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TO: |
Board of Trustees |
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THROUGH: |
Mary DeLoretto, Interim Executive Director |
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FROM: |
Andrea Packer, Communications Director |
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PRESENTER(S): |
Andrea Packer, Communications Director |
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TITLE:
title
Change Order: Advertising Services Extension (Lamar Transit Advertising)
end
AGENDA ITEM TYPE:
Procurement Contract/Change Order
RECOMMENDATION:
Authorize the Interim Executive Director to extend the contract with Lamar Advertising for one year and set the Minimum Annual Guarantee at $2,160,000. This action represents the second of three option years available per the original contract.
BACKGROUND:
Lamar Transit Advertising was procured in 2013 through a full RFP procurement process. It’s a seven-year contract, with up to three option years available. Lamar Transit Advertising was unanimously chosen by the selection committee due to their experience and their financial proposal.
DISCUSSION:
Lamar is a highly experienced national advertising company, and their performance has been exemplary during the term of their contract. They have been a great partner with UTA.
On August 5th, 2020, the UTA Board of Trustees approved the execution of the first option year available on the contract. The terms of the first option year, which expires August 31, 2021, were modified in response to the COVID-19 pandemic’s significant impact on advertising sales. Lamar requested financial relief, and the modified terms were reviewed and agreed upon by staff. In addition to reducing the Minimum Annual Guarantee (MAG), the terms included a mid-year review of advertising sales to gauge any improvement in economic conditions as the pandemic continued.
Staff is now recommending the execution of the second option year. The mid-year review was completed by Lamar and provided to UTA, with the recommendation to adjust - and improve - the financial terms for this option year. While advertising revenues - which initially dropped by approximately 67% - have notably recovered over the past year, sales are currently trending down approximately 17% from pre-pandemic levels.
The terms of the second option year contract extension are as follows:
- Initiate one-year contract extension with modified terms beginning September 1, 2021, through August 31, 2022.
- Set the annual Minimum Annual Guarantee at $2,160,000. The MAG was reduced to $1,080,000 the past year; this reflects almost a $1 million increase.
- Reinstate the full annual prepayment of the MAG in lieu of monthly installments.
- Reinstate the annual true-up of the contracted 65% revenue share.
- Evaluate the terms at 6 months.
CONTRACT SUMMARY:
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Contractor Name: |
Lamar Transit Advertising |
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Contract Number: |
UT13-014GL-2 |
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Base Contract Effective Dates: |
September 1, 2013 - August 31, 2020 with three one-year options. |
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Extended Contract Dates: |
September 1, 2021 - August 31, 2022 |
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Existing Contract Value: |
$17,530,000.00 |
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Amendment Amount: |
$2,160,000.00 |
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New/Total Amount Contract Value: |
$19,690,000.00 |
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Procurement Method: |
RFP selection process |
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Funding Sources: |
UTA funds |
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ALTERNATIVES:
Should UTA not move forward with the contract extension a new procurement process would need to be undertaken. This process would take several months, during a pandemic and economic downtown, which would likely result in proposals with reduced revenues over the long-term.
FISCAL IMPACT:
Potential reduced advertising revenues of $440,000 based on the original proposed MAG of $2,600,000 for this contract year.
ATTACHMENTS:
• Contract extension document
• Original Contract may be accessed in the 8/5/2020 Board of Trustees Meeting Packet