Meeting Date: April 18, 2007

Subject: Procurement Authorization - Supply Of Zf Hurth (Add-Ons)

Recommendation

It is recommended that the Commission authorize for inventory, additional authority in the amount of €224,000 (EURO) or $343,000 (CAD) to ZF Hurth for the additional supply of ZF Friedrichshafen AG parts for the period ending October 27, 2008 resulting in revised upset limit of €800,000 (EURO) or $1,188,000 (CAD).

Funding

Sufficient funds are available in the 2007 TTC Operating Budget and will be included in future Operating Budgets as required.  These inventory materials will be charged to the appropriate budget at the time of issuance from Stores.

Background

At its meeting of October 19, 2005, the Commission approved the awarding of a supply contract for the supply of various parts for €576,000 (EURO), $845,000 (CAD) for a three year inventory supply contract on the basis of single source, as they are the only approved supplier of the subject parts.

Subsequent to that award, staff identified another 5 part types as candidates to be added to this contract.  The subject parts are used to maintain the Commission’s Subway and Streetcar vehicles.  Several examples include bushings, pins, bearings used on traction motors and gearboxes.

Discussion

ZF Friedrichshafen AG submitted pricing on 5 pre-approved part types and did not state any exceptions or qualifications for the remaining term of the contract (19 months).  One part type was removed from the evaluation by staff due to a discrepancy with the part number.  This part may subsequently be part of a future request for proposal.

Staff contacted ZF Friedrichshafen AG to negotiate further price reductions, however, ZF Friedrichshafen AG advised they had offered the Commission their best pricing and could not reduce pricing any further.

ZF Friedrichshafen AG’s proposed pricing represented an overall decrease in pricing of 21% in year 2 of the contract compared to the last purchase price, and increase of 2.5% in year 3 of the contract compared to year 2 pricing.  ZF Friedrichshafen AG’s bid was quoted in Euro Funds and was converted to Canadian Funds at the Bank of Canada exchange rate of 1.5315 for comparison purposes only.

The contract includes approximately 15% contingency for variance between forecasted and actual usage and new parts yet to be identified which may be added to the contract during the contract term and 45% to cover freight cost.

ZF Friedrichshafen AG is recommended for the award of the 4 part types in the upset limit amount of €224,000 (EURO) or $343,000 (CAD).

Justification

The amendment to this inventory supply contract will result in having sufficient inventory for Operations’ rail maintenance needs to the end of the contract in October 2008.

April 3, 2007
9-121-63