Newspapers across the USA today featured pretty pictures of New York City’s “Taxi of Tomorrow” unveiled yesterday. While that is cute news, there actually was quite a significant amount of procurement work that led up to NYC’s public relations spectacle.
According to a press release on the city’s official website, there was a “two-year-long Taxi of Tomorrow procurement process” that eventually resulted in the selection of Nissan North America, Inc. as the supplier of these taxis. The two categories for supplier selection were “the qualifications and ability of the proposer to deliver on the various aspects of the agreement and…how the proposed vehicle interacts with its passengers and operators.”
According to the press release, “In the first category, evaluators considered the organizational capability of the proposer and relevant experience of the proposer. In the second category, evaluators reviewed such areas as the proposed vehicles’ safety, ergonomics, average cost to the taxi industry to purchase and total lifecycle costs to operate the vehicle as a taxi, internal air/environmental quality (HVAC), overall ride quality (noise or vibration), the vehicle durability, the design elements, and warranty and service provision, as well as proposers’ plans for stakeholder outreach to help provide input on the final design.”
Strangely enough, the criteria for total lifecycle costs did not include fuel efficiency. I don’t know how fuel can not be factored into the total lifecycle cost of operating a vehicle – especially this week, when gas prices are expected to crest above $4 per gallon and continue to rise – but, fortunately, the Nissan option offered the best fuel efficiency of all competitors. (I am betting that there is a procurement director breathing a sigh of relief at that fact/coincidence!)
There are a couple of other interesting things about this procurement.
First, the press release states that “ the NV200, designed by Nissan North America, Inc., has been chosen as the winner of the Taxi of Tomorrow competition. The City now will enter into final negotiations with Nissan.”
Really? It is almost impossible to negotiate with a supplier who thinks that they have the deal in their pocket. NYC didn’t just create the perception that Nissan is a front runner. They held a freakin’ press conference in which the mayor told the entire country that Nissan won the business!
If NYC expects to have any negotiation leverage, they are sorely mistaken. Nissan will certainly know that it would be incredibly embarrassing for Mayor Bloomberg to publicly change his mind on the supplier selection.
Second, is NYC getting the best deal it can get? An article on Comcast.net says that this procurement is a deal “city officials estimated at around $1 billion.” But the article later says that “Nissan officials said they expected to provide up to 26,000 taxi cabs over the lifetime of the contract starting in 2013, with a manufacturer’s suggested retail price (MSRP) of about $29,000.”
I’m hoping my calculator is on the fritz. But 26,000 x $29,000 = $754 million. I would never pay MSRP for a vehicle. That’s way too high. But NYC is paying like 33% more than MSRP?
Did Nissan leave the meter running when it prepared its proposal or something?
To Your Career,
Charles Dominick, SPSM, SPSM2
President & Chief Procurement Officer
Next Level Purchasing, Inc.
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