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HomeMy WebLinkAboutItem 11f - Purchase of Fuel for City's FleetPurchase Order for City Fleet Fuel October 3, 2023 Page 1 of 3 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 Page 2 of 3 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 Page 3 of 3 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