2003-191ORDINANCE NO. 2003-
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF DENTON, TEXAS
AUTHORIZING THE CITY MANAGER TO EXECUTE A PROFESSIONAL SERVICES
AGREEMENT WITH R. J. COVINGTON CONSULTING, LLC FOR CONSULTING
SERVICES RELATING TO TASK ORDER NO. 03-E, REGARDING COMPLETION OF A
FIXED ASSET COST SEPARATION STUDY RELATING TO DENTON MUNICIPAL
ELECTRIC; AUTHORIZING THE EXPENDITURE OF FUNDS THEREFOR; AND
PROVIDING AN EFFECTIVE DATE.
WHEREAS, the City Council deems it in the public interest to engage the firm of R. J.
Covington Consult'mg, LLC of Austin, Texas ("Covington"), to provide professional consulting
services to the City relating to Task Order No. 03-E, including, without limitation, services that
relate to a review of Denton Municipal Electfic's ("DME") fixed assets, focusing on the
substation assets; developing an adjusted net book value for those facilities for FY 2002; and
preparing data for use in supporting the adjustments that will be made for the transmission cost
of service filing with the Public Utility Commission of Texas; and
WHEREAS, the City staffhas reported to the City Council that there is a substantial need
for the above-described specialized professional services, and that limited City staff cannot
adequately perform the services and tasks with its own personnel; and
WHEREAS, Chapter 2254 of the Texas Government Code, known as the "Professional
Services Procurement Act", generally provides that a City may not select a provider of
professional services on the basis of competitive bids, but must select the provider on the basis of
demonstrated competence, knowledge, and qualifications, and for a fair and reasonable price;
and
WHEREAS, Covington has represented DME continuously and ably over the past seven
years, and has proven to be a valuable, affordable, competent, dependable professional resource
that has expertise in and is well acquainted with the electric financial and regulatory framework
of Denton Municipal Electric ("DME"). Covington and his staff are familiar with the
characteristics and operations of DME; and
WHEREAS, the City Council has provided in the City Budget for the appropriation of
funds to be used for the purchase of the professional services, as set forth in the Professional
Services Agreement; NOW, THEREFORE,
THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS:
SECTION 1: That the City Manager is hereby authorized to execute a Professional
Services Agreement with R. J. Covington Consulting, LLC of Austin, Texas, for professional
consulting services relating to Task Order No. 03-E, to Denton Municipal Electric, in
substantially the form of the Professional Services Agreement attached hereto and incorporated
herewith by reference as Exhibit "A."
SECTION 2: That the award of this Agreement by the City is on the basis of the
demonstrated competence, knowledge, and qualifications of Covington and the ability of
Covington to perform the professional services needed by the City for a fair and reasonable
price.
SECTION 3: That the expenditure of funds as provided in the attached Professional
Services Agreement is hereby authorized.
SECTION 4: That this ordinance shall become effective immediately upon its passage
and approval.
PASSED AND APPROVED this the /0¢ dayof ~2~ ,2003.
EULINE BROCK, MAYOR
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
APPR( }VED AS TO LEGAL FORM:
HERBERT L. PROUTY, CITY ATTORNEY
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STATE OF TEXAS
COUNTY OF DENTON
PROFESSIONAL SERVICES AGREEMENT FOR CONSULTING SERVICES
PERTAINING TO DENTON MUNICIPAL ELECTRIC
THIS AGREEMENT is made and entered into as of the day of June, 2003, by and
between the City of Denton, a Texas Municipal Corporation, with its principal office at 215 East
McKinney Street, Denton, Texas 76201 ("CITY"); and R. J. COVINGTON CONSULTING, LLC,
A Texas Limited Liability Corporation, with its principal office at 13276 Research Blvd., Suite 2i31,
Austin, Texas 78750, hereafter "COVINGTON"; acting herein by and through their duly authorized
representatives.
WITNESSETH, that in consideration of the covenants, promises and agreements herein
contained, the CITY and COVINGTON do hereby AGREE as follows:
ARTICI ,E 1
EMPLOYMENT OF CONSULTANT
The CITY hereby contracts with COVINGTON, as an independent contractor, and
COVINGTON hereby agrees to perform the services herein in connection with the Scope of
Services as stated in the Articles to follow, with diligence and in accordance with the highest
professional standards customarily obtained for such services in the State of Texas.
