July 19, 2005

SUBJECT:  Award of Request for Proposals No. F0403-46 for Traffic Signal Preventive Maintenance and Repair Services

REPORT IN BRIEF

Approval is requested for the award of a one-year contract, with option to extend for four additional one-year periods, to Econolite Traffic Engineering and Maintenance, Inc. (TEAM Econolite), to perform traffic signal preventive maintenance and repair services for the Department of Public Works  Division of Transportation and Traffic. 

BACKGROUND

The City of Sunnyvale currently operates and maintains 129 traffic signals, nine signal interconnect systems, three flashing beacons and one in-pavement lighted crosswalk. Traffic signal maintenance and repair involves ongoing and regular field preventive maintenance and the repair of traffic signals and other pertinent equipment. Current service levels require monthly preventive maintenance on all 129 traffic signals and more comprehensive maintenance on an annual basis. In addition to scheduled maintenance, services must be performed “as needed”.  "As needed" services typically include repairs to malfunctioning or damaged traffic signals due to equipment failure, vehicular collisions, vandalism, weather or other miscellaneous repairs required to maintain safe and efficient operation of the traffic signals.

Historically, preventive maintenance and repair of the City’s traffic signals has been outsourced through a competitive bid or proposal process.  The most recent contract with Peek Signal Maintenance of Santa Clara expired on September 30, 2004.  This contract was awarded by Council on April 21, 1998 (RTC 98-145) for a three-year term with an option to extend the contract for three additional years. 

An RFP process initiated in early 2004 was terminated when the proposals expired before a recommendation could be developed.  This was the result of a number of issues, including a pending court decision on payment of prevailing wages that could have potentially impacted a contract.  Also, one of the proposers (Peek Signal Maintenance) was acquired by another of the proposers (Republic Electric) which fouled the proposal process.  A significant, unbudgeted increase in cost was another factor in delaying the award of contract. 

Since that time, City Public Works Division of Transportation and Traffic and Field Services Division staff have been conducting signal preventive maintenance and repairs, augmented by an on call contract for as-needed heavy repairs.  To augment this major shift in work responsibilities for the Division of Transportation and Traffic, other traffic engineering services have been outsourced and certain traffic engineering studies and citizen complaint issues have been deferred.

At an October 26, 2004 study session regarding prevailing wage for maintenance contracts, the Council was briefed on the current status of prevailing wage law as it pertains to maintenance contracts versus capital construction contracts.  The Council was also briefed on a pending case before the State Supreme Court that would potentially change prevailing wage law to require charter cities to pay prevailing wages for maintenance services.  Finally, a discussion was held on what kinds of existing and pending City maintenance service contracts might be affected by such a change, such as traffic signal maintenance and janitorial services.

The California Supreme Court recently issued its decision in the case City of Long Beach v. Dept. of Industrial Relations, which raised a number of issues related to the state’s prevailing wage law.  One of the issues raised by the case concerned the application of prevailing wage laws to charter city projects and contracts.  Historically, charter cities are exempt from the requirement to pay prevailing wage rates for public works contracts which fall within the realm of “municipal affairs,” including, for example, traffic signal maintenance. The court of appeal in the City of Long Beach case held, among other things, that payment of prevailing wages is a matter of statewide concern and therefore charter cities could not use the municipal affairs doctrine to avoid paying them.  When the California Supreme Court granted review in the case, it was anticipated that the Court would consider and make a final determination on this issue.

Instead, the Supreme Court decided the case on other issues, and expressly stated:  “We leave open for consideration at another time important questions raised by the parties, including (1) whether, assuming the project was a “public work” under [Labor Code] section 1771, it should be deemed a “municipal affair” of a charter city and therefore exempt from Prevailing Wage Law, and (2) whether the Prevailing Wage Law is a matter of such “statewide concern” that it would override a charter city’s interests in conducting its municipal affairs.  Resolution of these important issues is unnecessary and inappropriate here because the present project was not a public work subject to the Prevailing Wage Law.”

The Long Beach decision side-stepped the issue of  the application of prevailing wage laws to charter cities’ municipal affairs, which means that the law is “back” to where it was prior to the appellate court decision.  Unfortunately this does not mean that the law is settled, rather uncertainty remains as to how the Supreme Court will ultimately resolve the issue.  In the meantime, the City is exempt from the requirement to pay prevailing wage rates for public works contracts which fall within the realm of its “municipal affairs.”  Of the three responders to the most recent request for proposals, all three do not pay prevailing wages, although they do pay union scale.

