MINUTES REGULAR MEETING Tuesday, September 23, 2008 1:30 P.M. City Hall, Room 400 1 Dr. Carlton B. Goodlett Place COMMISSIONERS The Honorable Ann Moller Caen, President The Honorable F. X. Crowley Vice President The Honorable Francesca Vietor

DEPARTMENTS AND ENTERPRISES Water Enterprise Wastewater Enterprise Power Enterprise Infrastructure Business Services External Affairs Gavin Newsom MAYOR   Ed Harrington GENERAL MANAGER Michael Housh SECRETARY

ORDER OF BUSINESS:

1. Call to Order: 1:40 P.M.

2. Roll Call: Present – President Ann Moller Caen, Vice President F.X. Crowley, and Commissioner Francesca Vietor

3. Approval of Minutes

Moved by Vice President Crowley, seconded by Commissioner Vietor to adopt the Minutes of the September 9, 2008, Regular Meeting; passed (3-0 Caen, Crowley and Vietor) unanimously.

4. Public Comments

No comments were offered on any item not on the meeting’s agenda.

5. Communications

There was no discussion of communications received since the last regular meeting.

6. Other Commission Business

a) Commissioner Training on Code of Conduct as required by Rule #23 of the San Francisco Public Utilities Rules of Order.

City Attorney Noreen Ambrose introduced Deputy City Attorney Andrew Shen who presented a brief Code of Conduct training. This training consisted of information about: the San Francisco Charter; San Francisco Campaign and Government Conduct Code; the Mayor's Policy on Commissioner Attendance and Board of Supervisors Resolution No. 502-06; the San Francisco Administrative Code, Chapter 67, the San Francisco Sunshine Ordinance and requirements of the California Fair Political Practices Act and concerning the Annual Statement of Economic Interest Obligations, as well as called attention to various Commission Policies.

Following this presentation and discussion of aspects of it President Caen requested that when the remaining Commissioners were appointed that the new members meet on an informal basis to review the training, noting that of course, members of the public would be welcome to attend this training session.

7. Report of the General Manager

General Manager Ed Harrington reported two brief updates. The first concerning the remaining appointments to the Commission, the General Manager reported that that the Mayor’s office was actively considering candidates to submit to the Board of Supervisors. Secondly, Mr. Harrington reported that the proposed 525 Golden Gate headquarters building for the PUC was undergoing active review by several City agencies, and the he hoped to bring back a report on those discussions in the near future.

Mr. Harrington introduced Julie Labonte, Director, Water System Improvement Program (WSIP), who presented the WSIP Report.

a) Water System Improvement Program Report

1) WSIP Quarterly Report

Ms. Labonte noted that this report was for the last quarter, noting parenthetically that now that the Commissioners were back in office, the future quarterly reports would be presented shortly after they were completed, and that this report had been presented to the Bay Area Water Supply and Conservation Agency (BAWSCA) Board. Ms. Labonte reported that projects were moving forward into the construction phase regionally and that of the local construction projects one third were completed. Turning to the 50 regional projects, Ms. Labonte noted that the majority of these were in the design phase and reported details of each of the performance of the regional projects. Ms. Labonte noted her presentation included report of project performance both with and without the often very complex water supply projects. Dropping down to the project level, Ms. Labonte then reported on tracking of the various project variances, calling attention in particular to some delays in the environmental review phase. Discussing performance levels overall Ms. Labonte noted that the project was on track even if some projects were lagging slightly.

Ms. Labonte than reported details of four major projects with schedule variances such as on the Alameda Siphon Project which had been turned over to outside experts to further insure reliability of this critical key project. Ms. Labonte next discussed the factor that contributed to schedule delays in the environmental process and issues involved in closely coordinating various aspects of each of these projects. Ms. Labonte next in response to a query by President Caen clarified what the dates in her slide presentation represented and then explained how staff proposed to mitigate these schedule variances.

