Title
MOTION TO APPROVE A FOURTH AMENDMENT TO THE SERVICE AGREEMENT BETWEEN THE CITY OF PEMBROKE PINES AND BCR ENVIRONMENTAL CORPORATION FOR AN AMOUNT NOT TO EXCEED $308,340.00.
Summary Explanation and Background
- Chapter 35 of the City's Code of Ordinances is titled "PROCUREMENT PROCEDURES, PUBLIC FUNDS."
- Pursuant to Section 35.29(F) "City Commission notification" of the City's Code of Ordinances, "The City Manager, or his or her designee, shall notify the Commission, in writing, at least three months in advance of the expiration, renewal, automatic renewal or extension date, and shall provide a copy of the contract or agreement and a vendor performance report card for the contract or agreement to the City Commission."
- Section 35.21 of the City's Code of Ordinances is titled "AWARD OF CONTRACT."
- Section 35.21 (A) of the City's Code of Ordinances is titled "City Commission approval."
- Section 35.21(A)(1) states, "An initial purchase of, or contract for, commodities or services, in excess of $25,000, shall require the approval of the City Commission, regardless of whether the competitive bidding or competitive proposal procedures were followed."
SUMMARY EXPLANATION AND BACKGROUND:
1. The City’s wastewater treatment plant (WWTP) cleans wastewater from homes and businesses to remove harmful substances and make the water safe for release back into the environment. In addition to treated water, the WWTP produces debris that has been screened from the water, and biosolids (also known as “sludge”), both of which must be disposed of. The debris is taken to a landfill and the sludge is typically hauled away and land-applied as a fertilizer, mostly to sod farms in central Florida.
2. The disposal of sludge is regulated by the US Environmental Protection Agency and the Florida Department of Environmental Protection. These agencies classify sludge as Class B, Class A, or Class AA depending on the amount of pathogens and pollutant metals they contain, which dictates the manner in which they may be used/disposed. The package treatment units at the WWTP produce Class B sludge.
3. In 2013, the agencies made significant changes to the sludge regulations. These changes were expected to make disposal of Class B sludge much more expensive, which was of concern to Utilities Department Staff.
4. In response to that concern, the Staff explored options for producing Class A or AA sludge. After researching the options, the City Commission approved an agreement on June 18, 2014, with a company called BCR Environmental, to provide design-build services for construction of Phase One of improvements to the sludge management system at the City’s WWTP to produce and dispose of Class AA sludge.
5. The agreement also included a Service Agreement wherein BCR would be paid fees to provide services for the new system. These fees include Base Service Fees, Hauling and Disposition Service Fees, Chemical Supply and Delivery Plan Fees, Supplemental Technical Service Fees, Repair and Maintenance Plan Fees, and Operational Improvement Fees. In accordance with the terms of the Agreement, the Hauling and Disposition Service Fees, the Supplemental Technical Service Fees, and the Repair and Maintenance Plan Fees are subject to annual adjustments based on changes to the Consumer Price Index (CPI).
6. On August 5, 2015, the Commission approved an agreement with BCR Environmental to provide design-build services for construction of Phase Two of the improvements to the sludge management system, which was completed in 2017. This system involves chemical treatment of the biosolids to produce Class AA sludge and was operated at the WWTP through 2023.
7. In accordance with the terms of the Service Agreement, the effective date of the agreement was December 1, 2016. The Agreement was for five (5) years, naturally expiring on November 30, 2021. The Agreement included provisions for three (3) additional five (5) year renewals, along with the above-mentioned annual adjustments based on changes to the CPI.
8. On September 17, 2018, the Commission approved the First Amendment to the Service Agreement that increased the purchase order for chemicals associated with the operation of Phase Two, as well as increasing the Service Fees based on changes to the CPI.
9. On September 13, 2021, Commission approved the Second Amendment to the Service Agreement to renew the term of the Original Agreement, as amended, for a five (5) year period commencing on December 1, 2021, and naturally expiring on November 30, 2026. The Second Amendment also revised the Service Agreement fees in accordance with changes to the CPI.
10. On December 20, 2022, the Commission approved the Third Amendment to the Service Agreement to increase the Service Fees based on changes to the CPI.
11. In 2023, Utilities Department Staff decided to re-evaluate the effectiveness and feasibility of operating the sludge management system to produce Class AA sludge, and of the associated BCR Service Agreement. This decision was due, in part, to the fact that the regulation changes in 2013 did not result in a drastic increase in the cost of disposal of Class B sludge, as originally expected. In July 2023, Staff asked the City’s wastewater consultant, Hazen, to perform an analysis of the sludge management system and the BCR Service Agreement. This analysis included a financial component to confirm the cost effectiveness of operating the system.
12. Hazen produced a report indicating that the City’s cost to operate the system to produce and dispose of Class AA sludge, combined with the cost of the BCR Service Agreement, was $151 per ton of sludge. It also indicated that the cost of not operating the system and simply producing and disposing of Class B sludge would be approximately $90-$100 per ton.
13. Based on that information, Staff concluded that it would be in the best interest of the City to discontinue operation of the system and amend the BCR agreement as follows:
• Reduce the Base Service Fee from $11,667.00/month to $2,000/month.
• Change the Hauling and Disposition Service Fee to actual costs incurred by BCR plus fifteen percent (15%) per ton of sludge.
14. The estimated annual cost of the Service Agreement, with the above changes implemented, are as follows:
• Basic Service Fee = $24,000.00
• Hauling and Disposition Service Fees = $284,340.00
This represents a savings of approximately $164,000.00 per year compared with operating the Class AA system. If, at some point in the future, the economics change and producing Class AA sludge becomes more cost effective than Class B, Staff will bring an amendment back to the Commission to reverse these changes and bring the system back online.
15. Staff recommends City Commission approval of a Fourth Amendment to the Service Agreement between the City and BCR Environmental Corporation for an amount not to exceed $308,340.00.
Financial Impact
FINANCIAL IMPACT DETAIL:
a) Initial Cost: $308,340.00
b) Amount budgeted for this item in Account No:
$143,000.00 471-535-6022-534990-0000-000-0000-
$165,340.00 471-535-6022-534450-0000-000-0000-
c) Source of funding for difference, if not fully budgeted: Not Applicable.
d) 5 year projection of the operational cost of the project Not Applicable.
|
|
Current FY |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|
Revenues |
|
|
|
|
|
|
Expenditures |
$308,340.00 |
$316,870.00 |
$54,276.00 |
|
|
|
Net Cost |
$308,340.00 |
$316,870.00 |
$54,276.00 |
|
|
e) Detail of additional staff requirements: Not Applicable.
FEASIBILITY REVIEW:
A feasibility review is required for the award, renewal and/or expiration of all function sourcing contracts. This analysis is to determine the financial effectiveness of function sourcing services.
a) Was a Feasibility Review/Cost Analysis of Out-Sourcing vs. In-House Labor Conducted for this service? Not Applicable.
b) If Yes, what is the total cost or total savings of utilizing Out-Sourcing vs. In-House Labor for this service? Not Applicable.