(323) 881-2401
October 31, 2000
The Honorable Board of Supervisors
County of Los Angeles
383 Kenneth Hahn Hall of Administration
500 West Temple Street
Los Angeles, CA 90012
Dear Supervisors:
1. Approve the Fire Department’s acquisition of two Sikorsky S-70A FIREHAWKTM helicopters, ancillary equipment and training services to replace three Bell 205’s before the start of the 2001 brush season at a total purchase price of $25.7 million.
2. Approve the lease purchase of the two Sikorsky helicopters and ancillary equipment at a purchase price of $25.0 million, via financing provided through Sikorsky by GE Capital Public Finance at a total financed cost not to exceed $33.6 million over ten years, as negotiated by the Chief Administrative Office (CAO) and Internal Services Department (ISD), and authorize the CAO and ISD to execute an escrow agreement and the required leasing documents for this transaction.
3. Instruct the Purchasing Agent and the Fire Chief to complete and execute all necessary purchasing documents relating to the acquisition of these helicopters: Sikorsky Products, Inc. in Stratford, Connecticut for the helicopters, ground support equipment and pilot/mechanic training; Air Methods Corporation in Englewood, Colorado for the EMS interiors and
avionics; and Aero Union Corporation in Chico, California for the water tanks and landing gear extensions. These will be sole source purchases, based on District program requirements.
4. Authorize the Fire Chief to execute a Total Assurance Program (TAP) agreement with Sikorsky, which will provide the Fire District with replacement parts for the new Sikorsky helicopters from the acceptance of the first helicopter obtained via the helicopter Sales Agreement through June 30, 2013. The contract will be billed at a fixed price per flight hour in each contract year ($924 per flight hour through December 31, 2003), with an annual minimum 600 hours billed, and subject to annual increases for the remainder of the contract of a minimum increase of 1.5% with a cap of 11% on the maximum increase that can be billed in any one calendar year. The actual rate will be determined by a formula using the U.S. Department of Labor, Bureau of Labor Statistics Producer Price Index-Commodities for aircraft parts and auxiliary equipment. Amounts exceeding the annual cap will be recovered in future years, but either party may request a change to the formula to ensure equity between the two parties regarding future parts costs to Sikorsky and TAP costs to the District.
5. Authorize the Fire Chief to execute amendments to TAP as necessary to perfect the technical administration of this agreement and to ensure that the future increases to the cost per flight hour are equitable to both Sikorsky and the District. Such amendments will be approved by Sikorsky and approved by County Counsel as to form.
6. Approve the attached appropriations adjustments to reallocate a combined $2.055 million in appropriation from the Fixed Assets-Equipment budget of the Fire Department Helicopter ACO Fund budget to its Services & Supplies budget for helicopter training services for Department pilots and mechanics ($655,000) and to its Other Charges budget for lease-purchase costs to be incurred in fiscal year 2000-01 for the replacement helicopters ($1.40 million).
The Fire Department must replace its three single engine Bell 205’s due to their age, limited ability to perform all of the Department’s Air Operations mission elements, and high cost of repairs and frequent unavailability of repair parts. For the past eight months, the Department, with the assistance of the aviation consulting firm Conklin and de Decker, has been researching all of the available replacement options. Using mission-related objectives and safety/reliability factors, the Fire Department is recommending that two Sikorsky S-70A FIREHAWKS be purchased as cost-effective replacements for the Bell 205’s and as a needed upgrade for the Department’s aircraft fleet by adding these “heavy” Type I helicopters to our permanent fleet. The Bell 205’s and 412’s are classified as “medium” Type II helicopters.
Approval of the recommendations now before your Board will allow the Fire Department and the central support departments to proceed with the acquisition of these helicopters and have them operational before the start of the 2001 brush fire season. Pilot and mechanic training will be done early in 2001 when there is minimal brush fire activity.
The Fire Department operates a multi-mission Air Operations Program consisting of three major components: brush fire suppression (water drops and fire crew transportation), emergency medical transportation, and swiftwater/hoist rescues. This program currently uses seven water dropping helicopters (three Bell 205’s and four Bell 412’s), with a smaller Bell 206 used as a command ship and for infrared mapping of brush fires. Since 1994, we have supplemented the brush fire suppression element of this program by contracting for heavy lift water dropping helicopters and SuperScooper aircraft during the peak months of the brush fire season. Attachment I shows the Department’s current aircraft fleet, categorized by Aircraft Level types as defined by the Incident Command System used by the Fire Service.
