Travis County Commissioners Court
July 26, 2005
Item 18
The starflight item is number 18. It is consider and take appropriate action on the following issues, regarding the purchase of two helicopters from american your row eurocopter. And approval of contract. B, exercise option for avionics and mission completion for one helicopter on a contract with american eurocopter.
>> good morning, judge, Commissioners. Casey and bonnie are coming in, they are in the other room. I’m cyd grimes, Travis County purchasing agent. We have been working on this project for several months now. Starflight, a group made presentations to you earlier in the year. What I have before you is sort of a one-page synopsis of the negotiations that have occurred. As you will see, we have a base cost of the helicopters for -- we have it split up for the two different ones, but for the total base costs for both helicopters at 11,805 and $610. Million, yeah. 11 million. We wish. Once you take the base cost, have you to add in the instruments and avionics equipment. That's another $573,848. And then we have the interior, another 535,492. So your total for both helicopters is 12,914,950,000. Then -- I’m not saying those numbers right, but they are there. We also are getting a trade-in on each helicopter of about 2,856,000 -- 28,563, which gives us a come combined of -- american eurocopter also gave us special pricing considerations that total 494,000. And then they also gave us some trade in or discount value on some of our tools which amounted to $23,020. You will see the both is $8,380,804. The budget that the court approved was 8 million. So the budget amount needed in f.y. '06 is $380,804. There were some additional information -- the other thing that the starflight crew had wanted and would still like to have is a hoist. And the hoist was originally quoted by american eurocopter at a little over -- well, almost 600,000. The negotiation committee did research and found that we could buy it -- we could purchase that hoist for about 300,000, saving about $292,000. Of course, we still don't have the 300,000 included in the budget so starflight would like to still make that purchase. One of the things that we're hoping for is on the trade-ins, we are guaranteed the $2,865,000 for each helicopter, but, if they sell those helicopters for more than the -- that 2 million, we will get 75% of any amount over that. So we are very hopeful that they will sell those helicopters for more than that and that that will help to defray the cost of the budget needed of 380, and then the 300,000 for the hoist. The other issue that is somewhat fluid is the barrier filters. And the starflight guys could explain that a lot better than me, but apparently they are in development, and starflight will be working with them to help develop those filters and test them so they are willing to give us some concessions. Currently the contract amount includes the barrier filters at 1,257,500 each. Some of the -- 127,500. We're hoping that will be another 127,500 in savings. We also went back and forth on how we would pay for this. Initially seven years ago we didn't pay any money up front. However, they were very, very reluctant to do that. If you recall the past seven years, seven years ago eurocopter was trying to get into the american market. So they were pretty much willing to do a lot of things for us. And if you recall, we got very good pricing then also. But this time they wanted progress payments. We talked about letter of credit. That went away. So now we're back to progress payments, and the negotiation committee was able to -- instead of paying 15% up front basically they negotiated and we're going to be paying two payments for a total of 6% each. And then the third payment will be our final payment upon acceptance. The plane -- the plane. The helicopters also come with warranties. The standard warranty is two years. 1,000 hours. And they also have an extended warranty that starflight intends to look at sometime in the near future.
>> I just have a couple comments.
>> that's pretty much my presentation. The contract, there's a few fine points that barbara and eurocopter attorneys are still negotiating. We do have liquidated damages in the contract, that if they don't deliver on time, they will be paying us some money. So barbara is working -- barbara is working out the fine details of that. We're hoping to have the contract ready next Tuesday for you'll's approval. So unless the committee has any comments, we're here to answer questions.
>> what action is expected of the court today?
>> if you'll recall, judge Biscoe, we discussed that we just wanted to bring this forward and answer any questions today that you all might have because we knew the contract would not be ready.
>> discussion, question and answer.
>> yes, sir. [one moment, please, for change in captioners] .
>> ... In other words, especially if you are going and getting bumper to bumper, extended warranties, all of this other kind of stuff, in addition to the two-year warranty that they are offering, what would an extended warranty cost if the county was to pursue that and what is the time line? In other words, you go out and purchase a vehicle, for an example, an automobile or whatever you purchase, sometimes they say well you have -- the manufactured warranty is good for x number of years. Then, however, there is another warranty we have called an extended warranty. Now, you -- you only have a certain length of time to participate in acquiring an extended warranty. And I guess what -- since extended warranty has been mentioned, I’m trying to determine what -- what are the ramifications of or the consequences of receiving an extended warranty and how much would that cost? Do we have any idea because -- because this is some really major mega investment dollars. And I want to make sure that we have an opportunity to get the kind of coverage that I think we need in case something goes wrong after the two year thousand dollar type of situation. Because somebody can --
>> well, normally on warranties, bumper to bumpers, you are right, they offer it only to you at the time that you make the purchase. However, because they are actually building in a sense these helicopters, we will have -- where he won't receive delivery until I believe February. February. So we have until February, I believe, to make a decision on that. As far as cost, did we ask for -- for bumper to bumper cost warranty?
