Resolution No. 82561 RESOLUTION NO. 8256
2
3 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
VERNON APPROVING AND AUTHORIZING THE EXECUTION OF A
4 LETTER AGREEMENT BY AND BETWEEN THE CITY OF VERNON
AND PETRELLI ELECTRIC, INC. REGARDING THE VERNON
5 ELECTRIC SYSTEM
6
7 WHEREAS, the City of Vernon owns and operates its own
8 electric system (the "Electric System") which services the City's
9 constituents; and
10 WHEREAS, on July 28, 1998, the City Council of the City of
11 Vernon approved Resolution No. 7190 approving an Electric System
12 Maintenance Agreement (the "Renewal Agreement") with RMI Utility
13 Services ("RMI-US"), now known as Navigant, effective August 1, 1998
14 through July 31, 2009; and
15 WHEREAS, in accordance with Section 10 of the Renewal
16 Agreement, the City's written consent is needed to an assignment and
17 the City is in the process of reviewing a proposed assignment; and
18 WHEREAS, pursuant to the Renewal Agreement, the City has the
19 right to retain its own subcontractors in order to provide service for
20 the Electric System if such services cannot, or are not provided by
21 RMI-US under the Renewal Agreement; and
22 WHEREAS, in order to make sure that backup service is
23 available during the transition, if necessary, Kenneth J. DeDario,
24 Director of Utilities, has recommended that the City enter into a
25 letter agreement with Petrelli Electric, Inc. ("Petrelli") to provide
26 backup maintenance and emergency services for the Electric
27 System; and
28 WHEREAS, by letter dated July 31, 2003, Bruce V.
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Malkenhorst, City Administrator/City Clerk, has recommended that the
interim letter agreement with Petrelli to provide Electric System
maintenance services be executed; and
WHEREAS, the City Council of the City of Vernon has
determined that, pursuant to the provisions of subsection (a) of
Section 2.27 of the Vernon City Code, it is in the public interest and
necessity to enter into a Letter Agreement with Petrelli.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF VERNON AS FOLLOWS:
SECTION 1: The City Council of the City of Vernon hereby
finds and determines that the recitals contained hereinabove are true
and correct.
SECTION 2: The City Council of the City of Vernon hereby
approves the Letter Agreement with Petrelli Electric, Inc., a copy of
which is attached hereto as Exhibit "A" and made a part hereof.
SECTION 3: The City Council of the City of Vernon hereby
authorizes the City Administrator to execute said Letter Agreement
for, and on behalf of, the City of Vernon.
SECTION 4: The City Council of the City of Vernon hereby
directs the City Clerk, or his designee, to send two executed Letter
Agreements to:
Petrelli Electric, Inc.
Attn. Sal Petrelli
11615 Davenport Road
Agua Dulce, CA 91390
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SECTION 5: The City Clerk of the City of Vernon shall
certify to the passage of this resolution, and thereupon and
thereafter the same shall be in full force and effect.
APPROVED AND ADOPTED this 6tn day of August, 2003.
LEONIS C. MA BURG, rMayor
ATTEST:
IBRUCE V. MALKENHORST, City Clerk
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STATE OF CALIFORNIA )
ss
COUNTY OF LOS ANGELES }
I, BRUCE V. MALKENHORST, City Clerk of the City of Vernon, do
hereby certify that the foregoing Resolution, being Resolution No.
8256, was duly adopted by the City Council of the City of Vernon at a
regular meeting of the City Council duly held on Wednesday, August 6,
2003, and thereafter was duly signed by the Mayor of the City of
Vernon.
(SEAL)
BRUCE V. MALKENHORST, City Clerk
- 4 -
EXHIBIT
0
CITY COUNCIL
LEONIS C. MALBURG
Mayor
THOMAS A. YBARRA
Mayor Pro-Tem
WM. 'BILL" DAVIS
. Councilman
H. "LARRY" GONZALES
Councilman
W. MICHAEL MCCORMICK
Councilman
BRUCE V. MALKENHORST
City Administrator/City Clerk
FAX (323) 826-1438
CITY HALL
4305 SANTA FE AVENUE, VERNON, CALIFORNIA 90058
TELEPHONE (323) 583-8811
July 30, 2003
LETTER AGREEMENT
Petrelli Electric, Inc.
