AGENDA ITEM 10-B
ACTION ITEM
TO:
CHAIRMAN BULOVA AND THE VRE OPERATIONS BOARD
FROM:
DALE ZEHNER
DATE:
DECEMBER 16, 2011
RE:
AUTHORIZATION TO AMEND THE CONTRACT WITH SCHEIDT &
BACHMANN FOR FARE COLLECTION EQUIPMENT MAINTENANCE
_____________________________________________________________________
RECOMMENDATION:
The VRE Operations Board is being asked to authorize the Chief Executive Officer to
amend the Scheidt & Bachmann (S&B) contract for fare collection system maintenance
in order to add three years and five months of maintenance services in an amount not
to exceed $2,438,931, for a total contract value not to exceed $9,876,968.
BACKGROUND:
In June 2000, the VRE Operations Board authorized a contract with S&B for the
delivery of a new fare collection system. In October 2002, the system was accepted
and four years of maintenance support, which includes two full-time fare collection
maintenance technicians, began.
The Operations Board has since authorized
extensions to this contract in 2006, 2007 and 2011. The current maintenance
agreement is set to expire on January 31, 2012 and a further contract extension for this
work is required due to warranty issues and proprietary licenses.
This proposed extension continues the support of two full-time technicians, while also
adding a software support module which has become necessary due to increasingly
stringent requirements for data security and compliance with the Payment Card Industry
(PCI) standards. This Service Level Agreement provides for equipment preventative
maintenance and repair, replenishment of the fare collection spare parts inventory,
software revisions, and updates required for fare collection database maintenance and
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to maintain PCI compliance. The amendment also aligns the term of the maintenance
agreement with the VRE fiscal calendar.
This item was presented to the VRE Operations Board in November 2011. The Board
requested additional information on pricing and other options to extending the contract.
A white paper was forwarded to Board members after the meeting, which included
additional background information on pricing and the reasons for sole sourcing the
system maintenance based on proprietary and warranty issues (see Attachment). No
concerns were raised based on the information provided so authorization is being
sought at this time.
FISCAL IMPACT:
Funding for this project is included in VRE’s Capital Improvement Program as part of
the fare collection project. Total project funding over FY 2012 – 2015 is $2,438,931.
The project is included in the FY 2012 and FY 2013 budgets using operating funds.
This amendment would bring the total contract value to an amount not to exceed
$9,876,968.
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TO:
FROM:
DATE:
RE:
CHAIRMAN BULOVA AND THE VRE OPERATIONS BOARD
DALE ZEHNER
DECEMBER 16, 2011
AUTHORIZATION TO AMEND THE CONTRACT WITH SCHEIDT &
BACHMANN FOR FARE COLLECTION EQUIPMENT MAINTENANCE
RESOLUTION
10B-12-2011
OF THE
VIRGINIA RAILWAY EXPRESS
OPERATIONS BOARD
WHEREAS, on June 16, 2000, the VRE Operations Board authorized a contract with
Scheidt & Bachmann for the delivery of a new fare collection system; and,
WHEREAS, on October 31, 2002, the system was accepted and maintenance support
began; and,
WHEREAS, the current maintenance agreement is set to expire on January 31, 2012;
and,
WHEREAS, this proposed extension continues the support of two full-time technicians,
while also adding a software support module which has become necessary due to
increasingly stringent requirements for data security and compliance with the Payment
Card Industry (PCI) standards.
NOW, THEREFORE, BE IT RESOLVED THAT, the VRE Operations Board authorizes
the Chief Executive Officer to amend the Scheidt & Bachmann contract for fare
collection system maintenance in order to add three years and five months of
maintenance services in an amount not to exceed $2,438,931, for a total contract value
not to exceed $9,876,968.
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Fare Collection Equipment Maintenance Agreement Summary
Background
In June of 2000, after a competitive procurement, the VRE Operations Board authorized
a contract with Scheidt & Bachmann (S&B) for the design and delivery of a new fare
collection system.
