BOARD MEETING DATE: March 7, 2008
AGENDA NO. 12

PROPOSAL:

Approve Contract Modifications under MSRC’s FY 2005-06 and 2006-07 Work Programs and Award Contracts under FY 2007-08 AB 2766 Discretionary Fund Work Program

SYNOPSIS:

At its February 21, 2008 meeting, the MSRC approved modification requests from Westport Fuel Systems to make HPDI system incentives available for leases, as well as purchases, of eligible vehicles under the MSRC’s FY 2005-06 and 2006-07 Work Programs. The MSRC also qualified two vendors, A-Z Bus Sales and BusWest, for their Alternative Fuel School Bus Incentive Program. At this time the MSRC requests approval to modify two contracts under the FYs 2005-06 and 2006-07 Work Programs as well as award two contracts totaling $600,000 under the FY 2007-08 AB 2766 Discretionary Fund Work Program.

COMMITTEE:

Mobile Source Air Pollution Reduction Review, February 21, 2008

RECOMMENDED ACTIONS:

1. Authorize the Chairman of the Board to execute new and modified contracts under FYs 2005-06, 2006-07 and 2007-08 AB 2766 Discretionary Fund Work Program, as described below:

a. Approve contract modifications (#MS06043X and #MS07003) with Westport Fuel Systems to make HPDI system incentives available for leases, as well as purchases, of eligible vehicles under the Advanced Natural Gas Engine Incentive Programs, under the FYs 2005-06 and 2006-07 Work Programs, as described in this letter;

b.  Approve two contracts totaling $600,000 to qualified vendors under the Alternative Fuel School Bus Incentive Program, under the FY 2007-08 Work Program, as described in this letter and as follows:

i.  $300,000 contract with A-Z Bus Sales; and
ii.  $300,000 contract with BusWest.

2. Authorize MSRC the authority to adjust contract awards up to five percent, as necessary.
 

Gwenn Norton-Perry
Chair, MSRC
 

Background

In September 1990 Assembly Bill 2766 was signed into law (Health & Safety Code Sections 44220-44247) authorizing the imposition of an annual $4 motor vehicle registration fee to fund the implementation of programs exclusively to reduce air pollution from motor vehicles. AB 2766 provides that 30 percent of the annual $4 vehicle registration fee subvened to the AQMD be placed into an account to be allocated pursuant to a work program developed and adopted by the MSRC and approved by the Board.

FYs 2005-06 and 2006-07 Work Programs
The MSRC allocated $2 million for an Advanced On-Road Natural Gas Heavy-Duty Engine Program under its FY 2005-06 Phase II Work Program, and an additional $1.5 million under its FY 2006-07 Phase I Work Program. To implement the program, the MSRC awarded sole-source contracts to Westport Innovations to enable fleet customers purchasing engines equipped with Westport’s High Pressure Direct Injection (HPDI) system, which allows trucks to operate on LNG, to receive an incentive ($50,000 per engine for FY 2005-06 funds and $35,000 per engine for FY 2006-07 funds). Customers would realize 100% of the benefit of the incentive. Contracts were executed with Westport Fuel Systems (the U.S. affiliate of Westport Innovations) to implement this program. The current contracts, including the incorporated Participant Agreements, are founded upon a fleet operator purchasing a vehicle equipped with an HPDI system. This reflects the way that the incentive programs were originally depicted to the MSRC and AQMD Board.

Westport has subsequently found that a number of their potential customers lease vehicles rather than purchase them. Westport has now requested that the contracts be modified to make HPDI system incentives available to operators of qualifying vehicles equipped with HPDI systems—whether purchasers or lessees. The MSRC considered this request at their February 21, 2008 meeting; further details are provided below in the Proposals section.