Attention: Sal Petrelli
11615 Davenport Road
Agua Dulce, CA 91390
EDUARDO OLIVO
City Attorney
FAX: (562) 869-1883
KEVIN WILSON
Director of Community Services & Water
FAX: (323) 826-1435
KENNETH J. DeDARIO
Director of Utilities
FAX: (323) 826-1425
STEVEN E. PARKER
Fire Chief
FAX: (323) 826-1407
BRUCE W. OLSON
Police Chief
FAX: (323) 826-1481
Re: Letter Agreement for Backup Maintenance and Emergency
Services for the City of Vernon Electric System
Gentlemen:
The City of Vernon ("City") owns and operates its own
electric system (the "Electric System"), which serves the City's
constituents. The City currently has a Maintenance and Services
Agreement (the "Agreement") with RMI-US Inc. (now known as
Navigant), pursuant to which RMI-US maintains and services the
Electric System. The City is in the process of reviewing a
proposed assignment of the Agreement. Pursuant to the
Agreement, City has the right to retain its own subcontractors
in order to provide service for the Electric System if such
services cannot; or are not provided by RMI-Us under the
Agreement. In order to avoid potential disruption of service
during the transition of the Agreement, City has discussed the
potential need for backup maintenance and emergency services
with Petrelli Electric, Inc. ("Petrelli"). Petrelli has agreed
that it can provide such services, if
Petrelli Electric Co.
Letter Agreement
Page 2
July 30, 2003
necessary, pursuant to the terms and conditions of the
Agreement.
Based upon the above, the City and Petrelli
(hereinafter referred to as "the Parties") have agreed to enter
into this Letter Agreement. The Parties do mutually agree to
this Letter Agreement subject to the following terms and
conditions:
1. Effective Date. This Letter Agreement will become
effective on August 6, 2003, after approval by the City of
Vernon Council. If such approval occurs on a letter date,
the Letter Agreement will become effective on the date of
such later approval.
2. Scope of Services. Petrelli shall provide the services set
forth in the Scope of Services, which is attached hereto as
Exhibit A and incorporated herein by,reference.
3. Insurance. Petrelli shall provide the insurance set forth
in the Insurance Schedule attached hereto as Exhibit B, and
shall provide a letter from its insurance company that
certifies the amounts of the insurance policy. The letter
from the insurance company will be in substantially the
same form as the SAMPLE INSURANCE FORM LETTER, which is
also attached hereto as Exhibit B. This Letter Agreement
will not become effective until such letter is provided to
the City.
4. Work Authorizations. All work by-Petrelli shall be
accomplished under approved work authorizations and will be
scheduled with the City with the exception of emergency
work). Work authorizations fall under one.of .three
categories:
A. Major Work. Major modifications, extensions,
additions, improvements, including large maintenance
jobs shall be accomplished under pre -approved work
orders. Large maintenance jobs are defined as those
estimated in advance to take more than four (4) man -
days.
1
Petrelli Electric Co.
Letter Agreement
Page 3
July 30, 2003
B. Emergency Work. Emergency repairs will be initiated
as soon as possible under a pre -assigned, but not
approved, work order number. Petrelli shall seek
City's approval for the work order at the start of the
next business day after the work is initiated.
C. Routine Work. Routine operations and maintenance work
shall be completed under pre -approved standing work
orders specifically established for these activities.
Routine work will include line patrol, switching,
replacement of minor components, minor modifications
and additions, and other routine work normally
required on electric utility systems. Petrelli and
City will collaborate in establishing a number of
standing work order for routine operations and
maintenance work.
5. Fees and Costs. City shall pay Petrelli for the services
provided under this Letter Agreement pursuant to the rates
and charges set forth in the FEES FOR SERVICES, which is
attached hereto as Exhibit D and incorporated herein by
reference.
6. Invoices. Petrelli shall submit an invoice to City within
thirty (30) days of the end of any month in which services
have been performed or costs incurred by Petrelli. The
invoice shall state the amount. due to Petrelli and itemize
the services performed. City shall pay such invoice within
15 days of receipt.
7. Termination. Petrelli understands that City has only
entered into this Letter Agreement to provide for backup
services and that City is currently reviewing a proposed
assignment of the Agreement. City will, eventually, be
executing a new Maintenance and Services Agreement with the
company that will replace RMI-US. The City may, or may not
require services from Petrelli pursuant to this Letter
Agreement and may terminate this Letter Agreement at any
time, without cause.
8. Applicable Law. The laws of the State of California shall
govern this Letter Agreement.
Petrelli Electric Co.
Letter Agreement
Page 4
July 30, 2003
9. Amendments or Change Orders. The parties may amend this
Letter Agreement or agree to change orders at any time in
the future. The Vernon City Council must approve any such
amendments or change orders.
Please confirm your acceptance of this Letter
Agreement by return.
Sincerely,
CITY OF VERNON
By:
Bruce V. Malkenhorst
City Administrator
APPROVED AS TO FORM:
By : �Ps6�ct
Eduardo Olivo, Cites Attorney
ACCEPTED BY PETRELLI ELECTRIC, INC.
