HomeMy WebLinkAboutPacket - 01/06/2014 - City Council
PROFESSIONAL SERVICES AGREEMENT
For
City of McHenry Water and Sewer Rate Study
with Cost of Service Analysis
Jon M. Schmitt, Director of Public Works
City of McHenry
1415 Industrial Drive
McHenry, Illinois 60050
(815) 363-2186
Chad J. Pieper, P.E.
City Engineer
HR Green
420 N. Front Street, Suite 100
McHenry, Illinois, 60050
86130419
December 16, 2013
I.
TABLE OF CONTENTS
1.0 PROJECT UNDERSTANDING
2.0 SCOPE OF SERVICES
3.0 DELIVERABLES AND SCHEDULES INCLUDED IN THIS AGREEMENT
4.0 ITEMS NOT INCLUDED IN AGREEMENT/SUPPLEMENTAL SERVICES
5.0 SERVICES BY OTHERS
6.0 CLIENT RESPONSIBILITIES
7.0 PROFESSIONAL SERVICES FEE
8.0 TERMS AND CONDITIONS
Professional Services Agreement
City of McHenry Water and Sewer Rate Study
December 16, 2013
Page 1 of 9
THIS AGREEMENT is between the CITY OF McHENRY (hereafter “CLIENT”) and HR GREEN,
INC. (hereafter "COMPANY").
1.0 Project Understanding
1.1 General Understanding
The City of McHenry, IL (CLIENT) is seeking a Water and Sewer Rate Study with cost-of-
service analysis. It will propose rates that generate sufficient revenue to fund projected
expenses and planned capital improvements.
The CLIENT currently has a uniform block water rate structure with a standard rate for the
first 4,000 gallons and a volume rate for residential and commercial/industrial customers.
Water user rates for customers considered to be Outside Corporate Limits are
approximately 1.5 times greater than rates for customers within Inside Corporate Limits.
The CLIENT currently has a standard sewer rate structure which includes a basic user
charge, a fixed debt service charge, and a variable debt service charge. A treatment
service surcharge is applied for sewer users whose wastewater exceeds the average
concentrations for biochemical oxygen demand (240 mg/L) and suspended solids (275
mg/L).
The CLIENT desires a rate study to verify that the rates being charged to customers are
fair and equitable. A cost-of-service analysis will provide the CLIENT with confidence that
customer classes are paying for the cost of providing their service.
1.2 Design Criteria/Assumptions
The specific services to conduct the W ater and Sewer Rate Study include the review of
historical operating results, development of a water usage and sales forecast,
development of a water cost forecast, development of forecasted operating results,
analysis of the cost to serve each customer class and/or meter size, determination of
necessary rate adjustments, and design of new rates. The proposed 5-year Study Period
for this project is from fiscal year (FY) 2014/2015 through FY 2018/2019.
2.0 Scope of Services
The CLIENT agrees to employ COMPANY to perform the following services:
2.1 Data Requests
Data Requests encompass the request of information from the CLIENT necessary to
develop a projection of revenue requirements, allocation factors, cost-of-service, and rate
design analysis.
2.1.1 Data Request
The data collection process will be initiated in the form of a letter to the CLIENT
summarizing the data that will need to be reviewed. This letter will allow the CLIENT to
begin locating and compiling the necessary data related to the water and sewer
departments to move the study along smoothly.
Professional Services Agreement
City of McHenry Water and Sewer Rate Study
December 16, 2013
Page 2 of 9
2.1.2 Revenue Requirements
Development of the revenue requirements will include review of annual historical and
budgeted operating expenses, anticipated additions to the system, and any other
financial obligations of the CLIENT, such as debt service and transfers to the CLIENT.
The data to be provided by the CLIENT shall cover the most recent four years. The
most recent year is considered the test year (Test Year).
2.1.3 Allocation Data
The data required to complete the study includes monthly billing and accounting data
related to retail water and sewer operation, monthly and peak day water production,
monthly water sales by class and/or meter size, monthly usage for residential and
commercial/industrial customers, and number, size, and type of customers for each rate
class.
