HomeMy WebLinkAboutStaff Report 13835
City of Palo Alto (ID # 13835)
City Council Staff Report
Meeting Date: 5/23/2022 Report Type: Consent Calendar
City of Palo Alto Page 1
Title: Approval of Contract No. C22183901 with Genuine Parts Company dba
Napa Auto Parts for an Amount Not-to-Exceed $2,306,433 for an On-Site
Fleet Parts and Inventory Program for a Three-Year Term from January 24,
2022 through January 23, 2025, with Pricing Set by Cooperative Sourcewell
Contract No. 110520 with Genuine Auto Parts Company dba Napa Integrated
Business Solutions; and Approve and Authorize the City Manager or Their
Designee to Execute an Amendment to Contract No. C22183901 to Extend
the Term for up to One Additional Year through January 24, 2026 (Provided
that the Cooperative Sourcewell Contract is Extended for an Additional Year)
for an Additional Amount Not to Exceed $831,227 (Annual Amount Is Subject
to Adjustment Provided the Total Contract Amount Is Not Exceeded), for a
Total Not to Exceed Amount of the Contract, if Extended, of $3,137,660
From: City Manager
Lead Department: Public Works
Recommendation
Staff recommends that the City Council:
1. Approve and authorize the City Manager or their designee to execute Contract No.
C22183901 with Genuine Parts Company dba Napa Auto Parts (“NAPA”) for an amount
not-to-exceed $2,306,433 for an on-site fleet parts and inventory program over a three
(3)-year contract term (January 24, 2022 through January 23, 2025), with pricing set by
cooperative Sourcewell Contract No. 110520 with Genuine Auto Parts Company dba
Napa Integrated Business Solutions ; and
2. Approve and authorize the City Manager or their designee to execute an amendment to
Contract No. C22183901 to extend the term for up to one (1) additional year through
January 23, 2026, constituting contract year 4 in alignment with the underlying
NAPA/Sourcewell cooperative contract, for an annual contract year 4 amount not to
exceed $831,227 (subject to the provisions of Exhibit C) and a total not-to-exceed
amount of the contract, if extended, of $3,137,660.
Note: Exhibit C allows adjustment between contract year amounts, provided that the total not-
to-exceed amount of the contract over the life of the contract term is not exceeded.
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Background
In August 2016, the City contracted parts operations to NAPA as a three-year pilot after
approval from the Fleet Review Committee (FRC), approval from the Finance Committee on
May 12, 2016 (CMR# 6887), and final approval from Council on August 15, 2016 (CMR #7027).
Analysis conducted by staff indicated that the pilot with NAPA was successful and benefited the
City in overall cost savings. At the conclusion of the City’s pilot with NAPA, the following is a
history of contractual relationships with NAPA:
• The pilot ended on July 21, 2019 and was renewed for one additional year via
Amendment No. 1 on August 12, 2019, which aligned with the term of NAPA’s
cooperative contract with Sourcewell (CMR #10512).
• Amendment No. 2 was executed on June 15, 2020 for a second one-year extension
through July 21, 2021 and to add funding accordingly (CMR# 11263).
• Amendment No. 3 was entered into on July 7, 2021 (Amendment No. 3), to extend the
term through January 20, 2022 at no added cost to the City, and an exemption to
competitive solicitation was approved under municipal code section 2.30.290 (b)(1) to
give staff time to bring forward this request.
Discussion
On December 23, 2020, NAPA entered into a new competitively-solicitated cooperative
contract with Sourcewell (a cooperative purchasing group for government, education, and
nonprofit agencies), for a four-year term (Sourcewell Contract) with an expiration date of
December 29, 2024. This cooperative contract may be extended up to one additional one-year
period upon request of Sourcewell and with written agreement by NAPA to further the term
until December 29, 2025. Since NAPA’s current cooperative contract with Sourcewell is valid for
the next three years, with an optional (but not yet exercised) one-year extension, staff
recommends keeping alignment with the Sourcewell contract. Staff recommends Council
approve the contract between the City and NAPA for on-site parts management services for
three-years (ending January 23, 2025), with the option for the City Manager to renew for a
fourth year through January 23, 2026, provided that the underlying NAPA/Sourcewell
cooperative contract is renewed. (The Sourcewell agreement requires public agencies using its
cooperative agreement to enter into or extend a contract based on that agreement while the
agreement’s term is active, however, the contract or extension entered into may have a term
longer than that of the cooperative agreement.)