Name
Title
Name
Title
EXHIBIT A
EXHIBIT A
SCOPE OF SERVICES
A. For purposes of this Letter Agreement, "Electric System shall mean all
transmission, distribution, substation, and communication facilities now or
hereafter owned by City for providing electric service in City including, but not.
limited to, transmission, overhead and underground distribution systems, street
lighting systems, substations, transformers, and service lines. During the term of
this Letter Agreement, Petrelli shall provide services with regard to City's Electric
System which shall include, but not be limited to, the following:
i. Provide construction services and maintain City's Electric System in a
safe and reliable condition. Such work shall include, but not be limited to,
switching, performing routine and emergency repairs, and construction on
City's Electric System.
ii. Make all modifications, extensions, additions, and improvements in and to
City's Electric System, as shall from time to time be required or necessary
to serve in a safe and reliable manner the electric power requirements of
City and its customers, both present and future.
iii. Furnish all labor, supervision, and services and in the event not furnished
by City, transportation, equipment, materials, supplies, and tools of
whatsoever kind or nature as shall from time to time be required or
necessary to carry out the terms and provisions of this Letter Agreement,
including, but not limited to, maintenance of office and field staffs, and
construction and operations headquarters within City limits, as shall be
required or necessary to meet the needs and requirements of City and its
customers, both present and future.
iv. Furnish to City current accountings and reports, with supporting data
covering activities engaged in and work performed by Petrelli to this
Letter Agreement.
v. Make electrical measurements and reports as requested by City to provide
operational data on City's Electric System.
vi. Install transformers, switches, cutouts, lines, and other facilities on the
transmission and distribution system as required for repairs, replacements,
new customers, and system expansion.
vii. Remove underground and overhead facilities no longer needed, as
approved by Vernon consistent with Exhibit C.
viii. Perform other work on underground and overhead systems as required.
ix. Carry out troubleshooting activities including responding to customer calls
and complaints, traveling to various sites in City, assessing and estimating
failures or damages, safely restoring service as quickly as possible, and
reporting on system and equipment status.
x. Provide all engineering and management support services as shall from
time to time be required and approved, including, but not limited to,
transmission and distribution planning and engineering, substation
modifications and additions, and other required services.
b. All work shall be performed in accordance with City's standards, codes, rules,
regulations, and operating procedures. Where no such applicable code, rule,
regulation, or operating procedure exists, Petrelli shall perform work in
accordance with good utility practice.
c. All work shall be performed pursuant to work authorizations as described in
Exhibit C attached hereto. Such exhibit may be revised from time to time by
mutual agreement of the Parties, consistent with the terms of this Letter
Agreement.
d. Petrelli shall provide a minimum level of employee staffing and said staff shall be
dedicated to perform services on City's Electric System.
e. Petrelli shall not accept or bid for any work for any of the customers of City
located within City unless City provides its written consent and agrees that such
work shall not constitute a conflict of interest.
f. Petrelli agrees that it shall provide services and operate City's Electric System for
and on behalf of City, subject to and in accordance with good utility practice and
within the terms and provisions of this Letter Agreement and direction given by
City's authorized representative. Petrelli shall also respond to City's
requirements for any and all City purposes and of all customers of City's Electric
System, both present and future, and shall provide safe, proper, efficient and
reliable services as provided under good utility practice.
EXHIBIT B
INSURANCE SCHEDULE
Petrelli shall provide proof of insurance, including a standard certificate of insurance, in at least
the following amounts and coverage (combined single limit permitted):
I Coverage and Limits
Bodily InjuiX Property Damage
Hazards Each Person Each Accident Each Accident
Automobile Liability
Owned Automobiles $ 500,000 $1,000,000 $ 500,000
Hired Automobiles $ 500,000 $1,000,000 $ 500,000
Non -Owned Automobiles $ 500,000 $1,000,000 $ 500,000
Workers' Compensation $ Statutory
Employers' Liability $1,000,000 per employer
II. General and Professional Liability
General Liability
$1,000,000
$2,000,000
$1,000,000
Premises Operations
$1,000,000
$2,000,000
$1,000,000
Elevators (If Applicable)
$1,000,000
$2,000,000
$1,000,000
Independent Contractors
$1,000,000
$2,000,000
$1,000,000
Products - Completed Operations
$1,000,000
$2,000,000
$1,000,000
Contractual Liability
$1,000,000
$2,000,000
$1,000,000
Umbrella Liability
$2,000,000
$2,000,000
$2,000,000
a. The general liability policy shall contain the following special endorsements which shall be
noted on or attached to the standard certificate of insurance:
1. An endorsement naming the City of Vernon, its officers, and employees as additional
insureds under the policy.
2. An endorsement providing the City of Vernon thirty (30) days notice of cancellation or
material reduction of coverage.
3. An endorsement providing coverage for all operations under this Agreement.
4. Such other endorsement as may be required by addendum hereto.
b. In addition to the standard certificate of insurance, proof of general and professional liability
coverage shall be furnished in the form checked below. Only certification of the following
proofs will be accepted:
X For each policy, a notarized letter from the underwriter or carrier certifying that the
coverage and statements in the standard certificate of insurance (attached thereto) are true
and correct and that the signator is an officer authorized to so certify.
A copy of each policy certified by an officer of the underwriter or carrier and notarized.
