City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Public Works
Meeting Date: December 15, 2025
Report #:2509-5243
TITLE
Approval of General Services Contract No. C26195803 with Genuine Parts Company dba Napa Auto Parts for an Amount Not-to-Exceed $6,238,832 for an On-Site Fleet Parts and Inventory Program for a Six-Year Term Utilizing Pricing Set by Cooperative Sourcewell Contract No. 090624-GPC, and Approval of a Budget Amendment in the Vehicle Replacement and Maintenance Fund; CEQA Status - Not a Project
RECOMMENDATION
Staff recommends that the City Council:
1. Approve and authorize the City Manager or their designee to execute Contract No.
C25193345 with Genuine Parts Company dba Napa Auto Parts (“NAPA”) for an amount not-to-exceed $6,238,832 for an on-site fleet parts and inventory program for a term of six years (January 1, 2026 through December 31, 2031), with pricing set by cooperative Sourcewell Contract No. 090624-GPC with Genuine Auto Parts Company dba Napa Integrated Business Solutions; and
2. Amend the Fiscal Year 2026 Adopted Operating Budget Appropriation (2/3 vote needed) for the Vehicle Replacement and Maintenance Fund by:
a. Increasing the expense appropriation for Vehicle Operations and Maintenance contract services by $601,837; and
b. Decreasing the Vehicle Replacement and Maintenance Fund Balance by $601,837.
Note: Exhibit C allows adjustment between contract year amounts, provided that the total not- to-exceed amount of the contract over the life of the contract term is not exceeded.
EXECUTIVE SUMMARY
Staff recommends City Council approval of Contract No. C26195803 with Genuine Parts Company dba NAPA Auto Parts for an amount not-to-exceed $6,238,832 to continue the City’s on-site fleet parts and inventory program for a six-year term from January 1, 2026, through December 31, 2031. The proposed contract utilizes cooperative Sourcewell Contract No.
090624-GPC to maintain competitive pricing and ensure continuity of service following a successful pilot and subsequent agreements with NAPA dating back to 2016. Approval of this contract will allow the City to avoid significant operational disruptions and additional staffing costs that would result if parts management services were brought back in-house, while maintaining the efficiencies and cost savings achieved under the existing program.
The recommended appropriations amendment is due to a misalignment of this contract with Fiscal Year timing. To correctly align this new NAPA contract, FY 2026 funding is needed for a portion of Year 4 of the current NAPA contract and the entirety of Year 1 of this new contract.
This is a one-time fix that will realign the encumbrances moving forward.
BACKGROUND
In August 2016, the City contracted parts operations to NAPA as a three-year pilot after approval by City Council on August 15, 2016 (CMR #7027). Analysis conducted by staff indicated that the pilot with NAPA was successful and benefited the City in overall cost savings. The following is a history of contractual relationships with NAPA:
The pilot ended on July 21, 2019 and was renewed for one additional year via Amendment No. 1 on August 12, 2019, which aligned with the term of NAPA’s cooperative contract with Sourcewell (CMR #10512).
Amendment No. 2 was executed on June 15, 2020 for a second one-year extension through July 21, 2021 and to add funding accordingly (CMR# 11263). Amendment No. 3 was entered into on July 7, 2021, to extend the term through January 20, 2022 at no added cost to the City, and an exemption to competitive solicitation was approved under municipal code section 2.30.290 (b)(1) to give staff time to bring forward the request to approve a new three-year contract with NAPA. Council approved the existing three-year contract with NAPA which began January 24, 2022 and was set to expire on January 23, 2025 (CMR# 13835)1 . Staff utilized the option to extend the contract an additional year via Amendment No. 1, with the contract expiring on December 29, 2025.
ANALYSIS
On January 8, 2025, NAPA entered into a new competitively-solicited cooperative contract with Sourcewell (a cooperative purchasing group for government, education, and nonprofit agencies), for an initial four-year term, expiring January 10, 2029, with the option to renew for three additional one-year terms through January 10, 2032 2. To align with the term of the 1 City Council, May 23, 2022; Agenda Item #4; SR #13835, https://portal.laserfiche.com/Portal/DocView.aspx?id=59479&repo=r-704298fc&searchid=c6d84985-ef08-4638- 8077-ce0a0c9a5c02
2 NAPA IBS Contract with Sourcewell for On-Site Parts Management, Contract #100124; https://www.paloalto.gov/files/assets/public/v/1/public-works/public-services/fleet/genuine-parts-company-dba- napa-contract-100124.pdf
Sourcewell Contract, staff recommends Council approve a contract (Attachment B) between the City and NAPA for an initial three-year term, ending December 31, 2028, with the option to extend the contract for up to three additional one-year terms, ending December 31, 2031, if NAPA renews its contract with Sourcewell. This approach provides continuity of service while ensuring that the City‘s contract does not extend beyond the availability of cooperative pricing.
