THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA. Addendum No. 1 REQUEST FOR PROPOSALS RFP-ER

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1 THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA REQUEST FOR PROPOSALS CHLORINE AND CAUSTIC SODA FOR WATER TREATMENT To all prospective respondents of Request for Proposals No , the information given in this is hereinafter incorporated into. Q1. Who is the incumbent and what is Metropolitan s current pricing? A1. Metropolitan s current supplier is Olin Corporation. Metropolitan s current delivered pricing is as follows: Chlorine, railcars Chlorine, in truckloads, with a repacking charge Caustic Soda, 25%, truckload Caustic Soda, 50%, railcar Caustic Soda, 50%, truckload Demurrage, chlorine, railcar Demurrage, caustic, railcar Demurrage, beyond 2 free hours, chlorine and caustic Lab Report, chlorine or caustic $300.91, ton $339.72, ton $607.05, dry ton $526.30, dry ton $550.05, dry ton $47.50, day $47.50, day $80.75, hour $ each Q2. Would it be possible to get the previous bid results/tabulations for both products? A2. Metropolitan s last formal solicitation for chlorine and caustic was RFB No and under that RFB, pricing under various options was received. Metropolitan has now posted that previous bid tabulation in NETConnect. Two bidders responded to RFB Pioneer Americas and Univar. Q3. Page 3 of the RFP states Jensen facility railcars of chlorine; railcars of caustic but page 5 of the caustic soda specifications state that this facility can take either railcar deliveries or cargo trailer/tanker deliveries. Which is correct? A3. Both are correct. Page 3 of the RFP is intended to express how each plant generally (i.e., almost always) receives its product. The Specifications state the modes in which each plant is capable of receiving product. So in the case of Jensen, while it is capable of receiving caustic by cargo trailer it is much more efficient and desirable to receive by railcar. Therefore, the Contractor will provide caustic by railcar. However, to maintain maximum flexibility in its operations, particularly in the case of emergencies, if a Metropolitan plant is capable of receiving by railcar and truck then the Contractor must be able to be able to provide product in both modes. Page 1 of 5

2 Q4. Railcar Demurrage Page 4 of the RFP states the demurrage may be charged after 60 days. However page 6 of the caustic soda specifications states after 45 days. Which is correct? A4. The specification is incorrect and it should state 60 days, not 45 days. Amend first sentence of 9.0 (b) of the caustic soda specification to: The railcar shall be free of demurrage charges for a minimum of 60 days, beginning on the date of delivery into the Metropolitan facility. Q5. Pricing Aside from the option to offer pricing firm for one year, or adjusted every six months, will suppliers be able to offer separate pricing for the 25% and 50% material online, or are we only able to offer one price for both percentages? a. Will suppliers also be able to offer separate pricing for railcar deliveries vs. cargo trailer deliveries? A5. Yes, Supplier may offer separate pricing for the 25% and 50% material, and railcar vs. cargo trailer deliveries. Metropolitan erroneously omitted Exhibit A Price Schedule, when it posted the RFP. Metropolitan has now posted Exhibit A and Respondents will use Exhibit A to submit pricing. 6. Section 1, 1.3 Minimum Qualifications and Requirements. 3b now reads: 3b. Be capable of making railcar deliveries to any Metropolitan facility that has railcar access. 7. Section 1, 1.18 Price Adjustments. Metropolitan now provides more detail on the Indexed Price Adjustment mechanism. As a result, add this to b. Indexed pricing: b. The PPI will be used to calculate price adjustments in the cost of raw materials and the EIA index shall be used to adjust for changes in fuel costs as described below. With the exception of raw materials and fuel, no other costs shall be subject to escalation. Raw Material Price Adjustment For Chlorine The following United States Bureau of Labor Statistics (BLS) Producer Price Index shall be specifically used for raw material price adjustments: Series ID: Industry: Item: PCU (Preliminary Data) Other basic inorganic chemical manufacturing chlorine, compressed or liquified Here is the link to the Bureau of Labor Statistics website where this PPI information can be found: Metropolitan s price will be based on changes to this PPI and adjusted against the PPI base index every six months as described and illustrated herein. For purposes of price adjustment, raw material costs are assumed to be 70% of total price, regardless of which respondent is awarded the contract. The 70% factor shall be used to calculate baseline raw material cost relative to the bid price, regardless of the supplier s actual material cost/price ratio. With the exception of fuel, all other costs and profit (referred to as margin ) remain fixed. The percentage of change, up or down, between the current PPI Index and the PPI base index will be applied to 70% of Metropolitan s initial/base price to arrive at an Page 2 of 5

