Eastern Municipal Water District
California

Action/Info Item
4527

Approve and Authorize a Five-Year Agreement with Genuine Parts Company (NAPA) to Provide Automotive Parts and On-Site Support Services

Information

Department:ContractsSponsors:
Category:Action/Info ItemMeeting Workflows:Board Admin Committee Workflow

Attachments

  1. Printout
  2. Presentation

Background

Eastern Municipal Water Districts fleet consists of nearly 540 vehicles and pieces of equipment with purchase values generally ranging between $20,000 to $500,000.  As summarized in the table below, these assets consist of a highly diverse array of operational equipment supporting functional work groups and departments throughout all areas of the organization:

 

Vehicle/Equipment Type

Number of Equipment Assets

Sedans and Light Duty Trucks/Vehicles

276

Medium and Heavy-Duty Vehicles

72

Construction Equipment and Forklifts

41

Trailers and Portable Equipment

121

Other

29

Total:

539

 

The Fleet Services department is responsible for efficiently managing and maintaining these assets.  Departmental responsibilities include planning, specifying, budgeting, and ordering new and replacement vehicles in accordance with defined criteria, as well as the day to day maintenance and repair of vehicles and equipment to ensure operational readiness and availability.

 

Automotive Parts Supply Process

 

District expenditures for the purchase of general use automotive parts and supplies totals approximately $500,000 per year. Common and routinely used items are maintained in the Districts Warehouse or as bench stock within the Fleet Services department.  However, due to the wide variety and diversity of District equipment, Fleet Services interacts with numerous vendors and suppliers throughout each business day to secure required parts and supplies.  These individual needs are typically identified by the departments Service Writer, Supervisor or Fleet Technician and communicated with one of the Districts many automotive and equipment suppliers.  Deliveries are received throughout the day and issued to a Technician to perform the scheduled maintenance or needed repair.  Following the process to secure an item, invoices and delivery receipts are reviewed and approved, then forwarded to the Accounts Payable department for processing and payment.  Lastly, the departments work order management system (RTA) is updated with assigned parts and materials for accurate accounting and asset tracking.

 

The process of ordering, receiving, issuing, and tracking of these items is, itself, a highly interactive and costly component of Fleet operationsThe combined time of more than one full-time-equivalent employee is consumed in the process of managing these requirements, with burdened labor costs totaling nearly $150,000 per year.

 

NAPAs On-Site Store

 

Genuine Parts Company, doing business as Napa Auto Parts, is one of the nations largest suppliers and distributors of automotive parts and supplies.  At the corporate level, Napa has implemented on-site store capabilities serving higher volume fleet customers such as the DistrictNapas On-Site Store Program provides the following benefits:

 

·         On-site, vendor managed inventory consisting of commonly used items.  These items are purchased and held at Napas expense and are charged to the customer only when used for a given maintenance or repair.

·         Dedicated staff providing on-site parts related services.

·         Procuring, stocking, and issuing of automotive parts including both Napa branded and non-branded items.

·         Work order system integration to ensure parts and equipment are accurately charged to vehicle maintenance and cost records in a timely manner.

 

These services greatly reduce the involvement of Fleet personnel in the acquisition and administration of parts enabling improved departmental focus on core vehicle maintenance and repair functions and other related responsibilities.

 

Cooperative Purchasing Agreement and Contracted Support

 

The Napa On-Site Store Program is offered to public entities under a competitively awarded cooperative purchasing agreement (Sourcewell Agreement No. 061015).  Cooperative purchasing agreements, such as those through Sourcewell (formerly the National Joint Powers Alliance), are competitively bid through established public procurement processes and satisfy agency contracting requirements, such as those of the District.  Agencies such as the City and County of San Diego, the City of Ventura, and the City of Corona, California, all utilize Napas On-Site Store Program under the Sourcewell Agreement and have achieved favorable results.

