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HomeMy WebLinkAboutRATP Dev SLO Cost Narrative - READY TO PRODUCECity of San Luis Obispo, CA Transit-01 | Transit Operation and Maintenance Services i Cost Narrative RATP Dev USA, Inc. (RATP Dev) takes a comprehensive approach to developing our cost models in order to arrive at the most advantageous results for our customer organizations. This effort begins with our leading experience in operating contracts of similar size and scope to that of the City of San Luis Obispo (SLO). We have conducted a detailed review of the scope of services outlined in your RFP and conducted in-person observations and operational assessments in the SLO area to inform the proposal we have submitted for your consideration. Transparency is a key part of how we at RATP Dev do business. So, in the interests of transparency, we have developed the following narrative to describe our project and pricing approach and assumptions to assist in your review of our pricing and our proposal. We believe partnership and collaboration often start well before signing on the dotted line – in that spirit, RATP Dev would be more than happy to collaboratively discuss any or all of the items noted here or elsewhere in our proposal during contract negotiations. General Overview RATP Dev’s proposal to the City reflects a strategic approach to managing risks and keeping proper cost containment measures in place to arrive at sustainable contract rates that will allow us to manage and operate the City's service safely, efficiently, and to the level the area’s passengers and public expect and deserve. Unlike many of our competitors who will baseline the expense categories and then attempt to modify the contract post-transition, RATP Dev’s pricing assumptions ensure a smooth transition without any service disruption. Please note that as we completed the pricing forms, we have noticed that certain items appear to calculate differently from what we understand the City's intent to be (as an example, Start-Up and Transition Costs total into the Monthly Fee, but we understand and have assumed per the Q&A that such costs will be a separate reimbursable). To honor the integrity of the City's procurement, we have not modified these items but are leaving them "as they are" to enable the City to undertake an apples-to -apples comparison of the submitted costs. Service Volumes RATP Dev has programmed our costs based on the revenue hours as provided in the procurement materials for the two scenarios the City has requested. These figures were used to determine overall staffing counts and pay hours. We have assumed these service levels as the baselines for our proposal. As part of our review, we noted that the quantity of hours represented in the Year 4 for the Alternate scenario was different than the quantity noted in the RFP; we have adjusted the hours in the form in the interests of accuracy. We are very supporting of the City's desire to increase service to meet the demand and expectations of the passengers and stakeholders in the SLO area, including the service volumes noted in the City's short-range transit plan (SRTP). Should we earn the City's business, we wish to discuss and seek clarity during contract negotiations on how and when the City envisions the service change occurring (ramp -up vs. "flip the switch," timing, other contractual factors such as how and when rate changes would be applied, etc.) since it is a City of San Luis Obispo, CA Transit-01 | Transit Operation and Maintenance Services ii material addition to the current baseline service level. Please note that we are flexible in these areas, and we stand ready to assist the City in planning for this change. W e have a long history of accommodating significant service changes, and have found open, honest communication and realistic, achievable objectives go a long way toward ensuring that service changes are undertaken with minimal disruption, and with the required and warranted attention to safety, employee care, and passenger care. In short, we are here to help. In either scenario, we have noted the City's 20% rate renegotiation threshold, and we have assumed such change would trigger an equitable rate adjustment; we appreciate the City's adherence to a fixed-and- variable billing structure, which we have found to be mutually beneficial in many of our partnerships. Finally, you may note small variances in certain costs between the Base and Alternate costs proposals; this reflective of how RATP Dev develops and applies certain general and administrative costs that are driven by contract size; since the Alternate scenario features a higher cost structure driven by a higher service volume assumption, these costs flex up accordingly. Wage Assumptions RATP Dev has determined our labor costs based on the seniority levels noted in the procurement materials. We understand the current labor contract with the Teamsters Local 986 to be in place through the end of 2029; our wage assumptions are based on the economics noted in the labor contract; thereafter, we have assumed a wage increase of 5.0% to finish out the operating contract's base term. We support the approach taken in the new labor contract, especially for the benefit of the employees themselves; further, the additional dollars for the higher wages noted would stay right in the SLO area, benefitting not only the employees themselves, but the SLO economy as well. In order to hit the ground running, we are happy to share that we have reached out to the Teamsters to begin laying the groundwork for an open, honest, constructive relationship; should RATP Dev be fortunate enough to win the City's business, we will work to very quickly establish a strong local partnership with the Teamsters, benefitting the employees, the City's passengers, and the general public. Benefits RATP Dev has assembled a full array of health and medical benefits programs for the employee workforce. This includes medical, dental, vision, and life/AD&D. Our pricing reflects a 61% take rate on the health benefits program and an 8% annual inflation factor. We assume that should the actual participation rate or annual inflation factors be higher, we will work collaboratively with the City for an equitable adjustment. With respect to paid time off (“PTO”), we assume employee seniority will be honored and maintained, and that any PTO balances, including any time earned prior to the start of the new operating contract and to be awarded thereafter will be paid out by the City's current partner and that all employees’ balances will reset on the start date of the new contract, as new PTO accruals with RATP Dev as their new employer. RATP Dev does not assume any liabilities of any kind for any pension programs that may exist today or in the future. City of San Luis Obispo, CA Transit-01 | Transit Operation and Maintenance Services iii Employee Recruitment & Training Based on our review of the current operation, RATP Dev understands the difficulty in maintaining adequate bus operators and mechanics/technicians given the local labor pool. We have included in our pricing the requisite bus operator training for classroom and Behind The Wheel (BTW). Staffing & Seniority Assumptions Since most of the contract expense is related to labor, we wanted to call out specifically our methodology in developing a sustainable staffing plan. Initially, RATP Dev takes the baseline data points given through the RFP for total service hours included