2.1.4 Data Review
Review the information collected as a result of the data request. Typically, adjustments
will need to be made to operating expenses that have fluctuated to reflect annualized
Test Year levels. Additionally, during this period, any one-time expenses or large non-
recurring expenses should be adjusted to reflect normal operations. The adjusted
revenue requirements should also account for any reasonably identifiable planned
construction costs, improvements or extensions to the water and sewer system.
2.2 Project Future Water and Sewer Requirements
Analyze the CLIENT’s historical sales and customer statistics and project annual revenue
requirements and retail sales for the 5-year Study Period. The estimates will take into
account any recent or anticipated changes in customer service characteristics identified
by the CLIENT. In addition, estimated sales during the Study Period will be developed for
each customer classification and/or meter size.
2.3 Estimate Revenue Requirements
Evaluate the CLIENT’s historical operating results and prepare an estimate of annual
revenue requirements for each year of the Study Period. Estimated revenue requirements
will include water supply, treatment, and distribution costs, wastewater collection and
treatment costs, customer accounting, administrative and general expenses, investment
income (as a credit), an allowance for capital improvements and additions or for rate of
return, debt service obligations, and other pertinent expenses.
2.4 Estimate Revenues
Based on the CLIENT's existing rates and estimated sales developed in Task 2.2,
estimate annual revenues, by customer classification and/or meter size, for each year of
the Study Period.
2.5 Estimate Operating Results
Based on estimated revenues and revenue requirements developed above, prepare a
summary of annual operating results for each year of the Study Period. This summary will
include a determination of the revenue adjustments, if any, required during the Study
Professional Services Agreement
City of McHenry Water and Sewer Rate Study
December 16, 2013
Page 3 of 9
Period in order to meet annual revenue requirements or to provide a rate of return
sufficient to ensure a greater degree of financial stability for the CLIENT.
2.6 Classify Costs
This portion of the scope is related to the Water and Sewer Rate Study cost-of-service
analysis. Using embedded costs, analyze Test Year revenue requirements and classify to
various cost components. Before classifying Test Year revenue requirements to individual
cost components, each expense item will be evaluated to determine what, if any,
adjustments may be required to ensure an appropriate analysis of the near-term costs of
providing service to the CLIENT's customers.
2.7 Develop Allocation Factors
This portion of the scope is related to the Water and Sewer Rate Study cost-of-service
analysis. Analyze the service characteristics of the CLIENT’s customers and develop
appropriate factors for allocating Test Year revenue requirements to individual customer
classifications and/or meter sizes.
2.8 Allocate Costs
This portion of the scope is related to the Water and Sewer Rate Study cost-of-service
analysis. Based on classified revenue requirements and class allocation factors, calculate
the allocated cost of serving each customer classification. The result is an estimate of the
revenue requirements by class linked to the aggregate usage and operating expenses of
the entire system.
2.9 Compare Cost-of-Service to Revenues Under Existing Rates
This portion of the scope is related to the Water and Sewer Rate Study cost-of-service
analysis. Compare the allocated cost-of-service with actual Test Year revenues under
existing rates and calculate the percentage adjustment, if any, required in the annual
revenue recovery in each customer classification in order to meet the allocated cost of
providing service.
2.10 Initial Meeting and Data Review
Meet once with representatives of the CLIENT at its office to review the initial findings and
to identify what changes to existing retail water and sewer rates might be recommended
for implementation.
2.11 Design Rate Alternatives
Based on the results of the above meeting, design proposed new rates for each customer
classification, including new and modified classes, as necessary. A Bulk water user rate
will also be developed. Also prepare graphical comparisons of monthly bills under
existing and proposed rates at various usage levels in each rate classification. Identify
changes that may enhance the CLIENT’s financial integrity and recover costs in a more
equitable manner.
Professional Services Agreement
City of McHenry Water and Sewer Rate Study
December 16, 2013
Page 4 of 9
2.12 Comparisons to Other Utility Rates
A comparison will also be made between the CLIENT’s existing and proposed rates and
the rates of several municipal utilities. The comparisons will be made relative to rate
design as well as level of rates at typical monthly usages for the major rate classes.