>> we have gotten some preliminary information about -- about what they call power by the hour.
>> power by the what?
>> power by the hour. In other words for every hour that we operate the helicopter, we are spaying in, which is how the extended warranty works. We have the option, as it says in the backup to do anything from the entire air frame to components, to where we can only do engines or we can only do transmissions. So you really get to pick and choose what of those components we want to put on power by the hour. But we have until we accept the aircraft to actually start flying it to make a decision like that. So we thought that the best strategy was to do it outside of the purchase contract because it -- doing it as part of the contract would not result in any financial incentive to do it with the contract. And then we can sit down with -- with p.b.o. And some of our other folks, sit down in purchasing and look at those types of how do we maintain and control costs over the long haul and protect the county's interest. And come back to the court with some recommendations. Maybe it's only engines and transmissions which are a big high -- which are big high ticket items. Maybe it is a bumper to bumper warranty, but I think we need to look in depth in the cost and what the potential savings are, if there are any, and how do we control those costs long-term.
>> okay. The reason that I brought that, I wanted to make a comparison, I can remember and recall when we -- when we participate in work sessions, when you came before the Commissioners court, there was analogies that were made at the time as far as looking at what we have 1 through 5, opposed to what we are planning to do and getting out and purchasing the new ones. One of the things that we did look at was the cost of what it would take to bring these helicopter transmissions, you know, engines, repair, dada, da-da-da, on down the line, quite a substantial number as far as replacing doing the necessary maintenance upkeep of these existing helicopters. The old ones, what kind of warranty did we have on them currently, what kind of warranty did we have on them when we purchased them as opposed to what we are looking at now in the new situation where we looked at those big cost driving factors. And figures that were there to maintain them and -- those big ticket cost items that led us to do what we are doing today, discussing and going forward to purchase the new helicopters. So I’m trying to -- to come up with some kind of analogy to look at where we're going as far as purchasing these helicopters, but with the kind of warranties in place whereby it won't be such a -- such a massive cost to the county. I don't know if that's possible. I do know that there was some numbers that p.b.o. Brought to the Commissioners court that suggested substantial amount of money that we would have had to spend to -- to keep the current helicopters and also to spend an amount of money, of dollars, to ensure to bring them back up to where we need to get them to. I think it's kind of important. I don't know if those things would have been covered by warranty. That's the question that I’m trying to pose now. Those kind of repairs, transmissions, all of that kind of stuff, could that have been covered by warranty if the county had purchased warranties, if you did purchase warranties, when did they expire, stuff like that. Can somebody answer that question.
>> I will give it a try, Commissioner Davis. On the warranty itself, the two year warranty, 1,000 hour warranty that comes with the aircraft, that -- should they decide for the next few years until February of 2008, if there's something that goes wrong with the engine, that is not caused by something that we did to it personally, you know, we -- believe -- if we leave a wrench up there, it gets sucked through the engine, that's not going to be covered through the warranty. In two years any normal wear and tear or any manufacturer's defect will be covered under the first two years. Depending on what term you are using on that the per hour you, can taylor that to what you forecast you are going to need on the aircraft based on how many hours you fly per year. The support by the hour can be -- can be specific for the air crime itself, the air -- the air frame itself, the air frame and the engines or every components on the aircraft. Of course there's a price that you pay for this type of coverage. But each day that you fly the aircraft, it requires maintenance. So you are going to have a cost associated with operating the aircraft on the first day you start operating it. So what they are doing with the support by the hour, they level this cost. You pay a given amount of money to urocopter or turbo mecca for the [indiscernible] and the air frame. Based upon that, when inspections come due to the engines then you have already paid for it as you are going along flying the aircraft. You are not spaying for it as a -- at a set period of time. Five years from now we have an engine that needs to be overhauled. You are not paying the overhaul price at that one point because you have paid for it all along as you are flying.
