ADMINISTRATIVE REPORT

Date: February 22, 2002
Author/Local: P. Henderson

940-3201

RTS No. 2561

CC File No. 1805

CS&B: March 7, 2002

TO:	Standing Committee on City Services and Budgets
FROM:	General Manager of Engineering Services Manager, Materials Management
SUBJECT:	Award of Tender PS01080- Supply and Delivery of 305 Hp Bulldozer

RECOMMENDATIONS

THAT Council accept the bid offering best value to the City from Finning Canada for one (1) - 2002 Cat D8RII at a total cost of $648,772, plus the Provincial Sales Tax, the Goods and Services Tax (less any municipal rebate received) and the Provincial Environmental Levy, subject to a contract satisfactory to the Director of Legal Services.

POLICY

The policy of Council is to award contracts for the purchase of equipment, supplies, and services that will give the highest value based on quality, service and price.

Contracts with a value over $300,000 are referred to Council.

BACKGROUND

The Vancouver South Transfer Station (VSTS) was opened in 1989 as part of Vancouver's obligations under the 1985 Regional Solid Waste Management Plan. VSTS provides a convenient location for both residents and commercial haulers to drop-off garbage, yard trimmings and recyclables. Garbage and yard trimmings from VSTS are hauled to the Landfill using large tractor trailers thereby significantly reducing traffic on the roads approaching the Landfill.

The central activity performed at VSTS is trucks dumping garbage into a large pit. A bulldozer then pushes the garbage into the tops of the tractor trailers. The bulldozer's work is an extreme duty application because:

A) The pit design means that the garbage must be constantly pushed uphill fully

loading the bulldozer's engine

B) The amount of dust in the air creates the potential for clogging of mechanical systems (e.g. radiators) causing overheating and other maintenance concerns

C) The pit is a small space requiring high manoeuvrability
D) The bulldozers must be able to operate on concrete surfaces that potentially
may lead to rough ride in the bulldozer cab.

These factors combine to result in high maintenance costs for bulldozers as well as a requirement for a highly reliable machine. The VSTS bulldozers are the critical piece of equipment at VSTS, and bulldozer failure results in an inability to process garbage being delivered to VSTS.

DISCUSSION

Tenders for the above were opened on November 14, 2001 and referred to the General Manager of Engineering Services and the Manager of Materials Management for report.

The PST, the 7% GST (less any municipal rebate received) and any Provincial Environmental Levy are in addition to the pricing shown in this report.

This tender called for prices for one (1) - 305 Hp Bulldozer with an option to purchase an additional unit within 12 months from date of purchase order. This tender was advertised in a local newspaper as well as on the internet.

Three bids were received from two suppliers with unit prices including options ranging from $542,281.80 to $648,772.

Bid 1 exceeded the maximum height, and therefore is not acceptable. The maximum height of the machine is crucial because the machine has to enter the transfer station pit through a 12'-0"door opening. The machine tendered in Bid 1 has a height of 12'-5".

Bid 2 from Terratech Equipment for a Komatsu D155AX-5A meets specifications, but does not provide best value to the City based on previous equipment operating history and anticipated lower resale value. Bid 3 from Finning Canada for a Caterpillar DRII , meets specifications and provides best value to the City.

1. Lower Cost Operating History

In 1994, the City purchased a Cat D8N bulldozer. In 1997, the City purchased a Komatsu D155AX bulldozer. The City has had significantly better experience with the Cat D8N than with the Komatsu D155AX at the VSTS. During the first three years of each machine's operating life, the hourly operating cost of the Komatsu (after adjusting for inflation) was $7.81 per hour more than the Cat or 20% higher. The City normally operates the bulldozers in excess of 15,000 hours before replacement. With 15,000 hours of operation the Komatsu would cost approximately $100,000 (discounted to year 2002 values) more for maintenance than the Caterpillar. Other than the design changes to the power steering system on the Komatsu D155AX, the 1997 model is essentially the same as the 2002 model. The City did not experience maintenance problems with the Komatsu's steering system.

