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Home My WebLink AboutJones Chemical Inc. - Sole Source Procurement - Chlorine Gas 5�� INr jo 2000 Main Street, o,1 ti, Huntington Beach,CA s Cityof Huntington Beach 92648 APPROVED 7-0 92cF��UNTY CP��Q P File #: 24-625 MEETING DATE: 9/17/2024 REQUEST FOR CITY COUNCIL ACTION SUBMITTED TO: Honorable Mayor and City Council Members SUBMITTED BY: Eric G. Parra, Interim City Manager VIA: Chau Vu, Director of Public Works PREPARED BY: Chris Davis, Senior Management Analyst Subject: Approve Sole Source Procurement Request with Jones Chemical (JCI) for Chlorine Gas Statement of Issue: Submitted for City Council approval is a sole source procurement request in the amount of$150,000 annually for the purchase of chlorine gas from JCI. Financial Impact: Staff is requesting authorization for procurement of chlorine in an amount up to $150,000 annually. There is sufficient funding for the purchase of chlorine within the FY 2024/25 Water Fund Budget and no additional appropriations are requested at this time. Recommended Action: Approve the sole source procurement request for the annual purchase of chlorine gas from JCI. Alternative Action(s): Do not approve the recommended action and direct staff accordingly. Analysis: The City annually produces approximately 20,000 acre-feet (AF) of water from the City's nine potable drinking water wells. Water produced from these wells is continuously chlorinated using gaseous chlorine, which is American National Standards Institute/National Science Foundation (ANSI/NSF) Standard 60 certified, as required under the City's Domestic Water Permit. The City has used chlorine gas as the primary disinfection method since the Utility Division's creation in 1964. Up until Fiscal Year 2019/20, the average annual chlorine supply cost had been less than $30,000 and was procured in accordance with Huntington Beach Municipal Code (HBMC) Section 3.02.070 for Small Procurements. However, the price of chlorine has more than doubled due to raw material cost increases for chlorine and sodium hydroxide products. Additionally, the Orange County City of Huntington Beach Page 1 of 2 Printed on 9/11/2024 powere9l@-'LegistarTM File #: 24-625 MEETING DATE: 9/17/2024 Water District has allowed groundwater producers to pump a larger portion of their potable water demand, which, while much cheaper than importing water, results in a corresponding increase in demand for chlorine. As a result, the annual procurement cost of chlorine gas will exceed the amount allowable for small procurements. JCI is the only supplier of ANSI/NSF Standard 60 certified 1-ton and 150-pound chlorine gas cylinders suitable for use in public potable water distribution systems. JCI's nearest facility is in Torrance, CA. The closest alternate chlorine supplier is Olin Corporation in Freeport, Texas. Per Huntington Beach Municipal Code Chapter 3.02 Purchase of Goods and Service, sole source procurements are allowed in cases where the procurement of any product or supply is obtainable only from a single, or sole source. Such purchases above $50,000 require City Council approval. Chlorine disinfection allows the City to serve well water at a current cost of$688 per acre-foot. Without chlorine gas and the ability to sole source from JCI, the City would be forced to import its water supply from the Municipal Water District of Orange County (MWDOC) at a cost of$1,256 per acre-foot. Environmental Status: This action is covered by the General Rule that the California Environmental Quality Act (CEQA) applies only to projects that have the potential for causing a significant effect on the environment (Section 15061.b.3 of the State CEQA Guidelines). It can be seen with certainty that there is no possibility that this activity will have a significant effect on the environment. Therefore, this activity is not subject to CEQA. Strategic Plan Goal: Non Applicable - Administrative Item For details, visit www.huntingtonbeachca.gov/strategicplan. Attachment(s): 1. Sole Source Justification 2. Power Point City of Huntington Beach Page 2 of 2 Printed on 9/11/2024 powered LegistarM 1,1 x °per CITY OF HUNTINGTON BEACH Sole-Source