ARTICI .E IT
SCOPE OF SERVICES
A. COVINGTON shall provide to the CITY professional consulting services pertaining to the
preparation of a fixed asset cost separation study for Denton Municipal Electric. COVINGTON
agrees to perform those services and tasks more particularly described in Task Order No. 03-E
attached hereto and incorporated herewith by reference.
B. To consult with the City Manager, Assistant City Manager/Utilities, the Director of Electric
Utilities, the Utility Attomey, and any other designated administrative personnel regarding any and
all aspects of the services to be performed pursuant to this Agreement.
A RTICI .E 1[1
PERIOD OF SERVICE
This Agreement shall become effective upon execution by both the CITY and COVINGTON.
The termination date of this Agreement shall be upon the earliest to occur of the following events:
completion of the work described herein and in the attached Task Order No. 03-E; or upon the
depletion and exhaustion of the $ l 8,540 not to exceed amount provided for herein; or upon fifteen
(15) day's written notice to terminate, issued by the Director of Electric Utilities, DME. This
Agreement may be sooner terminated in accordance with the provisions hereof. Time is of the
essence in this Agreement. COVINGTON shall make all reasonable efforts to complete the services
set forth herein as expeditiously as possible and to meet the schedule established by the CITY, acting
through its Director of Electric Utilities.
ARTICI,E lV
COMPENSATION
A. COMPENSATION TERMS:
"Direct Non-Labor Expense" is defined as that expense for any assignment incurred hereunder
by COVINGTON for supplies, long-distance telephone, telecopier, reproduction expense,
overnight courier, photocopy expense, transportation, travel, communications, subsistence and
lodging away from home and similar incidental expenses reasonably incurred in connection
with that assignment.
B. BILLING AND PAYMENT:
1. For and in consideration of the professional services to be performed by COVINGTON
herein, the CITY agrees to pay COVINGTON, a total fee, including reimbursement for direct
non-labor expense, not to exceed $18,540 for those services described in Task Order No. 03-
E.
2. The fee for the services described in this Agreement to be performed by COVINGTON
are to be billed the rates as set forth in Exhibit "A" attached hereto and incorporated herewith
by reference. Billing shall be reported in minimum one-quarter (1/4) hour increments.
3. Payments to COVINGTON will be made by the CITY on the basis of detailed monthly
statements rendered to the CITY through its Director of Electric Utilities. The fee bills as
submitted, shall be allowed and approved by the Director of Electric Utilities. However,
under no circumstances shall any monthly statement for services exceed the value of the work
performed at the time a statement is rendered.
4. Nothing contained in this Article shall require the CITY to pay for any work which is
unsatisfactory as reasonably determined by the City Manager or the Director of Electhc
Utilities, or which is not submitted in compliance with the terms of this Agreement. The City
shall not be required to make any payments to COVINGTON when COVINGTON is in
default under this Agreement.
5. It is specifically understood and agreed that COVINGTON shall not be authorized to
undertake any work pursuant to this Agreement which would require additional payments by
the CITY for any charge, expense or reimbursement above the maximum not-to-exceed fee as
stated, without first having obtained written authorization from the CITY.
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C. PAYMENT
If the CITY fails to make payments due COVINGTON for services and expenses within forty
(40) days after receipt of COVINGTON'S undisputed statement thereof, the amounts due
COVINGTON will be increased by the rate of one percent (1%) per month fi-om the said forty
(40th) day, and in addition, COVINGTON may, after giving ten (10) days' written notice to
the CITY, suspend services under this Agreement until COVINGTON has been paid in full all
amounts due for services, expenses and charges provided. However, nothing herein shall
require the CITY to pay the late charge of one percent (1%) set forth herein if the CITY
reasonably determines that the work of COVINGTON is unsatisfactory, in accordance with
this Article IV, Compensation, and the CITY notifies COVINGTON in writing of any such
defect.