Subsequent to this decision, staff issued a new Request for Proposals for traffic signal maintenance services under the framework of existing law, which allows that traffic signal maintenance is a municipal affair and is not subject to the payment of prevailing wages.  Three proposals were received and reviewed by a panel of City Transportation and Finance staff, as well as, Traffic staff from a neighboring jurisdiction.  Interviews and a field maintenance exercise were also conducted and reviewed by the panel. 

Based on a number of factors that had the potential to increase the cost of signal maintenance services, staff also investigated other alternatives for traffic signal maintenance, including in-house services, and pooled signal maintenance with neighboring jurisdictions.  It does not appear at this time that the cost of outside contract maintenance services will increase beyond budgeted levels.  

DISCUSSION

Specifications were prepared by Public Works and Purchasing staff, and Request for Proposals No. FO403-46 was issued on March 17, 2005. The RFP package was directly distributed to three firms known to provide the required services and broadcast to other potential contractors through the DemandStar by Onvia procurement network.  Six firms requested RFP documents.

The Request for Proposals required proposers to provide detailed descriptions of their equipment, facilities, and experience of the typical personnel who would perform the work under the contract as well as a list of references consisting of organizations for which they are currently providing similar services.

In addition, proposers were required to submit firm, fixed pricing for regularly scheduled maintenance, a fixed percentage markup for materials and equipment rental, a variety of unit pricing for several common types of as-needed repairs, and a unit price for implementing a computerized traffic signal maintenance and inventory management system. 

The payment of prevailing wage was neither required nor precluded.  By law, placement and maintenance of traffic control devices by cities is a municipal affair, Charter cities are exempt from the prevailing wage requirement for activities that are within the realm of municipal affairs.  The City Council considered the issue of payment of prevailing wages for traffic signal maintenance as part of a 2000 study issue and at its July 18, 2000 meeting voted to continue the policy of requiring contractors to pay the State-defined prevailing wage on public works projects, but not requiring prevailing wages for City maintenance and repair contracts.  Of the three proposers on this contract, none guarantee prevailing wages, although all pay union scale. Since this contract is clearly a maintenance contract for traffic control devices, and therefore a legally defined municipal affair, then State-defined prevailing wage does not apply and the Council policy is to not require prevailing wages.

Sealed proposals were publicly opened on April 13, 2005. Three proposals were received.  Staff used a Request for Proposals process rather than a formal bid process.  Therefore, proposers are not bound by any cost proposal.  There is no bid bond associated with an RFP process, and proposals are not transferable upon transfer of ownership.  Final terms and pricing can be negotiated and are determined by the contract documents. 

The three proposals are as follows:

                                                     One Time

                                 Scheduled   Management    Year 1

Proposer                        Maint.         System          Total

TEAM Econolite           $169,911     $  2,000        $ 171,911

Republic Electric         $171,061      $       0         $ 171,061

Cal West Lighting        $146,520      $ 14,486       $ 161,006

Annual totals are assumed to remain relatively static over the life of the contract.  Additional costs, such as for maintenance of newly constructed traffic signals, will be adjusted through the annual budget process. 

The annual cost of as-needed repairs and services for each proposer were also evaluated by City staff, using quantities that were selected for proposal evaluation purposes only prior to issuance of the Request for Proposals.  Because the cost of as-needed repairs fluctuates greatly from month to month and year to year, the methodology used to compare cost proposals for as-needed services was to use a level of repairs actually experienced during a representative month, apply the cost proposed by each proposer to accomplish those repairs, and project that over a one year period.  It should be noted that the actual as-needed costs may deviate significantly from year to year because these repairs are often in response to factors that are beyond the control of City staff, such as repairs to damages caused by vehicular collisions, vandalism or weather.  The amounts used for comparison of proposer pricing will not be used for contracting purposes; rather an open-ended contract with a base amount for scheduled maintenance services is proposed, as has been past practice.  Staff’s evaluation found that Republic Electric offers the lowest price for as-needed repairs, followed by Team Econolite and Cal West Lighting.

Cost was one of the factors considered in determining the most advantageous proposal.  Proposals were evaluated based on the following criteria:

In addition, interviews were conducted with each proposer and responses to questions were evaluated by an evaluation team that consisted of City Transportation and Purchasing staff and a peer engineer from the City of Mountain View.  A field test of preventive maintenance methods and responsiveness to the City of Sunnyvale’s proposed maintenance specification was also conducted and the results incorporated into the evaluation and selection process.

