HomeMy WebLinkAboutItem 10i - Purchase of City Fleet FuelPurchase Order for City Fleet Fuel
October 6, 2020
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DATE: October 6, 2020
TO: Honorable Mayor and City Council
FROM: Tom Tait, Public Works Services Director
By: Jacquelyn Mercado, Senior Management Analyst
SUBJECT: PURCHASE ORDER WITH MERRIMAC PETROLEUM, INC. DBA
MERRIMAC ENERGY GROUP FOR THE PURCHASE AND DELIVERY
OF FUEL FOR THE CITY’S FLEET IN AN AMOUNT NOT TO EXCEED
$350,000
Recommendation: Approve
SUMMARY
The City currently has a purchase order with Falcon Fuels, Inc., through the Los Angeles
County Countywide Master Agreement, for the purchase and delivery of fuel for the City’s
fleet vehicles and other fueled equipment. After exploring possible contract opportunities
for the purchase and delivery of fuel, it was determined that piggybacking on the City of
Torrance’s purchase order contract with Merrimac Petroleum dba Merrimac Energy
Group (“Merrimac”) would provide the most competitive pricing and meet the City’s fleet
fuel delivery needs. The City of Torrance fuel pricing contract with Merrimac was awarded
on February 26, 2019, providing the best pricing for a three-year period, with two optional
annual extensions through 2024.
It is recommended that the City Council approve a purchase order with Merrimac
Petroleum dba Merrimac Energy Group for the purchase and delivery of fuel for the City’s
fleet in an annual amount not to exceed $350,000, with optional annual extensions
through 2024.
BACKGROUND
The Public Works Services Department (“PWSD”) is responsible for the purchase of bulk
fuel delivery (unleaded and diesel) for over 200 City vehicles and other fueled equipment
such as generators. Annually, the City uses approximately 85,000 gallons of unleaded
fuel and 28,000 gallons of diesel fuel. The City’s purchasing rules and procedures allow
the City to “piggyback” onto, or join, an existing written purchase contract obtained
through a competitive bidding process prepared and awarded by another local, state, or
Purchase Order for City Fleet Fuel
October 6, 2020
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federal government agency. Since 2016, the City has piggybacked on the Los Angeles
County Countywide Master Agreement fuel pricing contract. This Master Agreement
expires in October 2020.
DISCUSSION
Due to the fluctuation in fuel costs, and the amount of fuel the City purchases on an annual
basis, the PWSD determined that the City would receive the best pricing by piggybacking
on a contract with a larger agency to receive a discount on bulk fuel. An in depth review
of fuel pricing contracts from other cities and local agencies was conducted in order to
find a contract that would provide the most competitive pricing and meet the City’s fleet
fuel delivery needs. It was determined that the City of Torrance’s fuel purchase order
contract with Merrimac would provide the best pricing.
The mechanism used to price motor fuel is the Oil Price Information Service (“OPIS”)
wholesale/rack index pricing, which rises and falls daily as a function of the oil market.
OPIS is used as the industry standard for reporting national weekly average fuel prices
on a per gallon basis. Based on the fuel order date, the City pays the daily OPIS price
with a fixed price adjustment discount (-) or surcharge (+) factored in, based on volume
and load size. Applicable local taxes and state fees are then added on the per gallon
price.
The City of Torrance pricing terms are based on a per gallon discount (-) or surcharge (+)
from the daily OPIS price for the Los Angeles area for bulk and non-bulk fuel deliveries.
Bulk fuel sites are storage tanks over 10,000 gallons in capacity, while non-bulk fuel
locations are comprised of smaller storage tanks and back-up generators from 200 to
1,000 gallons in size. The City of Arcadia orders in bulk quantities for our fueling sites.
Historically, the City purchases an average of 113,000 gallons of fuel per year (85,000
gallons in unleaded and 28,000 gallons in diesel) and is expecting to use a similar volume
of fuel for City vehicles this fiscal year. In determining the purchase order contract amount,
the factors taken into consideration were the average price paid per gallon in Fiscal Year
2019-20, average gallons used, and the proposed OPIS discount amount.
Estimated
Usage
Average Unit
Price Paid
FY19/20
City of Torrance
Purchase Contract
OPIS (-) Discount
Total Unit
Price
Extended Unit
Price
Unleaded
Gasoline Bulk
Deliveries
85,000 $3.19 - $0.1509 $3.0391 $258,323.50
Ultra Low
Sulfur Diesel 28,000 $3.28 - $0.0299 $3.2501 $91,002.80
Total Based on Anticipated Annual Usage $349,326.30
Purchase Order for City Fleet Fuel
October 6, 2020
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Under the City’s current fuel purchasing contract, the City was receiving an OPIS discount
of $0.0970 for Unleaded Gasoline bulk deliveries and $0.0109 for Ultra Low Sulfur Diesel
bulk deliveries. The City of Torrance fuel pricing agreement with Merrimac was awarded
on February 26, 2019, for a three-year period, with two optional annual extensions
through 2024 per the attached contract. Merrimac offers a higher bulk discount than the
City’s current contract and they are allowing the City the opportunity to piggyback on this
purchase contract at the same pricing discounts and terms. Merrimac currently supplies
and delivers fuel to the Cities of Burbank, Costa Mesa, La Habra, Los Angeles, Long
Beach, and Yorba Linda, as well as the Orange County Transportation Authority.
ENVIRONMENTAL ANALYSIS
The proposed action does not constitute a project under the California Environmental
Quality Act (“CEQA”) per Section 15061(b)(3) of the CEQA Guidelines as it can be seen
with certainty that it will have no impact on the environment. Thus, this matter is exempt
under CEQA.
FISCAL IMPACT
Sufficient funds are appropriated in each Department’s Fiscal Year 2020-21 Operating
Budget for the purchase and delivery of unleaded and diesel fuel.
RECOMMENDATION
It is recommended that the City Council determine that this project is exempt under the
California Environmental Quality Act (“CEQA”); and approve a purchase order with
Merrimac Petroleum dba Merrimac Energy Group for the purchase and delivery of fuel
for the City’s fleet in an amount not to exceed $350,000, with optional annual extensions
through 2024.
Attachment: City of Torrance Fuel Purchase Order Contract