1-888-837-9337 sweepingcorp.com 390 East Gish Road., San Jose, CA 95112 Dear Humza,
We appreciate the long and collaborative partnership SCA (previously Cleanstreet) has had with the City of East Palo Alto. As requested, we have broken down the proposed rates for converting our contract to a prevailing wage one. As discussed in our call last week, labor is by far the largest component of our costs and by converting to a prevailing wage contract, the labor cost would go up by 2.7x (hourly costs changes from ~$26/hr to $69.42/hr). To come up with our quoted price, we have used the following calculations, please let us know if there are any questions. Thank you! Current Contract (Annual contract value = $164,275.32)
• Labor = $56,827.78 (35%)
• Fuel = $34,322.71 (21%)
• Maintenance = $29,055.11 (18%)
• Safety = $4,026.59 (2%)
• Operating Expenses = $28,543.86 (17%)
• Net Profit = $11,499.27 (7%)
Prevailing Wage Proposal (Annual contract value = $297,000.00) • Labor = $151,730.17 (51%); Labor costs increases from ~$26/hr to ~$69.42/hr (Teamsters Gr. 3) • Fuel = $53,200.19 (18%); Fuel costs in NorCal have increased by more than ~50% over the past couple of years • Maintenance = $36,318.89 (12%); Scarcity of parts, longer lead times, and higher mechanic wages have led to a ~25% increase in our maintenance costs
• Safety = $4,026.59 (1%); No adjustments
• Operating Expenses = $30,934.16 (11%); Wage inflation • Net Profit = $20,790.00 (7%); Maintaining profit margin As you can see above, almost $95K of the increase comes from just the change in labor costs, representing more than 70% of the total increased price. Apart from that we have adjusted for historic increase in fuel and truck maintenance costs to maintain the profit margin % that we had in the last contract.
Recently, converting to prevailing wage has caused a similar price increase in a handful of other cities we do, for e.g., the City of Palo Alto, City of Redwood city. Ultimately, we hope you understand our position/thought process to get to what we think is a fair proposal. We hope that we can continue to serve you and the City of East Palo Alto and build on our long-term partnership. Please do not hesitate to reach out if you have any questions.
Kind Regards,
MANVENDRA (MANNY) SAXENA
Senior General Manager
Sweeping Corp. of America
San Jose Office: 390 E. Gish Road | San Jose, CA 95112
Office: 510.431.8643| Direct: 224.532.7396
[email protected]