STATEMENT OF ISSUE
The City’s Hopkins and Purdom generating units are designed to utilize both natural gas (primary fuel) and fuel oil (secondary fuel). The natural gas is delivered to the plants via pipeline, and the fuel oil is delivered by either barge (Purdom only) or truck (both sites) and stored in large on-site storage tanks. Historically, the majority of the fuel oil utilized and stored at each plant was #6 fuel oil (bunker C). With the recent completion of the Hopkins Unit 2 repowering, the majority of the City’s generating units now utilize #2 (diesel) fuel oil as the secondary fuel. As a result, there is a need to convert three of the City’s existing fuel oil storage tanks from storing #6 fuel oil to #2 fuel oil. This conversion requires certain modifications be performed to meet the applicable Florida DEP Above Ground Storage Tank Rules. IFB 0026-09-RM-BC was issued for this work. This agenda item is seeking City Commission to award this conversion work.

RECOMMENDED ACTION
Option 1: Award the Hopkins and Purdom fuel oil storage tank modifications to BIS Frucon in the amount of $3,460,289. Authorize the City Manager to approve up to $400,000 in contract amendments if needed.

FISCAL IMPACT
Option 1: $3,860,289
Funding is available in projects 06099 - Hopkins Unit 2 Repowering and 08130 – Purdom Oil Tank Conversion. Contract amendment funding will be from the appropriate project depending on which tank required additional work. Project 06099 available balance as of 12/19/08 is $12.06 million, and project 08130 available balance as of 12/19/08 is $6 million.

Kevin G. Wailes, General Manager – Electric Utility

Anita Favors Thompson, City Manager

For information, please contact: Rob McGarrah, Manager Power Production, x 5534

SUPPLEMENTAL MATERIAL/ISSUE ANALYSIS
HISTORY/FACTS & ISSUES

1. The City’s Hopkins and Purdom generating units are designed to utilize both natural gas (primary fuel) and fuel oil (secondary fuel). The natural gas is delivered to the plants via pipeline, and the fuel oil is delivered by either barge (Purdom only) or truck (both sites) and stored in large on site storage tanks. Historically, the majority of the fuel oil utilized and stored at each plant was #6 fuel oil (bunker C). With the recent completion of the Hopkins Unit 2 repowering, the majority of the City’s generating units now utilize #2 (diesel) fuel oil as the secondary fuel.

2. In order to meet the system reliability requirements, a target fuel oil inventory level has been established. This target fuel oil inventory level is the fuel oil required to supply the City’s electricity demand for 18.5 peak load days. This equates to ~273,000 barrels (bbls) of #2 fuel oil. To meet this target inventory, the City needs to convert three existing #6 fuel oil tanks (Hopkins tank 4 and Purdom tanks 1 & 3) to #2 fuel oil. The table below outlines the fuel oil storage tanks at each plant, their capacity, current product and future product. (Tanks in bold are the ones being modified)

3. To meet the applicable Florida Department of Environmental Protection (FDEP) above ground storage tank rules, the three tanks will require certain modifications. These modifications include:

a. Cleaning and inspection of the tanks: This phase of the work includes removal of the sludge and residual #6 fuel oil in the tanks and inspection of the tanks by an approved tank inspector to ensure that there are no issues with the tank’s integrity.

b. Internal Secondary Containment and Leak Detection: The three tanks are designed with a single bottom and no secondary containment or leak detection under the tank. To store #2 fuel oil in the tanks, the tanks will be retrofitted to have secondary containment and leak detection under the tanks.

c. External secondary containment: The three tanks currently are located within a dirt bottom bermed area. To meet the FDEP tank rules, there needs to be either an impervious barrier in the bermed area or approved alternative installed. Historically, installing a concrete floor to the bermed area or installing an impervious liner would be utilized to meet this requirement. As the project design for this secondary containment was progressing, staff met with FDEP’s Above Ground Storage Tank section. During these discussions, FDEP identified an alternative external leak detection system that would provide the same benefits as the concrete or liner containment structure. Staff has reviewed this alternative and agrees with FDEP’s assessment. This alternative results in a significant reduction in the total project cost ($4-6 million as compared to the original budget estimates). Staff has petitioned FDEP for approval to utilize this alternative system for all three tanks. Based on discussions with FDEP staff, it is expected that this approval will be granted by FDEP.