Following an extensive review of all written proposals, onsite presentations by all three proposers, the field test by all three proposers, and reference checks, the evaluation team determined that two of the three proposers were technically qualified and capable of performing the required services.  Cal West Lighting does not currently have any maintenance contracts or signal technicians, and proposed to “grow” the company to serve Sunnyvale if it were awarded the contract.  Therefore, it was impossible to gauge the qualifications of field personnel that would be working in Sunnyvale.  The company’s service facility also is outside of a ten mile proximity that is specified in the RFP. 

The evaluation team selected TEAM Econolite as the firm whose proposal best meets the City’s specifications.  Team Econolite has a solid record of meeting response time and quality standards similar to those required by the City; and discussions with its reference agencies consistently brought forth comments about the exceptional experience and technical expertise of its personnel.  TEAM Econolite performed well in the preventive maintenance field test, and field personnel that would be working in Sunnyvale were the best qualified. 

Service Alternative – In-House Traffic Signal Maintenance Services

In early 2004, staff explored in some detail an option of conducting signal maintenance using in-house staff.  An adequate in-house signal maintenance operation is defined as 3 technicians, a signal maintenance supervisor/timing engineer, a construction laborer, and a construction supervisor.  Staffing levels are based on the experience of both private and public entities that perform signal maintenance, and approximate, but are slightly lower than, Federal Highway Administration and Institute of Transportation Engineers recommendations for technician-to-signal ratios.  Staff believes that there might be some limited ability to overlap existing services, particularly in the area of construction services, but that the fiscal impact would be inconsequential.

In-house service would also require the procurement of fleet vehicles and heavy equipment. Necessary equipment that is not already in the City’s inventory and available for signal maintenance includes an equipment testing facility, a bucket truck, a service van, a service truck, a trailer mounted air compressor, and a concrete saw.

It was determined early in the 2004 investigation that in-house signal maintenance would have significant start up costs associated with equipment acquisition and inventory, and labor costs would not be competitive with private sector contracting.  Given the increase in vendor pricing since the 2004 RFP process, staff has updated the information on the cost of in-house traffic signal services. 

Two cost estimates are provided, one for an optimally staffed in-house operation, and one assuming hours equivalent to a competitive bid proposal. 

Estimated costs of an optimal in-house service are as follows: 

Annual Labor Costs:                    $            588,579

Annual Materials/

Overhead Costs:                         $            138,526       

Total Annual Cost                           $             727,105

Start-Up Costs (Equipment, etc):   $           247,864

This service would feature 5 full time employees, which is roughly equivalent to the staffing levels utilized by City staff over the last 8 months to perform signal maintenance.

However, the private contractors are able to achieve greater efficiencies by allocating people to the workload as it occurs in different cities and subcontracting out groups of like work on an as-needed basis.  Therefore, the equivalent work hours for a private contractor may be less then an in-house signal operation with full time employees.  Staff therefore made some assumptions about the equivalent work hours of the private contractor proposals vs. an in-house service to give a more direct comparison of costs. 

Staff utilized information on the number of hours spent by City staff over a five month period from January to May, 2005 to estimate equivalent work hours.

There would be an additional $247,864 start up cost for an in-house service for one time equipment and support infrastructure.  The startup costs if amortized over the 10 year life of the equipment would amount to $24,786 annual cost.    This would place the annual cost of operating an in-house traffic signal maintenance service to be $488,895.  Quoted rates from signal maintenance proposers for roughly the same level of effort for annual maintenance (preventive + as needed repairs) are in the range of $439,000-$462,000.  It is important to note that this comparison is not precisely “apples to apples” - staff is unable to make direct comparisons of work hours in the proposers’ estimates versus City staff experience. This estimate approximates, based on experience, the required level of effort by City forces versus the costs for a similar level of effort proposed by private contractors.

The costs to utilize City forces begin to approach that of private traffic signal maintenance firms, less the significant start up costs.  However, staff continues to conclude that while this is an effective way to provide high quality service, it is more expensive than other alternatives with a significant start up cost.   

