REPORT/RECOMMENDATION TO THE BOARD OF SUPERVISORS
OF SAN BERNARDINO COUNTY
AND RECORD OF ACTION
December 17, 2024
FROM
NOEL CASTILLO, Director, Department of Public Works - Special Districts
SUBJECT
Title
Non-Financial Terms and Conditions of Sale for Technical Support Services for the Membrane Wastewater Treatment Plant at Calico Ghost Town Regional Parks.
End
RECOMMENDATION(S)
Recommendation
Approve non-financial Terms and Conditions of Sale, including non-standard terms, for purchase orders with Ovivo USA, LLC, for technical support services for the existing Membrane Wastewater Treatment Plant, located at Calico Ghost Town Regional Park, in purchase amounts as authorized by County Policy, to avoid cancellation of existing warranties to the Membrane Wastewater Treatment system.
(Presenter: Noel Castillo, Director, 387-7906)
Body
COUNTY AND CHIEF EXECUTIVE OFFICER GOALS & OBJECTIVES
Operate in a Fiscally Responsible and Business-Like Manner.
Ensure Development of a Well-Planned, Balanced, and Sustainable County.
FINANCIAL IMPACT
Approval of this item will not result in the use of additional Discretionary General Funding (Net County Cost). This project is funded with General Fund Contingencies as approved by the Board of Supervisors (Board) on September 21, 2021 (Item No. 54). The first quote (QFAW004017) is for Ovivo USA, LLC (Ovivo), technical service in the amount of $21,380. The second quote (QFAW004018) is for parts in the amount of $11,086.21, for a total of $32,466.21. These costs have been included in the 2024-25 budget for the County Service Area 70 Countywide fund (1378).
BACKGROUND INFORMATION
The Membrane Wastewater Treatment Plant (WWTP) at Calico Ghost Town Regional Park in Yermo is operated, managed, and administered by the Department of Public Works - Special Districts (Department). To maintain the warranties on the new WWTP system and its components, Ovivo is required to provide technical support services, including inspection, evaluation, troubleshooting, and replacement of the existing membranes. Ovivo is the supplier of the WWTP system, which was sold as part of the construction contract for the Calico Ghost Town Regional Park Phase Two Advanced Wastewater Treatment Project, approved by the Board on September 21, 2021 (Item No. 54). Consequently, Ovivo possesses specialized knowledge of the system and delivers cost-efficient results.
The WWTP membrane system warranty covers the membrane system which is comprised of Ovivo membrane plate and all equipment provided by Ovivo. The warranty process for the County requires submission of a detailed description of the defect/issue, showing operational data prior to and during the failure. Within seven days upon request by Ovivo, the County must also make operational data, repair data, maintenance data, and lab data available for the membranes/equipment to support the claim. Photographs or any other graphical evidence must be provided to support the claim, including serial numbers of the membrane modules/equipment which are covered by the warranty claim. The total duration of warranty coverage varies from two to five years depending on the type of equipment.
Ovivo's technical support services will include providing necessary documentation, coordinating issue resolution to support potential claims, fulfilling warranty requirements, and efficiently performing any required repairs and maintenance on the WWTP system. Ovivo’s quotations are governed by their standard commercial Terms and Conditions of Sale (TCS), which differ from the standard County contract and omit certain standard County language. The non-standard and missing terms include the following:
1. The governing law for the TCS is the state of Utah.
• The County standard contract requires California law.
• Potential Impact: The TCS will be interpreted under Utah state law. Any questions, issues or claims arising under the TCS will require the County to hire outside counsel competent to advise on Utah state law, which may result in fees that exceed the total TCS amount. Any questions, issues or claims arising under this contract could require the County to hire outside counsel competent to advise on the applicable state law, which may result in fees that exceed the total contract amount.
2. The TCS requires that the exclusive jurisdiction and venue to bring and hear disputes is the state and federal courts located in Salt Lake City, Utah.
• The County standard contract requires venue for disputes to be San Bernardino County.
• Potential Impact: Having a venue in Salt Lake City, Utah, may result in additional expenses that exceed the amount of the contract.
3. The TCS includes a limitation of liability that requires in no event may Ovivo be responsible to County or any third party in contract or in tort, or otherwise, for loss or damage sustained as a result of the operation of the equipment, loss of use, expenses involved in loss of capital claims or County’s loss of profit or revenues, or any other indirect, incidental, special or consequential loss or damage, whether arising from defects, delay, or any other cause whatsoever.
• The County Standard contract does not include a limitation of liability.
• Potential Impact: Claims could exceed the liability cap and the contract amount leaving the County financially liable for the excess. County Counsel cannot advise on whether, and to what extent, Utah law may limit or expand the exclusion of limits to the extent prohibited by applicable law.
