Travis County Commissioners Court
June 17, 2008
Item 14
14. A consider and take appropriate action on order exempting the purchase of one helicopter from american eurocopter, llc from the competitive procurement process pursuant to section 262.024(a)(2) of the county purchasing act; and b. Consider and take appropriate action on contract award for the purchase of one helicopter from american eurocopter, llc during fiscal year 2010 that is contingent upon funding for the purchase in either the fiscal year 2010 budget or a special budget for debt funding approved before October 31, 2010. (starflight/emergency services) good morning.
>> good morning, thank you very much. I'm danny hobby, the executive manager of emergency services and with me today are folks from the star flight program. To my left, to my right is casey ping the program manager. To my right is -- is willy
>> [indiscernible] who is the aviation director. I also have some other folks that are part of this -- of this agenda item and that's bonnie floyd with purchasing as well as some -- I see cyd just walked in as well as other financial folks. What this particular item is about, is in follow-up to the work session that was held several weeks ago, in regards to a -- to a discussion that we had, that would put in place elements, certain elements that would allow us the opportunity if we so desire, especially if the court desires, to move forward in enhancing the business approach for the star flight program. What that would mean is that we would look in the future at the potential of being able to purchase an additional aircraft. In order to meet that business need. In order to do that, we had to look at the time table of how you go about getting an aircraft. And right away we find out that it takes an extreme amount of time to get one. In order for it to be delivered. In order for it to be in operation. And so in order to meet that, for instance, if we would order an aircraft today, which we would not, but if we would order an aircraft today, then we would not be able to receive that aircraft until 2010. January or February or March of 2010. So -- so recognizing that fact, then it's important for us to put things in place, elements in place that will enable us if the decision is to look at purchasing a third aircraft, if, then we want to of course be ready to do so. Also, what you see is another welcome that's really a, in this particular item, if you want to look at what you need to do in regards to the purchase we are asking the court to do an exemption based upon the fact that we already have two aircraft -- that are the same? That we would like to move forwarding with a like aircraft to go along again with the business plan. The business plan if you remember involved the two aircraft, had to do with many elements, one of those elements was that it was able to have the right equipment and specialities on the aircraft in order to accommodate those particular transports that -- that require that special equipment. As well as we -- we were taking care of other needs in the county in regards to fire. For instance, having the -- having the right size of bucket to be able to handle fire situations. We also added things to the aircraft that we have found to be -- to be the best safety measure and that is night goggles, night vision goggles. In fact I'm quite proud that the court has labeled us, I think willie you will let the court know today that we have the finest aircraft that we can possibly have for the missions that we have. What we want to try to do today is again put those elements in place and I know that you have a long court today, let me be quick about it. The first is to do the -- the exemption of purchase, we work with purchasing, bonnie is here if you would like to ask any questions in regards to that. I think the second is to go forward and put in place a purchasing agreement that could be utilized if -- if it is decided that down the road we want to purchase a third aircraft. So if you looked at the document, you will see that in particular in 2.1 of that purchasing agreement, it lays out very specific guidelines that will protect us, you the court, and the county, in regards to -- to obligation of a third aircraft. What this particular personal agreement will do for us, however, is it will keep our place in line in order to be able to meet that 2010 if we were to go and decide that we want to purchase a third aircraft. Also, very, very important, it would hold the pricing because we have already been notified that there may be a potential increase in pricing of the aircraft. So this would protect that for us. Originally, I had mentioned that we had a letter of intent when I was here with the work session. But now after we have heard from the -- from the particular vendor, since that work session, it's felt by staff as well as with everybody concerned that we need to have a little bit more than a letter of intent. We need to have something in place that we can utilize if we decide to move forward with the business plan. I will actually be back in a couple of weeks to -- to come forward with some other recommendations that are part of the business plan, but today it is important because of the timing issues that we go ahead and try to put in place the exemption as well as this -- this purchasing agreement.
>> barbara, I think that we have taken these two actions before, correct? The exemption order and we did the -- we did a -- sort of a -- of a formal agreement with them about the other helicopter.
