Alternate Directors RUFUS PHILLIPS CHARLESSE. BEATLEY, JR. Virginia Mr. Douglas N. Schneider, Jr. Director of Transportation Government of the District of Columbia Room 503 415 Twelfth Street, N. W. Washington, D. C. 20004 Dear Mr. Schneider: In reference to your letter of October 31, 1975, you indicated that there were four general problem areas which must be remedied in order that the public interest and the rights of the parties be adequately secured in the currently proposed Electric Service Agreement between WMATA and PEPCO. We are also of the opinion that the contract and its performance and administration must be in the public interest and that the rights of NORMAN & CHRISTELLER all parties be adequately secured. This was the objective of our negotiating team and shall continue to be their objective to the successful conclusion of said contract. JAMES E. COATES JERRY A MOORE, JR District of Columbia CARLTON R. SICKLES We are enclosing a copy of our comments; however, since it is possible that the negotiating team may very well be called upon to reopen discussion with PEPCO concerning some of the specific proposals that you enumerated, we have intentionally not elaborated to a great extent. As this letter will be widely distributed we have avoided comments that may be beneficial to the Utility in the event discussions are reopened. We have agreed to meet with members of your staff on November 3, 1975 to further discuss, on a point by point basis, each of your comments. The Authority staff's response to your comments is listed in the same order as they occur in your letter of October 31, 1975. M metro 1. The electrical rates could be the subject of a separate agreement. However, there are general provisions in this agreement which are applicable and should be retained, and therefore, we believe that this should be done by an amendment to the existing agreement. We generally agree with the recommendation of the District staff in that the Agreement should reflect the intent of the parties during negotiations. We would, however, suggest that the clause as proposed by the District staff be modified. (See Revised Attachment A.) 2. The definition of the "RT" rate is implicit within the contents of Article IIA of the proposed Electric Service Agreement. However, for clarification, we would propose that the following definition be added to the list of definitions in the proposed Agreement. Article 1. M. M. "RT Rate" means a uniform rate for all electricity provided 3. We agree that the proposed contract should be modified to establish that construction contribution be made on the basis of progress reports for work performed. The District of Columbia's proposed attachment B utilized a normal payment to the contractor clause for a fixed price construction contract. In our opinion, its provisions do not reflect the conditions found in cost-reimbursable situation. For . these reasons we recommend that consideration be given to modifying the existing contract clause to reflect the actual practice under which the Utility is fully paid on a continuing basis for work performed (see Revised Attachment B (1)). 4. The Authority's procurement practices have been modeled after those of the Federal Government. The Federal practice has been to exclude subcontracts and change orders of less than $100,000.00 and those contracts that are competitively bid. For further clarification the proposal as stated in Revised Attachment 3 (2) is offered. 5. A "Dispute" clause was proposed to PEPCO in a draft contract submitted to them in February 1973. However, the Authority was unable to obtain agreement that the provision be retained in the proposed agreement. We do agree with the District staff that a dispute article is desirable and we would therefore propose to reopen discussions concerning this article with the objective of obtaining agreement for 3 Mr. Douglas N. Schneider, Jr. the re-insertion of the article or some alternative procedure for resolving disputes short of litigation in the courts. 6. The Authority staff's proposed wording for Section 4 concerning the maintenance of separate books for all construction accounts is contained in the attached Revised Attachment B (2). 7. We would agree that it is desirable to have a "Termination for Convenience" clause for the Authority. We recommend using the "Termination for Convenience" clause as used in our Standard Specifications with any appropriate modifications. (See Revised Attachment C.) 8. A. This proposal is an extension of the existing force majeure clause presently in the contract and the inclusion of such terms are deemed acceptable. We would, therefore, recommend that the Authority's standard clause "Termination for Default - Damages for Delay Time Extensions" with appropriate modification be proposed. (See Revised Attachment D 1.) B. We would agree to propose the good faith clause as suggested by the District staff as an added provision of the contract. (See Revised Attachment D 2.) 9. (The Authority staff agrees with the recommendation making re-estimates subject to WMATA approval.) The Authority staff's response to this is covered in the attached Revised Amendment B (1). 10. The Authority staff has previously agreed to this recommendation relative to the term of the contract. It is anticipated that the recommendation of the District of Columbia's staff will not undermine the fundamental concepts and structure of the agreement. Where clarification is necessary, the staff will seek to clarify all areas of the agreement and incorporate the other provisions customarily used to protect all parties. REVISED ATTACHMENT A Suggested language for Amendment No. 1 in the covering letter. Delete paragraph 11-B in the proposed agreement; substitute therefore: The Utility will conduct a cost of service study applicable to the Authority as a separate customer class." Based upon the results of the cost of service study (and criteria reflecting a fair rate design and fair rate of return to Utility), the parties shall agree upon an initial rail rapid transit rate or rates as applicable to Authority, which shall be made a part of this agreement, and shall define with particularity, the applicability of such rate or rates and all terms and conditions of service thereunder. Such rate or rates, together with supporting data, shall be filed with the appropriate regulatory Commissions; provided, however, if the parties are unable to reach agreement on such rail rapid transit rate or rates after due and diligent efforts and all matters pertaining to the establishment of a rate or rates applicable to Authority shall be submitted to and determined by the appropriate regulatory Commission as required by law. REVISED ATTACHMENT B(1) Suggested language for Amendment ilo. 3 in the covering letter. Delete paragraph 11 A.2; A.3; A.4 in the proposed agreement; substitute tretofore. 2. Upon receipt of such notification and information, Utility will proceed immediately to estimate by Authority Project, within a reasonable period of time and using Utility's Standard Accounting and Estimating Practices: the estimated cost of constructing the Utility Projects pursuant to Utility's standard construction practice as if there were no Technical Provisions applicable, and (a) (ذ) the estimated cost of constructing the Utility Projects pursuant The difference in these estimated costs will be the Estimated Cost of Contribution in Aid of Construction. (See example, Appendix F.) Such estimates and any re-estimated costs shall be subject to approval by the Authority. 3. The Utility will make these estimates in accordance with standards of engineering and materials not exceeding the standard utilized in the performance of work otherwise conducted by Utility except where necessary to meet the Technical Provisions. 4. Utility will prepare a plan of detailed engineering and construction work and estimated completion dates as necessary to construct and complete the Utility Projects and shall commence work upon receipt of a work authorization from the Authority. The Authority will reimburse Utility, at monthly intervals for work actually performed, on the basis of actual costs incurred. However, the reimbursable cost of Utility Projects shall not include the costs that Utility would have expanded in its cost on the Project if it were constructed pursuant to Utility's standard construction practice without Authority's Technical Provisions. 5. 5. Utility reserves the right to re-estimate by Utility Project periodically any Estimated Cost of Contribution in Aid of Construction or part thereof which was originally estimated pursuant to Article 1 A.2 above (and the re-estimated cost of Contribution in Aid of Construction, or part thereof, shall be paid pursuant to Article 11 A.4 above). At the completion of each Authority Projecty Utility will submit to Authority the actual cost incurred by Utility for the Utility Projects witain the Authority Project, and payment will be made as required to adjust the Estimated Cost of Contribution in Aid of Construction to the Actual Cost, and the resulting arount will be the Actual Cost of Contribacion in Ald of Construction for the Authority Projects (See Appendix |