The Water System Improvement Program (WSIP) Director next described steps taken to accelerate project through contract measures. Ms. Labonte noted staff was aggressively moving forward to gain necessary approvals from various authorities as early as possible. Ms. Labonte noted that steps were underway to reduce costs displayed in the project’s costs forecasts in the $50 million range. Responding to a question from President Caen, Ms. Labonte noted most of these were due to escalation due to delays and outlined by promoting a more competitive bidding process as a means to bring down these costs. Ms. Labonte then outlined steps taken to make the City a more friendly business environment and promote contractor interest in the program. Ms. Labonte emphasized that quantity control and accuracy in program documentation were being emphasized as well as firmly established field controls and effective use of construction management contracts. Ms. Labonte then discussed market conditions and what was revealed in the few bids received so far, especially calling attention to a $7 million lower bid received for design/build contract for the Tesla Treatment Facility that would be taken up later in the meeting. Ms.. Labonte then discussed the upcoming New Crystal Springs Bypass project. The WSIP Director then discussed progress on Bay Division Tunnels 3 and 4 in response to concerns previously raised by Bay Area Water Supply Conservation Agency (BAWSCA).

2) WSIP Project Environmental Impact Report Schedule

Ms. Labonte concluded with a discussion about the September 30th issuance of the WSIP Project Environmental Review (PEIR) at the San Francisco Planning Commission for certification and before the Commission for approval on October 30th. Ms. Labonte then called attention to issues involved in the Harry Tracy Project, the seismic assessment of the Sunol Valley system reliability and its impact on the Siphon project. Ms. Labonte concluded with a discussion of staff’s ongoing efforts to strengthen oversight of construction documents as an effective tool to better manage the program.

b) Capital Projects

Mr. Harrington announced that there would be no Capital Projects Report today.

Public comment: no comment was offered

8. Bay Area Water Supply and Conservation Agency (BAWSCA’S) General Manager’s Report

(a) BAWSCA Update

General Manager Arthur Jensen welcomed the Commission back to operation and then briefly discussed the role and function of the state created Bay Area Water Supply and Conservation Agency in representing the 27 water agencies and their responsibilities and customers. Mr. Jensen provided an overview of BAWSCA’s structure and operations and noted the long-term professional and productive working relationship between the SFPUC and BAWSCA on both in the current water contract negotiations as well as the ongoing engagement with the WSIP Program projects.

CONSENT CALENDAR

9. The San Francisco Public Utilities Commission hereby ratifies the determinations made by the General Manager in approving the following action item:

Moved by Commissioner Vietor, seconded by Vice President Crowley passed (3-0 Caen, Crowley, and Vietor) unanimously.

Resolution No. 08-0170:
Approval of an addendum to the Water System Improvement Program Project Labor Agreement.

9b.  Moved by Vice President Crowley, seconded by Commissioner Vietor, to adopt item (9) listed under the Consent Calendar; passed (3-0 Caen, Crowley, and Vietor) unanimously.

b) Resolution No. 08-0171:
Approve the plans and specifications and award CUW260 Water Main Replacement/Retrofit Program-funded Contract No. WD-2524 Installation of Sacrificial Anode Stations for University Mound System along Howard St., South Van Ness Ave. and Harrison St. in the amount of $583,325 to the lowest, qualified, responsible and responsive bidder, Con-Quest Contractors, Inc.

President Caen requested this Consent Item (9a item be taken out of order for the discussion of the rationale for the increase in costs noted in the item. Assistant General Manager Harlan Kelly explained this job order contract allowed for such as needed contract adjustments within limits as are allowed under job order contracts guidelines in the administrative code when program needs and circumstances warranted. In response to a query by President Caen, Mr. Kelly reported this was a Chapter 6 change that took place two years ago. In response to a query by Commissioner Vietor, Mr. Kelly explained how this was budgeted when using this more efficient job order contract model.

Moved by President Caen, seconded by Vice President Crowley, to adopt item (9aa) listed under the Consent Calendar; passed (3-0 Caen, Crowley, and Vietor) unanimously.

a) Resolution No. 08-0172:
Approve Modification No. 1 to Enterprise-funded Contract No. HH-930, Job Order Contract, General Engineering Services (A-License), San Francisco/East Bay/Peninsula with Power Engineering Contractors, Inc., increasing the contract by $1,500,000, for a total contract amount not to exceed $4,500,000, and with a time extension of one year for a total contract duration of three (3) years.