This system included Ticket Vending Machines (TVMs) at every VRE station as well as
in VRE’s offices and at all vendors – currently 69 TVMs, 13 Ticket Operating Machines
(TOMs), and 8 servers are in service. Since then, as permitted in the original contract,
a series of upgrades to the system have occurred as well as ongoing general
maintenance. Because VRE is a cashless system, the fare collection system must
produce every single ticket that passengers use to board VRE trains. As an order of
magnitude, in October 2011 alone, the fare collection system produced nearly 50,000
tickets and collected over $3 million in fare revenue, approximately $36 million annually.
The addition of a second technician in 2006 was determined necessary based on the
length of service hours (5AM – 7PM) and a significant number of complaints being
received by passengers. Approved expenditures to date are shown below.
Description
Period Covered
Contract Amount
Fare collection system design,
installation, spare part inventory
Post-installation maintenance and
upgrades (48 months, 1 technician)
Post-warranty maintenance (add 2nd
technician)
Post-warranty maintenance and
upgrades (3 months, 2 technicians)
One Year Post-warranty
maintenance and upgrades
One Year Post-warranty
maintenance and upgrades
One Year Post-warranty
maintenance and upgrades
August 18, 2000
$2,952,040
November 1, 2002 to
October 31, 2006
February 18, 2006 to
October 31, 2006
November 1, 2006 to
January 31, 2007
February 1, 2007 to
January 31, 2008
February 1, 2008 to
January 31, 2009
February 1, 2009 to
January 31, 2010
$593,716
TVM/TOM and PCI upgrade
July 2011
$824,130
One Year Post-warranty
maintenance and upgrades
February 1, 2010 to
January 31, 2011
$511,298
One Year Post-warranty
maintenance and upgrades
February 1, 2011 to
January 31, 2012
$511,621
Total
$173,626
$83,639
$558,412
$573,730
$582,446
$7,364,658
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More than Maintenance
It is important to note that while the description of work is termed “maintenance,” the
scope has and will continue to include mid-life renewal and larger capital maintenance
items – including parts and labor.
For example, in 2007 the card readers and touch screens were replaced on all
equipment. In 2009, all equipment received new ticket printing mechanisms and in
2010 central processing units and PIN pads were replaced. As part of the maintenance
contracts, we have also replaced the system servers and upgraded software to comply
with the new Payment Card Industry (PCI) data security requirements. As the system
ages, there has been a proactive focus on preventative maintenance and life-cycle
renewal. As these needs will continue to grow, incorporating such improvements into
the maintenance contract allows us to control expenses and shift some cost exposure to
S&B.
Contract Extension
Because of the proprietary nature of the fare collection system and warranty
requirements, S&B is the only practical vendor able to perform the ongoing system
maintenance. While a third party could maintain certain components of the system, the
contract requires that S&B maintain all proprietary aspects of the system (i.e., fare
collection software application and some TVM/TOM component maintenance). The
additional cost of third party maintenance for only a portion of the system proved cost
prohibitive.
The contract holds no provisions for a month to month extension. However, a year to
year extension was considered as an option over a multi-year extension. However,
negotiations showed that a savings was being offered by S&B in return for a longer
commitment. As such, the overall cost is significantly higher for an annual contract than
a multi-year contract and is, therefore, not being recommended.
Annual Cost Analysis
VRE costs for maintenance services are summarized in the following table. VRE costs
have increased, on average, by about 2% annually over the past five years. Pricing for
monthly maintenance is tied to the Consumer Price Index (CPI) for annual adjustments.
This resulted in a decrease in monthly costs between 2009 and 2010 and a very small
increase for 2011.
