POWER AUTHORITY OF THE STATE OF NEW YORK
ANNUAL REPORT OF PROCUREMENT CONTRACTS
The Power Authority of the State of New York (“Authority”) is a diversified energy corporation committed to meeting the electrical needs and challenges of New York State (“State”) by providing lower-cost electricity, as well as by being a leader in conservation, energy efficiency, electrotechnologies and small-scale renewable energy forms. A nonprofit public energy corporation, the Authority does not use tax revenues or State funds or credit. It finances construction of its projects through bond and note sales to private investors and repays the debt holders with proceeds from operations.
In 2003, the Authority solicited proposals for new turbine runners for the St. Lawrence LEM Project, as well as for other major equipment in support of the Niagara upgrade. The Procurement and Real Estate Division also continued to provide significant support to the 500 MW Combined Cycle Project.
The Authority also continued a major effort to install new energy-efficient lighting fixtures and ballasts in State, local, and municipal government facilities and public schools throughout the State.
Other energy efficiency efforts include the Non-Electric End Use Program and the Electrotechnologies Program in public facilities that uses alternative-fuel energy technologies; a Coal Conversion Program for New York City and Buffalo public schools to replace obsolete coal boilers with modern boilers using optimized dual-fuel (gas or oil) technology and to replace the existing climate-control distribution systems; a program for supplying super-efficient refrigerators for certain Authority public housing customers; an Electric Vehicle Program promoting the use of electric vehicles (cars, pick-up trucks and buses) throughout the State; installation of photovoltaic (“PV”) systems on several facilities throughout the State and installation of fuel cell power plants (“FCPPs”) at several locations throughout New York State.
In the course of constructing and operating its facilities, the Authority requires the services of outside firms for accounting, engineering, legal, public relations, surveying and other work of a consulting, professional or technical nature to supplement its own staff, as well as to furnish varied goods and services and perform construction work. Many of these contracts are associated with the construction, maintenance and operation of the Authority's electric generating facilities and transmission lines, as well as with support of the energy efficiency projects noted above.
In compliance with the applicable provisions of Section 2879 of the Public Authorities Law, as amended by the laws of 1988, the Authority has established comprehensive guidelines detailing its operative policy and instructions concerning the use, awarding, monitoring and reporting of procurement contracts.
A copy of the Authority's current Guidelines for Procurement Contracts governing solicitations and evaluation of proposals for procurement contracts is attached hereto. These Guidelines, approved by the Authority's Trustees, were implemented on January 1, 1990, and have been amended annually as necessary. A copy of the Guidelines for Procurement Contracts, effective April 27, 2004 (Exhibit "A-2"), is attached to the Report. These Guidelines have been amended with two substantive changes to the version approved last year. The revisions are indicated below.
In response to Executive Order 127, the Authority has adopted a policy (“Policy”) consistent with New York State policy providing for increased disclosure in the public procurement process through identification of persons or organizations whose function is to influence procurement contracts, public works agreements and real property transactions. The Guidelines have been amended as follows:
Page 12, Section 7 “Contract Provisions”, Paragraph B listing of “Contract Attachments” insert
“9. Appendix “J” (Bidder/Contractor Compliance with NYPA Policy Providing for Certain Procurement Disclosures)”
Also, to further define the category of non-procurement contracts, funding agreements, co-funding agreements and grants have been included in the definition as follows:
Page 1, Section 2 DEFINITIONS , Paragraph A, fourth sentence shall read:
“In addition, Procurement Contracts shall not include funding agreements, co-funding agreements, grants or memberships in various industry groups, professional societies, and similar cooperative associations, nor any cooperative projects and procurement activities, conducted or sponsored by such organizations, in which the Authority participates; advertising agreements with radio, television, and print media shall also be excluded.”
The Guidelines describe the Authority's process for soliciting proposals and awarding contracts. Topics detailed in the Guidelines include solicitation requirements, evaluation criteria, contract award process, contract provisions, change orders, Minority/Women Business Enterprise (“M/WBE”) requirements, employment of former officers and reporting requirements. The Guidelines have been designed to be self-explanatory.
Major procurement efforts in 2003 included purchase of goods, services and construction work in support of the Authority's operating projects and headquarters’ facilities, support of the 500 MW Combined Cycle Project, Life Extension and Modernization (“LEM”) Programs at Niagara and St. Lawrence, the Energy Services and Technology (“EST”) Programs (e.g., High Efficiency Lighting Program (“HELP”), the Refrigerator Program for the New York City Housing Authority, Energy Services Program (“ESP”) and the Electric Transportation Program). Procurement is continuing efforts to optimize use of the Authority’s credit card system for procurements under $5,000, the SAP procurement and materials management system, as well as supporting the requirements of our operating and capital projects and headquarters operations.