2.13 Prepare Preliminary Report
Prepare a written report describing the analyses undertaken in the study, including the
development of future revenue requirements, cost allocation, proposed rates, and
comparison of existing and proposed rates. Estimated operating results at proposed rates
will be included. Present three (3) hard copies and one (1) electronic copy of this
preliminary report to the CLIENT for review and comment.
2.14 Submit Final Report
Hold one meeting via conference call to discuss the draft report. Based on comments
received from the CLIENT staff, finalize the report and submit three (3) hard copies and
one (1) electronic copy to the CLIENT and the governing board.
2.15 Present Findings to the Governing Board
Present the findings of the study at one meeting with representatives of the CLIENT and
the governing board and answer any questions regarding the study.
3.0 Deliverables and Schedules Included in this Contract
The project schedule for the study, based on major milestones, is as follows:
Submit Data Request to CLIENT December 2013
Receive Data for Study from CLIENT January 2014
Data Analysis Complete February 2014
Initial Meeting with CLIENT Staff to Review Data February 2014
Submit Draft Study for CLIENT Review March 2014
Conference Call with CLIENT Staff To Discuss Study March 2014
Submit Final Study to CLIENT April 2014
Present Study to CLIENT Council April 2014
This schedule was prepared to include reasonable allowances for review and approval
times required by the CLIENT and public authorities having jurisdiction over the project.
This schedule shall be equitably adjusted as the project progresses, allowing for changes
in the scope of the project requested by the CLIENT or for delays or other causes beyond
the control of COMPANY.
4.0 Items not included in Agreement/Supplemental Services
The following items are not included as part of this agreement.
1. Preparation of fliers or mailers.
2. Public meetings associated with educating the public about the rates.
3. Cost estimating for future projects.
Professional Services Agreement
City of McHenry Water and Sewer Rate Study
December 16, 2013
Page 5 of 9
4. Permits necessary for the work.
5. Preparation of contract documents (plans or specifications) associated with this
project.
6. Hydraulic modeling.
Supplemental services not included in the agreement can be provided by COMPANY
under separate agreement, if desired.
5.0 Services by Others
Not applicable.
6.0 Client Responsibilities
The ability of COMPANY to complete the Services with the above schedule is dependent
upon the cooperation of the CLIENT and the timely response to the data requests.
COMPANY will rely on this information in the performance of the study. Because of this
reliance it is essential that the Data Requests be completed with accurate information.
As the study proceeds, additional information may be requested.
7.0 Professional Services Fee
7.1 Fees
The fee for services will be based on COMPANY standard hourly rates current at the time
the agreement is signed. These standard hourly rates are subject to change upon 30
days’ written notice. Non salary expenses directly attributable to the project such as: (1)
living and traveling expenses of employees when away from the home office on business
connected with the project; (2) identifiable communication expenses; (3) identifiable
reproduction costs applicable to the work; and (4) outside services will be charged in
accordance with the rates current at the time the work is done.
7.2 Invoices
Invoices for COMPANY’s services shall be submitted, on a monthly basis. Invoices shall
be due and payable upon receipt. If any invoice is not paid within 15 days, COMPANY
may, without waiving any claim or right against the CLIENT, and without liability
whatsoever to the CLIENT, suspend or terminate the performance of services. The
retainer shall be credited on the final invoice. Accounts unpaid 30 days after the invoice
date may be subject to a monthly service charge of 1.5% (or the maximum legal rate) on
the unpaid balance. In the event any portion of an account remains unpaid 60 days after
the billing, COMPANY may institute collection action and the CLIENT shall pay all costs of
collection, including reasonable attorney’s fees.
7.3 Extra Work
Any work required but not included as part of this contract shall be considered extra work.
Extra work will be billed on a Time and Material basis with prior approval of the CLIENT.
Professional Services Agreement
City of McHenry Water and Sewer Rate Study
December 16, 2013
Page 6 of 9
7.4 Exclusion
This fee does not include attendance at any meetings or public hearings other than those
specifically listed in the Scope of Services. These work items are considered extra and
are billed separately on an hourly basis.