The recommended contract between the City and NAPA will allow for continued on-site fleet
parts and inventory services, including NAPA-assigned personnel to procure and manage the
auto parts/supplies inventory. Overall, there is a projected annual cost decrease of $58,242 for
the first year of this new contract, adjusted for salary and miscellaneous expenses. This reflects
the last year of the previous contract’s amount of $781,013 plus a three percent (3%) annual
increase, less one full-time, on-site, NAPA staff, resulting in the following annual pricing:
• a new contract year 1 amount of $746,201,
• a contract year 2 amount of $768,587 and
• contract year 3 amount of $791,645.
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Notwithstanding the foregoing, Exhibit C of the contract permits the parties to adjust the
annual contract year amounts, and/or the amount of Services used by City, if any contract year
amount exceeds or appears that it may be on track to exceed the aforementioned annual
amounts, provided that the total not-to-exceed amount of the contract is not exceeded. The
total not-to-exceed amount of the recommended three-year contract is $2,306,433.
Amendment to Extend for Fourth Contract Year
If Council authorizes the City Manager to execute an option to extend the contract for a fourth
contract year, as recommended above, and if the underlying Sourcewell cooperative contract is
extended and the City exercises this option to extend, the annual not-to-exceed amount of
contract year 4 will be subject to a five percent (5%) increase over the preceding contract year’s
not-to-exceed amount, for a contract year 4 annual amount not to exceed $831,227, and the
total not-to-exceed amount of the contract shall not exceed $3,137,660. As above, adjustments
to the annual contract amounts are permitted provided that the total not-to-exceed amount of
the contract is not exceeded.
The Sourcewell Member Pricing identified in the contract provides the same pricing terms as
the previous contract. Goods will be billed to the City at a 10% gross margin over NAPA’s
acquisition cost, operating expenses will be billed at actual cost with no markup, and NAPA’s
return is built into the price of parts, so that no separate fee is billed.
This contract is on the City’s general services agreement template, which permits the City to
terminate without cause/for convenience by providing written notice to the contractor. In the
event the City finds itself facing a challenging budget situation, and it is determined that City
resources need to be refocused elsewhere, the City can terminate for convenience. Other
options include termination due to non-appropriation of funds or amending the contract to
reduce the cost, for example, by reducing the scope of work.
Procurement Process
The City’s Municipal code, PAMC section 2.30.360 (j) identifies the process that allows the use
of cooperative purchasing agreements. Quotes for this contract were obtained through the
approved cooperative group, Sourcewell, and a proposal was received December 2, 2021 from
NAPA (Attachment A).
If this request is not approved, Fleet staff would have to reassume all parts management
services. By discontinuing services with NAPA, Fleet and Purchasing staff would have to take on
a substantial workload increase to keep up with all the contracts that would be required to
conduct business. This would require bringing back one full-time employee and one hourly
employee. The City would also be required to purchase back all non-NAPA parts inventory, and
would opt to purchase back any NAPA parts inventory necessary to keep on-hand. This buy-
back is estimated to cost between $250,000 and $300,000.
Resource Impact
Funding for this contract is available in the Fiscal Year 2022 Vehicle Replacement and
Maintenance Fund Operating Budget. As an internal service fund, these costs are funded by
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revenue collected from vehicle operation and maintenance allocations charged to other City
departments and funds. Funding for subsequent years of the contract is subject to
appropriation of funds through the annual budget process.
Stakeholder Engagement
Stakeholder engagement is not required for execution of this contract.
Policy Implications
This recommendation does not present any changes to existing City policies.
Environmental Review
Approval of this contract does not constitute a project and is exempt from the requirements of
California Environmental Protection Act (CEQA) pursuant to Section 15061(b)(3).