Justification fe E4oV-'-''ik°! (For use on all goods and services acquisitions.) This justification document consists of two(2)'pages. All information must be provided and all questions must be answered. The"Required Approvals"section must include a date for each signature,as appropriate for the transaction. Re questing Department,lnformation` Date: August 7, 2024 Requestor Name: Vince Madrid Division Manager: Alvin Papa (Type names. Do not sign.) Department: Public Works Department Head: Chau Vu (Type names. Do not sign. Must be same as signature below.) Department Contact information Contact Name: Chris Davis Street Address: 19001 Huntington Street Telephone: 714-374-1641 Fax: Shipping Address: 19001 Huntington.Street Cellular phone: Required:Contact Information Contractor/Supplier Name: JCI Jones Chemicals,Inc. Contractor/Supplier Address: 2801 Post Oak Blvd,Suite 600 Contractor/Supplier City/State/Zip: Houston,TX 77056 Original Contract Amount:* Amendment Amount:*(if applicable) New Contract Amount:* $30,000 $ $150,000 annually (*Includes original contract and previously (*Includes original contract and all amendments, approved.amendments) (*Current amendment only) including current amendment) Provide a brief description of the acquisition, including all goods and/or services the contractor will provide: Chlorine Contract Type and Term` Contract Type: Contract Term: What account number will be used to purchase? Select One: Goods Begin: 7/1/2024 Business Unit: 50685803 ❑, Service ❑ Goods&Services End: Object Code: 64305 Required Approvals Department Head Fipance Manager Budget chief Financial Officer ssistant City Manager 4Approved ❑Denied ®Approved 0 Denied Ca Approved El Denied Approved 0 Denied ist i nature Signature ignature ° e f 11 c l l?0 / Signature I/ Date 77 Date Date /f 67 _-9 Date (Transactions exceeding$50,000 must be approved by City Council) 469 1 CITY OF HUNTINGTON BEACH Sole Source Justification azoU„Tv c9;;1 (For use on all goods and services acquisitions.) Complete responses must be provided for all of the following items. A. THE GOOD/SERVICE REQUESTED IS RESTRICTED TO ONE SUPPLIER FOR THE REASONS STATED BELOW: 1. •Why is the acquisition restricted to this goods/services/supplier? (Explain why the acquisition cannot be competitively bid.) In the western United States,JCi Jones Chemicals, Inc.(JCI) is the only known supplier of 1-ton and 150- pound chlorine gas cylinders suitable for use in public potable water distribution systems. JCI's nearest facility is in Torrance,California. The next nearest alternate chlorine supplier is Olin Corporation,whose nearest chlorine plant and distribution center is located in Freeport,Texas. A reliable and high-quality chlorine supply is crucial to our water system, and the public health and safety of the Huntington Beach residents. In the past year,there have been supply chain disruptions due to force majeures and lack of trucking ability. The Utilities Division has qualified staff with Class B driver licenses with HAZMAT and Tank Vehicle Endorsements. JCI's facility in Torrance allows staff some operational flexiblity to ensure that chlorine deliveries are not impacted. There is no known equal. 2. Provide the background of events leading to this acquisition. The Utilities Division uses chlorine gas to treat water pumped from the groundwater water wells. The City has used JCi for over 15 years. Historically,the annual chlorine supply cost was less than $30,000 and was procured using non-competitive procurement in accordance with Huntington Beach Municpal Code (HBMC)Section 3.02.070 Small Procurements. Since 2021,the price of chlorine gas has more than doubled due to raw material cost increases for chlorine and sodium hydroxide products. Due to these price increases,the planned annual procurement cost of chlorine exceeds the amount allowable for Small Procurements per the HBMC. 3. Describe the uniqueness of the acquisition (why was the good/service/supplier chosen?). The City has used chlorine gas as the primary disinfection method since the Utility Division's creation in 1964. All of the City's wells and reservoirs are outfitted to disinfect water using chlorine gas only. There is no alternate method available. JCI was selected because they are the only known chlorine gas supplier of 1-ton and 150 pound cylinders in our region. FYI-In June 2022,the City of Long Beach advertised and bid for their chlorine gas supply. 