Consent 1.A.2.
Regular City Council Meeting
- Meeting Date:
- 09/25/2017
- TITLE
- Gasoline and Diesel Fuel Products
- PRESENTED BY:
- Bruce McCandless
- Department:
- City Hall Administration
Presentation:
No
PROBLEM/ISSUE STATEMENT
The Fleet Services Division administers the annual contracts for all gasoline and diesel fuel products for City equipment. The present contract expires next month, so staff requested bids for gasoline and diesel fuel products. Staff advertised for sealed bids for Gasoline and Diesel Fuel Products on September 1 and September 8, 2017, with a bid opening on September 12, 2017.
The prices for gasoline and diesel fuel products are based on the OPIS (Oil Pricing Information Service) pricing index. OPIS is a nationwide information system which monitors and reports fuel prices per gallon and fluctuations at each terminal location on a daily basis. Daily fuel pricing will match the OPIS Daily Average Gross Rack price for each product. Since the OPIS/Rack price and Taxes are pre-established, only the “Vendor Markup” figure is used to establish the bid award recommendation. The Vendor Markup includes: cost of transportation; vendor overhead costs; blending and additive fees; and the vendor’s margin of profit. The total amount listed is the Vendor Markup per gallon times the estimated annual usage. The City uses about 260,000 gallons of gasoline and 570,000 gallons of diesel fuel per year.
The vendor markup bid is calculated as a plus or minus number in respect to the posted OPIS Daily Average Rack price. Fuel vendors have submitted negative numbers for their vendor markup bids. The negative numbers are the amount per gallon the vendor will discount or subtract from the OPIS Daily Average Rack Price. The negative bid number is made possible by refineries offering “Terminal Discounts” to distributors who in turn can pass the discounts on to their large volume customers with good payment histories.
The OPIS Daily Average Rack price for Tuesday, September 12, 2017, for each product bid is included in this document as an example for comparison purposes.
The bid award will be for two years, with five one-year options to renew. Renewals of the contract, by mutual agreement of both parties, may be made at one-year intervals, or any interval that is advantageous to the City, not to exceed a total of seven years.
The prices for gasoline and diesel fuel products are based on the OPIS (Oil Pricing Information Service) pricing index. OPIS is a nationwide information system which monitors and reports fuel prices per gallon and fluctuations at each terminal location on a daily basis. Daily fuel pricing will match the OPIS Daily Average Gross Rack price for each product. Since the OPIS/Rack price and Taxes are pre-established, only the “Vendor Markup” figure is used to establish the bid award recommendation. The Vendor Markup includes: cost of transportation; vendor overhead costs; blending and additive fees; and the vendor’s margin of profit. The total amount listed is the Vendor Markup per gallon times the estimated annual usage. The City uses about 260,000 gallons of gasoline and 570,000 gallons of diesel fuel per year.
The vendor markup bid is calculated as a plus or minus number in respect to the posted OPIS Daily Average Rack price. Fuel vendors have submitted negative numbers for their vendor markup bids. The negative numbers are the amount per gallon the vendor will discount or subtract from the OPIS Daily Average Rack Price. The negative bid number is made possible by refineries offering “Terminal Discounts” to distributors who in turn can pass the discounts on to their large volume customers with good payment histories.
The OPIS Daily Average Rack price for Tuesday, September 12, 2017, for each product bid is included in this document as an example for comparison purposes.
The bid award will be for two years, with five one-year options to renew. Renewals of the contract, by mutual agreement of both parties, may be made at one-year intervals, or any interval that is advantageous to the City, not to exceed a total of seven years.
ALTERNATIVES ANALYZED
City Council may:
- Approve the bid award for Gasoline and Diesel Fuel Products or:
- Disapprove the bid award and reject all bids.
FINANCIAL IMPACT
All departments with city equipment budget for fuel expense. Two bids were received September 12, 2017, as outlined in attachment A.
Staff discovered a calculation error in the initial bid total of -$25,585.00 from Town and Country Supply. The corrected annual bid award amount for Town & Country Supply's Vendor Markup is -$18,005.00. The estimated annual fuel cost calculations, based on OPIS pricing on 9/12/17 is $1,760,648.62. Using this estimated fuel cost, the recommended bid is $57,455.00, less than the other bid.
Staff discovered a calculation error in the initial bid total of -$25,585.00 from Town and Country Supply. The corrected annual bid award amount for Town & Country Supply's Vendor Markup is -$18,005.00. The estimated annual fuel cost calculations, based on OPIS pricing on 9/12/17 is $1,760,648.62. Using this estimated fuel cost, the recommended bid is $57,455.00, less than the other bid.
RECOMMENDATION
Staff recommends that City Council award the gasoline and diesel fuel products contract to Town and Country Supply Association for two years, with five one-year options to renew by mutual agreement.