P.R TICI ,E V
OBSERVATION AND REVIEW OF THE WORK
COVINGTON will exercise reasonable care and due diligence in discovering and promptly
reporting to the CITY any defects or deficiencies in his work or the work of any subconsultants
performed hereunder.
ARTICI .F. VI
OWNERSHIP OF DOCUMENTS
All documents, analyses and other data prepared by COVINGTON under this Agreement
("Work Products") are instruments of service and are and shall remain the property of CITY.
COVINGTON shall have the right to make and retain copies and use all Work Products; provided,
however, the use shall be limited to the intended use for which the services and Work Products are
provided under this Agreement. COVINGTON may use and may copyright certain non-sensitive
Work Products as property of COVINGTON; provided that prior written approval is obtained from
CITY, whose approval shall not be unreasonably withheld, and providing that copywfiting will not
restrict CITY'S right to retain or make copies of the Work Products for its information, reference
and use on the Project or services under the Agreement.
The Work Products shall not be changed or used for purposes other than those set forth in this
Agreement without the prior written approval of COVINGTON. If CITY releases the Work
Products to a third party without COVINGTON'S prior written consent, or changes or uses the
Work Products other than as intended hereunder, CITY does so at its sole risk and discretion and
COVINGTON shall not be liable for any claims or damages resulting from or connected with the
release or any third party's use of the Work Products.
ARTIC1.1~ VII
INDEPENDENT CONTRACTOR
COVINGTON shall provide services to the CITY as an independent contractor, not as an
employee of the CITY. COVINGTON shall not have or claim any right arising from employee
status.
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ARTICI,E VIII
INDEMNITY AGREEMENT
COVINGTON shall indemnify and save and hold harmless the CITY and its officers, agents,
and employees from and against any and all liability, claims, demands, damages, losses and
expenses, including but not limited to court costs and reasonable attorney's fees incurred by the
CITY, and including without limitation, damages for bodily and personal injury, death and property
damage, and damage for pmfessional malpractice resulting from the negligent acts or omissions of
COVINGTON or any subconsultants, in performance of this Agreement. COV1NGTON'S liability
under this Article VIII is expressly limited to the amount of COV1NGTON'S insurance coverage as
set forth in Article IX.
Nothing in this Agreement shall be construed to create a liability to any person who is not a
party to this Agreement and nothing herein shall waive any of the party's defenses, both at law or
equity, to any claim, cause of action or litigation filed by anyone not a party to this Agreement,
including the defense of governmental immunity, which defenses are hereby expressly reserved.
ARTICI ~E IX
INSURANCE
During the performance of the Services under this Agreement, COVINGTON shall maintain
the following insurance with an insurance company licensed to do business in the State of Texas by
the State Insurance Commission or any successor agency that has a rating with Best Rate Carders of
at least an "A-" or above:
Comprehensive General Liability Insurance with bodily injury limits of not less than $500,000
for each occurrence and not less than $500,000 in the aggregate, and with property damage
limits of not less than $100,000 for each occurrence, and not less than $100,000 in the
aggregate.
Automobile Liability Insurance with bodily injury limits of not less than $500,000 for each
person and not less than $500,000 for each accident; and with property damage limits of not
less than $100,000 for each accident.
Professional Liability Insurance with policy limits of not less than $1,000,000 annual
aggregate.
COVINGTON shall furnish insurance certificates or insurance policies at the CITY's request
to evidence such coverages. The insurance policies shall name the CITY as an additional
insured on all such policies to the extent legally possible, and shall contain a provision that
such insurance shall not be canceled or modified without thirty (30) days prior written notice
to CITY and COVINGTON. In such event, COVINGTON shall, prior to the effective date of
the change or cancellation, deliver substitute policies furnishing the same coverage to the
CITY.
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ARTICI.E X
ARBITRATION AND ALTERNATE DISPUTE RESOLUTION
The parties agree to settle any disputes under this Agreement by submitting the dispute to
arbitration or other means of alternate dispute resolution such as mediation. No arbitration or
alternate dispute resolution ar/sing out of or relating to, this Agreement involving one party's
disagreement may include the other party to the disagreement without the other's approval.
