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2. MOTOR GRADERS – MOVE FROM LEASE TO OWN NIVELEUSES – PASSER DE LA LOCATION À L’ACQUISITION |
Committee Recommendation
That Council approve the transfer from the
Corporate Fleet Reserve in the amount of $4.010 M to enable the Fleet Services
Branch to exercise the Purchase Option of the recent Motor Grader Lease vs.
Purchase Tender and acquire eighteen (18) new graders.
Recommandation DU Comité
Que le Conseil approuve le transfert
de 4,010 millions de dollars du Fonds de réserve du parc automobile de la
Ville afin de permettre à la Branche du service du Parc d’exercer l’option
d’achat de la récente Demande de soumission pour l’achat ou la location de
niveleuse et permettre l’acquisition de
dix-huit (18) nouvelles niveleuses.
Documentation
1. Deputy City Manager’s report dated 19 August 2010 (ACS2010-COS-PWS-0012).
Transportation Committee
Comité des transports
and Council / et au Conseil
19 August 2010 / le 19 août 2010
Submitted by/Soumis par :
Steve Kanellakos, Deputy City
Manager/Directeur municipal adjoint
City Operations/Opérations municipales
Contact/Personne resource:
John Manconi, General Manager/directeur générale, Public Works/ Travaux
publics
613-580-2424,
extension 2110, John.Manconi@ottawa.ca
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Ref N°: ACS2010-COS-PWS-0012 |
SUBJECT: MOTOR GRADERS – MOVE FROM
LEASE TO OWN
OBJET: NIVELEUSES – PASSER DE LA LOCATION
À L’ACQUISITION
REPORT RECOMMENDATION
RECOMMENDATION
DU RAPPORT
BACKGROUND
The Fleet Services Branch is responsible for
the life cycle management of vehicles and equipment that support the City of
Ottawa’s diverse operations. Motor
graders are used to plow snow, grade shoulders, repair roadways, break up ice
and other similar activities associated with road maintenance duties. To support the City’s road maintenance
activities, Fleet Services has been leasing eighteen (18) graders for the Roads
and Traffic Operations & Maintenance Branch for the past eight (8) years. The current lease is at the end of its
contract term. As a result, Fleet
Services created the Motor
Grader Lease vs. Purchase Tender to determine the most effective way to provide
this equipment. Having reached the end
of the tender process, the City must now either enter into a new multi-year lease
agreement or move to acquire new graders.
In order to ensure availability of Graders for
November of 2010, a Purchase Order has been issued to lease these units. However, the City has made arrangements with
the contractor to keep the outright purchase of these units as an option until
15 October, 2010.
ANALYSIS
In order to establish the preferred procurement
plan, Fleet Services issued a tender for the equipment asking potential bidders
to quote both a cost to lease the graders as well as a cost to acquire the
graders, along with the expected cost of routine maintenance for the machines.
The results of the tender clearly demonstrate that
over the life cycle period procuring the equipment is more cost effective for
the City of Ottawa.
As detailed in the Lease vs. Purchasing Tender
and outlined in Table 1 below, the price for purchasing the graders is $7,257,690 with an expected 12 years of service and the associated routine
maintenance expenses. The cost of
leasing the graders over the same period with the same level of maintenance is $10,419,844. Implementing the purchase option will generate
a cost-avoidance of $3,162,154 for the 12 year
period of ownership.
Table 1 – Cost Comparison – Lease with
Maintenance versus Purchase with Maintenance
|
|
Lease
with Maintenance |
Purchase
with Maintenance |
Lease
Less Purchase |
|
12 Year Cost |
$10,419,844 |
$7,257,690 |
$3,162,154 |
|
Annual Cost |
$868,320 |
$604,807 |
$263,513 |
As a result, it is
recommended that Fleet Services be authorized to proceed with the Purchase
Option of the Motor Grader Lease vs. Purchase Tender to acquire eighteen (18)
new graders in the amount of $4.010M and that the appropriate funds be
transferred from the Corporate Fleet Reserve.
CONSULTATION/PUBLIC NOTIFICATION
Fleet Services has consulted with Financial Services to confirm the funding source for the recommended purchase of 18 graders.
LEGAL/RISK MANAGEMENT IMPLICATIONS
There are no legal/risk management impediments to implementing the recommendation in this report.
CITY STRATEGIC PLAN
The City strategic plan is not affected by the
recommendation in this report.
TECHNICAL IMPLICATIONS
There are no technical implications to implementing the recommendation in this report.
FINANCIAL IMPLICATIONS
The cost of $4,007,188 to acquire the eighteen (18) graders would be transferred from the Corporate Fleet Reserve for this acquisition. The current balance available in the Reserve is $4.5 M.
Annual
Current Lease/Maintenance Operating Budget $689,845
New Owned 18 units:
Cost of Maintenance $338,375
Repayment to Reserve for purchase $351,470
The reserve will be paid back for the purchase in 11.4 years.
Based on the new lease projections, the cost-avoidance of moving from lease to own, as identified by Fleet Services, is $3.162 M over the 12 year period.
SUPPORTING DOCUMENTATION
N/A
DISPOSITION
Upon
approval of this report, the Public Works Department will proceed as per
Council’s direction.