Okaloosa County BOCC — March 18, 2013 — Action Item Printout — reading text

BOARD OF COUNTY COMMISSIONERS AGENDA REQUEST DATE: March 5, 2013 TO: Honorable Chairman and Members of the Board FROM: John Hofstad SUBJECT: Motor Grader Leases Options DEPARTMENT: Public Works BCC DISTRICT: 1 and 3 STATEMENT OF ISSUE: The Public Works Roads Division has procured two lease agreements through the Kansas State Bank of Manhattan via ASC Volvo for 8 Volvo Motor Graders to grade County maintained dirt roads. The leases will expire in June of 2013 and January 2014 respectively. Staff has been looking into alternatives to reduce or eliminate the lease fees and to project the relative costs moving forward for various options as the expiration of the existing grader leases approaches. BACKGROUND: The Public Works Road Division provides weekly service to grade dirt roads to keep them safely passable for the traveling public and emergency services. In an effort to reduce our overhead expenses, lease options were pursued with the approval of the Board in the past. We are currently working under two leases through the Kansas State Bank of Manhattan (via ASC Volvo) for the lease of 8 Volvo motor graders. The lease had an estimated usage of 1,000 hours per machine per year based on the existing machines that the County owned. We are projecting that we will exceed the hours allotment on nearly all of the machines under lease in spite of staff reallocating higher use machines to lower use routes/operators. The lease has a fee of $25 per hour for every hour over 3,000 hours. Our current estimate for the amount of overage use is approximately $70,000. We believe that the usage of the machines has increased because downtime has decreased due to improved reliability of the new graders and due to emergency response during storm events. Staff is exploring four alternatives to bring back to the Board for consideration: Remain in Lease Until Expiration, Exercise Lease But-out, Lease New Machines and Buy New Machines Outright. Two of the options being considered require advertisement and solicitation of bids from vendors for the options of leasing new machines and buying new machines outright. Based on this need, we are requesting permission from the Board to pursue competitive bids from vendors for these two alternatives. Once we have obtained the bids, we will present all of the alternatives to the Board for consideration regarding which option the Board wishes to pursue. OPTIONS: Approve/Disapprove RECOMMENDATIONS: Authorize Purchasing to obtain bids for new grader leases and for the outright purchase of motor graders comparable to what the Roads division is currently using to allow a complete set of options for the Board to consider prior to the expiration of the existing leases. RECOMMENDED BY: APPROVED BY: James D. Curry, County Administrator