Memorandum
City of Lawrence
Public Works
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TO: |
Mark Thiel |
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FROM: |
Tom Orzulak |
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Date: |
03/22/11 |
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RE: |
Wheel Loader Bid #B1112 |
Bids were opened on 03/16/2011 for item #B1112, Wheel Loader for the Street Division. The bids were as follows:
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1. Kan Equipment, New Holland NHW170B, $137,500 |
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$12,000 trade-in |
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N/A 3 year lease |
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$119,500 net cost |
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Road Builders did not originally bid (nor was one asked for in the original bid) a buy back price. We asked if they had a buyback program since they had the low purchase price.
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3. Victor L Philips, Hyundai HL757XTD9, $133,317 $12,000 trade-in $121,317 net cost N/A 3 year lease |
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4. Murphy Tractor, John Deere 544KL, $134,590 $14,000 trade-in $120,590 net cost $38,632 3 year lease, $91,000 to purchase after lease $107,500 Buy Back after 3 years if purchased |
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5. Victor L Phillips, Case 621XR, $140,951 $12,000 trade-in $128,951 net cost N/A 3 year lease |
All machines bid have 3 year full machine warranty.
Bid Rejected
The low bid from Kan Equipment does not meet specifications in 2 areas. Hydraulic pump flow of 50 gpm was asked for and the model bid has only 31.6. This will slow cycle times. Dual locking differentials were asked for and the model bid has only limited slip. Locking is needed for operation in heavy snow or mud.
Options
This leaves 3 options. If we want to just purchase, the bid from Road Builders is acceptable. If we want to lease for 3 years, the bid from Murphy is acceptable. We wanted to look at the lease option for a loader because we have had good success with the back-hoes. Leasing has dramatically reduced our maintenance cost for this type of equipment and our 3rd option purchasing the machine from Murphy Tractor or Road Builders with a guaranteed buyback option.
Cost of Buy Back
Although the purchase with the buy back from Murphy Tractor is not the lowest price as bid, the overall cost of ownership over the first 3 years is the lowest. It will also give us more options over leasing and cost less. At the end of 3 years, we will have the option of keeping the machine at no additional cost or sell the machine back for a fixed price. The cost to the City will be the trade-in of $14,000 plus the difference of purchase and the buyback which is $13,090. The same scenario on the purchase from Road Builders would be $14,456. If we were to lease, the cost would be the trade of $14,000 plus the lease for $38,632 from Murphy Tractor.
Recommendation
We recommend purchasing the wheel loader with a guaranteed buy back option. This gives us the most flexibility down the road. We are recommending the selection of Murphy Tractor. They have the best overall price.
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Murphy Tractor John Deere 544KL $134,590 $14,000 trade-in $120,590 net cost $107,500 Buy Back after 3 years if purchased |
The actual cost for the first three years would be $13,090 or $4,363.33 per year that would be less than the lease option where we would be required to return the loader at the end of three years. With this option we have the ability to either return the loader and receive a guaranteed $107,500 or the option to keep the loader.
Funding
Purchase of the wheel loader was budgeted and approved in the 2011 adopted budget in the amount of $150,000 from the motor fuels tax fund 214-3-3800-6005.
Action
Authorize the City of Lawrence to award the purchase of the wheel loader to Murphy Tractor for $120,590 with a guaranteed buy back option of $107,500 at the end of three years.