Title
RFI #1009
Fleet Management Services
Body
Agenda of: November 29, 2017
Item No.: 2017-438
Amount: $4,369,009.00
TO: The Honorable
Board of Directors
Great Lakes Water Authority
FROM: Sue F. McCormick
Chief Executive Officer
Great Lakes Water Authority
DATE: November 29, 2017
RE: RFI #1009 Fleet Management Services
Vendor: Enterprise Fleet Management
MOTION
Upon recommendation of Cheryl Porter, Chief Operating Officer - Water and Field Services, the Board of Directors (Board) of the Great Lakes Water Authority (GLWA), authorizes the CEO to enter into RFI #1009 “Fleet Management Services” with Enterprise Fleet Management, Inc., at cost not to exceed $4,369,009.00 for a duration of five (5) years, and authorizes the CEO to take such other action as may be necessary to accomplish the intent of this vote.
BACKGROUND
As a result of the bifurcation of the Detroit Water and Sewerage Department and GLWA, the vehicle fleet allocated to GLWA consists of a variety of over 300 vehicles. The fleet includes light duty vehicles such as sedans, pickup trucks, cargo vans, and security vehicles; medium duty vehicles outfitted with utility service equipment; and heavy duty vehicles that include dump trucks and vacuum loaders. Determining appropriate GLWA vehicle life cycles and replacement schedules is critical to the success of each group within the GLWA organization. High mileage or heavy use vehicles contribute to vehicle reliability, safety, and operational efficiency concerns. The continued use of the older units will result in unacceptable vehicle availability, and excessive maintenance costs. Equipment that is out of service and in need of repair will cause major interruptions or delays in the completion of work, significant logistical issues for the transportation of personnel and commodities, and diminish the ability of the GLWA team members to respond to emergency situations. GLWA Fleet and Facilities group has identified 116 units that are in need of immediate replacement to ensure the continued quality service our customers demand.
JUSTIFICATION
The Enterprise Fleet Management model provides GLWA with several advantages not available through conventional outright purchase. The initial outlay of funds required to purchase rather than lease 116 new vehicles would encumber the current capital improvement budgets. It is anticipated that the Enterprise model represents a sustainable vehicle replacement schedule that has a positive impact on cash flow, and drives down the total cost of vehicle ownership.
GLWA will be able to utilize Enterprise resources with fixed cost on vehicle maintenance needs, and discounted repair prices at approved repair facilities; the ability to utilize Enterprise approved repair facilities will result in a reduction in the time vehicles are out of service due to repair needs.
Enterprise has software to track vehicle usage trends, and allow GLWA to monitor maintenance and repair expenses. It is critical to have current and reliable expense information to determine the total cost of vehicle ownership, and identify exceptions to typical expense patterns that may indicate abuse or fraud. Using the Enterprise lease model, GLWA will provide the right vehicle for the right job, and right size the fleet with the correct types of equipment.
Procurement Method
Procurement issued Request for Information (RFI) #1009 “Fleet Management Services” to identify firms capable of providing fleet management services for GLWA. Six (6) responses were received and reviewed and interviews were conducted with two (2) of the respondents whose submissions appeared to be aligned with GLWA’s needs. Following this review, a recommendation was made to negotiate a contract with Enterprise Fleet Management to provide GLWA fleet management services. An opinion was provided by William M. Wolfson, Chief Administrative and Compliance Officer, February 8, 2017, to allow for a single source procurement. This agreement will cover all passenger vehicles and light duty trucks.
This agreement will not include the acquisition and maintenance of:
• Heavy duty trucks such as dump trucks and other construction equipment (will be maintained under a separate non-Enterprise agreement)
• Fuel management system
• Large vehicle up-fits and equipment
• Non-titled/plates vehicles
• Collision damage
The agreement is based on the replacement list by the GLWA Fleet and Facilities team, which is comprised of a mix of sixteen (16) vehicle models (Focus, Escape, Explorer, F150, F350, F250, Transit, and Utility Interceptor).
