Title
The City of Detroit Board of Water Commissioners authorizes the Director to amend the previously approved Detroit Water and Sewerage Department Contract 6002757 with Itron, Inc. for the Water SaveSource Warranty Replacement Program - OpenWay Riva AMI Implementation Agreement to change the contract amount to $18,240,000, change the communication platform from a DWSD-owned collector system to a third-party owned and operated cellular system, and to make related revisions to the previous Agreement terms and conditions This also authorizes the Director to take such other action as may be necessary to accomplish the intent of this vote.
Body
Agenda of May 18, 2022 Item No. 22-0811
Contract No. 6002757 Contractor: Itron, Inc.
111 N. Molter Road
Liberty Lake, Washington 99019 Total Contract Amount: $18,240,000.00 Term: Date of Execution + 20 years
TO: The Honorable
Board of Water Commissioners City of Detroit
FROM: Gary Brown, Director
Water and Sewerage Department
RE: Proposed DWSD Contract 6002757
Water SaveSource Warranty Replacement Program - From Openway Riva AMI Implementation to Cellular AMI Implementation
MOTION
Upon recommendation of Samuel Smalley, Chief Operating Officer, and Debra N. Pospiech, General Counsel, the City of Detroit Board of Water Commissioners authorizes the Director to approve an amendment to the Detroit Water and Sewerage Department Contract 6002757 with Itron, Inc. for the Water SaveSource Warranty Replacement Program - OpenWay Riva AMI Implementation Agreement to change the contract amount to $18,240,000, to change the communication platform from a DWSD-owned collector system to a third-party owned and operated cellular system, and to make related revisions to the previous Agreement terms and conditions. This also authorizes the Director to take such other action as may be necessary to accomplish the intent of this vote.
BACKGROUND
In March 2017, Itron notified DWSD that due to on-going changes in reading automation system technologies market it would no longer manufacture the component parts of the Water Save Source system technology, which DWSD had purchased in 2006. Further, Itron no longer had parts in inventory for modules and collector units needed to maintain the existing system for the expected and warranted 20-year useful life of the system. There was no substitute product compatible with the existing collection network and software system.
In April 2017, DWSD weighed its legal and operational options and opted to negotiate a new contract with Itron, which would take advantage of the current relationship, leverage warranty provisions of the initial Agreement and obtain the latest reading technology improvements at favorable terms.
By March 2020, DWSD and Itron reached an agreement to replace the Water SaveSource System with the OpenWay Riva system, which the Board approved April 2020, issuing a Notice to Proceed September 29, 2020.
In October 2020, Itron notified DWSD that due to additional market changes in reading automation technologies, Itron had recently made a business decision to shift its technology platform investment support away from the previously agreed to OpenWay Riva point-to-multi- point collection network technology1 to either a mesh network2 or cellular collection solution.
Itron noted that it could provide the Riva, mesh network or the cellular option. DWSD investigated the mesh network and cellular option and determined that the cellular approach would provide the longest and most technologically stable solution to DWSD’s current and future reading automation needs. DWSD seeks to amend and restate the 2020 agreement.
JUSTIFICATION
Highlights of this proposed amended agreement include:
1. The immediate availability to Itron’s existing cellular system collection network (through Verizon as the first network and AT&T as a potential backup, if needed), removing the need to procure, manage, maintain and upgrade the collectors for the network to continue working efficiently.
1 The point-to-multipoint topology consists of a central base station that supports several subscriber stations. A CCU Collector collects numerous reads from several different endpoints. An endpoint (ERT) is the device that reads the meter.
2 Mesh Network = A local area network (LAN) of continuously connected meter end nodes, Access Point (AP), and Relays that connect to and communicate with adjacent nodes via multiple hops. In a mesh network, devices collaborate to propagate the data in the network.
2. Install 200,000 exterior replacement modules over a 21-month period and give priority hiring to Detroiters.3
3. Twenty years of Itron’s cloud-based software services are provided at a fixed annual price for a period of seven years at rates that are at least 50% less expensive than rates for similar services provided by other vendors. Future annual price adjustments are limited to a fixed rate that is estimated to be near or below the CPI index rate. DWSD also receives credits if software availability is below defined performance levels.
