HomeMy WebLinkAboutStaff Report 2301-0718Item No. 4. Page 1 of 5
Finance Committee
Staff Report
From: Kiely Nose, Assistant City Manager
Report Type: Action Item
Lead Department: Utilities
Meeting Date: March 7, 2023
Report #: 2301-0718
TITLE
Approval of the Electric Utility Construction Services Contract with VIP Powerline Corp.
(C23185980) for a Total Not-to-Exceed Amount of $20,000,000 over Five Years; CEQA status –
exempt (existing facilities, replacement or reconstruction)
RECOMMENDATION
Staff recommends that the Finance Committee recommend the Council:
1. Adopt a determination that this action is exempt from environmental review under
Class 1 (Existing Facilities) and/or Class 2 (Replacement or Reconstruction) (CEQA
Guidelines section 15301-15302); and
2. Approve and authorize the City Manager to execute the construction contract
C23185980 (Attachment A) with VIP Powerline Corp. (VIP) in an amount not-to-exceed
$20,000,000 over five (5) years, with an annual not-to-exceed amount of $4,000,000 for
Electric Construction Services to provide essential ongoing operational work including
construction maintenance and system improvement work on the City’s electric
distribution system at various locations throughout the City of Palo Alto.
BACKGROUND
The Electric Utility has routinely hired contractors over the last 25+ years to assist City crews in
offsetting the labor shortages caused by the inability to hire qualified electrical journey-level line
workers. In addition, these contractors have provided maintenance and capital system
improvement construction work to replace or reconstruct infrastructure as required. The most
recent utility construction services contract was for a three-year term with Hot Line Construction
Inc. (HLC). The City issued an Invitation for Bid (IFB) in July 2019 (IFB #172366A) for overhead
construction services. Council awarded Contract No. C20172366A to HLC1 on October 7, 2019
1 Contract #C20172366A HLC, https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-
reports/reports/city-manager-reports-cmrs/attachments/03-06-2023-id-2301-0718-c20172366a-hot-line-
construction-inc.pdf
Item No. 4. Page 2 of 5
(Staff Report #105022), with the Notice to Proceed issued February 24, 2020. Under this contract
through February 23, 2023, the total not-to-exceed amount was originally $4,500,000 for three
years, with an annual not-to-exceed amount of $1,500,000. An amendment was then submitted
(Staff Report #134703) for approval of an exemption to Competitive Solicitation and Change
Order No. 1 to the existing Contract C20172366A with HLC for additional underground
construction and emergency construction on-call services, increasing the contract amount by
$6,800,000 for a new not-to-exceed amount of $11,300,000 for the entire three-year term of the
contract.
Throughout the industry, Utilities are struggling with a labor shortage of qualified electrical
journey-level line workers. There is a high demand for this type of work and resources are scarce.
There is increased pressure on Investor-Owned Utilities such as PG&E to reduce the potential for
fires around their electric infrastructure, this has resulted in a dramatic increase in utility
construction work and has contributed to the lack of available qualified electrical journey-level
lineperson workers.
Over the past 10 years, Utility Electric Operations has not been able to successfully hire and retain
qualified electrical journey-level staff, specifically in the line construction section, to perform the
required work on the electric distribution system. This contract will provide electric line
construction crew(s) and relative equipment to be used on an ongoing, as-needed basis to assist
with construction, operating activities, and emergency response on the City of Palo Alto Utilities
Electric Distribution System.
ANALYSIS/DISCUSSION
The Electric Line Construction division currently has insufficient resources to meet daily
operational demands, complete required work, connect new services, and respond to
emergencies/unplanned outages. This is due to the high number of vacancies and the inability to
retain and hire qualified electrical journey-level line workers in a high demand labor market.
Critical utility electric operations would be compromised if the City does not contract out this
work until it can hire qualified electrical journey-level line workers and/or train internal staff in
the form of an apprenticeship program, which takes four (4) years to complete.
This contract will also support emergency or unplanned service outage response. A standby unit
is needed to assess and isolate a system outage and perform corrective repairs. The City’s ability
to adequately staff the standby unit with existing internal staffing is very limited, and there is
2 City Council, October 7, 2019, Staff Report #10520, https://www.cityofpaloalto.org/files/assets/public/agendas-
minutes-reports/reports/city-manager-reports-cmrs/attachments/03-06-2023-id-2301-0718-c20172366a-hot-line-
construction-inc.pdf
3 City Council, October 4, 2021, Staff Report #13470, https://www.cityofpaloalto.org/files/assets/public/agendas-
minutes-reports/reports/city-manager-reports-cmrs/attachments/03-06-2023-id-2301-0718-c20172366a-hot-line-
construction-inc.pdf
Item No. 4. Page 3 of 5
similarly limited availability of additional qualified internal staff to address the corrective actions
and repairs to the system. Some system failures require emergency repair work matched with
specialized electrical journey-level line workers, construction equipment, and other such
resources that a licensed contractor crew can provide.