>> so would you say --
>> is this something we are doing now that we didn't do before.
>> this is an opportunity that we have now that we didn't have before.
>> that's what I’m trying to get to. That. Right there. Go ahead, I’m sorry.
>> we did not purchase any extended warranty with the current ec 135's, which is why you are seeing some of the costs that you are seeing today.
>> exactly. That's where I’m trying to go, if it's power by the hour you are talking, maybe we need to look at that and analyze it. The figures that p.b.o. Brought to us, when we looked at purchasing these two new helicopters, opposed to repairing the other ones, in my opinion was something that was tied to what we didn't do in the past that maybe could have saved us some money. Maybe, I don't really know.
>> I think it's very important when you are talking about savings of money, what power by hour would do is flat 10 the cost of -- flatten the cost of it. You would be paying the same amount or more, you would be paying it over a longer period of time. What we were doing with the ec 135's would be a period of peaks and valleys, where we have routine maintenance, we have an expensive item brought to the court and approved during the budget process. Any warranty discussion needs to be very in depth, it does involve some decisions on the part of the court. Do they want flatter expenditures that might be slightly higher or do they want to have the whole peaks and valleys, with routine expenditures, then when you need to do an overhaul you budget for it in the budget process and pay for it. I can't really tell you right now whether or not we would have had savings if we had gone with power by the hour with the ec 135's, I think that's something that we should consider when looking at the overall warranty costs. What I can tell you from talking to the power by the hour people, if you have a limit of the helicopter, power by the hour would be a really good way of doing it. But if you have a routine helicopter that's an average usage, average maintenance, average wear and tear, based on what I saw in their presentation, you would probably be a little bit cheaper if you did the routine maintenance and then paid for the spikes. But you would have those pikes and you would have to account for those in the budget process.
>> when do we need to make a decision on the extended warranty opportunity.
>> we can make that decision up and to the point that we accept the aircraft and start to operate it. And even then we could -- you could buy back the extended warranty if you chose to, it becomes more expensive because you are having to pay back those hours that you have already used. So we have six months to investigate this fully and come back with a recommendation on a long-term strategy for controlling these costs.
>> no, the only consideration is we don't have any maintenance related costs in these budget figures. So to the degree that we have to expend money in fy '06 those decisions need to be budgeted for during the fy '06 budget process.
>> can we get a written side by side comparison next Tuesday?
>> we can get some preliminary cost numbers.
>> what it means, what it costs to have the extended warranty, what it means and what it costs and when not to have it. That will help us make that decision, all right?
>> yes.
>> now, what funding options do we have on the -- on the $380,000?
>> our recommendation from talking to the department is that it be added to the overall capitalist for fy '06. I can't tell you whether it would be through savings in fy '05 or coing it, just that we add it to the capital provided in fy '06.
>> and knowing that the -- the reality is that on the final price of what we are going to get for the -- for the sale of the old helicopters, that is still the unknown there. It's almost like the not to exceed is 380. It could come down from there and so we just need to have flexibility of how we are going to deal with it. But I think tied into that, there is also a strategy in terms of I will call it splitting it apart, just so that we can proceed ahead with the dollars that we've got, and then we can address the other issue during budget process and -- and fill in the gap there. Because the auditor looks at those kinds of things.
>> uh-huh.
>> if we work out our differences and delivery is timely, when would we need the 800,000 -- $380,000?
>> I believe that second --
>> we would need a reimbursement resolution, I believe.
>> but that's part of the third --
>> when would we need the $380,000, if everything goes according to plan?
>> the cash is -- would be March the 15th.
>> March 15th?
>> if they are planning on -- if I understand the planning is that the option that would require the budgeting of the additional 380,804 would begin in October. So the budget would need to be in place in October. Now whether it's coed and that requires a reimbursement resolution or there's an alternative funding source, that's when the funding, the budget would need to be in place.
>> my question really went to which would we have to mail the check to the vendor and the answer is March 1st.
>> March 15th.
>> March 15th. As we know, it would be part of the '06 budget process.
>> yes.
>> so the -- so the -- you mentioned co option. The other option I guess would be finding unexpended balances and capital budgets elsewhere.
>> I think that would be a possible option, although I think that co's are probably a more likely option.
>> you have chatted with ms. [indiscernible]
>> she's starting her work on capital. I would be very hesitant in trying to speak for her regarding the capital piece of it.