Service Alternative – Partnership with Neighboring Jurisdictions

Investigation of possible efficiencies in entering into agreements with neighboring jurisdictions was investigated.  Specifically, City staff presented information to three neighboring jurisdictions on facilities to be maintained, proposed service levels and the City’s anticipated costs for contracted vs. in-house services, and requested feedback as to how the Sunnyvale’s maintenance needs and potential costs might interlock with neighboring jurisdiction’s approaches.  The three jurisdictions all featured different characteristics to their current approach to traffic signal maintenance:  The City of Santa Clara conducts in-house maintenance by the City’s electrical utility staff; the City of Mountain View contracts service out but at lower maintenance levels than Sunnyvale; and the Town of Los Gatos is between signal contractors and was interested in discussing shared in-house maintenance. Staff believes that a good range of potential operation configurations was explored.

Potential issues with a multi-agency operation are prioritization across City boundaries, response time, and administrative costs.  Given the nature of staffing for a signal maintenance operation, typically only one crew is available to deal with major repairs, such as a pole knockdown.  If multiple repairs happen simultaneously in the two jurisdictions, determination of priority and the subsequent ability to meet response time standards would be difficult.  Response time across a larger area could be problematic, unless the ratio of signals to repair techs was relatively low.  Costs increase as this ratio decreases.  However, it is unlikely that any efficiencies would arise from sharing of signal technician crews due to the relatively high signal to technician ratios that are currently realized by Sunnyvale and the neighboring cities.  Administration of a shared operation would be increased for whichever agency was the lead contractor, as it would need to process, verify, and distribute billing to the contracting agency.  This would amount to additional work for various divisions, which would be needed in order to process and bill the contracting jurisdiction.  Also differences in maintenance standards, priority and order of responses to traffic signal problems would need to be negotiated and could be a significant barrier to achieving agreement.

FISCAL IMPACT

The adopted FY 2005/2006 budget for the Transportation Operations program 115 includes $368,275 for traffic signal operations and maintenance.

The base level of regularly scheduled maintenance costs of $169,911 and the one time Management System fee of $2,000 will be funded by the existing budget appropriated to the Transportation Operations operating program. Additional funds for as-needed traffic signal repair for FY 2005/2006 based on past expenditure history are budgeted in the Program as well.

The City’s experience with signal maintenance costs has fluctuated fairly significantly over the last two years.  The last maintenance contract featured lower costs than subsequent proposals, with a base price of $121,187.  However, the specified service levels allowed the contractor to meet preventive maintenance requirements that were lower than optimal service levels. Previous City contracts were based on lists of work tasks and did not include the specific components of the task.  This allowed the maintenance contractor significant flexibility to define the tasks and “cut corners” while meeting basic contract requirements.  The result was substandard maintenance. As a result, the City incurred significant levels of trouble calls due to poor preventive maintenance.  The contractor then did not meet the City’s response time standards for trouble calls, and performance measures were not met.  Punitive fiscal measures were required at the time, and some services were withdrawn from the contract, including intersection safety lighting and internally illuminated street name sign maintenance.  The City consequently tightened up the preventive maintenance performance specifications when it prepared a new Request for Proposals. 

The first RFP process then resulted in a significant increase in potential costs. 

That cost increase reflected three main factors:  (1) An industry wide cost increase in scheduled maintenance due to factors such as labor rate and materials cost increases; (2) better definition of required services in the RFP and contract documents, resulting in true costs of maintenance being reflected in contractor cost proposals, and (3) limited competition and payment of prevailing wages by the single dominant maintenance provider in the Bay Area.  The previous contractor’s proposed cost increased by 91%, and other proposers’ costs were 150% to 185% greater than the City’s previous cost experience.  These proposals were not acted upon, and City staff has conducted signal preventive maintenance and repairs for the last nine months, augmented by an on call contract for as-needed heavy repairs.

As a result, preventive maintenance has occurred at more optimal levels, and the City signal system is in a much better state of repair.  Staff believes that improving the City’s signal maintenance situation, defining a set and well defined maintenance program and developing accountability measures may have had an influence on the most recent set of cost proposals, which are higher than the previous contract but much lower than the 2004 proposed costs.  Also, all proposers are now paying less than prevailing wages, due to staffing realignments away from electricians and towards traffic signal technicians conducting the bulk of the work.  Staff considered whether any one proposer had a significantly different competitive rate structure, and found that rates in all proposals are nearly identical. Wage rates did not appear to be a competitive factor on the part of the proposers.  Staff believes that the current cost proposals are reflective of reasonable current competitive costs for the services specified in the City’s RFP.  However, there would be an approximate 40% increase in base signal maintenance costs from the City’s previous contract in 2003/2004.  Staff believes this will be offset by significantly lower “as needed” repair costs.   