ARTICI.E XT
LIMITATION OF LIABILITY
To the extent penn/tted by law, the total liability of COVINGTON to CITY for any and all
claims arising out of this Agreement, whether caused by negligence, errors, omissions, strict
liability, broach of contract or contribution, or indemnity claims based on third-party claims, shall
not exceed one million dollars ($1,000,000).
ARTICI.E XII
CONSEQUENTIAL DAMAGES
In no event and under no circumstances shall COVINGTON be liable to CITY for any
interest, loss of anticipated revenues, earnings, profits, or increased expense of operations, or for any
consequential, indirect or special damages.
ARTICI,E XIII
PROFER,RIONAI. STANDARDS
COVINGTON will perform services under this Agreement with the degree of skill and
diligence normally practiced by professional engineers or consultants performing the same degree of
similar services. No other warranty or guarantee, expressed or implied, is made with respect to the
services furnished under this Agreement and all implied warranties am disclaimed.
ARTICI,E XIV
TERMINATION OF AGREEMENT
Notwithstanding any other provision of this Agreement, either party may terminate this
Agreement by giving thirty (30) days advance written notice of termination to the other party.
This Agreement may be terminated in whole or in part in the event of either party substantially
failing to fulfill its obligations under this Agreement. No such termination will be effected
unless the other party is given: (1) written notice (delivered by certified mail, return receipt
requested) of intent to terminate and setting forth the masons specifying the nonperformance,
and not less than ten (10) business days in which to cure the failure; and (2) an opportunity for
consultation with the terminating party prior to termination.
If this Agreement is terminated prior to completion of the services to be provided hereunder,
COVINGTON shall inm~ediately cease all services and shall render a final bill for services to
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the CITY within 30 days after the date of termination. The CITY shall pay COViNGTON for
all services properly rendered and satisfactorily performed and for reimbursable expenses to
termination incurred prior to the date of termination in accordance with Article IV,
Compensation. Should the CITY subsequently contract with a new consultant for the
continuation of services on the Project, COVINGTON shall cooperate in providing
information. COVINGTON shall turn over all documents prepared or fumished by
COVINGTON pursuant to this Agreement to the CITY on or before the date of termination,
but may maintain copies of such documents for its use.
ARTICI ,~ XV
RESPONSIBILITY FOR CLAIMS AND LIABILITIES
Approval by the CITY shall not constitute nor be deemed a release of the responsibility and
liability of COVINGTON, or any sub-consultants of COVINGTON, for the accuracy and
competency of their designs or other work product.
ARTICLE XVI
NOTICES
All notices, communications, and reports required or permitted under this Agreement shall be
personally delivered or mailed to the respective parties by depositing same in the United States mail
at the address shown below, certified mail, return receipt requested unless otherwise specified
herein. Mailed notices shall be sent to the parties at the following addresses:
To COVINGTON:
To CITY:
R.J. Covington Consulting, LLC
Attn: Richard J. Covington
13276 Research Blvd., Suite 201
Austin, Texas 78750
City of Denton, Texas
Atto: Michael A. Conduff, City Manager
215 East McKinney Street
Denton, Texas 76201
All notices shall be deemed effective upon receipt by the party to whom such notice is given
or within three days after the date of mailing.
ARTICI.E XVII
ENTIRE AGREEMENT
This Agreement consisting of nine (9) pages, and four (4) additional pages consisting of Task
Order No. 03-E, constitutes the complete and final expression of the agreement of the parties and is
intended as a complete and exclusive statement of the terms of their agreements and supersedes all
prior contemporaneous offers, promises, representations, negotiations, discussions, communications
and agreements which may have been made in connection with the subject matter hereof.
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ARTICI.E XVIII
SEVERABILITY
If any provision of this Agreement is found or deemed by a court of competent jurisdiction to
be invalid or unenfomeable, it shall be considered severable from the remainder of this Agreement
and shall not cause the remainder to be invalid or unenforceable. In such event, the party shall
reform this Agreement to replace such stricken provision with a valid and enforceable provision
which comes as close as possible to expressing the intention of the stricken provision.
ARTICLE XIX
COMPLIANCE WITH LAWS
COVINGTON shall comply with all federal, state, local laws, tales, regulations, and
ordinances applicable to the work covered hereunder as they may now read or hereinafter be
amended.
