To: From: Honorable Mayor Smith and members of the City Council; City Manager Brenda Fischer Wade Brannon, Fire Chief; Date: 6/21/2011 RE: Approval of Contract: Brindlee Mountain Fire Apparatus REQUEST Approval of Contract. The Mayor and City Council shall discuss and possibly take action on a request by Fire Chief Wade Brannon to approve a contract for the sale of two (2), 2006, E-One Typhoon rescue Pumpers for the sum of $419,000 (four hundred nineteen thousand and no cents). RECOMMENDATION Staff recommends the approval of contract. COUNCIL PRIORITIES AND/OR THEMES ADDRESSED o Public Safety o Economic sustainability PROJECT INFORMATION Bristol Bay Borough, Alaska has offered $419,000 to the City for the purchase of two (2) out of the three (3) E-One rescue pumpers the City has for sale. Background The Maricopa Fire District purchased three (3) new E-One fire engines through Frontier Emergency Products in 2006. The District awarded the purchasing contract to Frontier after a competitive purchasing process identified the Frontier proposal as the lowest responsive proposal. The apparatus purchase price was $432,352 per truck. Frontier is the local dealer for the fire truck manufacturer E-One, Inc. At the time of the purchase, E-one was a subsidiary of Federal Signal and one of the largest Fire Truck manufacturers in the United States, holding approximately 20% of the U.S. market share. Local E-One customers included Chandler, Tempe, Glendale, and Casa Grande. The Fire District elected to purchase the three fire engines with lease to-own financing through Federal Signal. The lease was signed on 11/30/2006 for a term of ten (10) years. The Fire District made a down payment of $402,809 or $134,270 per vehicle and agreed to make payments of$39,319.54, paid annually in arrears.
The Fire District took delivery of the three (3) trucks in January, 2007. One year later, in January, 2008 Frontier severed its relationship with E-One. Frontier became a dealer and warranty service center for Rosenbauer Fire Apparatus. E-One did not have a local warranty service center or manufacturer s representative until April, 2008 when H&E Equipment Services signed on as the service center for Arizona. In February, 2008, 13 months after delivery, the first Cummins diesel motor failed because of dusting. Dust and dirt managed to get through the air filtration system and damage the motor. Even though the motor only had 16,000 miles on it, a complete overhaul was required to repair the damage. Left without local dealer support, the Fire Department was forced to work with the local Cummins dealer and the E-One warranty service representatives based in Ocala, Florida on the issue. Both E-One and Cummins denied responsibility for the failure and refused to pay for the overhaul. However, after several months of discussion, the Maricopa Fire Department was able to successfully demonstrate that the engine had been maintained to manufacturer recommendations and Cummins paid the claim. However, the truck continued to experience problems with engine overheating and E-One was either unable or unwilling to solve the problem. In July, 2008 the Fire Department Senior Mechanic engineered and fabricated a partial solution and the Department was able to return the truck to service. In August, 2008, Federal Signal sold E-One to American Industrial Partners, a privately held venture capital firm. Just before its sale of E-One, Federal Signal sold its municipal leasing assets to Bank of America, the current lease holder. The terms of the lease remained the same. Approximately 18 months later, in June 2009, a second Cummins diesel motor failed at 29,000 miles. The warranty repair center overhauled the engine believing that it would be covered under warranty. However, the claim was denied by Cummins because they believed that it should be covered by the apparatus manufacturer. E-One refused to pay stating that the problem should be covered by the Cummins Warranty. Both parties were able to agree that Maricopa was not at fault. The Fire Department began working with all of the involved parties in an attempt to resolve the warranty payment issues and devise a fix for the filtration and overheating problems. At various times these efforts included the local Cummins dealer; Cummins, Inc; the local E-One dealer, E-One; and the air filter manufacturer. After several months, Cummins proposed a settlement agreement. The invoice for the overhaul would be reduced from over $14,000 to less than $8,500. Payment of the remaining amount would then be divided between Cummins, E-One, and the City. However, the City would waive the right to any future claims against Cummins. The settlement offer was not accepted because it did not address the underlying cause of the engine failures and left the City responsible for paying for expensive future overhauls. 2