>> my question was have you chatted with her?
>> I have.
>> not can you speak for her [laughter] you have not talked with her.
>> I have chatted with her in some preliminaries, I think we haven't chatted on specific funding sources.
>> ms. Rio, looking for $380,000, put that on your list of moneys to look for.
>> judge?
>> yes, sir.
>> you mentioned nearlier deliberations trying to look at the barriers from a compare -- analysis of what we did last year and the -- with the other ec 135 compared to the ec 135 helicopters as far as the maintenance and also the I guess the -- the actual bumper to bumper, whatever type of warranty you are going to pursue. I guess my point is, is next week enough time to bring that type of analysis back, what you had looked up? Because if there is something that we can look for this year if it's going to take that for this year's budget, that need to be probably added into all of this stuff that we are doing here. I know that you have mentioned 300 some odd thousand dollars, but what about these other costs? I’m trying to put my arm around all of it.
>> [indiscernible] [multiple voices] what we were told a year ago.
>> yeah.
>> the 380 is a shortfall.
>> yeah.
>> the extended warranty was the issue that came up today and we will make the decision during the budget process, but actually we have more time than that. It's just while the iron is hot, we may as well go ahead and get it done. In a side by side written comparison, it would be a lot more beneficial I think than --
>> if we want to purchase the hoist, we also should be thinking about that. We still are very hopeful that we will get some of this money back on the trade-in and the barrier filters. But to be up front and full disclosure, they want the hoist, too, that's -- that's another $300,000.
>> what's a barrier filter.
>> >
>> it's a filter that's like an air filter on your car that protects your engine, the air, the engines uses air and fuel to burn. So to clean the air coming into the engine for the protection of the engine.
>> pay me now, pay me later type of deals.
>> yes, sir, absolutely [laughter]
>> [indiscernible] a year ago.
>> uh-huh.
>> you all [indiscernible]
>> they need it [multiple voices]
>> what on the one-pager is new? Meaning different than what we anticipated projection a year ago? We know that 380, 804 is a shortfall. And what else on this I guess expenditures, what other expenditures are new, unexpected, unanticipated, et cetera?
>> the biggest difference between it, it's in trade-in value of the helicopter.
>> we thought that we would get more.
>> we thought that we would get more. We feel like -- euroadopter feels like -- copter feels like we will get more, they are just hesitant to go over that 2 million mark today when they are not going to have the helicopter to sell to somebody until March. They really can't even market that helicopter today because they don't even have a contract. They don't even really for sure have two ec 135's to sell. So they are kind of going out and visiting with potential buyers on a -- we might have some helicopters to sell and how interested would you be. So we think that number will go up. Based on our conversations with them, I think they feel that that number will go up. Just at this point being nine months out they are a little hesitant to put that in the contract.
>> so did they give us a higher figure or did we give ourselves a higher one?
>> that figure that --
>> value.
>> the figure that we used in November was a figure that we got from them. On trade-in.
>> so helicopter salespersons are just like car sales persons.
>> sure. [laughter]
>> [indiscernible] [laughter]
>> with the hoist part of the helicopters, the assumption that we were going to have the helicopters with a hoist on there?
>> yes.
>> so there is an additional $300,000. The bottom line is that we are in an expensive business. We are in a business that we want to be in because of the benefits that we get out of this community and especially after having read the last week or so, you know, the stellar record that we have, what this community, you know, enjoys by having, you know, star flight. But it is -- it is an expensive business. And I think that Commissioner Sonleitner and I yesterday, when we were in the subcommittee meeting, talked about, you know, the power by the hour that we will talk about, you know, makes, I mean, seems to make sense because you can at least know what you have and plan for it and adjust your pricing and all of those kind of things predicated on that. But this is not an industry that you want to play with. I mean, this is worse than vegas, I mean, you getting in the helicopter business, you make a mistake, not have something like power by the hour or whatever. I think that that's what we are learning, I mean, is let's -- since we are going to be in the business, let's suck it up do what we know we need to do. The pricing, I can see where eurocopter would say we don't even have the machinery to take and to do. I’m surprised -- with this 2,800,000, they are probably crossing their fingers on that, they are willing to give us a guarantee that's the least that it will be, judge. But we need to recognize that we are not talking about 380. We are talking about 680. And then we're talking about additional dollars to that whenever it really comes to -- as you said, allen, we haven't really built in any sort of operational part for this. Now, we would hope that given that we have 2,000 or two years, a thousand hours a year, that the warranty or a thousand hours for two years.
