10 Mistakes When Purchasing Apparatus and How to Avoid Them (Part 3 of 3)

Today’s fire service is likely one of the best educated in the history of the nation and has relatively easy access to vast amounts of information about apparatus, suppliers, components and regulations. Yet whether the department is a rural volunteer, combination county or large municipal, the apparatus acquisition process is likely one that challenges the staff because of its complexity
 
KME’s core sales management and marketing team has well over 200 years of fire service experience in fire apparatus design, sales, service and support. In addition, many team members have held or continue to hold leadership positions within fire departments from coast to coast. Over the last 29 years, KME has worked with federal, municipal and industrial departments and delivered over 10,000 vehicles. Through the years, we’ve observed common challenges and offer here some advice to consider when making an apparatus purchase. These are not unique to a single supplier or type of fire customer; they are commonly seen across the board. It is our hope that through this information, we can contribute to a more informed and better equipped fire service that is able to obtain the safest apparatus available.
 
Part 1 of 3’s Blog covered:
  • #1 Research Before the Acquisition Process Begins
  • #2 Understanding Purchase Options
  • #3 Translating Performance Expectations into Specifications
 Part 2 of 3’s Blog covered:
  • #4 Estimating the Final Required GVWR
  • #5 New Technologies
  • #6 Specifications that Kill (competition)
 
Now Part 3 of 3 includes:
 
#7 Evaluating Today’s Cost vs. Future Cost
 
Mistake: Assuming that not making a needed apparatus purchase is “saving money” or has no cost associated with the decision.
 
Recommendation: In an attempt to be conservative with budgets, many fire and EMS departments delay buying new trucks for as long as possible. Few recognize that there is a cost of waiting to consider as well. Two relevant points include:
1) Maintenance costs of older apparatus vs. new apparatus costs
2) Finance costs versus future cost increases
 
Of course the first point requires accurate data collection as to the maintenance costs, repair costs and downtime associated with the aged apparatus to justify a new purchase. Other considerations however should include increased liability due to potential accidents as well as increased firefighter injuries. An excellent case study by Henrico County fire department has some other creative suggestions. The overview to the study can be found here: http://firechief.com/maintenance-amp-repair/formula-helps-determine-when-repair-replace-fire-apparatus?page=1
 
The second point takes into account the fact that the inflation of capital equipment normally outpaces the tax-exempt interest rates found in fire truck and ambulance lease financing. In short, you can’t outpace inflation by waiting.
 
To understand this, consider that the purchase price of new trucks has been increasing due to higher material costs and changes in standards. It has been running higher over the last 10 years, but let’s assume we estimate this increase to average 4% per year. The inflation identified above would cause a $400,000 truck to increase to $486,661 in five years – an $86,661 increase. At the same time, if you finance that $400,000 truck today, you will pay $36,709 in interest over the same 5 year period. So there is a cost to financing, and a cost to waiting. It is easy to see why considering both costs makes sense. $36,709 in interest is a good thing if it avoids the larger cost of inflation $86,661.
 
#8 Evaluating Operating Costs
 
Mistake: Using initial purchase price as the only cost consideration when making an apparatus purchase.
 
Recommendation: Since fire apparatus is a significant investment with life cycles that generally exceed 10-15 years, it’s important to evaluate both initial purchase cost as well as long term operating costs of apparatus. In addition, fleets need to establish replacement plans for apparatus purchases in part based upon understanding when maintenance and service costs dictate apparatus replacement.
While there are no industry-wide published statistics of operating cost by brand, several large fleets have done such analysis by truck type and even brand within their own fleet. Factors that seem to affect operating costs and should be considered include:
 
Delays and substantially increased costs for proprietary parts
Apparatus constructed with standard automotive components that are available from dozens of sources offer the benefit of quick availability and competitive pricing. When suspensions, pumps or other major components are only available from a single source, the department may experience increased long term costs in downtime and parts costs.
 
Limited and Pro-Rated Warranties
It isn’t always apparent at first glance whether a five or ten year warranty offered by a particular manufacturer covers you completely during the period or is pro-rated so that actual coverage in the last few years is only at 10 or 15% of the cost. It’s important to understand what type of warranty is being offered and of course, will that manufacturer continue to exist for the life of the warranty.
 
