Bid: Roll Carts

Attached Resolution A would accept the bid of OTTO Industries, Inc., from Charlotte, North Carolina, in the amount of $156,400 for the acquisition through lease purchase of 4,600 roll carts to be used by the Public Works Department’s Solid Waste Services Division.

Resolution B would authorize the Manager to accept an installment purchase contract and low bid offered by Branch Banking & Trust to finance this purchase over three years at a fixed interest rate of 5.03%. The first installment of $57,463.71 would be due in October, 200l, and would be included in next year’s budget for 2001-2002 as originally planned by the Council.

BACKGROUND

As part of the budget process for the current fiscal year, the Town Council authorized a conversion of residential refuse collection from twice weekly rear yard service to once weekly curbside collections. This program change is scheduled for implementation over two fiscal years, with about one half of the Town to be converted in the latter half of fiscal 2000-01 and the remaining half in the latter half of fiscal 2001-02. Under this program, the Town will offer each residence a roll cart at no cost to the resident. Using an estimated exemption rate of seven percent and about 10,000 residential stops, we believe we could dispense as many as 4,600 carts in the first year. Therefore, our first year’s acquisition is for the maximum number of carts potentially needed, or 4,600.

No funds will be required for lease payments in the current fiscal year; required funding under this arrangement will be included in the Public Works Department’s budget beginning fiscal 2001-02. Delivery of the carts for the first year is anticipated no later than December 15, 2000.

DISCUSSION

When we prepared the analysis of the costs for curbside service, we used a unit cost for roll carts of $55. At the time we were preparing the report, we had informal cost estimates from potential vendors of $50 or more, to which we added a factor for possible inflation. The recommended bid described below includes a unit cost per cart of $34, resulting in a total capital saving in terms of the aggregate cost total for carts of about $173,000, plus an estimated saving of about $29,900 in interest payments.

Our original analysis anticipated a cost up to $91,300 in fiscal 2001-02 for the lease purchase payments for the carts used in the first year. We also had assumed an interest rate of 5.5%. Given the relatively favorable unit price for carts (cf., $34 rather than $55 per cart) and the interest rate proposed by Branch Banking & Trust (5.03% rather than 5.5%), the payments will be only $57,463 annually.

A comparison between our original estimated total savings based on the anticipated lease purchase payments and the saving given the relatively lower costs for lease purchase payments and assuming about the same interest rate for the second lease-purchase contract is shown below.

Specifications and bid notices were distributed to 22 vendors in North Carolina, Georgia, South Carolina, Michigan, Tennessee, California and Kansas, and also to four minority organizations in North Carolina.

The Notice To Bidders was published in The Chapel Hill News/Village Advocate Classifieds on September 20, 2000. Eight bids were received and opened on October 10, 2000, as follows:

Only three of the eight responses were relatively competitive in terms of costs. The other five did not sufficiently exceed specifications to justify their higher quoted costs.

We recommend awarding the bid to OTTO Industries, Inc., based on comparatively favorable responses to key bid specifications. While their total bid for the first year of acquisition of carts was .54% higher ($828) than Schaefer Systems International’s low bid, we believe their total actual costs will be more favorable because of the cost for parts, exclusive of the bodies, submitted by Schaefer that is 102.5% greater than that submitted by OTTO. This factor is for replacement parts such as lids, wheels and axles (those items most likely to require replacement due to normal wear and tear).

While Cascade submitted costs that were favorable relative to those submitted by OTTO, Cascade did not address key bid specifications. First, they did not furnish any information related to warranties or to the recyclability issues related to the eventual disposal of damaged or worn carts. In addition, they did not provide information on the thickness of the walls or bottoms of their carts. Also, the Cascade cart has a significantly lower weight capacity (200 lbs. versus 238 for Otto). While we hope that residents will not avail themselves of the full weight capacity of the cart, the extra capacity is indicative of the relative sturdiness of the carts. We believe that Cascade’s lower cost of $184, or .1%, for carts in the first year and lower price for replacement parts of 15.9% relative to those submitted by OTTO do not justify ignoring the cited specifications not met.

We recommend acceptance of the bid by Otto, Industries, Inc. in the amount of $156,400.

