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Home My WebLink About07 - Single Source Purchase Order and Budget Amendment Approval for Liquid Sodium HypochloriteQ �EwPpRT CITY OF s NEWPORT BEACH `q44:09 City Council Staff Report December 13, 2022 Agenda Item No. 7 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Mark Vukojevic, Utilities Director - 949-644-3011, mvukojevic@newportbeachca.gov PREPARED BY: Steffen Catron, Utilities Water Manager, scatron@newportbeachca.gov PHONE: 949-644-3011 TITLE: Single Source Purchase Order and Budget Amendment Approval for Liquid Sodium Hypochlorite h\ 33 d:7±Tip 6 The Utilities Department administers the disinfection of the City of Newport Beach's (City's) drinking water supply. The main component of the disinfection is sodium hypochlorite (commonly referred to as chlorine). Significant price increases and availability fluctuations have occurred over the last year due to nationwide supply chain issues. A water enterprise fund budget amendment is necessary to fund the increased costs and staff recommends a single source purchase order to secure the purchase of the needed product for the remainder of the fiscal year. RECOMMENDATION: a) Determine this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly; b) Authorize a single source purchase order to Olin Corporation up to $140,000 for the purchase of liquid sodium hypochlorite; and c) Approve Budget Amendment No. 23-041 appropriating $140,000 in increased expenditures in Account No. 7019052-841018 and transferring funds from the Water Enterprise Fund unappropriated fund balance for the purchase of liquid sodium hypochlorite. DISCUSSION: Liquid sodium hypochlorite (a chlorine product) is used for the disinfection of the City's drinking water supply prior to the water entering the water distribution system. Highly sensitive equipment and analyzers measure, dose and monitor the liquid sodium hypochlorite amounts to specific set point parameters. The water is then retested by a laboratory at 30 different locations throughout the water distribution system. Approximately 100,000 gallons of sodium hypochlorite are used annually. 7-1 Single Source Purchase Order and Budget Amendment Approval for Liquid Sodium Hypochlorite December 13, 2022 Page 2 Over the last year, the price of sodium hypochlorite has doubled and future increases seem likely. The cost increases stem from higher energy, transportation, raw material and inflationary costs associated with producing the chlorine products. In addition, chlorine production in the United States has experienced a 10% decline, further exacerbating the problem. Product availability has also been a source of major concern. The water industry and the United States Environmental Protection Agency (USEPA) continue to acknowledge and make recommendations to water suppliers regarding potential shortages, disruptions to service, and a potential railroad strike. They also note that "water and wastewater systems are likely to see continued increases in the price of chlorine products, perhaps as frequently as on a quarterly basis, through the end of 2022, and potentially beyond." The City has been using Olin Corporation through purchase order contracts for many years, utilizing competitive pricing from the Orange County Water District. Olin Corporation is the largest North American manufacturer of sodium hypochlorite; however, it remains under a strict companywide order control program, to control the reliability of its deliveries. The City has had a long-standing relationship, and has maintained "a place in line" with Olin; deliveries, quality and responsiveness have remained reliable and consistent. With this years' price increases, the remaining budget and purchase order authority are insufficient for the remainder of the fiscal year. Normal recommendations would be to go out to bid for pricing. There are other companies that provide sodium hypochlorite; most of which are smaller distributors or manufacturers. A review of pricing received by other agencies indicates that Newport Beach's current pricing is lower or very competitive. With the reliability of delivery, Utilities staff believes that a continuation of the existing contract and existing relationship is the safest course of action for the next six months. A failure to obtain sodium hypochlorite could create a dire sourcing situation for the water system. In fact, of the many water industry recommendations and also listed on the USEPA website, water agencies are recommended to "establish contracts with suppliers that can ensure that your utility's orders are prioritized during a shortage..." Also, USEPA recommends "Utilities should consider adopting a quarterly bid process for chlorine products to ensure that prices accurately reflect the market..." Staff recommends that single source purchase order be established with Olin Corporation for up to $140,000 and the approval of a budget amendment drawing from the water enterprise funds reserved. In spring 2023, staff will reevaluate the market conditions, talk to neighboring agencies, and recommend a bid process commensurate with the current supply situation. FISCAL IMPACT - The budget amendment appropriates $140,000 in increased expenditure appropriations in Account No. 7019052-841018 from the Water Enterprise Fund unappropriated fund balance. 7-2 Single Source Purchase Order and Budget Amendment Approval for Liquid Sodium Hypochlorite December 13, 2022 Page 3 ENVIRONMENTAL REVIEW: Staff recommends the City Council find this action is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. NOTICING: The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). ATTACHMENT: Attachment A — Budget Amendment No. 23-041 7-3 Attachment A Budget Amendment No. 23-041 7-4 SEW PpRr City of Newport Beach BUDGET AMENDMENT 2022-23 BA#: 23-041 Department: Utilities ONETIME: ❑ Yes ❑ No Requestor: Steffen Catron Approvals ❑ CITY MANAGER'S APPROVAL ONLY Finance Director: ) Date 6ZZ 0 COUNCIL APPROVAL REQUIRED City Clerk: Date EXPLANATION FOR REQUEST: To approriate funds to the water system service account for the purchase of liquid sodium hypochlorite, which is used ❑ from existing budget appropriations to disinfect the City's drinking water supply prior to the water entering the water distribution system. ❑ from additional estimated revenues ❑� from unappropriated fund balance REVENUES Fund # Org Object Project Description Increase or (Decrease) $ Subtotal $ EXPENDITURES Fund # Org Object Project Description Increase or (Decrease) $ 701 7019052 841018 WATER SYSTEM SERVICE - TREATMENT CHEMICALS 140,000.00 Subtotals $ 140,000.00 FUND BALANCE Fund # Object Description Increase or (Decrease) $ 701 300000 WATER ENTERPRISE FUND - FUND BALANCE CONTROL (140,000.00) Subtotal', $ (140,000.00) Fund Balance Change Required 7-5