REGULAR BUSINESS

10. Discussion of and possible action to revise the Commission’s Rules of Order amending Rule #6 concerning the election of officers to change the date set for the annual election of officers from the first regular meeting after the 15th day of January, to the first regular meeting after the 1st of August to reflect the change in appointment date and terms in office of the San Francisco Public Utilities Commissioners in conformity with those established by Proposition E (June 2008).

Moved by Commissioner Vietor, seconded by Vice President Crowley, to adopt the following resolution; passed (3-0 Caen, Crowley and Vietor) unanimously.

There was no public comment.

Deputy City Attorney Noreen Ambrose clarified that a formal resolution was not required for the Commission to adopt changes to its rule only that they be properly noticed prior to adoption.

11. Discussion and possible action related to adoption of a calendar of regular San Francisco Public Utilities Commission meetings for 2009.

Moved by Commissioner Vietor, seconded by Vice President Crowley, to adopt the following resolution; passed (3-0 Caen, Crowley and Vietor) unanimously

There was no public comment.

12. Discussion and possible action to approve a resolution urging SF Board of Supervisors to enact an ordinance amending the San Francisco Administrative Code to authorize landlords to pass through to tenants fifty percent of increased water and sewer bill charges resulting from the adoption of water and sewer rates after July 1, 2002, where specified water conservation devices have been installed in all rental units and common areas of a building; and to provide for pass through administration, noticing and enforcement procedures.
Resolution No. 08-0179

Assistant General Manager Laura Spanjian presented an overview explaining how this resolution brought forward a specific direction from the Commission given during the adoption of the current rates structure and described the three hearings held at the Board of Supervisors that resulted in modifications of the original proposal to strengthen the notice to tenants as well as provide a means for tenants to monitor their water use. In addition, Ms. Spanjian pointed out this resolution would facilitate conducting of quick water audits to encourage installation of water conservation measures.

In response to a question by President Caen, Ms. Spanjian noted that the legislation was at the Land Use Committee and explained the background reasons that led to changes in the figures to further encourage landlords to actually install water saving devices. In response to a question by Commissioner Vietor concerning the fiscal impact to the SFPUC of the cost of doing these audits, Ms. Spanjian estimated it to be roughly $30,000 and described these audits as a means to better evaluate usage and encourage adoption of conservation measures. Ms. Spanjian then described the many already existing water conservation programs to Vice President Crowley.

Moved by Commissioner Vietor, seconded by Vice President Crowley, to adopt the following resolution; passed (3-0 Caen, Crowley and Vietor) unanimously.

There was no public comment.

PROFESSIONAL SERVICE CONTRACTS

Award

13. Discussion and possible action related to approve the selection of PCL Civil Constructors Inc.; award Water Enterprise Water System Improvement Program-Funded Agreement No. DB-116, Tesla Treatment Facility, a Design-Build Agreement (DBA) for design, construction, and commissioning of a new treatment facility at the existing Tesla Portal site; and authorize the General Manager of the San Francisco Public Utilities Commission to execute a DBA with PCL Civil Constructors Inc. consistent with the requirements of Section 6.61(G) of the San Francisco Administrative Code for an amount up to $81,420,562.

Ms. Julie Labonte reported that a protest had been filed on this item and presented an overview of this design/build project for a new UV Facility required by regulatory changes. Ms. Labonte explained the prequalification process for bidders and the panel that evaluated the bids. Ms. Labonte presented a detailed overview of the bidders’ qualifications and costs submitted and how each team was interviewed and their cost components were then evaluated and scored that resulted in the recommended selection. Ms. Labonte noted that this process resulted in a very close final result there being only a 1.21 point difference. Ms. Labonte then reported receipt of the formal protest and agreed with the City Attorney’s response that found no merit in the protest and recommended approval of this critical project that had to meet a very tight shut down schedule by October 30th of this year.

In response to a question by President Caen, Ms. Labonte discussed the greater unit costs of energy over the expected 25 year lifetime of the facility. General Manager Harrington further explained the differences between the bids.

Public Comment:

Mr. John Toyoda, Vice President of CDM/MM JV, described his firm’s excellent professional reputation and long history of good working relationships with the SFPUC and then outlined his rationale citing specific terms and proposals submitted by his firms showing that his firm ought to have been selected and specifically identified those staff determined elements he believed were unfair in the selection process that was used.