Conclusion

Approval is requested for the Award of Contract to perform traffic signal preventive maintenance and repair services for the Department of Public Works Transportation and Traffic Division. Staff considered three Service Alternatives for provision of preventative maintenance and repair services for the City of Sunnyvale Traffic Signals.

1. In-house Traffic Signal Maintenance Services – It was determined that in house signal maintenance would have significant start up costs associated with equipment acquisition and inventory, and labor costs would not be competitive with private sector contracting. 

2. Partnering with Neighboring Jurisdictions – It was determined that a multi-agency operation has many potential issues, such as prioritization across City boundaries, response time, and administrative costs. 

3. Contracting with a Traffic Signal Maintenance Firm – This was determined to be the most effect method for providing efficient and cost effective traffic signal maintenance and repair services. 

Staff has conducted a Request for Proposals process that resulted in the receipt of three proposals for these services.  An evaluation team comprised of City Transportation and Finance staff, as well as, traffic staff from a neighboring jurisdiction received and reviewed all three proposals.  An extensive review of all written proposals, onsite presentations and field test by all three proposers, as well as, reference checks were conducted by the Evaluation Team.  The Evaluation Team determined two of the three were technically qualified and capable of performing the required services. However after the evaluation, described in detail on page 5 of the report, it was determined that Econolite Traffic Engineering and Maintenance Inc. (TEAM Econolite) was most qualified.  The evaluation team selected TEAM Econolite as the firm whose proposal best meets the City’s specifications.  Team Econolite has a solid record of meeting response time and quality standards similar to those required by the City.  Council is being asked to approve the Award of Request to TEAM Econolite.   It appears the most feasible and cost effective approach to providing effective traffic signal maintenance services is to award a contract to Team Econolite.      

This contract is for a base amount of $171,911, with rates established for specific additional “as-needed” repairs and a one time maintenance and inventory management system.  Funds are budgeted in Program 115 in the amount of $368,275 to cover scheduled traffic signal maintenance and as-needed repair services.  These funds will cover the $171,911 base contract amount plus additional funding for as-needed repairs.  This amount is based on past experience with traffic signal maintenance and repair costs.

ALTERNATIVES

1. Award a one-year contract, in substantially the same form as the attached draft (Attachment A) and with an option to extend the contract for four additional one-year periods, to Econolite Traffic Engineering and Maintenance, Inc. (TEAM Econolite) to provide a computerized traffic signal maintenance and inventory system and to perform ongoing traffic signal maintenance and repair services.

2. Reject all proposals and direct staff to call for new proposals.

3. Reject all proposals and direct staff to pursue an alternative means of traffic signal maintenance, such as in-house signal maintenance services.

RECOMMENDATION

Staff recommends Alternatives #1: Award a one-year contract, in substantially the same form as the attached draft (Attachment A) and with an option to extend the contract for four additional one-year periods, to Econolite Traffic Engineering and Maintenance, Inc. (TEAM Econolite) to provide a computerized traffic signal maintenance and inventory system and to perform ongoing traffic signal maintenance and repair services.

TEAM Econolite has the best record of meeting response time and quality standards similar to those required by the City; and discussions with its reference agencies consistently brought forth comments about the exceptional experience and technical expertise of its personnel.  In addition, its pricing structure is the most favorable for the City’s required level of signal maintenance services; and it offers a proven computerized traffic signal maintenance and inventory system that interfaces well with the City’s own internal tracking and inventory system.  Other contractors’ systems did not adequately meet the City’s specifications and needs with respect to the ability to input work orders and the ability to input and review inventory.  TEAM Econolite performed well in the preventive maintenance field test, and their field personnel that would be working in Sunnyvale were the best qualified.  Other signal maintenance service alternatives to private contracting were considered and found to be costly or problematic.

Reviewed by:

Marvin Rose, Director, Public Works
Prepared by: Jack Witthaus, Transportation and Traffic Manager

Mary J. Bradley

Director, Finance

Approved by:

Amy Chan

City Manager

Attachment

A.  Draft Service Agreement - Exhibit A, Exhibit B, Exhibit C (.pdf)