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<br />The City of San Marcos Facilities Service Contract <br /> <br />on a design/build basis. While it is the intention of the City to have the Company operate, <br />maintain, repair, replace and manage Capital Modifications on an integrated basis with the <br />Facilities, the City is not obligated to do so and may contract for such services with a third <br />party, so long as any such third party contract does not impair the Company's rights under <br />Section 10.8. Company shall not be liable for actions of those third parties engaged by the <br />City, nor shall Company be liable for any damages, penalties or fines related to those services <br />provided by third parties engaged by the City. The City may determine to proceed with an <br />implementation procedure for Capital Modification at any time, whether before or after entering <br />into negotiations with the Company under the optional implementation procedure specified <br />under Section 10.6. No alternative implementation procedure for Capital Modifications shall <br />impair the Company's rights under Section 10.8. <br />SECTION 10.6. OPTIONAL PROCEDURE FOR IMPLEMENTING CAPITAL <br />MODIFICATIONS. (A) Preliminary Company Plan and City Review. At the request of the City <br />and upon the consent of the Company, the Company shall prepare and deliver to the City, at <br />the Company's cost and expense, a preliminary plan for the implementation of the Capital <br />Modification. The preliminary plan shall include recommendations as to technology, design, <br />construction, equipment, materials, and operating and performance impacts. Preliminary <br />schedule and capital and operating cost estimates shall be included, together with an <br />assessment of possible alternatives. The preliminary plan shall specifically evaluate reasonable <br />altematives to the mix of Capital Modifications and changed operating and management <br />practices which the Company is recommending. The City shall review the Company's <br />preliminary plan and recommendations, and undertake discussions with the Company in order <br />to reach agreement on a basic approach to the Capital Modification. <br />(B) Formal Companv Implementation Proposal. Following agreement on a <br />basic approach to the Capital Modification, at the request of the City and upon the consent of <br />the Company, the Company shall submit a formal implementation proposal to the City, at the <br />Company's cost and expense, for the City's consideration. The implementation proposal shall <br />contain (1) a Company services element, to be implemented through an amendment to this <br />Service Contract, and (2) a third party construction services element, to be implemented <br />through third party contracting. The Company services element shall contain (a) the <br />Company's offer to perform design, construction management and acceptance testing services <br />with respect to the Capital Modification for a fixed price, and shall include a guarantee of the <br />performance of the Capital Modification through an acceptance test and either a good faith <br />estimate of total construction costs or a guaranteed maximum construction price, if so <br />requested by the City and agreed to by the Company, and (b) the Company's offer to operate, <br />maintain, repair, replace and manage the Capital Modification following construction and <br />acceptance for a fixed fee or a fixed and variable fee to be added to the Service Fee, and shall <br /> <br />72 <br />