7.5 Payment
The CLIENT AGREES to pay COMPANY on the following basis:
Lump sum in the amount of _$35,000__
8.0 Terms and Conditions
The following Terms and Conditions are incorporated into this AGREEMENT and made a part of it.
8.1 Standard of Care
Services provided by COMPANY under this AGREEMENT will be performed in a manner consistent with that
degree of care and skill ordinarily exercised by members of the same profession currently practicing at the
same time and in the same or similar locality.
8.2 Entire Agreement
This Agreement, and its attachments, constitutes the entire understanding between CLIENT and COMPANY
relating to professional engineering services. Any prior or contemporaneous agreements, promises,
negotiations, or representations not expressly set forth herein are of no effect. Subsequent modifications or
amendments to this Agreement shall be in writing and signed by the parties to this Agree ment. If the CLIENT,
its officers, agents, or employees request COMPANY to perform extra work or services pursuant to this
Agreement, CLIENT will pay for the additional services even though an additional written Agreement is not
issued or signed.
8.3 Time Limit and Commencement of Work
This AGREEMENT must be executed within ninety (90) days to be accepted under the terms set forth herein.
The work will be commenced immediately upon receipt of this signed Agreement.
8.4 Suspension of Services
If the Project or the COMPANY’S services are suspended by the CLIENT for more than thirty (30) calendar
days, consecutive or in the aggregate, over the term of this Agr eement, the COMPANY shall be compensated
for all services performed and reimbursable expenses incurred prior to the receipt of notice of suspension. In
addition, upon resumption of services, the CLIENT shall compensate the COMPANY for expenses incurred as
a result of the suspension and resumption of its services, and the COMPANY’S schedule and fees for the
remainder of the Project shall be equitably adjusted.
If the COMPANY’S services are suspended for more than ninety (90) days, consecutive or in the aggre gate,
the COMPANY may terminate this Agreement upon giving not less than five (5) calendar days' written notice
to the CLIENT.
If the CLIENT is in breach of this Agreement, the COMPANY may suspend performance of services upon five
(5) calendar days' notice to the CLIENT. The COMPANY shall have no liability to the CLIENT, and the
CLIENT agrees to make no claim for any delay or damage as a result of such suspension caused by any
breach of this Agreement by the CLIENT. Upon receipt of payment in full of all ou tstanding sums due from the
CLIENT, or curing of such other breach which caused the COMPANY to suspend services, the COMPANY
shall resume services and there shall be an equitable adjustment to the remaining project schedule and fees
as a result of the suspension.
Professional Services Agreement
City of McHenry Water and Sewer Rate Study
December 16, 2013
Page 7 of 9
8.5 Book of Account
COMPANY will maintain books and accounts of payroll costs, travel, subsistence, field, and incidental
expenses for a period of five (5) years. Said books and accounts will be available at all reasonable times for
examination by CLIENT at the corporate office of COMPANY during that time.
8.6 Insurance
COMPANY will maintain insurance for claims under the Worker's Compensation Laws, and from General
Liability and Automobile claims for bodily injury, death, or property damage arising from the negligent
performance by COMPANY's employees of the functions and services required under this Agreement.
8.7 Termination or Abandonment
Either party has the option to terminate this Agreement for any reason or no reason at all.
8.8 Waiver
COMPANY's waiver of any term, condition, or covenant or breach of any term, condition, or covenant, shall
not constitute a waiver of any other term, condition, or covenant, or the breach thereof.
8.9 Severability
If any provision of this Agreement is declared invalid, illegal, or incapable of being enforced by any Court of
competent jurisdiction, all of the remaining provisions of this Agreement shall nevertheless continue in full
force and effect, and no provision shall be deemed dependent upon any other provision unless so expressed
herein.
8.10 Successors and Assigns
No assignment of this Agreement shall be made without written consent of the parties to this Agreement.
8.11 Third-Party Beneficiaries
Nothing contained in this Agreement shall create a contractual relationship with or a cause of action in favor of
a third party against either the CLIENT or the COMPANY. The COMPANY’s services under this Agreement
are being performed solely for the CLIENT’s benefit, and no other party or entity shall have any claim against
the COMPANY because of this Agreement or the performance or nonperformance of services hereunder.