>> we have not taken an exemption order for this type of purchase before. Although the law authorizes you to do that. When we purchased the two helicopters before, we used an r.f.p. Process and we negotiated very vigorously, we had two proposers, so there was much city of san antonio on this part of this vendor to negotiate with us for sweeten the deal as we went along. In comparing the contract that you being presented with today, I made the changes to it that were necessary because we are purchasing one not two, and we are not using the same kind of financing this time as we used last time. That last time they wanted money in advance, this time they are allowing us to pay the full amount. 30 days after the -- after the machine is delivered and accepted by us. So those kind of provisions, of course, were taken out. But all of the protections that we were able to negotiate in that competitive situation are included just as they were before in the previous agreement. So you have kind of got the benefits of a negotiation plus the benefits of -- of -- of timing in relation to being able to have a helicopter at the time that you would want it if you chose to budget for it. In a year from now or 15 months.
>> okay.
>> I guess there's some benefit in having a third helicopter that's like the other two. One is you have the same mechanic working on them, the parts, also.
>> the biggest advantage is the fact that you don't have to have two different kinds of parts being inventoried for your maintenance work.
>> also, judge, in addition to that, you have one like aircraft, the training is the same for all of the pilots. Each year -- we won't be required to take an additional ride, we have to take a check ride that involves time and money and fuel to negotiate those check rides. With one like aircraft, it's the same operations because all pilots are consistently flying the same aircraft all of the time. They have the same capability. You don't have reduced capability from one to the other. One is that of course when you -- when you purchase any mechanical type of -- automobiles, anything else, any vehicles, trucks, helicopters, there is -- the appreciation of course that goes into -- that goes into effect. The question I'm posing now is -- is what will be -- the expected -- the life expectancy of -- of the two helicopters that we have on board right now. They were out and of course I know that -- you get parts, all of the other things, in a while you want to be looking at the helicopter like we did in the past. We had some before that we actually sold. Someone purchased. Either we trade in. Whatever the situation was at that time. I can't recall, I think we traded it in.
>> the last one we did.
>> the last time we did.
>> so I'm looking at that because I'm looking at debt service, I'm looking at the balance that's owed on the helicopter that we looked at, that we are dealing with right now. Of course when the -- according to p.b.o. It appears that the -- that the debt service on this on the balance will -- will be -- will be paid off in 2013 according to what p.b.o. Is saying. So my concern at that time what would be the value of the two existing helicopters that we have now. Even if we get another one that -- that will be matching -- will be -- there will be triplets, they will all be the same hopefully. And my concern is that and what would be the life expectancy. Otherwise I guess we get to the three, sooner or later we are probably going to start looking at trading potential for the other two that are probably the same age. So I'm concerned about that. And especially with the debt service, all of these other kind of things that we have to look at. And making sure that -- that we have something that's worth the money when it comes to that time. Can somebody talk to me about that.
>> yes, judge, Commissioner Davis, I will address the issue of that. The value of the helicopters are based upon the maintenance cycles that they go through. For example, the helicopters have a retirement life on their engines and also on the transmissions, mean gear boxes.
>> what kind of life.
>> has a life expectancy in hours or years on their main components. The main components are the two engines, transmission and the accessory gear box.
>> okay.
>> all right.
>> as they start to cycle through their lives, the value go down, but when you replace them with new engines or rebuilt engines or transmission, the value of the aircraft will go back up. You follow what I'm saying.
>> yeah.
>> now you have a new aircraft, a new component. The air frames of the aircraft will not normally wear out. We have aircraft flying today that was built in the 1950s. Still good --
>> okay. All right.
>> we were looking initially. I think we discussed, looking at a period of 12 years life expectancy on the aircraft. Just knew technology, if it stays the same, technology stays the same, small upgrades, we are not having it that is going to change our mission to require a larger air frame, it can be extended past the 12 year points very easily.
>> okay. Okay.
>> I guess -- I guess in the future, looking at -- looking at new technology and all of these other kind of things, there will be hopefully -- that will be necessary in the future requests. I remember when you asked, the things that you provided, for example you didn't have night vision capability. That was a big deal.
>> it is.
>> a real big deal.