2
Year
Monthly Preventative
Maintenance
Remedial Maintenance,
Software Support, Spare
Parts Inventory
TVM/TOM
Upgrade
Total
20032006
2006
$593,716
$0
$0
$593,716
$207,723
$49,542
$0
$257,265
2007
$384,287
$90,000
$84,125
$558,412
2008
$397,730
$90,000
$86,000
$573,730
2009
$412,446
$105,000
$65,000
$582,446
2010
$411,298
$100,000
$0
$511,298
2011
$411,621
$100,000
$0
$511,621
Cost Analysis of Current System vs. New System
The ultimate goal of the VRE fare collection system is full interoperability with the
WMATA SmarTrip card. As such, the timeframe for implementing a new system has
been coordinated with WMATA’s schedule for the New Electronics Payment Program
(NEPP). VRE staff is actively participating in the NEPP process to make sure that our
system and WMATA’s new system will work together. This contract amendment is
meant to continue the viability of the current system until WMATA is far enough along in
their process that VRE can make the most informed choices regarding our fare
collection future.
When VRE first extended the maintenance contract several years ago, staff
recommended, and the Operations Board concurred, that the development of a new
VRE fare collection system should be deferred until a time when integration into a
regional system was more certain. As such, an investment in maintaining the current
equipment and extending its useful life was determined to be the most responsible
approach.
To change this approach now is not feasible given that a new system will take several
years to design, fabricate, install, test and implement. Knowing that, in December of
2010, the Operations Board authorized a contract award for technical support services
for VRE’s next generation fare collection system. Work underway includes an
assessment of the current system, analysis of VRE requirements for a new system, a
market assessment of new products/technologies, and development of a concept of
operations for the new system. Based on work completed to-date, the cost of a full
system replacement is estimated at between $5 to $7 million; other options being
considered include additional equipment being integrated into the existing system,
which would be slightly less expensive.
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In summary, the proposed approach is cost effective not only in its ability to allow
interoperability, but also in its volume of production. An investment of roughly $625,000
per year in maintenance costs provides for a system that has an up time of 98% and
provides $34 – $36 million in fare revenue per year – a cost of 1.75-1.85% to benefit.
Current Maintenance Agreement Request
The current Operations Board request is for renewal of the fare collection maintenance
agreement for a three year, five month period. The initial five month term will align the
term with VRE’s fiscal year.
Agreement Scope





Base annual hardware maintenance fee - $530,000
o hardware preventative and corrective maintenance
o two full-time technicians*
o two maintenance vehicles
o consumable supplies
o S&B overhead
Base annual software maintenance (covers general system updates, PCI
upgrades, and patches) - $74,690
Spare parts and inventory restocking - $60,000
Contingency - $221,722
TOTAL - $2,438,941**
*Note – VRE requires on-site technical support from 5 am until 7 pm on each service
day. This has maintained a 98%+ system reliability, and same day resolution of
passenger issues. The skill level of these technicians is high because they are required
to complete maintenance work, system configuration, and programming.
**Note - the agreement includes an annual escalation on the base fee and software
maintenance based on the CPI beginning in July 2012. A 3.5% escalation rate is
assumed.
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Proposed Fare Collection Maintenance Pricing Sheet for Period February 1, 2012 – June 30, 2015
Period
1
2
3
4
Description
Preventative and
Remedial
Maintenance (as
described in SLA)
Preventative and
Remedial
Maintenance
Software
Maintenance
Total Period 2
Preventative and
Remedial
Maintenance
Software
Maintenance
Total Period 3
Preventative and
Remedial
Maintenance
Software
Maintenance
Total Period 4
Start
End
Duration Base Contract
Amount
2/1/2012 6/30/2012
5 Mos.
$213,175
7/1/2012 6/30/2013
1 Year
$530,000
Estimated
Discretionary
Escalation
Inventory
(3.5%)
$213,175
$0
Estimate by
Period
$213,175
$74,690
7/1/2013 6/30/2014
$604,690
$604,690
1 Year
$625,854
$20,000
$645,854
$647,759
$20,000
$667,759
$670,431
$2,157,219
$20,000
$60,000
$690,431
$2,217,219
$2,217,219
$74,690
7/1/2014 6/30/2015
$604,690
$604,690
1 Year
$74,690
$604,690
$2,027,245
Total Estimated Contract Value
Contingency (10%)
$221,722
Total VRE Operations Board Authorization
$2,438,941
Notes: Period 1 pricing is based on existing maintenance price and is only valid as a onetime package when combined with Periods
2-4.
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