ARTICLE XX
DISCRIMINATION PROHIBITED
In performing the services required hereunder, COVINGTON shall not discriminate against
any person on the basis of race, color, religion, sex, national origin or ancestry, age, or physical
handicap.
ARTICI .F. XXI
PERSONNEL
COVINGTON represents that he has secured, or will secure at his own expense any additional
personnel required to perform all the services required under this Agreement. Such personnel
shall be subconsultants of COVINGTON, and shall not be employees or officers of, nor have
any contractual relations with the CITY. COVINGTON shall inform the CITY of any conflict
of interest or potential conflict of interest that may arise during the term of this Agreement.
All services required hereunder will be performed by COVINGTON or under his supervision.
All personnel engaged in work shall be qualified and shall be authorized and permitted under
state and local laws to perform such services.
ARTICI.E XXII
ASSIGNABILITY
COVINGTON shall not assign any interest in this Agreement and shall not transfer any
interest in this Agreement (whether by assignment, novation or otherwise) without the prior whtten
consent of the CITY.
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ARTICI,F, XXIII
MODIFICATION
No waiver or modification of this Agreement or of any covenant, condition, limitation herein
contained shall be valid unless in writing and duly executed by the party to be charged therewith and
no evidence of any waiver or modification shall be offered or received in evidence in any proceeding
arising between the parties hereto out of or affecting this Agreement, or the fights or obligations of
the parties hereunder, and unless such waiver or modification is in writing, duly executed; and, the
parties further agree that the provisions of this section wilI not be waived unless as herein set forth.
ARTICI ,F, XXIV
MISCELLANEOUS
COVINGTON agrees that CITY shall, until the expiration of three (3) years after the final
payment under this Agreement, have access to and the fight to examine any directly pertinent
books, documents, papers and records of COVINGTON involving transactions relating to this
Agreement. COVINGTON agrees that the CITY shall have access during normal working
hours to all necessary COVINGTON facilities and shall be provided adequate and appmpfiate
working space in order to conduct audits in compliance with this section. The CITY shall
give COVINGTON reasonable advance notice of any intended audits.
Venue of any suit or cause of action under this Agreement shall lie exclusively in Denton
County, Texas. This Agreement shall be governed by, and construed in accordance with the
laws of the State of Texas.
COVINGTON shall commence, carry on, and complete the work required by this engagement
with all applicable dispatch, in a sound, economical, efficient manner and in accordance with
the provisions hereofi In accomplishing the work, COVINGTON shall take such steps as are
appropriate to ensure that the work involved is properly coordinated with related work being
carried on by the CITY.
The CITY shall assist COVINGTON by placing at COVINGTON's disposal all available
information pertinent to the work required by this engagement, including previous reports, any
other data relative to the project and arranging for the access to, and make all provisions for
COVINGTON to enter in or upon, public and private property as required for COVINGTON
to perform services under this Agreement.
The captions of this Agreement are for informational purposes only and shall not in any way
affect the substantive terms or conditions of this Agreement.
IN WITNESS WHEREOF, the City of Denton, Texas has caused this Agreement to be
executed in four original counterparts, by its duly authorized City Manager; and R.J. ~(~vington
Consulting, LLC has executed this Agreement by its duly authofized officer on this the/~ day of
June, 2003.
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CITY OF DENTON, TEXAS
A Municipal Corporation
Michae~ A."C~ond~uff, 0(~k{nager
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
APPROVED AS TO LEGAL FORM:
HERBERT L. PROUTY, CITY ATTORNEY
By:
"COVINGTON"
R.J. COVINGTON CONSULTING, LLC
A Texas Limited Liability Corporation
ATTEST:
By:
Richard J. CoV~o~
By: ]~/orce..
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ATTACHMENT
PROFESSIONAL SERVICES AGREEMENT
BETWEEN THE CITY OF DENTON, TEXAS AND
R.J. COVINGTON CONSULTING, LLC
TASK ORDER NO. 03-E
Fixed Asset Cost Separation Study
This Attachment is a Task Order contemplated by and appended to the Professional
Services Agreement entered into by and between the City of Denton, Texas and R.J.