Due to the rigorous flying conditions and mission requirements of our Air Operations Program, continued use of the single engine Bell 205’s represents a safety risk to personnel and the public that becomes increasingly unacceptable as these helicopters get older. Two of the Bell 205’s were manufactured 28 years ago (1972) and one was manufactured 24 years ago (1976). All three 205’s are approaching the end of their economic life with our Department’s demanding mission requirements. Two of them are currently out of service and it is questionable if one of them can be put back into service due to an engine failure/hard landing that occurred in July, 2000. Industry studies show that unscheduled maintenance costs rise significantly for aircraft after 25-30 years of use. While helicopter components are regularly changed out, air frames that are in use beyond 25-30 years require significant inspection costs and work to maintain their structural integrity.
Based on safety, reliability, mission, availability and the following considerations, the three Bell 205’s must be replaced during 2000-01:
· Continuation of seasonal leasing of heavy lift helicopters and SuperScoopers for brush fire suppression will not replace the three single engine helicopters that are used during the entire year for all three major components of our Air Operations Program.
· As shown in Attachment II, only the Sikorsky FIREHAWK helicopters can perform all three major components of the Air Operations Program on a year round, day and night basis while also providing a significant increase to water dropping capacity (Type I water tank capacity and higher air speed).
· Also as shown in Attachment II, the only other alternative for replacing the three Bell 205’s would be to purchase three Bell 412’s. Using a life-cycle cost analysis, the District will save $3 million over 20 years by purchasing two FIREHAWKS compared to three Bell 412’s (initial acquisition cost and maintenance and fuel for 20 years).
Military surplus helicopters are not available to local fire agencies. Acquiring used helicopters is not being recommended at this time. There are no used S-70A’s on the commercial market. While there are used Bell 412’s for sale, the inspection and parts costs to conform used aircraft to our flying requirements offset the lower price of the used aircraft. Sikorsky Aircraft does not own helicopters for commercial lease, so leasing FIREHAWKS from Sikorsky is not an option.
We are also recommending approval of an agreement with Sikorsky for the Total Assurance Program (TAP), which will provide replacement parts for the new Sikorsky helicopters that we will need through June 30, 2013. The TAP will be billed based on the number of flight hours flown by the helicopters at a fixed rate per flight hour, with a minimum of 600 hours per year. The TAP program has several advantages to our Department. Our annual costs for parts will be a standardized cost every year with no spikes for major repairs. Sikorsky will place an inventory of parts at our Heliport and will guarantee delivery of replacement parts to minimize any down time of the helicopters. We will avoid making a substantial investment of inventory parts (currently at $4.5 million for the Bell 412’s with annual purchases varying from several hundreds of thousands of dollars to over one million dollars if major components have to be changed out). The only parts not covered by TAP are small parts common to many helicopters that will cost us approximately $25,000 per year to buy.
Attachment II provides further information about the above issues, including the information provided to us by Conklin and de Decker.
Pursuant to the Budget Correction Plan that was transmitted to your Board on August 18, 2000, these replacement helicopters and related equipment will be 100% leased-purchased in order to maintain a minimal prudent reserve over the next three years. The Chief Administrative Office and the Internal Services Department has negotiated a ten year lease-purchase financing package provided through Sikorsky by GE Capital Public Finance for the following items (costs include sales/use tax):
· $21.1 million for two S-70A FIREHAWKS from Sikorsky.
· $ 2.0 million for EMS interiors/avionics from Air Methods.
· $ 1.3 million for water tanks/extended landing gear from Aero Union.
· $ 0.6 million for ground support equipment from Sikorsky that our mechanics will need to maintain the helicopters.
The projected annual cost for this lease-purchase is $3.4 million ($1.6 million for 2000-01). Each of the vendors for this acquisition will be funded from an escrow fund established under an escrow agreement among the County, GE Capital and the State Street Bank as escrow agent. The $25 million in purchase costs will be deposited by GE Capital into the escrow fund upon execution of the Sales Agreement and then funds will be disbursed at County direction according to the payment terms established in the purchasing documents.
