Staff Report #2
October 27, 2022
To All Commissioners
Re: 2023 Replacement Bus Order
That the Commission APPROVE the early purchase of the 2023 replacement bus requirements (14 – 40’ buses and one – 60’ foot articulated buses) from New Flyer Industries Canada, ULC at a total cost of $12,426,800, exclusive of applicable taxes.
At the November 27, 2019 meeting, the Commission approved a contract with New Flyer Industries Canada, ULC for the supply of both 40’ and 60’ replacement and expansion buses purchased in the years 2020 through 2022. The contract includes an annual escalation clause that is used to determine the pricing for each type of bus. The confirmed pricing for the 40’ buses is $801,028.05 and the pricing for the 60’ buses is $1,212,807.58. This pricing represents an approximate 21% increase over the last bus order in 2021. The increase in cost over the previous year relates to the standard price escalation in the contract which takes into account increases in materials costs as well as the value of the Canadian dollar. The significant increase in pricing was not unexpected given global trends in pricing for raw materials coupled with ongoing supply chain issues.
The tables below set out the variance from budget to projected actual for the 2023 Bus Replacement Program based on the actual 2022 unit pricing. In addition to the adjustment relating to the actual vs budgeted price, the makeup of the replacement bus order has also been amended to reduce the 40’ bus order to 14 and the 60’ bus order to one. This adjustment has been made in order to avoid a request for increased capital funding from the City for 2023, noting the additional expenditure set out in the table will be covered by Provincial Gas Tax funding. This adjustment is not anticipated to have a significant impact on the average age of the fleet assuming it is one time only.
As indicated in the table, the variance relating to both unit price and adjustment to the makeup of the order is being reflected with a slight increase in Provincial Gas Tax funding, and as such, no modifications in City of London funding is required. The budget numbers in the table below are inclusive of ancillary and preparation costs associated with preparing the buses for service, and as such, are higher than the costs in the report recommendation, which covers the bus purchase only.
2023 Bus Replacement Program
|Description||Units||2023 Budget Amount||Units||Amended Cost||Variance|
|Bus Replacement (40’)||15||$ 9,883,500||14||$ 11,214,000||$ 1,330,500|
|Bus Replacement (60’)||2||2,000,000||1||1,212,800||(787,200)|
|17||$ 12,361,200||15||$ 12,848,300||$ 487,100|
|Provincial Gas Tax||$ 3,646,500||$ 4,133,600||$ 487,100|
|City of London||7,403,000||7,403,000|
|Federal Gas Tax – C/L||1,311,700||1,311,700|
|Total||$ 12,361,200||$ 12,848,300||$ 487,100|
Over the past number of years, the Commission has approved ordering buses late in the year prior to the program notwithstanding the capital budget program has not been approved by Municipal Council at that time. As set out in the report recommendation, the same process is being recommended this year, which will ensure buses arrive within the year they are required. New Flyer has advised that an order confirmation by October 28, 2022 would see the 2023 replacement buses arriving late in the third quarter of 2023.
Given the bus replacement program is a long-standing program that has been included in the City of London capital budget with allocated funding for many years, it is not anticipated this program will be the subject of debate during budget deliberations. Should the confirmation of the bus order be pushed to be subsequent to the final approval of the budget programs by Municipal Council, there is no chance that buses would be delivered in 2023.
Mike Gregor, Director of Finance
Craig Morneau, Director of Fleet & Facilities
Concurred in by:
Kelly S. Paleczny, General Manager