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Agenda Item # 17

BOARD MEMORANDUM

RECOMMENDATION:

Authorize the General Manager to execute a three-year lease with Air Products and Chemicals, Inc. for a cost not to exceed $637,593 to furnish and install equipment at the Cerone Operating Division for the storage of cryogenic hydrogen fuel, and execute a three-year fuel supply contract for a cost not to exceed $380,700 to furnish hydrogen fuel.  Further authorize the General Manager to execute two additional one-year equipment lease options at a cost of $152,633 per year for a total five-year lease value not to exceed $942,859, and for two additional one-year fuel supply contract options at a cost of $152,280 per year for a total five-year fuel supply contract value not to exceed $685,260.  If all options are exercised the total value of the five-year lease and fuel supply contract with Air Products and Chemicals would be $1,628,119.

BACKGROUND:

On February 24, 2000 the California Air Resources Board (CARB) adopted new regulations to reduce nitrous oxide(s) (NOx) and particulate matter (PM) emitted by transit buses.  The regulation seeks to foster innovative technology in the development of zero emission buses to achieve Californias long-term emission reduction goals.

On December 14, 2000   VTA decided on diesel fuel utilization in compliance with the California Air Resources Board Fleet Rule for Urban Transit Bus Operators.  Further, the Board acted to implement a bus procurement program that will shift from a low emission diesel bus fleet to a zero emission bus fleet, utilizing the fuel cell technology, beginning with the purchase of zero emission buses in 2008.

CARBs Fleet Rule for Urban Transit Bus Operators requires operators who selected the diesel fuel alternative to conduct an in-service demonstration of zero emission fuel cell buses commencing in 2003.  At the June 20, 2002, VTA Board of Directors meeting the Board authorized the General Manager to execute a contract for the purchase of up to three 40-foot low floor fuel cell (hydrogen fuel) powered zero emission buses.  This hydrogen fueling station equipment will support the zero emission buses to be purchased for the demonstration project.  The fueling station will be located at the Cerone Operating Division.

DISCUSSION:

In order to comply with the CARB mandate, VTA, in partnership with SamTrans, must purchase zero emission buses and related service equipment to implement the Zero Emission Demonstration Project.  The complexity of the emerging technology associated with this procurement rendered the standard method of competitive bidding inadequate.  Therefore, as authorized by the VTA Board of Directors on December 14, 2001, staff prepared documents to secure a negotiated procurement.

Staff developed technical specifications that described the salient features to be incorporated into the hydrogen fueling station equipment.  Because the fuel cell technology and the use of hydrogen as a fuel is an emerging technology, the potential offerors were encouraged to suggest clarifications or propose alternative technical specification language.

The negotiated procurement process required the potential offerors to submit a proposal in response to the Request for Proposal (RFP) containing four separate sections, each in sealed envelopes:  (1) Technical Proposal; (2) Price Proposal; (3) Contract Administration Package; and (4) Proprietary/Confidential Information Package.  Two teams were established from VTA staff members to conduct the reviews and evaluations.  One team was for the review of the Technical Proposal and the other team was for the Negotiation of a Best and Final Offer and evaluation of the Price Proposal.  The review and evaluation teams included staff from Maintenance Engineering, Maintenance Training, Facilities Design and Construction, and Contracts, and Maintenance staff from Cerone O&R and Cerone Minor Maintenance.  The Technical Proposal and Proprietary/Confidential Information Packages were reviewed and evaluated by the Technical Evaluation Team to determine if the offerors met the requirements of the RFP, while the Price Proposal remained sealed.  VTAs Contracts staff reviewed the Contract Administration Package to determine the financial and insurability resources of the offerors.  Meetings were held with each of the offerors to answer questions they had, to receive additional information and allow the offerors to make a formal presentation about their company and its capabilities.

VTA received five proposals on April 2, 2002 in response to the RFP from the following firms:  Air Products and Chemicals; Matrix Engineers and Contractors; Praxair; Stuart Energy; and ZTEK.  The Matrix and Stuart Energy proposals were judged to be incomplete in terms of the Contract Administration Package and was eliminated from further consideration.  The ZTEK proposal was judged to be technically deficient and therefore eliminated from further consideration.  The two remaining proposers were requested to submit Best and Final Offers.

On June 12, 2002, VTA requested Best and Final Offers from the two remaining potential vendors, Praxair, Inc. and Air Products and Chemicals, Inc.  Best and Final Offers from the two offerors were received on June 28, 2002.  Praxair, Inc.s proposal was more costly in terms of leased equipment and fuel cost and less beneficial to VTA and is therefore not recommended for consideration of award.  Air Products and Chemicals, Inc. offered VTA two options.  Option A was fully responsive to the RFP and at a lower price than anticipated or budgeted.  Option B would provide approximately $45,000 per year in potential cost savings to VTA in exchange for a joint use facility to be used by VTA and Air Products and Chemicals, Inc.

After careful consideration of the operational impacts associated with allowing Air Products and Chemicals to serve other customers at VTAs facility, staff feel that the potential conflicts to bus operations are significant compared to the minor reduction in price being offered.  Therefore, staff is recommending the Option A price instead of the Option B proposal.  

ALTERNATIVES:

There are no practical alternatives to the recommended action.  CARB requires that transit operators of an urban bus fleet using the diesel path with more than 200 transit buses in its active fleet on January 31, 2001 implement a Zero Emissions Bus Demonstration Project.

FISCAL IMPACT: 

Funds for this three year lease are included in VTAs FY2003 Capital Budget.  A State of California Energy Commission grant will provide reimbursement for 26% of project expenditures.  The remaining expenditures will be covered by VTA local funds (74%).

DISADVANTAGED BUSINESS ENTERPRISE (DBE) PARTICIPATION:

No specific goal was established for this contract due to lack of DBE firms available to perform the scope of the work.  Contactor is encouraged to make reasonable efforts to utilize DBEs in this procurement of associated services and products.

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