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SR 01-26-2021 3A City Council Report City Council Meeting: January 26, 2021 Agenda Item: 3.A 1 of 5 To: Mayor and City Council From: Susan Cline, Acting Assistant City Manager, Public Works, Fleet Services Subject: Approval of First Modification to Master Equity Lease Agreement with Enterprise Fleet Management, Inc. Recommended Action Staff recommends that the City Council authorize the City Manager to negotiate and execute a first modification to Master Equity Lease agreement #4631 in the amount of $857,500 with Enterprise Fleet Management, Inc. to provide vehicle leasing services for the Public Works, Police, and Fire Departments. This will result in a seven-year amended agreement with a new total amount not to exceed $1,038,120, including a 10% contingency, with future year funding contingent on Council budget approval. Summary In November 2019, the City piloted a leasing program with Enterprise Fleet Management to replace six of the City’s centralized pool vehicles with light-duty electric vehicles (EV) as an alternative to purchasing new vehicles. The program has proven to be a cost-efficient alternative to purchasing and reduces the up-front costs necessary to replace vehicles. Staff is requesting to expand the pilot program to lease 12 light-duty trucks, vans, and sport utility vehicles (SUV) for the Fire, Public Works, and Police Departments, on 60-month leases. The Police Department is also requesting 24-month leases for eight vehicles to be used in their specialized anti-crime operations. Staff recommends a modification to agreement #4631 to lease a total of 20 additional vehicles, increasing the contract budget from $180,620 to $1,038,120, and extending the term of the agreement through 2026 to cover the 60-month term of the new leases. Vehicle Replacement Program – 70 Fund Dept. Existing Lease Modified Lease Lease Term Citywide Pool Vehicles 6 (Nissan Leaf EV) 6 (Nissan Leaf EV) 60 Month Fire Dept 0 6 (3 F-150, 3 Explorers) 60 Month Public Works 0 3 (Ford E-350 Transit) 60 Month Police Dept 0 3 (2 F-350, 1 F-250) 60 Month Police Anti-Crime Operations – PD Operating Budget 3.A Packet Pg. 15 2 of 5 Police Dept 0 8 (various makes & models) 24 Month Total 26 Discussion The Fleet Management Division is responsible for ensuring the City’s diverse fleet of over 960 vehicles are available, dependable, meet the highest environmental standards for a sustainable fleet, and are safe to operate from acquisition through disposal. The Division routinely replaces vehicles that have reached the end of their cost-effective useful lives through the Vehicle Replacement Fund. In response to the City’s revenue shortfalls caused by COVID-19, contributions to the Vehicle Replacement Fund were reduced by $8.8 Million. To ensure the Vehicle Replacement Fund maintains an adequate fund balance, the Fleet Management Division has temporarily suspended vehicle replacements unless necessary for public safety or essential operations of City services. The Division is also working with City departments to evaluate vehicle needs and reduce the number of vehicles in the City fleet without adversely impacting City services. The 12 vehicles proposed for replacement from the Vehicle Replacement Program have significantly exceeded their asset lives and have an average age of 14 years. Due to their age and use, these vehicles incur significant maintenance and repair costs in order to remain safe and operational. More than $151,000 was spent over the past four years to repair these 12 vehicles, in addition to preventive maintenance. Furthermore, two of these vehicles are now inoperable and the costs to repair them would exceed their current value. Staff recommends replacing these vehicles through an existing Master Lease Agreement with Enterprise Fleet Management as an alternative to purchasing new vehicles. In the past, the City has solicited bids for large orders of vehicles and received reduced pricing due to economies of scale, typically purchasing between 50 to 60 vehicles per year. Given the relatively small order size and the various makes, models, and vehicle specifications required by each department, staff does not anticipate achieving significant cost savings through a competitive bid process to purchase vehicles. 