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