|
TO: |
Board of Trustees |
|
THROUGH: |
Jay Fox, Executive Director |
|
FROM: |
Cherryl Beveridge, Chief Operating Officer |
|
PRESENTER(S): |
Nathan Hess, Fleet Engineering Supervisor |
|
|
Lorin Simpson, Special Project Manager -Fleet |
TITLE:
title
Change Order: Tire Lease Program Close Out (Michelin North America, Inc.)
end
AGENDA ITEM TYPE:
Procurement Contract/Change Order
RECOMMENDATION:
Approve and authorize the Executive Director to execute the contract close out, and associated disbursements, with Michelin North America, Inc in the total amount of $2,125,000.00 to buy out the remaining value of Michelin tires still in possession of UTA.
BACKGROUND:
Last year UTA entered into a new contractual agreement for tire service and supply. During this procurement, our incumbent contractor (Michelin) chose not to participate in the procurement and a new contractor (Goodyear) was chosen.
At the expiration of the old contract, UTA was in possession of 5,676 Michelin tires, with a value of approximately $2,630,558.00. According to the previous lease agreement with Michelin, UTA had the option to purchase the remaining value at full price, or to pay the full price over the course of 36-months (runout). This method would require variable monthly billing and payments by mileage used on the existing Michelin tires. Any unpaid value of remaining useful life of tires at the end of 36 months would be paid in a lump sum final payment. The total amount to be paid under these options is the full value listed above of $2,630,558.
The parties have agreed to a negotiated option. The proposed agreement would provide UTA with a fixed payment schedule of three payments (ending January 2026) totaling $2,125,000. This approach avoids monthly mileage calculations and provides full payment to Michelin approximately 10 months earlier, saving UTA approximately $505,000.
DISCUSSION:
UTA reduces the risk of variable payments by setting a fixed payment schedule and saving $505,000 over the course of this agreement.
First lump sum payment will total $825,000 and be payable within 30 days after having a signed agreement. Any payments already made for millage accrued from December 1, 2023, to present will be deducted from the amount of the first payment.
Second Lump sum payment will be due January 30, 2025, for $700,000.
Third Lump sum payment will be due January 30, 2026, for $600,000.
During this same period, UTA will be requiring our new tire contractor to run out the Michelin tires on higher millage routes, which will lower the monthly cost of the new contract.
CONTRACT SUMMARY:
|
Contractor Name: |
Michelin North America, Inc |
|
Contract Number: |
18-2595-04 |
|
Base Contract Effective Dates: |
December 1, 2018, to November 30, 2023 |
|
Extended Contract Dates: |
December 1, 2023, to January 30, 2026 |
|
Existing Contract Value: |
$8,775,652.17 |
|
Amendment Amount: |
$2,125,000.00 |
|
New/Total Contract Value: |
$10,900,652.10 |
|
Procurement Method: |
RFP |
|
Budget Authority: |
2024 Operating Budget |
|
|
|
ALTERNATIVES:
The alternate option would be to continue with the default 36-month buyout (runout) option which would cost approximately $2.63 million over the 36 months
FISCAL IMPACT:
The cost of this buyout will be $2,125,000.00 from December 1,2023 to January 30, 2026. Operating expenses of $825,000 less any payments made from December 1, 2023, to present are included in the approved 2024 Operating budget. Budget of $700,000 for 2025 and $600,000 for 2026 will be reflected in the expected base budgets for those years.
ATTACHMENTS:
18-2595PP Close out Change order