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CITY OF COLTON AGENDA REPORT FOR COUNCIL MEETING OF OCTOBER 2, 2007 TO: Honorable Mayor and City Council FROM: Jeannette Olko, Electric Utility General Manager SUBJECT: Award of Bid for the Purchase of Two 69/12.47KV LTC Power Transformers for the North Substation to Howard Industries, Inc., C/O Young & Company Inc., in the amount of $998,212.16. DATE: September 27, 2007 ITEM #9 BACKGROUND: In November 2004, the Electric Utility sold approximately 26 acres of land near the Agua Mansa Power Plant. The proceeds from the sale can only be used for electric utility capital improvement projects. These proceeds will be used for the construction of the North Substation, which had previously been identified as the highest priority project in the Electric Utility's 10 -Year Master Plan completed in January 2007. This new substation will relieve existing overloaded conditions on the northern portion of the city and will supply load currently fed from distant substations to the south. The substation will also improve reliability and allow for a more cost-effective operation of the system. DISCUSSION/ANALYSIS: The Electric Utility department issued an Invitation to Bid Number RG -08-001 on July 16, 2007, for one, with the option to purchase two, 15/20/25 MVA, 69/12.47KV LTC power transformer. The Electric Utility has determined that two transformers are necessary for operations at the North Substation. The lead time for these transformers exceeds one year after receipt of the purchase order. Bid documents were mailed to six known manufacturers and distributors of power transformers. In addition, the bid document was posted on the City's website. Sealed bids were received and opened at the Electric Utility offices at 2:00 PM, on August 14, 2007. Two bids were received. The City's electrical engineer, AC Electric System, reviewed each bid to verify they met the technical specifications. The delivery time quoted by both vendors is between 52 and 62 weeks. Due to the long lead time and the volatility of the metals markets, each vendor included an escalation/de-escalation clause in their bids. The increase or decrease will be based on the changes in raw material costs from the date of the quote, August 14, 2007, to the date each raw material is purchased for the project. A Bid Analysis is attached showing the price and delivery quoted by each vendor. The recommended vendor's price is underlined. Also attached is a Transformer Load Loss Evaluation. This evaluation shows the life cycle cost of the transformer over its useful lifetime, using a combination of loss calculations supplied by the transformer manufacturer and the unit price quoted by the vendor. To evaluate the lowest cost bid, the life cycle costs demonstrate the cost of the transformer over its "in-service" life, taking into