HomeMy WebLinkAboutItem 11f - Purchase of Fuel for City's FleetPurchase Order for City Fleet Fuel
October 3, 2023
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DATE: October 3, 2023
TO: Honorable Mayor and City Council
FROM: Paul Cranmer, Public Works Services Director
By: Daniel Vargas, Management Analyst
SUBJECT: PURCHASE ORDER WITH FALCON FUELS, INC. FOR THE PURCHASE
AND DELIVERY OF FUEL FOR THE CITY’S FLEET IN AN AMOUNT NOT
TO EXCEED $510,000
CEQA: Not a Project
Recommendation: Approve
SUMMARY
The City currently has a purchase order with Merrimac Petroleum, Inc. dba Merrimac
Energy Group (“Merrimac”), for the purchase and delivery of fuel for the City’s fleet
vehicles, which is soon to expire. After exploring possible contract opportunities for the
purchase and delivery of fuel, it was determined that piggybacking on the City of
Pasadena’s purchase order contract with Falcon Fuels, Inc. (“Falcon Fuels”) would
provide the most competitive pricing and meet the City’s fleet fuel delivery needs. The
City of Pasadena’s fuel pricing contract with Falcon Fuels was awarded on February 24,
2022, providing the best pricing for a three-year contract, with two optional annual
extensions through 2027.
It is recommended that the City Council approve a purchase order with Falcon Fuels, Inc.
for the purchase and delivery of fuel for the City’s fleet, in an annual amount not to exceed
$510,000, with optional annual extensions through 2027.
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 that is prepared and awarded by another local, state, or
federal government agency. Since 2020, the City has piggybacked on the City of
Torrance’s fuel pricing contract; this pricing contract expires in February 2024.
Purchase Order for City Fleet Fuel
October 3, 2023
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DISCUSSION
Due to fluctuations in fuel costs, and the amount of fuel the City purchases on an annual
basis, the City will receive the best pricing by piggybacking on a contract from 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 to find a contract with the most competitive
pricing and meet the City’s fleet fuel delivery needs. It was determined that the City of
Pasadena’s fuel purchase order contract with Falcon Fuels would provide the best pricing.
In addition, this process will allow the City to purchase renewable diesel for the fueling of
City diesel engines. The transition from petroleum diesel to renewable diesel will help
reduce carbon dioxide and nitrogen oxide emissions from City diesel vehicles. PWSD
Fleet staff has verified that renewable diesel meets the same fuel quality specifications
as petroleum diesel. Furthermore, no modifications to existing diesel engines will be
required for the usage of renewable diesel.
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 to the per gallon price.
The City of Pasadena’s fuel purchase order pricing terms are based on 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
ranging from 200 to 1,000 gallons in size. The City of Arcadia orders in bulk quantities for
our fueling sites.
On average, the City purchases 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 Years
2021-23, average gallons used, and proposed OPIS discount amount.
Bulk
Deliveries
Estimated
Usage
(gallons)
Average Unit
Price Paid in
FYs 21-23
City of Pasadena
Purchase Contract
OPIS (-) Discount
Total
Unit
Price
Extended
Unit Price
Unleaded
Gasoline 85,000 $4.58 -$0.1542 $4.4258 $376,193.00
Renewable
Diesel 28,000 $4.82 -$0.0644 $4.7556 $133,156.80
Total Based on Anticipated Annual Usage $509,349.80
Under the City’s current fuel purchasing contract, the City was receiving an OPIS discount
of $0.1509 for Unleaded Gasoline bulk deliveries and $0.0299 for Ultra Low Sulfur Diesel
Purchase Order for City Fleet Fuel
October 3, 2023
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bulk deliveries. The City of Pasadena’s fuel agreement with Falcon Fuels was awarded
on February 24, 2022, for a three-year period, with two optional annual extensions
through 2027 per the attached contract. The agreement provides a discount of $0.1542
for Unleaded Gasoline bulk deliveries and $0.0644 for Diesel bulk deliveries. Falcon Fuels
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 discount
and terms. Falcon Fuels has previously supplied and delivered fuel to the City of Arcadia.
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 2023-24 Operating
Budget for the purchase and delivery of unleaded and renewable diesel fuel.
RECOMMENDATION
It is recommended that the City Council determine that this action does not constitute a
project, and is therefore, exempt under the California Environmental Quality Act
(“CEQA”); and approve a Purchase Order with Falcon Fuels Inc. for the purchase and
delivery of fuel for the City’s fleet in an amount not to exceed $510,000, with optional
annual extensions through 2027.
Attachment: City of Pasadena Fuel Purchase Order Contract