Mr. William H. McInerney, CDM & Dillon, P.C., criticized the fairness of the evaluation process that resulted in what he believed to have been an unfair change in the bid his firm submitted as well as an unfair and inconsistent application of rounding. Mr. McInerney also challenged the application of the Sunshine Ordinance as concealing information necessary until post bid to challenge the responsiveness of the other bidder’s proposals and that this process did not provide the SFPUC with the best value for the dollar as set forth in the specifications for this project.

In response to questions by President Caen, Mr. Toyoda described several previous projects his firm had done for the SFPUC. In response to a request by Commissioner Vietor, Ms. Labonte described terms of the selection process resulted in the selection of the winning firm, based as required by city code, on both costs and qualifications. Deputy City Attorney John White then outlined in detail each of the specific issues involved in the selection process as well as general issues raised by the protest. Mr. White then carefully explained the administrative code’s detailed requirements and procedural policies in this unusual design/build process as set out in the request for proposals and noted that all were fully met in this selection process. In the final analysis Mr. White noted that the determination of responsiveness was at the discretion of the SFPUC.

In response to questions by President Caen and Commissioner Vietor regarding the questions concerning rounding, Mr. White noted it was at the Department’s discretion and had been used before. General Manager Harrington noted in fact that it was virtually impossible not to round in almost every circumstance involved complex calculations and that it was routinely done. Mr. Harrington noted that while it was unfortunate that this result was so close and unless it was proposed to scrap the entire process and begin all over again. In response to a request for clarification of what was defined as best value by Commissioner Vietor, Mr. White explained what was meant in this case.

Moved by Vice President Crowley, seconded by Commissioner Vietor, to adopt the following resolution; passed (3-0 Caen, Crowley and Vietor) unanimously. Resolution No. 08-0173

14. Approve the selection of Jacobs Engineering Group; award Water Enterprise Water System Improvement Program-funded Agreement No. CS-914, Bay Division Regional Construction Management Services, to provide construction management services; and authorize the General Manager of the San Francisco Public Utilities Commission to negotiate a professional services agreement with Jacobs Engineering for an amount not to exceed $25,000,000, and with a duration of up to 58 months, or, in the event negotiations are not successful or City requirements are not satisfied, to negotiate a professional services agreement with the next highest ranked proposer; and authorize the General Manager to execute the agreement, subject to Board of Supervisors' approval of the agreement, pursuant to San Francisco Charter section 9.118. Resolution No. 08-0174.

Responding to a question by President Caen concerning where the identification of the firms bidding in this process could be found in the item, Ms. Labonte promised in future they would be clearly listed.

Public comment:  no comments were offered

Moved by Commissioner Vietor, seconded by Vice President Crowley, to adopt the following resolution; passed (3-0 Caen, Crowley and Vietor) unanimously.

15. Discussion and possible action to approve the selection of the following firms to serve as sales and remarketing agents: Goldman Sachs, JP Morgan Securities, Morgan Stanley, and Bank of America; Agreement No. CS-938, Commercial Paper Dealer Agreement for the Water Enterprise Commercial Paper Program; and authorize the General Manager of the San Francisco Public Utilities Commission or his designee to negotiate and execute a professional services agreement with Goldman Sachs, JP Morgan Securities, Morgan Stanley, and Bank of America for an amount not to exceed $175,000 total per year, and with a duration of 3 years with two one-year optional extensions; or, in the event negotiations are not successful or City requirements are not satisfied, to negotiate and execute a professional services agreement with the next highest ranked proposer. Resolution No. 08-0175

Acting Secretary Patricio called attention to a substitute resolution she had provided to the Commissioners. Assistant General Manger for Business and Finance Todd Rydstrom noted that the SFPUC commercial paper activities were unaffected by the unfolding financial market crisis. In response to President Caen’s questions concerning the credit worthiness of program participants, Mr. Rydstrom explained the controls built into the proposed commercial paper program to allow the staff to carefully monitor and make any changes in program participants should any of the firms experience difficulties as a result of the current problems in the financial markets.

Moved by Commissioner Vietor, seconded by Vice President Crowley, to adopt the following resolution; passed (3-0 Caen, Crowley and Vietor) unanimously

There were no public comments.

CLOSED SESSION

16. Public comments on matters to be discussed in Closed Session.

There were no public comments.

