TO:
Honorable Mayor and Members of the City Council
THROUGH:
Bruce Moe, City Manager
FROM:
Erick Lee, Public Works Director
Sean Roberts, Field Operations Manager
Nicholle Petroff, Senior Management Analyst
SUBJECT:Title
Consideration of a Resolution Approving a Three-Year General Services Agreement with Merrimac Petroleum, Inc. dba Merrimac Energy Group for Bulk Fuel Purchases in an Amount Not-to-Exceed $3,250,000 (Public Works Director Lee).
A) ADOPT RESOLUTION NO. 23-0133
B) APPROPRIATE FUNDS
Body
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RECOMMENDATION:
Staff recommends that the City Council:
1. Adopt Resolution No. 23-0133 approving a three-year agreement with Merrimac Petroleum, Inc. dba Merrimac Energy Group for bulk fuel purchases in an amount not to exceed $3,250,000; and
2. Authorize the City Manager to extend the agreement term for up to two additional one-year periods.
3. Appropriate $90,000 from the Fleet Management Fund.
FISCAL IMPLICATIONS:
The agreement under consideration with Merrimac Petroleum, Inc. dba Merrimac Energy Group (Merrimac) is to provide bulk fuel for three years, with two options to extend the term of the contract by up to one year for each instance. Staff anticipates that expenditures for services should not surpass $650,000 annually for the initial three-year term, with a total not exceeding $3,250,000 for the initial term of the agreement and any extensions.
An appropriation of $90,000 from the Fleet Management Fund’s unreserved balance is necessary to fund the agreement for the remainder of the current fiscal year. Future years will be budgeted accordingly.
BACKGROUND:
The City maintains a fleet of nearly 300 public safety/emergency vehicles, vacuum trucks, and other vehicles that are imperative for daily operations, life safety, and regular maintenance of City infrastructure. This fleet consumes approximately 120,000 gallons of unleaded gasoline and diesel fuel annually.
Due to the continued variance and volatility of the fuel market, the City uses fixed indexed pricing for bulk fuel purchases to alleviate the necessity to negotiate for every purchase. 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 OPIS average published prices over the course of the agreement.
DISCUSSION:
The City's most recent bulk fuel contract will expire on December 5, 2023. As a result, on March 21, 2023, staff solicited Bulk Fuel Request for Proposals (RFP) #1302-23 through OpenGov, a public bid notification system. The City specified regular (87 octane) and mid-grade (89 octane) unleaded gasoline and Clear CARB B10 biodiesel.
On April 13, 2023, three proposal responses were received from California Fuels and Lubricants, Merrimac Energy Group, and Pinnacle Petroleum, Inc.
The evaluation criteria for this service contract and vendor selection are based on several factors, including but not limited to:
• Qualifications
• Experience
• Availability of trained staff
• References
• The costs, quality, service, fitness, the bidder's ability to deliver, fuel availability, prior experience, and other factors relating to the City's particular needs
Proposal Results:
1. Merrimac Energy Group Most responsive proposal
2. California Fuels and Lubricants Highest priced proposal
3. Pinnacle Petroleum, Inc. Lowest overall score
Based on the criteria above, Pinnacle Petroleum, Inc. submitted the lowest-priced proposal. However, this vendor did not prove confidently that it could supply B10 biodiesel fuel, of which the City requires over 20,000 gallons annually. This unknown element is a supply risk. Furthermore, none of Pinnacle’s three references receive B10 biodiesel from Pinnacle.
California Fuels and Lubricants was the highest of the three bidders, with an annual price difference of approximately $16,535 from the lowest bidder.
The most responsive bidder was Merrimac Energy Group. Merrimac had the second-lowest priced bid and met the specifications for all three fuel grades. Merrimac has been a responsible vendor in the City for many years and provides superior customer service and on-time delivery of fuel. This vendor provided 14 references, including the City of Redondo Beach, the City of El Segundo, the City of Torrance, the City of Hawthorne, the City of Los Angeles, and the County of Los Angeles Department of Sanitation. All of these Merrimac customers receive B10 fuel from Merrimac.
In Fiscal Year 2022-2023, the City spent $410,056.37 on bulk fuel. At a forecasted 120,000 gallon annual usage rate, the variance in price between the top two proposals, Merrimac Energy Group and Pinnacle Petroleum, Inc., is $4,056.10 per year, or less than one percent.
After careful consideration, staff recommends that the City contract with Merrimac Energy Group for bulk fuel. The agreement anticipates $650,000 each fiscal year for bulk fuel with a total not to exceed the amount of $3,250,000. If the City is unsatisfied with any of the vendor’s services at any time, it may terminate the contract with a 30-day written notice.
Additionally, staff recommends that the City Manager be given the authority to administratively exercise the two one-year options to extend the terms of the agreement.
PUBLIC OUTREACH:
This bid was advertised on the City’s website and OpenGov, a public bid notification board.
ENVIRONMENTAL REVIEW:
The City has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines the activity is not subject to CEQA. Thus, no environmental review is necessary.
LEGAL REVIEW:
The agreement has been reviewed by the City Attorney and is approved as to form.
ATTACHMENTS:
1. Resolution No. 23-0133
2. Agreement - Merrimac Energy Group
3. Comparison of Proposals
4. RFP #1302-23 - Bulk Fuel