Factors that may impact pricing and net annual costs:
• Additional vehicles
• Manufacturer incentives
• Different vehicle build specifications
• Different vehicle mix
• Annual mileage
• Used wholesale pricing
Because of its size and the scope of its offerings, Enterprise Fleet Management offers the best services among the respondents. Enterprise has a large fleet and wide range of loaner vehicles available to backfill GLWA needs should a vehicle require maintenance or repair. Enterprise is the largest of the respondents and was the only respondent to have a national network or network affiliation covering maintenance, repair, fuel, lease, and resale of existing fleet vehicles. GLWA has a number of low mileage vehicles and this national network would allow maximum return on vehicles placed for sale.
Enterprise Fleet Management was unique amongst the respondents in having a software program that will track GLWA vehicles to determine maintenance needs and whether it is the Authority’s interest to retain or sell the vehicle. This program will also provide GLWA with valuable usage data on each vehicle within its fleet.
Enterprise Fleet Management has a program of vehicle lease financing that was also unique amongst the respondents. This program allows GLWA to utilize Enterprise leasing options and only take ownership, if desired, at the conclusion of the lease period.
Litigation
This vendor is not currently nor has been previously involved in any litigation with GLWA.
Financials
A financial risk assessment was performed by Supply Chain Operations via Dun & Bradstreet. It was determined that the selected vendor has the financial capacity to perform the tasks under this contract. This information is available for the Board of Directors to review upon request.
Project Estimate
The yearly average amount for this agreement is $873,801.80 totaling $4,369,009.00 for five years. The expected start date is January 1, 2018. The lease terms for each vehicle acquired from Enterprise Fleet Management is sixty (60) months, with the exception of higher mileage security vehicles that will utilize a 48-month model. GLWA can cancel the agreement at any time with no penalty.
By utilizing Enterprise Fleet Management maintenance network, there is an estimated annual savings of 10.5% on maintenance as against the open market. This is based on a combination of factors such as negotiation, goodwill, warranty coverage, and tech advice.
Enterprise
Lease Owned
Maintenance Maintenance Total
No. of No. of Enterprise ($804 per Costs ($1500 Estimated Total Gross Equity Total
Leased Owned Total Lease vehicle per Vehicle Maintenance Annual Resale Net Annual
Year Vehicles Vehicles Vehicles Costs annual) Annual) Costs* Costs (Minus) Costs
2018 116 149 265 $656,613 $93,264 $223,500 $316,764 $973,377 $170,200 $803,177
2019 144 111 255 $822,597 $115,776 $166,500 $282,276 $1,104,873 $180,000 $924,873
2020 172 73 245 $988,581 $138,288 $109,500 $247,788 $1,236,369 $152,000 $1,084,369
2021 200 35 235 $1,154,565 $160,800 $52,500 $213,300 $1,367,865 $266,000 $1,101,865
2022 225 0 225 $588,825 $180,900 $0 $180,900 $769,725 $315,000 $454,725
* Maintenance estimates are based upon Enterprise’s past fleet management experience.
BUDGET IMPACT
Maintenance: The proposed procurement of fleet management services is within the FY 2018 through FY 2022 five-year plan annual amount of $1,963,708 for maintenance services.
*FY 2023
FY 2018 (estimates
(prorated for prorated for
six months) FY 2019 FY 2020 FY 2021 FY 2022 six months)
Five Year Plan
for Vehicle
Maintenance $981,854 $1,963,708 $1,963,708 $1,963,708 $1,963,708 $981,854
Less:
**Enterprise
Maintenance
Costs (Leased
Vehicles &
Owned Vehicles) 52,794 282,276 247,788 213,300 180,900 30,150
Positive
Five-Year Plan
Variance $929,060 $1,681,432 $1,715,920 $1,750,408 $1,782,808 $951,704
*FY 2018 & FY 2023 - Enterprise Maintenance Costs (Leased Vehicles & Owned Vehicles) pro-rated for 6 months
Fleet Acquisition: The Enterprise option allows GLWA to modernize and right-size the fleet faster while reducing maintenance and fuel costs. A higher spending plan would have been requested over the next five years due to the age of the fleet to match the Enterprise option. The first year of the plan the recommendation is to replace 116 vehicles, that are at or older than 10 years or over 100,000 miles.
