SR 04-10-2018 3I
City Council
Report
City Council Meeting: April 10, 2018
Agenda Item: 3.I
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To: Mayor and City Council
From: Edward King, Director, Big Blue Bus, Transit Maintenance
Subject: Tire Lease and Related Onsite Tire Services
Recommended Action
Staff recommends that the City Council:
1. Award Bid #4294 to Michelin North America, Inc., a South Carolina-based
company, for the lease of new transit tires and related services;
2. Authorize the City Manager to negotiate and execute an agreement with Michelin
North America Inc., in an amount not to exceed $2,635,171, including a $239,561
contingency for a five-period, with future year funding contingent on Council
budget approval.
Executive Summary
Staff recommends the award of Bid #4294 to Michelin North America Inc. to provide
new transit tires and related services on a tire lease program. Big Blue Bus operates a
fleet of 200 transit buses, with six to ten tires on each bus. BBB transit buses run
approximately 6 million miles per year, and billing for transit bus tires is on a per-mile
basis. The agreement includes the lease of transit tires on a flat rate per-mile-driven
basis plus the cost of services including inspection, repair and replacement, and
inventory control. The expenditure for this bid is not to exceed $2,635,171, which
includes a 10% contingency, over a five-year term.
Background
Tire leasing has been a standard practice in the transit industry since the 1940’s and a
common practice at Big Blue Bus (BBB) for the last 45 years. Leasing tires is more
economical than purchasing because it is based on cost per mile-driven rather than
purchasing individual tires. The service ensures that new tires are available at all times,
and that any necessary repairs or replacements can be made in a timely manner.
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On November 13, 2012, Council awarded bid #4022 to Michelin North America Inc. for
an amount not to exceed $3,432,462 over a five -year period, including a one-time
payment to the previous tire lease provider of $390,000. This one -time payment was
authorized to purchase the previous vendor’s existing inventory as part of the transition
to the new vendor.
BBB’s latest agreement expired on November 12, 2017, requiring BBB to solicit bids for
tire leasing services for its fleet of transit buses. An interim purchase order was
approved under the City Manager’s authority for services performed while the bidding
process was ongoing.
Discussion
Big Blue Bus currently leases bus tires from Michelin North America , Inc. The existing
lease provides tire inventory, including spare stock on a replacement basis, and two full -
time on-site service attendants who perform inspections, tire repair, and replacement.
Tires are individually branded prior to delivery for inventory control purposes. Tire rates
are fixed and BBB only pays for the miles the tire actually travels. The award amount is
based on estimated miles traveled per year (6 million miles) plus a 10% contingency for
unforeseen charges such as tire damage due to accidents or curb damage, increased
miles traveled and new bus purchases. The award of this bid would enable BBB to
maintain its current fleet of transit buses in safe operating condition through the timely
and efficient repair or replacement of damaged or worn-out tires.
Method of Service
On August 26, 2014, staff was directed by Council to review contracted services
throughout the City and identify situations where contracted services could be brought
in-house. Per Attachment A of the January 13, 2015 Staff Report titled “As -Needed and
Contract Staffing Review Report,” seven criteria were established to determine proper
use of contracted staff. Of these, “Workforce Flexibility” and “Capital/Equipment
Requirements” are relevant to BBB’s decision to contract the services related to tire
lease and replacement.
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Bid #4294 requires that the vendor provide all necessary tooling and equipment to
deliver the contracted services, saving the City costs associated with the purchase and
storage of equipment. In addition to cost savings, the tire repair and replacement
service requires a large employee pool that would be available to work day and night t o
ensure that buses are available for service. The added costs associated with bringing
this service in-house would be $1,947,888 to the contracted amount over a five-year
period.
Based on the criteria outlined in the January 13, 2015 staff report, and th e added costs
associated with bringing this service in-house, staff recommends that Council award bid
#4294 to Michelin North America Inc. for tire lease and related services. The total
expense for the five-year term is not to exceed $2,635,171.
Vendor Selection
On December 12, 2017 the City published Notices Inviting Bids to provide tire lease and
related services in accordance with City specifications. The bid was posted on the City’s
on-line bidding site and notices were advertised in the Santa Monica Daily Press in
accordance with City Charter and Municipal Code provisions. Thirteen (13) vendors
downloaded the bid. We received and publicly opened on February 7, 2018 one
proposal from Michelin North America Inc.
Cost Estimate Michelin North America Inc.
Estimate 5-year Period $ 2,395,610
10% Contingency $ 239,561
Contract 5yr Total $ 2,635,171
The bid was evaluated based on the criteria in SMMC 2.24.072, including price,
previous experience, capacity and skill, ability to deliver, quality of product, and
compliance with City specifications and scope of work. Procurement conducted
additional outreach to vendors who downloaded the bid to s ee why they did not submit
a proposal. One prospective bidder responded that they could not bid as they were
unable to comply with the domestic partner provision to the living wage ordinance.
