Lodi sees last-minute price hike on pricy new truck | Local

The city had ordered a 900 ECO Combination Sewer Jetter Truck from Indiana-based Brown Equipment Company, at a cost of $465,579.98, but in the final days of the order received word from the company:

“Aluminum components have increased 14%, engine and powertrain components increased 12%, Duraprolene water tanks increased 20%, debris tanks increased 20%, and the list goes on. As a result of these increases, the factory has no choice but to take drastic measures and add a surcharge of 10%. This is an increase of $31,362.86 thus raising the price to $496,942.84.”

City of Lodi Director of Operations Terry Weter told the Common Council that BEC had announced that there would be an increase in material costs in May, as the truck was already under construction. With the announcement of the new price, Weter said that it was his understanding that the city could cancel the order and the truck would be sold to one of maybe five other prospective buyers. In that case, he estimated it would be up to two more years to get another truck and an additional cost of up to $50,000.

City Administrator and Finance Director Brenda Ayers suggested that it would be important for the council to “stand up” in this situation, which has been similarly experienced by local governments in Waunakee, Poynette, and elsewhere.

When asked by Mayor Ann Groves Lloyd about the resolution for Waunakee, Ayers said that the village paid the new price.

Stevenson moved that the city proceeded with the purchase agreement, pending clarification of the cost increases.

“I would like to see a document from them showing where the cost increases were,” said Stevenson, going on to ask, “are they charging us to restock their shelves?”

Responses of “yes,” came from various around the room.

Through discussion there was a consensus of being “between a rock and a hard place,” with no one describing themselves as feeling good about one option or the other.

“I don’t know what the best course of action is,” said Council Member Timothy Ripp. “I agree that it’s unethical what this company is trying to do, however, as has been stated in the room, if we lose this truck, we will never get another one at the same price even after the increase.”

The council agreed to request Ayers go back to BEC representatives to attempt further negotiation, with knowledge that the city could draw from available funding sources to cover the new bill and that withdrawing from the purchase would likely be an even more costly move.

In Poynette, Director of Public Works Scott Gorman explained that this hasn’t been an issue for vehicle purchases so far.

“The patrol truck that we purchased was a pre-purchased vehicle in partnership with Lakeside International and Monroe Truck Equipment, so they had already purchased those vehicles—they were not for order, waiting to be built,” said Gorman. “I have heard no increases on that. I don’t expect any, but I’ll bet that Lodi didn’t expect that either.”

Poynette’s purchases of a VAC truck and leaf collector were both used, so those were not an issue, but a lift station project that was bid in February is a different situation.

“We’re already over-budget with the bid that we’ve got,” said Gorman. “What we’re doing right now is we’re trying to find another supplier. And if that doesn’t pan out, I would suspect with it already being over-budget, we would re-bid. That would be my recommendation. I think it’s highway robbery to come in for a 30% increase on a project that was already bid out.”

Waunakee Utilities General Manager Herlitzka also described an expensive situation in personal terms, explaining that the purchase of one $450,000 truck came with a surprise additional cost of $4,000, which wasn’t welcome, but could be worked through with an agreement of service credit.

Another vehicle that Waunakee purchased totaled about $220,000 with a last minute price increase of $20,000.

“And they were very clear with us that, ‘We’re going to charge you that or we’re going to sell the vehicle to somebody else,'” said Herlitzka. “And again, as a customer of a trusted partner of ours, it doesn’t feel very good to have that happen.”

Outside Waunakee Herlitzka said that he knew of a municipality in southwestern Wisconsin that was given a similar choice and that one of the vendor’s sales representatives mentioned that Waunakee was one of about 20 municipalities where that message was being delivered.

It’s to the point now that they all say the same thing: ‘our prices are going up,’ and they’re being presented with cost increases, but my contention to them is, if the price went down, would we have a better price?” said Herlitzka. “And they never have an answer for that because they know they would not let us have it for cheaper than what they previously agreed to.”

No deal, minor consolation

When the Lodi Common Council met for a special meeting on July 26 to discuss the issue of the truck purchase, Stevenson opened the discussion by walking back his demand for an itemization of new costs for the truck.

Ayers explained that she emailed their sales representative and received their answer in person.

“I sent him an email and he showed up on my doorstep, literally,” Ayers said, conveying her message to him that she needed to do due diligence in representation of the city’s rate payers and tax payers. The rep told Ayers that he had verbally mentioned an unknown price increase in April, then a June letter which was overlooked on a new employee’s desk for a month.

“They’re between a rock and a hard place as well,” Ayers said. “They pretty much are more like we are and they have grave concerns that they are not going to last through this economy either. So the bottom line is, no. Either you accept it and pay for it or, they will sell it to someone else.”

Ayers told the council that to be best of her judgment, her sense was that the company was not creating the situation as a “snow job.”

“I feel good that the city didn’t just say, ‘okay, we’ll pay for it,’ and that we’ve done the best that we can,” said Ayers, putting it to the council to make the decision.

Stevenson pointed to funds in Utilities that could be used to solve the problem at hand, noting that the purchase of the truck had been on the city’s “wish list” for about four years. Additionally, water and wastewater operator Chad Wolter estimated that the city’s current VAC truck, at 25-years-old had run roughly twice the length of a similar piece of municipal equipment.

Stevenson moved for the city to go forward with the purchase, which was then seconded and approved by an unanimous vote.