August 9, 2005

SUBJECT: Award of Bid No. F0405-63 for the Construction of an Automated System to Collect and Treat Landfill Gas Condensate and Approval of Budget Modification No. 4

REPORT IN BRIEF

Approval is requested for the award of a contract to Shaw Environmental, Inc., of Concord for construction of the Landfill Gas Condensate Collection, Return and Pre-Treatment Project for the Public Works Engineering Division (Projects PR-96-06 A/B and PR-02/06-02). Approval is also requested for Budget Modification No. 4 for $170,245 in additional funding for this project.

BACKGROUND

As mandated by the Bay Area Air Quality Management District (BAAQMD) Rule 8-34, the City maintains a landfill gas (LFG) collection system at the closed Sunnyvale landfill. The collected gas provides fuel for the Water Pollution Control Plant (WPCP) Power Generation Facility which generates electricity for use by the WPCP as well as for export to the California power grid. As the warm landfill gas is collected, it cools.  As a result of the cooling, liquid condenses within the piping and has to be removed to keep it from blocking the flow of gas to the Power Generation Facility. In order to capture this condensate, landfill gas condensate drains were put in place during the closure of the landfill.

The drains are comprised of twelve gravity-fed condensate traps located around the perimeter of the landfill. There are several issues with the current condensate management system.  The most significant is that the condensate cannot be directly discharged to the WPCP without treatment as it contains several contaminants that are not acceptable under the City’s National Pollutant Discharge Elimination Permit.  Also, as mentioned above, regular removal is critical to the successful operation of the City’s Power Generation Facility, an activity that significantly reduces WPCP operating costs and generates revenue.   Currently, the condensate is pumped into vacuum trucks and hauled off-site for treatment and disposal at a facility in Redwood City which is under less environmental restrictions due to its more northerly location on the San Francisco Bay.  This is an expensive way to manage the condensate, which averages approximately 1,300 gallons per week and exposes the City to the risks of off-site transportation and disposal (e.g. accidents, spills, reliance on outside parties).

Construction of an automated condensate collection, return and treatment system will address the issues surrounding condensate collection and treatment. The proposed treatment system will:

• Minimize gas flow problems caused by condensate buildup, increasing the reliability of the Power Generation Facility and reducing the risk of air quality violations.
• Allow the City to accept its own condensate at the WPCP, thereby reducing the costs and risks associated with off-site transport and disposal of waste material.
• Provide a more efficient and more economical (discussed in detail in the fiscal impact section of this report) method of managing condensate.
• Provide a more environmental means of disposal as contaminants will be removed through the treatment process as opposed to the current arrangement where some contaminants in the condensate cannot be removed by traditional sewage treatment plants and are legally discharged into the San Francisco Bay. 

DISCUSSION

Bid specifications were prepared by Public Works and Purchasing staff. The Notice Inviting Bids was published in The Sun on May 11, 2005; and the bid package was distributed to Bay Area Builders Exchanges and broadcast to potential contractors through the DemandStar by Onvia public procurement network. Five contractors requested bid documents. Sealed bids were publicly opened on June 1, 2005; and two responsive bids were received.

Although the bids were well over the consulting engineer’s estimate, the fact that they were within 10% of one another suggests that the bids are more credible than the consultant’s estimate.  As a result, staff reviewed the basis for the estimate and identified certain areas of concern.  For example, the consultant’s estimate for the entire pre-treatment portion of the system was $23,702 while the actual bids for the pre-treatment electrical work alone were $20,500 and $35,000 respectively.    Based upon this and other discrepancies, it appears that the estimate failed to capture all project costs, and the bids received reflect the actual cost of construction.

Staff, therefore, recommends the acceptance of the bid from Shaw Environmental, Inc., the lowest responsive and responsible bidder.

A determination was made that this project will have no significant effect on the environment in accordance with CEQA guidelines for categorically exempt projects.

FISCAL IMPACT

Total Cost Analysis

This project should be considered as an investment for the City that cost- effectively addresses an issue that will require management for the life of the closed landfill which is a minimum of 30 years.

The total cost to complete the project, is estimated to be $613,686.  The costs break down as follows:

[1] Parts and equipment the City will purchase directly.

[2] Work cost effectively performed by No Fault Asphalt and Mountain Cascade while working on other projects in the immediate vicinity.

Public Works staff conservatively estimates that upon implementation, this project will save the Solid Waste Management Program $28,800 per year beginning in FY 2006/2007.  These savings will result from eliminated pumping and transfer expenses and reduced disposal expenses.  Given the projected savings, the return on investment is approximately twenty-two years. 

However, there are potentially serious and imminent risks that are associated with the current pumping and disposal method.  Any one of these risks (discussed briefly in the background section) could, in a matter of days, place the City in violation of BAAQMD regulations and/or deprive the WPCP of this source of fuel for the Power Generation Facility, thereby increasing WPCP operating costs. 

Budget Modification No. 4

For FY 2004/2005, $452,105 was budgeted in Project 824270 – Condensate Collection and Pretreatment System and $443,441 remains unspent.  In order to award the construction contract with a 15% contingency and fund all remaining costs, a total of $170,245 is required.

To modify the budget for this project, Council must first approve the carry over of the remaining FY 2004/2005 funds as identified in Table 1.  To complete the Budget Modification, Council must then approve the appropriation of funds outlined in Table 2.  The appropriations identified in Table 2 fund the Budget Modification through two means. 

First, savings will be realized from the FY 2005/2006 solid waste collection contractor payment.  Each year, the City undertakes, with the assistance of a professional firm, a review of the contractor payment application from Bay Counties Waste Services (Specialty).  Specialty submits its application for payment for each fiscal year early in the calendar year.  Specialty’s payment is based on its prior year allowable expenses.  Therefore, it is important that the payment application be carefully reviewed and adjusted to correct any errors and assure that the City and Specialty agree on the amount.  As a result of the timing, staff uses a preliminary estimate of the adjustment in the adopted budget and for the purposes of solid waste rate setting.  For the coming year, the review resulted in a reduction of $46,147 from the estimated payment amount that was adopted for FY 2005/2006.  Staff proposes that this be appropriated to the project.

An additional $124,098 is proposed to be appropriated from the Solid Waste Management Fund’s Resource Allocation Plan Reserve as identified in Table 2.  The FY 2005/2006 Solid Waste Management Fund 20 Year Resource Allocation Plan projected that the Resource Allocation Plan Reserve would have $1,155,877 remaining in the twentieth year.  The net effect of this modification is a reduction of $363,114 in the last year of the plan leaving $792,763 in reserve.

Budget Modification No. 4

Table 1

FY 2004/2005 Project Carryover

Table 2

Proposed Changes to FY 2005/2006 Budget

RECOMMENDATION

Staff recommends that Council:

1. Award a contract, in substantially the same form as the attached draft and in an amount not to exceed $449,300, to Shaw Environmental, Inc.;

2. Authorize a project contingency in an amount not to exceed $67,395; and

3. Approve Budget Modification No. 4.  

Prepared by:

Elaine Wesely
Purchasing Officer

Reviewed by:

Mary J. Bradley
Director, Finance

Reviewed by:

Marvin Rose
Director, Public Works

Approved by:

Amy Chan
City Manager

Attachment

Draft General Construction Agreement (.pdf format)