B-1
SAMPLE INSURANCE FORM LETTER
(To be issued on insurance carrier letterhead. This letter must be notarized).
Date:
City of Vernon
4305 Santa Fe Avenue
Vernon, CA 90058
Attn: Risk Management Department
Re: Insurance for City of Vernon
(description of permit or contract)
Policy Number(s)
Named Insured:
City Clerk:
I hereby certify that the certificate of insurance attached hereto and made a part hereof by
reference truly and accurately represents the above -cited insurance policies and the insurance
coverage of each for the named insured issued by
(insurance carrier).
The City of Vernon, its officers, and employees are included in said policies as additional
insureds and the City of Vernon will be provided with thirty (30) days written notice of
cancellation or material reduction of coverage.
I certify that I am an officer of the insurance carrier named herein and that I am
authorized to sign this certificate on behalf of said insurance carrier.
12/91
Signature
Title
B-2
EXHIBIT C
EXHIBIT C
FEES FOR SERVICES
For services provided by Petrelli to City pursuant to this Letter Agreement, City shall pay
Petrelli in accordance with the rates and charges set forth below.
Rates for June 1, 2003 — December 31, 2003
Hourly Labor Rates per Classification
Classification Straight Time Double Time
General Foreman $ 94.00 $ 188.00
Foreman $ 88.00 $ 176.00
Lineman $ 84.00 $ 168.00
Groundman $ 65.00 $ 130.00
Operator $ 72.00 $ 144.00
There is also a subsistence, which will be added daily per man as required by IBEW
Local 1245. Subsistence is $40.00 per day per man.
Hourly Equipment Rates
E ui ment
Rates
Flatbed Truck
$ 11.00
Altec 4065 Derrick
$ 42.00
Altec 947 Derrick
$ 34.00
Altec AM855 Bucket
$ 33.00
Altec AM900 Bucket
$ 35.00
Altec A77TE93 Bucket
$ 44.00
Teco V7-75 Bucket
$ 35.00
Hogg Davis Wiener Hound
$ 8.00
Large Reel Trailer
$ 12.00
Pole Dolly
$ 8.00
Sherman Reilly Puller
$ per job basis
SUPPORTING
DOCUMENTS
CITY COUNCIL
LEONIS C. MALBURG
Mayor
THOMAS A. YBARRA
Mayor Pro—Tem
WM. 'BILL" DAVIS
Councilman
H. "LARRY" GONZALES
Councilman
W. MICHAEL MCCORMICK
Councilman
BRUCE V. MALKENHORST
City Administrator/City Clerk
FAX (323) 826-1438
City Council
City of Vernon
Honorable Members:
472
AX
EDUARDO OLIVO
r'611 City Attorney
" 0\� FAX: (562) 869-1883
KEVIN WILSON
Director of Community Services & Water
FAX: (323) 826-1435
KENNETH J. DeDARIO
Director of Utilities
FAX: (323) 826-1425
STEVEN E. PARKER
Fire Chief
FAX: (323) 826-1407
CITY HALL BRUCE W. OLSON
4305 SANTA FE AVENUE, VERNON, CALIFORNIA 90058 Police Chief
TELEPHONE (323) 583-8811 FAX: (323) 826-1481
July 31, 2003 a
C .
0
The Utilities Department has been investigating the possibility of
replacing the services of RMI Utility Services (RMI-US) for electric
system maintenance with PAR Electrical Contractors, Inc. (PAR), a
wholly owned subsidiary of Quanta Services, Inc. Utility's staff and
the City Attorney initiated discussions with Navigant Corporation,
Inc. and PAR to discuss PAR's ability to perform the same duties as
RMI-US. After further discussions, it was determined that other
options should also be considered. Therefore, it is recommended that:
• The City Attorney advise the City Council of its options
under the RMI-US Electric System Maintenance Agreement,
• An interim letter agreement with Petrelli Electric Company
to provide backup electric system maintenance services be
approved and executed and;
• An informal RFP process for a new qualified contractor to
provide electric system maintenance services be initiated.
This has been reviewed by the Utilities Department and the City
Attorney, and it is hereby recommended that the above recommendations
be approved.
Very truly yours,
Bruce V . Malkenho st
City Administrat /City Clerk
BVM/gm
r
` CONFIDINTIAL
July 30, 2003
TO: Bruce V. Malkenhorst, City Administrator
FROM: Kenneth J. DeDario, Director of Utilities K
SUBJECT: Proposed Assignment of RMI Utility Services Agreement
To Quanta Services/PAR Electric
The Utilities Department has been evaluating the proposed assignment of the RMI Utility
Services Electric System Maintenance Agreement to PAR Electrical Contractors, Inc., a wholly
owned subsidiary of Quanta Services, Inc.
The Utilities Department and the City Attorney met with Navigant Corporation, Inc. and PAR to
discuss PAR's capabilities to be the right fit for the proposed assignment of the RMI-US
Agreement to PAR. The responses during the meeting and to the follow-up questions have not
been fully responsive. Some of the Utilities Department concerns are noted below:
- Responses from PAR are inadequate.