3.A Packet Pg. 16 3 of 5 On April 26, 2018, Sourcewell (formerly known as National Joint Powers Alliance or NJPA), a government agency that establishes nationally leveraged and competitively solicited purchasing contracts for education, government, and non-profits, issued a Request for Proposals (RFP) for Fleet Management Services. Under the terms of the RFP and the resulting Sourcewell Agreement with Enterprise Fleet Management, Inc. (Agreement #060618-EFM), similar nationally leveraged volume purchasing discounts are also available to other government agencies. On November 13, 2019, the City exercised the procurement option of utilizing the Sourcewell contract and entered into a Master Lease Agreement with Enterprise Fleet Management for the leasing of six Nissan Leaf EV vehicles for a 60-month term. This modification would extend the nationally bid pricing from the Sourcewell contract to the additional 20 vehicles. This brings the extension within an exception to the requirement for a competitive process under Santa Monica Municipal Code Section 2.24.250(c), which authorizes an exception if competitive procedures were followed by another governmental agency, including a joint powers agency; those procedures are equivalent to the procedures set out in SMMC Chapter 2.24; and the City is obtaining the goods or services at the same or better price as provided to that other agency. The leasing program would enable the City to replace these vehicles immediately while distributing the cost over five years. This program would provide the City time to recoup the funding shortfall caused by COVID-19 in the Vehicle Replacement Fund; allow staff time to reevaluate the needs for each vehicle under the program and make reductions to the overall City’s Fleet; reduce maintenance costs by maintaining a younger vehicle fleet; and provide the ability to easily replace vehicles with alternative fuel vehicles as manufacturers produce affordable alternatives. The pricing offered through the Enterprise Fleet Management contract (including the option to purchase vehicles upon lease maturity) is competitive, and in some vehicle types, lower than the purchase price the City received in previous bids. Enterprise could also deliver vehicles within one to two months, while a City competitive bid process and award would take an estimated six months to have vehicles delivered. 3.A Packet Pg. 17 4 of 5 Vehicle Replacement Program – Leasing Costs for all 12 Vehicles Make Model Quantity Dept. Lease – 60 Month Term End of Lease Buyout Option Total Estimated Purchase Price * Expected Cost Savings Ford F-150 3 Fire $122,972 $22,569 $145,541 $146,195 $654 Ford Explorer 3 Fire $129,639 $19,683 $149,322 $136,360 ($12,962) Ford F-350 2 Police $117,665 $11,671 $129,336 $128,235 ($1,101) Ford F-250 1 Police $39,725 $6,849 $46,574 $45,995 ($579) Ford E-350 3 PWD $107,284 $21,673 $128,957 $147,528 $18,571 Total: $599,730 $604,313 $4,583 *Based on previously purchased vehicle costs and current estimates Furthermore, the Police Department has a total of 213 vehicles in the City’s Vehicle Replacement Program and also regularly utilizes the services of car rental companies for undercover operations, funded by the Police Department’s operating budget. These vehicles are serviced and maintained outside of the Fleet Fund and are coordinated by the rental companies. The rental vehicles are used daily as the primary mode of transportation by these units and are a necessary element in the Department’s regular operations. On January 12, 2016, the City awarded bid #4210 to Enterprise-Rent-A-Car for vehicle rental services and the agreement ended on January 11, 2021. In order to reduce costs, the Police Department is requesting to lease eight vehicles in lieu of renting. The leasing option for these eight vehicles is projected to save the City approximately $35,000 over the 24-month term. The Department is recommending a 24-month lease in order to routinely change vehicles to prevent them from being recognized in undercover operations. Past Council Actions Meeting Date Description 01/12/16 (Attachment A) Original bid and award of agreement with Enterprise Rent-A- Car for vehicle rental services. 11/27/18 (Attachment B) Extension of Vehicle Rental Services by Enterprise Rent-A- Car. Financial Impacts and Budget Actions Staff seeks authority to approve available funding from the Fleet Fund and General Fund to increase the amount of the agreement with Enterprise Fleet Management, Inc. 3.A Packet Pg. 18 5 of 5 for vehicle leasing services. Future year funding is contingent on Council budget approval. Agreement Modification Request Agreement # Current Authorized Amount FY 2020-21 Modified Request Amount Account # Total Revised Contract Amount 4631 $180,620 $651,500 C7000010.689000 $832,120 $0 $51,500 01180004.525020 $206,000 Total: $1,038,120 Prepared By: Jose Arroyo, Senior Administrative Analyst Approved Forwarded to Council Attachments: A. January 12, 2016 Staff Report (Weblink) B. November 27, 2018 Staff Report (Web Link) C. Enterprise Fleet Management Oaks Initiative 3.A Packet Pg. 19 3.A.cPacket Pg. 20Attachment: Enterprise Fleet Management Oaks Initiative (4308 : 1st Modification to Enterprise Vehicle Lease Contract)