17. Motion on whether to assert the attorney-client privilege regarding the matters listed below as Conference with Legal Counsel.

Moved by Vice President Crowley, seconded by Commissioner Vietor, to assert the attorney-client privilege; passed (3-0 Caen, Crowley, and Vietor) unanimously.

The Commission took a break at 3:45 P.M.

The Commission went into Closed Session at 4:00 P.M.

18. Threat to Public Services or Facilities – Pursuant to California Government Code Section 54957 and San Francisco Administrative Code Section 67.10(a). (Ambrose)

Consultation with:  Agency Chief of Security concerning security of SFPUC Water and Power Systems.

There was no action.

19. Conference with Legal Counsel - Pursuant to California Government Code Section 54956.9(a) and San Francisco Administrative Code Section 67.10(d) (Rothschild)

Present were President Caen, Vice President Crowley, Commissioner Vietor, General Manager Ed Harrington, SFPUC Legal Counsel Noreen Ambrose, City Attorney Joshua Millstein and Acting Secretary Lorelei Patricio.

Moved by Vice President Crowley, seconded by Commissioner Vietor, to adopt the following resolution; passed (3-0 Caen, Crowley and Vietor) unanimously.

Existing Litigation: Jane Martin, et al v. CCSF (IMG Home Corporation; ChezSpenser, and Noreen Quimson), SF Superior Court Case Nos: 436930 & 436942, City Attorney File Nos. 041822, 050915, Filed. January 31, 2005. Resolution No. 08-0176, 08-0177, 08-0178

20. Conference with Legal Counsel - Pursuant to California Government Code Section 54956.9(a) and San Francisco Administrative Code Section 67.10(d) (Rothschild)

Present were President Caen, Vice President Crowley, Commissioner Vietor, General Manager Ed Harrington, SFPUC Legal Counsel Noreen Ambrose, City Attorney Joshua Millstein, and Acting Commission Secretary Lorelei Patricio.

Moved by Vice President Crowley, seconded by Commissioner Vietor, to adopt the following resolution; passed (3-0 Caen, Crowley and Vietor) unanimously.

Existing Litigation:
Jane Martin, et al v. CCSF (P. Gong, P. Kim, C. Munoz, & C. Tam, SF Superior Court Case Nos: 436930, City Attorney File No. 041822, Filed, January 31, 2005.

21. Conference with Legal Counsel – Pursuant to California Government Code Section 54956.9 (b) and (c) and San Francisco Administrative Code Section 67.10 (d) (2) (Ambrose)
Anticipated Litigation: As Defendant.

Present were President Caen, Vice President Crowley, Commissioner Vietor, General Manager Ed Harrington, Assistant Manager of Water Enterprise Michael Carlin, Assistant General Manager of Business & Financial Services Todd Rydstrom, Ellen Levin, SFPUC Legal Counsel Noreen Ambrose, City Attorney Joshua Millstein and Acting Secretary Lorelei Patricio. Commission Secretary Michael Housh joined the meeting during this item.

There was no action.

22. Conference with Real Property Negotiator – Pursuant to Sunshine Ordinance Section 67.8 (a)(2), Govt. Code section 54956.8: Property: Sunol Valley Aggregate Quarry (Surface Mining Permit 30), located at 6527 Calaveras Rd. Sunol California. (Dowd) APN 96-375-009

Property: 308.5-acre property located in Alameda County, Calif., known as the Sunol Valley Aggregate Quarry. SMP 30.  
Parties Negotiating: SFPUC – Dowd 
                           Oliver de Silva, Inc.

Under Negotiation: Price and Terms

There was no action.

Following Closed Session, the Commission reconvened in Open Session at 5:10 P.M.

23. Announcement following Closed Session.

Following Closed Session, President Caen announced the actions taken during Closed Session as: item 18 no action, items 19 and 20 settled, Item 21 no action, item 22 no action.

24. Motion regarding whether to disclose the discussions during Closed Session.

Moved by Vice President Crowley, seconded by Commissioner Vietor, not to disclose the discussions during Closed Session; passed (3-0 Caen, Crowley, and Vietor) unanimously.

There being no further business to discuss, the meeting was adjourned at 5:14 P.M.

Lorelei Patricio
Acting Commission Secretary