Staff successfully completed its negotiations with ABB in June 2005.  The City�s negotiating team included the Senior Assistant City Attorney, the Purchasing Manager, BWP�s Manager, Transmission and Distribution, and BWP�s Manager, Electrical Equipment.  ABB�s negotiating team included its local sales representative, marketing representative, and Robert McCorkle, ABB�s project manager for BWP�s earlier design-build projects. Staff believes they have negotiated an Agreement that offers favorable terms and a competitive price.

ANALYSIS

At the initial meeting on June 7, staff clarified the new Banks� technical specifications and stressed that BWP must replace at least one of the Banks by June 2006, and both Banks by June 2007. To meet BWP�s schedule, ABB agreed to expedite ordering the transformers so that they will be delivered to their permanent BWP location within 26 weeks (20 to 22 weeks for manufacturing and three to four weeks for transportation).

ABB and Staff have agreed on a competitive, Fixed Lump Sum Price of $3,911,988. Staff explored three different pricing alternatives:

• Fixed Lump Sum, even if the underlying price of metals (mainly copper and steel) and transformer oil should continue to escalate

• Actual costs, plus a set percentage of profit, but no cap on the costs

• Actual costs, plus a set percentage of profit, but with a cap on costs unless actual invoices and documentation justify exceeding the cap

ABB agreed to staff�s preference for Fixed Lump Sum pricing.  The other two pricing alternatives would have been much more difficult to implement and manage.

BWP initially estimated the cost of the replacement of replacing the Banks to be $3,631,988: $1,900,000 for the Banks themselves, and $1,731,988 for site and project management, engineering, demolition, constructing transformer pads and secondary containment wells, commissioning, insurance, bonds and warranty, as well as overhead and profit.

On June 16, ABB offered a firm, Lump Sum price quote of $4,061,988. Staff rejected that price and made a counter offer of $3,631,988, staff�s estimate, and requested ABB to solicit price quotes for power transformers (with a delivery of 26 weeks or less) from its Turkish plant and other power transformer manufacturers: Pauwels, Waukesha, and Areva:

Notice that the lowest price quote, $2,180,000, is $280,000 higher than staff�s initial estimate. (Areva quoted a price of $2,000,000 at its Turkey-based facility, but its delivery time of 36 to 38 weeks is too long.) The higher price is largely due to the escalating prices of copper, steel, and transformer oil.

After receiving this information, ABB offered a Fixed Lump Sum price of $3,911,988, which is $150,000 lower than their previous offer. ABB used the $2,180,000 price estimate for the Banks and accepted staff�s figure of $1,731,988 for all other costs plus profit. Staff found ABB�s offer to be acceptable.

The City�s negotiating team also reviewed and updated terms and conditions, including insurance and liability requirements.  ABB�s legal department reviewed the City�s proposed terms and conditions and found them to be acceptable. 

Funds are available in BWP�s Capital Improvement Program for this work.  As part of its approval of BWP�s FY 2005/06 Budget, the City Council authorized up to $7,600,000 for replacing the Banks and beginning the work of relocating of Burbank Substation:

• ABB portion of replacing Banks  is $3,911,988

• BWP in-house portion to replace Banks is $513,920 (includes electrical wiring and connection work, testing, commissioning, surveying, field inspection)

• BWP in-house upgrade of the underground cable connections between Banks and the existing Burbank Substation  is  $330,000, out of which cables and splicing is $265,000, and labor and equipment is $65,000

The total cost related to replacing the Banks and taking immediate advantage of their greater capacity is $4,755,908. The balance of the spending will support a detailed design review and initial construction work for the new Burbank Station.

The new Burbank Station will be within the BWP Yard near the corner of Lake Street and Olive Avenue. The Banks (located at the Olive Switching Station) will have been designed beforehand to interconnect with the Gas-Insulated Switchgear of the new Burbank Station. (Relocating Burbank Station is a multi-year, design-build project, and staff will be able to go out for competitive bidding without jeopardizing its schedule.)

FISCAL IMPACT

Approval of the Agreement allows BWP to remain within its capital improvement budget for replacing the Banks, and protects BWP against further increases in the price of metals or transformer oil.

RECOMMENDATION

Staff recommends that the City Council approve the design-build Agreement between the City and ABB in the amount of $3,911,988.  Staff also recommends that the City Council authorize the General Manager of BWP to execute all necessary documents with such non-substantive changes as the City Attorney may approve and the City Clerk is authorized to attest.

If the Council concurs, the appropriate action would be a motion to adopt the resolution entitled �A RESOLUTION OF THE COUNCIL OF THE CITY OF BURBANK APPROVING AND AUTHORIZING THE EXECUTION OF A DESIGN-BUILD AGREEMENT BETWEEN THE CITY OF BURBANK AND ABB, INC., FOR REPLACEMENT OF POWER TRANSFORMERS SERVING BURBANK STATION.�

L:\City Council\Staff Reports\2005\ABB Replace Transformers Serving Burbank Substation.doc

Attachment      

c: Rick Morillo

Paul Herman

go to the top