FY 2007-08 Work Program
Previously the MSRC allocated $1.2 million as part of its FY 2007-08 Work Program for an Alternative Fuel School Bus Incentive Program. Coincident with Governing Board approval on December 7, 2007, the MSRC released a Request for Qualifications (RFQ) solicitation seeking qualified vendors to participate in the Alternative Fuel School Bus Incentive Program. Each eligible vehicle must be configured with a factory installed, dedicated natural gas or liquefied petroleum gas engine. Vendors deemed qualified by the MSRC would be contractually authorized to offer substantial buy-down incentives to qualifying school districts, not to exceed $60,000 per qualified bus for full size “Type D” school buses.
Two vendors submitted qualifications packages. At its February 21, 2008 meeting, the MSRC considered the qualifications packages and two awards to implement this Program as part of the FY 2007-08 Work Program. Further details are described below in the Proposals section.

Outreach
In accordance with AQMD’s Procurement Policy and Procedure, public notices advertising the Alternative Fuel School Bus Incentive Program RFQ and inviting bids were published in the Los Angeles Times, the Orange County Register, the San Bernardino Sun, and Riverside County Press Enterprise newspapers to leverage the most cost-effective method of outreach to the entire South Coast Basin.

Additionally, potential bidders may have been notified utilizing AQMD’s own electronic listing of certified minority vendors. Notice of the RFP/RFQ was mailed to the Black and Latino Legislative Caucuses and various minority chambers of commerce and business associations, the State of California Contracts Register website, and placed on the Internet at AQMD’s Web site (http://www.aqmd.gov where it could be viewed by making menu selections “Inside AQMD”/“Employment and Business Opportunities”/“Business Opportunities” or by going directly to http://www.aqmd.gov/rfp/index.html). Information was also available on AQMD’s bidder’s 24-hour telephone message line (909) 396-2724.

Proposal Evaluation and Panel Composition
Qualifications packages received in response to the RFQ (further outlined under the Proposals section) were evaluated by members of the MSRC’s Technical Advisory Committee (MSRC-TAC), a diverse group of individuals appointed by participating members as prescribed in the Health & Safety Code.

Proposals
The MSRC considered two recommendations from its MSRC-TAC and unanimously approved the following:

FYs 2005-06 and 2006-07 Work Programs
As stated in the Background section, Westport requested that their contracts MS06043X and MS07003 be modified to make HPDI system incentives available for leases, as well as purchases, of eligible vehicles. Some fleets have little capital to expend on new vehicles, and others lease as a standard business practice. The current contracts’ wording precludes such potential customers from qualifying for the HPDI system incentives. At its February 21 meeting, the MSRC unanimously approved Westport’s request.

FY 2007-08 Work Program
As stated in the Background section, the MSRC allocated $1.2 million for the implementation of an Alternative Fuel School Bus Incentive Program. The MSRC received two qualifications packages in response to its Alternative Fuel School Bus Incentive Program RFQ. At its February 21 meeting, the MSRC unanimously deemed both A-Z Bus Sales and BusWest to be qualified vendors for participation in the Program. Further, it is recommended that each vendor be awarded an initial contract in the amount of $300,000. The balance of available program funds ($600,000) will be held in reserve and used to augment qualified vendor contracts based on sales performance, subject to review and approval of the MSRC and AQMD.

The MSRC respectfully requests the Board’s approval of the above contract modifications and awards under the FYs 2005-06, 2006-07 and 2007-08 Work Programs. Additional FY 2007-08 Work Program elements are expected to be brought forward in the next few months. The MSRC also requests authority to adjust the funds allocated to each project specified in this Board letter by up to five percent of the project's recommended funding. The Board has granted this authority to the MSRC for all past work programs. Finally, the MSRC requests the Board authorize the AQMD Chairman of the Board the authority to execute all agreements described in this letter.

Resource Impacts
The AQMD acts as fiscal administrator for the AB 2766 Discretionary Fund Program (Health & Safety Code Section 44243). Money received for this program is recorded in a special revenue fund (Fund 23) and the contracts will be drawn from this fund. These contracts will have no fiscal impact on the AQMD’s operational budget.