4. Twenty years of cellular services, with the first five years at a fixed price and then adjusted annually on the same terms as Itron cloud-based services for the subsequent services. Terms, beyond the initial 20-year period, for cellular and cloud services are to be negotiated to mutually acceptable terms.
5. Supply modules at a fixed price for five years from the Effective Date of the Agreement, with prices increasing annually at a rate not to exceed 2.5% for the next five years. Further terms are to be negotiated to mutually acceptable terms.
6. Modules are warranted against battery and electronics failures for up to twenty years. Any such failures occurring during the first ten years are replaced with equivalent modules at no cost. Failures occurring during the following ten years are replaced at pricing terms fixed for that period.
7. DWSD avoids the costs of upgrading the previously proposed collection network during its 20-year operating life at an estimated savings of $1.36 million. DWSD also avoids negotiating and paying for leasing agreements with various property owners for placement and access to maintain the data collection equipment.
8. Lowered cloud-based software as a service (SaaS) annual costs by an estimated
$50,000.00 per year as Cisco fees are eliminated. Cloud-based software support lowers annual software maintenance costs and frees up staff to perform other priority work.
9. Shifts network maintenance from Itron or DWSD to the Verizon/AT&T cellular system providers. Itron’s 20-year agreement with these cellular vendors stabilizes long-term rates and allows Itron to address any DWSD service issues directly with the cellular vendors.
10. Cellular networks provide a mission critical communication platform for a wide array of commercial, consumer, and strategic governmental purposes. They receive far more regulatory and R&D investment than privately owned networks such as the CCU, CGR and Gen 5 mesh network solutions. As a critical communication platform, they are frequently updated and receive exceptionally high priority for maintenance and repairs, especially during times of catastrophic events.
Moving to a cellular collection platform will assist DWSD to stay abreast with the evolution of meter reading automation technology and provide a robust communication network that can be used to incorporate other water and wastewater system monitoring devices to better manage operations.
3 The Board may recall under the prior agreement DWSD entered into a Memorandum of Understanding with the Detroit Employment Solutions Corporation, who will pre-certify Detroiters for employment with Itron and their local MBE contractor, Utility Resources Group (URG). URG currently employs 55 Detroit residents, many are currently working on a DTE meter installation project and many will transition to this project. An additional 25 Detroiters will be hired.
The proposed amendment is for an additional $4,740,000.00 above the current agreement to upgrade to the cellular technology solution, for a total of $18,240,000.00.
Below is a direct comparison of where the increase in price has taken - The Endpoint Equipment.
The main reason for this increase is the technology difference with the added cost/inflation due to COVID affecting all material, labor and shipping.
|
OpenWay RIVA Cost |
OpenWay Cellular Cost |
|
ITRON IMPLEMENTATION |
ITRON IMPLEMENTATION |
|
Endpoint Equipment |
9,021,000 |
Endpoint Equipment |
14,500,000 |
|
Hardware |
208,200 |
Hardware |
208,200 |
|
Professional Services |
959,700 |
Professional Services |
959,700 |
|
Installation |
5,169,078 |
Installation |
4,430,000 |
|
System Discount |
(1,857,978) |
System Discount |
(1,857,900) |
|
Itron Total |
$13,500,000 |
Itron Total |
$ 18,240,000 |
PROCUREMENT METHOD
This contract is a sole source contract for the previously stated reasons in a confidential attorney- client communication provided to the Board dated March 25, 2020.
SUMMARY
A. Contract Number: 6002757
B. Contract Term: Date of execution + 20 years
C. Total Contract Amount: $18, 240,000.00
D. Projected Fiscal Year (FY) Contract Expenditures:
|
FY22-23: |
$6,080,000.00 |
|
FY23-24: |
$6,080,000.00 |
|
FY24-25: |
$6,080,000.00 |
E. Funding Source: CIP Funds
F. GL String: 5720-20276-487611-624115-001688-10732-0000-000000
This proposed contract was presented to the Board of Water Commissioners Finance Committee on May , 2022 and approved on May , 2022 Per the DWSD Procurement, Post-FRC Mayoral review was also obtained.