REPORT TO THE CITY COUNCIL FROM: MICHAEL CARBAJAL, Director Department of Public Utilities BY: MARTIN WENDELS, Project Manager Department of Public Utilities - Water Division SUBJECT ..Title Actions pertaining to the purchase of liquefied carbon dioxide: 1. Reject all bids for the Requirements Contract for Liquefied Carbon Dioxide (CO2) (Bid File 9603) (Citywide) 2. ***RESOLUTION - Declaring an urgent necessity for the preservation of life, health, and property and authorizing the Purchase Manager of the Finance Department or designee to contract for the purchase and delivery of liquefied CO2 (Subject to Mayor's Veto). 3. Approve an agreement with Airgas USA, LLC, (Airgas) for the purchase of CO2 for a contract term of three years, with provisions for two, one year extensions, with an amount not to exceed $1,750,000. (Bid File 9628) (Citywide) ..Body RECOMMENDATION Staff recommends that Council reject all bids for the Requirements Contract for Liquefied Carbon Dioxide (Bid File 9603); adopt a resolution declaring an urgent necessity for the purchase and delivery of liquefied CO2 used for surface water treatment and authorize the Purchasing Manager, or designee, to sign an agreement on behalf of the City (Bid File 9628). EXECUTIVE SUMMARY Liquefied CO2 is used in the post-treatment process for corrosion control in the water distribution system. The Northeast Surface Water Treatment Facility (NESWTF) as well as the Southeast Surface Water Treatment (SESWTF) and East Central Fresno (T-3) add liquefied CO2 after the treatment and disinfection of drinking water. On December 10, 2020, Council approved a rejection of all bids related to Bid File 9558 and approved an interim contract with Air Liquide U.S. LP (parent company of Airgas USA, LLC), for the purchase and delivery of liquefied CO2 in an amount not to exceed $200,000, with the intent to have staff return to Council within 180 days with a recommendation to award a requirements contract for additional purchases. Due to unexpected delays necessary for updating requirements contract specifications, both the timeline and the approved $200,000 not to exceed amount had been exceeded. On May 13, 2021, City Council authorized an extension of the existing contract with Air Liquide U.S. LP, for the purchase and delivery of liquefied CO2 for an additional 180 days in an amount not to exceed $420,000. On June 8, 2021, bidding closed for Bid File 9603. A total of one bid with exceptions was received. Exceptions were specific to insurance requirements. As the previous extension remained in place, dialogue occurred with Airgas and the City with regards to indemnification and liability in an effort enter an agreement that was mutually conducive in both terms and pricing. Staff recommends that the City Council reject all bids for the Requirements Contract for Liquefied Carbon Dioxide (Bid File 9603), adopt a resolution declaring an urgent necessity for the purchase and delivery of liquefied CO2 used for surface water treatment and authorize the Purchasing Manager, or designee, to sign an agreement on behalf of the City. BACKGROUND The Water Division (Water) injects liquefied CO2 as part of the treatment of finished surface water at the water treatment facilities. It is considered to be an effective enhancement chemical for the City of Fresno's water supply by conditioning raw water and enhancing the chemical reaction with the primary coagulant to facilitate effective cleansing of the water. It also adjusts the pH level of the treated water entering the water distribution system, thereby controlling the corrosive quality of the treated water in water mains, pipes and other appurtenances, and ultimately the end-user's facilities (homes and businesses, etc.). A Notice Inviting Bids was published on June 3, 2020, per the City of Fresno Charter Section 1208. Notice of Inviting Bids and Bid Specifications were sent to 11 prospective bidders. The bid opening occurred on July 7, 2020, and three bids were received ranging from $421,705 to $647,850. During the bid evaluation two of the three bidders took exceptions after the closing of the bid process. These exceptions were either material in terms or would materially alter the terms of the contract and therefore the bids were considered to be non-responsive. The third bidder's bid amount was significantly higher. On December 10, 2020, Council approved a rejection of all bids related to Bid File 9558 and approved an interim contract with Air Liquide U.S. LP, (Bid File 9369) for the purchase and delivery of liquefied CO2 in an amount not to exceed $200,000, with the intent to have staff return to Council within 180 days with a recommendation to award a requirements contract for additional purchases. Since that time, staff from Water, Finance and Risk collaborated in updating requirements contract specifications. Additionally, in February 2021, meetings took place between a CO2 vendor and City Staff from Risk and Water with a focus on mitigating requirements that would have enabled Water to piggyback a cooperative purchase agreement with the City of Santa Barbara. The mitigation efforts were unsuccessful. On April 30, 2021, a Rebid for a Product Requirements Contract for Liquefied Carbon Dioxide was posted. A pre-bid meeting was scheduled on May 12, 2021, and the bid opening occurred on June 8, 2021. One bid, with exceptions, was submitted. Staff has determined the exceptions included in the bid are material or would materially alter the terms of the contract and therefore the bid must be considered non-responsible. With no responsive bids, staff must reject all bids. Staff from Water, Finance, Risk, and the City Attorney's Office have collaborated to work with Airgas to align indemnification and liability language that was conducive to arriving at an agreement. The pricing of $135 per ton of liquid CO2 with this agreement is a reduction in cost of 32.5 percent compared to the current voucher based purchase price of $200. ENVIRONMENTAL FINDINGS By definition provided in the California Environmental Quality Act Guidelines Section 15378, the award of this requirements contract does not qualify as a "project". LOCAL PREFERENCE Local preference was not applicable because this item is rejecting all bids and is of urgent necessity. FISCAL IMPACT The General Fund is not impacted by this citywide expenditure, as the appropriations for the purchase of the liquefied CO2 is included in the FY 2022 Water Enterprise Fund budget. Attachments: Attachment 1 - Bid Evaluation Attachment 2 - Resolution Attachment 3 - Agreement