The CLIENT and COMPANY agree to require a similar provision in all contracts with contractors,
subcontractors, subconsultants, vendors and other entities involved in this project to carry out the inten t of this
provision.
8.12 Governing Law and Jurisdiction
The CLIENT and the COMPANY agree that this Agreement and any legal actions concerning its validity,
interpretation and performance shall be governed by the laws of the State of Illinois, McHenry County without
regard to any conflict of laws provisions, which may apply the laws of other jurisdictions.
It is further agreed that any legal action between the CLIENT and the COMPANY arising out of this
Agreement or the performance of the services shall be brough t in a court of competent jurisdiction in the State
of Illinois, McHenry County.
8.13 Dispute Resolution
Mediation. The CLIENT and COMPANY agree that all disputes between them arising out of or relating to this
Agreement shall be submitted to non-binding mediation as the parties mutually agree. The CLIENT and
COMPANY further agree to include a similar mediation provision in all agreements with independent
contractors and consultants retained for the project and to require all independent contractors and consultants
also to include a similar mediation provision in all agreements with subcontractors, sub -consultants, suppliers
or fabricators so retained, thereby providing for mediation as the primary method for dispute resolution
between the parties to those agreements, within McHenry County Illinois.
Arbitration. In the event the parties to this Agreement are unable to reach a settlement of any dispute arising
out of the services under this Agreement, involving an amount of less than $50,000, in Mediation, then such
disputes shall be settled by binding arbitration by an arbitrator to be mutually agreed upon b y the parties, and
shall proceed in accordance with the Construction Industry Arbitration Rules of the American Arbitration
Association currently in effect. Following unsuccessful Mediation, for disputes involving amounts greater than
or equal to $50,000, the parties agree to submit the dispute first to non -binding Arbitration. If a dispute is still
unsettled, all other legal means of dispute resolution, including litigation, shall be available to the parties, at
Professional Services Agreement
City of McHenry Water and Sewer Rate Study
December 16, 2013
Page 8 of 9
the discretion of the complaining party.The venue of any Mediation or Arbitration proceeding shall be the
McHenry Municipal Center, 333 S. Green Street, McHenry, IL 60050, or other venue otherwise agreed to by
the parties.
8.14 Attorney’s Fees
If litigation or binding Arbitration is used for purposes of collecting fees or expenses due under this
Agreement, the Court in such proceeding shall award reasonable costs and expenses, including attorney fees,
to prevailing party. In awarding attorney fees, the Court shall not be bound by any Court fee schedule, but
shall, in the interest of justice, award the full amount of costs, expenses, and attorney fees paid or incurred in
good faith.
8.15 Ownership of Instruments of Service
All reports, plans, specifications, field data, field notes, laboratory test data, calculations, estimates and other
documents including all documents on electronic media prepared by COMPANY as instruments of service
shall remain the property of COMPANY. The COMPANY agrees release information pursuant to the Illinois
“Freedom of Information Act, 5 ILCS 140.”
8.16 Reuse of Documents
All project documents including, but not limited to, plans and specifications furnished by COMPANY under this
project are intended for use on this project only. Any reuse, without specific written verification or adoption by
COMPANY, shall be at the CLIENT's sole risk, and CLIENT shall defend, indemnify and hold harmless
COMPANY from all claims, damages and expenses including attorney's fees arising out of or resulting
therefrom.
Under no circumstances shall delivery of electronic files for use by the CLIENT be deemed a sale by the
COMPANY, and the COMPANY makes no warranties, either express or implied, of merchantability and fitness
for any particular purpose. In no event shall the COMPANY be liable for indirect or consequential damages as
a result of the CLIENT’s use or reuse of the electronic files.
8.17 Design Information in Electronic Form
CLIENT shall retain copies of the work performed by COMPANY in electronic form only for information and
use by CLIENT for the specific purpose for which COMPANY was engaged. Said material shall not be used
by CLIENT or transferred to any other party, for use in other projects, additions to this project, or any other
purpose for which the material was not strictly intended by COMPANY without COMPANY’s expressed written
permission. Any unauthorized use or reuse or modifications of this material shall be at CLIENT’S sole risk.