(1) Credit Card Procurement System (“CCPS”)
The Credit Card Procurement System is used to procure goods and services valued under $5,000. At the end of 2003, the Authority had 150 cardholders in both headquarters and operating facilities. Credit card transactions averaged 900 per month, with an average monthly value of $430,000, totaling more than $5,100,000 (compared to nearly $5,300,000 in 2002).
(2) Negotiated Savings Program
The procurement staff at the Authority established a goal of achieving $6,500,000 in additional savings by negotiating improved pricing and other commercial terms with recommended low bidders and resolving back charges and claims with the Authority’s outside vendors and contractors. In 2003, the actual value of such savings was $6,400,000, ranging from improved pricing terms for the 500 MW Combined Cycle Plant at Poletti, contracts in support of Energy Efficiency Programs, and the Niagara LEM Project.
(3) Supplier Diversity Program (“SDP”)
In 2003, the Power Authority continued to optimize the use of M/WBEs providing goods and services in support of Authority operations. As noted in Attachment I, in 2003, the Authority awarded nearly $23,000,000 for goods and services to M/WBE firms. This included direct and indirect procurements of office supplies, computer equipment, chemicals, consulting services, temporary engineering personnel and design. A large percentage of the 2003 M/WBE expenditures were in support of the 500 MW project.
In 2003, 9.4% of total reportable procurement expenditures were for M/WBEs, exceeding the Authority’s 7% goal.
The Authority includes subcontracting goals for M/WBE firms in nonconstruction procurements of more than $25,000 and construction procurements of more than $100,000. Staff will continue to pursue other direct and indirect procurement opportunities wherever possible, including the 500 MW Combined Cycle Plant, as previously mentioned. It should be noted that the Authority has included a substantial goal in the General Work Contract for the 500 MW Combined Cycle Project for subcontracting by Slattery Skanska Inc. to certified M/WBE firms. This could equate to approximately $40 million of subcontracting work over the next several years for M/WBE firms on this Project alone. Significant goals have already been reached on this project and staff expects to achieve even higher goals going forward.
The Authority has also focused on increasing opportunities for M/WBE firms to participate in investment banking activities and Treasury bill investments, as well as including an M/WBE firm as a co-manager in the Tax-Exempt Commercial Paper Program. In 2003, M/WBE investment banking firms purchased and sold more than $518,000,000 (in principal) of securities transactions for the Authority.
In June 2003, the Authority hosted its 13th Annual Purchasing Exchange for Minority and Women-Owned Businesses in White Plains. For the second time, the Authority hosted an upstate Purchasing Exchange in Buffalo in October 2003. The success of the event launched plans for annual upstate exchanges. Based on the substantial attendance and interest generated, other upstate venues will be explored as the Authority’s Supplier Diversity Program continues to gain positive statewide recognition.
Procurement representatives also worked closely with, and were members of, the National Minority Business Council, the Association of Minority Enterprises of New York, the New York/New Jersey Minority Purchasing Council, the Westchester and Long Island Hispanic Chamber of Commerce, Professional Women in Construction and the African American Chamber of Commerce for Westchester and Rockland Counties.
(4) Inventory Classification Program; Kitting and Staging of Material
In 2003, the Authority completed reclassification of approximately 80,000 inventory items at its operating facilities, using a common nomenclature for all inventory items, with an overall objective of standardizing classification of these items at all Authority facilities. This was a major effort requiring coordination with both plant material management and planning and maintenance personnel. The intent is to expand the classification system to Maximo users in 2004.
In addition, material management and Procurement personnel worked closely with operating facilities staff to explore opportunities for kitting and staging materials to support specific work orders issued by Materials Resource Management (MRM) planners at the facilities. By optimizing kitting and staging of materials, the efficiency of the Authority’s craft personnel should also be increased. This will continue to be a major effort in 2004, with a pilot program beginning at St. Lawrence for preventive maintenance tasks eventually expanded to LEM work orders.
The Annual Report includes specific details of procurements of $5,000 or greater awarded since January 1, 1990 that were active in 2003. There were 2151 such contracts with an estimated value of more than $2.2 billion, which also includes fossil fuel and corporate finance expenditures. More than $514 million was for the purchase of major equipment and construction of the 500 MW Combined Cycle Project, of which approximately $240 million was for the purchase of major equipment.
Total procurement expenditures in 2003 exceeded $640 million. This included more than $277 million for the purchase of fossil fuels.
Approximately 62% of the contracts active in 2003 were closed in 2003.
As noted in Attachment II:
It should also be noted that while approximately 51% of the 2003 nonfuel contracts covered by the Report exceeded $25,000, the total value of those contracts was approximately 99% of the total nonfuel expenditures.
Attachment III indicates that, based on the total value of the contracts included in the Annual Report, approximately 95% of the total dollars expended (including fuels and corporate finance) were for contracts that were competitively bid. In terms of the numbers of contracts processed (Attachment IV), approximately 73% were competitively bid and 27% were sole-source awards. Major reasons for the sole-source awards included the purchase of spare parts and services from original equipment manufacturers and procurement of services on an emergency basis and from proprietary sources.
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