within the scope of service. RATP Dev then takes a thorough review of the labor contract to apply the specific economic conditions and work rule obligations for the employer. These additional non-productive hours, such as vacation, sick-leave, training, etc. are then added to the payroll hours to come up with a total service hour component that arrives at a total staffing count. Our experience has led us to develop all our pricing proposals with this methodology due to the accuracy it achieves in being able to predict accurate expenses and mitigate against the potential for contract modifications. Our pricing is highly sensitive to seniority, as seniority drives PTO levels and therefore, headcount needs. As a professional operator who cares about its employees and the communities served, it is our practice never to downgrade or worsen an employees’ rank or pay grade upon transition to our company; our bid therefore assumes that, should the actual seniority composition of the workforce at SLO vary materially from what we have modeled based on the seniority information provided to bidders, the City and RATP Dev will negotiate an equitable adjustment so all employees’ seniority and pay can be honored. Insurance Assumptions RATP Dev has programmed our insurance costs to align with the limits outlined in the RFP as supplied by the City. Our annual inflationary indexation for insurance and risk management expenses are modeled with a 5% inflationary factor, based on our experience. Our bid assumes that in the event market changes lead to higher increases, RATP Dev and the City would negotiate an equitable rate increase. Corporate Support & Transition Manager RATP Dev has included within our offer a robust level of corporate support to assist the local management team with a dynamic presence of senior leadership. Our Director of Operations with oversight of this contract location will be Mr. Wess Cruz, who will act as Transition Manager in the months before and after the July 1 transition date, and will be directly supported by our Senior Vice President for Operations, Mr. Steve Sherrer. The level of understanding brought by Wess and Steve will be evidenced through our transition services and will continue throughout the term of the agreement to maintain a healthy level of responsiveness to the City's leadership group as well as SLO Transit's customers in the service area. Our leadership team and corporate oversight group have been through transitions of every kind and have successfully navigated transition processes, and we look forward to sharing our transition expertise with the City to provide a seamless changeover for the new contract term. City of San Luis Obispo, CA Transit-01 | Transit Operation and Maintenance Services iv Maintenance Oversight & Assumptions Our proactive, technology-driven, and cost-effective practices ensure we catch and repair issues before they become problems. Through accessible corporate support, you’ll receive additional expertise from RATP Dev’s Director of Maintenance, Mr. David Ramirez. RATP Dev is proud to offer our “best in class” maintenance oversight and quality control practices that have enabled our client locations to exceed standard life cycle benchmarks. Our dedication to ongoing training and the presence and involvement of David as a national- level expert will allow efficiencies and overall quality of the maintenance program to be achieved. Our global presence and experience operating and protecting vehicles of all kinds will also be an invaluable part of how you will be able to distinguish our maintenance expertise, developed from operating and maintaining some of the most high-profile fleets in the country. RATP Dev’s transition protocols plan for a thorough fleet inspection to identify any deferred maintenance so as to ensure your fleet is in top condition, particularly with respect to safety, once service is transitioned from your current partner. While we understand certain non-labor maintenance costs (parts, consumables, lubricants, major components, etc.) to be monthly pass-through expenses based on an estimate rather than firm, fixed pricing. RATP Dev will approach the Maintenance function for SLO with the same care, attention to detail, and commitment to safety that we bring to bear at all times in all of our partnerships. As a national transit service provider with experience with various vehicle types, RATP Dev is familiar with fleets of all kinds. Our proposal assumes that the City's fleet replacement plan and refurbishment plan will ensure the fleet is comprised of a sufficient quantity of vehicles to meet the service levels described in the procurement materials for both service scenarios. In the event the size, age, or composition of the provided fleet is insufficient, and/or the availability of requisite parts and/or components is insufficient due to factors outside our control, we assume that RATP Dev would be, as is common in the industry, held harmless from related liquidated damages and missed service billing. Startup Costs As per the Q&A shared to prospective bidders, we have assumed startup costs will be separate from the contract billing rates and will be paid back at the start of the contract as a separately-invoiced item. Liquidated Damages In order to avoid defensive pricing with respect to liquidated damages and allow time to work as partners to calibrate the system, our proposal assumes there will be a moratorium on liquidated damages for the first year of the contract and that LDs would be capped at 0.5% of annual project revenue thereafter. Such provisions are becoming increasingly common in the industry and help to avoid defensive pricing practices by bidders. City of San Luis Obispo, CA Transit-01 | Transit Operation and Maintenance Services v Inflation & Tariffs Our inflation assumptions are generally modeled in the range of 2.5% - 8.0%, depending on the cost category – wages, benefits, and insurance (among other categories) generally see different inflation factors. RATP Dev in modeling the City's operation, has specified different factors for each category in an effort to arrive at the lowest responsible pricing for your consideration. COVID and its after-effects have taught all of us that sometimes unforeseeable inflation can take effect and dramatically change the landscape in labor, insurance, etc. In the spirit of partnership with the City, we assume that in the event another such unforeseeable inflation spike occurs, or that unforeseeable tariffs, import duties, etc. impact supply chains affecting our ability to perform the work, the City and RATP Dev would work collaboratively toward revised contract rates. Please note as well that, should such disruptions occur, RATP Dev’s sourcing leadership would be very happy to work collaboratively to help address and mitigate any such disruption. Investments in Safety RATP Dev will implement our Origami risk management, drive2zero™ program, and related software in order to advance the overall safety and training aspects of the operation. The objective of the RATP Dev Safety Management System (SMS) is to proactively manage risk through the establishment of a just culture and process to identify hazards and mitigate them before they become incidents and accidents. SMS implementation will help in all areas of transportation by allowing you to benchmark and enhance SMS for your operation. RATP Dev's SMS will also include the use of Motive, an inertia-activated camera and monitoring system.