4. The TCS provides that all other warranties, express, or implied, including warranties of fitness for a particular purpose and merchantability, whether written, oral or statutory, are excluded to the fullest extent permissible by law.
• The County standard contract provides that a vendor/contractor fully warrants its services and product they provide to the County.
• Potential Impact: The County’s use of any new equipment or parts is solely at its own risk. Under California law, sellers are not required to provide any warranty.
5. The TCS provides a general indemnity that each party (Ovivo and the County) will indemnify the other party from and against all claims, demands and causes of action asserted by, or in favor of, any entity to the extent of the indemnifying party’s negligence or willful misconduct in connection with the performance under the TCS.
• The County standard contract does not include any indemnification or defense by the County of a vendor. The County standard contract general indemnity provision also requires the contractor to indemnify, defend, and hold County harmless from third party claims arising out of the acts, errors or omissions of any person.
• Potential Impact: By agreeing to indemnify, the County could be contractually waiving the protection of sovereign immunity. Claims that may otherwise be barred against the County, time limited, or expense limited could be brought against Ovivo without such limitations and the County would be responsible to defend and reimburse Ovivo for costs, expenses, and damages, which could exceed the total contract amount.
6. The TCS includes a provision allowing for recovery of attorneys' fees for all costs and expenses for litigation plus out-of-pocket expenses and interest.
• The County standard contract requires each party to bear its own costs and attorney fees, regardless of who is the prevailing party.
• Potential Impact: If Ovivo institutes any legal proceedings related to the TCS, if it is the prevailing party, it will be entitled to recover reasonable attorneys’ fees, which could exceed the total contract amount.
7. The TCS requires net 30 days for payment and a late payment penalty payment of 5% of the total amount of costs and expenses owed.
• County standard payment terms are Net 60 days with no interest or late payment penalties.
• Potential Impact: County standard processing time is 60 days or more. Failing to pay net 30 days will result in a material breach of the contract, which would allow Ovivo to terminate the contract and seek other legal remedies, including charging the late interest payment of 5% of the total amount of costs and expenses owed. County Counsel cannot advise on whether, and to what extent, Utah law may provide for such late payments and penalties to the extent allowable by applicable law.
8. The TCS does not provide the County with the ability to terminate the agreement for convenience.
• The County standard contract gives the County the right to terminate the contract, for any reason, with a thirty (30) day written notice of termination without any obligation other than to pay amounts for services rendered and expenses reasonably incurred prior to the effective date of termination.
• Potential Impact: There is no termination for convenience provision. Upon any termination by either party regardless of cause, the County may be required to pay for the work under the TCS, which could result in payment liability where no funds are available due to lack of allocation or loss of funding
9. The TCS does not require Ovivo to meet the County insurance standards.
• The County standard contract requires contractors to carry appropriate insurance at limits and under conditions determined by the County’s Risk Management Department.
• Potential Impact: The contract does not include County standard insurance requirements. This means that the County has no assurance that Ovivo will be financially responsible for claims that may arise from the TCS and work, which could result in expenses to the County that exceed the total contract amount.
The Department recommends the approval of Ovivo’s non-financial TCS, including non-standard terms, to permit purchase orders, in amounts as authorized by County Policy, for Ovivo’s technical support services to maintain the system and available warranties. Approval of the non-standard terms and conditions will allow for the Department to proceed with procuring of technical support services via issuance of purchase orders with Ovivo pursuant to the approved TCS terms, and subject to County Counsel review, and will reduce the cost of training, maintenance, efficiency, and funding of Department staff. There is a significant cost benefit to the County to utilize Ovivo, the seller of the system. Accordingly, approval of this item will allow the Department to receive needed support services from the manufacturer and operate in a fiscally-responsible and business-like manner.
PROCUREMENT
Ovivo is the manufacture and installer of the WWTP System at Calico Ghost Town Regional Park. Technical support services are essential to maintain manufacturer warranties on of the WWTP System and its components. Purchasing concurs with the non-competitive procurement based on manufacture direct technical support to maintain warranties on the WWTP Systems. County Policy 11-05 requires departments to obtain Board approval for procurement of goods and services with non-standard terms and conditions.
REVIEW BY OTHERS
This item has been reviewed by County Counsel (Aaron Gest, Deputy County Counsel, 387-5455) on December 11, 2024; Purchasing Department (Michael Candelaria, Lead Buyer, 387-8258) on November 4, 2024; Finance (Jessica Trillo, Administration Analyst, 387-4222) on November 8, 2024; and County Finance and Administration (Paloma Hernandez-Barker, Deputy Executive Officer, 387-5423) on November 15, 2024.