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HomeMy WebLinkAboutItem 1d: Contract for Motor Vehicle Fuel and Fuel Management Services with iiFuels, Inc. A. + it �!{�.1,.�rt1��1\�\�:� y-�y� r4.°°�P°RAT�9-t�°� STAFF R Services Department Date: September 20, 2011 To: Mayor and City Council From: Hue Quach, Administrative Services Director By: Jan Steese, Purchasing Officer Subject: Award a contract for the purchase of Motor Vehicle Fuel and Fuel Management Services Recommendation: Authorize the City Manager to approve a one (1) year contract for the purchase of motor vehicle fuel and fuel management support and services in an amount not to exceed $425,000.00 per year for the period of October 1, 2011 through September 30, 2012 with the option to renew on a year-by-year basis for a maximum of three (3) one year periods thereafter. SUMMARY On June 21, 2011, the Council approved the award of a three (3) month contract extension with SC Fuels, Inc. for the purchase of motor vehicle fuel in the amount of $75,000.00 to allow staff time to explore options to possibly take advantage of another entities contract and pricing. The City's current purchase order contract with SC Fuels Inc. will expire on September 30, 2011. Due to the fluctuation in fuel costs, the volatility of the commodity, and the amount of fuel the City of Arcadia purchases on a yearly basis it would be in the best interest of the City to piggyback on another agency's contract in order to take advantage of bulk discounts. Staff explored utilizing a company that could not only provide the fuel itself, but fuel management support and services. Such services would include annual testing and inspection of both underground and above ground tanks. It also includes certification of all tanks to ensure that all monthly and yearly requirements of the State of California are met as well as requirements of the Air Quality Management District (A.Q.M.D.) for fuel storage and dispensing. Staff has reviewed various available contracts and determined that iiFuels, Inc. is the company that best meets the needs of the City to provide fuel plus fuel management support and services as indicated above. Mayor and City Council September 20, 2011 Page 2 of 4 BACKGROUND The City currently purchases fuel from SC Fuels, Inc. utilizing the City of Inglewood pricing which expires on September 30, 2011. In the 2010-2011 fiscal year, the City spent approximately $395,303.00 for diesel and unleaded fuel and approximately $12,600.00 for repairs, testing, inspection and certification of all fuel tanks which includes delivery fees, taxes, etc. Historically, the City has awarded two (2) separate purchase order contracts; one (1) for the purchase of diesel and unleaded fuel from SC Fuels, Inc. and one (1) for the fuel management support and services in the amount of $25,000.00 which includes the testing and certification of the fuel storage tanks in compliance with all A.Q.M.D. rules and regulations. The pricing mechanism used to price motor fuel is the Oil Price Information Services (OPIS) rack index pricing, an industry standard for reporting average fuel prices on a per gallon basis nationally. Prices quoted under the current contract with SC Fuels, Inc. were an add-on to the weekly OPIS average. The City currently pays the OPTS rack price plus $.0175 - $.25 per gallon depending on the number of gallons of fuel required at the time of delivery. The City historically purchases approximately 116,400 gallons of gasoline and diesel fuel per year. DISCUSSION The City's Purchasing rules and regulations allow for the cooperative use of another agency's bid, known as piggybacking. After careful review of other agencies contracts, staff determined it would be in the best interest of the City to piggyback on the City of Huntington Beach contract with iiFuels, Inc. for the purchase of fuel and fuel management support and services. Staff has reviewed the following contracts: AGENCY VENDOR City of Inglewood SC Fuels, Inc. State of Texas (TCPN) Falcon Fuels, Inc. Los Angeles County Falcon Fuels, Inc. City of Huntington Beach iiFuels, Inc. The City of Inglewood contract with SC Fuels, Inc. is due to expire on September 30, 2011 and will not be renewed at the existing prices, terms or conditions. Staff did not Mayor and City Council September 20, 2011 Page 3 of 4 consider the Texas Cooperative Purchasing Network (TCPN) contract or the Los Angeles County fuel contract with Falcon Fuels because it did not include fuel management support and services in addition to requiring a minimum delivery of 2500 gallons per location. The City of Arcadia rarely orders 2500 gallons of fuel per delivery to any one tank location. The current fuel pricing is based on the weekly OPIS rack pricing and monitors the pricing weekly. Because of the volatility of the fuel market, the City may pay slightly more for fuel than necessary because it is a weekly rack price published on Friday of every week. By awarding a contract to iiFuels, Inc. pricing will be based on the daily rack prices compared from four (4) different refineries pricing published every hour for the time frame the fuel is needed. While the weekly OPIS rack price is a good baseline, all price benchmarks can be considered when purchasing fuel on a daily basis. Daily pricing may not only be better pricing, but the timing of the delivery may also be better depending on the fluctuation and volatility of fuel costs. Using the weekly OPIS pricing requires and limits the City to using just the price for that week as opposed to pricing that may be more advantageous on a daily basis. Simply put, if prices are lower we can take advantage of the lower prices and order fuel to top off all the tanks while the prices are low, conversely, if the prices are higher, we can wait to order fuel. Although fuel is still a volatile commodity and it is expected to remain so,using iiFuels, Inc. affords the City access to accurate, up to date prices on a daily basis thereby taking advantage of the pricing when it is low and restraining from purchasing when the prices are higher. iiFuels, Inc. will monitor fuel prices, evaluate short-term market trends, forecast our demands based on our usage and help determine the optimum day and time to purchase the fuel. This process may reduce costs based on historical consumption while buying the same amount of fuel for each location. In addition, iiFuels, Inc. will provide fuel management support and services at a cost of $5,400.00 per year versus the current costs of $8,600.00. Inclusive in this service, iiFuels, Inc. will prepare and file all necessary testing, inspection and certification documents required by A.Q.M.D. Staff has spoken to city personnel from the City of Huntington Beach and they have indicated they have been very pleased with the fuel, fuel management support and services that iiFuels, Inc. has provided. For these reasons, staff recommends the City Council authorize the City Manager to enter into a purchase order contract with iiFuels, Inc. in an amount not to exceed $425,000 for the purchase of fuel and fuel management support and services for one (1) year beginning October 1, 2011 with the option to renew on a year by year basis through September 30, 2014. Mayor and City Council September 20, 2011 Page 4 of 4 FISCAL IMPACT Sufficient funds are appropriated in the operating budget for fuel purchases and fuel management services with costs not to exceed $425,000.00 through September 30, 2012. RECOMMENDATION 1. Authorize the City Manager to award a contract for the purchase of fuel and fuel management support and services in the amount not to exceed $425,000.00 per year through September 30, 2012. 2. Authorize the City Manager to renew the contract through September 30, 2014 with the understanding that staff will continue to monitor the volatility of the fuel market and return to Council if other contracts would be more cost effective and advantageous to the City for those future contract years. Approved: Donald Penman, City Manager