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Home My WebLink About#11 Electric Distribution Transformer Purchase AGENDA ITEM #11 Public Utility District m MEETING DATE: May 1, 2024 TO: Board of Directors FROM: Keith Renshaw, Electric Engineering Manager SUBJECT: Consider Approval of Dispensing with the Public Bidding Process for Electric Distribution Transformer Purchase APPROVED BY: Z- Brian C. Wright, General Manager RECOMMENDATION: 1. Dispense with the competitive public bid process for electric distribution transformers allowing the General Manager to negotiate directly with prequalified vendors for FY24; and 2. Authorize the General Manager to contract with General Pacific, Inc. for the purchase of three electric distribution transformers in the amount of $153,097, plus a 10% contingency, for a not to exceed purchase amount of $168,407. BACKGROUND: District Code section 3.08.010 — Procedure for Purchase of Commodities or Equipment Over $15,000 Estimated purchase amount: $153,097 Distribution transformers are a critical component of the electric distribution system and are required to step down distribution level voltage to usable service level voltages for the District's customers. Over the past several years, all domestic distribution transformer manufacturers have experienced significant raw material shortages, causing major supply chain constraints for electric utilities nationwide. Beginning in 2021, the industry witnessed lead times for distribution transformers skyrocket from 7 to 15 weeks to more than two years in most cases. In 2021, the District was successful in its annual solicitation for bids and awarded to three transformer vendors for FY2022. However, lead times exceeded 52 weeks at that time. Orders placed by the District during the FY2022 contract period have yet to be fully fulfilled (more than two years later). In 2022, the District was unsuccessful in its annual solicitation for bids for FY2023 for distribution transformers. Many vendors and/or manufacturers responded to the bid request in late 2022 by stating that because of market conditions and raw material Page 1 of 4 Page 26 of 215 shortages, they were no longer able to commit to pricing on a long-term basis. The distribution transformer market has not improved since, and manufacturers do not see any relief in the near term. In late 2022, after a failed solicitation for bids for FY2023, and due to continued distribution transformer market volatility, staff published a Request for Qualifications (RFQ) for distribution transformers for FY2023. The intent of the RFQ was to pre-qualify a pool of transformer vendors, suppliers, and/or manufacturers that had the ability to supply distribution transformers meeting the District's technical specifications, and for the District's Board of Directors to consider an annual authorization for transformer purchases for FY2023 through the annual procurement process. The RFQ did not require vendors and/or manufacturers to commit to long-term pricing or delivery dates for FY2023, but it would require staff to request quotes for transformer purchases from the pre-qualified vendor pool, which would then be taken to the Board for approval on an as-needed basis. Staff received very few responses to the RFQ in 2022 for FY2023, and therefore, did not purchase transformers in 2023. In late 2023, staff again published a revised RFQ for transformer purchases for FY2024, which included clarifying language intended to solicit more responses. Staff successfully pre-qualified four vendors for FY2024 through the RFQ process. In early April this year, one of the District's pre-qualified transformer vendors, General Pacific, Inc. (GenPac), contacted staff offering transformer production slots for completion and delivery by the end of October 2024. The production slots offered to the District are for specific size and voltage transformers required to complete upcoming development projects planned for late 2024. The District currently does not have any stock of the transformers needed, and not taking the opportunity to secure the production slots offered by GenPac will likely lead to delays in the completion of the above-mentioned development projects until the proper transformers have been procured. ANALYSIS AND BODY: After being notified of the available transformer production slots by GenPac, staff sent an informal Request for Information (RFI) via email to the remaining pre-qualified transformer vendors who responded to the District's RFQ for FY2024. The RFI requested that the pre-qualified vendors respond whether they would or would not be responsive to a request for competitive bid on the specified transformer and quantities for a delivery date of no later than October 31, 2024. The pre-qualified vendors were given a deadline of 5:OOPM on April 25, 2024, to respond to the RFI. Of the pool of four pre-qualified vendors, including GenPac, only GenPac and One Source were able to meet the delivery date. One Source also provided a quotation with transformer pricing with their response. The remaining two pre-qualified vendors, Wesco/Anixter and Gexpro, both responded they could not meet the requests of the RFI. Of the two vendors who responded, GenPac's pricing was the lowest. The pricing comparison for both quotations received from GenPac and One Source can be found below. Page 2 of 4 Page 27 of 215 endor Unit Cost Qua ntityTotaI Cost GenPac$68,870.5243 $206,611.57 One $51,032.29 3 $153,096.89 Source In discussions during the RFQ process, and again recently with the pre-qualified transformer vendors, staff were made aware that vendors were still unable to forecast lead times. However, they regularly contact utilities to offer production slots as they become available. The staff's challenge is that production slot availability is first come- first serve and offered to many utilities by the vendors upfront, resulting in those production slots being filled within days of the offer. District legal counsel advises that California case law recognizes that the competitive bidding statutes are not to be applied in a way which denies public agencies the authority to deal with problems in a sensible, practical way (Domar Electric, Inc. v. City of Los Angeles, 9 Cal.41h 161 (1994)) and that where the public interest is better served by dispensing with competitive bidding, such as where the subject of a contract is such that competitive proposals would be unavailing or would not produce an advantage, and the advertisement for competitive bids would thus be undesirable or impractical, or impossible, a public agency may dispense with competitive bidding (Graydon v. Pasadena Development Agency, 104 Cal.App.3d 631 (1980)). Given the continuing market conditions, it appears that engaging in a competitive bid process would produce any bids, thus frustrating the District's ability to perform important projects. The most sensible and practical way to address this issue is to dispense with competitive bidding and engage in a procurement process, as described in this report. Staff does not have the ability to respond quickly enough to issue purchase orders over the $15,000 limit without prior Board authorization. Staff recommends the Board dispense with the competitive public bid process for distribution transformers, and allow the General Manager to negotiate directly with vendors pre-qualified through the District's RFQ process. Staff's recommendation will enable the District to better take advantage of production slot availability for future transformer purchases. In addition, staff recommends that the Board authorize the General Manager to contract with General Pacific, Inc. for the purchase of three electric distribution transformers in the amount of $153,097, plus a 10% contingency, for a not to exceed purchase amount of $168,407. GOALS AND OBJECTIVES: District Code 1 .05.020 Objectives: 1. Responsibly serve the public. 6. Manage the District in an effective, efficient and fiscally responsible manner. District Code 1 .05.030 Goals: 1. Manage for Financial Stability and Resiliency 4. Take the best of private sector thinking to modernize the utility and add value to our Page 3 of 4 Page 28 of 215 communities. FISCAL IMPACT: This item requests the Board of Directors approve of dispense with competitive bidding and negotiate with vendors, who have been pre-qualified through the RFQ process, for distribution transformer purchases in FY2024. The Board approved an annual authorization of $1,200,000 for distribution transformers on December 6, 2023 through the annual procurement authorization for FY2024. The initial proposed purchase of$153,097 recommended in this agenda item would be included in the annual authorization for FY2024. Distribution transformers are utilized for both Electric Capital Improvement Projects and Electric Developer Projects, and are charged to those respective work orders as needed. Transformers utilized for Capital Projects are included in the engineer's estimate for those projects budgeted for in the FY24/25 approved budget. The costs for transformers used on Developer projects are passed through to the developer. ATTACHMENTS: None Page 4 of 4 Page 29 of 215