ADMINISTRATIVE REPORT

Date: April 13, 1999
Author/Local: P. Navratil/7239
RTS No. 00478

CC File No. 3758

Council: April 27, 1999

TO:	Vancouver City Council
FROM:	General Manager of Engineering Services
SUBJECT:	Recycling Trucks Options for Apartment Recycling Program

RECOMMENDATION

A. THAT Council approve funding the one-time capital cost of three Additional Recycling Trucks for the City’s Portion of the Apartment Recycling Program, which is estimated to be $495,000, from the Solid Waste Capital Reserve.

B. THAT Council approve waiving the public tendering procedure and authorize the Manager of Purchasing Services to acquire, by direct purchase, three additional recycling trucks from Rollins Machinery through the extension of Contract 39-96-05.

C. THAT Council approve funding the one-time capital cost estimated at $100,000 from the Solid Waste Capital Reserve to refurbish four retired first generation recycling trucks to bridge between the August 1999 Apartment Recycling Program Implementation date and the delivery of the three new recycling trucks.

COUNCIL POLICY

On February 1, 1989, Council established a goal of reducing the City’s solid waste stream by 50%.

On May 3, 1994, Council agreed to support the Greater Vancouver Regional Solid Waste Management Plan, including apartment recycling programs.

On April 28, 1998, Council approved the design of the Apartment Recycling Program using both private and “in-house” recycling services.

On February 25, 1999, Council awarded Tender 9900 for Apartment Recycling to three companies serving four areas of the City.

It is Council policy to issue a tender or RFP for contracts in excess of $100,000.

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

PURPOSE

The purpose of this report is to present a business case analysis supporting the recommendation for Council to approve the implementation of the in-house portion of the Apartment Recycling Program (ARP) using three new trucks instead of refurbishing retired vehicles.

SUMMARY

When Council approved the ARP in April 1998, the purchase of new recycling trucks was not approved. Instead, staff was directed to use existing vehicles. Therefore, in order to commence collection by August 1999, the four best trucks from the retiring recycling fleet will need to be refurbished at $25,000 each to service the two additional recycling beats for the “in house” portion of the ARP. This will extend the life of each truck an extra 12-18 months while keeping operating costs in line. At the end of that extension new or rebuilt trucks should be available for the program. Staff recommends the purchase of three additional vehicles by direct purchase from an extension of the previous public tender 39-96-05. A direct purchase will reduce the purchasing time by three months while ensuring a standardized fleet. All of the City’s trucks are produced by the same manufacturer, which enhances efficiency in terms of training, parts and repairs.

BACKGROUND

On April 28, 1998, Council approved the design of the ARP which included using private contractors for roughly 75% of the City. The remaining “in-house” portion would be serviced by City crews by adding two additional beats to the existing 20 blue box beats.

During the discussion, Council directed staff to refurbish existing trucks for the program rather than purchasing the additional recycling trucks and spares.

Service for both “in-house” and contracted portions will commence by August 1, 1999.

DISCUSSION

As the City prepares to launch their portion of the ARP, a critical element will be the recycling trucks. The City portion of the ARP will result in two new collection beats. The program will require one truck per beat with one or two extras (depending on whether new or refurbish) for back-up as there is no back-up capacity within the existing fleet.

In the next 12-18 months, two vehicle issues exist. Firstly, four existing recycling vehicles need minor modifications and refurbishments in order to serve the immediate program demand. Secondly, a long term strategy is required to address the program’s on-going needs.

Short Term Vehicle Demands

In order to commence City collection by August 1, 1999, staff have concluded that four existing recycling vehicles will need minor refurbishing. As 12 new recycling trucks have been purchased and initial delivery commenced in March, trucks from the existing fleet will be retired and are available for refurbishing to extend their service life. The cost of minor refurbishing to an existing truck is approximately $25,000 and extends the life of the vehicle approximately 12-18 months. Equipment Services can refurbish four of the old trucks in approximately three months which will meet the August 1, 1999 target implementation date. Four trucks will be refurbished as opposed to three to safeguard against higher downtime rates witnessed in older models.

Long Term Solutions

Two options to address the additional demand for recycling vehicles were investigated by staff; Major refurbishing of selected vehicles from the old fleet and the purchase of new vehicles.

Major refurbishing would include a reconditioned motor, rebuilt transmission, new brakes for the chassis, structural and hydraulic system repairs to the body, as well as complete repainting. This work would extend the life of the recycling truck an extra five years, but would have a 10% higher frequency of downtime versus new trucks.

The time required to complete a major refurbishment in-house would be approximately three months per unit or 12 months total. Due to the higher frequency of downtime, four trucks would need to be upgraded to handle the apartment recycling beats. As well, Equipment Services does not have the personnel to perform the major refurbishing. Therefore, if contracted out, Equipment Management estimates that refurbishing of the vehicles would be $110,000 per unit. Two firms specializing in heavy equipment overhaul were contacted to provide verbal estimates on the work. These firms were reluctant to take on this work on a firm price basis because of the large uncertainty associated with major refurbishing work.

The second option would be to purchase three new vehicles for the program. The benefits to purchasing new vehicles would be the increased reliability, lower maintenance cost, one to three year warranty depending on components, and a longer lifespan than a refurbished model (typically 7-8 years).

One negative aspect to purchasing new vehicles is the abnormally long delivery periods. The demand for new garbage and recycling trucks has increased dramatically due to expanded collection services in North America. A world shortage of Allison transmissions has further impeded the supply of new vehicles. The result is an approximate 350 day delivery period for new vehicles compared to 210 days in the past. The process to tender for trucks and wait for delivery will be up to approximately 15 months or if Council wishes, the Manager of Purchasing Services can be authorized to make a direct purchase based on a previous public tender. A direct purchase will reduce the purchasing time by three months making the new truck purchase a more attractive option.

Rollins Machinery, the existing Contractor who submitted the low bid meeting specifications for Contract 39-96-05 has agreed to extend the supply of three (3) additional recycling trucks at a cost of $155,713 (including GST (less the anticipated rebate), PST and Provincial Environmental Levy) per unit, 6.6% over the previous price. The increase includes new 1999 model year change, U.S. exchange rate, labour and material. This price is valid until May 31,1999, and a further estimated price increase of $5,000 per truck will be anticipated for the year 2000 model, if the order is placed after this date.

For both options, the $100,000 minor refurbishing cost is unavoidable as these vehicles will be required while new vehicles are on delivery or while old vehicles are being rebuilt. Unfortunately, the cost of the minor refurbishments does not reduce the cost of the major refurbishment. The costs of the two options have been summarized below in terms of a one time capital cost.

Purchase New Trucks		Refurbish Old Trucks
4 minor refurbs	$100,000	4 minor refurbs	$100,000
3 new trucks	$495,000 (including in house outfitting)	4 major refurbished	$440,000
Totals	$595,000		$540,000
Service Life	7 years		5years
Cost for 5 years	$425,000		$540,000

FINANCIAL IMPLICATIONS

Purchase cost of new trucks and interim refurbishments to be funded through the Solid Waste Capital Reserve.

CONCLUSION

The new truck option will provide savings over the rebuilding option and therefore, staff recommends minor refurbishing of four recently retired trucks for program start-up in August. Staff further recommends direct purchase of three new recycling trucks from Rollins Machinery. All funding of capital work for 1999 would be funded through the Solid Waste Capital Reserve.

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(c) 1998 City of Vancouver