*FY 2023
FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 (estimates)
Five Year Plan
for Vehicle Purchases $270,420 $371,359 $137,401 $267,818 $43,914 $0
Less:
*Enterprise
Lease Costs
(Vehicles Only) 328,307 822,597 988,581 1,154,565 588,825 294,413
Less:
Equity Resale (170,200) (180,000) (152,000) (266,000) (315,000) (315,000)
Five Year Plan
Variance (but
different pace
of vehicle
replacement -
see next table) $112,314 ($271,238) ($699,180) ($620,747) ($229,911) $20,588
*FY 2018 & FY 2023 - Enterprise Lease Costs (Vehicles Only) pro-rated for 6 months
*FY 2023
FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 (estimates)
# of vehicle
purchases planned
in Improvement &
Extension (I & E)
(result in mix of older
and newer vehicles) 12 16 5 11 1 0
# of leased vehicles
planned from
Enterprise
(modernized fleet) 116 144 172 200 225 225
FY 2018* FY 2019 FY 2020 FY 2021 FY 2022 FY 2023*
Overall Positive Five
Year Plan Variance
(Vehicle Purchases
+ Vehicle Maintenance) $1,041,374 $1,410,194 $1,016,740 $1,129,661 $1,552,897 $972,292
*FY 2018 & FY 2023 - Enterprise Maintenance Costs (Leased Vehicles & Owned Vehicles) pro-rated for 6 months
The financial savings will come from the following sources within the program:
1. Funding the portion of the vehicle GLWA will use, will provide significant cash flow relief when compared with paying cash for the entire vehicle.
2. Maintenance costs should decline as older vehicles are removed from the fleet and replaced with newer vehicles that will essentially be within the manufacturer warranty for the majority of its Enterprise life cycle.
3. Fuel costs will decline as older vehicles with poor fuel efficiency will be replaced with newer units. Federal Government Corporate Average Fuel Economy (CAFE) standards mandate continual improvement in required fuel efficiency in years to come as well.
4. The Enterprise fleet will generate equity as the vehicles will be worth more than the book value at loan term (assuming GLWA driving habits stay the same). This equity can be used to offset vehicle inflation in future years.
For acquisition of vehicles, it should be noted that the lease will be an Operations and Maintenance Fund expense rather than a capital expense through the Improvement & Extension (I&E) Fund. Ultimately, the benefits of this arrangement improve GLWA financial performance which allows for additions to the I&E Fund at the end of the fiscal year.
SAVINGS, COST OPTIMIZATION, AND REVENUE ENHANCEMENT IMPACT
Fleet Maintenance: GLWA’s share of fleet maintenance is budgeted from the current provider at $1,963,708.00 annually. Enterprise Fleet Management costs range from a high of $316,764.00 to a low of $180,900.00 annually with cost savings between $1,646,944.00 and $1,782,808.00 annually.
Fleet Acquisition: For fiscal years 2018 through 2022 GLWA had budgeted $1,090,912.00 for 45 purchased new vehicles (an average of $24,242.29 per vehicle). By utilizing Enterprise Fleet Management’s program GLWA’s average cost of a vehicle will drop from $24,242.29 to $18,716.40.
COMMITTEE REVIEW
This matter was reviewed by the Operations and Resources Committee at its meeting on November 8, 2017. The Operations and Resources Committee recommended by a 2/1 vote that the GLWA Board adopt the resolution as presented.
SHARED SERVICES IMPACT
This item impacts the shared services agreement between GLWA and DWSD.