TO:
Honorable Mayor and Members of the City Council
THROUGH:
Mark Danaj, City Manager
FROM:
Bruce Moe, Finance Director
Gwen Eng, Purchasing Manager
SUBJECT:Title
Award of a One-Year Bulk Fuel Contract to Southern Counties Oil Company (Estimated Annual Value of $350,000) (Finance Director Moe).
APPROVE
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Recommended Action
RECOMMENDATION:
Staff recommends that the City Council award Bid #998-15 to Southern Counties Oil Company to provide fuel with an estimated annual value of $350,000.
Body
FISCAL IMPLICATIONS:
Sufficient funds are available in the Public Works budget for on-going fuel purchases. Given today's fuel prices, the City's annual cost to purchase gasoline and diesel fuel with taxes and fees is estimated to be $350,000 annually.
BACKGROUND:
The City operates a fueling station located at the City Yard. For the past year, the City has successfully procured automotive fuel through a bulk fuel contract with fixed indexed pricing.
The industry standard index, Oil Price Information Service (OPIS), publishes a daily index of fuel prices. With this pricing tool, the City and a supplier enter into a contract at a fixed markup over the daily Oil Price Information Service published prices over the course of the agreement.
DISCUSSION:
Staff solicited bids and six responses were received. The City specified regular (87 octane) and mid-grade (89 octane) unleaded gasoline and 10% biodiesel. Biodiesel is one of the methods used by the City to reduce our carbon footprint. The bid comparison (Attachment 1) shows markup over the Oil Price Information Service daily rate. In order to determine the bid ranking, staff applied the discount/premium per gallon bid by the supplier for each grade of fuel (87 octane, 89 octane, biodiesel) and multiplied it by the annual estimated City usage. The sum of the three discounts/premiums indicates the value of each bid with the lowest number equating to the lowest total cost.
The lowest bidder, Southern Counties Oil Company, meets specifications for all three grades of gasoline and provided the lowest total estimated cost for an annual contract. As a result, staff recommends that the City Council award Bid #998-15 to Southern Counties Oil.
The local vendor, DeWitt Petroleum, with whom we have a sales tax sharing agreement, did not respond to the solicitation.
This annual contract offers a deeper than discount than the previous. It was determined that the contract pricing would result in an average savings of $135 per purchase (approximately twelve purchases annually). This coupled with the time savings from eliminating spot bidding, issuing a one-time purchase order, and writing a City Council staff report for ratification after each purchase, leads staff to recommend the annual contract method.
The estimated spend level is based on current expenditure trends. The contract period is for one year. If this purchase is approved, the contract will be in the form of a purchase order. In addition, the City may cancel the contract at any time without cause if necessary.
CONCLUSION
Staff recommends that the City Council award Bid #998-15 to Southern Counties Oil Company for a one-year bulk fuel contract in the amount of $350,000.
Attachment:
1. Bid #998-15 Comparison for Bulk Fuel