In February, 2010 the third engine failed and was towed to Rocky Mountain Cummins. The problem was again found to be a dusted engine. When this third engine failed, the Fire Department added radios and communication equipment to an older fire truck that was being used exclusively for training and placed the truck in-service as a reserve in order to maintain service to the community. Maricopa s legal counsel was first briefed about the dispute in August 2009. Regular updates about the ongoing discussions were provided and their advice was actively sought. In November, 2009, the Fire Department and the City s legal counsel began settlement negotiations with E-One, Inc. The negotiations attempted to find a resolution to the payment of current and future warranty claims. The negotiations have been unsuccessful. In May, 2010 the Fire Department requested a budget transfer of $20,000 from City contingency funds to pay for two overhauls. The overhauls were completed and one (1) fire engine returned to service in early June and one in late July. In July, 2010 the Fire Department briefed the Council Budget, Finance, and Operations Subcommittee about the issues and potential remedies. The Fire Department recommended that the apparatus be sold and new fire engines purchased. Following the meeting the Fire Department and Purchasing began discussions on how to proceed with the selection of a broker and/or the sale of the apparatus. An RFP for a broker was issued in November, 2010 and responses were opened December 3, 2010. A contract with Brindlee Mountain Fire Apparatus to broker the sale of the apparatus was approved by Council on January 18, 2011. A representative of Bristol Bay Borough, Alaska made on on-site inspection of the apparatus on June 13, 2011. He made an offer for the purchase of two (2) of the trucks the same day. Executing the contract and getting the truck to Seattle as quickly as possible is very important to the Buyer. Bristol Bay Borough is located just North of the Aleutian Chain on the West Coast of Alaska. The only way to get the trucks to Bristol Bay is by water. The port will close to commercial shipping at the end of August. Because there is a limited amount of cargo space available on vessels sailing to Bristol Bay, if the trucks do not arrive at the port in Seattle soon enough, there is a chance that they will remain on the dock in Washington until next Summer. Sales Contract The contracted sales amount is for $419,000 for two (2), 2006 E-One Typhoons. The trucks are being sold as-is with no warranty either stated or implied. The sale includes the following: The apparatus, NFPA required ground ladders, 3
Installed headset communication systems, Installed deck guns and nozzles, Copies of all maintenance and shop records, plus any available operational and instructional materials, Shipping to Seattle, Washington Installation of RUD snow chains prior to shipment Allowing the installation of Bristol Bay Graphics prior to shipment. Possible Solutions Operational Impact Selling and shipping two (2) trucks simultaneously will present operational challenges. At a minimum there will be a gap of 60 days between the sale of these apparatus and the delivery of new ones. In the worst case scenario, this gap could be as long as a year. During this time, the Department will be using two reserve apparatus for frontline service. The Department brush truck will also be used as a reserve engine and if necessary, the Department will seek assistance from other local departments. The Fire Department plans on presenting replacement options at the July 19, 2011 Council meeting. Budgetary Impact Item Per Truck Total Sale price $209,500 $419,000 Expenses Broker Fee (3.8%) $7,961 $15,922 Snow Chains $1795 $3,590 FOB to Seattle $5,400 $10,800 Lease Pay Off amount $207,779 $415,558 Total Costs ($13,435.00) ($26,870.00) The per truck difference between the sales price and the expenses is less than the cost of one (1) engine overhaul. If the sale is approved the difference of $26,870 would be paid from the budgeted amount for the annual lease payment. CONCLUSION The City has three (3), E-One Typhoons for sale. After a representative flew to Arizona and performed an on-site inspection, Bristol Bay, Alaska has offered to purchase two (2) of the three (3) trucks for a total $419,000 ($209,500 ea.). The trucks are being sold as-is with no warranty either stated or implied. After Brokerage fees and other expenses the total cost to 4
city will be $26, 870 ($13,435 ea.). The per vehicle costs are less than one (1) engine overhaul and the can be paid from the amount budgeted for the annual lease payment. Staff recommends the approval of contract. -- End of staff report -- 5