Although the contract delineates annual amounts, Exhibit C of the contract permits the parties to adjust these amounts and/or the City’s amount of services if the City exceeds or is projected to exceed the aforementioned contract year annual amounts. These adjustments are subject to the provision that the City does not surpass the total not-to-exceed amount of the recommended contract, which is $6,238,832 over a six-year term.
The Sourcewell Member Pricing identified in the contract provides the same pricing terms as the previous contract. Goods will be billed to the City at a 10% gross margin over NAPA’s acquisition cost, operating expenses will be billed at actual cost with no markup, and NAPA’s return is built into the price of parts, so that no separate fee is billed.
Procurement Process
The City’s Palo Alto Municipal Code Section 2.30.360 (j) identifies the process that allows the use of cooperative purchasing agreements. Quotes for this contract were obtained through the approved cooperative group, Sourcewell, and a proposal was received September 26, 2025 from NAPA (Attachment A) for a six-year proforma with a 10% gross margin.
The current contract included a three-year term with an additional one-year extension through 2025. The proposed contract is recommended for a three-year initial term with three optional one-year extensions to align with the Sourcewell agreement. The salary component reflects the NAPA staff and operating costs billed at actual with no markup; the parts component is based on estimated City usage, which is billed at NAPA’s acquisition cost plus a 10% gross margin.
Estimated parts costs assume a 3% annual escalation in Years 2 and 3, a 5% escalation in Years 4 and Year 5, and a 7% escalation in Year 6.
The following table summarizes the estimated annual cost of the current and proposed NAPA IBS contracts, broken out by salary/operating expenses and estimated parts purchases:
Table #1: Comparison of Contract Rate Schedules
CURRENT CONTRACT PROPOSED CONTRACT
Term
Salary/
Operating
Expenses
Contract
(Parts Est.) Total
Salary/
Operating
Expense
Contract
(Parts Est.) Total
Year 1 $93,701 $652,500 $746,201 $127,656 $813,912 $941,568 Year 2 $96,512 $672,075 (3%↑) $768,587 $131,485 $838,329 (3%↑) $969,815 Year 3 $99,408 $692,237 (3%↑) $791,645 $135,430 $863,479 (3%↑) $998,909 Year 4 $104,378 $726,849 (5%↑) $831,227 $142,201 $906,653 (5%↑) $1,048,855 Year 5 N/A N/A N/A $149,311 $951,986 (5%↑) $1,101,297
Year 6 N/A N/A N/A $159,763 $1,018,625 (7%↑) $1,178,388 If this recommendation is not approved, Public Works Department Fleet staff would be required to reassume parts management services. By discontinuing services with NAPA, Fleet and Administrative Services Department Purchasing staff would encounter a substantial workload increase to manage all the parts-related contracts required to conduct business.
Insourcing this function would require approximately 1.5 full time equivalent staffing capacity plus parts inventory. The cost to purchase parts inventory necessary to keep on-hand is estimated to cost $320,000.
FISCAL/RESOURCE IMPACT
Partial funding for Year 1 of this contract is available in the Fiscal Year 2026 Vehicle Replacement and Maintenance Fund Adopted Operating Budget. For the remaining portion, staff recommends increasing the Public Works Department Vehicle Operations and Maintenance Operating Budget by $601,837 and decreasing the Vehicle Replacement and Maintenance Fund balance by the same amount. The recommended appropriations amendment is due to a misalignment of this contract with Fiscal Year timing. To correctly align this new NAPA contract, FY 2026 funding is needed for a portion of Year 4 of the current NAPA contract and the entirety of Year 1 of this new contract. This is a one-time fix that will realign the encumbrances moving forward.
The Vehicle Replacement and Maintenance Fund (VRM) is supported through an internal service fund model. Approximately 60% of VRM‘s costs are funded by the General Fund, with the remaining 40% supported by enterprise and special revenue funds. Funding for subsequent years of the contract is subject to appropriation of funds through the annual budget process and Council approval.
STAKEHOLDER ENGAGEMENT
Staff coordinated with internal stakeholders throughout the procurement process to ensure alignment with operational needs and purchasing requirements. Pricing and contract terms were obtained through the City’s use of the competitively bid Sourcewell cooperative agreement, allowing staff to solicit and review vendor proposals in accordance with municipal code.
ENVIRONMENTAL REVIEW
Approval of this contract does not constitute a project and is exempt from the requirements of California Environmental Protection Act (CEQA) pursuant to Section 15061(b)(3).
ATTACHMENTS
Attachment A: NAPA Quote for 6-Year Pro Forma
Attachment B: Genuine Parts Company dba NAPA Auto Parts GSA Contract C26195803 APPROVED BY:
Brad Eggleston, Director Public Works/City Engineer