4. Production Division staff developed the technical specifications for this work. These technical specifications were issued as IFB 0026-09-RM-BC. The City received two bids in response to the IFB. The two bids were:

5. In reviewing the two bids that were received, BIS Frucon is the recommended vendor.

6. Neither firm included any MBE participation or good faith information. While Electric staff was aware that there were no local MBE firms that could perform the specialized services associated with the inspection or the internal or external secondary containment/leak detection, no MBE waiver was sought in hope there would be some portion of the cleaning services that could be performed by a local MBE firm. Staff has talked with BIS Frucon concerning their lack of MBE participation. BIS Frucon has indicated that the tank cleaning work requires a significant amount of specialized equipment and training. They are not aware of any local market MBE firms that can provide these services. Based on discussions with the MBE office and BIS Frucon, staff will be working with BIS Frucon and their subs to see what, if any, mentoring opportunities are available for local MBE firms during the project.

7. Currently, the City does not have the target fuel oil inventory for system reliability. This tank conversion project needs to be completed in time to allow for fuel oil to be purchased and the tanks filled prior to the 2009 hurricane season. To meet this schedule, the work needs to be awarded based on this bid.

8. Staff is recommending that the City Commission award this work to BIS Frucon.

9. There is a potential that during the inspection phase of the work, that there might be additional repairs identified as being needed to the existing tanks. These inspections cannot be performed until the tanks are cleaned. In light of this potential, staff is requesting that the City Commission provide the City Manager with approval authority for up to total of $400,000 in contract amendments (approximately 12% of the bid price).

10. As noted above, staff has submitted a request to FDEP to utilize the alternative external secondary containment system. This portion of the work will not be released until the FDEP approval is received. The Purdom tank portion of the work will require a Site Certification amendment. The Purdom work will not be released until the amendment approval has been received.

11. Procurement Services and Budget and Policy have reviewed this agenda item and concur that it meets purchasing and budget guidelines.

CHARITABLE CONTRIBUTIONS

1. Bids/Proposals received from two vendors.
2. Contributions were claimed by one firm totaling $11,804.61.
3. Award not based on Charitable Contribution Preference.

OPTIONS

Option 1: Award the Hopkins and Purdom fuel oil storage tank modifications to BIS Frucon in the amount of $3,460,289. Authorize the City Manager to approve up to $400,000 in contract amendments if needed.

Option 2: Award the Hopkins and Purdom fuel oil storage tank modifications to Matrix in the amount of $3,996,378. Authorize the City Manager to approve up to $400,000 in contract amendments if needed.

Option 3: Reject all bids and direct staff to reissue the IFB.

FISCAL IMPACT

Option 1: $3,860,289.
Funding is available in projects 06099 - Hopkins Unit 2 Repowering and 08130 – Purdom Oil Tank Conversion. Contract amendment funding will be from the appropriate project depending on which tank required additional work. Project 06099 available balance as of 12/19/08 is $12.06 million, and project 08130 available balance as of 12/19/08 is $6 million.

Option 2: $4,396,378.
Funding is available in projects 06099 - Hopkins Unit 2 Repowering and 08130 – Purdom Oil Tank Conversion. Contract amendment funding will be from the appropriate project depending on which tank required additional work. Project 06099 available balance as of 12/19/08 is $12.06 million, and project 08130 available balance as of 12/19/08 is $6 million.

This option is not recommended. Approval of this option will result in increased cost to the City as compared to the recommended vendor.

Option 3: Unquantifiable at this time.
This option is not recommended. Reissuance of this bid will result in the tank work being delayed such that the tanks will not be ready for use for the 2009 hurricane season. This will expose the City to the potential of insufficient secondary fuel supplies if there is a natural gas interruption.

ATTACHMENTS/REFERENCES
Bid Tabulation