Michelin has had a positive history of providing tire lease and related services for Big
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Blue Bus and is able to meet all of the City’s requirements. In addition, the bid cost has
decreased from the previous contract cost. Based on these criteria, Michelin North
America, Inc. is recommended as the best bidder.
Financial Impacts and Budget Actions
The contract to be awarded to Michelin North America Inc. is for an amount not to
exceed $2,635,171 including a 5% annual price increase and a 10% contingency.
Funds of $437,230 are available in the FY17-18 Capital Improvement Program. This
contract will be charged to account C410106.589000. Future year funding is contingent
on Council budget approval.
Prepared By: Getty Modica, Transit Maintenance Officer
Approved
Forwarded to Council
Attachments:
A. November 2012 Tire award Staff Report (Weblink)
B. Contract and As-Needed and Staffing Review Report (Staff Report) - Weblink
C. Cost to contractor vs. City Staff
D. Michelin Oaks
Attachment B
Contract vs. In-House Services Cost Comparison
(Bid #4022)
Michelin Tire Labor Cost In-House Labor Cost + One-Time Purchase of Equipment
Period Year Personnel 10% Contingency Personnel Hr/Wk Weeks Pay Rate*Value
1 $186,900.00 $18,690.00 $205,590.00 1 FTE Service Attendant (Mechanic 1)40 52 $46.01 $95,696.00
2 $194,400.00 $19,440.00 $213,840.00 1 FTE Service Attendant (Mechanic 1)40 52 $46.01 $95,696.00
3 $202,200.00 $20,220.00 $222,420.00 .5FTE Service Attendant (Mechanic 1)20 52 $46.01 $95,696.00
4 $210,300.00 $21,030.00 $231,330.00 Year 1 (6 mos)$287,088.00
5 $218,700.00 $21,870.00 $240,570.00 Requires 2.5 FTE to provide same level of coverage Year 2 $291,394.32
Year 3 $295,765.23
Year4 $300,201.71
Total $1,113,750.00 * Pay rate includes fringe benefits.Year 5 $304,704.74
Overhead - Includes hiring, training, payroll, personnel administration, health benefits,** 1.5 % COLA increase assumed for contract term Total**$1,479,154.01
uniforms, tools, safety equipment, and vacation/sick/holiday leaves.
Training Training for Posting Reps
Bid requires vendor to provide trained technicians Training time and costs included in estimate of indirect labor hours.
Total:$0.00 Total:$0.00
Period Year Tire Lease
Roadside
assistance.*10% Contingency Period Year Tire Purchase
Roadside
assistance.10% Contingency
1 $250,329.60 $25,032.96 $275,362.56 1 Purchase existing inv. + Spares (915 tires needed/year)$533,445.00 $0.00 $77,441.00 $610,886.00
2 $262,924.80 $26,292.48 $289,217.28 2 (Change tires every 40K miles)+ 3% allow tire price incr $549,448.35 $2,000.00 $27,483.60 $578,931.95
3 $275,913.60 $27,591.36 $303,504.96 3 (Change tires every 40K miles)+ 3% allow tire price incr $565,931.80 $2,000.00 $30,211.90 $598,143.70
4 $289,689.60 $28,968.96 $318,658.56 4 (Change tires every 40K miles)+ 3% allow tire price incr $582,909.75 $2,000.00 $33,123.00 $618,032.75
5 $304,252.80 $30,425.28 $334,678.08 5 (Change tires every 40K miles)+ 3% allow tire price incr $600,397.05 $2,000.00 $36,514.30 $638,911.35
10% contingency includes tire lease, roadside assistance and labor.Total:$1,521,421.44 *# of Tires changed per year= 6.1M miles travelled divided by 40K miles x 6 wheel positions Total:$3,044,905.75
Equipment and Materials 0
Qty.Cost Value
Bid requires Vendor to provide equipment Tire Balancing Machine 1 $20,000.00 $20,000.00
Tire Changer 1 $10,000.00 $10,000.00
Portable Compressor 2 $3,000.00 $6,000.00
Floor Jacks 2 $2,500.00 $5,000.00
One inch impact wrenches 3 $3,500.00 $10,500.00
Safety Cage 1 $2,500.00 $2,500.00
Misc. Hand Tools $5,000.00
Total $0.00 Total:$59,000.00
Michelin Tire Year 1-5 Price:$2,635,171.44 In-House Cost (Estimated) for Year 1-5:$4,583,059.76
Michelin In-House*Difference % Difference
Year 1 $480,952.56 $956,974.00 ($476,021.44)-99%
Year 2 $503,057.28 $870,326.27 ($367,268.99)-73%
Year 3 $525,924.96 $893,908.94 ($367,983.98)-70%
Year 4 $549,988.56 $918,234.47 ($368,245.91)-67%
Year 5 $575,248.08 $943,616.09 ($368,368.01)-64%
Total $2,635,171.44 $4,583,059.76 ($1,947,888.32)
* In-house cost for Year 1 included one-time purchase of equipment and materials
Years 2 through 5 labor cost only plus 3% inflation factor.
6075
REFERENCE:
Agreement No. 10656
(CCS)