- PAR's responses are not tailored to meet City's needs.
- PAR's representatives at the July 9th meeting had not reviewed the RMI-US
Agreement with the City.
- Although PAR assured us during the meeting that PAR would provide a
"dedicated" crew to Vernon, we are not convinced. PAR is a very large outfit that
is used to working as a subcontractor bringing in linemen as needed rather than
tailoring their crews to specific needs.
PAR's recommendation for the manager position does not appear to be the best
qualified based on the resume presented.
Navigant has not demonstrated that it has done its due diligence to ensure that
PAR is the best contractor to meet the City's needs. For example Navigant
suggested POTELCO, a sister company to PAR working for Puget Sound Energy,
as an example of PAR's abilities. POTELCO and PAR have no relationship other
than they are sister companies.
- The reference list provided by PAR is not current - contact numbers for City of
Colorado Springs and Lincoln Electric System are disconnected. These utilities
are similar in size to Vernon.
- Other references contacted have not responded (SCE, SDG&E).
- PAR performed one project for City of Anaheim to replace direct buried cables.
Anaheim was happy with PAR's performance but cautioned that work had to be
monitored closely to prevent change orders
- Kansas City based PAR Electrical Contractors provided services to the City
Utilities of Springfield (Missouri). The Springfield representative is very satisfied
with PAR's performance; however, he stated that it comes down to the managers
and supervisors that take pride and implement the work and that it also comes
down to the work ethics of all involved.
a
i
Page — 2
PAR has worked for Vernon as a subcontractor in the past and had two safety
incidents. PAR has not convinced us that the proper steps have been taken to
ensure these incidents don't reoccur.
It is questionable whether PAR would provide the dedicated and tailored service that Vernon
requires. If their lack of responsiveness to requests for information to sell their services to us is
an indication of how they would respond to us in a daily manner, then PAR is not the right
contractor for Vernon.
Based on the above,it is not apparent that PAR is a good fit to replace RMI-US to handle the
City's electric system maintenance; therefore, I recommend the following:
terminate the agreement with RMI-US;
a letter agreement with Petrelli Electric Co. to provide electric system
maintenance for the City in case the RMI-US crew leaves when the termination
notice is issued or while seeking a replacement;
the letter agreement with Petrelli provide for the same conditions as the RMI-US
agreement except for the rates, if Petrelli's rates are better;
an informal RFP process to solicit bids from contractors to permanently replace
RMI-US; and
- contact PAR, Petrelli, Henkels & McCoy, SCE and other possible contractors to
be included in the bidders' list.
If you have any questions or comments, please contact me. Thank you for your consideration.
KJD:ah
c: Eduardo Olivo, City Attorney
CITY COUNCIL
LEONIS C. MALBURG
Mayor
THOMAS A. YBARRA
Mayor Pro—Tem
WM. "BILL" DAVIS
Councilman
H. "LARRY" GONZALES
Councilman
W. MICHAEL MCCORMICK
Councilman
BRUCE V. MALKENHORST
City Administrator/City Clerk
FAX (323) 826-1438
CITY HALL
4305 SANTA FE AVENUE, VERNON, CALIFORNIA 90058
TELEPHONE (323) 583-8811
Mr. Bruce V. Malkenhorst
City Administrator/City Clerk
4305 Santa Fe Avenue
Vernon, California 90058
July 30, 2003
EDUARDO OLIVO
City Attorney
FAX: (562) 869-1883
KEVIN WILSON
Director of Community Services & Water
FAX: (323) 826-1435
KENNETH J. DeDARIO
Director of Utilities
FAX: (323) 826-1425
STEVEN E. PARKER
Fire Chief
FAX: (323) 826-1407
BRUCE W. OLSON
Police Chief
FAX: (323) 826-1481
Closed Session
ATTORNEY -CLIENT PRIVILEGE
CONFIDELN�TIIAL
� �
Re: Proposed Letter Agreement with Petrelli Electric, Inc.
for Backup Maintenance and Emergency Services for the
Citv of Vernon Electric Svstem
Dear Bruce:
I have received a memorandum dated July 30, 2003, from Ken
DeDario to you regarding the proposed assignment of the RMI
Utility Services (RMI-US) Electric System Maintenance Agreement
to Quanta Services/PAR Electric. Mr. DeDario advises that PAR
has not been responsive to the City's requests for information.
Therefore, he recommends that the City obtain informal bids from
several contractors before deciding how to proceed.