 

Under the recommended agreement, the proposed store will be physically located within the Districts Fleet Services department at District headquarters in Perris, California.  Napa will staff this location with one, full-time, employee, dedicated to District support. Napa will work with District personnel to identify existing inventory with low utilization and will provide management with recommendations for disposition.  Napa, will then procure commonly used items and supplies used by the District, at its own cost, to stock the On-Site Store.  As previously mentioned, due to the wide variety of vehicles and equipment in operation at the District, many automotive related parts and supplies are procured on an as-needed basis. Napas assigned resource will be responsible to procure all such automotive related items, whether or not these are available through Napa or through any other source.  All items, whether issued through the On-Site Store, or procured by Napa on the Districts behalf will be entered into the Districts work order management system.

 

Key terms associated with the recommended agreement include:

 

·         Napa to provide one full-time staff resource and associated operational overhead, at cost.

·         Parts pricing based on a 10 percent target margin (Napa gross profit).

o       Napa branded itemsJobber (wholesale) price/.90

o       Non-Napa branded items:  Acquisition cost/.90

·         Cost documentation to be provided upon request throughout the term of the Agreement.

·         Agreement may be terminated at any time with 60 days written notice.

 

Anticipated Costs and Savings

 

The Districts Triennial Strategic Plan (2019 2021) covering fiscal responsibility provides for shared service opportunities that reduce costs and overhead by in-sourcing work from outside entities and out-sourcing functions, where appropriate.  Under the recommended agreement with Napa, cost savings, which include the primary benefit of productivity and efficiency gains resulting from the elimination of non-core activities, are estimated at $138,285 per year.  Additional components of savings include the reduction of inventory and transaction related costs. Anticipated costs and annual savings are summarized in the table below:

 

 

 

Estimated Savings and Labor Efficiencies

Increased Productivity and Staff Efficiency

$149,963

Reduction in Purchase Orders and Payments

$74,500

Inventory Management (reduced obsolescence and improved core credits)

$14,886

On-Site Store and Parts Acquisition Costs

(101,064)

 

Annual Estimated Savings:

$138,285

 

Contract Approach

 

Sourcewell Agreement No. 061015 is scheduled to expire on July 21, 2021As the Sourcewell contract is renewed or extended, the Districts agreement with Napa may be extended for similar or shorter periods of time.  In the event the Sourcewell Agreement were not renewed, the recommended agreement provides that Napa and the District may mutually agree to extend the terms of the agreement for, up to, an additional five-year period.

 

Annual expenditures for the purchase of vehicle parts and supplies are typically provided in each fiscal years operating budgetAnticipated costs under the recommended Program are estimated at $600,000 per year, which figure includes the recommended staffing and capabilities associated with Napas On-Site Store.  Total expenditures over the full, five-year term of the recommended agreement shall not exceed $3,000,000.

Financial/Strat Plan/Enviro

FINANCIAL IMPACT:

Funding for this item is provided for in the Biennial Budget for Fiscal Years 2019-20 and 2020-21.

 

STRATEGIC PLANNING GOAL/OBJECTIVE:

Shared Services:  Seek beneficial shared service opportunities that reduce costs and overhead by in-sourcing work from outside entities to EMWD and out-sourcing functions, where appropriate.

 

ENVIRONMENTAL IMPACT:

None

Recommendation

Approve and authorize up to a five-year agreement with Genuine Parts Company (NAPA) to provide automotive parts and on-site support services in the full-term, not-to-exceed total of $3,000,000.

Meeting History

Oct 1, 2020 4:00 PM  Board Administrative Committee Regular Meeting
draft Draft
RESULT:RECOMMENDED FOR APPROVAL
Oct 21, 2020 9:00 AM  Board of Directors Regular Meeting
draft Draft

Mr. Howell provided a presentation on this item

RESULT:APPROVED [UNANIMOUS]
MOVER:Philip E. Paule, Vice President
SECONDER:David J. Slawson, Board Member
YES:Ronald W. Sullivan, Philip E. Paule, Stephen J. Corona, Randy A. Record, David J. Slawson