>> then the capacity of water. To -- to deal with your firen/7rko was another bige= deal. I just wants to make sure what we are doing, I will try to cover as many bases as I can up front, so we want have something that's unexpected on the back end later, that's why I'm laying all of this out. Debt service, balance, that's why I brought up the -- the particular deal that deals with the maintenance and upkeep because I think those are very critical, transmission, replacing engines, all of this stuff. That's big -- that's big time stuff. So -- so I'm just wanting to make sure that -- that we are addressing that. Up front. Now. --
>> purchase and trade in, we got about two and a half million trade in on each helicopter. As well as depends on the condition of the aircraft and hours used, it's variable -- that was a pretty good return. It should be noted that the reason we traded them in was that -- that they were just before they needed very expensive maintenance in terms of -- of engine and -- and -- .
>> the expenditures on the overhauls, the value would increase dramatically.
>> judge, I move approval of a and b, contingent on a. With -- with euro copter. Obviously being in agreement --
>> they have already signed it.
>> I didn't have a signed.
>> I'm sorry, we got it yesterday
>> [multiple voices]
>> I haven't seen it, either.
>> two questions. One is summarize for me again the advantages of a third helicopter.
>> let me just go through the list if I can then. The advantages of a third helicopter would be that -- that we would be able to -- to meet demand. That is going to be required when -- when a third helicopter arrives. Right now as I mentioned in the work session, we are -- we are showing that our business is increasing. Increasing in the number of regular calls, in the number of special calls that we have. -- to go with the financial forecast, basically shows the number of transports increasing. It basically will show, you will see me coming in several weeks in regards to an increase in the fee, the transport launch fee which needs to be done now, doesn't have to wait for the business plan. And -- and the reason why that is -- because -- because we're seeing that -- that the costs of things are increasing, for instance, fuel. You saw me here several weeks ago in regards to -- to -- to a request for additional funding for fuel. And then of course the third element is the collectable itself and that is that we must be able to maintain our current, which are considered to be pretty high, collectable rate of what you -- of what you bill. But the benefit of a third to allow our subsidy to stay constant, in fact it will decrease, what that will do, is that will keep -- that will keep the transport fee at a reasonable cost for Travis County citizens. I think that we want to strive to do that. As -- as the individual citizen is experiencing so many increases in their life right now, I think that it's very important that we manage and that we come up with -- with a -- appropriate financial analysis and costs so that we keep planes at a reasonable level for our citizens and so with a third aircraft, and going along again, with the -- with what we consider to be the growth of -- of our program, then this accommodates that to where we can actually meet the number of missions that are going to be required, the number of transports, of -- and at the same time will be collecting -- collecting the revenue back into the program to where we can then keep the subsidy at a reasonable rate as well as keep the actual transport fee at a reasonable rate for Travis County citizens.
>> [one moment please for change in captioners] from now to f.y. 13? 13.
>> if would stay as we are? What you will see is a substantial increase. I've got the numbers if you would like to see them. What you see with a third aircraft you see the subsidy going down with no additional aircraft.
>> it was a leading question, so --
>> see a tremendous increase.
>> the continuing what we're doing subsidy until 2013 is $5,166,000? Is that right?
>> right.
>> and if we add an aircraft starting in 2011, which would be about when we would be able to come online with is 2,897,000? That's a -- you know, roughly -- a little over a $2 million decrease in our subsidy with an increase of service. And am I correct that the debt service and depreciation line which figures into this business model includes the cost of purchase and to bring the helicopter online?
>> that is correct.
>> does this also include the cost of maintenance and any trade-in requirements of the existing helicopters?
>> it would not include trade-in. It would not include trade-in.
>> maintenance and up keep.
>> that's the point I was trying to get across, especially a trade-in situation. That's why I had willie to bring up those points as far as what he said, and it's actually once you do the necessary maintenance and once you deal with the engines and all these other kind of things, transmissions, you basically have a new helicopter again.
>> so it's increased service, decreased subsidy by 2013.
>> that's correct. And I'll be back in two weeks to let you know that we want to initiate during 2009 a pilot program to make sure that the financial model does hold up before we would ever ask the court to go forward and purchase a third aircraft.
>> and if for some reason it doesn't hold up, what are our options under this contract that we're voting today?
>> well, under this contract we simply would not exercise the contract.
>> we don't have to buy it.
>> motion includes a and b. All in favor? That passes by unanimous vote. Thank you all very much. If I could get a copy of that written policy.
>> yes, sir.
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Last Modified:
Tuesday, June 17, 2008 2:31 PM