Under the TAP, there is a minimum annual requirement of six hundred flight hours and the flight hour rate is fixed at $924 hour through December 31, 2003, resulting in a minimum annual cost of $554,000 during this period. The TAP hourly flight rates are then increased for the next three calendar years: $989 for calendar year 2004, $1063 for calendar year 2005, and $1148 for calendar year 2006. For the remaining six calendar years, the increase each calendar year will be a minimum of 1.5%. The maximum increase that can be imposed in any one calendar year is capped at 11%, with any excess being recovered in future years of the agreement. However, the actual hourly flight rate used during these six calendar years will be determined by a formula using the U.S. Department of Labor, Bureau of Labor Statistics Producer Price Index-Commodities for aircraft parts and auxiliary equipment. Both the District and Sikorksy have the right under TAP to ask for a change in this formula if either party believes that the formula is not equitable to that party based on a schedule of actual part prices to be provided annually by Sikorsky. The hourly flight rate used for the last six months of the TAP agreement (January through June of 2013) will be the rate used for calendar year 2012.
The Department will pay TAP costs due in the current fiscal year (estimated at $100,000) from available funds in its Services & Supplies budget. The information provided by Conklin and de Decker indicate that using TAP to procure helicopter parts will cost us $1.2 million more over the 12 year term of the agreement than if the District were to purchase these parts on an as-needed basis. However, this cost is offset by avoiding an up-front parts inventory cost of at least $4.5 million (which would have to be immediately replenished for critical parts) and the fact that TAP serves as insurance that the District will not incur substantial unexpected costs due to catastrophic failure of parts. In addition, the District will no longer be incurring costs to purchase parts for the three Bell 205’s.
Following the appropriation adjustments from the Department’s Helicopter ACO Fund included in Attachment III, our District will have sufficient funding to pay for the helicopter training and lease-purchase costs of the helicopters due in the current fiscal year. The $1.6 million in lease payments due in the current fiscal year will be funded from the Department’s Other Charges budget through a combination of the $1.4 million budget adjustment attached. The $655,000 for Sikorsky training services due in 2000-01 will be funded from the Department’s Services & Supplies budget by the attached reallocation to the budget. Future TAP costs will be funded by annual increases in revenue received by the District from property taxes and reimbursement for services provided to other agencies.
Attachment IV is the Sales Agreement with Sikorsky for the helicopters, ground support equipment. Attachment V is the TAP Agreement with Sikorsky. Both agreements have been approved as to form by County Counsel.
We will be selling the three Bell 205’s and associated parts as surplus once the FIREHAWKS are operational. These sales are expected to provide approximately $4.6 million of one-time monies to help finance future lease-purchase payments. If in the future we were in a cash position to
buyout the lease-purchase, we would go back to the Board for the authority necessary to do that in order to minimize financing costs.
The Director of the County’s Emergency Medical Services Agency has reviewed the proposed acquisition of these two helicopters from Sikorsky and advises that these helicopters would be able to operate as trauma transport helicopters within Los Angeles County.
We have provided the Purchasing Agent with sole source justification for the Sikorsky FIREHAWK to be the “heavy” Type I helicopter for our permanent aircraft fleet, for Air Methods to install the EMS interiors and avionics, and for Aero Union to fabricate and install the water tanks and landing gear extensions.
We also looked at the possibility of a joint powers authority with cities that would benefit from the added brush fire response capability of the FIREHAWKS. Los Angeles City is the only city for which such a proposal might be beneficial, since they have considerable brush area and currently operate water dropping helicopters. The Los Angeles City Fire Department has indicated to us that they are not interested in a joint powers agreement. They want to use the Bell 412 as their standardized helicopter model, and beginning this year they have leased an air crane helicopter to supplement their brush suppression efforts during the peak brush fire season.
The helicopter purchase now before your Board will replace three single engine helicopters this fiscal year and will provide upgraded operational capabilities in the most cost effective approach available to the Fire Department.
Respectfully submitted,
P. MICHAEL FREEMAN DAVID E. JANSSEN
FIRE CHIEF CHIEF ADMINISTRATIVE OFFICER
PMF:DEJ:yh
Attachments (5)
c: Chief Administrative Officer
County Counsel
Executive Officer, Board of Supervisors
Auditor-Controller
Director, Internal Services
Director, Health Services