RMI-US (now Navigant) has previously indicated that they do
not want to continue with the Agreement. Therefore, they seem
eager to have another company assume their obligations. The
City cannot afford to allow RMI-US to simply abdicate their
responsibilities under the Agreement and leave the
responsibility for maintenance and service of the City's
Electric System to a contractor that may not be right for the
City. Therefore, I agree with Mr. DeDario's recommendation that
the City obtain more information before deciding how to proceed.
i
Mr. Bruce V. Malkenhorst
July 30, 2003
Page 2
When the City notifies RMI-US and PAR that it is requesting
informal bids, RMI-US may try to force the assignment or breach
the Agreement. In either case, there is a possibility of a gap
in connection with the service and maintenance of the City's
Electric System.
The City has the right to retain its own subcontractor to
satisfy the City's needs if RMI-US breaches the Agreement. The
Utilities Department has advised that Petrelli Electric, Inc. is
willing and able to provide backup maintenance services for the
Electric System, if necessary. If the City enters into an
agreement with Petrelli Electric, Inc., it will not be relieving
RMI-US of its responsibilities under the Agreement. Such an
arrangement would simply serve as an "insurance policy" and
avoid a gap in service if the City has a problem with the
transition. Therefore, I recommend that the City enter into the
enclosed Letter Agreement with Petrelli Electric.
I recommend that the Letter Agreement be executed by you
and sent out to Petrelli Electric for their signature. As
indicated in the Letter Agreement, it will only become effective
if approved by the City Council at its meeting on August 6,
2003. If this is acceptable to you, I will prepare a resolution
and have this matter placed on the Agenda for consideration by
the City Council.
Because of the potential for litigation, I will discuss
this matter in closed session. The City Council can then
consider the approval of the Letter Agreement in open session.
If you have any questions or comments, please contact me
EO:jl
Enclosure
Sincerely, e
Eduardo Olivo
City Attorney
CITY COUNCIL
LEONIS C. MALBURG
Mayor
THOMAS A. YBARRA
Mayor Pro-Tem
WM. 'BILL" DAVIS
Councilman
H. "LARRY" GONZALES
Councilman
W. MICHAEL MCCORMICK
Councilman
BRUCE V. MALKENHORST
City Administrator/City Clerk
FAX (323) 826-1438
CITY HALL
4305 SANTA FE AVENUE, VERNON, CALIFORNIA 90058
TELEPHONE (323) 583-8811
Petrelli Electric, Inc.
11615 Davenport Road
Agua Dulce, CA 91390
Attn: Sal Petrelli
Re: Letter Agreement
Dear Mr. Petrelli:
EDUARDO OLIVO
City Attorney
FAX: (562) 869-1883
KEVIN WILSON
Director of Community Services & Water
FAX: (323) 826-1435
September 11, 2003
KENNETH J. DeDARIO
Director of Utilities
FAX: (323) 826-1425
STEVEN E. PARKER
Fire Chief
FAX: (323) 826-1407
BRUCE W. OLSON
Police Chief
FAX: (323) 826-1481
The insurance requirement has been met. Transmitted herewith is an
original copy of the above referenced agreement approved by the Vernon
City Council on August 6, 2003.
If you have any questions regarding this matter, please call Mr. Ken
DeDario at (323) 583-8811 ext. 211.
Very truly yours,
is J. sco
;Chief Dep y City Clerk
GJO/gm
CC: Ken DeDario
Dolores Fonseca
Resolution No. 8256
Agreement No. 03-069
CITY COUNCIL
LEONIS C. MALBURG
Mayor
THOMAS A. YBARRA
Mayor Pro-Tem
WM. 'BILL" DAVIS
Councilman
H. "LARRY" GONZALES
Councilman
W. MICHAEL MCCORMICK
Councilman
BRUCE V. MALKENHORST
City Administrator/City Clerk
FAX (323) 826-1438
CITY HALL
4305 SANTA FE AVENUE, VERNON, CALIFORNIA 90058
TELEPHONE (323) 583-8811
August 19, 2003
Petrelli Electric, Inc.
11615 Davenport Road
Agua Dulce, CA 91390
Attn: Sal Petrelli
Re: Letter Agreement
Dear Mr. Petrelli:
EDUARDO OLIVO
City Attorney
FAX: (562) 869-1883
KEVIN WILSON
Director of Community Services & Water
FAX: (323) 826-1435
KENNETH J. DeDARIO
Director of Utilities
FAX: (323) 826-1425
STEVEN E. PARKER
Fire Chief
FAX: (323) 826-1407
BRUCE W. OLSON
Police Chief
FAX: (323) 826-1481
In accordance with Section 3 of said agreement, you are to furnish the
City with proof of Insurance as set forth in the Insurance Schedule,
Exhibit "B" of the agreement.
Please submit your proof of insurance to Joan Francone, Risk Manager,
for review and approval. Upon receipt of said documentation this
office will forward to you a fully executed duplicate original
agreement.
If you should have any questions, please contact Joan Francone at ext.
322.