8.18 Job Site Visits and Safety
Neither the professional activities of COMPANY, nor the presence of COMPANY’S employees and
subconsultants at a construction site, shall relieve the General Contractor and any other entity of their
obligations, duties and responsibilities including, but not limited to, construction means, methods, sequence,
techniques or procedures necessary for performing, superintending or coordinating all portions of the work of
construction in accordance with the contract documents and any health or safety precautions required by any
regulatory agencies. COMPANY and its personnel have no authority to exercise any control over any
construction contractor or other entity or their employees in connection with their work or any health or safety
precautions. The CLIENT agrees that the General Contractor is solely responsible for job site safety, and
warrants that this intent shall be made evident in the CLIENT's AGREEMENT with the General Contractor.
The CLIENT also agrees that the CLIENT, COMPANY and COMPANY’S consultants shall be shall be made
additional insureds on the General Contractor’s and all subcontractor’s general liability pol icies on a primary
and non-contributory basis.
8.19 Indemnification
The COMPANY agrees, to the fullest extent permitted by law, to indemnify and hold harmless the CLIENT, its
officers, directors and employees (collectively, CLIENT) against all damages, liabilities or costs, including
reasonable attorneys' fees and defense costs, to the extent caused by the COMPANY’S negligent
performance of professional services under this Agreement and that of its subconsultants or anyone for whom
the COMPANY is legally liable.
The CLIENT agrees, to the fullest extent permitted by law, to indemnify and hold harmless the COMPANY, its
officers, directors, employees and subconsultants (collectively, COMPANY) against all damages, liabilities or
costs, including reasonable attorneys' fees and defense costs, to the extent caused by the CLIENT’S
Professional Services Agreement
City of McHenry Water and Sewer Rate Study
December 16, 2013
Page 9 of 9
negligent acts in connection with the Agreement and the acts of its contractors, subcontractors or consultants
or anyone for whom the CLIENT is legally liable.
Neither the CLIENT nor the CONSULTANT shall be obligated to indemnify the other party in any manner
whatsoever for the other party's own negligence or for the negligence of others.
This AGREEMENT is approved and accepted by the CLIENT and COMPANY upon both parties
signing and dating the AGREEMENT. Work cannot begin until COMPANY receives a signed
agreement. The effective date of the AGREEMENT shall be the last date entered below.
Sincerely,
HR GREEN, INC.
__________________________________________
Chad J. Pieper, P.E.
Approved by:
Printed/Typed Name: Timothy J. Hartnett
Title: Vice President Date: 12/16/2013
CITY OF McHENRY
Accepted by:
Printed/Typed Name: Sue E. Low
Title: Mayor Date:
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Exhibit A
Man-Hour Estimate
Water and Sewer Rate Study
Job Number: 86130419
Date: December 16, 2013
TASK Personnel MAN-
HOURS LABOR COST
Data Collection and Analysis Project Manager 10 $1,750.00
Project Engineer 62 $8,060.00
Admin. 4 $240.00
Subtotal: 76 $10,050.00
Cost of Service Analysis Project Manager 8 $1,500.00
Project Engineer 40 $5,200.00
Admin. 8 $600.00
Subtotal: 56 $7,300.00
Report Preparation Project Manager 8 $1,500.00
Project Engineer 42 $5,460.00
Admin. 10 $610.00
Subtotal: 60 $7,570.00
Project Management and QA/QC Project Manager 20 $3,500.00
Admin. 4 $240.00
Subtotal: 24 $3,740.00
Meetings and Presentations Project Manager 15 $3,500.00
Project Engineer 20 $2,600.00
Admin. 4 $240.00
Subtotal: 39 $6,340.00
Contract Total: $35,000.00
Based upon our understanding of the project detailed in this Contract, the above is a summary of man-
hours and costs associated with the project. This Contract will be completed as a Lump Sum Contract.
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