The award of this contract is essential to provide the ongoing operational work necessary to
ensure the City provides safe, reliable power to the City’s utility customers and to keep the
electric distribution system in compliance with state and utility regulations. The City proposes to
utilize contract labor and equipment to supplement City electric utility crews in the construction
of necessary maintenance, pole replacements, emergency response, and existing facilities
upgrades on the electric distribution system at various locations throughout the City.
Staff prepared an Invitation for Bids (“IFB”) soliciting qualified contractors to provide Electric
Construction crew(s) at the City’s request and billed on a time/labor and equipment basis. These
bids were for labor and equipment costs only, materials were not included as a bid item since
they will be supplied by the City. A Scope of Services was included in the IFB describing the type
of construction work that is expected to be completed. The proposers bid on the contract by
providing labor and equipment rates for the various personnel and equipment that make up the
typical electrical construction crew(s).
Staff received and evaluated a total of three (3) bids and VIP was declared the lowest base bid.
Staff confirmed the Contractor's State License and they are registered with the Department of
Industrial Relations (DIR). Staff checked references supplied by the contractor for previous work
performed and found references to be satisfactory. This contractor demonstrates the knowledge
and skills required to perform the work. Therefore, staff considers the low based bid acceptable
for the work involved and recommends the award of the contract to VIP.
The following table summarizes the bid process initiated on August 18, 2022:
Summary of Proposal Process
Bid Name/Number Electric Utility Construction
Services Project - IFB 185980
Proposed Length of Project 5 years
Number of Bids Emailed to Contractors 1,339
Number of Bids Emailed to Builder’s Exchanges 3
Total Days to Respond to Bid 35
Pre-Bid Meeting?Yes
Number of Company Attendees at Pre-Bid Meeting 7
Number of Bids Received:3
Bid Price Range (Annual Estimate) $4,191,000 to $4,625,570
Item No. 4. Page 4 of 5
*Proposal summary provided in Attachment B.
This contract is on the City’s task order construction contract template, which permits the City to
terminate without cause/for convenience by providing written notice to the contractor in the
event the City finds itself facing budget shortfalls or amending the contract to reduce the cost,
for example, by reducing the scope of work. The term of the contract is five (5) years, and staff
has found that a multi-year contract is advantageous to the City as it allows us to retain continuity
with a contractor that can source highly qualified workers. The work by the contractor will be
continually monitored and evaluated. All work under this contract for subsequent fiscal years will
be subject to satisfactory performance by the contractor and appropriation of required funds in
the respective fiscal years.
TIMELINE
If Council approves the Contract, the Contractor will provide the City with the requested
operation crew(s) within seven (7) days of the issuance of the Notice to Proceed.
POLICY IMPLICATIONS
The approval of this contract is consistent with existing City policies, including the Council
approved Utilities Strategic Plan-Strategic Strategic Plan 2018 Objectives: Priority 4: Financial
Efficiency and Resource Optimization; we must manage our finances optimally and use resources
efficiently to meet our customers’ service priorities. Strategy 1. Establish a proactive
infrastructure replacement program based on planned replacement before failure to support
reliability and resiliency.
FISCAL/RESOURCE IMPACT
Funding the $4,000,000 for the first year of this contract is available in the FY 2023 Electric
Operating and Capital Fund budgets.
The Electric Operating budget will fund $2,000,000, this includes a transfer of $800,000 in annual
salary savings from vacant electrical lineperson positions to the operating budget fund.
The Electric Capital budget funds the remainder $2,000,000 of the contract based on anticipated
work among various existing projects (specific projects subject to change based on actual services
rendered to each project). For example: Electric Customer Connections (EL-89028) $500,000,
Wood Pole Replacement (EL-19004) $500,000, and Electric System Improvements (EL-98003)
$1,000,000.
Continued work and funding under this contract for FY 2024 through FY 2028 will be subject to
satisfactory performance by the contractor and Council approval of annual appropriations. Staff
is advancing this recommendation as reflected in the City’s adopted budget.
Item No. 4. Page 5 of 5
STAKEHOLDER ENGAGEMENT
This was completed as a public request for proposals and coordinated with internal stakeholders,
including the procurement division and legal reviews.
ENVIRONMENTAL REVIEW
This work is categorically exempt from the California Environmental Quality Act (CEQA), under
section 15301 (repair or maintenance of existing facilities), and section 15302 (replacement or
reconstruction of existing structures and facilities) of Title 14 of the California Code of Regulations
(“CEQA Guidelines”). There are no reasonably foreseeable adverse impacts from this resolution,
and there is no possibility that the activity in question would have a significant effect on the
environment.
ATTACHMENTS
Attachment A: VIP Powerline Corp. Contract, C23185980
Attachment B: Proposal Summary IFB185980
APPROVED BY:
Dean Batchelor, Director Utilities
Report #: 2301-0718