3 adjusted contract price effective for the next six-month period. This process will be repeated every six-months for the life of the agreement to include all renewal periods. Fuel Cost Adjustment for Chlorine Pricing is also subject to adjustment based on the change, up or down, in the Energy Information Administration s (EIA) Weekly On-Highway Diesel Prices Index. The website is and the information will be taken from the California data. Concurrent with a review of the PPI, fuel pricing will also be reviewed every six month as described and illustrated herein. For purposes of this adjustment, fuel costs are assumed to be 5% of total price, regardless of which respondent is awarded the contract. The percentage of change, up or down, between the current EIA Index and the EIA base index will be applied to 5% of Metropolitan s initial/base price to arrive at an adjusted contract price effective for the next six-month period. This process will be repeated every six-months for the life of the agreement to include all renewal periods. THE RAW MATERIAL AND FUEL COST PRICE ADJUSTMENT MECHANISM The examples below are for illustration only and are not intended to reflect actual data. The intent is to provide understanding of how the adjustment process will work under the Indexed Pricing option. EXAMPLE 1: INITIAL/BASE Base Index PPI %Change New Price PPI - Nov 11 May 12 Raw Materials $ % $ (70% of initial/original price) Base Index EIA EIA Nov 11 May 12 Fuel Cost $ % $ (5% of price) Margin $ $ (25% of price) MWD Price/ton $345.00* $ * Assume MWD s initial (base) delivered price for Cl2, truckloads is $345/ton Note: Example 1 assumes contract is effective on January 1, 2012, and therefore, the new Metropolitan price of $ for truckloads (repackaging) of chlorine would be effective July 1, 2012 to December 31, Page 3 of 5

4 EXAMPLE 2: INITIAL/BASE Base Index PPI %Change New Price PPI - Nov 11 Nov12 Raw Materials $ % $ (70% of initial/original price) Base Index EIA Nov 11 EIA Aug 12 Fuel Cost $ % $ (5% of price) Margin $ $ (25% of price) MWD Price/ton $345.00* $ * Assume MWD s initial/base delivered price is $345/ton Note: Example 2 illustrates calculation of Metropolitan s new price of $ for truckloads (repackaging) of chlorine effective January 1, 2013 to June 30, Should Metropolitan select the indexed pricing option, the PPI index (PCU ) and the EIA index (California data) will be used to adjust both chlorine railcar and truckload pricing. Price Adjustments For Caustic Soda The following United States Bureau of Labor Statistics (BLS) Producer Price Index shall be specifically used for raw material price adjustments: Series ID: Industry: Item: PCU (Preliminary Data) Other basic inorganic chemical manufacturing sodium hydroxide (caustic soda) The EIA index (CA data) would be applicable to caustic just as it is for chlorine. The Raw Material and Fuel Cost Price Adjustment Mechanism for caustic soda would work just like the chlorine adjustment mechanism illustrated above, except the caustic soda PPI would be used instead. Should Metropolitan select the indexed pricing option for caustic, the PPI index (PCU ) and the EIA index (California data) will be used to adjust both caustic railcar and truckload pricing. In other words, except for the use of different PPI series ID, the chlorine and caustic adjustment processes would work the same. Page 4 of 5

5 8. Respondents will now upload their Price Schedule (Exhibit A) as a file separate from the rest of their proposal. Do not place your Price Schedule in Section I of your proposal. Therefore, delete the following from Section 4, Proposal Instructions, Item I, Price and Costs: In Section I of their proposal, Respondent shall complete and submit the Price Schedule (Exhibit A). 9. IMPORTANT: The proposal due date is hereby amended. All Proposals must now be received in NETConnect by 3:00 p.m., PDT, Tuesday, October 18, Except as amended herein, all provisions of remain the same. - END OF ADDENDUM NO. 1 - Page 5 of 5

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