Report Prepared by: Julio Marquez CPPB, Purchasing Supervisor, Purchasing Division.
Title
SUBJECT: Approval to Wave Competitive Bidding Requirements and Approval of a Government Services Multi-Channel Sales Agreement and Addendum No. 1 with Iron Planet, Inc. DBA Govplanet
REPORT IN BRIEF
Considers approving to waive competitive bidding, approving an agreement and Addendum No. 1 with Iron Planet, Inc. DBA Govplanet to continue using its online marketplace to sell City of Merced surplus vehicles, equipment, and other miscellaneous surplus items as needed via online auction.
RECOMMENDATION
City Council - Adopt a motion:
A. Waving the competitive bidding process based on Merced Municipal Code Section 3.04.210 which states it may be waived with the approval of the city council; and,
B. Approving the Sales Agreement and Addendum No. 1 with Iron Planet, Inc. DBA Govplanet; and,
C. Authorizing the City Manager to execute the necessary documents.
Body
ALTERNATIVES
1. Approve, as recommended by staff; or,
2. Approve, subject to conditions other than recommended by staff (identify specific findings and/or conditions amended to be addressed in the motion); or,
3. Deny; or,
4. Refer to staff for reconsideration of specific items (specific items to be addressed in the motion); or,
5. Continue to a future meeting (date and time to be specified in the motion).
AUTHORITY
Merced Municipal Code and Merced Municipal Code Article VI, Section 3.04.370 - Surplus materials, supplies and equipment; and Article III, Section 3.04.210 - Exemptions from competitive bidding.
CITY COUNCIL PRIORITIES
As provided in the 2025 Adopted Budget.
DICUSSION
Approving the original agreement and amendment no. 1 extending the term of the sales agreement with Govplanet and waving competitive bidding requirements will allow the Purchasing Division to continue to offer efficient and cost-effective disposal of surplus sale services. Timely disposal of high value assets such as vehicles, machinery, and equipment is essential to maximize cost recovery because the value of these items rapidly depreciates over time. The longer these surplus items sit in City holding yards, the less funds Purchasing can recover at auction.
Purchasing has done its due diligence vetting and/or using other similar companies such as South Bay Auto Auction, GovDeals, and Public Surplus. For example, South Bay offers towing City vehicles to their nearest location (in Stockton) for a fee. They also offer optional services to clean up, decal, paint touch up, replace small parts such as batteries or headlights for a fee before placing vehicles for live auction in person and online at the same time. GovDeals works in a similar fashion.
Purchasing staff understands that good presentation of vehicles at auction increases the chances of obtaining higher sale proceeds. However, Purchasing staff does not see that the investment in these services would directly translate into real net gains for the City. Most of the extra gains realized in the auction sales witnessed by Purchasing staff at South Bay were overwritten by the extra fees.
On the other hand, Govplanet has shown better business results. The amount of proceeds is higher when compared to South Bay Auto, and especially with Public Surplus. Additionally, they do not charge extra fees for their inspectors to come to the City’s holding yards to inspect and test each vehicle, write descriptions, and upload the inspection reports to their website. Public Surplus does.
To help increase the net returns for City vehicle sales, Purchasing staff ensures vehicles get cleaned, washed, and tires inflated before Govplanet’s inspectors come to inspect, test and take photos of the vehicles.
With the approval of Govplanet’s agreement and extension, the Purchasing Division will continue to provide timely, cost-effective, and efficient surplus sale services to City departments.
The City keeps 85% or 90% of the final sale amount. Govplanet takes 10% or 15%, which is industry average. The final sale amount is the maximum amount paid by the buyer (highest bid plus 15% (if item sells for less than $14,999) or 10% (if the item sells for more than 15,000).
Final proceeds are calculated as follows:
Highest Bid for item X is $7,000. Govplanet adds an additional 15% premium (7,000+1,050=8,050). The City gets 6,842.50 (8,050x85%=6,842.50).
Staff is seeking Council approval to wave competitive bidding for this particular contract because the City has worked with several online auction platforms and still continues to utilize some of those platforms but Govplanet’s contract is the only one that will exceed the bid threshold. We are asking Council to approve the original agreement and extension because the amount of fees collected by Govplanet in the first two-year term is close to exceeding the current bid threshold of $38,000 and the additional two-year term will definitely exceed that threshold when compounding the fees for both terms.
The original agreement was approved at the City Manager level because (prior to this) net proceeds had not exceeded the bid threshold. Also, Govplanet’s contracts used to be annual agreements until 2022 when the company decided to make them multi-year.
Approving the extension to this contract will allow the Purchasing Division to continue to dispose of all the City’s surplus vehicles, equipment, and other miscellaneous items through Govplanet for all the reasons expressed above.
The table below shows the sales reports totals for the past two years and the total fees collected by Govplanet:
|
Fiscal Year |
Total/Year |
|
2023-24 |
$ 42,756.94 |
|
2022-23 |
$189,800.79 |
|
Fees for 2 years |
$ 36,474.59 |
History and Past Actions
The City’s Purchasing Division has met municipal code requirements regarding the sale of surplus materials supplies and equipment in various ways. At one point the City hired a professional auctioneer to perform live auction events. After several years, the live auction was eliminated. The City then used on-site, annual, silent, sealed bid auctions at the Purchasing facilities.
Both methods were time consuming and labor intensive. All surplus items (including vehicles, equipment, supplies, materials, scrap items, etc.) had to be carefully cataloged, tagged, arranged, and stored all at once in the City’s Central Stores yard by the division’s staff of two people. Inadequate staffing and storage space were always an issue.
Eventually, division staff moved auctions to an online platform named Public Surplus. This move greatly improved and simplified the surplus sale auction process and outcome. It allowed for ongoing, rather than annual, surplus sale events. It also increased both the sale proceeds rate and exposure of City auctions to more potential bidders. The Purchasing Division’s outreach capabilities expanded from local to national and even international viewership. Online auctions reach a far greater audience through the platform’s thousands of registered users as well as regular online presence.
While this platform was working well for miscellaneous items, staff began experimenting with Govplanet in the year 2019 as a potential outlet for vehicles and equipment. As the City continued to send additional surplus items to Govplanet, staff saw an improvement in the rate of proceeds received, especially for vehicles. After a successful trial period, the City formally contracted with Govplanet in the year 2020 to sell all City surplus vehicles and equipment.
IMPACT ON CITY RESOURCES
No additional appropriation is needed. All net proceeds will be deposited either in the City’s General Fund or designated replacement fund accounts for specific vehicles as required after auction company deducts its fees.
ATTACHMENTS
1. Addendum No. 1 & Original agreement