Very ruly yours,
�l
Glpria J. gyvoCity
Chief DepuClerk
GJO/gm
cc: Joan Francone
Ken DeDario
Resolution No. 8256
Agreement File No. 03-069
NVIGANT
CONSULTING
August 5, 2003
Bruce Malkenhorst
City Administrator/City Clerk
City of Vernon
4305 Santa Fe Ave.
Vernon, CA 90058
By Fax
J ffrey H. Ste, e k m'
Vice President,
Corporate Development
Re: RMI-US Electrical System Maintenance Agreement: Proposed replacement of RMI-US by
PAR Electrical Contractors, Inc.
Dear Mr. Malkenhorst:
It was our understanding that the City Council of Vernon will be asked tomorrow to give its
consent to the proposed replacement of RMI-US by PAR Electrical Contractors, Inc., ("Quanta")
as the City's contractor under an Electric System Maintenance Agreement dated July 28, 1998
(the "Agreement"). However, just today we were astonished and dismayed to read in the
proposed agenda that the City Council is apparently not even being asked to approve the transfer
of responsibilities from RMI-US to Quanta. Instead, the agenda contemplates that "an informal
RFP process for a new qualified contractor to provide electric system maintenance services [will]
be initiated." Until today NCI had every reason to believe that the City's electric utilities
department staff (the "Staff') would support the proposed transition of responsibilities to Quanta.
As you may know, on December 6, 2002, Navigant Consulting, Inc. ("NCI"), the corporate
parent of RMI-US, notified the Staff that it is exiting the business of outsourced electric utility
field operations. The City of Vernon is presently RMI-US's only customer and we have been
unable to operate profitably under the Agreement, in large part because of a labor shortage
involving skilled linemen and the restrictions that the City has placed on RMI-US's ability to
offer competitive pay to attract such employees. Over the last eight months, we have worked
diligently and in good faith to identify and attract other entities that would have the ability to
take over RMI-US's responsibilities under the Agreement with minimal disruption to the City
and maximum continuity for the current work force. We have kept the city Staff informed
throughout this process and at one point we even entered into extended negotiations with one
firm that the Staff suggested we consider, but with which we were unable to reach terms
including related to providing a smooth transition. After months of negotiations, we reached
agreement for Quanta to purchase all of the assets of RMI-US and to assume RMI-US's
615 North Wabash Avenue I Chicago IL 60611 1 direct line 312.573.5655 1 direct fax 312.573.5676
City of Vernon
August 5, 2003
Page 2
responsibilities under the Agreement. Again, the Staff had indicated to us orally that Quanta was
an acceptable provider of the outsourced services presently provided by RMI-US.
Note that this transaction certainly does not result in any windfall for NCI. The total sale price
for RMI-US is only $50,000, reflecting the limited operating margins possible under the
Agreement and an amount that will not even allow NCI to recover its costs associated with the
transaction. Also, the proposed transfer to Quanta of responsibilities under the Agreement does
not result in any additional costs or other burden whatsoever to the City. Based on our review of
alternative supplier, we do not understand what possible benefit will result from repeating the
RFP process. In fact, we are concerned that stretching out the process for the sale of RMI-US to
Quanta could threaten a smooth transition that has so carefully been coordinated to avoid the loss
of the operating staff who have dutifully served the City for several years.
While the proposed transaction is no windfall for NCI, it is an excellent outcome for the City.
Quanta is one of the leading electric system operations and maintenance companies in the United
States and may be able to apply management expertise and to achieve certain economies of scale
that are simply not available from RMI-US. In recent weeks, Quanta representatives have been
meeting with the Staff, responding to its questions and providing further assurances of its
competence and bona fides. It is our understanding that Quanta has been comprehensively
responsive to your Staff s requests for information.
With that background, the purpose of this letter is respectfully to urge the City Council to
provide its consent to this transition. Also, we want to notify the City Council that if the
transaction is not approved, RMI-US will claim Force Majeure under Section 16 of the
Agreement.
Under Section 16 of the Agreement, neither Party shall be considered to be in default of its
obligations when a failure of performance is due to an "uncontrollable force," a term which is
specifically defined to include, significantly, "a labor dispute or shortage" and the "action or
nonaction or inability to obtain the necessary authorization or approvals from any governmental
agency or authority, which by exercise of due diligence such Party could not reasonably have
been expected to avoid and which by exercise of due diligence it has been unable to overcome."
Both situations are applicable here.
We note that the proposed City Council meeting agenda also recommends that the City Council
will enter into an "interim letter agreement with Petrelli Electric Company to provide backup
electric system maintenance services." This apparently reflects the Staffs recognition of our
frequent warnings over the past eight months that RMI-US is having serious difficulties
continuing to provide services under the Agreement given the competition for linemen and
related field labor at the hourly rates and benefits the City is willing to pay for the provided
services.
NCI understands that the City Council must do what is in the best interests of the City of Vernon.
