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SR 02-14-2017 3D Ci ty Council Report City Council Meeting : February 14, 2017 Agenda Item: 3.D 1 of 5 To: Mayor and City Council From: Susan Cline, Director , Public Works, Water Resources Subject: Purchase of Badger Water Meters Recommended Action Staff recommends that the City Council authorize the Purchasing Services Manager to issue a purchase order with Badger Meter, Inc., a Wisconsin -based company, for water meters and parts. This recommended award is made pursuant to Santa Monica Municipal Code Section 2.24.080 (b ) and is for a total amount not to exceed $300,000 through November 4, 2018 , with fut ure year funding contingent on Council budget approval. Executive Summary The City owns and is responsible for maintenance and replacement of water meters used to bill Santa Monica water customers for potable water usage. Badger water meters make up appr oximately 7,200 of the 18,100 meters in the City's inventory, of which 3,200 meters have exceeded the estimated 20 to 25 -year meter lifespan to maintain accurate water usage readings and are due for replacement. Staff recommends Council approve a purcha se order with Badger Meter, Inc. for approximately 2,000 water meter s through November 4, 2018 not to exceed $300,000. Pricing would be based on the same competitive ly bid City of Santa Barbara contract (Bid No. 5262A dated October 17, 2013) used to issue a purchase order awarded by Council on November 11, 2014 for up to $220,000 in Badger water meters for the City's Advanced Metering Infrastructure (AMI) Pilot project. Since competitive bidding procedures have been used by the City of Santa Barbara, separ ate bidding by the City is not required (Santa Monica Municipal Code, Section 2.24.080 (b)). Background The City owns and maintains approximately 18,100 water meters throughout its water distribution system. 98% of the City's inventory is sourced from three manufacturers: Neptune (7,500 meters), Badger Meter (7,200 meters) and Hersey (3,000 meters; acquired by Mueller Systems in 2010). On March 12, 2013 (Attachment A), Council awarded a purchase order to Badger Meter, Inc. for the purchase of replacem ent meters in various sizes and repair parts in the amount of $60,000 per year, for a total 2 of 5 amount of $180,000 over a three -year term, to rebuild or refurbish existing Badger meters within the City’s distribution system. On November 11, 2014 (Attachment B ), Council awarded a purchase order for $220,000 to Badger Meter, Inc. to fund an Advanced Metering Infrastructure (AMI) Pilot project for approximately 1,700 meters for a one -year term. This pilot was subsequently reduced to 200 meters to correspond to a five -year schedule of water rate increases not to exceed 9% annually approved by Council on February 24, 2015 (Attachment C) in lieu of 13% rate increases from 2016 to 2019 . Discussion Water meters are manually read by City staff on a bi -monthly cycle for billing purposes. Approximately 3,200 (45%) of the City's 7,200 Badger meters and 6,800 (38%) of the City's total number of water meters were installed on or before 1996, and have reached or exceeded 20 years of age. Water meters are recommended to b e replaced on a 20 - year cycle to maintain accurate usage readings. Over the past five years, Water Resources staff have replaced an average of 655 meters per year; however, in order to maintain a 20 -year replacement cycle, 905 meters would need to be repl aced annually which staff believes is an achievable goal. If approved, staff would focus resources on water meter replacements to modernize the City's inventory. Badger Meter, Inc. is a well -established manufacturer and supplier of meters throughout th e industry, and the Water Resources Division has been utilizing Badger meters in the City’s water distribution system for more than 30 years. Over this time period, Badger meters have proven to be reliable and staff has gained a familiarity in maintaining the various models/sizes installed throughout Santa Monica. Badger meters are also economical compared to other brands, with the majority costing between $70 (5/8" x 3/4" size) and $351 (2" size). Meters sized between 5/8" x 3/4" to 2" make up 96% of th e City's inventory. By comparison, a recent competitively bid purchase of 100 Neptune 5/8" x 3/4" T10 meters was made in June 2016 for $144.60 each, approximately double the price of an equivalent sized Badger meter. All new meters are enabled for automa tic meter reading should the City opt to expand 3 of 5 or continue the work to obtain real -time water usage data as part of