Covington Consulting, on even date herewith, and approved by the Denton City Council.
The work provided for in this Task Order is for R.J. Covington Consulting, LLC ("RJC"),
to assist Denton Municipal Electric (DME) staff in the separation of transmission facility
costs from distribution facility costs in DME's Fixed Asset records. This separation is of
particular importance due to the difference in treatment of these costs for recovery of
costs. Costs meeting the requirements of {}25.192 of the Public Utility Commission of
Texas (PUC) Substantive Rules are recovered through the ERCOT-wide Transmission
Cost of Service (TCOS). Cost not meeting these requirements must be recovered directly
from DME ratepayers. This work will focus on DME's transmission/distribution
substations.
This task order provides for the following tasks:
1. A review of DME's fixed assets will be made, focusing on the substation
assets.
2. DME will provide RJC a listing of substation components and work with RJC
to identify items contained in DME's fixed asset records.
3. Based on the information compiled, RJC will develop an adjusted net book
value for these facilities for FY 2002.
4. All work will be documented for use in supporting the adjustments that will be
made for the TCOS filing with the PUC.
These costs will be used in the TCOS filing to document the adjustments that will be
made to booked costs for these substations. Following is the Scope of Services to
complete the study.
Task Order No.03-E
Fixed Asset Cost Separation Study
Scope of Services
Task A Review of Fixed Asset Records
1. RJC will meet with DME staff to review the fixed asset listing for substations.
2. RJC will also review the listing of substation assets used by DME in the 1996
TCOS filing.
3. Deficiencies in listing will be identified and spreadsheets prepared to act as check
sheets for inspection of substations.
Task B Inspection of Substation Facilities
1. DME staff will visit the substations to list and verify equipment in substations.
2. A listing of assets in each substation will be developed for use in the valuation
phase.
Task C Development of Adiustments To Fixed Asset Records
1. Based on the information compiled, RJC will develop a current cost value of
facilities.
2. Costs and depreciation will be adjusted to reflect the net book value for these
facilities for FY 2002.
3. The equipment in each substation will be identified as transmission,
distribution, or joint facilities.
4. The joint facility costs will be apportioned between transmission and
distribution costs based on the relative costs of the transmission versus
distribution facilities in each substation.
Documentation of Fixed Asset Cost Separation
l. The study will be documented in workpapers that can be used to respond to
Request For Information from PUC staff and interveners in the TCOS filing.
2. The documentation will show each step of the process used, the development of
replacement cost new, the allocation of joint costs, and the development of the
adjustments to booked costs.
Task D
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Task Order No.03-E
Fixed Asset Cost Separation Study
Budget
The not-to-exceed amount for the above scope of services for both labor and out-
of-pocket expenses is $18,540. This budget will not be exceeded without prior written
approval of the City of Denton. RJC will bill monthly with supporting documentation of
activities performed. This budget assumes that the appropriate records and DME staff are
available to assist in gathering records for the study, and that the fixed asset records are
reasonable. If after work is initiated, there arises questions regarding the fixed asset
records that require work to be redone, the budget will be adjusted accordingly.
The termination date of this Task Order shall be on the earliest to occur of the
following events: the date of completion of the work described herein; or upon the
depletion and exhaustion of the $18,540 not to exceed amount provided for herein; or
upon fifteen (15) days written notice to terminate, issued by the Director of Electric
Utilities, DME. The work being performed will be under the supervision of the Director
of Electric Utilities, DME and may be modified at any time upon appropriate notice to
RJC.
EXECUTED in four (4) original counterparts by a duly authorized officer, of RJC
and by a duly authorized officer of the City of Denton, Texas on this the /'~¢'/~ day of
June, 2003.
AUTHOR/ZED BY:
ACCEPTED BY:
CITY OF DENTON, TEXAS
R. J. COVINGTON CONSULTING, LLC
By:
City Manager
Richard J. Covi~ton
President
Dated: (~ Ir/I ~0~ Dated:
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
By: ~g
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Task Order No.03-E
Fixed Asset Cost Separation Study
APPROVED AS TO LEGAL FORM:
HERBERT L. PROUTY, CITY ATTORNEY
By: ~~~~
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