>> a thousand hours.
>> [multiple voices]
>> what are we flying right now.
>> about 600 hours a year combined. So we would be able to see that whole calendar, 24 month of warrantynd our current flying conditions. That's two things that I would add is we looked at extending that to two years, 2,000 hours, it was going to cost us I think $125,000 per aircraft to do that, when we would never exceed that flight time. We dropped that as an effort to save some money. The original trade-in allowance that we got from america euro copter was 1.8 million. We negotiated with them to assume some of the risk with us. On the trade-in. They upped it to the 2,086,000. The numbers have been 2.2, 2.3, maybe up to 2.4. When it's all said and done, as Commissioner Sonleitner said, we could be very close to our target, it's just that we have some variable intentions that we don't have good accurate information on today. And won't have until, you know, we get a little further down the path.
>> I think it's important to note that regarding the hoist that, in my talking with the department, the hoist is an item that can be added any time in the future. The hoist is an item that isn't on the existing helicopters, and depending on the price savings, that we got from the other items, the department was originally stating to us that it would be an item that they might not bring to the court in order to keep the cost containment down for the overall price of the helicopter. I think if they got some other savings options they talked about in the other considerations, they would propose they go towards the hoist, but the -- in a matter of prioritizing decision making, like the real decisions of the -- that the court needs to make is relating to 380, 804 right now rather than 680,804.
>> when is delivery of the first helicopter.
>> February 15th.
>> [multiple voices]
>> second?
>> it's 30 days following.
>> March 15tmfñno carrierringcot why.
>> [technical problems, please stand by] if you go beyond next Tuesday in terms of approving the contract, you would do it with one less person short at the table. That person happens to be fairly key, because casey feels like you might have questions for him, he is not expecting to be around.
>> we don't want to delay it too long because we don't want to affect our delivery dates.
>> yeah.
>> that's the problem.
>> we expect this court to do due diligence, though, on the contract.
>> yes.
>> that will take a few days.
>> and I don't know that -- I’m not suggesting that we necessarily delay it, but I’m suggesting that due diligence does require that we have sufficient time with it. Now, if there are -- if they are changing it, I don't know how they expect us to approve it.
>> well, they are getting smaller and smaller these changes.
>> barbara could send you the contract today as it is. Then any changes could be highlighted.
>> if you would like that, we can do that.
>> well, my advice to barbara is that we will be in court all day today unless this court moves with greater speed than we have been moving on Tuesday. [laughter]
>> you will have it for tonight.
>> we can get it tomorrow, that would be good.
>> okay.
>> did we get the estimated trade-in value in writing?
>> yes, that's part of the contract.
>> it's part of the contract terms.
>> do you mean the one that you were given a year ago or the one that --
>> the estimate that we acted on a year ago.
>> I don't know whether you got it in writing, there is one thing that you need to kind of take into account in terms of the fact that that differs from what is the contract. That is when that estimate was requested, there was an an operation this contract had been enter into somewhat earlier than we had gotten it negotiated and approved. Just like with a car, you keep it and use it for an extra year, they are going to give you less, that's part of what has happened with our estimated value.
>> send this court a copy of that written estimate.
>> okay.
>> we can do that.
>> anything else today. Judge, I want to recognize in the time that I worked with the negotiation team, I think they worked really hard. They worked with eurocopter to get to a fair and reasonable price, cyd, bonnie, everybody, put a lot of energy in getting to where we are on this. I think that they have done a really good job, getting us closer.
>> thanks to everybody.
>> thank you. I think for the public safety good, it's very important to get the type of safety addressed, concerned, as far as the stated warranty, a whole bunch of other stuff that I think we need in this whole aspect. So -- so I’m really looking to seeing what we can get to the extended warranty protection of such a critical vehicle for the safety and well-being of Travis County citizens. Thank you.
>> yeah, the helicopter purchase is a lot more fun than asphalt, so this is our -- a fun purchase.
>> can we get the comparison by noon.
>> we need to have the --
>> the -- the extended warranty, by Thursday? I think we should.
>> we will get started on it today.
>> one copy in my office. I will make sure the court gets copies and backup.
>> okay. We will get it, both the air frames and the engine.
>> we will have it back on next week. Thank you all very much.
>> there you go.
>> okay.
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Last Modified:
Wednesday, July 27, 2005 7:49 AM