Our bid solicitation included an option to acquire carts for the second year of implementation of curbside service using the bids submitted during this phase of the service change. All vendors responded to this optional request. We anticipate lease purchase of up to an additional 4,900 carts (or the number determined appropriate based on actual experience in the first year) in the second year of implementation. The three lowest bidders proposed to provide carts in the second year with the understanding that the following unit prices are available only if the respective first year bid is accepted:

We believe that the bid submitted by Otto Industries, Inc. is the bid that best meets the Town’s specifications and requirements for year two, as well as year one, based upon the same analysis as presented for year one.

FINANCING PROPOSALS

We propose to finance the purchase of the carts through an installment contract over a three-year period. Requests for proposals for financing this purchase were sent to five financial institutions on October 13, with responses requested on October 17. The proposals specified quotes for three-year fixed rate installment payments.

	3-Year Term
Financial Institution	Interest Rate	Total Principal, Interest & Fees
Branch Banking & Trust	5.03%	$172,391.13
Wachovia	5.45%	173,749.02
Centura	5.85%	175,045.38
Frist Citizens Bank	5.93%	175,305.03

Based on the above proposals, Branch Banking & Trust offers the lowest total interest cost with a bid of 5.03% for the three-year term.

The attached Resolution B would authorize the Manager to enter into a lease-purchase contract with Branch Banking & Trust for purchase of the roll carts. The resolution confirms that the Town does not expect to issue more than $10 million in tax-exempt debt during the calendar year, which allows financial institutions to bid lower rates for governmental lease-purchase contracts.

RECOMMENDATION

· Attached Resolution A awarding the bid for 4,600 roll carts to Otto Industries, Inc. in the amount of $156,400.

· Attached Resolution B accepting the low bid of Branch Banking & Trust for an installment purchase contract for this purchase.

A RESOLUTION ACCEPTING THE BID FOR THE LEASE PURCHASE OF ROLL CARTS (2000-10-23/R-12a)

WHEREAS, the Council authorized conversion of residential refuse collection from twice weekly rear yard to weekly curbside; and

WHEREAS, the Town will furnish roll carts to residents for the containerization of household refuse to be collected at the curb; and

WHEREAS, the bid from OTTO Industries, Inc., was found to be the most favorable responsive bid in terms of the combination of specifications met or exceeded and costs;

NOW, THEREFORE, BE IT RESOLVED by the Council of the Town of Chapel Hill that the Town accepts the lowest responsive bid of OTTO Industries, Inc., in the amount of $156,400 for acquisition of roll carts through lease purchase. Furthermore, by mutual agreement between the Town and OTTO Industries, Inc., additional carts may be acquired through lease purchase in fiscal 2001-2002 for the second phase of curbside service implementation.

A RESOLUTION AUTHORIZING A LEASE-PURCHASE CONTRACT FOR THE PURCHASE OF 4,600 ROLL CARTS FOR THE PUBLIC WORKS DEPARTMENT (2000-10-23/R-12b)

WHEREAS, the Town of Chapel Hill solicited and received competitive proposals from financial institutions for the lease-purchase of 4,600 roll carts for implementation of a curbside solid waste collections program; and

WHEREAS, Branch Banking & Trust offers the lowest interest rate of 5.03% for this purchase;

NOW, THEREFORE, BE IT RESOVED by the Council of the Town of Chapel Hill that the Council authorizes the Town Manager to enter into a contract with Branch Banking & Trust on behalf of the Town for the lease-purchase of 4,600 roll carts at a fixed interest rate of 5.03% for a three-year term.

BE IT FURTHER RESOLVED that the aforesaid contracts by and between the Town of Chapel Hill and Otto Industries, Inc., and Branch Banking & Trust, together with the amounts to be paid thereunder, be and the same are hereby designated as qualified tax-exempt obligations of the Town of Chapel Hill for purposes of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended.

BE IT FURTHER RESOLVED that the Council does not reasonably expect that the Purchaser (and any subordinate entities) will issue more than $10,000,000 in qualified tax-exempt obligations pursuant to such Sections 265(b)(3)(ii) during the current calendar year.

BACKGROUND

DISCUSSION

FINANCING PROPOSALS

3-Year Term

RECOMMENDATION