the 200 account AMI Pilot project at a future date. AMI project “smart” meters provide real -time water usage data which allow customers to monitor water usage online via the City’s WaterSmart software. Instead of one meter read every two months, customers can immediately identify water leaks to prevent water waste as well as monitor and adjust their water usage to meet individual conservati on and budget goals. Vendor Selection Badger Meter , Inc. is the sole manufacturer and distributor of Badger meters in California. Similar to the purchase order Council awarded to Badger Meter, Inc. for the AMI Pilot project on November 11, 2014, staff re commends joining the City of Santa Barbara's contract with Badger Meter, Inc. based on Bid No. 5262A dated October 17, 2013 which solicited bids for water meters of similar technical specifications to those acceptable for use in Santa Monica's system under competitive bid procedures comparable to the City's. At an estimated purchase quantity of 4,250 meters per year, the City of Santa Barbara's contract provides the City of Santa Monica an opportunity to take advantage of pricing at economies of scale the City might not be able to achieve on its own based on estimated purchases of 900 to 1,000 meters per year. Staff has confirmed with the City of Santa Barbara that the contract is valid through November 4, 2018. Pursuant to section 2.24.080(b) of the Sa nta Monica Municipal Code, Exception to Competitive Bidding, competitive bid procedures by the City need not be undertaken if they have already been utilized by Federal, State, County, City or special district government agencies, and these materials and s ervices are supplied to the City at the same or better price, as was obtained through competitive bid procedures of Federal, State, County, City or special district government agencies. The City of Santa Barbara has used competitive bidding procedures. The Public Works Department also contacted another vendor who stated that they could not match or beat the Badger contract awarded by the City of Santa Barbara. 4 of 5 Staff recommends awarding a purchase order to Badger Meter, Inc. in an amount not to exceed $300,000. Alternatives The City could opt to issue an RFP for purchase of meters from other manufacturer s . However, staff anticipates that this will not result in better pricing due to the economies of scale achieved under the City of Santa Barbara’s co ntract. Neptune meters have historically been more expensive compared to the same size of Badger meter; therefore, although staff has observed the quality of Neptune meters to be satisfactory, smaller purchase amounts are planned moving forward due to thi s higher cost . Staff has found that Hersey meters do not meet the same levels of reliability or customer service as Badger or Neptune meters. For this reason the City discontinued purchase of Hersey meters in 2010. On October 13, 2015 (Attachment D), Cou ncil awarded a competitively bid purchase order to Metron -Farnier for purchase of single jet water meters for 3 years not to exceed $211,500; however, these meters are for higher usage multi -family and commercial lines (less than 2% of the City's inventory ), cost significantly more per unit and are not suitable for smaller lines. To take advantage of favorable pricing, staff recommends continuing with Badger Meter , Inc. supplemented by smaller purchases of other brands of meters as needed. However, to avo id becoming solely reliant on one brand of meter, and to ensure an open and competitive process, staff also recommends bidding out provision of water meters on the open market closer to the expiration date of the City of Santa Barbara Badger Meter contract on November 4, 2018. Financial Impacts and Budget Actions The purchase order to be awarded to Badger Meter, Inc. is for an amount not to exceed $300,000. Funds in the amount of $150,000 are available in the FY 2016 -17 budget in the Public Works Departm ent. The purchase order will be charged to account 5 of 5 25671.544010. Future year funding is contingent on Council budget approval. Prepared By: Kevin Nagata, Senior Administrative Analyst Approved Forwarded to Council Attachments: A. March 12, 2013 Staff Report - Purchase of Water Meters and Repair Parts B. Novembe r 11, 2014 Staff Report - Purchase of Water Meters for Advanced Meter Infrastructure (AMI) Pilot C. February 24, 2015 Council Meeting Minutes - Item 9 -A - Public Hear ing to Adopt Water Rates D. October 13, 2015 Staff Report - Award Purchase Order for Single Jet Water Meters E. Oaks Initiativ e Disclosure Form - Badger Meter, Inc.