Staff, therefore, requests authorization to extend the rental of temporary equipment on a month-to-month basis up to June 30, 2005.  Rental costs per month is approximately $9,000.

Section 2.08.070(b)of the Sunnyvale Municipal Code exempts from competitive bidding situations where solicitation of bids would for any reason be impractical, unavailing or impossible.  In this case, the equipment is already in place; and there would be additional costs to have it removed and replaced by equipment from another company. 

FISCAL IMPACT

Total cost to the City for the rental of temporary HVAC equipment at the Sunnyvale Office Center will not exceed $130,000.  To date, expenditures of approximately $49,000 have been paid from Program 769, Facilities Management.  Anticipated additional expenditures up to $81,000 will be paid from reserves set aside for the Sunnyvale Office Center.

Funding for the temporary replacement of the HVAC system at the Sunnyvale Office Center is available through the Sunnyvale Office Center Sub-Fund within the General Services Fund.

The FY 2004/2005 Long-term Financial Plan shows the complex being operated for the entire twenty-year planning period.  Because of the age and general condition of the office buildings, it was necessary to propose capital improvements in the amount of $654,000, in the first ten years of the plan, in order to keep the facility in working order for the additional years it would be in operation.  Staff had originally anticipated these capital improvements to begin in FY 2004/2005 and be completed in FY 2006/2007.

Staff requests that Council appropriate these funds into a new project in the current fiscal year to fund the temporary replacement of the HVAC system at the Sunnyvale Office Center. 

BUDGET MODIFICATION NO. 12

FISCAL YEAR 2004/2005

 RECOMMENDATION

It is recommended that Council:

1.  Authorize additional payments to Newcomb Mechanical, Inc., in an amount not to exceed $81,000 for the continuing rental of temporary HVAC equipment at the Sunnyvale Office Center; and

2. Approve Budget Modification No. 12.

Prepared by:

Elaine Wesely, Purchasing Officer

Reviewed by:

Mary Bradley, Director, Finance

Reviewed by:

Robert Walker, Director, Parks and Recreation

Approved by:

Amy Chan

City Manager

Attachments

Draft Purchase Order (pdf)