Attachments:
• Attachment A: Genuine Parts Company dba Napa Auto Parts Bid;, Incld. 4 Year Projected
Budget
NAPA IBS Sample P&L Item Description
3%
escalation
3%
escalation
5%
Escalation
Customer Purchases 54,375 652,500 672,075 692,237 726,849 Parts Bill For Customer
Cost of Goods to NAPA 48,938 587,250 604,868 623,014 654,164 90.00%NAPA IBS Cost of Goods
NAPA Margin on Parts 5,438 65,250 67,208 69,224 72,685 10.00%NAPA IBS Gross Margin (Point of Sale)
GROSS MARGIN 5,438 65,250 67,208 69,224 72,685 10.00% NAPA IBS Gross Margin (Point of Sale)
0
Centralized Accounting/Admin Fees 544 6,525 6,721 6,922 7,268 1.00%Fixed Expense at .99% of purchases, Accounting & Data Processing Fee
0
Payroll 0 These costs will vary based on scope, hours and responsibilities as required per each contract
Manager/Counter Salaries 4,735 56,820 58,525 60,280 63,294 8.71% Cost of Dedicated Parts Manager/Project Manager and any parts clerks for IBS Site
Delivery Driver Salaries 0 0 0 0 0 0.00% Delivery Driver Pay - if applicable for a site there will be a charge in this category
Pension/401K 245 2,936 3,024 3,115 3,271 0.45%Fixed Expense at .45% of customer monthly purchases
Insurance 400 4,800 4,944 5,092 5,347 0.74% Mainly Group Insurance Premiums for on-site NAPA IBS staff
Workers Comp Insurance 0 0 0 0 0 0.00% Insurance - General and Worker's Comp for on-site NAPA IBS staff
FICA 350 4,200 4,326 4,456 4,679 0.64% Payroll Taxes for NAPA IBS On-Site Employees
Total IBS Payroll 5,730 68,756 70,819 72,944 76,591 10.54%
0
Miscellaneous Expenses 0
Delivery Truck Insurance 0 0 0 0 0 0.00% Insurance Coverage for delivery trucks required per contract - if applicable
Delivery Maintenance/Gas 0 0 0 0 0 0.00% Vehicle Repairs and Fuel for Delivery Vehicles required per contract - if applicable
Truck Payment 0 0 0 0 0 0.00% Lease/Depreciation Payment for any Delivery Trucks required per contract - if applicable
Inventory Insurance 0 0 0 0 0 0.00% Small insurance on our on-site inventory assets
Shelving/Equipment Depreciation 0 0 0 0 0 0.00% Shelving needed for secure parts location - if customer requires us to add shelving. Cage, etc - if applicable
Store Expenses 50 600 618 637 668 0.09% Misc. Store Expenses (Printer Ink, Paper, Barcode Labels etc.)
P-Card Card Fees 0 0 0 0 0 0.00% Credit Card Processing Fees - only if agency uses a p-card to pay NAPA parts and or operating statements
Phone/Internet 0 0 0 0 0.00% Phone and/or Internet Charges (if not provided from Customer)
TAMS Inventory Computer 1,000 12,000 12,360 12,731 13,367 1.84% TAMS Computer & Equipment Lease/Depreciation Expense, Maint./Support Fee's & Tams Misc. Expenses
Taxes 250 3,000 3,090 3,183 3,342 0.46% Sales and Use Taxes, Personal Property Tax - only if applicable
Freight & Postage 220 2,640 2,719 2,801 2,941 0.40% Estimated Freight Charges Incurred by this Operation to procure special order parts
Training 15 180 185 191 201 0.03% Training Materials for NAPA IBS (including Hazmat)
Total IBS Misc Expense 1,535 18,420 18,973 19,542 20,519 2.82%
TOTAL EXPENSES 7,808 93,701 96,512 99,408 104,378 14.36%Total Monthly Expenses to Operate this IBS
Gross Margin Less Expenses -2,371 -28,451 -29,305 -30,184 -31,693 -4.36%
ROI for NAPA 5,438 65,250 67,208 69,224 72,685 10.00% NAPA's contracted return on investment
Sample Billing Summary
Customer Purchases 54,375 652,500 672,075 692,237 726,849 Parts Bill For Customer including 10% margin
Management Fee 0 0 0 0 0 0.00%
Expense Bill 7,808 93,701 96,512 99,408 104,378 14.36% Expense Reimbursement by Customer
Adjustment to Customer 0 0 0 0 0 0.00% Margin reimbursement to Customer after all expenses and NAPA ROI are realized
Total Cost of Operation 62,183 746,201 768,587 791,645 831,227
*It is important to note that these sample operating statements are issued to inform new, existing and potential Sourcewell members of the flexibility of the NAPA IBS program.
** These sample operating statements reflect NAPA IBS's typical expense structure but all categories are subject to change based on scope, hours and responsibilities as required per each contract.
Pricing Option 10% Margin
10% Margin Model
Sourcewell Monthly First Year % of Purchases
Second Year Third Year Fourth Year