City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Public Works
Meeting Date: September 15, 2025
Report #:2504-4567
TITLE
Approval of the Third Amended and Restated Purchase Order Number 4521000199 with Altec Industries, Inc., to Increase the Purchase Order Amount by $365,983 to a New Not-to-Exceed Amount of $1,073,075, including a Contingency Amount of $51,099, for the Purchase of Two 2025 Peterbilt 548 Hydraulic Digger Derricks; and Amend the FY 2026 Budget in the Vehicle Replacement and Maintenance Fund and the Electric Fund; CEQA Status – Exempt, Not a Project
RECOMMENDATION
Staff recommends that the City Council:
1. Approve and authorize the City Manager or their designee to amend Purchase Order No. 4521000199 with Altec Industries, Inc., to increase the previously approved Purchase Order amount by $365,983, for a new total not-to-exceed amount of $1,073,075, which includes a 5% contingency in the amount of $51,099 for unforeseen cost increases, for the purchase of two 2025 Peterbilt 548 Hydraulic Digger Derricks, utilizing a cooperative purchase agreement via Sourcewell, a cooperative purchasing agency serving government and not-for-profit organizations; and
2. Amend the Fiscal Year 2026 Budget Appropriation (by a 2/3 vote) for a. the Utilities Electric Fund by:
i. Increasing the transfer to the Vehicle Replacement and Maintenance Fund in the amount of $365,983; and
ii. Decreasing the Electric Distribution Reserve in the amount of $365,983; and b. the Vehicle Replacement and Maintenance Fund by:
i. Increasing the transfer from the Utilities Electric Fund to the Scheduled Vehicle and Equipment Replacement Fiscal Year 2020 project (VR-20000) by $365,983; and
ii. Increasing the expense appropriation for the Scheduled Vehicle and Equipment Replacement Fiscal Year 2020 project (VR-20000) by $365,983.
BACKGROUND
On January 11, 2021, Council approved Purchase Order 4521000199 with Altec Industries, Inc. (Altec) in the amount of $633,866 for two new Digger Derrick Peterbilt crane trucks to replace units 7602 and 7603 (ID# 11582).1 The January 11, 2021 staff report describes the function of the trucks and the justification for their replacement. On November 29, 2021, Council approved Amendment #1 to Purchase Order 4521000199 with Altec Industries Inc., increasing the total by $33,202. This established a revised not-to-exceed amount of $667,068 for the procurement of two new trucks (ID #13652).2 This increase was primarily due to the rise in materials costs as a result of the Covid pandemic.
On February 9, 2022, Altec reached out to Public Works Fleet staff again and indicated that the rise in materials costs had continued, and that Peterbilt had discontinued the 348 model, as originally specified, due to supply chain issues. Peterbilt replaced the 348 model with the more expensive 548 model and secured two 548 chassis build slots for the City. On June 6, 2022 Council approved Amendment #2 for Purchase Order 4521000199 providing a $40,024 increase to cover costs and resulting in a new total purchase cost of $707,092 (ID# 14193).3 Subsequent to Council approval, staff worked with the manufacturer through a variety of supply chain and model adequacy issues. As a result, staff recommends a modified purchase specification.
While the City has established a long-term goal of fleet electrification, electric alternatives for this class of heavy-duty digger derrick trucks are not currently available on the market. The specialized functions of these trucks—such as supporting pole setting, line work, and heavy lifting—require significant payload and power capacity that electric technology has yet to meet.
Leasing was considered as a potential short-term solution to avoid committing to a diesel purchase; however, due to limited availability of such specialized units and the high costs associated with long-term lease arrangements, leasing is not a viable option. Proceeding with this diesel purchase is therefore recommended to ensure service reliability while the City continues to monitor technological advancements in heavy-duty electric utility vehicles.
ANALYSIS
On July 22, 2025, the City received updated quotes for two Digger Derricks on the 548 chassis (Attachment A). The upgraded chassis is equipped with dual-rear axles to support the additional 1 City Council, January 11, 2021, Agenda Item #5, SR# 11582 https://portal.laserfiche.com/Portal/DocView.aspx?id=192215&repo=r-704298fc 2 City Council, November 29, 2021; Agenda Item #5; SR# 13652 https://portal.laserfiche.com/Portal/DocView.aspx?id=61761&repo=r-704298fc&searchid=be0edcd1-e89c-4a3b- 9e03-e15e3632a4fb
3 City Council, June 6, 2022; Agenda Item #4; SR# 14193; https://portal.laserfiche.com/Portal/DocView.aspx?id=59506&repo=r-704298fc&searchid=be0edcd1-e89c-4a3b- 9e03-e15e3632a4fb
weight capacity needed. The $365,983 price increase is primarily a result of this chassis upgrade, but also includes increases related to enhanced equipment specifications on the newer DH50E and D3060E models, high volatility in material costs affecting manufacturing, and 24-month delivery timelines (incorporating inflationary adjustments). Additionally, a contingency of $51,099 is requested to mitigate unforeseen cost fluctuations given current market conditions. The revised not-to-exceed amount of $1,073,075 allows for the purchase of two properly sized chassis‘ to accommodate the addition of the DH50E and D3060E model derricks with utility bodies.
Procurement Process
Palo Alto Municipal Code section 2.30.360 (j) allows the use of cooperative purchasing agreements in lieu of conducting a competitive solicitation. Altec was awarded a contract by Sourcewell, a cooperative purchasing agency serving governmental, higher education, K-12 education, not-for-profit, tribal government, and other public agencies. Sourcewell conducted a Request for Proposals under which Altec Capital was an awarded vendor. Altec’s contract with Sourcewell was subsequently amended to allow Altec to increase its contract pricing.
Staff recommends that Council approve the purchase order with Altec Industries, Inc. (Attachment B) for the purchase of two 2025 Peterbilt 548 Hydraulic Digger Derricks. Staff has considered alternatives and believes this remains the most cost-effective means of procuring the required equipment. If this request is not approved, the City will forfeit the two 2025 Peterbilt 548 chassis that are designated for this build. Staff would then have to request a new specification and quote for a later year model chassis and return to Council for approval. This would further increase the purchase cost and delay the delivery of these new vehicles.
FISCAL/RESOURCE IMPACT
To fund the purchase recommended in this report, the Fiscal Year 2026 budget will be amended by increasing the transfer from the Electric Fund to the Vehicle Replacement and Maintenance Fund and decreasing the Electric Distribution Reserve by $365,983 and increasing both expense and revenue in the Scheduled Vehicle and Equipment Replacement Fiscal Year 2020 Project (VR-20000) by $365,983. The purchases of the two 2025 Peterbilt 548 Hydraulic Digger Derrick trucks were planned in the Fiscal Year 2020 Scheduled Vehicle and Equipment Replacement Capital Improvement Project (VR-20000). As a result of all the changes, each truck’s cost is now estimated at $510,988, when originally, they were estimated at $316,933 in 2021.
STAKEHOLDER ENGAGEMENT
Requests for vehicle replacements are presented to the Fleet Review Committee (FRC) for approval during the development of the proposed budget and any deviation from these plans is also reviewed by the FRC. The FRC is comprised of executive leadership representatives from the Public Works and Administrative Services Departments and the City Manager’s Office.
Additionally, Fleet staff review proposed vehicle replacements with the departments using the vehicles.
ENVIRONMENTAL REVIEW
This purchase is exempt from the provisions of the California Environmental Quality Act (CEQA) under Sections 10560 and 10561.
ATTACHMENTS
Attachment A: Sourcewell Quote
Attachment B: Purchase Order
APPROVED BY:
Brad Eggleston, Director Public Works/City Engineer