In 2000, due to high maintenance costs at the VSTS, the Komatsu bulldozer was moved out to the Vancouver Landfill to replace a rental machine in use at the Landfill. The Komatsu bulldozer has performed satisfactorily in the less harsh landfill environment.

2. Warranty

Both the Komatsu and the Caterpillar offer a five (5) year extended warranty. The Caterpillar warranty guarantees a replacement machine at no cost to the City or Finning will pay for the rental unit ( this amounts to approximately $1000 per day) in the event that the warranty issue can not be solved within 48 hours. The Komatsu warranty is a parts and labour warranty.

The main benefit of the supplier offering a free replacement in the event of warranty downtime exceeding 48 hours is that the warranty encourages the supplier to minimize downtime.

3. Serviceability

Cat bulldozers have a number of features that improve serviceability increasing productivity. Major components are modular allowing ease of removal and replacement. The cooling system provides easy access for cleaning. The extremely dusty work environment at VSTS requires frequent cleaning of the cooling system.

4. Operator Assessment

VSTS bulldozer operators had significant concerns with the 1997 Komatsu bulldozer. They found that ride, steering under load, general manoeuvrability and cab design were all inferior to the existing Cat D8 bulldozer. In January of this year, the Terratech provided a demonstration unit of the new D155AX-5. The operators concluded that from an operator perspective the only significant improvement was steering under load. The operators concluded that ride, general manoeuvrability and cab design were still significantly inferior to the Cat bulldozer.

5. Higher Resale Value

Cat bulldozers along with having a higher initial purchase price generally have a higher resale value than Komatsu bulldozers. A review of Ritchie Bros. worldwide auction results showed 119 Cat D8 (all models) and 13 Komatsu D155 (all models) sales for the model years 1994 - 2000 over the last 24 months. For 4 to 8 year old machines, (1994-1998), the current average auction prices in Canadian dollars are as follows:

Model Year	Cat D8	Units Sold	Komatsu D155	Units Sold	Current Difference
1998	$324,700	17	$154,800	2	$169,900
1997	$270,200	29	$177,500	2	$92,700
1996	$235,200	27	$127,000	1	$108,200
1995	$186,300	22	$125,100	5	$61,200
1994	$159,500	17	$104,500	3	$55,000

The City of Vancouver normally retains heavy equipment 6 to 8 years.

In addition to providing better data for predicting future resale value, the significantly higher D8 auction sales numbers compared to D155 sales numbers is indicative of the popularity of the Cat D8.

The following table summarizes the impact of the additional maintenance costs and the projected resale value.

	Bid #3 - Finning (Canada) Caterpillar D8RII	Bid #2 -Terratech Equipment Komatsu D155AX-5A
Purchase Price	$648,772.00	$560,643.80
ESTIMATED ADDITIONAL MAINTENANCE COST (Life of 15,000 hr)	$0.00	$100,000.00
ESTIMATED ADDITIONAL RESALE VALUE *	-$40,000.00	$0.00
TOTAL	$608,772.00	$660,643.80
* Estimated Additional Resale Value is based on the data in the previous table and is the expected difference in price between the Komatsu and Cat bulldozers in 7-8 years in 2002 dollars

FINANCIAL IMPLICATIONS

The existing bulldozer was scheduled for replacement in the 2001 replacement year, and the estimated replacement budget is $600,000. Funds for the purchase of this unit, including the $48,772 budgetary shortfall, are provided from the Truck and Equipment Plant Account.

RECOMMENDATION

We recommend the acceptance of Bid 3 from Finning Canada which represents best value to the City for the supply and delivery of one (1) 305 HP Cat 8RII bulldozer at a total cost of $648,772 ($620,000 including a standard tow pin , plus extended warranty at no charge, plus $6098 for a powered belly pan, plus $10,022 for a fire suppression system, plus $12,652 for enhanced cooling system option) .

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(c) 1998 City of Vancouver