104 potential vendors were notified of the opportunity. Only one (1) bid was received. The firm was JCI. 4. What are the consequences of not purchasing the goods/services or contracting with the proposed supplier? Without chlorine gas,the City would be forced to import its water supply from the Municipal Water District of Orange County (MWDOC) and pay almost double the cost of groundwater. The cost of imported water from MWDOC is currently$1,256 per acre-foot.' The Orange County Water District(OCWD)cost to pump groundwater from the City's wells is$688 per acre-foot plus$95 per acre- foot in energy and operating costs. 470 2 5. What market research was conducted to substantiate no competition, including evaluation of other items considered? (Provide a narrative of your efforts to identify other similar or appropriate goods/services,including a summary of how the department concluded that such alternatives are either inappropriate or unavailable. The names and addresses of suppliers contacted and the reasons for not considering them must be included OR an explanation of why the survey or effort to identify other goods/services was not performed.) As noted,there are no other known suppliers of chlorine gas for 1-ton and 150 pound cylinders in the western United States. As a result, reliabilty and timely delivery cannot be assured. Furthermore,the additional costs of hazardous material chlorine delivery via railcar, transoceanic shipping,and other long distances would be an unnecessary premium. B. PRICE ANALYSIS 1. How was the price offered determined to be fair and reasonable? (Explain what the basis was for comparison and include cost analyses as applicable.) There are few remaining agencies using chlorine gas for potable water disinfection. Currently,we pay $362 per 150 pound cylinder.The City of Tustin is the only other City in Orange County that uses chlorine gas. They currently pay$437 per 150 pound cylinder which is 20% more. For 1-ton cylinders, we currently pay$1,615 per 1-ton cylinder. Tustin's system is too small to need a one-ton. 2. Describe any cost savings realized or costs avoided by acquiring the goods/services from this supplier. The City of Huntington Beach is expected to save 20% in chlorine gas costs when compared to the only known agency in the region who uses chlorine. If the City is force to import water because we cannot pump water from the basin,the cost is $473 more per acre-foot as noted in A4. Assuming total demand of 25,000 AF,the 85% Basin Pumping Percentage of 21,250 Acre-Feet;would result in an increased cost to the City of$10,051,250. Remit completed form to: City of Huntington Beach—Purchasing Division 2000 Main Street,Huntington Beach,CA 92648-2702 471 3 /,,r�'ar►'►'"''�'► 11IN Gior .. tSZ\ 04, •.'' Approve Sole Source \,% .• ,011PORgT , �. '` ---- --- - - _ __ .c); Procurement Request . , �� fr ,,,,,. with Jones Chemical ._--- _-_____ - _ - ,,. : for Chlorine Gas , , /,,.....--,---7, „ ),,,,,,,r ....-......4% .. . "A . ,,,•' _ , 1,, • 411, % ;r ;: O e0. 0 ..1111.- < 1 0 September 17, 2024 °OUNTN p 472 Jones Chemical (JCI • Request for authorization to purchase up to $150,000 annually in chlorine gas from JCI • Chlorine Gas required to disinfect groundwater from wells • Annual Demand of 20,000 Acre-feet of groundwater • Jones Chemical only supplier of chlorine gas on West Coast • Groundwater costs $688 per acre-foot to produce. If the city cannot produce groundwater, City will have to purchase import water at $1 ,256 per acre-foot i *�NAINGpoRAre To� • Failure to approve will require pumping of import water I� instead at an additional cost of $10 million per year \2cF., 17 a . • , \<o ,r =00UNTY C'//#1 473 Questions ? , . ,,:z„,i,, .. _ .4,5.,,,,...1,„ ,.. , .,..,„ �' I:1 f.;;�,t 4 , V� �. I;,, r ;„, ' , .emu° "' � ° `a�itk '".' sir Z ,r ? g/ ' .l .. }J yr : ,.+%+'i, 'T'� ? ♦,.J� it # _ .: js C t ,..,�4^ 7 �a n ri � '`'.- i'. ''''..-* • d' - nY a d to 474