Design constraints causing service access difficulties
The written specification might require a 1,500gpm midship pump, with 6” suction inlets on each side, four crosslays, two hosebed discharges, four primary discharges, and a deck gun. That specification would put all of the manufacturers on an even level for pricing, but with four different bidders you could have four radically different designs. Some of those designs may provide a pumphouse that is built on the apparatus in the same position that it would be serviced, so serviceability is guaranteed. While others may be built off the apparatus on a work bench, then installed onto the chassis, providing limited or no access to parts that will require service during the life of the apparatus. In short, apparatus should be built with future maintenance and service in mind.
 
#9 Looking at the Entire Process
 
Mistake: Bypassing important steps in the purchase and build process that eventually yield the wrong apparatus or expensive changes late in the process.
 
Recommendation: As discussed previously, the acquisition process involves several steps that take months to complete and require sufficient research and planning. Once completed and the purchase is made, the design and build process with the supplier is the next set of milestones. This process also takes several months and is integral in receiving the best apparatus for your needs. Several key steps to include are:
 
Preconstruction Meeting
While the best time to clearly define your needs is in the bid spec process, the preconstruction meeting is critical to ensure all final details are clear to the supplier. Even the best acquisition process only defines about 90% of the information the supplier needs, so come prepared to the meeting to answer all open questions including paint, lettering/striping, shelving and equipment mounting. While it’s generally more expensive to make significant changes now as compared to the bid process, costs will only go up as the truck build process progresses. If the meeting is held at the manufacturer’s location, it’s also one last chance for the committee to see other apparatus in production for any final changes or additions. Our recommendation…don’t skip this meeting at the manufacturer’s facility.
 
Mid-Point Inspections
Due to budget constraints, many fire departments no longer include mid-point inspections which may be at chassis completion or body completion/mounting. If permitted, these can be valuable and allow for a final look before the last phase of the completion process. If the budget doesn’t permit such meetings, ask the supplier to provide regular photos of the apparatus through every major milestone of the process. You should receive something every other week after the apparatus has entered the production area.
 
Final Inspection
It's important to have the final inspection at the manufacturer’s location. No other organization is better capable of making corrections or changes to the truck in a timely fashion with the proper documentation for warranty and service support. A mistake that some departments make however is making changes to truck even at this final stage. This is the time to verify what’s been built is what was specified; it’s a very expensive time to still be making changes. We also recommend that the same personnel who came for previous meetings and inspections be the ones who come for the final inspection so that the final product matches the original vision of the truck.
 
#10 Keeping Everyone Honest
 
Mistake: Assuming potential suppliers have given you all the information you need to make the best purchase decision.
 
Recommendation: One of the most difficult parts of the acquisition process is comparing proposals from a variety of suppliers. Their verbiage isn’t always consistent, their proposals are rarely in the same order, and quite frankly, the philosophies on the exceptions and clarification section varies greatly.
 
Requiring the bid submissions to be in the same order as the department’s specification can limit the number of bidders as this process is very difficult depending on who wrote the initial specification. An easy solution to this issue is to require a detailed table of contents. This will provide a quick means of checking back and forth between the department spec and the manufacturer’s specification.
 
If a performance based specification is written the number of exceptions should be limited. When the specification is written properly without proprietary parts and based on performance data all manufacturers are capable of bidding, so the use of “NO EXCEPTION” statements will help assure that the bid meets your requirements, but does not limit the competition.
 
The bid evaluation process can take several days to complete as there are typically several hundred pages of documents to go through. In some situations if there is doubt as to whether the low bidder fully complied it may be helpful to involve one of the other bidders in the specification review process as they are typically aware of the differences between their product and the competition and they can quickly point out where specification deficiencies may exist. In addition, if there’s doubt spend time questioning vendors about any unclear statements and ask responses be put in writing before an award it made.

Be safe,

Phil Gerace, Director of Sales and Marketing
Posted: 9/5/2014 1:46:37 PM
comments powered by Disqus