However, we must advise you that NCI is unwilling to continue indefinitely subsidizing RMI-US
City of Vernon
August 5, 2003
Page 3
while the Staff attempts to improve on the highly acceptable candidate we have proposed after a
long and cooperative process. If the City Council does not consent to the proposed transfer of
responsibilities to Quanta, RMI-US will promptly serve the City with a formal notice of the
occurrence of events of Force Majeure under the Agreement and, after making a prompt and
orderly transition to the City's designated backup service provider, cease providing services
under the Agreement.
We have endeavored for eight months to achieve an orderly transition in the best interests of the
City at no small cost to RMI-US and its parent, NCI, with the clear objective of enabling the City
to continue reliable service at an affordable cost. We believe we have solidly met this objective
with the proposed sale of RMI-US to Quanta. We respectfully request the City approve this
transfer of responsibilities.
If you have any questions, please call me.
Yours sincerely,
Jeffrey H. Stoecklein
Vice President, Corporate Development
cc: Kenneth DeDario
Ron Nichols
4305 Santa Fe Ave.
Vernon, CA 90058
By Fax
Re: RMI-US Electrical System Maintenance Agreement: Proposed replacement of RMI-US by
PAR Electrical Contractors, Inc.
Dear Mr. Malkenhorst:
It was our understanding that the City Council of Vernon will be asked tomorrow to give its
consent to the proposed replacement of RMI-US by PAR Electrical Contractors, Inc., ("Quanta")
as tI7e City's contractor under an Electric System Maintenance Agreement dated July 28, 1998
(the "Agreement"). However, just today we were astonished and dismayed to read in the
proposed agenda that the City Council is apparently not even being asked to approve the transfer
of responsibilities from RMI-US to Quanta. Instead, the agenda contemplates that "an informal
RFP process for a new qualified contractor to provide electric system maintenance services [will)
be initiated." Until today NCI had every reason to believe that the City's electric utilities
department staff (the "Staff') would support the proposed transition of responsibilities to Quanta.
As you may know, on December 6, 2002, Navigant Consulting, Inc, C NCI"), the corporate
parent of RMI-US, notified the Staff that it is exiting the business of outsourced electric utility
field operations. The City of Vernon is presently RMI-US's only customer and we have been
unable to operate profitably under the Agreement, in large part because of a labor shortage
involving skilled linemen and the restrictions that the City has placed on RMI-US's ability to
offer competitive pay to attract such employees. Over the last eight months, we have worked
diligently and in good faith to identify and attract other entities that would have the ability to
take over RMI-US's responsibilities under the Agreement.with minimal disruption to the City
and maximum continuity for the current work force. We have kept the city Staff informed
throughout this process and at one point we even entered into extended negotiations with one
firm that the Staff suggested we consider, but with which we were unable to reach terms
including related to providing a smooth transition, After months of negotiations, we reached
agreement for Quanta to purchase all of the assets of RMI-US and to assume RMI-US's
615 North Wabash Avenkie 1 Chicago IL 6W11 I direct line $12,573.5655 I direct fox 312,573,5676
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4305 Santa Fe Ave.
Vernon, CA 90058
By Fax
Re: RMI-US Electrical System Maintenance Agreement. Proposed replacement of RMI-US by
PAR Electrical Contractors, Inc.
Dear Mr. Malkenhorst:
it was our understanding that the City Council of Vernon will be asked tomorrow to give its
consent to the proposed replacement of RMI-US by PAR Electrical Contractors, Inc., ("Quanta")
as the City's contractor under an Electric System Maintenance Agreement dated July 28, 1998
(the "Agreement'). However, just today we were astonished and dismayed to read in the
proposed agenda that the City Council is apparently not even being asked to approve the transfer
of responsibilities from RMI-US to Quanta. Instead, the agenda contemplates that "an infonnal
RFP process for a new qualified contractor to provide electric system maintenance services [will]
be initiated." Until today NCI had every reason to believe that the City's electric utilities
department staff (the "Staff') would support the proposed transition of responsibilities to Quanta.
As you may know, on December 6, 2002, Navigant Consulting, Inc. ("NCI"), the corporate
parent of RMI-US, notified the Staff that it is exiting the business of outsoureed electric utility
field operations. The City of Vernon is presently RMI-US's only customer and we have been
unable to operate profitably under the Agreement, in large part because of a labor shortage
involving skilled linemen and the restrictions that the City has placed on RMI-US's ability to
offer competitive pay to attract such employees_ Over the last eight months, we have worked
diligently and in good faith to identify and attract other entities that would have the ability to
take over RMI-US's responsibilities under the Agreement with minimal disruption to the City
and maximum continuity for the current work force. We have kept the city Staff informed
throughout this process and at one point we even entered into extended negotiations with one
firm that the Staff suggested we consider, but with which we were unable to reach terms
including related to providing a smooth transition. After months of negotiations, we reached
agreement for Quanta to purchase all of the assets of RMI-US and to assume RMI-US's
615 North Wabash Avenue I Chicago IL 60611 1 direct line 312-573.5655 I direct fax 312.573.5676
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